Hajra Naz
Appen announced that Alphabet’s Google is set to terminate its inbound services contract, representing approximately 30% of Appen’s 2023 revenue. The abrupt decision, revealed on Monday, was described by Appen as unexpected and disappointing, attributing it to a strategic review conducted by the U.S. tech giant.
This improvement denotes the second time in under a year that Appen has been constrained to make vital changes. In May, recently appointed CEO Armughan Ahmad communicated the objective of growing and enhancing income streams from significant tech firms, which generally comprised 80% of Appen’s yearly income.
In response to the Google contract termination, Appen stated that it would promptly realign its strategic priorities, discontinuing all projects covered by the contract by March 19. The termination is significant, as Google contributed $82.8 million to Appen’s 2023 revenue of $273.0 million, as disclosed on Monday.
The effect on Appen’s financial standing is clear in the early exchange, with its shares plunging by 39% to 28 Australian cents (18.5 U.S. pennies). Since arriving at its top in August 2020, the stock has lost more than the vast majority of its worth.
Appen’s challenges extend beyond the recent contract termination. The company has already been ousted from Australia’s S&P/ASX 200 benchmark index due to a declining valuation, prompting multiple rounds of capital raising, including a recent A$30 million investment from investors in November.
Analysts have consistently expressed concerns about Appen’s heavy reliance on major tech players like Meta Platforms, Google, Microsoft, Apple, and Amazon.com for revenue. The company suffered setbacks when some of these clients scaled back projects utilizing Appen’s AI-training capabilities during the COVID-19 pandemic. Unaudited results released on Monday indicate a 13% revenue decline in 2022 and approximately 30% in 2023. Appen also reported an unaudited underlying EBITDA loss of $20.4 million for 2023.
This downturn in share price may renew interest from potential suitors, as Appen disclosed in November that it had received inquiries about parts of its business and expressed a willingness to engage with third parties under suitable proposals. Appen is scheduled to release its audited annual results in February.
