Slide 1: Acquisition of Leapforce and Capital Raising
For personal use only Appen Limited Acquisition of Leapforce and Capital Raising 29 November 2017 Not for distribution or release in the United States
Slide 2: Important notice and disclaimer
Important notice and disclaimer This investor presentation (Presentation) is dated 29 November 2017 and has been prepared by Appen Limited ACN 138 878 298 (Appen) in connection with the proposed acquisition For personal use only by Appen of Leapforce, Inc. and RaterLabs, Inc. (Acquisition) and the a
Slide 3: Important notice and disclaimer (cont.)
Important notice and disclaimer (cont.) Investment risk For personal use only An investment in securities is subject to known and unknown risks, some of which are beyond the control of Appen and its directors, including, possible loss of income and principal invested. Appen does not guarantee any pa
Slide 4: Important notice and disclaimer (cont.)
Important notice and disclaimer (cont.) Disclaimer For personal use only To the maximum extent permitted by law, (1) Appen (including its subsidiaries, related bodies corporate, shareholders, affiliates, advisers and agents); and (2) Bell Potter Securities Limited (Lead Manager) together with the Le
Slide 5: 1. Transaction Overview
For personal use only 1. Transaction Overview Not for distribution or release in the United States
Slide 6: Overview
Overview Acquisition of • Appen Limited (Appen) to acquire 100% of the shares of Leapforce, Inc. and RaterLabs, Inc. (together For personal use only Leapforce, Inc. & Leapforce) for US$80.0 million2 (the Acquisition) RaterLabs, Inc.1 • Leapforce provides relevance data for search and social media wi
Slide 7: Transaction summary
Transaction summary Funding • The acquisition of Leapforce and associated transaction costs will be funded through a combination of For personal use only new equity and debt - a fully underwritten placement of 4.3 million shares to raise A$25.0 million (Placement) - a fully underwritten share purcha
Slide 8: 2. Overview of Leapforce
For personal use only 2. Overview of Leapforce
Slide 9: Overview of Leapforce
Overview of Leapforce For personal use only Business overview Expertise • Leapforce was founded in 2008 and is privately • Search Evaluation: Helps data scientists owned improve search relevance via a global crowd of raters using a scalable task management • Headquartered in Pleasanton, California w
Slide 10: Historical financial performance of Leapforce
Historical financial performance of Leapforce For personal use only Revenue EBITDA • Revenue growth of 164% from CY2013 to • EBITDA growth of 188% from CY2013 to CY2017 is primarily driven by expansion of work CY2017 is primarily driven by revenue growth, with prime customer and new customer wins re
Slide 11: Strategic rationale
Strategic rationale Establishes Appen as the Adds contracts with For personal use only 1 world’s leading provider of 2 3 Highly automated leading technology technology platform relevance services providers ü Enhanced market share from ü Further diversifies customer ü Proprietary technology platform
Slide 12: Customer revenue distribution
Customer revenue distribution For personal use only Appen + Leapforce Customer Cohort • The acquisition of Leapforce adds substantial Pro Forma Revenue (A$m) Appen + Leapforce Customer Cohort Pro-forma contracts with leading global technology 171.1 providers • Improves customer revenue distribution
Slide 13: Expected financial impact
Expected financial impact For personal use only Accretion • Expected underlying EPS accretion of at least 35% on a FY2017 pro forma basis - Before expensing of transaction costs and share based payments - Before amortisation of identifiable acquired intangibles and related tax impact - No revenue an
Slide 14: Expanded management structure
Expanded management structure For personal use only • Leapforce to operate initially as-is, to maintain customer relationships, ongoing CEO operations and revenue Mark Brayan • Leapforce CEO, Daren Jackson, to continue to lead Leapforce and report to Appen CEO Mark Brayan • Daren Jackson brings enha
Slide 15: 3. Transaction funding, pro forma financials and terms
For personal use only 3. Transaction funding, pro forma financials and terms Not for distribution or release in the United States
Slide 16: Acquisition funding and terms
Acquisition funding and terms Acquisition terms For personal use only • Appen has entered into a binding stock purchase agreement (SPA) to acquire Leapforce for US$80.0 Purchase price million • Purchase price subject to adjustment mechanism relating to working capital at completion • Fully underwrit
Slide 17: H1FY2017 pro forma financial information
H1FY2017 pro forma financial information H1 FY2017 Pro Forma Historical Consolidated Profit and Loss For personal use only Total Pro forma Pro forma A$ millions Pro forma Underlying Appen14 Leapforce15 consolidated statutory underlying (unless otherwise stated) 30 June 2017 adjustments16 combined gr
