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Sydney-based global AI annotation and services group Appen (ASX: APX) continues to close the revenue gap left by a terminated contract with Google a year ago, with recent quarterly sales within 7 per cent of their former glory and underlying earnings up substantially.
This narrowing of the difference represents an improvement on the September quarter when Appen's revenue was 13 per cent shy of figures before the disruptive event.
Excluding the Google contract, Appen's December quarter revenue of $66.7 million was up 37 per cent, while underlying EBITDA was 70 per cent higher year-on-year at $4.7 million.
Such underlying earnings are almost five times the $1 million figure reported for the September quarter as the impacts of Appen's recovery under springboarded CEO and managing director Ryan Kolln started to be felt on the group's bottom line.
Investor's reacted negatively to today's announcement however with shares down 8.59 per cent at $2.395 at the time of writing, likely spurred by a mix of missed expectations and a drastic change in Appen's net operating cash flows quarter-on-quarter.
After reporting net operating cash inflows of $316,000 in the September quarter, that figure plummeted to $12.42 million in the red for the recent period.
The bulk of the decline can be explained by a decline of more than $7 million in customer receipts and increased spending on R&D and staff, the latter two being key components of a $50 million capital raise and oversubscribed $15 million share purchase plan (SPP) to shore up funds for working capital and pursuing generative AI (GenAI) opportunities.
The cash flow report would have looked very different if it weren't for a major customer paying Appen $10 million in the first week of January instead of the last week of December as planned.
Kolln says the fourth quarter result marks the end of a "transformative year".
"We have strengthened our business and are well positioned for sustained profitable growth," he says.
"We are very pleased to have built on the return to EBITDA profitability in Q3 FY24. In Q4, we delivered strong quarter on quarter revenue growth and improved underlying EBITDA and underlying cash EBITDA profitability.
"We’re continuing to experience LLM (large language model) related growth which is contributing to our positive revenue performance. China continues to experience significant revenue growth, and we have conviction in the potential of our Enterprise and Government divisions."
Even though APX shares are down today, they are still far higher than the $1.92 offer price for last year's capital raise and are five times higher than levels even before the arrangement with Google toppled over.
In March last year, US suitor Innodata (NASDAQ: INOD) withdrew a non-binding indicative takeover offer for Appen valuing the company at $153 million, on the basis the deal was supposed to remain confidential but word got out.
Appen, an erstwhile unicorn a few years ago, is now worth $654 million.
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