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Appen share price: Where next following organisational restructure?

We examine the highlights from the artificial intelligence company’s organisational restructure, including reiterated FY21 guidance figures.

Appen share price: Where next following organisational restructure? Source: Bloomberg

Machine learning and artificial intelligence company Appen (ticker: APX) on Wednesday announced an organisational restructure.

The new structure will aim to provide stakeholders with better visibility on the fundamental drivers of growth across the business, as well as be more closely aligned with the company’s core strategic priorities.

Management noted that this was part of a broader transformation agenda: the company was no longer merely an artificial intelligence data annotation company, but a provider of broader services within the space aimed at unlocking growth for other businesses.

There Can Only be Four

The new Appen will be broken up into four business units: Global, enterprise, China and government. This, said the company, will better reflect Appen’s product-focused growth strategy.

While broken down into four business units, the company will report operational performance through two segments: Global Services and New Markets.

In the adjoining investor presentation released on Wednesday, management noted that they expected 2021 revenue growth from the New Markets segment of ~25%; while Global Services growth was flagged to be skewed towards the second-half of FY21, with its full-year growth rate expected to hit mid to high single digits.

New Markets likely captured the attention of investors most, with management reporting that this segment has delivered annualised revenue CAGR of 41% across the first half of FY19 and the second half of FY20.

Making the Switch

Under this new structure, the company said it would report financial performance in US dollars, as of the FY21 interim results.

With over 90% of Appen’s revenue and assets being booked in US dollars already, this move makes significant sense. Management also noted that this decision would result in easier comps between financial periods and remove volatility between currency translations.

Guidance Reiterated

The company also took the chance to reiterate its previous earnings guidance as part of this shakeup, saying it expected full-year earnings (EBITDA) – for the year ending December 31 2021 – to come in at between US$83-90 million.

Despite reiterating full-year earnings guidance, the company noted that these results would be skewed to the second half of FY21, as a result of project delays and resource optimisation benefits.

On the top-line, the company said year-to-date it had booked revenues of approximately US$260 million, at the close of the April month.

Cost Savings

Management noted that as a result of this restructure – which would incur redundancies – that the company would book annualised cost savings of approximately US$15 million, from FY22 onwards.

Appen Share Price

The Appen share price surged off the back of this news, rising approximately 12%, to trade at $12.62 per share, by 11:30AM.

YTD however APX is down ~50%.

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