Slide 18: H1FY2017 pro forma financial information
H1FY2017 pro forma financial information H1 FY2017 Pro Forma Consolidated Statement of Financial Position For personal use only Impact of Offer Pro forma Total consolidated Impact of the A$ millions Appen18 Leapforce19 30 June 2017 and new debt Acquisition21 combined group facilities20 30 June 2017
Slide 19: 4. Offer summary
For personal use only 4. Offer summary Not for distribution or release in the United States
Slide 20: Sources of funding
Sources of funding • A fully underwritten equity raising comprising a placement and share purchase plan (the Offer): For personal use only Placement and – a placement of 4.3 million shares to raise A$25.0 million (Placement) SPP – a share purchase plan to existing eligible shareholders to raise up t
Slide 21: Offer details
Offer details Offer structure • Fully underwritten Placement and SPP to raise gross proceeds of A$30.0 million For personal use only and size • Approximately 5.2 million fully paid ordinary shares to be issued (New Shares) • The Offer Price is as follows: - Placement will be conducted at A$5.80 per
Slide 22: Offer timetable
Offer timetable For personal use only Event Date24 Trading halt and announcement of the Acquisition, Placement and SPP 29 November 2017 Placement bookbuild 29 to 30 November 2017 Trading halt lifted and Appen shares recommence trading on ASX 1 December 2017 Record Date for determining eligible parti
Slide 23: Appendix A: Key risks
For personal use only Appendix A Key risks Not for distribution or release in the United States
Slide 24: Key risks
Key risks Appen’s existing customer base consists of, amongst others, a number of large global multi-national technology companies. The projects awarded by these companies, or the For personal use only ongoing services which Appen may provide to these companies, can generate large amounts of revenue
Slide 25: Key risks (cont.)
Key risks (cont.) The Appen Group’s operating model requires an ability to mobilise a large number of independent contractors on a project by project basis to fulfil customer needs and project For personal use only requirements. If Appen fails to find independent contractors of a suitable quality, a
Slide 26: Key risks (cont.)
Key risks (cont.) Appen has entered into a syndicated facilities agreement (Facility Agreement) to provide funding for the Acquisition and associated acquisition costs. If certain conditions precedent For personal use only are not satisfied or certain events occur, the financiers may be entitled not
Slide 27: Key risks (cont.)
Key risks (cont.) For personal use only The Acquisition may trigger change of control clauses in some of the contracts to which Leapforce (and its subsidiaries) are a party. Where triggered, the change of control clauses Acquisition liability will, in most cases, require Appen to seek the counterpar
Slide 28: Key risks (cont.)
Key risks (cont.) For personal use only 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 Intellectual Property property rights have not been protected, have not bee
Slide 29: Key risks (cont.)
Key risks (cont.) The Appen Group currently operates in certain jurisdictions in the world that may from time to time be the subject of heightened terrorism or sabotage threat. Appen believes that the For personal use only Acts of terrorism or Appen Group’s operations are not immune from being the t
Slide 30: Key risks (cont.)
Key risks (cont.) Activity levels in key For personal use only The Appen Group’s customer base is spread across numerous industry sectors including automobile, information technology, and government. Any adverse developments which industry sectors may impact these industry sectors have the potential
Slide 31: Appendix B: Foreign selling restrictions
For personal use only Appendix B Foreign selling restrictions Not for distribution or release in the United States
Slide 32: Foreign selling restrictions
Foreign selling restrictions For personal use only HONG KONG Notice to prospective investors in Hong Kong WARNING The contents of this document have not been reviewed by any regulatory authority in Hong Kong. You are advised to exercise caution in relation to the offer. If you are in any doubt about
Slide 33: Foreign selling restrictions (cont.)
Foreign selling restrictions (cont.) For personal use only SINGAPORE This document and any other materials relating to the offer or sale of the New Shares have not been, and will not be, lodged or registered as a prospectus in Singapore with the Monetary Authority of Singapore, and statutory liabili
Slide 34: Foreign selling restrictions (cont.)
Foreign selling restrictions (cont.) For personal use only UNITED KINGDOM Neither this document nor any other document relating to the offer has been delivered for approval to the Financial Conduct Authority in the United Kingdom and no prospectus (within the meaning of section 85 of the Financial S
Slide 35: Thank you
For personal use only Thank you Mark Brayan, CEO mbrayan@appen.com Kevin Levine, CFO klevine@appen.com appen.com