Appen Reports $50.2M Q1 Revenue, 12% Growth Excluding Google Contract
Appen Limited reported a 12% revenue increase excluding Google in Q1 FY25, alongside a significant improvement in underlying EBITDA and a robust cash position, setting a positive tone for the year ahead.
- Q1 FY25 revenue of $50.2 million, down 14% year-on-year due to Google contract termination
- Revenue excluding Google grew 12% compared to prior corresponding period
- Underlying EBITDA loss improved by $1.4 million to a loss of $1.5 million
- Cash balance increased to $67.9 million, supported by positive operating cash flow
- Growth driven by demand for large language models and strong performance in China
Revenue Dynamics and Contract Impact
Appen Limited’s Q1 FY25 results reveal a nuanced revenue story shaped by the termination of a significant contract with Google. Total revenue for the quarter stood at $50.2 million, marking a 14% decline year-on-year. However, this figure includes a $13.4 million revenue contribution from Google in the prior corresponding period, which was terminated effective March 2024. When excluding Google revenue, Appen actually achieved a 12% increase compared to Q1 FY24, underscoring underlying growth momentum in its core business.
Improved Profitability Metrics
Despite the revenue headwinds from the lost Google contract, Appen reported a meaningful improvement in its underlying EBITDA (before foreign exchange impacts), narrowing its loss from $2.9 million in Q1 FY24 to $1.5 million in Q1 FY25. This $1.4 million improvement signals enhanced operational efficiency and cost management, even as the company continues to invest in growth areas.
Strong Cash Position and Operating Cash Flow
Appen’s cash reserves strengthened significantly during the quarter, with cash on hand rising to $67.9 million from $54.8 million at the end of December 2024. This was supported by a positive net cash inflow from operating activities of $16.6 million, a notable turnaround from the $12.4 million cash used in operations in the previous quarter. The company attributes this improvement partly to a $10 million payment received from a major customer early in the quarter and strong trading in Q4 FY24.
Growth Drivers and Market Outlook
CEO Ryan Kolln highlighted ongoing growth driven by demand related to large language models (LLMs), a key segment within artificial intelligence data services. Additionally, Appen is seeing significant revenue expansion in China and expresses confidence in the potential of its Enterprise and Government divisions. The company also noted the cyclical nature of its revenue, historically skewed toward the second half of the fiscal year, suggesting that stronger performance may yet be ahead in FY25.
Investment and Cost Management
Staff costs, including payments to employed direct project workers, increased modestly to $6.2 million, reflecting the revenue growth in projects requiring such resources. Capital expenditure remained steady, with $2.8 million invested in intellectual property and product development, signaling ongoing commitment to innovation despite the cautious revenue environment.
Strategic Positioning
With a healthy balance sheet and a focus on delivering quality data rapidly, Appen positions itself well for sustained profitable growth. The company maintains its emphasis on revenue growth and achieving ongoing cash EBITDA positivity, aiming to leverage its global crowd workforce and AI data platform to meet the evolving needs of technology, automotive, financial services, retail, healthcare, and government clients worldwide.
Bottom Line?
Appen’s Q1 results reflect resilience and strategic focus amid contract shifts, setting the stage for a potentially stronger second half of FY25.
Questions in the middle?
- How will Appen offset the revenue gap left by the terminated Google contract in upcoming quarters?
- What specific initiatives are driving the strong growth in China and the Enterprise and Government divisions?
- Can Appen sustain its improved EBITDA trajectory while continuing to invest in product development?
