Appen Ltd. · ASX:APX
Appen — H1 2024 Earnings Presentation
33 slides from Appen's earnings presentation, Aug 30, 2024
Slide 1: H1 2024 results
H1 2024 results 30 August 2024
Slide 2: Important Information
Important Information The forward-looking statements included in these materials involve No representation, warranty or assurance (express or implied) is given or subjective judgement and analysis and are subject to significant made in relation to any forward-looking statement by any person (includi
Slide 3: Agenda
Agenda 01 Results and overview 02 H1 FY24 performance 03 Strategy update 04 July trading update and 2024 outlook 3
Slide 4: Results and overview
Results and overview Ryan Kolln
Slide 5: Revenue growth returning
Revenue growth returning Group revenue excluding Google Commentary 80.0 • Excluding the impact of Google, we are experiencing a 70.0 return to revenue growth 19.1 • Excluding Google, revenue for Q2 FY24 grew 16% on pcp 60.0 23.3 (from $47.2 million in Q2 FY23) 18.3 13.4 • Q2 growth benefited from LL
Slide 6: EBITDA improving as costs remain in control
EBITDA improving as costs remain in control Underlying EBITDA before Fx1 Commentary 4.0 • Underlying EBITDA1 (before FX) for Q2 FY24 was a profit of $0.6 million, a $7.8 million improvement on pcp loss of $7.2 million 2.0 2.8 • We acted swiftly to control costs following the Google 0.6 announcement,
Slide 7: Generative AI major driver of revenue growth
Generative AI major driver of revenue growth 15% of group revenue 28% of group revenue Delivered generative AI- from generative AI-related from generative AI-related related projects to 42 LLM projects1 in H1 FY24 projects1 in June 2024 customers in H1 FY24 30% 30% 28% 50 42 40 20% 20% 30 28 15% 20
Slide 8: Financial performance
Financial performance Justin Miles
Slide 9: H1 FY24 snapshot
H1 FY24 snapshot H1 H1 Change Commentary FY24 FY23 • Revenue decreased 18% to $113.4m, reflecting termination of the Google Revenue 113.4 138.9 (18%) contract • Excluding the impact of Google, decrease a modest 2% Global Services revenue 63.6 100.1 (36%) • Global Services impacted by termination of
Slide 10: Revenue
Revenue Group Global services New markets 150 150 50 49.8 138.9 125 125 40 113.4 38.9 100 100 100.1 30 75 75 20 63.6 50 50 10 25 25 0 0 0 1H23 1H24 1H23 1H24 1H23 1H24 • Revenue down 18% on H1 FY23 • Revenue down 36% on H1 FY23 • Revenue up 28% on H1 FY23 • Impacted by termination of Google contract
Slide 11: Underlying EBITDA (before FX)
Underlying EBITDA1 (before FX) Group Global services New markets 30 30 30 20 20 20 10 10 10 8.7 6.7 0 0 0 -2.3 -7.9 -10 -10 -10 -15.7 -20 -20 -20 -21.7 -30 -30 -30 1H23 1H24 1H23 1H24 1H23 1H24 • $13.4m improvement on H1 FY23 • EBITDA of $6.7m down 23% on H1 FY23 • $13.8m improvement on H1 FY23 • De
Slide 12: Cash EBITDA improving month-on-month
Cash EBITDA improving month-on-month Revenue Underlying EBITDA1 Underlying cash EBITDA2 before FX before FX 25.0 4.0 4.0 20.0 2.0 2.0 15.0 15.7 13.9 2.4 0.0 10.0 21.1 15.4 -0.2 18.1 -1.1 -0.5 15.9 -1.4 -1.3 0.0 -1.9 5.0 -0.1 -0.7 -2.0 6.9 4.7 -1.1 -1.3 1.8 -1.5 0.0 Jan Feb Mar Apr May Jun -2.0 -4.0
Slide 13: Global revenue stabilised with growth returning
Global revenue stabilised with growth returning Global revenue excluding Google Commentary 45.0 • Following stabilisation of revenue in H2 FY23, growth 40.0 returned in Q2 FY24 3.4 • Q1 FY24 result pleasing given Q4 FY23 volume includes 35.0 some seasonality 30.0 8.6 • Global Product growth driven b
Slide 14: Record revenue for China in Q2
Record revenue for China in Q2 China revenue Commentary 16.0 • Revenue growth continued during the half, off the back of a 14.0 strong Q4 FY23 • China achieved revenue record in Q2 FY24 12.0 • Significant traction in LLM projects, continuing to support leading LLM builders 10.0 • Expansion continues
Slide 15: Conviction in revenue opportunity remains for Enterprise, Government
Conviction in revenue opportunity remains for Enterprise, Government Enterprise, Government revenue Commentary 12.0 • Decrease in revenue driven by lower volumes within existing large Enterprise projects 10.0 • Remain bullish on the opportunity, however timing is unclear with uncertainty around how
Slide 16: Profit and loss summary
Profit and loss summary H1 H1 Change Commentary FY24 FY23 Revenue 113.4 138.9 (18%) • Revenue decreased 18% to $113.4m, reflecting termination of Google contract Gross Margin1% 37.7% 37.3% 0.4 pp • Gross margin % improvement primarily due to change in customer and project mix Employee expenses 2 28.
