Slide 1: 2023 full year results
2023 full year results Investor presentation 27 February 2024 Appen
Slide 2: 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 3: Agenda
Agenda Introduction & FY23 overview FY23 financial performance Growth strategy & FY24 priorities FY24 outlook RON = Appen
Slide 4: Introduction & FY23 overview
Introduction FY23 overvie Ryan Kolln CEO 4
Slide 5: FY23 performance overview
FY23 performance overview Business reset due to major customer reduction Positive Q4 momentum * Reductions from a large customer resulted in revenue * Q4 on Q3 growth in Global Services and New Markets reduction (incl. China) * Resized cost base - with $60m * Decline from major customer cost reducti
Slide 6: FY22 FY23 Jul
4.0 400.0 200 3.2 388.1 2.0 160 300.0 159 273.0 0.2 120 0.0 -0.6 200.0 80 99 -2.3 -2.1 -2.0 100.0 40 -3.1 0.0 0 -4.0 FY22 FY23 FY23 start FY23 end Jul Aug Sep Oct Nov Dec • • • • •
Slide 7: Q1 Q2 Q3
60.0 12.0 12.0 11.1 50.0 10.0 10.0 10.8 9.0 9.0 40.0 8.0 8.0 8.5 38.2 8.1 8.1 26.8 30.6 23.1 7.1 30.0 6.0 6.0 20.0 4.0 4.0 21.9 23.3 10.0 19.1 18.3 2.0 2.0 0.0 0.0 0.0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Google Total excluding Google • • • •
Slide 8: $2m+ exit run rate with a leading generative AI model builder
• • • • $2m+ exit run rate with a leading generative AI model builder for LLM prompt- response annotation in 9 languages. 3-year program of work.
Slide 9: Google impact and action to reduce costs
1, INTRODUCTION AND FY23 OVERVIEW Google impact and action to reduce costs Details of the impact *Google terminated its global inbound services contract with all projects to cease by 19 March 2024 *FY23 Google revenue $82.8M at a gross margin of 26%! Gross margin refers to revenue less crowd expense
Slide 10: FY23 financial performance
FY23 1! mlatelatel(e] heron Justin Miles CFO
Slide 11: FY23 financial summary
a 2. FY23 FINANCIAL PERFORMANCE FY23 financial summary FY23 FY22 change Revenue 273.0 388.1 -380% Gross Margin'% 36.3% 37.6% -130bps Underlying EBITDA 2 (24.5) 11.0 nm% Underlying EBITDA 2 before FX (20.4) 13.6 nm% Underlying NPAT 8 (52.8) (22.8) nm% Statutory NPAT 4 (118.1) (239.1) nm% Dividend Nil
Slide 12: FY22 FY23 FY22
400.0 400.0 100.0 388.1 80.0 88.4 300.0 300.0 81.5 299.8 273.0 60.0 200.0 200.0 191.5 40.0 100.0 100.0 20.0 0.0 0.0 0.0 FY22 FY23 FY22 FY23 FY22 FY23 • • • • • • •
Slide 13: FY22 FY22 FY23
60.0 60.0 60.0 54.5 40.0 40.0 40.0 20.0 20.0 20.0 17.5 13.6 0.0 0.0 0.0 -20.4 -20.0 -20.0 -20.0 -32.7 -36.5 -40.0 -40.0 -40.0 -60.0 -60.0 -60.0 FY22 FY23 FY22 FY23 FY22 FY23 • • • •
Slide 14: Jul Aug Sep
30.0 4.0 4.0 25.0 3.2 2.0 2.0 2.3 20.0 18.5 0.2 16.0 15.0 14.1 0.0 0.0 14.0 13.0 13.1 -0.6 -0.7 -1.0 10.0 -2.1 -2.0 -2.3 -2.0 -2.5 -2.7 5.0 -3.1 7.5 7.6 7.8 8.1 7.5 6.8 -3.4 0.0 -4.0 -4.0 Jul Aug Sep Oct Nov Dec Jul Aug Sep Oct Nov Dec Jul Aug Sep Oct Nov Dec Google Total excluding Google
Slide 15: Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 Q1 FY22 Q2 FY22 Q3 FY22
140.0 • 120.0 10.9 • 100.0 8.5 3.5 • 80.0 9.1 13.2 4.1 5.3 5.3 60.0 109.7 3.4 2.5 • 2.7 1.1 86.2 85.5 40.0 76.6 76.5 72.2 68.8 69.1 53.9 46.2 43.9 47.6 20.0 0.0 Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Global services Global product
Slide 16: Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 Q1 FY22 Q2 FY22 Q3 FY22
12.0 • 11.1 • 9.9 9.0 9.1 • 9.0 8.1 8.1 8.1 7.4 7.5 7.1 • 6.0 • 4.5 3.0 2.9 0.0 Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23
