Data company Appen takes a hit on its share price as investors digest update

Shares in Australian data company Appen have taken a dive after the company’s projected results spooked shareholders.

Appen chief executive Mark Brayan. Picture: John Feder

Shares in Appen slid almost 12 per cent on Thursday after the artificial intelligence company said revenues in the six months to the end of ­December would be lower than market expectations.

In an investor update, Appen said revenues would be between $US375m ($578m) and $US395m for the second half of its reporting year, down from the $US448m it recorded last year.

It said earnings would come in at between $US13m and $US18m. That was 51 per cent below the consensus analyst estimate.

Appen shares fell as much as 18 per cent to a five-year low of $2.73 before recovering to close 11.7 per cent lower at $2.94. Shares have fallen more than 73.6 per cent – or $8.20 – since December 31.

“Since Appen’s half year result, there has been no improvement in trading conditions in August and September,” the company said in a statement on Thursday.

Appen chief executive Mark Brayan. Picture: John Feder

“As noted in the half year, challenging external operating and macro conditions have resulted in weaker digital advertising revenue and a slowdown in spending by some of our major customers.

“This has impacted our ad-­related programs and had a flow-on impact to non-ad-related programs and some core programs.”

Appen chief executive Mark Brayan said that, despite the challenging operating conditions, the company was “committed to our long-term strategy, including ­investments in new markets to ­diversify revenue and products to improve productivity”.

“While our plans to increase the use of offshore facilities are gathering pace as well as our actions to reduce costs, the full benefits of these programs will not be evident (this year),” he said.

“Appen has a strong balance sheet with no debt. The business has solid cash conversion, and we remain confident in our ability to invest and implement our strategy during this … period.”

Appen co-founders Chris and Julie Vonwiller. Picture: John Feder

Equities analysts at RBC Capital Markets said the disclosure was disappointing and “the limited revenue visibility continues to be an issue for forecasting revenue and earnings”.

“(Appen’s) share price is now 40 per cent below where it was five years ago to the day and in our view is likely to breach the $3 on the back of this downgrade,” the analysts wrote on Thursday.

“Pressure on the management team to execute on strategy and demonstrate greater recurring revenue remains.”

Appen, which provides AI data to tech giants and other companies has struggled with privacy changes made by Apple to iPhones, which have also hit tech giants, including Facebook.

Apple’s privacy tweaks restrict how much data third parties can glean off end users when they use apps and browse the web.

Appen tumbled out of the ASX 200 in June, weeks after Canadian IT firm Telus walked away without explanation from a $9.50-a-share takeover bid, which would have valued Appen at $1.2bn.

Mr Brayan said in an interview in May the Telus saga demonstrated that his company “is still a valuable commodity”.

Additional reporting: Matt Bell, David Rogers