Appen Ltd (ASX: APX) shares are down 4.5% to 86 cents after the company released its 1H FY25 report on Thursday.
By comparison, the S&P/ASX All Ordinaries Index (ASX: XAO) is down 0.14%.
The Appen share price opened higher at 91 cents per share, up 2.25%, and quickly rose to an intraday high of 94 cents, up 5.6%.
The ASX tech share then retreated, touching an intraday low of 85 cents, down 4.5%, before recovering a little to 86 cents now.
Let's take a look at that report.
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Appen shares tumble amid revenue and EBITDA declines
Here are the highlights of the report:
- Revenue of US$102.1 million, down 10% on the prior corresponding period (pcp)
- Underlying earnings before interest, taxes, depreciation, and amortisation (EBITDA) after FX loss of (US$2.8 million) compared to (US$2.6 million) pcp
- Underlying EBITDA before FX loss of (US$2.2 million), a minor improvement from (US$2.3 million) in the pcp
- Underlying net loss of (US$12.2 million) compared to (US$11.8 million) pcp
- Gross margin of 37%, down from 37.7% pcp
- Cash on hand, as at 30 June, was US$60.9 million
What else happened in 1H FY25?
Appen's loss of the Google contract in March 2024 was a major component of its 10% revenue decline year over year in 1H FY25.
Appen's China division was the standout performer, with revenue of US$42.2 million, up 67% on 1H FY24.
However, the company noted that China margins are traditionally lower than other countries.
Appen said growth in China was offset by ongoing volatility in the US artificial intelligence market, including uncertainty on the timing for large language model (LLM) projects to resume.
Appen said it was continuing to try to turn around the core business by deepening customer relationships and executing its strategy.
It noted that it recently won a project with the potential to deliver more than US$10 million in annual revenue.
What did Appen management say?
Appen's CEO & Managing Director, Ryan Kolln, said:
Appen's first half delivered a strong result for our China business, exiting the period with an annualised revenue run-rate over $100 million – a pleasing result and milestone.
In addition to the significant revenue growth, the China business achieved underlying EBITDA profitability for both Q1 and Q2.
The remainder of our business was impacted by short-term volatility due to the dynamic nature of the US AI market.
Notwithstanding this, we remain confident the market opportunity remains strong, and the execution of our near-term strategy will be the enabler in capturing growth throughout the remainder of FY25 and into FY26.
Kolln said the company's focus was on achieving revenue growth and EBITDA profitability.
What's next for Appen?
Appen said its near-term strategy of increasing efficiency through technology innovation and automation will deliver about $10 million in incremental annualised cost savings in its non-China business.
The company said this cost-cutting will be executed over the rest of FY25, with about 70% expected to be completed by the end of 3Q.
Appen also intends to wind back investment in its US Government division in 2H FY25, given that policy uncertainty has made it difficult to generate meaningful short-term revenue opportunities.
The company expects to save $4 million in annual operational expenses as a result.
Appen reaffirmed its existing FY25 guidance range of revenue at the low end of between $235 million and $260 million.
The company is also guiding positive full-year underlying EBITDA.
Appen share price snapshot
Appen shares have tanked 34% over the past 12 months and 97% over the past five years.