Slide 17: Balance sheet
Balance sheet Jun 2024 Dec 2023 Commentary Cash 34.7 32.1 • Cash balance of $34.7m, up $2.6m from December 2023 Receivables 40.2 49.9 • Cash balance at 31 July of $30.6m, decrease from June due to working capital cycle Contract assets 14.4 15.6 • Receivables decreased due to lower revenue Q2 FY24 co
Slide 18: Cash flow summary
Cash flow summary H1 FY24 H1 FY23 Commentary Receipts 123.3 175.1 Payments and other (112.7) (166.1) • Cash balance of $34.7m, up $2.6m from December 2023 Cash flow from operations before interest and tax 10.6 9.0 • Cash flow from operations of $10.6m, positively impacted by strong Q4 FY23 trading N
Slide 19: Strategy update
Strategy update Ryan Kolln Appen
Slide 20: Appen specialises in high-quality data that brings human expertise into AI model development
Appen specialises in high-quality data that brings human expertise into AI model development Data Your model People Curate the Prepare useable Develop and deploy Evaluate model right data training data your models performance 20
Slide 21: Appen AI data solutions
Appen AI data solutions AI/ML data = we support Personalised Content Content Metaverse Computer Vision Audio & Speech LLM Foundation Enterprise LLM Ad Relevance recommendation Relevance Moderation AR / VR Models Models Models Customisation AI solutions Product News Feed Search Sentiment Autonomous T
Slide 22: Appen global workforce
Appen global workforce 1M+ 50M+ 500+ 100+ 7 100+ people people hours on languages domain specific secure facility countries platform capabilities options 22
Slide 23: Generative AI is a key component of our service offering
Generative AI is a key component of our service offering LLM evaluation for a leading SFT dataset for a leading LLM Domain-specific LLM for Multimodal prompt-response technology company model builder leading technology company dataset for a leading LLM model builder LLM evaluation and preference Sup
Slide 24: Growth strategy
Growth strategy Appen’s traditional TAM New Generative AI opportunities Companies adopting generative Deep learning model builders Generative AI model builders AI 1. Next generation crowd and project management platform 3. SaaS platform for LLM customisation 2. Optimise and automate high quality dat
Slide 25: July trading update and 2024 outlook
July trading update and 2024 outlook Ryan Kolln
Slide 26: July 2024 trading update
July 2024 trading update Revenue1 Underlying EBITDA2 Underlying cash EBITDA3 before FX before FX 25.0 4.0 4.0 20.0 6.9 2.0 2.0 4.7 1.8 15.0 2.4 10.0 21.1 0.0 18.1 17.6 0.0 0.0 15.7 15.4 15.9 -0.1 -0.7 -0.2 -0.3 13.9 -0.5 -1.1 -1.1 5.0 -1.3 -1.4 -1.3 -1.5 -1.9 -2.0 -2.0 0.0 Jan Feb Mar Apr May Jun Ju
Slide 27: 2024 outlook statement
2024 outlook statement Excluding the impact of Google, revenue momentum is positive We continue to see positive signals on LLM related growth including from our Global and China customers Tight cost controls remain in place, in keeping with the company’s focus on managing costs in line with the reve
Slide 28: Appendix
Appendix Appen
Slide 29: Appendix 1: Appen reporting structure
Appendix 1: Appen reporting structure Global Services New Markets Services provided to New Markets reflects progress against our product led strategy leading US tech companies utilising their Includes Global Product (Global customer revenue through Appen products), platform Enterprise, China, and Go
Slide 30: Appendix 2: Google contribution to revenue
Appendix 2: Google contribution to revenue Group revenue Global revenue 80.0 70.0 70.0 60.0 19.1 60.0 23.3 18.3 50.0 19.1 21.9 13.4 50.0 40.0 18.3 23.3 40.0 21.9 13.4 30.0 30.0 54.3 55.0 47.2 48.6 45.0 20.0 38.2 20.0 40.2 34.5 30.6 26.8 26.6 23.1 10.0 10.0 0.0 0.0 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Q1
Slide 31: Appendix 3: Investment in product development
Appendix 3: Investment in product development Investment in product development¹ Commentary Product development (exc. amortisation) as a % of revenue • $10.3m investment in product development significantly lower than prior periods, reflecting cost out program executed during FY23 12.7% • Savings pr
Slide 32: Appendix 4: Reconciliation between statutory and underlying results
Appendix 4: Reconciliation between statutory and underlying results Half-year ended Half-year ended Change 30-Jun-24 30-Jun-23 $000 $000 1. Underlying results are a non-IFRS measure used by management to assess Underlying net loss after tax (NPAT)1 (11,815) (34,209) nm% the performance of the busine
Slide 33: Appendix 5: AI market opportunity
Appendix 5: AI market opportunity Appen’s traditional TAM New Generative AI opportunities Companies adopting Deep learning model builders Generative AI model builders generative AI Description Technology and software companies Well-funded start up and technology Companies that are customising that h