Appen’s Quadrant bet may not be paying off
The beleaguered AI specialist’s 2021 acquisition seems to have failed to hit required revenue targets.
Technology
Don't miss out on the headlines from Technology. Followed categories will be added to My News.
AI specialist Appen says it is no longer liable for a $US20m ($31m) payment for its acquisition of Quadrant, after the mobile location data provider failed to hit required revenue targets.
Appen acquired Quadrant in 2021 for a cash payment of $US25.3m, with a further potential payment of up to $US20m to be paid in February 2024 in either cash or shares, if Quadrant had achieved certain revenue milestones.
Quadrant’s Geolancer platform provides point-of-interest data, which is manually verified on the ground by crowd workers.
Founded in 1996, the Sydney-based Appen has around 1 million crowdsource workers globally who help improve the quality of AI tools and large language models on behalf of the tech giants. Those workers are hired to verify and feedback the accuracy of responses produced by chatbots like Google’s Bard, with the human feedback used to improve the quality of future answers.
The company has endured a torrid 18 months however as its new chief executive attempts to translate rampant interest in ChatGPT and generative artificial intelligence technologies into revenue growth.
On June 30, 2023, the earn out liability of Quadrant was recorded in the balance sheet as $US19.4m, which has now been slashed to just $US5m.
“Appen now expects the earn out liability to be no greater than $US5m which represents the lower end of any payable earn-out,” its board said on Monday.
“The earn out liability can still be paid in either cash or shares and our current intention is to issues shares to meet the liability.
“Appen’s working capital facility has been resized from $20m to $10m. The facility remains undrawn and Appen has no current intention to draw the facility prior to its expiry on January 3, 2024.”
Once the strongest performer on the ASX, the Sydney-based Appen has suffered multiple earnings downgrades over the past 12 months. In May, it flagged revenue would decline materially, with new chief executive Armughan Ahmad announcing a strategy refresh and a $US46m cost reduction program, including the culling of 300 of its 1500 employees.
In August, Appen warned of ongoing headwinds from the broader technology market slowdown to continue as customers re-evaluate their AI strategies, after its interim loss more than quadrupled.
Mr Ahmad is a former KPMG and Dell executive and took the top job at Appen last December after the resignation of former CEO Mark Brayan, who led the Quadrant acquisition.
Mr Brayan last month took a role leading Sydney-based enterprise communications outfit Soprano Design.
“The acquisition of Quadrant enables Appen to increase our addressable market and to expand our product and service offering to our customers to include more mobile location and POI data capabilities,” Mr Brayan said in 2021.
“We already have the broadest AI training data offering in the industry, and we see an opportunity to grow in the mobile location and POI data space. With Quadrant’s Geolancer and our global crowd, we will be strongly positioned to serve customers’ scale, speed and quality requirements.”
Mr Ahmad is now still deep in the midst of a turnaround effort, attempting to reverse a slide in fortunes and convince investors it can take advantage of new opportunities in generative AI.
Since Mr Ahmad took on the CEO role in December, Appen has added a chief revenue officer, a new chief marketing officer and chief technology officer and has tapped the market for $60m in fresh capital.
Its previous chief financial officer Helen Johnson departed in June after less than two months in the role, and the company is yet to appoint a replacement.
“Our second half is going to be better than our first half, that’s the guidance we have provided,” Mr Ahmad said in June.
“I really see that this is a long-term play for me and for our leadership team, and our shareholders and investors. We recently did an equity raise and you can see the kind of institutional investors who have backed us, and now we are just working on executing, so we have our heads down and we’re going to execute.”
Shares in Appen traded at $1.26 at 12pm AEDT, up 1.6 per cent.
More Coverage
Originally published as Appen’s Quadrant bet may not be paying off
Baby-faced DOGE team tearing down US gov
Elon Musk’s DOGE has brought in a team of six baby-faced engineers, aged from 19 to 25, tasked with dismantling US government agencies.
Man’s sickening backyard find
A man was left with “shivers” after 102 venomous snakes were found in his backyard in a “terrifying” incident.