FY22 EBITDA and EBITDA margins are expected to remain ‘materially lower than FY21, and the most recent trading data reinforces this position.’
FY22 EBITDA is now expected to be in the range of US$13 million to US$18 million.
APX shares fell 15% in late Thursday trade, with the stock down 75% year to date.
Since hitting more than $40 a share in August 2020, APX shares have fallen 92%.
Source: tradingview.com
Appen’s disappointing FY22 trading update
Appen has seen no improvement in trading conditions since its half-year result. This surprised the stock as it thought its FY22 revenue would weigh into the latter half of FY22.
While Appen reiterated how occluded its revenue visibility is, the firm nonetheless provided ‘additional clarity for FY22 revenue and EBITDA’.
FY22 EBITDA and EBITDA margins are expected to remain ‘materially lower than FY21 and the most recent trading data reinforces this position.’
FY22 EBITDA is now expected to be in the range of US$13 million to US$18 million.
Broker RBC said the latest EBITDA downgrade is ‘material’ at 51% below consensus estimates.
Appen pointed to external operating and macro conditions as the main culprits affecting performance:
‘Challenging external operating and macro conditions have resulted in weaker digital advertising revenue and a slowdown in spending by some of our major customers. This has impacted our ad-related programs and had a flow on impact to non-ad related programs and some core programs.’
Appen’s CEO Mark Brayan commented:
‘Despite the challenging operating conditions, we remain committed to our long-term strategy including investments in New Markets to diversify revenue and products to improve productivity. While our plans to increase the use of offshore facilities are gathering pace as well as our actions to reduce costs, the full benefits of these programs will not be evident in FY2022.
‘Appen has a strong balance sheet with no debt. Additionally, the business has solid cash conversion, and we remain confident in our ability to invest and implement our strategy during this transitional period.’
Is APX in a rut?
Appen is upping its investments in product, tech, and transforming of business, as well as swapping out some large-scale high-margin projects in favour of smaller ones.
Couple those recent activities with the lack of interest from global customers, and we see APX floundering at a harsh point in the cycle.
How will it fund these investments and changes at a time when it is making less revenue in a tough macro environment?
Appen said:
‘In response to the challenging external operating environment, Appen is focused on high impact initiatives; accelerating productivity improvements; increasing the use of offshore facilities for project delivery, engineering, and business support; and right sizing investments to market opportunities.’
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