Today, the chairman of AI technology group Appen [ASX:APX] released an address to shareholders reflecting on the group’s performance in most recent months, and that of the market’s performance.
Richard Freudenstein claimed that most recently the group has ‘not performed to its full potential’, with 2022 financial results being ‘far from satisfactory’ and warned of signs the broader technology sector is experiencing a slowdown in the US.
However, Freudenstein also pointed out that 2022 was a ‘breakthrough year’ for AI and the emergence of generative AI, causing the company to reshape its strategy.
The tech stock opened at an 8.5% high earlier on Friday, yet after lunchtime the shares came to a flat.
Longer term, metrics haven’t been good. APX has taken a downturn of more than 60% over the last 12 months compared with broader markets:
Source: TradingView
Freudenstein shares disappointment at Appen’s 2022 performance
Today, the chairman of AI technology group Appen released an address to shareholders and investors, looking to reflect on the group’s performance in recent months, and to search for solutions in navigating a widespread slowdown, particularly in the US.
Chair of Appen Richard Freudenstein claimed that most recently the group has ‘not performed to its full potential’, with 2022 financial results being ‘far from satisfactory’.
For the 2022 financial year, Appen reported a statutory loss of $239.1 million, which also reflected an impairment of $204 million attributed to the investment in its ‘new markets’ business.
Total revenue declined 13.1% to $388.1 million due to the broader tech slowdown flagged by Mr Freudenstein earlier in the piece, even as revenue from new markets (not including global product) increased 15.4% to $70.2 million, underpinned by strong growth in China.
Underlying earnings before interest and tax (and before foreign exchange) declined from $78.8 million to $13.6 million.
However, Freudenstein also pointed out that 2022 was a ‘breakthrough year for AI’ as well as for the emergence of generative AI.
Language models such as ChatGPT were raised as an example, which have created significant excitement around the future of AI.
It’s been this kind of momentum that has caused the company to reshape its strategy and launch a cost reduction program hoped to capitalise on this angle.
Yet the cost reduction program was only one piece of a two-part puzzle, as it was also revealed the company intends to oversee a $60 million capital raising, to support the company’s strategy refresh and return to profitability.
The equity raising is to comprise of two parts — a pro-rata accelerated non-renounceable entitlement offer of AU$38 million — and a AU$21 million institutional placement.
Mr Freudenstein said that once the equity raising has been completed, Appen will need to change up its placement capacity, which will require shareholder approval to do so.
He also said that ‘due to legal reasons’ no further details relating to the capital raising can yet be discussed.
Appen said that it will hold an extraordinary general meeting ‘in the not-too-distant future’. Perhaps by then it will also be able to share more information on the capital raising and what that might entail.
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Regards,
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For Money Morning
