Appen in US acquisition

AI firm spends $426m to ‘future-proof’ company

HIGH-FLYING Sydney artificial intelligence firm Appen has agreed to pay as much as $426 million for a San Francisco-based company that has yet to turn a profit.

Appen is launching a $300 million capital raising to fund the acquisition of Figure Eight, raising $285 million through a fully underwritten placement of $21.50 a share and $15 million through a nonunderwritten share purchase plan.

“This is an acquisition that future-proofs Appen,” the company’ chief executive officer Mark Brayan (pictured) said yesterday. “To us, this was a no-brainer that accelerates what we do.

“The union of Appen and Figure Eight creates a unique, exciting and powerful opportunity for our customers. Combined, we’ll meet and exceed our customers’ scale, speed and quality requirements.”

Appen will pay $US175 million ($249 million) for the company, and an earn-out consideration of up to $US125 million ($177 million) in March next year.

Founded in 2007 as Crowdflower, Figure Eight services the booming artificial intelligence market.

Clients including Microsoft, Google, Spotify, Microsoft, eBay and the Home Depot upload images, audio, video and text for Figure Eight’s remote workforce to annotate.

That annotated data is then used by the clients to train their machine-learning algorithms for use in everything from chatbots to autonomous vehicles.

Mr Brayan said the upfront payment for Figure Eight represented 5.7 times the company’s 2018 revenue of $41.5 million.

Appen expects to pay another $86 million to $114 million in earn-out consideration, which will go to Figure Eight’s 107 employees.

“We think we’ve struck a good deal here, based on all the market markers,” Mr Brayan said.

Other companies have been bought for about six to eight times the last 12 months of revenue, he said. While Figure Eight lost $22 million last year, Mr Brayan said the company was growing rapidly and had a clear pathway towards profitably.

Appen shares were in a trading halt yesterday and were expected to resume trading today.