APPEN LIMITED — Interim / Quarterly Report 2016

Aug 25, 2016

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Appen Limited

FY2016 First Half Results Presentation

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Disclaimer

The forward looking statements included in these materials involve subjective judgement and analysis and are subject to significant uncertainties, risks, contingencies, many of which are outside the control of, and are unknown to Appen Limited. In particular, they speak only as of the date of these materials, they are based on particular events, conditions or circumstances stated in the materials, they assume the success of Appen Limited’s business strategies, and they are subject to significant regulatory, business, competitive and economic uncertainties and risks.

Appen Limited disclaims any obligation or undertaking to disseminate any updates or revisions to any forward looking statements in these materials to reflect any change in expectations in relation to any forward looking statements or any change in events, conditions or circumstances on which any such statement is based. Nothing in these materials shall under any circumstances create an implication that there has been no change in the affairs of Appen Limited since the date of these materials.

No representation, warranty or assurance (express or implied) is given or made in relation to any forward looking statement by any person (including Appen Limited). In particular, no representation, warranty or assurance (express or implied) is given in relation to any underlying assumption or that any forward looking statement will be achieved. Actual future events and conditions may vary materially from the forward looking statements and the assumptions on which the forward looking statements are based. Given these uncertainties, readers are cautioned to not place undue reliance on such forward looking statements.

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Company Confidential 2
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Company snapshot

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53.4
35.8
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Appen (APX) is a global language technology company with operations in Australia, the US and the Philippines

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8.8
4.8
1H FY2015 1H FY2016
($Am) Revenue EBITDA
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Strong growth in 1H FY2016

A$300M market capitalisation

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Customers include the world’s leading technology companies, automakers and governments

Data and services used in mobile devices, digital assistants, vehicles, security and surveillance, search, social media, ecommerce and consumer electronics Covering over 130 countries and 180 languages

230 employees and over 400,000 on-demand global crowd

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Company Confidential 3
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Positioned for growth

Speech is growing as the interface of choice: ‘Conversational User Interface’

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%"of"USA"Smartphone"Users"Using"Voice"
Assitants"Annually"
70%$ 65%$
60%$ 56%$
50%$
40%$
30%$
30%$
20%$
10%$
0%$
2013$ 2014$ 2015$
%$of$Total$Respondents$
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Appen is a leading provider of critical, multi-lingual, high quality speech data that enables speech interfaces

Search, social media and ecommerce using machine learning for more relevant and personal services

Appen fulfills ongoing need for training data for machine learningbased services

Rapid growth in digital assistants and bots relies on natural language processing

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Digital'Assistants'and'Bots'Market'
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!700!!
!600!!
!500!!
!400!!
!300!!
!200!!
!100!!
!"!!!!
2016! 2017! 2018! 2019! 2020!
Consumer! Enterprise!!
$!US!Billions!
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Appen well positioned for opportunities with language technology and crowd delivery

Source: Thrive Analytics, “Local Search Reports” 2013-2015

Source: William Meisel, “Specialized Digital Assistants and Bots”, 2016

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Company Confidential 4
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First half highlights (A$m)

Revenue up 49%

EBITDA up 83%

NPAT up 102%

Strong execution of customer work won in FY2015

Increasing demand for language data and services

Deep relationships with the world’s largest technology companies

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Revenue Earnings
53.4 8.8
35.8
5.4
4.8
EBITDA
NPAT
2.7
1H FY2015 1H FY2016 1H FY2015 1H FY2016
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Company Confidential 5
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Increasing demand for language data (A$m)

Language Resources revenue up 41%

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Language Resources
18.4
13.1
7.4
4.8
1H FY2015 1H FY2016
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Provision of high quality speech data to global technology companies

Demand driven by growth in speech as an interface. Need for multiple languages and accents.

