Annual report
Page 1
2024 Annual ReportFor personal use only
Page 2
Overview 02 About Appen 04 2024 at a glance 06 Chair message 08 CEO message Value drivers 10 How we create value 12 Technology, processes, systems 15 Crowd, social and environment 22 Customer and brand 25 Our people 28 Financial Governance 33 Identifying and managing risks 44 Our approach to governance 46 Board of Directors 48 Executive team Directors’ report 52 Directors’ report 55 Remuneration report Financial report 73 Financial report 118 Directors’ declaration 119 Independent auditor’s report Other information 123 Additional information 126 Materiality assessment 127 Prioritised United Nations Sustainable Development Goals 128 Non-financial data metrics 131 Corporate directory Appen Limited ABN 60 138 878 298 All amounts in this report are in United States (US) dollars unless otherwise stated. Contents About this report This Annual Report combines our financial and non-financial performance, linking environmental, social and governance matters to our strategy and business performance. In preparing our Annual Report, we have used the International Integrated Reporting Council (IIRC) Framework, the Sustainability Accounting Standards Board (SASB) and the Task Force on Climate-related Financial Disclosures (TCFD) to guide our disclosures on how Appen creates value for shareholders and which topics are most material to our business. Underlying results are alternative measures to those recommended under International Financial Reporting Standards (IFRS) and are used by management to assess the underlying performance of the business. Underlying results have been derived from statutory measures contained in the financial statements but have not been subject to audit. A reconciliation between statutory and underlying results is detailed on page 32 of this report. Sustainable Development goals We support the United Nations’ Sustainable Development Goals (SDGs), and by doing our part to contribute to the success of the SDGs we believe we can help contribute to a more sustainable future. On page 127 we have identified five SDGs as priority SDGs where we believe we can best contribute. Reporting currency Appen reports its financial results in United States (US) dollars. Forward-looking statements This report contains forward-looking statements. These statements involve subjective judgement and analysis and are subject to significant uncertainties, risks, and contingencies, many of which are outside the control of Appen. In particular, they speak only as of the date of this report, they are based on particular events, conditions or circumstances stated in the materials, they assume the success of Appen’s business strategies, and they are subject to significant regulatory, business, competitive, currency and economic uncertainties and risks. Except as required by applicable regulations or by law, Appen does not undertake to publicly update or review any forward-looking statements, whether as a result of new information or future events. Past performance cannot be relied on as a guide to future performance. Material issues A matter is considered material if senior management and the board believe it could significantly impact the value created and delivered in the short, medium, and long term. We identify and capture material issues through stakeholder engagement and our annual risk and materiality assessment. The outcome of these processes and our material issues are described on page 126. Operating and Financial Review The sections of this report from pages 6 to 45 titled the Chair message, CEO message, How we create value, Identifying and managing risk and Our approach to governance, comprise our Operating and financial review (OFR), and form part of the Directors’ report. 1 Real world AI transforming the lives of our customers and crowd Appen 2024 Annual Report 1 For personal use only
Page 3
Overview 02 About Appen 04 2024 at a glance 06 Chair message 08 CEO message Value drivers 10 How we create value 12 Technology, processes, systems 15 Crowd, social and environment 22 Customer and brand 25 Our people 28 Financial Governance 33 Identifying and managing risks 44 Our approach to governance 46 Board of Directors 48 Executive team Directors’ report 52 Directors’ report 55 Remuneration report Financial report 73 Financial report 118 Directors’ declaration 119 Independent auditor’s report Other information 123 Additional information 126 Materiality assessment 127 Prioritised United Nations Sustainable Development Goals 128 Non-financial data metrics 131 Corporate directory Appen Limited ABN 60 138 878 298 All amounts in this report are in United States (US) dollars unless otherwise stated. Contents About this report This Annual Report combines our financial and non-financial performance, linking environmental, social and governance matters to our strategy and business performance. In preparing our Annual Report, we have used the International Integrated Reporting Council (IIRC) Framework, the Sustainability Accounting Standards Board (SASB) and the Task Force on Climate-related Financial Disclosures (TCFD) to guide our disclosures on how Appen creates value for shareholders and which topics are most material to our business. Underlying results are alternative measures to those recommended under International Financial Reporting Standards (IFRS) and are used by management to assess the underlying performance of the business. Underlying results have been derived from statutory measures contained in the financial statements but have not been subject to audit. A reconciliation between statutory and underlying results is detailed on page 32 of this report. Sustainable Development goals We support the United Nations’ Sustainable Development Goals (SDGs), and by doing our part to contribute to the success of the SDGs we believe we can help contribute to a more sustainable future. On page 127 we have identified five SDGs as priority SDGs where we believe we can best contribute. Reporting currency Appen reports its financial results in United States (US) dollars. Forward-looking statements This report contains forward-looking statements. These statements involve subjective judgement and analysis and are subject to significant uncertainties, risks, and contingencies, many of which are outside the control of Appen. In particular, they speak only as of the date of this report, they are based on particular events, conditions or circumstances stated in the materials, they assume the success of Appen’s business strategies, and they are subject to significant regulatory, business, competitive, currency and economic uncertainties and risks. Except as required by applicable regulations or by law, Appen does not undertake to publicly update or review any forward-looking statements, whether as a result of new information or future events. Past performance cannot be relied on as a guide to future performance. Material issues A matter is considered material if senior management and the board believe it could significantly impact the value created and delivered in the short, medium, and long term. We identify and capture material issues through stakeholder engagement and our annual risk and materiality assessment. The outcome of these processes and our material issues are described on page 126. Operating and Financial Review The sections of this report from pages 6 to 45 titled the Chair message, CEO message, How we create value, Identifying and managing risk and Our approach to governance, comprise our Operating and financial review (OFR), and form part of the Directors’ report. 1 Real world AI transforming the lives of our customers and crowd Appen 2024 Annual Report 1 For personal use only
Page 4
Appen About Appen is a global market leader in data with expertise in deep learning and generative AI. With almost three decades of experience in data sourcing, data annotation, and model evaluation by humans, Appen specialises in developing high‑quality data that enable the training, fine‑tuning, and deployment of world-class AI models and applications. Our expertise includes a global crowd of more than 1 million skilled contractors who speak over 500 languages 1, in over 200 countries 2, with over 100 domain specialisations, and our advanced AI-assisted data annotation platform. Our products and services serve over 80% of the world’s leading LLM foundation model builders and cutting-edge AI industry applications of traditional AI and machine learning models and generative AI applications. In 2024, Appen continued its focus on capturing growth in the generative AI space, successfully expanding from our traditional market to capture new opportunities in generative AI. Appen’s growth vision captures a full set of AI data services for deep learning and generative AI, enabling expansion of our addressable market and deliver a strong return on investment. 1 Self-reported. 2 Self-reported, includes territories. Appen AI data solutions support Core AI lifestyle services AI Solutions Platform capabilities Language English German Spanish French Hindi Mandarin Portuguese Japanese 500+ Others Global delivery models Appen CrowdGen Platform Appen Secure Workplace Client Internal Teams LLM & Generative Data Annotation Quality Assurance & Workflow Management AI Chat Feedback (Model API) GenAI Evaluation & A/B Testing Model Mate AI Detector Text, Audio, Image, Video, Document Multimodal Data Test Questions Quality & Productivity Monitoring & Dashboards Validators Custom Quality Assurance Workflows Personalized recommendations Product Cataloguing Ad Relevance News Feed Evaluation Content Relevance Search Engines Content Moderation Sentiment Analysis Metaverse AR/VR Autonomous Vehicles Computer Vision Models Translation & Localization Audio & Speech Models Multimodal AI Models LLM Foundation Models Multimodal Generative AI Enterprise LLM Customization Enterprise LLM Red Teaming Data Sourcing • Custom Data Collection • Off-the-shelf or Prelabeled Datasets Data Preparation • Data Annotation (Traditional AI/ML,Relevance) • Supervised Fine Tuning (General, Multilingual, Domain-Specific) • Human Preference Ranking (RLHF/DPO) Model Evaluation • Model Evaluation • A/B Testing • Benchmarking • Red Teaming • Application and User Testing 2 We unlock the power of ‘AI for good’ to build a better world Our values Our purpose Customer obsessed We believe our customer relationships are the ultimate differentiator and the foundation of our success. Action oriented We take decisive action, fast pace and make informed decisions quickly to drive progress and achieve results. Courage to innovate We have the courage to innovate and foster breakthrough thinking and make it our engine for growth, success, and progress. Winning together We foster teamwork and collaboration, celebrate each other's success, and work together towards common goals. 3Appen 2024 Annual Report For personal use only
Page 5
Appen About Appen is a global market leader in data with expertise in deep learning and generative AI. With almost three decades of experience in data sourcing, data annotation, and model evaluation by humans, Appen specialises in developing high‑quality data that enable the training, fine‑tuning, and deployment of world-class AI models and applications. Our expertise includes a global crowd of more than 1 million skilled contractors who speak over 500 languages 1, in over 200 countries 2, with over 100 domain specialisations, and our advanced AI-assisted data annotation platform. Our products and services serve over 80% of the world’s leading LLM foundation model builders and cutting-edge AI industry applications of traditional AI and machine learning models and generative AI applications. In 2024, Appen continued its focus on capturing growth in the generative AI space, successfully expanding from our traditional market to capture new opportunities in generative AI. Appen’s growth vision captures a full set of AI data services for deep learning and generative AI, enabling expansion of our addressable market and deliver a strong return on investment. 1 Self-reported. 2 Self-reported, includes territories. Appen AI data solutions support Core AI lifestyle services AI Solutions Platform capabilities Language English German Spanish French Hindi Mandarin Portuguese Japanese 500+ Others Global delivery models Appen CrowdGen Platform Appen Secure Workplace Client Internal Teams LLM & Generative Data Annotation Quality Assurance & Workflow Management AI Chat Feedback (Model API) GenAI Evaluation & A/B Testing Model Mate AI Detector Text, Audio, Image, Video, Document Multimodal Data Test Questions Quality & Productivity Monitoring & Dashboards Validators Custom Quality Assurance Workflows Personalized recommendations Product Cataloguing Ad Relevance News Feed Evaluation Content Relevance Search Engines Content Moderation Sentiment Analysis Metaverse AR/VR Autonomous Vehicles Computer Vision Models Translation & Localization Audio & Speech Models Multimodal AI Models LLM Foundation Models Multimodal Generative AI Enterprise LLM Customization Enterprise LLM Red Teaming Data Sourcing • Custom Data Collection • Off-the-shelf or Prelabeled Datasets Data Preparation • Data Annotation (Traditional AI/ML,Relevance) • Supervised Fine Tuning (General, Multilingual, Domain-Specific) • Human Preference Ranking (RLHF/DPO) Model Evaluation • Model Evaluation • A/B Testing • Benchmarking • Red Teaming • Application and User Testing 2 We unlock the power of ‘AI for good’ to build a better world Our values Our purpose Customer obsessed We believe our customer relationships are the ultimate differentiator and the foundation of our success. Action oriented We take decisive action, fast pace and make informed decisions quickly to drive progress and achieve results. Courage to innovate We have the courage to innovate and foster breakthrough thinking and make it our engine for growth, success, and progress. Winning together We foster teamwork and collaboration, celebrate each other's success, and work together towards common goals. 3Appen 2024 Annual Report For personal use only
Page 6
2024 at a glance 1 Excludes the impact of Google contract termination. Revenue (US$M) $234.3M 14.2% from $273.0M in FY23 Adjusted revenue 1 $220.9M 16.0% from $190.4M in FY23 Underlying EBITDA $7.8M compared to $(24.5)M in FY23 57 Customer NPS from 35 in FY23 26 LLM model builders as customers 80% World's leading LLM foundation model builders as customers Underlying EBITDA excluding FX $3.5M compared to $(20.4)M in FY23 Underlying NPAT $(10.5)M compared to $(52.8)M in FY23 Statutory NPAT $(20.0)M compared to $(118.1)M in FY23 FINANCIAL CUSTOMERS 4 79% Employee engagement from 75% 50% Female representation amongst our board 23% Female representation amongst our senior leadership 33 Crowd NPS from 27 Global Ethical and Modern Slavery Policy Ethical AI through our crowd code of ethics $19.6M in product development 99.9% uptime across all platforms ISO 27001 certifications upgraded to latest edition Crowd experience Improving with technology upgrades Signatory to the UN Global Compact Net Zero by 2030 OUR PEOPLE OUR CROWD, SOCIAL & ENVIRONMENT TECHNOLOGY 5Appen 2024 Annual Report For personal use only
Page 7
2024 at a glance 1 Excludes the impact of Google contract termination. Revenue (US$M) $234.3M 14.2% from $273.0M in FY23 Adjusted revenue 1 $220.9M 16.0% from $190.4M in FY23 Underlying EBITDA $7.8M compared to $(24.5)M in FY23 57 Customer NPS from 35 in FY23 26 LLM model builders as customers 80% World's leading LLM foundation model builders as customers Underlying EBITDA excluding FX $3.5M compared to $(20.4)M in FY23 Underlying NPAT $(10.5)M compared to $(52.8)M in FY23 Statutory NPAT $(20.0)M compared to $(118.1)M in FY23 FINANCIAL CUSTOMERS 4 79% Employee engagement from 75% 50% Female representation amongst our board 23% Female representation amongst our senior leadership 33 Crowd NPS from 27 Global Ethical and Modern Slavery Policy Ethical AI through our crowd code of ethics $19.6M in product development 99.9% uptime across all platforms ISO 27001 certifications upgraded to latest edition Crowd experience Improving with technology upgrades Signatory to the UN Global Compact Net Zero by 2030 OUR PEOPLE OUR CROWD, SOCIAL & ENVIRONMENT TECHNOLOGY 5Appen 2024 Annual Report For personal use only
Page 8
