Bombshell from $APX this morning. Full text of the release is below.
This kind of announcement has been foreshadowed by many here, so it will not really be a surprise to them. However, the market has taken a sharp intake of breath with SP down almost 40%. This says that some holders remain in denial that this business model has had its day.
I first took a position in $APX in December 2016 as part of the MF PRO recommendations, like many here. And over the next year built a sizeable position premised on the growth of demand for data to train AI models. I'll admit to being initially skeptical when some started saying the model would be short-lived, but as the chorus of respected voices grew, I progressively exited (missing the peak on the way down) and pocketing between $12.90 and $39,00 over the period Feb-2020 to July-2021. How long ago that now seems.
Today's announceent is surely a very important milestone. Full text follows.
As a personal observation, I teach business operations as one of my occupations. A current student of mine last week showed how he coached ChatGPT 4.0 to solve a rather complex analytical problem I set for the class. The level of coaching was non-trivial, but the progress LLM's have made in one year is remarkable.
ASX Announcement
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Appen Limited (Appen) (ASX: APX) received notification on Saturday, 20 January 2024 AEDT from a material customer, Google LLC, that as part of a strategic review processit will be terminating its global inbound services contract with Appen, resulting in the cessation of all projects with Appen by 19 March 2024. Appen had no prior knowledge of Google’s decision to terminate the contract.
In FY23, Appen’s revenue from Google was $82.8m1 at a gross margin2 of 26%.
The news is unexpected and disappointing, particularly considering the progress made against Appen’s transformation and performance in November and December 2023. Appen saw Q4 on Q3 growth in both Global Services and New Markets (including China). On a YoY basis, Global Services Q4 2023 revenue was down while New Markets (including China) was up. Within the New Markets division, China achieved a quarterly revenue record in Q4 2023 of $11.1m. At a group level, based on unaudited management accounts, Appen recorded revenue of $24.1m and $25.9m in November and December 2023 respectively, along with execution of cost management initiatives, which enabled achievement of cash EBITDA breakeven objectives.
Based on the unaudited management accounts, Appen also recorded:
• Underlying EBITDA3 (excluding FX) of $3.2m and Underlying cash EBITDA (excluding FX)4 of $2.3m in December 2023;
• Revenue of $273.0m and an Underlying EBITDA (excluding FX) loss of $20.4m for the full year; and
• $32.1m cash on hand at 31 December 2023.
These results are preliminary and subject to change as the audit process is finalised. Appen’s full year FY23 results remain unaudited and are subject to Board review and approval as well as completion of the external audit.
Appen continues to focus on cost management, business turnaround and delivery of high-quality AI data for its customers. Appen will immediately adjust its strategic priorities following the notification of the Google contract termination and provide further details in its FY23 full year results on 27 February 2024.
Authorised for release by the Board of Appen Limited.