Appen’s contract losses stabilise

Artificial intelligence business Appen expects the full benefits of $US60m ($91.6m) in cost cutting to flow through to the bottom line this year as it looks to target growth in companies that are adopting generative AI models.

The embattled group also told investors on Tuesday that it had seen a stabilisation in the number of companies reducing work with Appen amid a reevaluation of their AI investments following a boom in the technology throughout 2023.

Appen reported a 29.7 per cent decline in revenue to $US273m in the 2023 financial year as a result of customers reviewing plans for AI and also optimising costs in response to the impact from external market conditions such as interest rates.

Work losses that Appen faced included the abrupt termination of an $US82.8m contract from Google that resulted in a share price plunge of 40 per cent last month.

Appen’s statutory net loss narrowed to $US118.1m in 2023 compared to a $US239.1m net loss in 2022, but was larger than what markets had expected.

Freshly installed chief executive Ryan Kolln said the mainstream availability of generative AI created huge interest from customers, but also resulted in many re-evaluating their AI investments.

“We experienced a material revenue reduction as customers navigated the rapidly evolving AI market and responded to the general economic slowdown,” he said.

“We saw positive momentum in the fourth quarter of 2023 as declines from a major customer stabilised, we benefited from digital advertising seasonality, and China recorded record revenue.”

Mr Kolln assumed the top job this month after Armughan Ahmad became the second CEO to depart the company in 14 months following a steep fall in its share price. Mr Ahmad’s predecessor Mark Brayan quit Appen in December 2022.

Mr Kolln said Appen had completed a $60m cost cutting program which allowed it to exit December as cash EBITDA positive.