Improved financials through FY24 For the 2024 financial year, Appen announced a Statutory Loss of ($20.0) million, an improvement of $98.1 million compared to the prior year. Total operating revenue declined 14.2% to $234.3 million and Appen recorded underlying EBITDA (before foreign exchange) of $3.5 million, compared to a loss of ($20.4) million in the prior year. Revenue was significantly impacted by the loss of Google in Q1. Non-Google revenue in 2024 grew 16.0% compared to the prior year. Appen experienced strong growth in H2 with non-Google revenue for H2 up 36.1% compared to H2 2023. Pleasingly, China annual revenue grew 70.7% to $58.9 million, largely due to generative AI opportunities. Global Product experienced strong growth due to Global customers utilising Appen’s software platform (ADAP). Revenue grew 221.9% to $31.3 million compared to 2023. Appen remained focused on maintaining adequate balance sheet flexibility. In support of working capital requirements, Appen raised ~A$65 million during the year. A$50 million fully underwritten institutional placement completed on 14 October 2024, and A$15 million Share Purchase Plan completed on 7 November 2024. At the end of the year, Appen had $54.8 million (equivalent to A$88.3 million) 1 in cash. Once again, the Board made the decision not to declare an interim or final dividend in 2024 to ensure an appropriate allocation of capital. 2024 was a pivotal year for Appen, driven by generative AI as a key growth engine. Disciplined cost management and sharpened focus on execution have resulted in improved growth and profitability throughout the year. With a positive market outlook and a strong foundation, Appen is ready to seize future opportunities and deliver long-term value for shareholders. Returning 6 Chair message 1 31 December 2024 exchange rate AUD/USD 0.6204. to profitable growth 6 Significant progress to reset Appen Throughout 2024, Appen was highly focused on resetting the business to achieve profitability. In response to Google's decision to terminate its global services contract by 19 March 2024, Appen reduced the cost base by $13.5 million. At the beginning of 2023, we began a transformation process to reset Appen to better capture the growth in generative Al and improve performance of our core business. This included a new strategy to deliver long term growth and revenue diversification along with a $60 million cost reduction program. Some of the key areas identified for improvement included a leadership and strategy refresh, operational improvements to project delivery and crowd management and strengthening of Appen's sales and marketing functions. We remain committed to sizing our cost base in line with our revenue opportunity. Change in leadership On 5 February 2024, we appointed Ryan KolIn as our new CEO and Managing Director. In his first year as CEO, Ryan has led Appen to capitalise on the generative AI market opportunity while delivering improved financial results. His focus on operational excellence and cost controls have been instrumental to the performance of the business. Board governance There have been no changes to the Board in 2024. Vanessa Liu and Robin Low were re-elected to the Appen Board by shareholders at our AGM held in May 2024. Executive remuneration Appen's short-term incentive (STI) scorecard for key management personnel represents a combination of financial and non-financial metrics. Appen will always regard its financial performance as paramount. Given the 2024 focus on resetting the business to achieve profitability, the STI weighting for the financial performance metrics increased to 80% from 70%. Non-financial metrics reflect Appen's focus on its customers, crowd and people and are assigned an STI weighting of 20%. The 2024 STI equates to 85.9% of the maximum payable, with all measures above the minimum payout threshold. I would encourage shareholders to read the remuneration report, commencing on page 55. Sustainable operations Our commitment to our stakeholders including our crowd, our customers and people remain as strong as ever. We recognise the value of crowd and the benefit it provides to our customers. This year we undertook a significant digital transformation to improve our underlying crowd management platform. Crowd NPS improved due to the platform and increasing earning opportunities as our business grew throughout the year. The high ethical treatment of our crowd remains a key priority. We stand by our commitment to the crowd as defined in our Crowd Code of Conduct, and our Global Ethical Sourcing and Modern Slavery Policy. Promoting a diverse and inclusive culture across all aspects of Appen's business has been a long-held priority. In 2024 Appen achieved 57% female representation among its employees. We maintained female representation of 50% among directors, and female representation among the senior leadership team increased to 23% from 22%. Appen remains committed to supporting international initiatives to transition to net zero emissions. We have completed our initial Net Zero Roadmap and have committed to net zero by 2030. We continue to work towards assurance for our emissions data and remain committed to the Science Based Target initiative. Closing We are pleased with the progress made throughout 2024 to reset the business and return to profitable growth. There is significant opportunity for Appen, largely driven by the potential of generative AI opportunities. Our constant focus remains on improving the company's performance and delivering better returns for shareholders. We thank shareholders for their ongoing support. RICHARD FREUDENSTEIN Non-executive Chair 7Appen 2024 Annual Report For personal use only
Page 9
Improved financials through FY24 For the 2024 financial year, Appen announced a Statutory Loss of ($20.0) million, an improvement of $98.1 million compared to the prior year. Total operating revenue declined 14.2% to $234.3 million and Appen recorded underlying EBITDA (before foreign exchange) of $3.5 million, compared to a loss of ($20.4) million in the prior year. Revenue was significantly impacted by the loss of Google in Q1. Non-Google revenue in 2024 grew 16.0% compared to the prior year. Appen experienced strong growth in H2 with non-Google revenue for H2 up 36.1% compared to H2 2023. Pleasingly, China annual revenue grew 70.7% to $58.9 million, largely due to generative AI opportunities. Global Product experienced strong growth due to Global customers utilising Appen’s software platform (ADAP). Revenue grew 221.9% to $31.3 million compared to 2023. Appen remained focused on maintaining adequate balance sheet flexibility. In support of working capital requirements, Appen raised ~A$65 million during the year. A$50 million fully underwritten institutional placement completed on 14 October 2024, and A$15 million Share Purchase Plan completed on 7 November 2024. At the end of the year, Appen had $54.8 million (equivalent to A$88.3 million) 1 in cash. Once again, the Board made the decision not to declare an interim or final dividend in 2024 to ensure an appropriate allocation of capital. 2024 was a pivotal year for Appen, driven by generative AI as a key growth engine. Disciplined cost management and sharpened focus on execution have resulted in improved growth and profitability throughout the year. With a positive market outlook and a strong foundation, Appen is ready to seize future opportunities and deliver long-term value for shareholders. Returning 6 Chair message 1 31 December 2024 exchange rate AUD/USD 0.6204. to profitable growth 6 Significant progress to reset Appen Throughout 2024, Appen was highly focused on resetting the business to achieve profitability. In response to Google's decision to terminate its global services contract by 19 March 2024, Appen reduced the cost base by $13.5 million. At the beginning of 2023, we began a transformation process to reset Appen to better capture the growth in generative Al and improve performance of our core business. This included a new strategy to deliver long term growth and revenue diversification along with a $60 million cost reduction program. Some of the key areas identified for improvement included a leadership and strategy refresh, operational improvements to project delivery and crowd management and strengthening of Appen's sales and marketing functions. We remain committed to sizing our cost base in line with our revenue opportunity. Change in leadership On 5 February 2024, we appointed Ryan KolIn as our new CEO and Managing Director. In his first year as CEO, Ryan has led Appen to capitalise on the generative AI market opportunity while delivering improved financial results. His focus on operational excellence and cost controls have been instrumental to the performance of the business. Board governance There have been no changes to the Board in 2024. Vanessa Liu and Robin Low were re-elected to the Appen Board by shareholders at our AGM held in May 2024. Executive remuneration Appen's short-term incentive (STI) scorecard for key management personnel represents a combination of financial and non-financial metrics. Appen will always regard its financial performance as paramount. Given the 2024 focus on resetting the business to achieve profitability, the STI weighting for the financial performance metrics increased to 80% from 70%. Non-financial metrics reflect Appen's focus on its customers, crowd and people and are assigned an STI weighting of 20%. The 2024 STI equates to 85.9% of the maximum payable, with all measures above the minimum payout threshold. I would encourage shareholders to read the remuneration report, commencing on page 55. Sustainable operations Our commitment to our stakeholders including our crowd, our customers and people remain as strong as ever. We recognise the value of crowd and the benefit it provides to our customers. This year we undertook a significant digital transformation to improve our underlying crowd management platform. Crowd NPS improved due to the platform and increasing earning opportunities as our business grew throughout the year. The high ethical treatment of our crowd remains a key priority. We stand by our commitment to the crowd as defined in our Crowd Code of Conduct, and our Global Ethical Sourcing and Modern Slavery Policy. Promoting a diverse and inclusive culture across all aspects of Appen's business has been a long-held priority. In 2024 Appen achieved 57% female representation among its employees. We maintained female representation of 50% among directors, and female representation among the senior leadership team increased to 23% from 22%. Appen remains committed to supporting international initiatives to transition to net zero emissions. We have completed our initial Net Zero Roadmap and have committed to net zero by 2030. We continue to work towards assurance for our emissions data and remain committed to the Science Based Target initiative. Closing We are pleased with the progress made throughout 2024 to reset the business and return to profitable growth. There is significant opportunity for Appen, largely driven by the potential of generative AI opportunities. Our constant focus remains on improving the company's performance and delivering better returns for shareholders. We thank shareholders for their ongoing support. RICHARD FREUDENSTEIN Non-executive Chair 7Appen 2024 Annual Report For personal use only
Page 10
Positioned for CEO message 2024 has been a transformative year for both Appen and the AI ecosystem we serve. Through our focus on operational efficiency, innovation, and data quality fundamentals, we have strengthened our business and are well positioned for sustained growth. Market Opportunity: The Generative AI Revolution Generative AI marks a once-in-a-generation paradigm shift. Machines are evolving from simple search and retrieval capabilities to demonstrating deep understanding and creative generation. The applications are vast and powerful, ranging from personalised customer experiences to complex content creation. At the heart of this revolution lies high -quality data – a critical foundation that we provide. This is an incredibly exciting time, and we are honoured to play such a pivotal role in shaping this transformative future. 2024: Challenges and Resilience The past few years have tested Appen’s resilience. We faced reduced spending from a major customer and experienced the financial impact of Google's decision to terminate their contract in early 2024. These challenges required radical changes to our business, including disciplined cost management. We took decisive steps to streamline operations, significantly reduce expenses, and improve financial efficiency. At the same time, we maintained our commitment to prioritising data quality and building a team capable of delivering excellence. Our efforts paid off. In 2024, we successfully passed several rigorous customer assessments for generative AI projects. We also reached new benchmarks in data quality for our traditional work with a major customer. By shifting our go-to- market strategy to prioritise LLM model builders – the primary drivers of market spending – we grew revenue and positioned ourselves to capture significant growth opportunities. Innovation with Impact Innovation remains the cornerstone of our success. This year, we enhanced our technology platform to meet the evolving needs of generative AI. Notable improvements included the onboarding of domain experts and significant advancements to our AI Data Platform (ADAP). These updates allowed us to tackle the sophisticated demands of generative AI projects with precision and efficiency. ADAP has become a cornerstone of our strategy, enabling scalable, accurate, and timely delivery of complex data tasks. sustained growth 8 2024 Outcomes: Growth Amidst Change Our full-year operating revenue for 2024 was $234.3 million, reflecting a decline of 14.2% compared to 2023, inclusive of Google’s departure. However, when excluding Google, revenue grew 16.0% year-over-year. Quarterly performance showed consistent improvement, with Q3 and Q4 revenue (excluding Google) increasing 34.6% and 37.2% respectively compared to the prior year. Generative AI projects emerged as a key growth driver, contributing 35% of total revenue in Q4, up from 9% in Q1. At the divisional level, our Global division (excluding Google) and China were standout performers. Revenue from Global increased 14.6%, while China achieved a breakout year with revenue reaching $58.9 million — an impressive 70.7% growth over 2023. We solidified our position as the largest AI data company in China, with run-rate revenue nearly double that of our nearest competitors. Alongside revenue growth, we achieved significant cost optimisation. Compared to 2023, employee expenses 1 were reduced by 29.2%, and all other expenses 2 were reduced by 19.6%. This combination of top-line growth and disciplined cost management led to a turnaround in profitability. We improved underlying EBITDA (before foreign exchange) from a loss of $20.4 million in 2023 to a gain of $3.5 million in 2024, with quarterly profitability throughout the year rising from a $2.9 million loss in Q1 to a $4.7 million gain in Q4. Strengthening Our Balance Sheet In October 2024, we raised ~ A$65 million in capital to bolster our balance sheet and provide additional liquidity to fund working capital. This capital infusion brought our year-end cash balance to $54.8 million (equivalent to A$88.3 million) 3, ensuring we are well-positioned to pursue growth opportunities and navigate market dynamics. Strategic Focus for 2025 As we look to 2025, our focus remains clear: delivering high-quality data that powers cutting-edge AI models. Customers are increasingly demanding faster turnaround times and higher-quality data, which requires seamless integration of our project delivery teams, advanced technology platforms, and skilled crowd workforce. Key strategic priorities include: • Target Customer Segments: Our efforts will centre on providing high quality data for companies building or utilising leading AI models. The market segments we address will remain the same as 2024, focusing on US hyperscalers, China, government entities, and other technology enabled enterprises. • Technology Evolution: Continuing to advance ADAP to meet the sophisticated requirements of generative AI projects, while enhancing our crowd management platform to support faster ramp times and specialised expertise. Technology is key to our delivery operations, this is a major focus for 2025, however we will maintain our current spend. • Operational AI: Leveraging AI within our operations to drive efficiency in quality assessment, workforce onboarding, and support functions. • Talent Development: Investing in our people by fostering growth and attracting new talent to meet the evolving demands of the AI landscape. • Financial discipline: Continued cost control remains a high priority to deliver profitable growth. Looking Ahead 2024 was a pivotal year for Appen. Amid challenges, we demonstrated resilience, adaptability, and an unwavering commitment to excellence. As we move into 2025, I am confident in our ability to build on this momentum, drive growth, and deliver exceptional value to our stakeholders. RYAN KOLLN CEO and Managing Director 1 Employee expenses per management reporting. Excludes direct project workers included in gross margin calculation (i.e. crowd expenses). 2 All other expenses excludes non-cash share based payment expense but all other expenses included in underlying EBITDA before FX. 3 31 December 2024 exchange rate AUD/USD 0.6204. 9Appen 2024 Annual Report For personal use only
Page 11
Positioned for CEO message 2024 has been a transformative year for both Appen and the AI ecosystem we serve. Through our focus on operational efficiency, innovation, and data quality fundamentals, we have strengthened our business and are well positioned for sustained growth. Market Opportunity: The Generative AI Revolution Generative AI marks a once-in-a-generation paradigm shift. Machines are evolving from simple search and retrieval capabilities to demonstrating deep understanding and creative generation. The applications are vast and powerful, ranging from personalised customer experiences to complex content creation. At the heart of this revolution lies high -quality data – a critical foundation that we provide. This is an incredibly exciting time, and we are honoured to play such a pivotal role in shaping this transformative future. 2024: Challenges and Resilience The past few years have tested Appen’s resilience. We faced reduced spending from a major customer and experienced the financial impact of Google's decision to terminate their contract in early 2024. These challenges required radical changes to our business, including disciplined cost management. We took decisive steps to streamline operations, significantly reduce expenses, and improve financial efficiency. At the same time, we maintained our commitment to prioritising data quality and building a team capable of delivering excellence. Our efforts paid off. In 2024, we successfully passed several rigorous customer assessments for generative AI projects. We also reached new benchmarks in data quality for our traditional work with a major customer. By shifting our go-to- market strategy to prioritise LLM model builders – the primary drivers of market spending – we grew revenue and positioned ourselves to capture significant growth opportunities. Innovation with Impact Innovation remains the cornerstone of our success. This year, we enhanced our technology platform to meet the evolving needs of generative AI. Notable improvements included the onboarding of domain experts and significant advancements to our AI Data Platform (ADAP). These updates allowed us to tackle the sophisticated demands of generative AI projects with precision and efficiency. ADAP has become a cornerstone of our strategy, enabling scalable, accurate, and timely delivery of complex data tasks. sustained growth 8 2024 Outcomes: Growth Amidst Change Our full-year operating revenue for 2024 was $234.3 million, reflecting a decline of 14.2% compared to 2023, inclusive of Google’s departure. However, when excluding Google, revenue grew 16.0% year-over-year. Quarterly performance showed consistent improvement, with Q3 and Q4 revenue (excluding Google) increasing 34.6% and 37.2% respectively compared to the prior year. Generative AI projects emerged as a key growth driver, contributing 35% of total revenue in Q4, up from 9% in Q1. At the divisional level, our Global division (excluding Google) and China were standout performers. Revenue from Global increased 14.6%, while China achieved a breakout year with revenue reaching $58.9 million — an impressive 70.7% growth over 2023. We solidified our position as the largest AI data company in China, with run-rate revenue nearly double that of our nearest competitors. Alongside revenue growth, we achieved significant cost optimisation. Compared to 2023, employee expenses 1 were reduced by 29.2%, and all other expenses 2 were reduced by 19.6%. This combination of top-line growth and disciplined cost management led to a turnaround in profitability. We improved underlying EBITDA (before foreign exchange) from a loss of $20.4 million in 2023 to a gain of $3.5 million in 2024, with quarterly profitability throughout the year rising from a $2.9 million loss in Q1 to a $4.7 million gain in Q4. Strengthening Our Balance Sheet In October 2024, we raised ~ A$65 million in capital to bolster our balance sheet and provide additional liquidity to fund working capital. This capital infusion brought our year-end cash balance to $54.8 million (equivalent to A$88.3 million) 3, ensuring we are well-positioned to pursue growth opportunities and navigate market dynamics. Strategic Focus for 2025 As we look to 2025, our focus remains clear: delivering high-quality data that powers cutting-edge AI models. Customers are increasingly demanding faster turnaround times and higher-quality data, which requires seamless integration of our project delivery teams, advanced technology platforms, and skilled crowd workforce. Key strategic priorities include: • Target Customer Segments: Our efforts will centre on providing high quality data for companies building or utilising leading AI models. The market segments we address will remain the same as 2024, focusing on US hyperscalers, China, government entities, and other technology enabled enterprises. • Technology Evolution: Continuing to advance ADAP to meet the sophisticated requirements of generative AI projects, while enhancing our crowd management platform to support faster ramp times and specialised expertise. Technology is key to our delivery operations, this is a major focus for 2025, however we will maintain our current spend. • Operational AI: Leveraging AI within our operations to drive efficiency in quality assessment, workforce onboarding, and support functions. • Talent Development: Investing in our people by fostering growth and attracting new talent to meet the evolving demands of the AI landscape. • Financial discipline: Continued cost control remains a high priority to deliver profitable growth. Looking Ahead 2024 was a pivotal year for Appen. Amid challenges, we demonstrated resilience, adaptability, and an unwavering commitment to excellence. As we move into 2025, I am confident in our ability to build on this momentum, drive growth, and deliver exceptional value to our stakeholders. RYAN KOLLN CEO and Managing Director 1 Employee expenses per management reporting. Excludes direct project workers included in gross margin calculation (i.e. crowd expenses). 2 All other expenses excludes non-cash share based payment expense but all other expenses included in underlying EBITDA before FX. 3 31 December 2024 exchange rate AUD/USD 0.6204. 9Appen 2024 Annual Report For personal use only
