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Results: Appen shares soar 9.2% as first-half sales hit $245 million

Appen’s 2019 interim results revealed expanding margins, surging profits (EBITDA) and robust revenue growth.

Updated price action at a glance

Though the Appen Limited share price rose significantly at the open, as is reflected in our headline, it has since tumbled more than 12%.

Even so, Appen's FY19 results delivered strong growth across the board, as the company saw upticks in revenue, a surge in earnings (EBITDA) and improved margins.

Much enthusiasm had been built leading into today’s release, with Appen’s share price rising 10.7% yesterday.

This bullish sentiment remained intact at the open but crumbled soon after: as the company initially saw its share price surge another 9.24% – to A$29.90 per share.

By comparison and as of 15:20 AEST, Appen (ASX: APX) traded at just A$24.40 per share.

1H19 results summarised

Appen Limited continues to demonstrate the importance of innovation when it comes to driving growth in the ultra-competitive tech space.

Off the back of this innovation, Appen (ASX: APX) saw its revenue top A$245.1m in 1H19.

Underlying earnings (EBITDA) also rose, reaching A$46.3m – representing an 81% increase, on a year-over-year basis.

Net income also grew in the 2019 first-half, hitting A$18.6m.

Management commentary on the results

Appen’s CEO, Mark Brayan, noted that the company’s strong 2019 first-half results demonstrates the significant potential of the fast-growing AI market.

Highlighting some of the key positives from these results, Mr Brayan said that 'speech and image data grew by 85% on the first half of last year, relevance revenue by 48%, and underlying EBITDA margins expanded from 16.8% to 18.9%.’

Margins benefited from increased scale and efficiency improvements, according to management.

With momentum often being the name of the game in tech, investors will likely also be pleased to hear that demand for Appen’s product offerings remains robust.

Here, Mr Brayan said that in the first-half the company witnessed, 'an increase in use cases and our existing customers are asking for more data to develop new AI products and to improve their existing offerings.'

Figure 8 acquisition in focus

Appen paid $175m up-front to acquire the AI company Figure 8 earlier in 2019. An additional payment of $125m may be paid in 2020, based on the company's FY19 performance.

Both figure 8 and Appen make use of a crowdsourced business model to build out machine learning and artificial intelligence capabilities.

Speaking of this acquisition, Appen noted that:

'The number and size of joint opportunities is exceeding our expectations, its technology, including its secure SOC 23 accreditation, is better than we first thought.’

Appen’s 2019 full-year guidance

Building on these strong results, Appen Limited’s management has forecasted that underlying FY19 EBITDA will come in at the higher end of the previous A$85m to A$90m guidance.

By comparison, Appen reported pro-forma earnings (EBITDA) of 71.3m in FY18.

Finally, the company, though pursuing an aggressive growth program still announced an interim dividend of A$0.04 per share.

Investors are likely to pay little heed to such a dividend given the market-beating returns Appen (ASX: APX) has delivered since January.

Year-to-date, Appen’s share price has risen 86% – far outpacing the ASX 200 index.

Click here now to read our report on Afterpay’s FY19 earnings, this week’s other big tech result.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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