Slide 1: Refreshing Appen
Refreshing Appen Strategy refresh and capital raising presentation NOT FOR DISTRIBUTION IN THE UNITED STATES
Slide 2: Important notice and disclaimers (1 of 4)
Important notice and disclaimers (1 of 4) This investor presentation (Presentation) is dated 16 May 2023 and has been prepared by Appen Limited (ACN 138 878 298) (Appen). • This Presentation has been prepared in relation to: • a pro rata accelerated non-renounceable entitlement offer of new fully pa
Slide 3: Important notice and disclaimers (2 of 4)
Important notice and disclaimers (2 of 4) Appen prepares its financial information in accordance with the Corporations Act, Australian Accounting Standards (AAS) adopted by the Australian Accounting Standards Board (AASB) and International Financial Reporting Standards (IFRS) adopted by the Internat
Slide 4: Important notice and disclaimers (3 of 4)
Important notice and disclaimers (3 of 4) Each recipient of this Presentation should make its own enquiries and investigations regarding all information included in this Presentation including the assumptions, uncertainties and contingencies which may affect the Appen Group's future operations and t
Slide 5: Important notice and disclaimers (4 of 4)
Important notice and disclaimers (4 of 4) APPEN GROUP AND THE UNDERWRITER None of the underwriter nor any of its Extended Parties, nor the advisers to Appen, have authorised, permitted or caused the issue, lodgement, submission, dispatch or provision of this Presentation and do not make or purport t
Slide 6: Executive summary
Executive summary Appen supports AI training data and model evaluation for the world’s leading AI 1 Appen overview The new management team has undertaken an operational review and identified a number of opportunities to instil operational rigour and return Appen to profitability Strategic refr
Slide 7: Appen overview
01 Appen overview NOT FOR DISTRIBUTION IN THE UNITED STATES
Slide 8: Appen is an AI platform services business
Appen is an AI platform services business We provide Fortune 500 clients Our AI data AI platform services value our expertise platform to many of the and consultative underpins our world’s advanced big approach services tech companies 8 NOT FOR DISTRIBUTION IN THE UNITED STATES
Slide 9: We power the world's leading AI
We power the world’s leading AI 8 out of 10 largest global tech companies by market capitalisation 184 new clients in 2022 +9 years average tenure + m a n y m o r e of our top 5 clients 9 NOT FOR DISTRIBUTION IN THE UNITED STATES
Slide 10: Key findings of the operational review
Key findings of the operational review… Sales and marketing New market growth Operations Immediate need to level-up our sales Investments in Enterprise and Federal Growth opportunity and marketing, focus on hiring new BUs have not resulted in current business, requires marketing and sales operations
Slide 11: Focus for first 4 months has been on resetting for growth
Focus for first 4 months has been on resetting for growth Operational rigour Product velocity World class go- Ecosystem #AIforGood to-market partnerships Establish business Launch products that Build consultative Expand our partner Deliver trustworthy management capture new market sales and go-to- e
Slide 12: Refreshed growth strategy
02 Refreshed growth strategy NOT FOR DISTRIBUTION IN THE UNITED STATES
Slide 13: Appen's growth vision
Appen’s growth vision Full set of AI data services for deep-learning and generative AI Deep-learning AI Generative AI Appen AI models and services (future) Data collection Data collection Data annotation Appen DeepRelevance Learning Fine tuning Assurance Point of interest Annotation Search relevance
Slide 14: Generative AI market size estimated to reach >$110 billion by 2030
Generative AI market size estimated to reach >$110 billion by 2030 Estimated Generative AI market size ($ billion) Challenges with adoption Appen can help address Human feedback (RLHF) is required for base models to perform at levels comparable to humans and to minimize hallucinations, bias and toxi
Slide 15: Appen's new set of LLM Data products
Appen’s new set of LLM Data products Enabling the development and fine tuning of generative AI models Fine tuning products Assurance products Appen’s fine tuning products Appen’s assurance enable enterprises to products ensure customise existing customers’ model performance is generative AI models f
Slide 16: Extending our channels to market will allow us to scale
Extending our channels to market will allow us to scale Ecosystem relationships1 Model 2 Enterprise Builders Customer Appen Ecosystem Enterprise leaders Sales 3 Enterprise Compute Customer Enterprise Customer Systems Enterprise Direct Sales Integrators/ Professional services firms Customer Network I
Slide 17: We are already gaining momentum
We are already gaining momentum Large-tech model Enterprise model Enterprise model builder builder fine tuning Evaluated model Recent pilot leads to $2 – 5 Active partnership with Reka performance of text to million opportunity for large drives opportunity to deliver image generative AI scale creati
Slide 18: Strategic refresh under new leadership
Strategic refresh under new leadership Deep-learning AI Generative AI Maximise the opportunity from our current data Enable generative AI services Provide crowd-based services and products that enable the Improve our project delivery and crowd management development and enterprise adoption of genera
Slide 19: Strategic refresh addresses key focus areas
Strategic refresh addresses key focus areas Customer diversification Generative AI expected to create material demand beyond large tech customers Margin improvement Greater reliance on technology to improve gross margins Revenue visibility New products to have a greater proportion of recurring reven
Slide 20: Operational rigour initiatives
03 Operational rigour initiatives NOT FOR DISTRIBUTION IN THE UNITED STATES
Slide 21: Operational rigour improvements delivered
Operational rigour improvements delivered New product and Generative AI automation in our engineering measurements annotation processes to drive delivery and business impact Cost review completed across all Business Management System business areas for financial and operational metrics Weekly, Month
Slide 22: Taking action to reduce cost base
