Appen Limited (ASX: $APX) FY23 results overview

Appen Limited (ASX: $APX) presented its FY23 results in an investor presentation, outlining a business reset due to a major customer reduction, positive Q4 momentum, and generative AI wins. The CEO, Ryan Kolln, highlighted the revenue decline primarily due to a major client, the resized cost base with $60m cost reduction initiatives complete in FY23, and the positive Q4 revenue momentum with growth in Global Services and New Markets. The company also saw generative AI-related revenue significantly increase in 2H FY23.

Executive commentary on FY23 performance and outlook

Customers were exploratory in FY23, and generative AI-related revenue significantly increased in 2H FY23. Appen is currently working with 22 LLM model builders globally, including over 80% of leading model builders. The company's response to Google's termination of its global inbound services contract includes $13.5m of cost out initiatives, with 80% to be achieved by the end of March FY24 and the remainder complete by the end of June FY24. The FY23 financial summary reflects a 30% revenue decrease to $273m, primarily driven by lower contribution from the Global Services Division. However, the company achieved underlying cash EBITDA positive and saw positive Q4 revenue momentum in Global Services and China.

Outlook and future strategy

Appen's FY24 outlook anticipates the stabilization of revenue decline from a large customer, containment of costs associated with the development of new products, and the first full year benefit of the $60m cost reduction program. The company is highly focused on achieving ongoing cash positivity and cash EBITDA profitability in FY24, which largely depends on revenue growth from non-global customers. Appen's growth strategy for FY24 includes focusing on generative AI, optimizing and automating delivery processes, and modernizing sales and marketing. The company aims to capitalize on the expanding generative AI market and its traditional TAM, with a focus on high-quality data for leading AI and a SaaS platform for LLM customization.