Content Relevance revenue up 54%

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Content Relevance
35.0
22.7 Revenue
EBITDA
6.1
3.7
1H#FY2015# 1H#FY2016#
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Ongoing delivery of training data for machine learning-based search and social media services

Demand fueled by need for more personal and relevant online services

Volume discounts will impact margins

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Company Confidential 6
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Deep relationships with global companies

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82.7
2H FY16
60.7
53.4
51.0
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Appen’s customers include the world’s largest technology companies, automakers and governments

Ever increasing need for language data and services

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33.3
29.5
FY2011 FY2012 FY2013 FY2014 FY2015 H1 FY2016
Language Resources customers
originating in year
Content Relevance customers
originating in year
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Quality of Appen’s data and services drives growing and repeat revenue

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Company Confidential 7
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Scalable technology and operations

Appen is well positioned to support growth in digital assistants and bots Quality of data and service underpinned by proprietary technology

Operational scalability enabled by over 400,000 on-demand crowd-based contractors 230 innovative staff worldwide High employee engagement, low turnover

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Company Confidential 8
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	1H FY2016	1H FY2015	% change	% change constant currency
Statutory Results
Language Resources	18.4	13.1	41%
Content Relevance	35.0	22.7	54%
Total Revenue	53.4	35.8	49%	41%
EBITDA	8.8	4.8	83%	59%
EBITDA Margin	17%	14%
NPAT	5.4	2.7	102%	63%
Pro Forma Results*
EBITDA	8.8	5.1	75%	52%
NPAT	5.4	2.8	87%	51%

High Growth (A$m)

Revenue up 49% on 1H FY2015

Revenue growth from strong execution of customer work won in FY2015

EBITDA up 83%

Margin improvement due to operational scalability underpinned by offshoring and technology

NPAT up 102%

*1H FY2015 Pro Forma results exclude one-off expenses associated with the IPO and other non-recurring items

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Company Confidential 9
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	Jun 2016	Dec 2015
Cash	13.1	12.7
Receivables	18.5	17.3
Current Assets	0.3	0.3
Non-Current Assets	11.2	11.7
Total Assets	43.1	42.0
Current Liabilities	9.4	11.4
Non-Current Liabilities	2.4	1.9
Total Liabilities	11.9	13.3
Net Assets	31.3	28.7
Total Equity	31.3	28.7

Strong Balance Sheet (A$m)

Strong balance sheet. No debt.

Increase in cash reserves and receivables related to increase in revenue volumes

Interim dividend of 2.0 cents per share fully franked, up from 1.2 cents per share in 1H FY2015.

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Company Confidential 10
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	1H FY2016	FY2015	1H FY2015
Receipts	50.7	72.5	27.4
Payments and other	(44.0)	(67.6)	(30.6)
Cash flow from Operations before interest and tax	6.7	4.9	(3.2)
Taxes	(3.2)	(0.9)	(0.8)
Total Cash flow from Operations	3.5	4.0	(4.0)
Cash flows - Investment Activities	(0.4)	(0.6)	(0.2)
Cash flows - Financing Activities	(2.5)	(0.5)	0.6
Net Cash flow for the period	0.6	2.9	(3.6)
Opening cash balances	12.7	8.6	8.6
FX Impact	(0.3)	1.2	0.2
Closing cash balances	13.1	12.7	5.2

Solid Cash Flow (A$m)

Cash balance increased by $7.9m over 1H FY2015

Cash flow from operations improved due to improvements in timing of customer receipts

Cash flow is sensitive to working capital and other requirements that are necessary to fund and support sustainable growth

Strong cash flow conversion($m):

EBITDA	8.8
Working capital	(2.5)
Other	0.4
Cash flow from operations before interest and tax	6.7

Review and upgrade of IT systems in 2H FY2016 and FY2017 to improve scalability and support future growth

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Company Confidential 11
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Currency impact (A$m)

Almost all revenue derived offshore, most in USD Substantial growth on top of currency benefit

Revenue

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EBITDA
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53.4 14.6 3.0

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8.8
14.6 3.0 1.2
2.8
35.8
4.8
1H FY2015 Currency Currency 1H FY2016 1H FY2015 Currency Currency 1H FY2016
Neutral Impact Neutral Impact
Growth Growth
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Company Confidential 12
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Outlook

Pipeline continues to build, fuelled by demand for high quality language data and services 1H FY2016 revenue plus orders in hand for delivery in FY2016 ~$100m as of August 2016 Full year outlook for earnings growth now on target to exceed 20%

Outlook susceptible to upside or downside from factors including timing of work from major customers and Australian dollar fluctuations (outlook at 76c)

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Company Confidential 13
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Thank you

Mark Brayan, CEO, mbrayan@appen.com Kevin Levine, CFO, klevine@appen.com Leanne Ralph, Company Secretary, leanne.ralph@boardworx.net.au

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Company Confidential
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