Page 12
How we create value Value Driver Principal risks How we deliver value Creating and measuring value SDGs Technology, processes systems Investment in technology, innovation and transformation Compliance with security, privacy and other data regulations Through our technology and innovative solutions, we look to streamline and automate processes so we can deliver AI training data at scale Our engineering, privacy, and cyber security teams work to ensure that data availability targets are met, and data is protected and secure Invested $19.6 million in technology and systems, including enhancements to ADAP and a new crowd management platform (CrowdGen) to support LLM products, and better support our crowd and customers Further development of China MatrixGo platform releasing many new features enhancing the capabilities of annotation tools, and improved user experience and crowd management Met or exceeded 99.9% uptime across all our platforms Maintained certification for ISO 27001 and SOC 2, including upgrading to latest ISO 27001 certifications Pages 12–14 Global crowd Crowd conditions Crowd supply meets customer demand We are committed to treating our crowd fairly in accordance with our Crowd Code of Ethics Whistleblower and Speak Up Policy is available to support crowd grievances Our Impact Sourcing strategy provides jobs to people who have limited prospects for secure employment We provided flexible, work-from-home opportunities to our global crowd of one million+ contractors We help make AI ethical and fair through our Crowd Code of Ethics Enhanced crowd experience with the launch of CrowdGen a next-generation crowd management platform Prioritisation of health and wellbeing via wellness resources, counselling services, and flexible work options Pages 15–21 Social and environment Compliance with legal, statutory and ethical obligations Environmental, social and governance (ESG) risks and performance We are taking steps to reduce the impact of our operations on the environment Our platform removes traditional barriers to work and increases global participation and representation in the development of emerging technologies We are committed to achieving fair AI and creating responsible AI standards Continued disclosure of scopes 1,2 and 3 and commenced work on assuring the data Continued implementation of our Net Zero Roadmap and working towards net zero emissions across operations by 2030 Reporting on progress against United Nations Global Compact commitments Pages 15–21 Customer and brand Changing customer strategy and needs Ability to execute on operational requirements We deliver high-quality data at speed for our customers and provide a superior customer experience Our LLM capabilities provide solutions for customers across the core AI data lifecycle (data sourcing, data preparation, model evaluation) Constantly monitoring relevant market and customer trends to meet the evolving needs of customers Improved customer satisfaction with a significant uplift in our Net Promoter Score Enhanced the customer experience through the launch of many new ADAP features We demonstrated leadership in promoting responsible and ethical AI which helps to enhance our brand Pages 22–24 Our people Talent strategy and employee value proposition Managing a culture of growth through change By focusing on making Appen a great place to work and creating a culture where our people can thrive, grow and feel valued Investing in our people and HR systems to build a workforce for the future and optimise the employee experience Embedding diversity principles across our business via our Diversity and Inclusion policy We have a target of 30% female representation of women in senior management positions and on the board. We exceeded this target at board level Continue to respond to employee feedback to drive future engagement scores higher Pages 25–27 Financial Strategic direction of the business Financial sustainability We aim to grow the business and to deliver increased revenue and earnings to support returns for shareholders Capture the potential of generative AI Completed an equity raising in Q4 2024 to provide additional liquidity to fund working capital Returned to EBITDA profitability in H1 2024 Decided not to declare a dividend to ensure an appropriate allocation of capital Pages 28–32 10 Value Driver Principal risks How we deliver value Creating and measuring value SDGs Technology, processes systems Investment in technology, innovation and transformation Compliance with security, privacy and other data regulations Through our technology and innovative solutions, we look to streamline and automate processes so we can deliver AI training data at scale Our engineering, privacy, and cyber security teams work to ensure that data availability targets are met, and data is protected and secure Invested $19.6 million in technology and systems, including enhancements to ADAP and a new crowd management platform (CrowdGen) to support LLM products, and better support our crowd and customers Further development of China MatrixGo platform releasing many new features enhancing the capabilities of annotation tools, and improved user experience and crowd management Met or exceeded 99.9% uptime across all our platforms Maintained certification for ISO 27001 and SOC 2, including upgrading to latest ISO 27001 certifications Pages 12–14 Global crowd Crowd conditions Crowd supply meets customer demand We are committed to treating our crowd fairly in accordance with our Crowd Code of Ethics Whistleblower and Speak Up Policy is available to support crowd grievances Our Impact Sourcing strategy provides jobs to people who have limited prospects for secure employment We provided flexible, work-from-home opportunities to our global crowd of one million+ contractors We help make AI ethical and fair through our Crowd Code of Ethics Enhanced crowd experience with the launch of CrowdGen a next-generation crowd management platform Prioritisation of health and wellbeing via wellness resources, counselling services, and flexible work options Pages 15–21 Social and environment Compliance with legal, statutory and ethical obligations Environmental, social and governance (ESG) risks and performance We are taking steps to reduce the impact of our operations on the environment Our platform removes traditional barriers to work and increases global participation and representation in the development of emerging technologies We are committed to achieving fair AI and creating responsible AI standards Continued disclosure of scopes 1,2 and 3 and commenced work on assuring the data Continued implementation of our Net Zero Roadmap and working towards net zero emissions across operations by 2030 Reporting on progress against United Nations Global Compact commitments Pages 15–21 Customer and brand Changing customer strategy and needs Ability to execute on operational requirements We deliver high-quality data at speed for our customers and provide a superior customer experience Our LLM capabilities provide solutions for customers across the core AI data lifecycle (data sourcing, data preparation, model evaluation) Constantly monitoring relevant market and customer trends to meet the evolving needs of customers Improved customer satisfaction with a significant uplift in our Net Promoter Score Enhanced the customer experience through the launch of many new ADAP features We demonstrated leadership in promoting responsible and ethical AI which helps to enhance our brand Pages 22–24 Our people Talent strategy and employee value proposition Managing a culture of growth through change By focusing on making Appen a great place to work and creating a culture where our people can thrive, grow and feel valued Investing in our people and HR systems to build a workforce for the future and optimise the employee experience Embedding diversity principles across our business via our Diversity and Inclusion policy We have a target of 30% female representation of women in senior management positions and on the board. We exceeded this target at board level Continue to respond to employee feedback to drive future engagement scores higher Pages 25–27 Financial Strategic direction of the business Financial sustainability We aim to grow the business and to deliver increased revenue and earnings to support returns for shareholders Capture the potential of generative AI Completed an equity raising in Q4 2024 to provide additional liquidity to fund working capital Returned to EBITDA profitability in H1 2024 Decided not to declare a dividend to ensure an appropriate allocation of capital Pages 28–32 To deliver on our purpose and unlock the power of ‘AI for good’ to build a better world we draw our technology, scale and flexibility of our Crowd and deep expertise. We offer our customers highly flexible offerings – from fully tailored solutions to pre-labelled datasets and LLM solutions. We have a strong track record of AI deployment across many data types and a proven ability to meet production needs that achieve high benchmarks for data quality. The outcomes delivered for each value driver determines our ability to create value for our stakeholders – including Our Crowd, Our customers, Our people, shareholders, and the community more broadly. Even though we conduct our work with an innovative mindset and embrace new ways of doing things, our decisions are always supported by a disciplined approach to governance and risk management. We support the United Nations’ Sustainable Development Goals (SDGs). By doing our part to contribute to the success of these goals we believe we can help contribute to a more sustainable future and create value for our stakeholders. We have identified the following six core priority SDGs where we believe we can best contribute. 11Appen 2024 Annual Report For personal use only
Page 13
How we create value Value Driver Principal risks How we deliver value Creating and measuring value SDGs Technology, processes systems Investment in technology, innovation and transformation Compliance with security, privacy and other data regulations Through our technology and innovative solutions, we look to streamline and automate processes so we can deliver AI training data at scale Our engineering, privacy, and cyber security teams work to ensure that data availability targets are met, and data is protected and secure Invested $19.6 million in technology and systems, including enhancements to ADAP and a new crowd management platform (CrowdGen) to support LLM products, and better support our crowd and customers Further development of China MatrixGo platform releasing many new features enhancing the capabilities of annotation tools, and improved user experience and crowd management Met or exceeded 99.9% uptime across all our platforms Maintained certification for ISO 27001 and SOC 2, including upgrading to latest ISO 27001 certifications Pages 12–14 Global crowd Crowd conditions Crowd supply meets customer demand We are committed to treating our crowd fairly in accordance with our Crowd Code of Ethics Whistleblower and Speak Up Policy is available to support crowd grievances Our Impact Sourcing strategy provides jobs to people who have limited prospects for secure employment We provided flexible, work-from-home opportunities to our global crowd of one million+ contractors We help make AI ethical and fair through our Crowd Code of Ethics Enhanced crowd experience with the launch of CrowdGen a next-generation crowd management platform Prioritisation of health and wellbeing via wellness resources, counselling services, and flexible work options Pages 15–21 Social and environment Compliance with legal, statutory and ethical obligations Environmental, social and governance (ESG) risks and performance We are taking steps to reduce the impact of our operations on the environment Our platform removes traditional barriers to work and increases global participation and representation in the development of emerging technologies We are committed to achieving fair AI and creating responsible AI standards Continued disclosure of scopes 1,2 and 3 and commenced work on assuring the data Continued implementation of our Net Zero Roadmap and working towards net zero emissions across operations by 2030 Reporting on progress against United Nations Global Compact commitments Pages 15–21 Customer and brand Changing customer strategy and needs Ability to execute on operational requirements We deliver high-quality data at speed for our customers and provide a superior customer experience Our LLM capabilities provide solutions for customers across the core AI data lifecycle (data sourcing, data preparation, model evaluation) Constantly monitoring relevant market and customer trends to meet the evolving needs of customers Improved customer satisfaction with a significant uplift in our Net Promoter Score Enhanced the customer experience through the launch of many new ADAP features We demonstrated leadership in promoting responsible and ethical AI which helps to enhance our brand Pages 22–24 Our people Talent strategy and employee value proposition Managing a culture of growth through change By focusing on making Appen a great place to work and creating a culture where our people can thrive, grow and feel valued Investing in our people and HR systems to build a workforce for the future and optimise the employee experience Embedding diversity principles across our business via our Diversity and Inclusion policy We have a target of 30% female representation of women in senior management positions and on the board. We exceeded this target at board level Continue to respond to employee feedback to drive future engagement scores higher Pages 25–27 Financial Strategic direction of the business Financial sustainability We aim to grow the business and to deliver increased revenue and earnings to support returns for shareholders Capture the potential of generative AI Completed an equity raising in Q4 2024 to provide additional liquidity to fund working capital Returned to EBITDA profitability in H1 2024 Decided not to declare a dividend to ensure an appropriate allocation of capital Pages 28–32 10 Value Driver Principal risks How we deliver value Creating and measuring value SDGs Technology, processes systems Investment in technology, innovation and transformation Compliance with security, privacy and other data regulations Through our technology and innovative solutions, we look to streamline and automate processes so we can deliver AI training data at scale Our engineering, privacy, and cyber security teams work to ensure that data availability targets are met, and data is protected and secure Invested $19.6 million in technology and systems, including enhancements to ADAP and a new crowd management platform (CrowdGen) to support LLM products, and better support our crowd and customers Further development of China MatrixGo platform releasing many new features enhancing the capabilities of annotation tools, and improved user experience and crowd management Met or exceeded 99.9% uptime across all our platforms Maintained certification for ISO 27001 and SOC 2, including upgrading to latest ISO 27001 certifications Pages 12–14 Global crowd Crowd conditions Crowd supply meets customer demand We are committed to treating our crowd fairly in accordance with our Crowd Code of Ethics Whistleblower and Speak Up Policy is available to support crowd grievances Our Impact Sourcing strategy provides jobs to people who have limited prospects for secure employment We provided flexible, work-from-home opportunities to our global crowd of one million+ contractors We help make AI ethical and fair through our Crowd Code of Ethics Enhanced crowd experience with the launch of CrowdGen a next-generation crowd management platform Prioritisation of health and wellbeing via wellness resources, counselling services, and flexible work options Pages 15–21 Social and environment Compliance with legal, statutory and ethical obligations Environmental, social and governance (ESG) risks and performance We are taking steps to reduce the impact of our operations on the environment Our platform removes traditional barriers to work and increases global participation and representation in the development of emerging technologies We are committed to achieving fair AI and creating responsible AI standards Continued disclosure of scopes 1,2 and 3 and commenced work on assuring the data Continued implementation of our Net Zero Roadmap and working towards net zero emissions across operations by 2030 Reporting on progress against United Nations Global Compact commitments Pages 15–21 Customer and brand Changing customer strategy and needs Ability to execute on operational requirements We deliver high-quality data at speed for our customers and provide a superior customer experience Our LLM capabilities provide solutions for customers across the core AI data lifecycle (data sourcing, data preparation, model evaluation) Constantly monitoring relevant market and customer trends to meet the evolving needs of customers Improved customer satisfaction with a significant uplift in our Net Promoter Score Enhanced the customer experience through the launch of many new ADAP features We demonstrated leadership in promoting responsible and ethical AI which helps to enhance our brand Pages 22–24 Our people Talent strategy and employee value proposition Managing a culture of growth through change By focusing on making Appen a great place to work and creating a culture where our people can thrive, grow and feel valued Investing in our people and HR systems to build a workforce for the future and optimise the employee experience Embedding diversity principles across our business via our Diversity and Inclusion policy We have a target of 30% female representation of women in senior management positions and on the board. We exceeded this target at board level Continue to respond to employee feedback to drive future engagement scores higher Pages 25–27 Financial Strategic direction of the business Financial sustainability We aim to grow the business and to deliver increased revenue and earnings to support returns for shareholders Capture the potential of generative AI Completed an equity raising in Q4 2024 to provide additional liquidity to fund working capital Returned to EBITDA profitability in H1 2024 Decided not to declare a dividend to ensure an appropriate allocation of capital Pages 28–32 To deliver on our purpose and unlock the power of ‘AI for good’ to build a better world we draw our technology, scale and flexibility of our Crowd and deep expertise. We offer our customers highly flexible offerings – from fully tailored solutions to pre-labelled datasets and LLM solutions. We have a strong track record of AI deployment across many data types and a proven ability to meet production needs that achieve high benchmarks for data quality. The outcomes delivered for each value driver determines our ability to create value for our stakeholders – including Our Crowd, Our customers, Our people, shareholders, and the community more broadly. Even though we conduct our work with an innovative mindset and embrace new ways of doing things, our decisions are always supported by a disciplined approach to governance and risk management. We support the United Nations’ Sustainable Development Goals (SDGs). By doing our part to contribute to the success of these goals we believe we can help contribute to a more sustainable future and create value for our stakeholders. We have identified the following six core priority SDGs where we believe we can best contribute. 11Appen 2024 Annual Report For personal use only
