Appen shares rise as shareholders grill leadership on lost Google contract
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The news: Shares in Appen climbed on the ASX despite a grilling from shareholders on the troubled company's terminated Google contract and its poor share price at its annual general meeting.
The numbers: Appen shares were up 5% to $0.62 by 11:45am AEST. Its share price was at its highest in August 2020 at $35.43.
Shares in Appen plunged 40% in January, after Google terminated a contract with the Sydney firm worth $126 million, representing 26% of its gross revenue in the 2023 financial year.
A month later, after the abrupt departure of former CEO Armughan Ahmad, shares soared on a $154 million takeover bid by US tech firm Innodata, which was later withdrawn due to a confidentiality breach.
Today, recently appointed CEO Ryan Kolln noted that its cost-cutting initiatives were supporting the company to reach its cash positivity target for the early second-half of the financial year. He noted that Appen's cash balance at 30 April 2024 was at $36.4 million.
The context: During the company annual general meeting this morning, Appen chair Richard Freudenstein and Kolln were grilled by shareholders about the financial performance of the company which had deteriorated since the termination of the Google contract.
Asked by Peter Gregory from the Australian Shareholders' Association on the reasons for Google's decision, Freudenstein said it took Appen's leadership "completely by surprise" and that they weren't given any reasons for the change other than it was part of a "strategic review".
Another shareholder said something at Appen had to have gone "drastically wrong" in terms of the market's perception of the company, outside of the loss of Google, given its share price was around 2% of its value in 2020.
Freudenstein agreed and said there had not only been a "huge change" in the performance of the business, but also in how the market perceived it. The chair said the company needed to deliver results to change perceptions.
"I'm hoping that as you see results start to go the right way, that will be reflected in the share price over time," he said.
What they said: However, pointing to the company's financial performance over the last five years, one shareholder said: "Please take it personally, I'm not sparing punches here. I think lots of complacency crept in".
"There's a bit of falling asleep at the steering wheel, and we've been watching a high-speed train crashing in slow-motion."
When asked on the likelihood of regaining Google as a client, Freudenstein said: "We do communicate with Google periodically now still, but the decision was made at a high level within Google. The people that deal with the operational side of things, the people we deal with day to day, don't have the authority to change that".
"I'm optimistic that over time, given the quality of work we did for Google, they may decide at some stage to come back but there's nothing immediate in that in that regard," he said.
Kolln said: "We're still engaging with them [Google], along with many other enterprise customers, to install the SaaS platform to enable large language models (LLMs).
"That market is a very interesting one because there's huge interest from enterprises to adopt LLMs into their operations, that they're taking a very cautious approach because they need to get them right for the operation. So that market we're still very bullish on. The timing is the big uncertain factor around that element of the market."
The source: Appen AGM