Slide 17: Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 Q1 FY22 Q2 FY22 Q3 FY22
14.0 • 12.0 • 11.6 10.8 10.0 9.9 • 9.0 9.2 9.0 9.0 8.9 8.0 8.6 8.5 8.2 • 7.2 6.0 • 4.0 2.0 0.0 Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23
Slide 18: Balance sheet
18 2. FY23 FINANCIAL PERFORMANCE Balance sheet US$M Cash Receivables Contract assets Other current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Net Assets Total equity Dec 2023 321 49.9 15.6 91 48.5 155.2 477 147 62.4 92.8 92.8 Dec 2022 23.4 64
Slide 19: Cash flow summary
19 2. FY23 FINANCIAL PERFORMANCE Cash flow summary US$M Receipts Payments and other Cash flow from operations before interest and tax Net interest Taxes Net cash from operations Cash flows - investing activities Cash flows - financing activities Net cash flow for the period Opening cash balance FX i
Slide 20: Growth strategy & FY24 priorities
Ryan Kolln CEO
Slide 21: Generative AI revenue forecast
• 1,400 30% 1304 1,200 1079 25% • 1,000 897 20% 800 728 $ billions 15% • 600 548 12% 10% 399 11% 400 10% 304 9% 217 7% 6% 5% 200 137 5% 40 67 4% 3% 0 0% 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 Generative AI Revenue Generative AI as % of Total Technology Spend
Slide 22: Market landscape: Data tools and services are key enabler for Generative AI
3. GROWTH STRATEGY AND FY24 PRIORITIES Market landscape: Data tools and services are key enabler for Generative Al development Application Enterprise & Industry Applications a >) Model Tools Data Tools & Services Propriety models (©) Hugging Face Appen C > . Model Foundation models WA mosaic™ scale
Slide 23: Generative AI has expanded our TAM by $4-8B
3. GROWTH STRATEGY AND FY24 PRIORITIES Al market opportunity: Generative Al has expanded our TAM by $4-8B Description S ated TAM for data services and software by 2030 *——— Appen’s traditional TAM Technology and software companies that have built Al into their core product offering US and China majo
Slide 24: Growth strategy: high quality data for leading AI
24 3. GROWTH STRATEGY AND FY24 PRIORITIES Growth strategy: high quality data for leading Al *——— Appen’s traditional TAM 7° New Generative Al opportunities 1. Next generation crowd and project management platform 3. SaaS platform for LLM customisation 2. Optimise and automate high quality data creat
Slide 25: 1. Next gen crowd and project management platform
25 3. GROWTH STRATEGY AND FY24 PRIORITIES 1. Next gen crowd and project management platform Al-enabled crowd management Automated contributor screening for target demographics, skills and attributes Automated crowd performance evaluation and remediation Dynamic supply and demand matching Key element
Slide 26: 2. Optimise and automate our delivery processes
26 3. GROWTH STRATEGY AND FY24 PRIORITIES 2. Optimise and automate our delivery processes Key elements of the strategy Use LLM to automate dataset creation Automate part of human annotation Evolve our delivery process Utilise generative Al for data quality checks, replacing human QA Al evaluation of
Slide 27: 3. SaaS platform for LLM customisation: opportunity
3. GROWTH STRATEGY AND FY24 PRIORITIES 3. SaaS platform for LLM customisation: opportunity Enterprises will adopt existing LLMs, but customise for Customising LLMs requires investment into enterprise data and inputs Limited tooling exists for efficient collaboration between 27 their use cases Increa
Slide 28: 3. SaaS platform for LLM customisation: our solution