Taking action to reduce cost base Reduce cost base for the future, ensuring Appen is appropriately resourced to execute on its strategy Incremental reduction in annualised operating costs • Total annualised cost savings of $46 million relating to measures announced in 2023 • Cost savings to be imple
Slide 23: The New Appen
04 The New Appen NOT FOR DISTRIBUTION IN THE UNITED STATES
Slide 24: Management to deliver next phase of growth
Management to deliver next phase of growth Helen Johnson Andrea Clayton Ryan Kolln Chief Financial Officer Chief People & SVP, Strategy & Joined in 2023 Purpose Officer Innovation Corporate Sujatha Sagiraju Saty Bahadur Carl Middlehurst Chief Product Officer Chief Technology Officer VP, General Coun
Slide 25: #CultureCode
#CultureCode PURPOSE PERSPECTIVE We unlock the power of #AIforgood to We are a learn-it-all culture and embrace that build a better world. comfort and growth do not coexist. PROSPERITY Four values unite us Customer Courage to Action Winning obsessed innovate oriented together 25 NOT FOR DISTRIBUTION
Slide 26: Turnaround scorecard for next 6 months
Turnaround scorecard for next 6 months Operational rigour Product velocity World class go- Ecosystem #AIforGood to-market partnerships Execute cost saving LLM benchmarking New sales leaders and Expanded set of Focus on conversion to initiatives product launched structure in place ecosystem partners
Slide 27: 2023 outlook
2023 outlook • Taking into account headwinds from the broader technology market slowdown, historical fourth quarter seasonal trends, regular dialogue with customers and our pipeline of project work across all clients, we expect an improvement in 2H FY23 revenue relative to revenue achieved in 1H FY2
Slide 28: Wrap up
Wrap up Five key take aways 1 AI is changing the world. Generative AI is creating new experiences like we have not seen before. The future is with us The new strategy positions Appen well to capture growth in the 2 deep learning and generative AI markets. Our growth vision is to move beyond AI data
Slide 29: Equity raising
05 Equity raising NOT FOR DISTRIBUTION IN THE UNITED STATES
Slide 30: Sources and uses of funds
Sources and uses of funds Sources of funds (A$ million) • Appen’s lender, Westpac, has granted a waiver of Entitlement Offer 38.3 financial covenants in relation to the June testing date for its Credit Placement 21.2 Facility, conditional on completion of the equity Total sources of funds 59.5 raisi
Slide 31: Equity raising details
Equity raising details • Fully underwritten ~A$60 million Equity Raising comprised of: • A 1 for 6 pro rata accelerated non-renounceable entitlement offer (“Entitlement Offer”) to existing eligible shareholders to raise Offer structure and ~A$38 million; and size • An institutional placement (“Place
Slide 32: Equity raising timetable
Equity raising timetable Events Dates Announcement of the Equity Raising Tuesday, 16 May Placement and Institutional Entitlement Offer bookbuild Tuesday, 16 May Announcement of results of the Placement and Institutional Entitlement Offer Wednesday, 17 May Appen shares recommence trading (on an ex-en
Slide 33: Pro forma balance sheet
Pro forma balance sheet 31 Dec 2022 31 Dec 2022 $ million Actual Pro forma1 Cash and cash equivalents 23 612 Trade and other receivables 64 64 Contract assets 30 30 Intangibles 110 110 Property, plant and equipment 4 4 Other assets 23 23 Total assets 255 293 Trade and other payables 40 40 Contract l
Slide 34: Key risks
Key risks This section discusses some of the key risks associated with an investment in shares in Appen. These risks may affect the future operating and financial performance of the Appen Group and the value of Appen shares. The risks set out below are not necessarily listed in order of importance a
Slide 35: Key risks (cont.)
Key risks (cont.) Business risks Appen depends on the talent and experience of its existing management personnel. However, despite incentives offered to key personnel, there can be no assurance that Appen will be able to retain all of its key personnel. The loss of any Appen management key managemen
Slide 36: Key risks (cont.)
Key risks (cont.) Business risks The Appen Group’s success depends, in part, on its ability to maintain trade secret protection and operate without infringing the rights of third parties. If the Company’s intellectual property rights have not been protected, have not been Intellectual protected adeq
Slide 37: Key risks (cont.)
Key risks (cont.) Business risks Geopolitical tensions may impact global trade and have wide-ranging impacts to the global economy and markets. The world is currently experiencing a number of conflicts, including the war between Russia and the Ukraine, and the duration and path of those conflicts re
Slide 38: Key risks (cont.)
Key risks (cont.) Business risks Accounting Australian Accounting Standards are set by the AASB and are outside the control of either Appen or its Directors and management. There is a risk that interpretations of existing Australian Accounting Standards, including those relating to standards may the
Slide 39: Summary of Underwriting Agreement
Summary of Underwriting Agreement Appen entered into an underwriting agreement with the underwriter in respect of the Offer on 16 May 2023 (Underwriting Agreement). The Underwriter's obligations under the Underwriting Agreement, including to underwrite the Placement and the Entitlement Offer of appr
Slide 40: Summary of Underwriting Agreement (cont.)
Summary of Underwriting Agreement (cont.) • any adverse change occurs, or there is a development involving a prospective adverse change, in the assets, liabilities, financial position or performance, profits, losses or prospects of the Appen Group from those respectively fully and fairly disclosed i
Slide 41: International selling restrictions
International selling restrictions International Offer Restrictions This document does not constitute an offer of new ordinary shares (“New Shares”) of the Company in any jurisdiction in which it would be unlawful. In particular, this document may not be distributed to any person, and the New Shares
Slide 42: International selling restrictions (cont.)
International selling restrictions (cont.) Norway This document has not been approved by, or registered with, any Norwegian securities regulator under the Norwegian Securities Trading Act of 29 June 2007 no. 75. Accordingly, this document shall not be deemed to constitute an offer to the public in N