By Colin Kruger
Artificial intelligence crowdsourcing provider Appen will use artificial intelligence (AI) itself in a restructuring that will allow it to slash service staff and become more customer-focused.
“To put it simply, we are accelerating our transformation into an AI-powered provider of AI data and solutions,” said Appen chief executive Mark Brayan.
The stock bounced back on the ASX, having been savaged this year on fears the company’s big tech customers may become less reliant on its services. Appen shares, which were worth as much as $43.50 in August last year, jumped more than 14 per cent to a high of $13.19 on Wednesday.
Appen makes most of its money from crowdsourcing a global workforce of a million people that do the low-level grunt work for tech giants such as Facebook, Google and Amazon. The workers teach computers to recognise basic images and speech, laying the groundwork for the development of artificial intelligence solutions.
Appen chief executive Mark Brayan is implementing a restructure that will slash staffing costs. Credit: Steven Siewert
In a trading update ahead of its technology day on Thursday, Appen reiterated its forecast for EBITDA (earnings before interest, tax, depreciation and amortisation) of between $US83 million ($106 million) and $US90 million in 2021 excluding restructuring costs which will generate annualised savings of $US15 million in 2022 “before reinvestment”.
The company said the savings were “largely related to lower labour expense of $US15 million from 2022” as it restructures its operations to become a product- rather than a service-led business.
According to Mr Brayan, Appen has relied on a lot of people for the management of its services. Its increased reliance on technology and automation means fewer of those workers are needed, but the company plans to recruit staff for its transformation into a product- and customer-focused company.
“It’s not an exercise to cut costs, though there are cost advantages. It’s an exercise to realign the workforce, and the business to that product-led future,” he said.
On Thursday, Appen is expected to detail the new features of its platform which can now support any customer that wants so-called training data - like a retailer looking to automate the identification of products it sells - not just those that have invested in their own data recognition like the tech giants.
“This enables us to provide high quality training data faster at scale, and with improved unit economics,” Mr Brayan said.
The company also said it will report its results in US dollars as of its first-half results on June 30, which would remove most of the foreign exchange rate uncertainty from its financial forecasts. About 90 per cent of Appen’s business is in the US, with the big tech firms accounting for 80 per cent of its business.
Wilsons Research cautiously welcomed Appen’s plan to change its revenue model away from project-based work to look for more committed spending by customers.
“This will require further investigation, but if Appen is able to move its revenue model from project-based work to committed spend by customers, this would increase revenue visibility and decrease revenue volatility, which is a positive,” said Wilson.
Wilsons said its overweight recommendation on Appen’s stock and its $22.83 share price target are under review.
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