Appen has provided training of AI models to some of the most prominent tech entities such as Microsoft, Nvidia, Meta, Apple, Adobe, Google and Amazon. Of late, the company has been confronted with losing customers, the departure of several senior staff members and deteriorating finances. In August 2020, the market cap of Appen rose to a maximum of $4.3 billion, though its current value has dwindled to about $150 million. Appen's shares are down nearly 25% since month, and earnings fell nearly 10% in the first quarter of 2021.
When Mike Monegan looked at Appen in January, he had difficulty sleeping. The company was already feeling the effects of tech behemoths cutting back on their investments in AI training data. Five major customers - Microsoft, Apple, Meta, Google, and Amazon - made up 80 percent of Appen's revenue. As other companies committed to major investments in generative AI, Appen was struggling to keep pace. With a network of around one million freelance workers across 170 countries, Appen had previously trained AI systems for major tech companies, but its revenue declined 13 percent in 2022. The company attributed part of the drop to external macroeconomic factors.
In December, Armughan Ahmad, a 25-year veteran of the tech industry, was appointed CEO. He mentioned that Appen had already put generative AI to use in marketing. Monegan didn't believe Ahmad had the solution and began job searching. He ultimately left in March to start his own company. Appen's stock has dropped 25 percent since then, and earnings have decreased 10 percent in the first quarter of 2021. This seems to have confirmed Monegan's fears.
Despite Appen's impressive client roster and storied past, the firm has endured a difficult year. In the first half of 2023, revenue dropped a striking 24% to $138.9 million in light of what it labelled a "broader technology slowdown." The business' fundamental loss widened to $34.2 million, representing an increase compared to the $3.8 million in losses incurred a year earlier. At a recent earnings call, CEO Ahmad maintained Appen's supremacy by citing the company's "data and services [which] power the world's leading AI models." He further stressed the profound economic pressures and "continued slowdown in tech spending" among its major patrons that fed into the company's unsatisfactory results. Appen's shares, which had peaked on the ASX at AU$42.44 in August 2020 and soared its market cap to an equivalent of $4.3 billion, currently trade at around AU$1.52, giving it a market cap of around $150 million.
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The company is currently experiencing a period of tribulation due to its financial situation alongside the consequence of several leading personnel leaving their posts. Helen Johnson, who had been recruited as finance chief in May, relinquished her employment after a span of seven weeks. Fab Dolan, the marketing chief, was declared absent during the earnings call, with his resignation occurring after a brief two months in place. Most recently, the company declared the resignation of their Chief Product Officer Sujatha Sagiraju. Reacting to the recent situation, a spokesman for Appen commented that "in this stage of the turnaround, changes can be anticipated". Prior to this, in April, Elena Sagunova, the global human resources director, resigned, followed by Jen Cole, the senior vice president of enterprise, in July and Jukka Korpi, the senior manager of business development for the Europe, Middle East and Africa Region, in August. On the earnings call, Ahmad said the company is "concentrating intensely on re-aligning the business" as they turn to providing data for generative AI models. He also said "the positive results from the recovery have yet to become noticeable" and that the rise in revenue does not make up for the current descending trends of the rest of the operation.Appen has claimed to be involved in various projects such as assessing the relatedness of search results, helping AI assistants realize demands in different dialects, classifying e-commerce images with the help of AI and constructing map locations of electric vehicle charging stations; these are both based on reliable sources of information as well as interviews held with CNBC. Appen has also spoken about their work with Adobe on search relevance and their partnership with Microsoft on translation services, in addition to providing training data for lidar companies, security applications and automotive manufacturers. The variety of data needed by a customer may determine whether the Appen freelancer should be labeling or classifying images or search results on a laptop or using the mobile application to register the sound of glass breaking or environmental sound from a vehicle.
In the past, data collection was essential for the development of Artificial Intelligence (AI). However, Language and Learning Models (LLMs) have revolutionized the way AI can be utilized. By using models like OpenAI's ChatGPT and Google's Bard, highly sophisticated answers and images can be generated just by using simple text queries. Companies are investing heavily in these LLMs which are powered by cutting-edge processors from Nvidia, rather than opting to use Appen and other services that specialize in generative AI. Though Appen's finances have been affected by the current economic climate and a decrease in customers' spending, Ahmad has pointed out that by staying focused and making early changes to the company, Appen should be able to take advantage of the thriving generative AI market and surges back into growth.
Ahmad said on the earnings call that customers appear to be interested in particular kinds of data which are harder to acquire. Appen needs to grow its base of workers while also preserving cash. As of June 30, Appen's cash on hand was $55 million, which was obtained from a $38 million equity raise. Prior to this, there was a dramatic decrease of cash from $48 million in 2021 to $23.4 million in 2022. Even before the AI transformation, wages for Appen's data labelers were a contentious issue. In 2019, Google announced that contractors needed to pay $15 per hour, however Appen did not reach this requirement. In January, there were wage increases for Appen freelancers working on the Bard chatbot and other Google products, which went up to $14 to $14.50 per hour. Soon after, Appen was accused of exploiting freelancers focused on generative AI, as they had to complete time-consuming assignments in a limited time span. In June, Appen faced charges from the U.S. National Labor Relations Board due to the firing of six freelancers who mentioned their discontent with workplace conditions. The workers were later reinstated. Erik Vogt, Appen's Vice President of solutions, said in May that the AI sector was in a state of transition. It's necessary to find experts and specialists with diverse capabilities to make new AI use cases reality, as often times this requires obtaining unusual data. Kim Stagg, Appen's Vice President of product, noted the need for creative people and domain experts. However, former Appen employees expressed doubt in the company's ability to succeed due to the executive shuffling and organizational issues. Canaccord Genuity analysts cut their price target on Appen by more than half to AU$1.56, suggesting investors don't believe Appen will have success in the generative AI space. As Appen tries to grow a business around generative AI, they are looking to reduce costs by 31% in 2023. This is seen as a difficult goal to accomplish.
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