28 3. GROWTH STRATEGY AND FY24 PRIORITIES 3. SaaS platform for LLM customisation: our solution On-premise deployment Platform deployment supports data security needs Flexible deployment approach to support multiple cloud environments Key elements of the strategy Pre-built workflows to capture expert
Slide 29: 4. Modernised sales and marketing
29 3. GROWTH STRATEGY AND FY24 PRIORITIES 4. Modernised sales and marketing Key elements of the strategy Established team New website and Dedicated account with strong technical marketing management background approach * CRO, CMO, Field CTO + Simplified website, + Expert team in place and head of sa
Slide 30: 5. Tight financial controls
3. GROWTH STRATEGY AND FY24 PRIORITIES 5. Tight financial controls Key elements of the strategy Financial benefits 30 Quarterly budgeting process to adjust costs to revenue Re-base expenses each quarter to right- size business based on revenue Strong focus on cashflow management ROI evaluation of pr
Slide 31: Tenured management team with industry expertise
31 3. GROWTH STRATEGY AND FY24 PRIORITIES Tenured management team with industry expertise Corporate and shared services Sales and delivery & an Ryan Kolin Chief Executive Officer Mike Davie Chief Product and Technology Officer Brian Haskett SVP Client management and operations Roc Tian SVP and GM Ap
Slide 32: FY24 outlook
FY24 outlook Ryan Kolln CEO
Slide 33: FY24 outlook: Market observations
33 4. FY24 OUTLOOK Market observations * FY23 was a transitional year for the Al market. Many companies experimented with and evaluated the potential of generative Al * The experimental period, along with a broader focus on cost optimisation among tech customers, resulted in challenging market condi
Slide 34: Jul Aug Sep
30.0 4.0 4.0 3.2 25.0 25.9 24.1 2.0 2.0 2.3 22.7 21.9 20.0 20.8 20.8 20.5 0.2 15.0 0.0 0.0 -0.6 -0.1 -0.7 -0.2 -1.0 10.0 -2.1 -2.0 -2.3 -2.0 -2.5 -2.7 5.0 -3.1 -3.4 0.0 -4.0 -4.0 Jul Aug Sep Oct Nov Dec Jan Jul Aug Sep Oct Nov Dec Jan Jul Aug Sep Oct Nov Dec Jan
Slide 35: FY24 outlook
4. FY24 OUTLOOK FY24 outlook * Revenue decline from a large customer that impacted FY23 revenue has stabilised in Q4 FY23, and this trend is expected to continue further into FY24 * Costs associated with the development of new products will be contained in the current product and engineering spend.
Slide 36: Thank you!
Thank you!
Slide 37: Appendix 1: Appen reporting structure
37 Appendix 1: Appen reporting structure Services provided to New Markets reflects progress against our Product Led strategy leading US tech companies utilising their platform Includes Global Product (Global customer revenue through Appen products), Enterprise, Govt, China and Quadrant Includes larg
Slide 38: 60.0 60.0 54.3 50.0 50.0 48.6 47.2 40.0 40.0 40.2 30.0 30.0 23.3 20.0
60.0 60.0 54.3 50.0 50.0 48.6 47.2 40.0 40.0 40.2 30.0 30.0 23.3 20.0 20.0 21.9 19.1 18.3 10.0 10.0 0.0 0.0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Slide 39: FY22 FY23
12.7% • 10.6% 41.2 • 34.6 23.4 • 17.8 • 17.8 16.8 • FY22 FY23
Slide 40: Appendix 4: Reconciliation between statutory and underlying results
40 Appendix 4: Reconciliation between statutory and underlying results Year ended Year ended 31 Dec 2023 31 Dec 2022 Change $000 $000 Underlying net loss after tax (NPAT) * (52,810) (22,739) nm% (Less)/add underlying adjustments (net of tax) Impairment loss (61,663) (204,326) Amortisation of acquisi