APPEN LIMITED — Investor Presentation 2016

Feb 28, 2016

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Appen Limited

FY2015 Full Year 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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Appen’s work underpins speech recognition technologies for government and commercial applications such as Skype’s translator that connects friends and businesses around the globe

Appen helps major ecommerce vendors improve search accuracy to make shopping easier, improve conversion rates and grow businesses

Appen helps leading search and social media companies deliver relevant content and news to their users

Appen helps the world’s leading vehicle makers develop hands-free, voice-activated systems for safer driving

Appen works with gaming console providers for voice activated commands that enhance the player’s experience

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Company Confidential 3
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Company overview

Founded in 1996

Providing high quality language data and services to technology companies and government agencies worldwide Customers include 9 of the top 10 global technology companies

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140 languages and dialects

210 staff globally: Australia, US, Philippines, UK and other locations

Over 320,000 crowd-sourced on-demand independent contractors worldwide

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Company Confidential 4
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Full year results (A$m)

Revenue up 62% EBITDA up 189% NPAT up 414%

Pro forma EBITDA up 110% Pro forma NPAT up 136% Benefit from falling AUD

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Revenue! Earnings!
!82.7!!
!13.8!!
!51.0!!
!8.3!!
EBITDA!
!4.8!! NPAT!
!1.6!!
FY2014! FY2015! FY2014! FY2015!
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Company Confidential 5
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Share price growth

Share price growth: $0.50 - $1.61* + 222%

Dividend:

4.2c

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!2.00!!
!14,000!!
!1.80!!
!1.60!! !12,000!!
!1.40!!
!10,000!!
!1.20!!
!8,000!!
!1.00!!
!APX!!
!0.80!! !6,000!!
!ASX!All!
!0.60!! Ordinaries!!
!4,000!!
!0.40!!
!2,000!!
!0.20!!
!"!!!! !"!!!!
02"Jan"15!02"Feb"15!02"Mar"15!02"Apr"15!02"May"15!02"Jun"15! 02"Jul"15!02"Aug"15!02"Sep"15!02"Oct"15!02"Nov"15!02"Dec"15!
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• At 31 December 2015

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Company Confidential 6
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	FY2015	FY2014	% change	% change constant currency
Statutory Results
Language Resources	31.9	22.5	42%
Content Relevance	50.7	28.4	78%
Total Revenue	82.7	51.0	62%	35%
EBITDA	13.8	4.8	189%	85%
EBITDA Margin	17%	9%
NPAT	8.3	1.6	414%	144%
Pro Forma Results*
EBITDA	14.0	6.7	110%	48%
NPAT	8.5	3.6	136%	38%

Full year results (A$m)

Revenue up 62% on FY2014

Language Resources up 42% Content Relevance up 78%

EBITDA up 189% (Pro forma up 110%*)

Margin improvement due to operational scalability underpinned by offshoring and technology

NPAT up 414% (Pro forma up 136%*)

*Pro forma results exclude one-off expenses associated with the IPO and other non-recurring items

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Company Confidential 7
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New revenue growth

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!25,000!!
!20,000!!
!15,000!!
FY14!
!10,000!!
FY15!
!5,000!!
!"!!!!
eCommerce! Search!Customer! Social!Media!
Customer! Customer!
Revenue in FY2015 from customers
won after successful pilots in FY2014
($#'000)#
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Customers won through successful pilots in FY2014 provided substantial revenue in FY2015

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Company Confidential 8
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Improved customer diversification

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FY2014
FY2015
Others
14%
Improved revenue distribution Others
2%
28%
23%
2%
across top ten customers 3%
3%
1%
No single customer > 28% 2%
48%
3%
2%
2%
4%
3%
5%
9%
10%
9%
27%
Percentage of revenue from top ten customers in FY2014 and FY2015
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Company Confidential 9
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Repeat revenue

A significant percentage of revenue each year is derived from repeat customers

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95%$ 96%$ 94%$ 97%$
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FY2012$ FY2013$ FY2014$ FY2015$
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Percentage of revenue each year from customers that provided revenue in the prior year

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Company Confidential 10
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Strong growth from both divisions (A$m)

Language Resources revenue up 42%

Improvement on high margins

Content Relevance revenue up 78%

Operational scalability from offshoring and technology

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Language!Resources! Content!Relevance!
!50.7!!
!31.9!!
!28.4!!
Revenue!
!22.5!!
Opera:ng!Profit!
!13.0!!
!8.1!! !7.7!!
!4.2!!
FY2014! FY2015! FY2014! FY2015!
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Company Confidential 11
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Currency impact (A$m)

