Appen Benefits From Lower Australian Dollar
Artificial Intelligence (AI) giant, Appen Limited, is the latest firm that has acknowledged that the plunge in the Australian dollar in March was possibly a blessing in disguise. As of 06 May 2020, the currency has plunged by more than 8 per cent against the US dollar this year, trading at US$64.34. Nevertheless, Reserve Bank of Australia governor Philip Lowe is a firm believer that the local currency remains a crucial source of stability as the nation works its way through the COVID-19 slowdown. Yet for firms such as Appen, the currency has proved to be a source of support.
Chief Executive Mark Brayan asserts that the firm derives all its revenue offshore and therefore stands to benefit in the current environment. As part of broader movement restrictions globally, the world now places a heavy reliance on social media, e-commerce and search. This is evident in the performance of FANNG stocks including Facebook, Apple, Amazon, Netflix and Google owner Alphabet- who have witnessed solid gains since Mid-March to April. These big players are also the companies that the world relies on to help tide through the pandemic. Consequently, Appen stands to benefit as it generates revenue from these firms who have a keen interest in investing in AI.
Appen provides training data used in artificial intelligence products and collects and label image, audio, speech data to continuously improve its systems. Since it was established in 1996, Appen's operations has since expanded to more than 130 countries. Back in Mid-April, the firm has affirmed its 2020 full-year market guidance, reinforcing that it anticipates underlying earnings before interest, tax, depreciation, and amortisation to fall within the range of $125 million to $130 million. The range is made on the assumption of a US70cents Australian dollar conversion rate.
In light of the recent pandemic, the company has had no difficulties in transiting towards working from home. This is because the employees it hires have always been working from home. Mr Brayan further asserted that the recent weeks had witnessed a surge in people who are keen to join the firm. Consequently, both the demand and supply side of the business is thriving well. Despite the tailwinds, Appen too experiences several headwinds. Foremost, as a result of the pandemic, there is a decline in advertising expenditure at Appen’s largest clients as these costs further eat into revenue. Likewise, the pandemic-induced shutdown will, in turn, hit several of Appen’s smaller customers.
Additionally, the firm has always been on the lookout for acquisition opportunities. Given its previous track record of purchasing companies, the current environment does not appear that any near-term opportunity is likely. Nevertheless, Appen’s business in China is proceeding well. Despite some lost business, Appen’s employees have now returned to work. Moving forward, the firm remains in an excellent position as it currently maintains cash resources in excess of $100 million.
By Caroline Wong
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