Page 14
Appen’s technology processes and systems deliver AI training data at scale. We leverage advanced tools and methodologies to source, prepare, and evaluate data, ensuring the highest quality datasets for our clients. With the ability to support large language model (LLM) capabilities we are at the forefront of generative AI, providing our customers with the resources they need to fine‑tune their AI models and achieve optimal performance. Our comprehensive range of technology products and data services encompasses both deep learning and generative AI. This includes four major platforms 1) CrowdGen, the interface for our crowd workers to apply for tasks, 2) Mercury, the backend for all our crowd management tasks, 3) AI Data Platform (ADAP), a solution that allows internal teams and external customers to design and manage human annotation projects, and 4) China MatrixGo ¹, the bespoke annotation platform to provide specialised services for the Chinese market. Priority SDG $19.6M in product development 99.9% uptime met or exceeded across all platforms Technology processes, systems China Platform & Services MatrixGo and Generative AI data annotation platform AI data services for China markets Off-the-shelf datasets AI Data Annotation Platform (ADAP) Data collection and annotation LLM & Generative AI workflows (fine-tuning and evaluation) AI automation tools CrowdGen Crowd Platform Sourcing and recruitment Qualification and smart matching Crowd Payments Crowd support AI Data Solutions LLM & Generative AI Data Solutions (SFT, RLHF, Evaluation, Red Teaming) AI training data (data collection, data annotation, off-the-shelf datasets) Global Services, Global Product, Enterprise, Government China Value drivers 1 Previously known as China A9. 12 Product development In FY24 we undertook a major replatform of our core crowd management software, called Appen Connect. Appen Connect was introduced through the acquisition of Leapforce, and while it provided significant benefits to the business, the technology was built using legacy architecture and was inhibiting our ability to make rapid improvements, including automations. In September we launched our new crowd management platform that consists of two deeply integrated components. The first is CrowdGen. This is the interface that our crowd workers use to interact with Appen to assess available work, apply for projects, and manage their accounts including payments. The second is Mercury. This is the backend system that we use internally to set up projects and manage our crowd workforce. The evolution to Mercury enables us to significantly improve the level of automation in our project management approach, and provides better insights into our workforce, leading to improved outcomes for our customers. For CrowdGen and Mercury, we utilised best of breed software across the ecosystem to improve the return on investment in our software development resources and ensure access to the latest innovations. Our AI Data Platform (ADAP) is the software we use to set up and administer project tasks. It is also the interface for our crowd workers to work on projects. We use ADAP for our managed service projects, and is also offered as a SaaS platform. With the growth of generative AI related projects in FY24, we saw a significant increase in the volume of work utilising our ADAP platform. Revenue from Global Product, representing projects from our large Global customers that utilise ADAP, increased to $31.3 million in FY24, a 221.9% increase on FY23. Customers selected ADAP over internal annotation tools for the ability to rapidly set up and customise annotation tasks. We released many new ADAP features in FY24 to support generative AI related projects, including: AI Detector that improves data quality by identifying non-human generated content, specifically where contributors are using LLMs to generate responses. Retrieval-augmented generation (RAG) capabilities that cover end-to-end data requirements for preparing data and evaluating performance. AI Chat Feedback enhancements, that allows connections with third-party endpoints directly from inside an ADAP project, to run a multi turns live conversation with a model, and to evaluate and live-correct completions. Appen China released many new MatrixGo features in FY24, with a focus on enhancing the capabilities of the annotation tools, improving user experience and crowd management, and boosting data processing efficiency through algorithms. New features and enhancements include: MatrixGo Instant Messaging System, that allows project managers and annotators to interact in real time. It can handle one million transactions per second (TPS) in message throughput and supports dynamic scaling. The system is integrated into the MatrixGo platform and is accessible via web and mobile. Self-Operated Crowd Module, that groups contributors based on language, skills, and project experience. It fosters talent development through dedicated project managers and continuous project opportunities, increasing platform loyalty and work enthusiasm. Point Cloud 2.0, that supports very dense point cloud data with hundreds of millions of points per frame and supports various annotation tasks on 4D data. This reinforces our leadership in the computer vision point cloud annotation field. Automated Data Annotation Loop, that combines pre-annotated foundation models with project -level fine-tuning. It boosts 2D annotation efficiency by up to five times and improves 3D annotation efficiency by around 25%. Audio Classification Model, that can identify noise, music, speaker age and gender across multiple languages, providing a powerful tool for quality screening and feature extraction in the production of audio datasets. Investment in product development In FY24, investment in product development (excluding amortisation) decreased 43.3% to $19.6 million and represented 8.4% of revenue (2023: $34.6 million or 12.7% of revenue). Managing and protecting data At Appen, we manage and protect massive amounts of data in line with security, privacy, and regulatory requirements. We recognise the critical importance of meeting our customers' expectations and fulfilling contractual obligations related to data security. Additionally, we remain vigilant against the increasing risk of cyber security attacks, continuously adopting industry best practices to safeguard our systems, data, and customer trust. 13Appen 2024 Annual Report For personal use only
Page 15
Appen’s technology processes and systems deliver AI training data at scale. We leverage advanced tools and methodologies to source, prepare, and evaluate data, ensuring the highest quality datasets for our clients. With the ability to support large language model (LLM) capabilities we are at the forefront of generative AI, providing our customers with the resources they need to fine‑tune their AI models and achieve optimal performance. Our comprehensive range of technology products and data services encompasses both deep learning and generative AI. This includes four major platforms 1) CrowdGen, the interface for our crowd workers to apply for tasks, 2) Mercury, the backend for all our crowd management tasks, 3) AI Data Platform (ADAP), a solution that allows internal teams and external customers to design and manage human annotation projects, and 4) China MatrixGo ¹, the bespoke annotation platform to provide specialised services for the Chinese market. Priority SDG $19.6M in product development 99.9% uptime met or exceeded across all platforms Technology processes, systems China Platform & Services MatrixGo and Generative AI data annotation platform AI data services for China markets Off-the-shelf datasets AI Data Annotation Platform (ADAP) Data collection and annotation LLM & Generative AI workflows (fine-tuning and evaluation) AI automation tools CrowdGen Crowd Platform Sourcing and recruitment Qualification and smart matching Crowd Payments Crowd support AI Data Solutions LLM & Generative AI Data Solutions (SFT, RLHF, Evaluation, Red Teaming) AI training data (data collection, data annotation, off-the-shelf datasets) Global Services, Global Product, Enterprise, Government China Value drivers 1 Previously known as China A9. 12 Product development In FY24 we undertook a major replatform of our core crowd management software, called Appen Connect. Appen Connect was introduced through the acquisition of Leapforce, and while it provided significant benefits to the business, the technology was built using legacy architecture and was inhibiting our ability to make rapid improvements, including automations. In September we launched our new crowd management platform that consists of two deeply integrated components. The first is CrowdGen. This is the interface that our crowd workers use to interact with Appen to assess available work, apply for projects, and manage their accounts including payments. The second is Mercury. This is the backend system that we use internally to set up projects and manage our crowd workforce. The evolution to Mercury enables us to significantly improve the level of automation in our project management approach, and provides better insights into our workforce, leading to improved outcomes for our customers. For CrowdGen and Mercury, we utilised best of breed software across the ecosystem to improve the return on investment in our software development resources and ensure access to the latest innovations. Our AI Data Platform (ADAP) is the software we use to set up and administer project tasks. It is also the interface for our crowd workers to work on projects. We use ADAP for our managed service projects, and is also offered as a SaaS platform. With the growth of generative AI related projects in FY24, we saw a significant increase in the volume of work utilising our ADAP platform. Revenue from Global Product, representing projects from our large Global customers that utilise ADAP, increased to $31.3 million in FY24, a 221.9% increase on FY23. Customers selected ADAP over internal annotation tools for the ability to rapidly set up and customise annotation tasks. We released many new ADAP features in FY24 to support generative AI related projects, including: AI Detector that improves data quality by identifying non-human generated content, specifically where contributors are using LLMs to generate responses. Retrieval-augmented generation (RAG) capabilities that cover end-to-end data requirements for preparing data and evaluating performance. AI Chat Feedback enhancements, that allows connections with third-party endpoints directly from inside an ADAP project, to run a multi turns live conversation with a model, and to evaluate and live-correct completions. Appen China released many new MatrixGo features in FY24, with a focus on enhancing the capabilities of the annotation tools, improving user experience and crowd management, and boosting data processing efficiency through algorithms. New features and enhancements include: MatrixGo Instant Messaging System, that allows project managers and annotators to interact in real time. It can handle one million transactions per second (TPS) in message throughput and supports dynamic scaling. The system is integrated into the MatrixGo platform and is accessible via web and mobile. Self-Operated Crowd Module, that groups contributors based on language, skills, and project experience. It fosters talent development through dedicated project managers and continuous project opportunities, increasing platform loyalty and work enthusiasm. Point Cloud 2.0, that supports very dense point cloud data with hundreds of millions of points per frame and supports various annotation tasks on 4D data. This reinforces our leadership in the computer vision point cloud annotation field. Automated Data Annotation Loop, that combines pre-annotated foundation models with project -level fine-tuning. It boosts 2D annotation efficiency by up to five times and improves 3D annotation efficiency by around 25%. Audio Classification Model, that can identify noise, music, speaker age and gender across multiple languages, providing a powerful tool for quality screening and feature extraction in the production of audio datasets. Investment in product development In FY24, investment in product development (excluding amortisation) decreased 43.3% to $19.6 million and represented 8.4% of revenue (2023: $34.6 million or 12.7% of revenue). Managing and protecting data At Appen, we manage and protect massive amounts of data in line with security, privacy, and regulatory requirements. We recognise the critical importance of meeting our customers' expectations and fulfilling contractual obligations related to data security. Additionally, we remain vigilant against the increasing risk of cyber security attacks, continuously adopting industry best practices to safeguard our systems, data, and customer trust. 13Appen 2024 Annual Report For personal use only
Page 16
System and data security Managing data security is an essential and a core competency of our business. Our approach is comprehensive and involves people, processes, and technology. As a minimum we adhere to industry recognised standards, such as the International Organisation for Standardisation (ISO) and National Institute of Standards and Technology (NIST) and implement global best practices. Mandatory security awareness and privacy training is provided to all employees on annual basis. We also conduct regular synthetic phishing tests to promote employee awareness of the threats and their responsibilities in managing data security. These tests also provide an indication as to the effectiveness of our training programs. We provide customers with a range of secure technology solutions. Our SaaS customers can maintain their data in their environment and do not need to physically move it to our environment. For maximum data security, our software can be deployed in the customers’ air-gapped environment or private cloud and provides flexibility to cater to client's expectations. Customers with even higher data security requirements can use one of our ISO 27001-certified secure facilities in the Philippines, the UK, and China. In FY24, we successfully upgraded our ISO 27001 certifications to the most recent edition (ISO 27001:2022). Data privacy Our engineering, security and privacy teams work closely together to ensure that data privacy is integrated into our systems. We also work to comply with specific data privacy requirements in the markets in which we operate, including the California Consumer Privacy Act, the Philippines and Australian Privacy Acts, and the EU/UK General Data Protection Regulation. Mandatory data privacy training is provided to all employees on an annual basis. In FY24, there was one non-material security incident involving and limited to Quadrant, a subsidiary of Appen. We promptly identified the root cause and resolved it following established protocols. Additional safeguards were implemented to further strengthen our security posture, reinforcing our commitment to protecting our customers. Platform availability, reliability and resilience Platform availability, reliability and resilience is a key focus of our engineering teams. The team works to strict system availability targets and ensures that our systems can safely scale in response to changes in demand. In FY24, we continued to meet or exceed 99.9% 1 uptime across all our platforms. Cyber security Our cyber security risk management framework is based on internationally recognised NIST standards and is structured to identify, detect, protect against, respond and recover to cyber security threats. Security penetration testing is conducted annually by third-party specialists. Our operational facilities are ISO 27001:2022 certified, and our ADAP and CrowdGen (Mercury) platforms are SOC 2 Type 2 attested. Additionally, our UK and China facilities hold ISO 9001 certifications, and our UK facility is Cyber Essentials Plus certified, meeting UK requirements. Appen also has Payment Card Industry (PCI) compliance for its ADAP platform. Our IT security policies and standards are adhering to ISO 27001 controls and the incident response procedure is aligned with the NIST CSF (Cyber security Framework). We conduct incident response tabletop exercises annually. We have adopted a practice of engaging third-party cyber security maturity assessments for our organisation every two years. The latest assessment, conducted by PwC in FY24, demonstrated consistent improvement in our scores, which exceed the industry benchmark for organisations of similar size and scope. The results of this review continue to form the program of works to further mature Appen's cyber security capability. Appen has cyber security insurance in place. Data encryption is in place when data is at rest and in transit for critical systems as per SAL (Secure Algorithm List). We have centralised access controls via SSO (Single Sign On) and MFA (Multi Factor Authentication) for additional layers of protection. Security logs from our critical systems are captured and monitored in a SIEM (Security Information and Event Management) tool. We also have top tier network, perimeter, and end point security tools protecting the assets and monitoring inbound and outbound network traffic. Privileged access and vendor security reviews are conducted as per our standards. 