The Appen Ltd (ASX: APX) share price is starting the week deep in the red.
In morning trade, the artificial intelligence (AI) data services company's shares are down 17% to a multi-year low of $1.86.
This follows the release of Appen's half-year results this morning.
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Appen share price sinks on half-year results
- Revenue down 24% to US$138.9 million
- Underlying earnings before interest, tax, depreciation, and amortisation (EBITDA) negative US$15.7 million
- Underlying net loss after tax of US$24.2 million
- Statutory net loss after tax of US$43.3 million
What happened during the half?
For the six months ended 30 June, Appen reported a 24% decline in revenue over the prior corresponding period to US$138.9 million. This was driven by a 27.4% decline in Global Services revenue to US$100.1 million and a 13.7% slide in New Markets revenue to US$38.9 million.
Management advised that this reflects challenging external operating and macroeconomic conditions.
Things were much worse for the company's earnings, with the company posting an underlying operating loss of US$15.7 million. This is down from positive underlying EBITDA of US$9.6 million a year earlier.
This was driven by reduced revenue and gross margin pressures, as well as a proportionally higher cost base coming out of FY 2022.
On the bottom line, Appen posted an underlying loss of US$34.2 million and a statutory loss of US$43.3 million. This left it with a cash balance of US$55.2 million and no debt.
Management commentary
Appen's CEO and President, Armughan Ahmad, commented:
The first half result reflects a challenging external environment. Against this backdrop we remain focused on resetting Appen. This includes instilling operational rigour across the business, releasing new generative AI focused products, refreshing our go-to-market and sales, establishing ecosystem partnerships and continuing with our AI for Good.
Ahmad remains positive that a turnaround is coming before the end of the financial year. He said:
In response to the broader technology slowdown, we are focusing on areas we can control and have already achieved 63% of our $46 million cost reduction target. We remain focused on exiting FY23 as an underlying EBITDA and cash EBITDA positive business. To help achieve this, we are exploring further actions to prioritise our investments into a more focused set of higher potential areas and expect to exit the year with a further reduced cost base.
Outlook
Appen advised that it continues to face headwinds from the broader technology market slowdown and as customers evaluate their AI strategies.
In light of this ongoing uncertainty across its customer base, it now expects second-half revenue to be closer to first-half revenue. Previously, it was guiding to an improvement half on half.
However, management continues to focus on exiting FY 2023 with a return to underlying EBITDA and underlying cash EBITDA profitability on an annualised, run-rate basis. It also believes it will exit FY 2023 with an annualised run-rate operating cost base lower than $113 million.
This is expected to be achieved by prioritising its growth investments into a smaller set of higher potential areas. Management believes this will simplify its business and deliver incremental cost savings. However, it warns that it may have a negative impact on 2024 revenue.
The Appen share price is down approximately 50% over the last 12 months.
