The Appen Ltd (ASX: APX) share price is heading south regardless of the company providing a positive update today.
At the time of writing, the artificial intelligence data services provider’s shares are down 0.81% to $9.78. It’s worth noting that its shares hit a multi-year low of $9.58 yesterday, a level not seen since May 2018.
Appen completes acquisition
In a statement to the ASX, Appen advised it has completed the acquisition of leading global location data provider Quadrant.
The latest procurement is expected to expand Appen’s data capabilities and product offering for existing customers. In addition, management hopes it will open the door to new growth opportunities in the global location intelligence market.
Valued at US$11.9 billion, the global location intelligence market is forecast to grow 14% at a compounded annual growth rate (CAGR). This translates to a sector that could be potentially worth US$29.8 billion in 2027, signifying attractive returns for Appen.
The company made an upfront cash payment of US$25 million for the entire share capital of the Quadrant business. However, an additional payment of up to US$20 million is applicable should revenue milestones for 2022 and 2023 be met.
Appen intends to increase its investment in Quadrant’s product and market expansion for the remainder of 2021 and in 2022. While growth is projected to accelerate, Appen’s FY21 underlying earnings before interest, tax, depreciation and amortisation (EBITDA) will be reduced by around US$2 million. This gives Appen a full-year FY21 EBITDA guidance of between US$81 million to US$88 million.
The company is projecting a stronger order book and a weighted second-half revenue skew to finish off the financial year. It noted that this is due to customer delivery schedules for e-commerce, digital ads and search programs.
Appen share price snapshot
Over the past 12 months, Appen shares have fallen from grace to record losses of a mammoth 69%. Year-to-date has not fared any better, registering a drop of around 60%.
The former market darling has been heavily impacted by COVID-19 as its United States-based customers delayed or cancelled project spending.
At today’s price, Appen commands a market capitalisation of roughly $1.2 billion with approximately 123 million shares outstanding.