Slide 1: ASX Release: Investor Presentation
ASX Release 28 August 2023 Investor Presentation Further to the Appen Limited’s (ASX:APX) announcement to the market today on its results for the half-year ended 30 June 2023, please find attached the presentation to be delivered to investors and analysts this morning. Authorised for release by the
Slide 2: Powering Real World AI
28 August 2023 Powering Real World Al
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: Introduction
Introduction 1H FY 23 financial performance Turnaround progress & outlook Q&A << appen
Slide 5: 1H FY23 Financial Performance
1H FY23 Financial Performance
Slide 6: 1H FY23 summary
1H FY23 summary US$M 1H23 1H22 change Revenue 138.9 182.9 -24% Underlying EBITDA ' (18.1) 8.5 nm Underlying EBITDA margin -13.0% 46% Underlying EBITDA’ before FX (15.7) 9.6 nm Underlying EBITDA margin before FX -11.3% 5.2% Underlying NPAT 2 (34.2) (3.8) Statutory NPAT (43.3) (9.4) 1. Underlying EBIT
Slide 7: Revenue
Revenue SS Group Ei Global Services © New Markets @ $138.9M $100.1M $38.9M $182.9M in 1H FY22 $137.8M in 1H FY22 $45.0M in 1H FY22 » Revenue down 24% on 1H FY22 » Revenue down 27% on 1H FY22 * Revenue down 14% on 1H FY22 * Majority of decline from Global Services * Reduction in spend due to the ongo
Slide 8: Underlying EBITDA (before FX)
Underlying EBITDA! (before FX) a . @ Group ES Global Services ©) New Markets » a $9.6M in 1H FY22 $26.2M in 1H FY22 ($15.6M) in 1H FY22 * EBITDA impacted by lower revenue, lower + EBITDA of $8.7M down 67% on 1H FY22 * EBITDA impacted by lower Global gross margin and a proportionally higher . i % j P
Slide 9: Investment in product development
Investment in product development Investment in product development’ Product development (ex amortisation) as a % of revenue 147% 10.8% ‘oO -o— ° 42.0 30.2 23.4 20.5 20.6 10.7 52% capitalised 18.6 9.6 98 48% expensed FY21 FY22 1H FY23 Product development relates to investment in engineering to ensur
Slide 10: Strong progress against $46m cost out target
Strong progress against $46m cost out target As planned, at the end of 1H FY23 approximately 63% or $28.9M of annualised cost savings target has been achieved At least 80% of the $46 million cost out program will be completed by the end of Q3 FY23; remainder on track to be delivered in Q4 FY23. The
Slide 11: Cash flow summary
Cash flow summary * Cash balance includes net proceeds from equity raise of $38.2M * Cash flow from operations decreased 50% to $9.0M due to lower trading volumes, partially offset by positive working capital Positive cash flow from operations despite EBITDA loss due to strong Q4 FY22 customer recei
Slide 12: Balance sheet
Balance sheet US$M Jun 2023 Dec 2022 Cash 55.2 23.4 Receivables 43.2 64.3 Contract assets 10.8 30.4 Other current assets 9.1 6.5 Non-current assets 128.9 130.3 Total assets 247.2 254.9 Current liabilities 776 65.1 Non-current liabilities 22.9 41.8 Total liabilities 100.5 106.9 Net Assets 146.7 148.0
Slide 13: Turnaround progress & outlook
co 0 8 x re: O £ Dg =) rsd
Slide 14: Generative AI market potential has grown
Generative Al market potential has grown December 2022: $111b market size by 2030 8 as 2021 Source: Acumen Research (December 2022) 2030 June 2023: ~$900b market size by 2030 897 23 2021 2030 Source: Bloomberg Intelligence, IDC (June 2023) << appen
Slide 15: Humans critical to generative AI
Humans critical to generative Al Human feedback (RLHF) is required for base models to perform at levels comparable to humans and to minimise hallucinations, bias and toxicity Many base models do not work out of the box for companies and in a domain context - fine tuning and evaluation is required, t
Slide 16: Not for distribution in the United States
NOT FOR DISTRIBUTION IN THE UNITED STATES
Slide 17: Generative AI potential does not yet offset market headwinds
