Ann: Appen to Acquire Figure Eight & Launch Capital Raising, page-26

Appen has had very good history of value adding acquisitions.

Last acquisition was Leapforce, capital raising price was $5.80 when the shares were trading at $8. It never got down anywhere close to $5.80 and that to me was amazing. I’ve never seen anything like it.

Most investors here applied for the full $15k but got scaled back to about $1.4k which was nothing really.

Leapforce turned out to be a huge driver in profitability straight off the bat.

My feeling is that Figure 8 will be very positive to Appen’s future earnings, but this acquisition will probably not be contributing to EBITDA this half, but the next. It depends how quickly integration happens, and how quickly they can raise subscription fees for the new service.

Given that their customers are all tech companies at the forefront of Artificial Intelligence and are all leaders in the race to dominate their field (facial recognition, pattern identification, smart home, voice activation, search, commands, machine learning), they will have no qualms paying up for a superior product.

My experience with tech companies is that they are always willing to pay for a new piece of software that is a game changer, they are not shy to pay up big time for anything that can give them an edge. That’s the price of the NASDAQ tech sector. But that’s also why Google, Microsoft, Apple, Facebook, Amazon and the like are massive - they pay up for new technology.

A key word that has never crossed my mind in Mark Bryan’s writeup was that Data Recency is important to this sector. Search algorithms and pattern recognising algorithms need to have the latest data in order to return relevant results.

That means Appen’s services are Long Term. They aren’t selling just a one-off set of data. Their clients are going to continuously need data, at higher and higher frequencies. Faster. Sooner. Quicker. As real-time as possible. As immediate as possible.

All this points towards Appen’s revenue growing at the same rate or faster. And the icing on the cake is that it’ll be sustainable and be even more in-demand in the future. Love this company!