Appen Ltd (ASX: APX) has reported its half year result for the six months to 30 June 2020 showing more growth.
Appen is a global business that develops and provides human annotated datasets in more thna 180 languages from over 1 million contractors for machine learning and artificial intelligence.
FY20 half year revenue grew by 25% to $306.2 million. The company said there was a substantial increase in annual contract value (ACV) to US$103 million. Appen also announced an enterprise-wide platform agreement with a major customer – this includes a US$80 million annual commitment.
Appen said four of five major customers are using the Appen annotation platform (formerly called the Figure Eight platform).
Underlying EBITDA (click here to learn what EBITDA means) went up 6% to $49.1 million. Excluding ‘growth investments’, underlying EBITDA rose 35% to $62.5 million – which Appen says includes sales & marketing, China, engineering and the government market. The company said statutory EBITDA rose 44%.
The underlying EBITDA margin fell from 18.9% in the prior corresponding period to 16%.
Despite COVID-19, management said that was no material change to its growth investments through the pandemic.
Underlying net profit after tax (NPAT) declined by 3% to $28.9 million (down 12% in constant currency) and statutory net profit grew 20% to $22.3 million.
The board of Appen decided to declare an interim dividend of 4.5 cents per share, up 12.5% from last year.
Appen said it had US$126 million of cash at 30 June 2020 and it had repaid its debt relating to the Figure Eight acquisition after the period end.
Appen CEO Mark Brayan said: “We’re very pleased to have delivered another strong half with exceptional revenue growth. I am extraordinarily proud of our team and their resilience and customer focus.”
Chris Vonwiller, Chairman of Appen, said: “We are especially pleased with this result amidst the pandemic and the implementation of our growth initiatives. The strength of our business model, market exposure, competitive position and our consistent execution give us the confidence to push forward with our investments to solidify our future growth.”
Appen said the pandemic is accelerating growth in various technology sectors, which benefits Appen indirectly.
It’s maintaining its guidance for underlying EBITDA for the year to be between $125 million to $130 million. Year to date revenue plus orders in hand for delivery in FY20 was around US$475 million at August 2020. The full year underlying EBITDA margin is expected to be in the high teen percentages.
Appen is a business that sometimes divide opinion. Its Figure Eight acquisition improved the quality of the business, but I think the Appen share price is trading too expensively to continue to be a big market beater. I would prefer to buy a tech share like Pushpay Holdings Ltd (ASX: PPH).