1 Based on report from third-party website monitoring company, StatusCake. FY25 focus Appen is committed to innovation and excellence. We remain focused on continuing to enhance the crowd experience to foster a more engaging environment, advancing our ADAP and MatrixGo platforms to support the evolving generative AI market, and strengthening our deep learning capabilities. We also remain dedicated to further automating processes through AI-driven productivity enhancements. Cyber security continues to be a key priority. We are advancing our cyber security maturity through dedicated programs, as well as prioritising data classification and loss prevention projects. 14 At Appen, our commitment to creating a positive social and environmental impact is a cornerstone of our mission to enable responsible and inclusive AI development. In 2024, we made significant strides in supporting our global crowd and embedding sustainability into our operations. Governance Our social and environmental frameworks remain underpinned by a steadfast commitment to high standards of corporate governance, ensuring transparency, accountability, and sustainability in all facets of our operations. The Board of Directors provides strategic oversight, while management ensures operational alignment with these principles. Responsibilities of the Board of Directors: Evaluating the environmental and social impacts of our business activities and decisions. Setting and monitoring adherence to social and environmental standards that align with global best practices. Overseeing the management of risks and opportunities related to climate change, biodiversity, and environmental sustainability. Approving climate-related disclosures, ensuring transparency and alignment with emerging regulatory requirements. Tracking progress against defined goals and targets for climate, social, and governance-related issues. Audit and Risk Management Committee: Integrating environmental, social, and governance (ESG) considerations into the company’s broader risk framework. Reviewing quarterly risk reports to ensure effective management of climate-related and environmental risks. Supporting the identification and mitigation of emerging risks, such as supply chain vulnerabilities and compliance gaps in ESG areas. Providing recommendations to the Board for continuous improvement in governance and risk oversight. Crowd, social and environment Priority SDG Ethical AI through our Crowd code of ethics 33 Crowd NPS 6 points from 27 FY23 Value drivers 15Appen 2024 Annual Report For personal use only
Page 17
System and data security Managing data security is an essential and a core competency of our business. Our approach is comprehensive and involves people, processes, and technology. As a minimum we adhere to industry recognised standards, such as the International Organisation for Standardisation (ISO) and National Institute of Standards and Technology (NIST) and implement global best practices. Mandatory security awareness and privacy training is provided to all employees on annual basis. We also conduct regular synthetic phishing tests to promote employee awareness of the threats and their responsibilities in managing data security. These tests also provide an indication as to the effectiveness of our training programs. We provide customers with a range of secure technology solutions. Our SaaS customers can maintain their data in their environment and do not need to physically move it to our environment. For maximum data security, our software can be deployed in the customers’ air-gapped environment or private cloud and provides flexibility to cater to client's expectations. Customers with even higher data security requirements can use one of our ISO 27001-certified secure facilities in the Philippines, the UK, and China. In FY24, we successfully upgraded our ISO 27001 certifications to the most recent edition (ISO 27001:2022). Data privacy Our engineering, security and privacy teams work closely together to ensure that data privacy is integrated into our systems. We also work to comply with specific data privacy requirements in the markets in which we operate, including the California Consumer Privacy Act, the Philippines and Australian Privacy Acts, and the EU/UK General Data Protection Regulation. Mandatory data privacy training is provided to all employees on an annual basis. In FY24, there was one non-material security incident involving and limited to Quadrant, a subsidiary of Appen. We promptly identified the root cause and resolved it following established protocols. Additional safeguards were implemented to further strengthen our security posture, reinforcing our commitment to protecting our customers. Platform availability, reliability and resilience Platform availability, reliability and resilience is a key focus of our engineering teams. The team works to strict system availability targets and ensures that our systems can safely scale in response to changes in demand. In FY24, we continued to meet or exceed 99.9% 1 uptime across all our platforms. Cyber security Our cyber security risk management framework is based on internationally recognised NIST standards and is structured to identify, detect, protect against, respond and recover to cyber security threats. Security penetration testing is conducted annually by third-party specialists. Our operational facilities are ISO 27001:2022 certified, and our ADAP and CrowdGen (Mercury) platforms are SOC 2 Type 2 attested. Additionally, our UK and China facilities hold ISO 9001 certifications, and our UK facility is Cyber Essentials Plus certified, meeting UK requirements. Appen also has Payment Card Industry (PCI) compliance for its ADAP platform. Our IT security policies and standards are adhering to ISO 27001 controls and the incident response procedure is aligned with the NIST CSF (Cyber security Framework). We conduct incident response tabletop exercises annually. We have adopted a practice of engaging third-party cyber security maturity assessments for our organisation every two years. The latest assessment, conducted by PwC in FY24, demonstrated consistent improvement in our scores, which exceed the industry benchmark for organisations of similar size and scope. The results of this review continue to form the program of works to further mature Appen's cyber security capability. Appen has cyber security insurance in place. Data encryption is in place when data is at rest and in transit for critical systems as per SAL (Secure Algorithm List). We have centralised access controls via SSO (Single Sign On) and MFA (Multi Factor Authentication) for additional layers of protection. Security logs from our critical systems are captured and monitored in a SIEM (Security Information and Event Management) tool. We also have top tier network, perimeter, and end point security tools protecting the assets and monitoring inbound and outbound network traffic. Privileged access and vendor security reviews are conducted as per our standards. 1 Based on report from third-party website monitoring company, StatusCake. FY25 focus Appen is committed to innovation and excellence. We remain focused on continuing to enhance the crowd experience to foster a more engaging environment, advancing our ADAP and MatrixGo platforms to support the evolving generative AI market, and strengthening our deep learning capabilities. We also remain dedicated to further automating processes through AI-driven productivity enhancements. Cyber security continues to be a key priority. We are advancing our cyber security maturity through dedicated programs, as well as prioritising data classification and loss prevention projects. 14 At Appen, our commitment to creating a positive social and environmental impact is a cornerstone of our mission to enable responsible and inclusive AI development. In 2024, we made significant strides in supporting our global crowd and embedding sustainability into our operations. Governance Our social and environmental frameworks remain underpinned by a steadfast commitment to high standards of corporate governance, ensuring transparency, accountability, and sustainability in all facets of our operations. The Board of Directors provides strategic oversight, while management ensures operational alignment with these principles. Responsibilities of the Board of Directors: Evaluating the environmental and social impacts of our business activities and decisions. Setting and monitoring adherence to social and environmental standards that align with global best practices. Overseeing the management of risks and opportunities related to climate change, biodiversity, and environmental sustainability. Approving climate-related disclosures, ensuring transparency and alignment with emerging regulatory requirements. Tracking progress against defined goals and targets for climate, social, and governance-related issues. Audit and Risk Management Committee: Integrating environmental, social, and governance (ESG) considerations into the company’s broader risk framework. Reviewing quarterly risk reports to ensure effective management of climate-related and environmental risks. Supporting the identification and mitigation of emerging risks, such as supply chain vulnerabilities and compliance gaps in ESG areas. Providing recommendations to the Board for continuous improvement in governance and risk oversight. Crowd, social and environment Priority SDG Ethical AI through our Crowd code of ethics 33 Crowd NPS 6 points from 27 FY23 Value drivers 15Appen 2024 Annual Report For personal use only
Page 18
Good Business Practice Good business practice at Appen is defined by ethical leadership, integrity, and responsible decision-making. These principles guide how we interact with stakeholders, manage our workforce, and deliver services to customers. Code of Conduct and Ethical Standards Our Code of Conduct outlines the minimum standards for ethical behaviour, emphasising fairness, respect, and accountability. It applies to all employees, contractors, and business partners. Anti-Corruption and Anti-Bribery Our Anti-Corruption and Anti-Bribery Policy reinforces a zero-tolerance approach to bribery and corruption. Strictly prohibits the use of corporate funds for political donations or advocacy unrelated to our core mission. Mandatory annual compliance training ensures employees are aware of their responsibilities. In FY24, 90% of employees completed this training, compared to 95% in FY23. UN Global Compact and Ethical Sourcing As a proud signatory of the United Nations Global Compact (UNGC), we continue to embed its ten principles on human rights, labor, environment, and anti-corruption into our strategies and operations. We have also completed our first Communication on Progress during the year. Human Rights: Conducted risk-based supplier reviews, focusing on compliance with our Global Ethical Sourcing and Modern Slavery Policy . Labour: Set diversity targets, including 30% female representation in senior management roles. Environment: Advanced our net-zero emissions roadmap, maintaining flat emissions despite the opening of new facilities. Anti-Corruption: Continued to support our whistleblower hotline that enables anonymous reporting. Training and Accountability To drive accountability across all levels of the organisation: Short-term incentives for senior leadership are directly linked to compliance metrics, including training completion rates and ESG performance. Mandatory ethical sourcing training for key procurement and supply chain staff. Empowering Contributors Through Economic Opportunities Human involvement is not just a stage in AI development – it is its foundation. Keeping humans in the loop ensures that AI systems remain aligned with human values, helping to minimise hallucinations, bias, and toxicity. By embedding diverse human perspectives at every stage of the AI lifecycle, we aim to create systems that augment human potential, solving complex challenges and unlocking opportunities for positive societal impact. In 2024, we connected over 1 million contributors in 170 countries with projects spanning 20 domains, creating a truly borderless workforce. For almost 50% of our contributors in the US, this work served as a primary source of income, helping contributors support their families, fund education, or invest in their future goals. A significant portion of our contributor base resides in emerging markets, where access to remote work opportunities is critical. Crowd Engagement In FY24, our Crowd Net Promoter Score (NPS) increased to 33 from 27, reflecting the resilience of our contributor community and the impact of our targeted improvements. This growth comes despite challenges associated with the rollout of our new contributor platform, CrowdGen, and demonstrates the crowd's trust in our efforts to enhance their experience. Key Highlights of NPS Feedback Contributors highlighted areas where we can further enhance their experience: Project availability and relevance: Continued focus on increasing and better matching contributors to suitable projects is essential. System challenges: Initial issues with the new system caused some frustration, particularly around transparency and ease of use. Support and communication: Contributors appreciated ongoing updates but expressed a desire for faster resolution of queries. Crowd, social and environment 16 Championing Fair Labor Practices The well-being and dignity of our contributors are at the forefront of our efforts to improve the gig economy. Key milestones in 2024 included: Minimum wage commitment: We ensured that all contributors were paid at least the local minimum wage equivalent. This commitment reflects our dedication to promoting fair pay and reducing financial uncertainty. Enhanced payment options: We introduced a suite of payment methods, including direct bank transfers, gift cards, and local payout systems, giving contributors greater flexibility and control over how they receive their earnings. Collaborative advocacy: Our partnerships with organisations like Fairwork and PAI have allowed us to contribute to global conversations on ethical labor practices and help set new benchmarks for fairness in the gig economy. Enhanced Contributor Systems and Support In FY24, we launched CrowdGen a next-generation platform designed to address contributors' concerns and deliver a superior experience. The new system focuses on creating a seamless, efficient, and transparent environment for contributors, addressing pain points highlighted in past feedback. Key features include: Better project matching: Contributors are now matched to projects more effectively based on their skills, experience, and preferences. This improvement ensures that individuals have access to more relevant opportunities, increasing satisfaction and engagement. Streamlined user experience: CrowdGen simplifies onboarding, qualification processes, and project participation, reducing friction and saving contributors’ time. Expanded payment options: Offering flexible, transparent payment methods tailored to contributors' preferences. New features allow contributors to track payments with greater visibility, providing details such as hours worked, project breakdowns, and estimated timelines for fund availability. Prioritising Contributor Health and Well-Being In recognition of the challenges that come with gig work, we have implemented several initiatives to support the mental, emotional, and physical health of our contributors: Wellness resources: We expanded access to wellness programs, including monthly newsletters with tips on resilience, mental health, and stress management. Counselling services: Contributors working on sensitive or high-risk projects, such as content moderation, were provided with on-demand access to counselling and wellness services to safeguard their mental health. Flexible work options: By encouraging project structures that accommodate varying schedules, we empowered contributors to balance work with personal responsibilities. Modern Slavery and respect for Human Rights At Appen, we believe that any form of modern slavery and human rights abuse is unacceptable, and we are committed to playing a proactive role in eradicating these practices. Our commitment is detailed in our Global Ethical Sourcing and Modern Slavery Policy , which outlines our expectations for ethical behaviour across all levels of our supply chain. This policy reinforces our zero-tolerance stance on forced labor and prioritises fair employment practices, safe working conditions, freedom of association, non-discrimination, and robust whistleblower protections. Appen 2024 Annual Report 17 For personal use only
Page 19
