Appen Ltd’s [ASX:APX] share price has continued its impressive rise today, surging another 18.82%, to trade at $22.35 per share. The price marks the company’s all-time high.
Appen provides language technology data and services in more than 150 languages and dialects to technology companies and government agencies. Appen is divided into two distinct business divisions: content relevance and speech and data collection.
Appen share price thanks AI for strong growth
In the release of its full-year results this morning, Appen highlighted strong growth across its business operations, citing new and existing customer investments into AI.
While its language resources business unit recorded a 27% jump in revenue for the year, its content relevance unit grew by a mammoth 148%, pulling in $312.8 million.
Total revenue was up 119%, from $166.6 million to $364.3 million. Statutory earnings more than tripled, recording an increase of 206% from $22.2 million to $68.1 million. Their earnings margin also increased from 16.9% to 19.6%.
Statutory net profit rose 192%, from $14.3 million to $41.7 million.
Appen’s Chief Executive Officer, Mark Brayan, said that the company’s strong growth is a result of the accelerating AI market and the high and growing demand for quality training data.
The company said growth was driven by existing and new customers that are developing an increasing array of AI solutions.
‘Our Content Relevance division, including Leapforce, continues to be the growth engine for Appen and performed particularly strongly in Q4…the inclusion of Leapforce, customer expansion and economies of scale have all contributed to growth and margin expansion.’
Appen purchased Leapforce — a competitor in the same industry — in November 2017 for $105.3 million.
Appen’s results are largely due to a booming AI market. Analysts forecast a market of $169 billion to $191 billion by 2025. The McKinsey Global Institute estimates that up to 10% of the cost of AI is labelled data, sizing Appen’s addressable market at up to $19 billion by 2025.
What’s next for Appen?
In its investor presentation, Appen said it is focusing investment in technology that will help meet demand for data.
Because AI performance improves with larger volumes of data, Appen said it will be further investing in its crowd-sourced delivery model that enables greater crowed productivity, increases data volumes and quality, and improves the company’s competitive position.
This investment has been sourced from the efficiency savings identified for 2019 from the Leapforce integration and forecast at $6 million in 2019. To help lead the investment, Appen hired former senior director of engineering at eBay, Wilson Pang as CTO.
Appen also advised the company’s full-year underlying earnings for the year ending 31 Dec 2019 is currently forecast to be in the range $85–90 million, after engineering investment.
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