Published in the AFR

Appen shares surge 15pc as new chief outlines AIstrategy

New Appen chief executive Ryan Kollnis hoping to sign one of the world’s largest telcos as a new customer torecover from a painful year that saw revenue at the data services businesscollapse 30 per cent.

The Australian, who is based in NorthAmerica, is searching for new sales after Appen’s full-year results showedrevenue fell to $US273 ($417 million) for the full year ended December 31.

Ryan Kolln, new chief executive ofAppen, remains bullish on generative AI. Appen was dealt a furtherblow in the new year when Google abruptly cancelled its $US82.8 million contract with the company, forcing the business to reduce its costs by $US13.5 million.

Shares climbed 14 per cent higher to48¢ on Tuesday, but are down 76 per cent over the past 12 months.

Presenting his first set of resultsjust three weeks into the top job, Mr Kolln was bullish on Appen’s ability torecast itself as a provider of tools and services to help businesses customisetheir own generative AI chatbots. “Clearly we need to identify new revenueopportunities ... and we see the adoption of generative AI amongst enterprisesis a big growth opportunity,” Mr Kolln said.

He pointed to the data annotationplatform which came from Appen’s $428million acquisition of Silicon Valley-based rival Figure Eight as one of the company’s most valuable assets.

Appen is customising the Figure Eightplatform to sell as a software subscription that connects data scientists withthe internal experts in an organisation who provide feedback on large languagemodels.

For example, a bank that is buildingan AI model to assess credit risk would use the platform to connect with itscredit experts to refine the chatbot’s output. “We’re currently in alpha phaseand close to signing one of the world’s largest telcos as a lead customer,” MrKolln said.

Founded in Sydney in 1996, Appenscrubs large data sets and on-sells them to large companies experimenting withartificial intelligence. Appen’s revenue largely comes from providing data services to a handful of big tech customers, which is less predictable than recurring revenue enjoyed by software companies.

Mr Kolln said the material decline inrevenue last year was mainly driven by a large customer pulling back how muchit spent on Appen’s services. He was “cautiously optimistic” that decline wasstarting to stabilise.

“We experienced a material revenuereduction as customers navigated the rapidly evolving AI market and respondedto the general economic slowdown,” Mr Kolln said.

For the full year, Appen reported anunderlying earnings loss of $US20.4 million compared to underlying earnings of$US13.6 million a year earlier, thanks to the fall in revenue and margins. Asof December 31, Appen had a cash balance of $US32.1 million, which includes theproceeds of its recent equity raisings, and no debt.

The chief executive, and newlypromoted chief financial officer Justin Miles, told analysts on Tuesday thecompany remained “laser-focused” on keeping its costs in line with revenue toreturn the company to cash EBITDA profitability.

“We need to invest wisely and executeflawlessly, but I feel like we’ve got the right team to make that happen,” MrKolln said.