Good Business Practice Good business practice at Appen is defined by ethical leadership, integrity, and responsible decision-making. These principles guide how we interact with stakeholders, manage our workforce, and deliver services to customers. Code of Conduct and Ethical Standards Our Code of Conduct outlines the minimum standards for ethical behaviour, emphasising fairness, respect, and accountability. It applies to all employees, contractors, and business partners. Anti-Corruption and Anti-Bribery Our Anti-Corruption and Anti-Bribery Policy reinforces a zero-tolerance approach to bribery and corruption. Strictly prohibits the use of corporate funds for political donations or advocacy unrelated to our core mission. Mandatory annual compliance training ensures employees are aware of their responsibilities. In FY24, 90% of employees completed this training, compared to 95% in FY23. UN Global Compact and Ethical Sourcing As a proud signatory of the United Nations Global Compact (UNGC), we continue to embed its ten principles on human rights, labor, environment, and anti-corruption into our strategies and operations. We have also completed our first Communication on Progress during the year. Human Rights: Conducted risk-based supplier reviews, focusing on compliance with our Global Ethical Sourcing and Modern Slavery Policy . Labour: Set diversity targets, including 30% female representation in senior management roles. Environment: Advanced our net-zero emissions roadmap, maintaining flat emissions despite the opening of new facilities. Anti-Corruption: Continued to support our whistleblower hotline that enables anonymous reporting. Training and Accountability To drive accountability across all levels of the organisation: Short-term incentives for senior leadership are directly linked to compliance metrics, including training completion rates and ESG performance. Mandatory ethical sourcing training for key procurement and supply chain staff. Empowering Contributors Through Economic Opportunities Human involvement is not just a stage in AI development – it is its foundation. Keeping humans in the loop ensures that AI systems remain aligned with human values, helping to minimise hallucinations, bias, and toxicity. By embedding diverse human perspectives at every stage of the AI lifecycle, we aim to create systems that augment human potential, solving complex challenges and unlocking opportunities for positive societal impact. In 2024, we connected over 1 million contributors in 170 countries with projects spanning 20 domains, creating a truly borderless workforce. For almost 50% of our contributors in the US, this work served as a primary source of income, helping contributors support their families, fund education, or invest in their future goals. A significant portion of our contributor base resides in emerging markets, where access to remote work opportunities is critical. Crowd Engagement In FY24, our Crowd Net Promoter Score (NPS) increased to 33 from 27, reflecting the resilience of our contributor community and the impact of our targeted improvements. This growth comes despite challenges associated with the rollout of our new contributor platform, CrowdGen, and demonstrates the crowd's trust in our efforts to enhance their experience. Key Highlights of NPS Feedback Contributors highlighted areas where we can further enhance their experience: Project availability and relevance: Continued focus on increasing and better matching contributors to suitable projects is essential. System challenges: Initial issues with the new system caused some frustration, particularly around transparency and ease of use. Support and communication: Contributors appreciated ongoing updates but expressed a desire for faster resolution of queries. Crowd, social and environment 16 Championing Fair Labor Practices The well-being and dignity of our contributors are at the forefront of our efforts to improve the gig economy. Key milestones in 2024 included: Minimum wage commitment: We ensured that all contributors were paid at least the local minimum wage equivalent. This commitment reflects our dedication to promoting fair pay and reducing financial uncertainty. Enhanced payment options: We introduced a suite of payment methods, including direct bank transfers, gift cards, and local payout systems, giving contributors greater flexibility and control over how they receive their earnings. Collaborative advocacy: Our partnerships with organisations like Fairwork and PAI have allowed us to contribute to global conversations on ethical labor practices and help set new benchmarks for fairness in the gig economy. Enhanced Contributor Systems and Support In FY24, we launched CrowdGen a next-generation platform designed to address contributors' concerns and deliver a superior experience. The new system focuses on creating a seamless, efficient, and transparent environment for contributors, addressing pain points highlighted in past feedback. Key features include: Better project matching: Contributors are now matched to projects more effectively based on their skills, experience, and preferences. This improvement ensures that individuals have access to more relevant opportunities, increasing satisfaction and engagement. Streamlined user experience: CrowdGen simplifies onboarding, qualification processes, and project participation, reducing friction and saving contributors’ time. Expanded payment options: Offering flexible, transparent payment methods tailored to contributors' preferences. New features allow contributors to track payments with greater visibility, providing details such as hours worked, project breakdowns, and estimated timelines for fund availability. Prioritising Contributor Health and Well-Being In recognition of the challenges that come with gig work, we have implemented several initiatives to support the mental, emotional, and physical health of our contributors: Wellness resources: We expanded access to wellness programs, including monthly newsletters with tips on resilience, mental health, and stress management. Counselling services: Contributors working on sensitive or high-risk projects, such as content moderation, were provided with on-demand access to counselling and wellness services to safeguard their mental health. Flexible work options: By encouraging project structures that accommodate varying schedules, we empowered contributors to balance work with personal responsibilities. Modern Slavery and respect for Human Rights At Appen, we believe that any form of modern slavery and human rights abuse is unacceptable, and we are committed to playing a proactive role in eradicating these practices. Our commitment is detailed in our Global Ethical Sourcing and Modern Slavery Policy , which outlines our expectations for ethical behaviour across all levels of our supply chain. This policy reinforces our zero-tolerance stance on forced labor and prioritises fair employment practices, safe working conditions, freedom of association, non-discrimination, and robust whistleblower protections. Appen 2024 Annual Report 17 For personal use only
Page 20
Crowd, social and environment Climate change We acknowledge the significant risks posed by climate change and are committed to supporting the global transition to net-zero emissions. Our alignment with the Science Based Target initiative (SBTi) reflects our pledge to limit global warming to 1.5°C. We have developed a Net Zero Emissions Roadmap to provide actionable pathways toward achieving our targets. The roadmap, approved by management, includes funding (excluding offsets) and will be applied across the business, focusing on sustainable energy use, operational efficiency, and targeted supplier engagement. Environmental footprint Our environmental and climate commitments are outlined in our Environment Position Statement (EPS). This statement reaffirms our dedication to engaging external stakeholders, such as suppliers, clients, and contractors, to reduce our environmental impact. It also ensures transparency in our progress and establishes a governance structure to oversee the management of environmental risks and compliance. Given the relatively small environmental footprint of our direct operations, our focus remains on minimising the impact of our offices, facilities, travel, and data centre usage by: Reducing electricity consumption and increasing the use of renewable energy Optimising data centre requirements by collaborating with a cloud provider committed to 100% renewable energy Reducing water consumption and waste generation while increasing recycling and reprocessing of used technology equipment Minimising travel through enhanced digital collaboration tools Partnering with suppliers to pursue sustainable procurement solutions. Strategy Our Net Zero Carbon Roadmap outlines key strategic actions to achieve net-zero emissions by 2030 for our broader value chain. These actions include: Sustainable office design and operational efficiency Better energy management and sourcing renewable energy Partner engagement to achieve shared net-zero goals Procuring carbon offsets aligned with our values, providing additional social and economic benefits beyond carbon reductions. Our offset strategy includes: Current and forecasted greenhouse gas emissions for Appen Scenario modelling and budget planning for offsets Criteria for selecting carbon offsets to align with our company values and sustainability objectives. Progress We have continued the implementation of our net zero strategy this year and achieved the following: 1. Renewable energy Signed ‘green’ electricity contract for our corporate office in Australia 2. Energy efficiency Finalised installation of LED lightings in our Philippines’ offices 3. Sustainable office design Applied sustainable design specifications to new office locations Closed underutilised office spaces to reduce emissions 4. Carbon offsets Procured carbon offsets to offset our business travel emissions Commenced discussions with customers on best offset strategies to align with their goals 18 Risk management We assess climate risks through our risk management framework, aligned with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). Climate risks are incorporated into our Risk Appetite Statement and monitored across all levels of governance, including the Board. In 2024, we conducted a scenario analysis of physical risks affecting our global offices to identify vulnerabilities and inform mitigation strategies. Further details can be found in the section ‘TCFD-based Scenario Analysis.’ Metrics and targets Our 2024 GHG emissions inventory was completed in accordance with the GHG Protocol, categorising emissions into scopes 1, 2, and 3. While direct operations account for a portion of emissions, the majority stem from our supply chain, including contractors and suppliers. Source 2024 tCO2e 2023 tCO2e Scope 1 Natural gas 283 309 Scope 2 Electricity – Location-Based 1,945 1,631 Scope 2 Electricity – Market-Based 1,990 1,637 Scope 3 12,509 13,515 Total Scope 1, 2 & 3 Emissions 14,737 15,455 The reporting boundary for scope 1 and 2 includes all offices globally occupied by Appen employees. Office spaces leased exclusively for the delivery of specific projects on a short-term basis and offices that were operational for less than six months in the reporting period have been excluded from this boundary. Further details of our GHG inventory, including category breakdown for scope 3 and emissions by geography can be found in Appendix page 130 of the annual report. Outlook While we are proud of the progress made in 2024, we know there is much more to be done. Our priorities for 2025 include: 1. Improving Advocacy: We will strengthen our efforts to amplify contributor voices, ensuring they have a say in shaping the future of the platform. 2. Advancing Fairness: Building on our partnerships with industry bodies, we will continue to advocate for ethical. 3. Supporting Innovation: By investing in new technologies and platform features, we will create a more seamless, rewarding experience for contributors and customers alike. 4. Expanding Carbon Offset Strategy: Finalising and implementing our offset strategy, ensuring carbon credits are sourced from projects that align with our company values and deliver social and economic benefits beyond emissions reductions. Appen 2024 Annual Report 19 For personal use only
Page 21
Crowd, social and environment Climate change We acknowledge the significant risks posed by climate change and are committed to supporting the global transition to net-zero emissions. Our alignment with the Science Based Target initiative (SBTi) reflects our pledge to limit global warming to 1.5°C. We have developed a Net Zero Emissions Roadmap to provide actionable pathways toward achieving our targets. The roadmap, approved by management, includes funding (excluding offsets) and will be applied across the business, focusing on sustainable energy use, operational efficiency, and targeted supplier engagement. Environmental footprint Our environmental and climate commitments are outlined in our Environment Position Statement (EPS). This statement reaffirms our dedication to engaging external stakeholders, such as suppliers, clients, and contractors, to reduce our environmental impact. It also ensures transparency in our progress and establishes a governance structure to oversee the management of environmental risks and compliance. Given the relatively small environmental footprint of our direct operations, our focus remains on minimising the impact of our offices, facilities, travel, and data centre usage by: Reducing electricity consumption and increasing the use of renewable energy Optimising data centre requirements by collaborating with a cloud provider committed to 100% renewable energy Reducing water consumption and waste generation while increasing recycling and reprocessing of used technology equipment Minimising travel through enhanced digital collaboration tools Partnering with suppliers to pursue sustainable procurement solutions. Strategy Our Net Zero Carbon Roadmap outlines key strategic actions to achieve net-zero emissions by 2030 for our broader value chain. These actions include: Sustainable office design and operational efficiency Better energy management and sourcing renewable energy Partner engagement to achieve shared net-zero goals Procuring carbon offsets aligned with our values, providing additional social and economic benefits beyond carbon reductions. Our offset strategy includes: Current and forecasted greenhouse gas emissions for Appen Scenario modelling and budget planning for offsets Criteria for selecting carbon offsets to align with our company values and sustainability objectives. Progress We have continued the implementation of our net zero strategy this year and achieved the following: 1. Renewable energy Signed ‘green’ electricity contract for our corporate office in Australia 2. Energy efficiency Finalised installation of LED lightings in our Philippines’ offices 3. Sustainable office design Applied sustainable design specifications to new office locations Closed underutilised office spaces to reduce emissions 4. Carbon offsets Procured carbon offsets to offset our business travel emissions Commenced discussions with customers on best offset strategies to align with their goals 18 Risk management We assess climate risks through our risk management framework, aligned with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). Climate risks are incorporated into our Risk Appetite Statement and monitored across all levels of governance, including the Board. In 2024, we conducted a scenario analysis of physical risks affecting our global offices to identify vulnerabilities and inform mitigation strategies. Further details can be found in the section ‘TCFD-based Scenario Analysis.’ Metrics and targets Our 2024 GHG emissions inventory was completed in accordance with the GHG Protocol, categorising emissions into scopes 1, 2, and 3. While direct operations account for a portion of emissions, the majority stem from our supply chain, including contractors and suppliers. Source 2024 tCO2e 2023 tCO2e Scope 1 Natural gas 283 309 Scope 2 Electricity – Location-Based 1,945 1,631 Scope 2 Electricity – Market-Based 1,990 1,637 Scope 3 12,509 13,515 Total Scope 1, 2 & 3 Emissions 14,737 15,455 The reporting boundary for scope 1 and 2 includes all offices globally occupied by Appen employees. Office spaces leased exclusively for the delivery of specific projects on a short-term basis and offices that were operational for less than six months in the reporting period have been excluded from this boundary. Further details of our GHG inventory, including category breakdown for scope 3 and emissions by geography can be found in Appendix page 130 of the annual report. Outlook While we are proud of the progress made in 2024, we know there is much more to be done. Our priorities for 2025 include: 1. Improving Advocacy: We will strengthen our efforts to amplify contributor voices, ensuring they have a say in shaping the future of the platform. 2. Advancing Fairness: Building on our partnerships with industry bodies, we will continue to advocate for ethical. 3. Supporting Innovation: By investing in new technologies and platform features, we will create a more seamless, rewarding experience for contributors and customers alike. 4. Expanding Carbon Offset Strategy: Finalising and implementing our offset strategy, ensuring carbon credits are sourced from projects that align with our company values and deliver social and economic benefits beyond emissions reductions. Appen 2024 Annual Report 19 For personal use only
Page 22
Crowd, social and environment Analysis of risks and opportunities Our updated analysis indicates significant opportunities and manageable risks associated with climate change impacts. While the dispersed nature of our operations, suppliers, and customers mitigates certain physical risks, emerging challenges such as evolving customer expectations and regulatory landscapes require ongoing attention. Potential Impact Response Transition risks Policy and legal Customers increasingly expect suppliers to demonstrate environmentally responsible practices and net-zero commitments within their supply chains. We address these risks by further enhancing energy-efficient operations and reporting on our carbon footprint transparently. Additionally, we align with customer sustainability programs to mutually advance climate goals. Physical risks Acute Offices in regions prone to extreme weather events, such as floods, heatwaves, and wildfires, are at risk of disruptions and damage. Short-term disruptions are mitigated by leveraging remote working capabilities with minimal business impact. Business continuity and disaster recovery plans are regularly updated, factoring in the increasing frequency and severity of weather events. Opportunities Resource efficiency Transitioning to resource- efficient processes offers long-term cost reductions, employee satisfaction, and enhanced customer value. We are expanding energy and water efficiency programs across all sites and continuously reviewing operations to identify further efficiency gains. Energy source Utilising lower-emission energy sources reduces exposure to fossil fuel price volatility, potential carbon pricing changes, and enhances reputation. We are scaling our use of renewable energy across operations, focusing on solar, wind, and hydroelectric sources to meet sustainability commitments. Products and services AI innovations that reduce emissions and optimise resource allocation increase demand for high-quality training data. We anticipate sustained demand for our AI data services, driven by the need for training models supporting climate -focused technologies. 20 TCFD-based scenario analysis We have conducted an updated desktop scenario analysis of the potential physical risks associated with climate change across Appen's global offices. This analysis utilised two scenarios from the Intergovernmental Panel on Climate Change (IPCC): Low emissions scenario (RCP 4.5): Represents a 2°C warming scenario. High emissions scenario (RCP 8.5): Represents a 4°C warming scenario. Physical Risks Assessed For each office location, the following risks were analysed under both scenarios: Fires: Risk of bushfires and wildfires driven by hotter and drier climates. Heatwaves: Increased frequency and severity of prolonged high temperatures. Drought: Reduced rainfall and water scarcity due to changing climate patterns. Flooding: Higher risk of floods from more intense storms and storm surges. Inundation: Rising sea levels threatening low-lying areas. Business Impacts Identified Key risks included: Property damage and potential safety concerns. Increased operational costs due to resource scarcity or infrastructure repair. Disruptions to supply chains and customer delivery commitments. Scenario Analysis Outcomes Our analysis shows that heatwaves and drought pose the greatest risk to our global office network, particularly in a high emissions scenario (RCP 8.5). Mitigation and Adaptation Initiatives In response, we have implemented and expanded the following measures: Energy Efficiency: Installation of LED lighting and efficient HVAC systems in high-risk locations. Water Conservation: Deployment of water-efficient plumbing fixtures to mitigate drought-related risks. Renewable Energy: Accelerating the transition to renewable energy sources, such as solar and wind, for onsite and offsite energy requirements. Disaster Preparedness: Enhancing business continuity and disaster recovery plans to address site-specific risks, including flooding and heatwaves. By incorporating scenario analysis into our risk management framework, we continue to align our operations with the Task Force on Climate-related Financial Disclosures (TCFD) recommendations and ensure resilience against evolving climate risks. 21Appen 2024 Annual Report For personal use only
