Appen Ltd (ASX: APX) shares have returned from their trading halt and are sinking into the red.
At the time of writing, the artificial intelligence (AI) data services company's shares are down 8% to $2.00.
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Why are Appen shares falling?
On Friday, Appen decided to take advantage of its strong share price performance this year to raise capital.
The company is aiming to raise a total of $55 million from investors via an institutional placement and share purchase plan.
Management notes that proceeds 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 related projects.
According to an announcement this morning, Appen has completed the institutional component of its capital raising. It has raised $50 million through a fully underwritten institutional placement at $1.92 per new share. This represents an 11.5% discount to where Appen shares last traded.
The release notes that the placement was strongly supported by both Appen's existing shareholders and new investors. Appen's CEO and Managing Director, Ryan Kolln, said:
The strong support for this Placement is reflective of our return to profitability on an underlying EBITDA and underlying cash EBITDA basis. It also highlights investor confidence in our growth potential as our external environment displays continuous signs of improvement, particularly from generative AI related opportunities.
Appen will now push ahead with its non-underwritten share purchase plan. It is aiming to raise $5 million at the same price as the institutional placement.
Q3 update
While it was in its trading halt, Appen also provided the market with an update on its performance during the third quarter of FY 2024.
Management advised that for the three months ended 30 September, it achieved revenue of $54.1 million. This represents a 12.9% decline over the prior corresponding period. Though, if you exclude the loss of Google as a customer, Appen's revenue would have increased 34.6% year on year.
Another positive that is likely to have gone down well with the market is Appen reporting an improvement in its gross margin. It has lifted to 41.2% from 33.6%, which underpinned a breakeven EBITDA result. This compares favourably to an $8.6 million loss in the prior corresponding period. Management notes that this improvement was driven by the successful completion of its cost-out initiatives.
Commenting on its performance during the quarter, CEO Ryan Kolln said:
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.
