Appen Ltd (ASX: APX) shares are sinking in early morning trade following the release of the company's full-year results for the period ending 31 December 2020. At the time of writing, the Appen share price is down 6.77% to $18.88.
Let's take a look and see how the artificial intelligence company performed for the period.
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What's impacting the Appen share price?
The Appen share price is being hit hard today despite the company delivering revenue of $599.9 million, up 12% on the prior corresponding period. Most of the earnings came from its 'Relevance' segment, which contributed $538.2 million – a lift of 15% over FY19. 'Speech and Image' followed with $61.2 million in earnings for the 2020 full year, down 10% from the comparative period. The fall was blamed upon cyclical timings and the COVID-19 pandemic.
The group saw its customer base expand over the period with the addition of 136 new clients. Many of the customers represented a variety of sectors such as payments tech, autonomous trucking, financial banking, and more. Appen noted that while many of these wins were small, they provide a foundation for growth in the coming years.
Notably, the company's top five customers increased their number of projects by 34%, supporting new product development.
Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) lifted to $108.6 million, an increase of 8% on the same time the year prior. However, in other results impacting the Appen share price, the company reported that the underlying EBITDA margin stood at 18.1% for the period compared to 18.8% in FY19. Appen stated that the lower EBITDA margin was a result of $12.7 million invested in sales and marketing in China.
Underlying net profit after tax (NPAT) also eased to $64.4 million, down 1% on FY19's result. This was mostly affected by growth investment (net of tax) and increased amortisation.
Appen closed the year with a strong balance sheet of $78 million in cash and no debt.
The board declared a 50% franked dividend of 5.5 cents per share to be paid on 19 March 2021.
Management commentary
Appen CEO Mark Brayan briefly touched on company's result, saying:
2020 was a breakout year for new sales, new projects, committed revenue and our entry into China, but it was not without its challenges. I am extremely proud of our team's efforts to support our customers and growth strategy, and deliver for our shareholders, in such a difficult year.
Outlook
Appen's performance for the full year was hit hard by COVID-19 which led to fewer B2B sales and reduced online advertising spend. However, the company saw a bounce back in the fourth quarter. It believes that most of the projects that have been deferred will recommence this year.
The company's year-to-date revenues including the orders on hand for delivery amount to $240 million in February so far.
As a result, underlying EBITA for the year ending FY21 is expected to be in the range of $120 million to $130 million. Based on a constant currency basis, this would reflect growth of around 18% to 28% on FY20's underlying EBITDA (excluding currency gain) of $101.8 million.
Appen share price snapshot
Over the last 12 months, the Appen share price is down more than 20%. Appen shares hit a low of $15.70 last March, before accelerating up until August, reaching a high of $43.66. Since then, the company's shares have tumbled back towards their COVID-19 lows.
Based on the current Appen share price, the company has a market capitalisation of around $2.5 billion.
