The Appen Ltd (ASX: APX) share price has been on fire in recent weeks.
Since this time last month, the artificial intelligence (AI) data services company's shares have risen 68%.
This means that Appen's shares are now up 250% year to date.
But this impressive run won't be continuing on Friday after the company requested a trading halt.
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Why is the Appen share price halted?
The company requested a trading halt this morning after it decided to take advantage of its strong share price gains to raise capital.
This shouldn't come as a big surprise to shareholders. In fact, late last month I suggested that a capital raising was likely to be on the horizon for Appen.
According to the release, the company is aiming to raise $55 million from investors via an institutional placement and share purchase plan.
The main component of this will be a fully underwritten $50 million institutional placement at $1.92 per new share. This represents an 11.5% discount to where the Appen share price last traded.
This will be complemented by a non-underwritten share purchase plan that is aiming to raise $5 million at the same price.
Management notes that the proceeds from the placement and share purchase plan will provide additional liquidity to fund working capital and provide greater flexibility to pursue generative AI related opportunities. It notes that Appen's external customer environment continues to show signs of improvement, particularly from generative AI (eg. ChatGPT) related projects.
Trading update
Appen has also provided the market with a trading update for the third quarter of FY 2024.
It reported a 12.9% decline in revenue to $54.1 million for the three months ended 30 September. However, its revenue would be up 34.6% on the prior corresponding period if you exclude the loss of Google as a customer.
Appen's gross margin improved to 41.2% from 33.6% thanks to the successful completion of its cost-out initiatives. This underpinned a breakeven EBITDA result, which compares favourably to an $8.6 million loss in the prior corresponding period.
Management notes that its revenue trend continues to exhibit a stable and positive trajectory with each month delivering an increase versus the prior corresponding period, excluding Google revenue.
Appen's CEO and managing director, Ryan Kolln, commented:
Profitability is a key focus for Appen and we are very pleased to have returned to underlying EBITDA and underlying cash EBITDA profitability in Q3 FY24. Our external environment continues to display signs of improvement and we are excited by the potential opportunities that this presents.
We're continuing to experience LLM-related growth which is contributing to our positive revenue trajectory. China continues to experience significant revenue growth and we remain optimistic about the potential of our Enterprise and Government divisions.
Appen shares are expected to be offline until Monday.