Page 23
Crowd, social and environment Analysis of risks and opportunities Our updated analysis indicates significant opportunities and manageable risks associated with climate change impacts. While the dispersed nature of our operations, suppliers, and customers mitigates certain physical risks, emerging challenges such as evolving customer expectations and regulatory landscapes require ongoing attention. Potential Impact Response Transition risks Policy and legal Customers increasingly expect suppliers to demonstrate environmentally responsible practices and net-zero commitments within their supply chains. We address these risks by further enhancing energy-efficient operations and reporting on our carbon footprint transparently. Additionally, we align with customer sustainability programs to mutually advance climate goals. Physical risks Acute Offices in regions prone to extreme weather events, such as floods, heatwaves, and wildfires, are at risk of disruptions and damage. Short-term disruptions are mitigated by leveraging remote working capabilities with minimal business impact. Business continuity and disaster recovery plans are regularly updated, factoring in the increasing frequency and severity of weather events. Opportunities Resource efficiency Transitioning to resource- efficient processes offers long-term cost reductions, employee satisfaction, and enhanced customer value. We are expanding energy and water efficiency programs across all sites and continuously reviewing operations to identify further efficiency gains. Energy source Utilising lower-emission energy sources reduces exposure to fossil fuel price volatility, potential carbon pricing changes, and enhances reputation. We are scaling our use of renewable energy across operations, focusing on solar, wind, and hydroelectric sources to meet sustainability commitments. Products and services AI innovations that reduce emissions and optimise resource allocation increase demand for high-quality training data. We anticipate sustained demand for our AI data services, driven by the need for training models supporting climate -focused technologies. 20 TCFD-based scenario analysis We have conducted an updated desktop scenario analysis of the potential physical risks associated with climate change across Appen's global offices. This analysis utilised two scenarios from the Intergovernmental Panel on Climate Change (IPCC): Low emissions scenario (RCP 4.5): Represents a 2°C warming scenario. High emissions scenario (RCP 8.5): Represents a 4°C warming scenario. Physical Risks Assessed For each office location, the following risks were analysed under both scenarios: Fires: Risk of bushfires and wildfires driven by hotter and drier climates. Heatwaves: Increased frequency and severity of prolonged high temperatures. Drought: Reduced rainfall and water scarcity due to changing climate patterns. Flooding: Higher risk of floods from more intense storms and storm surges. Inundation: Rising sea levels threatening low-lying areas. Business Impacts Identified Key risks included: Property damage and potential safety concerns. Increased operational costs due to resource scarcity or infrastructure repair. Disruptions to supply chains and customer delivery commitments. Scenario Analysis Outcomes Our analysis shows that heatwaves and drought pose the greatest risk to our global office network, particularly in a high emissions scenario (RCP 8.5). Mitigation and Adaptation Initiatives In response, we have implemented and expanded the following measures: Energy Efficiency: Installation of LED lighting and efficient HVAC systems in high-risk locations. Water Conservation: Deployment of water-efficient plumbing fixtures to mitigate drought-related risks. Renewable Energy: Accelerating the transition to renewable energy sources, such as solar and wind, for onsite and offsite energy requirements. Disaster Preparedness: Enhancing business continuity and disaster recovery plans to address site-specific risks, including flooding and heatwaves. By incorporating scenario analysis into our risk management framework, we continue to align our operations with the Task Force on Climate-related Financial Disclosures (TCFD) recommendations and ensure resilience against evolving climate risks. 21Appen 2024 Annual Report For personal use only
Page 24
Customer and brand At Appen, our focus is to deliver great outcomes and experiences for our customers. As a global market leader and trusted partner, we provide high quality, human centric data to promote responsible and ethical AI. Delivering value for customers Since 1996, we have powered innovative AI applications for global brands including Microsoft, Amazon, Pinterest, Salesforce, Oracle, Adobe and BestBuy. Appen has cultivated trusted partnerships and earned a reputation based on our ability to provide unbiased, high quality, and globally representative data. As the demand for AI continues to grow, we remain committed to our core belief that humans are at the heart of its success. Our focus is helping our customers improve the performance of their models to create stronger, smarter, and more efficient AI systems for our customers and to help shape a future where human intellect and machine learning seamlessly collaborate. We believe that the success of our customers lies in their ability to leverage data effectively. Our high-quality human-annotated datasets are essential in training and validating AI algorithms, ultimately leading to more accurate and reliable results. AI can be a powerful tool for positive change in the world. The work we do for our customers is impactful and we are committed to using our expertise and resources to support initiatives that use AI for social good. From partnering with organisations focused on environmental conservation to supporting projects that promote diversity and inclusion, we are dedicated to making a difference through AI. Our customers value our unwavering focus to promote responsible and ethical AI. Value drivers Priority SDG 57 Customer NPS 22 points from 35 in FY23 80% World's leading LLM foundation model builders as customers 26 LLM model builders as customers 22 Net promoter score Our key customer satisfaction measurement tool is Net Promoter Score (NPS). We seek feedback from our customers on a bi-annual basis and monitor NPS across our Global, Enterprise and China clients. This year customer NPS was 57, compared with 35 in FY23. This score was above target and reflected a high level of customer satisfaction with Appen’s service offerings and project delivery. Customers saw improvements in operational excellence with more streamlined processes to deliver higher quality project outcomes. As model iterations evolved rapidly, there was an increased level of partnership between Appen and our customers, with speed and agility the priority. High-quality data for Large Language Models (LLMs) As generative AI adoption grows, Appen continues to enhance our LLM solutions for foundation model builders and organisations adopting LLMs. These include pre-training data, fine-tuning data to enhance model performance in post-training, benchmarking and evaluation data to provide insights into model performance, and red teaming for safety assurance. Collectively, these help companies build more complex and high-performing LLMs that provide helpful, harmless, and honest responses while reducing bias and toxicity. In FY23, our projects included curating prompt -response datasets for fine-tuning, preference annotation and ranking to train LLMs with human feedback, evaluation and benchmarking of generative AI model outputs, and human testing with live model interactions. In FY24, we continued these programs of work and completed increasingly complex projects. Notable examples included multi-step reasoning capabilities and tasks requiring deep domain expertise in programming, coding, STEM, and other domains. In addition, our customers expanded the multilingual capabilities of LLMs in 70+ languages with large programs of work with demographically diverse crowds to address challenges with language and cultural nuances. As models shifted from text-based to multimodal, we also delivered projects involving multimodal data across text, image, documents, audio, and video. As more models reach deployment, addressing the challenge related to the safety of model outputs is more important than ever. In FY24 we expanded our capabilities to conduct systematic and structured testing of models before deployment. By leveraging a curated crowd of our AI training specialists, we help customers conduct a full assessment of model performance and safety. This includes identifying problems like misinformation, privacy leaks, irrelevant content, bias, or toxic content. Our tooling allows real-time multi-turn scenario-based testing, comparison of multiple models, and analysis across key metrics, providing invaluable insights for ensuring the safety of models before deployment. Growing and diversifying our customer base Appen is truly a global business and supports companies that are at the forefront of AI. Our customers include global technology companies, software business that incorporate AI models into their core products, generative AI model builders and enterprise companies that are adopting AI in their products and operations. In FY24, our top five customers accounted for 67.3% of revenue, down from 74.8% in FY23. Revenue from New Markets (excluding Global Product) accounted for 36.2% of revenue, up from 26.3% in FY23. This year, Appen delivered multiple projects related to generative AI model development and evaluation, for leading model builders, large tech and enterprise customers. These included expansions with existing customers. Generative AI projects included human feedback for general LLMs, specialised domain training data such as code annotation and generation, and multimodal training data for video generation. Generative AI revenue ¹ significantly increased in FY24, up 601% and accounted for 22% of revenue in FY24 up from 4% in FY23. Many projects are delivered using Appen’s AI Data Platform (ADAP). Appen is currently working with 26 LLM model builders globally. Taking the industry to new heights Beyond contributing to the technical growth of the AI industry, Appen plays a significant role in ensuring responsible AI practices. Our dedication to ethical considerations is apparent in every aspect of our work, from strict adherence to privacy and security protocols to regular reviews and updates of our policies. By instilling these ethical standards throughout the AI lifecycle, we help create a framework within the industry that prioritises responsible AI use. This commitment ensures that the AI technologies we enable are not only advanced but also respect user privacy and promote fairness. We remain dedicated to shaping a future towards positive and ethical progress of AI. In addition to supporting customers directly, we provide industry information and resources that monitor trends and developments in AI. In FY24, Appen released its State of AI Report, partnering with The Harris Poll to deliver the research. The report surveyed over 500 IT decision-makers, revealing that while the adoption of AI technologies continues to grow, progress is being hindered by a shortage of accurate, high-quality data. The report found that with the increasing complexity of AI use cases, data management has become the leading challenge. Companies report a 10% rise in bottlenecks related to sourcing, cleaning, and annotating data, a 9% drop in data accuracy, and a 7% increase in data availability challenges. Appen’s research also uncovered the importance of human oversight and custom data collection. 97% of respondents agree that data diversity, bias reduction, and scalability are vital components for building AI models. Custom data collection remains the top method for sourcing AI training data. The report can be accessed on the web: 2024 State of AI Report (appen.com).1 Excludes Google. 23Appen 2024 Annual Report For personal use only
Page 25
Customer and brand At Appen, our focus is to deliver great outcomes and experiences for our customers. As a global market leader and trusted partner, we provide high quality, human centric data to promote responsible and ethical AI. Delivering value for customers Since 1996, we have powered innovative AI applications for global brands including Microsoft, Amazon, Pinterest, Salesforce, Oracle, Adobe and BestBuy. Appen has cultivated trusted partnerships and earned a reputation based on our ability to provide unbiased, high quality, and globally representative data. As the demand for AI continues to grow, we remain committed to our core belief that humans are at the heart of its success. Our focus is helping our customers improve the performance of their models to create stronger, smarter, and more efficient AI systems for our customers and to help shape a future where human intellect and machine learning seamlessly collaborate. We believe that the success of our customers lies in their ability to leverage data effectively. Our high-quality human-annotated datasets are essential in training and validating AI algorithms, ultimately leading to more accurate and reliable results. AI can be a powerful tool for positive change in the world. The work we do for our customers is impactful and we are committed to using our expertise and resources to support initiatives that use AI for social good. From partnering with organisations focused on environmental conservation to supporting projects that promote diversity and inclusion, we are dedicated to making a difference through AI. Our customers value our unwavering focus to promote responsible and ethical AI. Value drivers Priority SDG 57 Customer NPS 22 points from 35 in FY23 80% World's leading LLM foundation model builders as customers 26 LLM model builders as customers 22 Net promoter score Our key customer satisfaction measurement tool is Net Promoter Score (NPS). We seek feedback from our customers on a bi-annual basis and monitor NPS across our Global, Enterprise and China clients. This year customer NPS was 57, compared with 35 in FY23. This score was above target and reflected a high level of customer satisfaction with Appen’s service offerings and project delivery. Customers saw improvements in operational excellence with more streamlined processes to deliver higher quality project outcomes. As model iterations evolved rapidly, there was an increased level of partnership between Appen and our customers, with speed and agility the priority. High-quality data for Large Language Models (LLMs) As generative AI adoption grows, Appen continues to enhance our LLM solutions for foundation model builders and organisations adopting LLMs. These include pre-training data, fine-tuning data to enhance model performance in post-training, benchmarking and evaluation data to provide insights into model performance, and red teaming for safety assurance. Collectively, these help companies build more complex and high-performing LLMs that provide helpful, harmless, and honest responses while reducing bias and toxicity. In FY23, our projects included curating prompt -response datasets for fine-tuning, preference annotation and ranking to train LLMs with human feedback, evaluation and benchmarking of generative AI model outputs, and human testing with live model interactions. In FY24, we continued these programs of work and completed increasingly complex projects. Notable examples included multi-step reasoning capabilities and tasks requiring deep domain expertise in programming, coding, STEM, and other domains. In addition, our customers expanded the multilingual capabilities of LLMs in 70+ languages with large programs of work with demographically diverse crowds to address challenges with language and cultural nuances. As models shifted from text-based to multimodal, we also delivered projects involving multimodal data across text, image, documents, audio, and video. As more models reach deployment, addressing the challenge related to the safety of model outputs is more important than ever. In FY24 we expanded our capabilities to conduct systematic and structured testing of models before deployment. By leveraging a curated crowd of our AI training specialists, we help customers conduct a full assessment of model performance and safety. This includes identifying problems like misinformation, privacy leaks, irrelevant content, bias, or toxic content. Our tooling allows real-time multi-turn scenario-based testing, comparison of multiple models, and analysis across key metrics, providing invaluable insights for ensuring the safety of models before deployment. Growing and diversifying our customer base Appen is truly a global business and supports companies that are at the forefront of AI. Our customers include global technology companies, software business that incorporate AI models into their core products, generative AI model builders and enterprise companies that are adopting AI in their products and operations. In FY24, our top five customers accounted for 67.3% of revenue, down from 74.8% in FY23. Revenue from New Markets (excluding Global Product) accounted for 36.2% of revenue, up from 26.3% in FY23. This year, Appen delivered multiple projects related to generative AI model development and evaluation, for leading model builders, large tech and enterprise customers. These included expansions with existing customers. Generative AI projects included human feedback for general LLMs, specialised domain training data such as code annotation and generation, and multimodal training data for video generation. Generative AI revenue ¹ significantly increased in FY24, up 601% and accounted for 22% of revenue in FY24 up from 4% in FY23. Many projects are delivered using Appen’s AI Data Platform (ADAP). Appen is currently working with 26 LLM model builders globally. Taking the industry to new heights Beyond contributing to the technical growth of the AI industry, Appen plays a significant role in ensuring responsible AI practices. Our dedication to ethical considerations is apparent in every aspect of our work, from strict adherence to privacy and security protocols to regular reviews and updates of our policies. By instilling these ethical standards throughout the AI lifecycle, we help create a framework within the industry that prioritises responsible AI use. This commitment ensures that the AI technologies we enable are not only advanced but also respect user privacy and promote fairness. We remain dedicated to shaping a future towards positive and ethical progress of AI. In addition to supporting customers directly, we provide industry information and resources that monitor trends and developments in AI. In FY24, Appen released its State of AI Report, partnering with The Harris Poll to deliver the research. The report surveyed over 500 IT decision-makers, revealing that while the adoption of AI technologies continues to grow, progress is being hindered by a shortage of accurate, high-quality data. The report found that with the increasing complexity of AI use cases, data management has become the leading challenge. Companies report a 10% rise in bottlenecks related to sourcing, cleaning, and annotating data, a 9% drop in data accuracy, and a 7% increase in data availability challenges. Appen’s research also uncovered the importance of human oversight and custom data collection. 97% of respondents agree that data diversity, bias reduction, and scalability are vital components for building AI models. Custom data collection remains the top method for sourcing AI training data. The report can be accessed on the web: 2024 State of AI Report (appen.com).1 Excludes Google. 23Appen 2024 Annual Report For personal use only
