Slide 1: ASX Announcement: Investor Presentation
Appen Limited Level 6, 9 Help Street Chatswood NSW 2067 Tel: 02 9468 6300 www.appen.com ACN: 138 878 298 ASX ANNOUNCEMENT 26 August 2021 INVESTOR PRESENTATION Further to the Company’s announcement to the market today on its results for the half year ended 30 June 2021, please find attached the prese
Slide 2: 2021 Half Year Results Presentation
Appen Limited 2021 Half Year Results Presentation 26th August 2021
Slide 3: Important information
Important information The forward-looking statements included in these materials involve subjective judgement and analysis and are subject to significant uncertainties, risks and contingencies, many of which are outside the control of, and are unknown to, Appen Limited. In particular, they speak onl
Slide 4: Market expansion
Market expansion The data annotation market is expected Appen's core market Adjacent AI markets to grow from $2.5B to more than $5B by 2021 2024E 2024, ~25% CAGR1 Appen revenue CAGR of 38% 1H16-1H21 New Markets revenue growth of 31.5% 1H21 vs 1H20, driven by new customer ~$110B segments and AI
Slide 5: Accelerating our transformation
Accelerating our transformation Appen is transforming FROM TO into an AI powered provider of AI data Data type Language data AI data and solutions Delivery model Service led Product led Delivering greater capabilities, Revenue Project based Committed broader application, All industries & Customers M
Slide 6: 1H21 result overview
1H21 result overview As expected, 1H21 growth rate impacted by the skew US$ 1H21 vs 1H20 in project delivery to 2H21 and the strong pcp result Global Services revenue lower due to Global Group revenue $196.6M (2.0%) customers’ allocation of resources to new and non- advertising related projects
Slide 7: Key focus areas
Key focus areas Global leader in data annotation and collection for AI Grow in attractive new markets and geographies and leverage our capabilities across a broad customer base Build scalable products and processes to deliver high-quality training data, faster, with improved unit economics 6
Slide 8: 1. Strong core
1. Strong core Global leader in data annotation and collection for AI Track record of high growth - 38% revenue CAGR 1H16-1H21 Industry-leading AI-enabled annotation technology Flexible, diverse crowd of 1m+ annotators in 170+ countries with expertise in 235 languages Unrivalled customer rel
Slide 9: Supporting Global customers' evolving needs
Supporting Global customers’ evolving needs Global Services Global Product Global customer revenue through customers’ platforms Global customer revenue through Appen’s platform and tools US$M US$M 163.9 148.8 26 22 32%1 19 Revenue 13 EBITDA 42.3 7 34.4 1H20 1H21 1H19 2H19 1H20 2H20 1H21 Global Ser
Slide 10: Project diversity supports revenue growth
Project diversity supports revenue growth Global Revenue1 Global Revenue1 Projects related to advertising2 All other projects US$M 140 Non-ad related revenue is now 75% of total revenue from Global customers, reflecting their 120 accelerated investment in new AI products and applications 100 In
Slide 11: Growth in new projects due to expertise, capabilities
Growth in new projects due to expertise, capabilities 1H21 Global 1H21 Global revenue (US$M) project count Projects that Working with Global customers on 100 new 20.3 commenced in projects since Jan 2021, reflecting our expertise 2021 and evolving capabilities 100 New projects have lower revenue
Slide 12: New projects with Global customers
New projects with Global customers AR/VR Capture of household actions to help AI understand hand motions e.g., toy assembly AR/VR Data collection of categories of motion without distinct boundaries e.g., liquid, gas, light, wind Geolocation Point-of-Interest and business validation data Smart glasse
Slide 13: 2. New market expansion
2. New market expansion Grow in attractive new markets and geographies and leverage our capabilities across a broad customer base Global Product – leveraging our annotation platform and tools to expand the business we do with Global customers China – capturing share in the high growth China mark
Slide 14: New Markets delivered strong growth and new customers
New Markets delivered strong growth and new customers New Markets Customer wins Global Product, Enterprise, Government, and China # US$M 46 47.8 42 36.3 36 32 30 Revenue EBITDA 24 1H20 1H21 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 -7.9 -7.4 1H21 revenue of $47.8M, up 31.5% 74 new customers in 1H21, further
Slide 15: New Markets revenue breakdown
New Markets revenue breakdown Global Product Enterprise, China, Government Global customers using Appen platform US$M US$M 26 27 25 22 27%1 22 32%1 19 17 16 13 7 1H19 2H19 1H20 2H20 1H21 1H19 2H19 1H20 2H20 1H21 1H21 revenue of $22.3M, up 15.2% from 1H20 1H21 revenue of $25.5M, up 50.1% from 3
Slide 16: New Markets driving committed revenue
New Markets driving committed revenue Annual contract value (ACV) Revenue by type At end of period During the period US$M US$M 119.6 103.0 98.7 69% 69% 93% 88% 97% Project Committed 25.0 31% 31% 3% 7% 12% 2H19 1H20 2H20 1H21 1H19 2H19 1H20 2H20 1H21 ACV of $119.6M, up 16% from 1H20 $61.8M of com
Slide 17: Capturing share in the high growth China market
Capturing share in the high growth China market China revenue 1H21 revenue of US$7.5M, 5.8x 1H20 US$M 60% compound growth rate 1Q20-2Q21 4.5 Strong result driven by growing business with tech +60% QoQ giants plus new logo wins 2.9 Winning new deals in speech and image annotation and speech d
Slide 18: Growing our Enterprise customer base
Growing our Enterprise New Enterprise projects customer base Automotive Technology Online retail Product Growing customer base Driver activity Translation pair categorisation and monitoring evaluation search relevance Continued project expansion Average revenue per project up 18% year on year