Generative Al potential does not yet offset market headwinds Tech spending Customers are slowdown evaluating their Al continues strategies * Customers continue to * Generative Al has led to reduce spending in most customers evaluating their areas Al strategies * Reduction to customer ° This has resu
Slide 18: Not for distribution in the United States
NOT FOR DISTRIBUTION IN THE UNITED STATES
Slide 19: Strong progress against H2 turnaround plan
Strong progress against H2 turnaround plan 9 © @ © Operational Product World class Ecosystem #AlforGood rigour velocity go-to-market partnerships O Execute cost OLLM ONew sales leaders © Expanded set of © Focus on saving initiatives benchmarking and structure in ecosystem conversion to product launc
Slide 20: We are building new generative AI capabilities
We are building new generative Al capabilities Ensuring that model performance meets performance, risk and regulatory requirements Optimise model performance to align with human experiences <- appen
Slide 21: LLM conversational RLHF
LLM conversational RLHF Deshboare ec Multi-turn feedback deere
Slide 22: LLM Benchmarking
LLM Benchmarking Benchmarking
Slide 23: Growing LLM success
Growing LLM success Examples of LLM projects delivered Fine-tuned LLM 42 LLM projects and pilots on promet A/B testing for models through delivered in 2023) leading leading human feedback generative Al generative Al ; for global model builders moder builders financial services firm 40 Deals in curre
Slide 24: Modernised mobile-first crowd experience
Modernised mobile-first crowd experience Quick Tasks Data Collect ST_Hurst, Dunn & Gallow a ST_Bush Inc 17/07/2023 8 Applied Project © Completed Validate Smartphone Qualify Sign E-docs Benefits Improved crowd experience leading to better engagement with Appen Faster sign on leading to reduced time t
Slide 25: Slide 25
Slide 26: Ecosystem relationships
Ecosystem relationships1 2 3 Professional services firms
Slide 27: 2023 outlook
2023 outlook * The following outlook is provided on the basis that market conditions do not change materially. * Appen continues to face headwinds from the broader technology market slowdown and as customers evaluate their Al strategies. * Due to the ongoing uncertainty across all customers, we now
Slide 28: Thank you for your attendance
Thank you for your attendance
Slide 29: Appendix
Slide 30: Global revenue
Global revenue! Global division revenue by half ($M) 215.2 * Global revenue down 28% in 1H 183.3 190.2 19.3 FY23 on 1H FY22, impacted by : VARI reduced volumes and reduction in 19.4 26.0 spend by our customers 1H20 2H20 1H21 2H21 1H22 2H22 1H23 22.3 » Largest customer revenue down 106.2 34% in 1H FY
Slide 31: New Markets revenue
New Markets revenue! New Markets revenue by half ($M) » New Markets revenue down 14% in 1H23 on 1H22, primarily impacted by 54.7 478 45.0 43.4 Global Product revenue 78 38.9 Global Product revenue 43% down 6 on 1H FY22 as a small number of 18.1 large projects were discounted or reduced in scope 16.4
Slide 32: China revenue
China revenue China revenue by half ($M) 18.0 17.2 » China revenue down 15.2% in 1H23 on 1H22, due to impact of Covid-19 : pandemic and challenging external market conditions carried over into 1H FY23 China, Japan and Korea won 50 new clients 75 Launched Appen China LLM Data Training platform Releas
Slide 33: Underlying profit and loss summary
Underlying! profit and loss summary Underlying results are a non-IFRS measure used by management to assess the performance of the business and have been calculated from statutory measures. Non-IFRS measures have not been subject to audit. Underlying EBITDA excludes the impairment loss, restructure c
Slide 34: Reconciliation between statutory and underlying results
Reconciliation between statutory and underlying results |, Underlying results are a non-IFRS measure used by management to assess the performance of the business and have been calculated from statutory measures. Non-IFRS measures have not been subject to audit. Underlying EBITDA excludes the impairm