Results have benefited from the falling AUD

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Revenue!
!13.7!! !82.7!!
!18.0!!
!51.0!!
FY2014! Currency! Currency! FY2015!
Neutral! Impact!
Growth!
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EBITDA!
!4.9!! !13.8!!
!4.1!!
!4.8!!
FY2014! Currency! Currency! FY2015!
Neutral! Impact!
Growth!
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Company Confidential 12
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People and culture

Employee satisfaction high at 90% Turnover low at 13%

210 employees, up from 150 in FY2014 Over 320,000 crowd-sourced on-demand independent contractors worldwide 140 languages and dialects Rated in Flexjobs Top 100 companies for remote work Active in-house Corporate Social Responsibility program

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Company Confidential 13
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Balance Sheet (A$m)

	FY2015	FY2014
Current Assets	30.3	18.9
Non-Current Assets	11.7	11.2
Total Assets	42.0	30.1
Current Liabilities	11.4	9.3
Non-current Liabilities	1.9	1.2
Total Liabilities	13.3	10.5
Net Assets	28.7	19.6
Total Equity	28.7	19.6

Strong balance sheet. No debt. Current assets up due to increase in cash reserves and receivables related to increase in revenue volumes

Interim dividend of 1.2 cents per share fully franked

Final dividend of 3.0 cents per share fully franked Total dividend for year of 4.2 cents

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Company Confidential 14
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Cash Flow (A$m)

	FY2015	FY2014
Receipts	72.5	58.8
Payments and other	(67.6)	(49.6)
Cash flow from operations before interest and tax	4.9	9.2
Taxes	(0.9)	(0.9)
Total Cash flow from Operations	4.0	8.3
Cash flows - Investment Activities	(0.6)	(11.4)
Cash flows - Financing Activities	(0.5)	5.3
Net Cash flow for the period	2.9	2.2
Opening cash balances	8.6	5.8
FX Impact	1.2	0.6
Closing cash balances	12.7	8.6

Cash balance increased by $4.1m Cash flow from operations impacted by: Working capital investment relating to increased sales volume IPO payment of $1.3m

Cash flow reconciliation ($m):

EBITDA	13.8
Working capital (Balance Sheet movement)	(6.2)
Payment of IPO costs not going through P&L	(1.3)
FX impact	(1.2)
Other	(0.2)
Cash flow from operations before interest and tax	4.9

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Company Confidential 15
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Outlook - Markets

Major technology companies continue to invest in speech recognition

Increasing use of speech recognition technology in multiple verticals including automotive, healthcare, military, gaming and call centres

Search leaders continue to invest in relevance services Facebook and Amazon emerging as ‘go to’ destinations for search and ads Growing importance of search for eCommerce and mobile Automotive speech market forecast at 10.6% CAGR Large government investments in intelligence gathering

Source:
Appen
analysis
and
mulBple
public
sources.

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Company Confidential 16
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Outlook - Pipeline

Over $60m orders in hand for FY2016 Healthy pipeline of 19 pilots (commenced in FY15)

5 pilots now in production. Delivered FY2015 revenue

7 pilots with existing customers

3 pilots with a large, potential new customer

4 pilots with three potential new customers

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!100!!
!90!!
!80!!
!70!!
!60!!
!50!!
!40!!
!30!!
!20!!
!10!!
!"!!!!
Search! Search! eCommerce! Social!Media! Search!
Customer! Customer! Customer! Customer! Customer!
Revenue from FY2015 pilots
($#'000)#
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Pilots span focus areas

7 search pilots

8 social pilots

4 eCommerce pilots

End of FY2014 – 2 pilots underway, 6 in pipeline

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Company Confidential 17
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Outlook - Targets

Targeting low double digit revenue growth in FY2016 Revenue growth through orders in hand and pilot pipeline Growth will be strong but unlikely at FY2015 rate Cyclicality may impact level of revenue growth Currency movements will influence results Targeting low double digit earnings growth in FY2016 Solid earnings growth but not to FY2015 levels Anticipate continuing margin pressure from competitors and project ramp ups Managing margins with offshoring and technology Strong platform for FY2016 and beyond

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Company Confidential 18
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Thank you

Mark Brayan, CEO, mbrayan@appen.com Kevin Levine, CFO, klevine@appen.com

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Company Confidential
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