Slide 19: Growing opportunities with Government
Growing opportunities with Government New partnerships with leading government contractors and integrators New engagements with government research labs Increased opportunities in space and mapping projects Launched new tiled imagery tool to support geospatial annotation Longer sales and b
Slide 20: 3. Product led
3. Product led Build scalable products and processes to deliver high-quality training data, faster, with improved unit economics Our product suite expands our addressable market and customer base, and enables us to support the long tail of companies that are investing in AI Adding machine learni
Slide 21: Building scalable products
Building scalable products New products Appen Appen Data Appen Appen Appen Connect Annotation Platform Intelligence In-Platform Audit Mobile Match our global Collect and annotate Empower Appen products Organise and analyse Engages, enables and crowd workforce to training data with proprietary machin
Slide 22: ML-powered automation project deployments in 1H21
ML-powered automation project deployments in 1H21 Automatic Speech Recognition 20% efficiency gain model for video transcription Computer vision model for 200% annotation speed e-commerce improvement Object detection model for 29% efficiency gain 2D video 22% quality improvement ML for automated aud
Slide 23: Quadrant acquisition
Quadrant acquisition A global leader in mobile location and Point-of-Interest data Location analytics and intelligence market to reach $29.8B1 by 2027 29.8 +14% CAGR Hydra Geolancer QCMP Leading location data High-fidelity crowd sourced Consent management intelligence provider with Point-of-Interest
Slide 24: Quadrant unlocks new market potential for Appen
Quadrant unlocks new market potential for Appen Strategic rationale Acquisition details Quadrant’s highly-scalable approach to US$25M upfront, funded from existing cash data capture and processing aligns to reserves Appen’s product-led strategy Potential additional payment of up to Provides
Slide 25: 1H21 sustainability highlights
1H21 sustainability highlights Multi-year partnership with the World Economic Forum on Responsible AI helping to develop and promote responsible AI standards Calculated our 2019 and 2020 carbon footprint in accordance with the GHG Protocol; and have a low emissions intensity 3.16g CO2e/$ revenue
Slide 26: Making an impact through digital work
Making an impact through digital work Impact Pulse Survey of our crowd1 40% 1 in 5 39% 69% relied on our work from home were long-term unemployed relied on Appen as their use their Appen earnings to model due to barriers to (>1 year) before joining Appen primary source of income support their househ
Slide 27: Revenue and EBITDA summary
Revenue and EBITDA summary % Challenging pcp comparison with 1H20 revenue split at US$M 1H21 1H20 change 49%, significantly higher than historic split and FY21 forecast, coupled with the higher cost base in 1H21 Global Services 148.8 163.9 (9.2%) 1H21 revenue impacted by Global customers’ alloca
Slide 28: Core productivity has improved, growth investments continue
Core productivity has improved, growth investments continue Expenses as % of revenue 30% 25% 20% Gap between total expense and core expense driven by incremental growth investments and investments in New Markets 15% 10% Core expenses include service delivery, IT, recruitment, HR and corporate costs,
Slide 29: Investment in product development
Investment in product development Investment in product development1 US$M 1H21 investment of $21.2M reflects increased focus Product development as a % of revenue on product development to drive customer wins, scalability, repeatability, quality and margin 8.6% 10.8% expansion 4.0% Increase in F
Slide 30: Conservative approach to amortisation
Conservative approach to amortisation Product development is amortised over 3 years. Amortisation expense has increased due to the strategic focus on product development. 100% Year of US$’000 90% origination of Year of amortisation3 Amounts amortised 80% 2018 2019 2020 2021 capitalised Amount spend
Slide 31: Strong and resilient balance sheet
Strong and resilient balance sheet US$M Jun 2021 Dec 2020 Strong balance sheet with no debt Cash 66.0 60.5 $66.0M in cash at 30 June 2021, increased from Receivables 41.1 50.6 31 Dec 2020 as a result of effective cash collection, contributing to the reduction in Contract assets1 28.2 31.5 receiv
Slide 32: Effective cash flow conversion
Effective cash flow conversion US$M 1H21 1H20 1H20 cash flow from operations benefitted from Receipts 210.4 219.3 favourable receipt timing differences Payments and other (182.5) (169.8) Closing cash balance reduced by $20.7M, impacted by repayment of borrowings of $23.5M in Cash flow from opera
Slide 33: Outlook
Outlook Full year underlying EBITDA will be impacted by the planned investment in Quadrant1 – and reduces the guidance provided in February and May of $83M - $90M, by $2M, to $81M - $88M Full year underlying EBITDA expected to be at the low end of the range due to ad-related project impacts Ye
Slide 34: Strongly positioned for the long term
Strongly positioned for the long term Largest global player in AI training data collection and annotation Strong AI industry tailwinds – growing adoption, use cases Market-leading crowd, technology and Strong New market Product expertise - capabilities aligned with Global core expansion led cu
Slide 35: Appendix: Summary financials
Appendix: Summary financials CAGR US$’000 2015-2020 2015 2016 2017 2018 2019 2020 Revenue 46% 62,136 81,655 127,742 272,415 372,181 412,996 Underlying EBITDA 48% 10,462 12,811 21,592 52,839 70,176 75,439 Underlying EBITDA margin - 16.8% 15.7% 16.9% 19.4% 18.9% 18.3% Underlying NPAT 49% 6,241 7,812 1
Slide 36: appen.com/investors
appen.com/investors appen