The Appen Ltd (ASX: APX) share price is falling lower today. This comes after the company announced a disappointing trading update to the market. At the time of writing, the Appen share price is trading down 11.1% at $26.60.
What’s driving the Appen share price lower?
Investors have sent the Appen share price to lows not seen since May after the company reported that COVID-19 impacts have disrupted its performance for the current quarter of FY20.
The company – a global language technology data provider – noted a slowdown in customer spend in both in April and August announcements to the market. While the current quarter has improved over the previous period, Appen attributed this to the time of year, which routinely sees a lift in revenue from customers.
As the pandemic has intensified in the United States, Appen’s major customers have shifted their priorities and activities. This has impacted the company’s face-to-face sales and customer engagement norms, thus leading to lower revenue being achieved.
In light of these developments, Appen anticipates underlying earnings before interest, tax, depreciation and amortisation (EBITDA) to be in the range of $106 million to $109 million. This reflects a substantially lower guidance range of the previously indicated $125 million to $130 million EBITDA in its half-year August report.
Further weighing down the expected results is the surging Australian dollar against the US dollar. In December, the exchange rate moved 4 cents to AUD$1 = US$0.74, impacting EBITDA by up to a further $2 million.
Despite this, Appen revealed that the second-half EBITDA is forecast to grow more than 30% over the period.
The company said that it continued to win new customers in industries less affected by COVID-19. These include shipping, automotive, education and healthcare.
In addition, its major clients have transferred their focus to new product development, in which Appen is seeing a significant increase in work load.
A report from IDC Worldwide Artificial Intelligence Systems Spending Guide estimates that artificial intelligence (AI) spend is increasing 28% annually. Appen reiterated that long-term trends remained positive and it projects a strong rebound post COVID-19.
Appen share price summary
After losing 11% today, the Appen share price has fallen almost 40% from its 52-week high of $43.66. The company’s shares have risen 20% since the start of the year.