Appen Revenues Rise 60% to USD 165m in H1 2019

On August 29, 2019, Australia’s Appen announced results for the first half of 2019. The Sydney-listed company grew revenue by 60% to AUD 245m (USD 165.3m). Adjusted EBITDA (excluding certain costs related to Appen’s acquisition of Leapforce and Figure Eight) rose 81% to AUD 46.3m (USD 31.2m). The company employed 662 full-time staff globally as of June 30, 2019, and said it works with over one million freelance data annotators.

Appen breaks out three individual divisions in its financial results. Speech & Image (data annotation in areas such as speech, natural language processing, as well as image and video projects); Search Relevance (human evaluation of search engine results); and Figure Eight (the data annotation platform Appen acquired earlier in 2019 for USD 300m.

On Figure Eight, Appen said the company generated AUD 11.2m (USD 7.5m)  in the first half and incurred a loss of less than AUD 2.6m (USD 1.75m). Appen pointed out the loss was less than planned, but also flagged lower renewals in Q2 and said the delay in large deals negatively affected Figure Eight revenues in Q2. For the full-year, Appen projected Figure Eight revenues to come in at AUD 30m (USD 20.2m).

Australian newspaper The West Australian quotes Appen CEO Mark Brayan as saying the acquisition “distracted” Figure Eight staff, which cost the company some deals. However, Brayan remained very positive about the acquisition telling the newspaper that Figure Eight’s technology was better than they had thought and praising their government business.

Appen also provided an integration update for Leapforce and Figure Eight. While the Leapforce integration is now complete, Figure Eight was operating “as is” in 2019 with Appen management “supporting sales and technology acceleration.” The full-scale integration of Figure Eight is scheduled to kick off in 2020.

The company highlighted two areas where it sees major growth opportunities: government and China. China’s AI market is growing rapidly and Appen’s facility in Wuxi (a large city near Shanghai) is now up and running. With regard to government, Appen said public sector projects present high barriers to entry including cleared personnel and facilities.

Ramping up physical infrastructure in areas with high barriers to entry is one way Appen looks to keep an increasingly numerous group of competitors at bay. Among Appen’s emerging competitors is Scale AI, which raised USD 100m in VC money in mid-August 2019. But more traditional players like Lionbridge, too, have woken up to the potential of the data annotation market.

Appen said revenues plus orders in hand for delivery in 2019 stood at about AUD 380m (USD 256.4m) at mid-August 2019. The company projects full-year 2019 EBITDA to be around AUD 85–90m (USD 57–61m).

It was a wild ride for Appen shares in the wake of the results with shares initially rising strongly and then closing the day down 11%. The company’s market cap stands at USD 1.75bn at the time of writing.

Appen CEO Mark Brayan will speak at SlatorCon San Francisco on September 12, 2019.