Page 26
Case Study: Training an LLM Image Generator for Graphics Design in 20+ Languages Introduction A leading graphic design software company created a multimodal AI model to generate original images from text prompts serving 20+ languages. To ensure these AI-generated images met high standards of visual quality and cultural relevance, they partnered with Appen to evaluate the AI-generated images and ensure successful alignment with user expectations. Appen supported the company in expanding their model capabilities to 20+ languages and producing high-quality AI-generated images across diverse cultural contexts. Challenge The generated designs were assessed based on over 15 different criteria to arrive at a final rating, which included cultural relevance to the localized prompts, as well as the format and style of the images. The complexity of this project arose from the need to accurately evaluate prompts covering 20+ different countries and languages, ensuring that all design outputs were appropriate and effective in their respective cultural contexts. Solution Appen executed a two-step approach to address this challenge with the LLM image generator: 1. Prompt Localization Appen’s network of native-language translators localized the prompts from English into 20+ languages, applying cultural expertise to ensure accurate adaptation. Beyond direct translation, this phase also required transcreation in cases where certain cultural events or visual elements needed adaptation to better resonate with the local audience. This process was essential in capturing culturally specific celebrations, symbols, and habits to ensure the prompts accurately reflected each target language’s unique characteristics. 2. Design Evaluation In the second phase, Appen’s expert reviewers evaluated each LLM-generated image against a set of detailed criteria including cultural relevance, adherence to prompt instructions, design style, and format. The English version of each prompt also underwent evaluation, serving as a benchmark to ensure consistency across 20+ languages. By providing clear and consistent feedback on each image, Appen enabled the client to refine their model and improve the quality of the AI-generated designs. Results Through this detailed, culturally sensitive evaluation approach, Appen helped the client achieve high-quality, culturally relevant graphic outputs that met user expectations. By refining the AI model’s ability to produce contextually appropriate designs, Appen’s collaboration ensured an improved user experience for this global design software application, enhancing user satisfaction and product engagement across a diverse, international audience. Customer and brand FY25 focus In a dynamic and fast-paced AI market, new opportunities are endless. As AI adoption accelerates, Appen’s role as a provider of high-quality, human-sourced data is more critical than ever. Appen will continue to leverage its position as a global leader in high-quality data to deliver great outcomes for its customers. In FY25, we will continue to build on our expertise in generative AI projects and evolve our offerings, including multilingual and domain-specific datasets, through advancements to our annotation platform and automating processes through AI-based initiatives to enhance quality and optimise productivity. From advancing multilingual AI to supporting agentic systems and multimodal innovations, Appen will continue to drive meaningful progress in the development of cutting-edge AI systems. 24 For personal use only
Page 27
Case Study: Training an LLM Image Generator for Graphics Design in 20+ Languages Introduction A leading graphic design software company created a multimodal AI model to generate original images from text prompts serving 20+ languages. To ensure these AI-generated images met high standards of visual quality and cultural relevance, they partnered with Appen to evaluate the AI-generated images and ensure successful alignment with user expectations. Appen supported the company in expanding their model capabilities to 20+ languages and producing high-quality AI-generated images across diverse cultural contexts. Challenge The generated designs were assessed based on over 15 different criteria to arrive at a final rating, which included cultural relevance to the localized prompts, as well as the format and style of the images. The complexity of this project arose from the need to accurately evaluate prompts covering 20+ different countries and languages, ensuring that all design outputs were appropriate and effective in their respective cultural contexts. Solution Appen executed a two-step approach to address this challenge with the LLM image generator: 1. Prompt Localization Appen’s network of native-language translators localized the prompts from English into 20+ languages, applying cultural expertise to ensure accurate adaptation. Beyond direct translation, this phase also required transcreation in cases where certain cultural events or visual elements needed adaptation to better resonate with the local audience. This process was essential in capturing culturally specific celebrations, symbols, and habits to ensure the prompts accurately reflected each target language’s unique characteristics. 2. Design Evaluation In the second phase, Appen’s expert reviewers evaluated each LLM-generated image against a set of detailed criteria including cultural relevance, adherence to prompt instructions, design style, and format. The English version of each prompt also underwent evaluation, serving as a benchmark to ensure consistency across 20+ languages. By providing clear and consistent feedback on each image, Appen enabled the client to refine their model and improve the quality of the AI-generated designs. Results Through this detailed, culturally sensitive evaluation approach, Appen helped the client achieve high-quality, culturally relevant graphic outputs that met user expectations. By refining the AI model’s ability to produce contextually appropriate designs, Appen’s collaboration ensured an improved user experience for this global design software application, enhancing user satisfaction and product engagement across a diverse, international audience. Customer and brand FY25 focus In a dynamic and fast-paced AI market, new opportunities are endless. As AI adoption accelerates, Appen’s role as a provider of high-quality, human-sourced data is more critical than ever. Appen will continue to leverage its position as a global leader in high-quality data to deliver great outcomes for its customers. In FY25, we will continue to build on our expertise in generative AI projects and evolve our offerings, including multilingual and domain-specific datasets, through advancements to our annotation platform and automating processes through AI-based initiatives to enhance quality and optimise productivity. From advancing multilingual AI to supporting agentic systems and multimodal innovations, Appen will continue to drive meaningful progress in the development of cutting-edge AI systems. 24 Value drivers Our people Every day, our people strive to unlock the power of AI for Good to build a better world. Our aim is to support their ability to do so, by providing continuous learning, empowerment and autonomy and an inclusive work culture to allow them to perform at their best. 2024 employee distribution Appen’s people are based in North America, Asia Pacific, UK, Europe, and Australia. Global and diverse work force As of 31 December 2024, we had 835 full time equivalent employees (FTE), 313 fixed term, 8 casual employees, and 15 interns. Full time employees total 1,130 and part time employees total 41. 1,171 employees 1,171 employees 1,171 Employees from 1,037 in FY23 79% Employee engagement from 75% in FY23 Asia Pacific 824 North America 224 Australia/NZ 52 UK/Europe 71 Permanent 835 Fixed term 313 Casual 8 Interns 15 Full time 1,130 Part time 41 Priority SDG 25Appen 2024 Annual Report For personal use only
Page 28
Occupational profile Our people have deep industry expertise, particularly in the areas of project delivery, crowd management and engineering. We have developed specialised industry capabilities which we embed into our products and processes. We also rely on deep domain expertise in the areas of large language models, linguistics, machine learning, data science and computer science. AI is fast paced and dynamic, and with rise of generative AI we recognise that ongoing upskilling and reskilling is required to meet and exceed stakeholder expectations. Employee engagement 1 We recognise that an engaged and high performing team is essential for the success of our business. To ensure we are listening and responding to our people, we conduct bi-annual engagement surveys followed up with action plans. We continue to receive good employee participation rates that allow us to leverage insights to drive further improvements. In 2024 our average engagement score was 79%, up from 75% in the prior year. The increase reflects the focus on employee communication, specifically providing clear, transparent and regular updates from the CEO and senior leaders. 2024 2023 79% 78% 82% 76% 75% 2022 2021 2020 Cost reduction and the impact on our people Following the decision by Google to terminate its global services contract, Appen reacted quickly to reduce costs. Unfortunately, this impacted approximately 100 of our valued people, and they exited Appen during H1 FY24. The impacted employees were directly and indirectly associated with the delivery of Google projects. 1 Measures the likelihood of employees (including those in PEOs) referring a friend or colleague to Appen based on their employee experience. The scale is a 5-point Likert resulting in 1–2 Detractor, 3 Passive and 4–5 Promoter. NPS is calculated by subtracting the % of total detractors from the % of total promoters. Survey results are provided by Workday Peakon. 2 Based on HR report for all employees (excluding casuals and interns) generated by Workday. Commitment to diversity and inclusion At Appen, we strive to create a diverse and inclusive workforce that drives better performance and represents the communities we serve. We value the strength of a global team and celebrate the unique perspectives, experiences, and backgrounds our people bring. Our diversity and inclusion policy supports inclusive practices and focuses on increasing gender and ethnic diversity across our employees, senior management, and board. The Board has continued to set a target of 30% female representation at all senior leadership levels. Female representation at the executive team and senior vice president (SVP) level has increased from the prior year however will continue to be a focus in FY25 as we prioritise our efforts towards talent management and Executive succession planning. As of 31 December, women represented: % female 2 2024 2023 Overall workforce 57 55 Board director 50 50 Executive team/SVP 23 22 Vice President 57 35 Senior Director 36 47 Director 50 40 Manager 56 61 Our people Delivery 613 Product, technology and engineering 163 Corporate 125 Crowd 212 Revenue, solutions and marketing 45 Executive 13 26 1 Data from Appen University. 2 Data from Appen University, excludes China employees. Training and development In FY24, our employees averaged 2 hours of training per month via Appen University, with a total training time of 29,280 hours 1. Our courses focused on building knowledge about AI and large language models, along with leading teams and team management. Working ethically Our people are required to complete mandatory annual training in critical areas such as data privacy, security awareness and sexual harassment. Our Business Ethics training which sets out employees’ obligations to act honestly and ethically is also mandatory for all employees and contractors. In FY24, we achieved an 90% completion rate for our Business Ethics and Code of Conduct training 2. Impact through inclusion and volunteering This year, our Employee Service Committee (ESC) team led impactful initiatives that celebrated diversity, promoted employee well-being, and strengthened our commitment to giving back. We hosted TedChat sessions on topics such as emotional intelligence, mental health, and leadership, fostering meaningful conversations and professional growth across the organisation. Our health and wellness programs included the annual flu vaccination drive, our inaugural fitness challenge, and the Steptember activity, which encouraged physical activity while supporting disability-focused causes. Key highlights included the Biggest Morning Tea fundraiser, where employees came together to support cancer research, and our Community Outreach Program in the Philippines, which brought meaningful support to local communities. These efforts exemplify our dedication to creating a positive impact beyond the workplace. Diversity and inclusion remained at the heart of our initiatives, with celebrations like Women’s Month, Pride Month, and National Disability Week fostering awareness and belonging. Cultural and community-building events, such as Flores de Mayo and Juneteenth, strengthened employee engagement and connection. A standout initiative this year was our partnership with Na’amal, through which employees mentored refugees and underrepresented communities in Ethiopia and Kenya. This program provided vital guidance and support for mentees as they developed digital skills and pursued remote work opportunities. Through these programs and more, the ESC team has continued to inspire connection, growth, and meaningful impact, reflecting our shared commitment to making a difference. FY25 focus We remain focused on creating an environment where our employees can thrive, grow, and contribute to Appen's success. In 2025, our emphasis will be on creating additional learning opportunities including investing in leadership development, and enhancing our overall employee experience. 27Appen 2024 Annual Report For personal use only
Page 29
Occupational profile Our people have deep industry expertise, particularly in the areas of project delivery, crowd management and engineering. We have developed specialised industry capabilities which we embed into our products and processes. We also rely on deep domain expertise in the areas of large language models, linguistics, machine learning, data science and computer science. AI is fast paced and dynamic, and with rise of generative AI we recognise that ongoing upskilling and reskilling is required to meet and exceed stakeholder expectations. Employee engagement 1 We recognise that an engaged and high performing team is essential for the success of our business. To ensure we are listening and responding to our people, we conduct bi-annual engagement surveys followed up with action plans. We continue to receive good employee participation rates that allow us to leverage insights to drive further improvements. In 2024 our average engagement score was 79%, up from 75% in the prior year. The increase reflects the focus on employee communication, specifically providing clear, transparent and regular updates from the CEO and senior leaders. 2024 2023 79% 78% 82% 76% 75% 2022 2021 2020 Cost reduction and the impact on our people Following the decision by Google to terminate its global services contract, Appen reacted quickly to reduce costs. Unfortunately, this impacted approximately 100 of our valued people, and they exited Appen during H1 FY24. The impacted employees were directly and indirectly associated with the delivery of Google projects. 1 Measures the likelihood of employees (including those in PEOs) referring a friend or colleague to Appen based on their employee experience. The scale is a 5-point Likert resulting in 1–2 Detractor, 3 Passive and 4–5 Promoter. NPS is calculated by subtracting the % of total detractors from the % of total promoters. Survey results are provided by Workday Peakon. 2 Based on HR report for all employees (excluding casuals and interns) generated by Workday. Commitment to diversity and inclusion At Appen, we strive to create a diverse and inclusive workforce that drives better performance and represents the communities we serve. We value the strength of a global team and celebrate the unique perspectives, experiences, and backgrounds our people bring. Our diversity and inclusion policy supports inclusive practices and focuses on increasing gender and ethnic diversity across our employees, senior management, and board. The Board has continued to set a target of 30% female representation at all senior leadership levels. Female representation at the executive team and senior vice president (SVP) level has increased from the prior year however will continue to be a focus in FY25 as we prioritise our efforts towards talent management and Executive succession planning. As of 31 December, women represented: % female 2 2024 2023 Overall workforce 57 55 Board director 50 50 Executive team/SVP 23 22 Vice President 57 35 Senior Director 36 47 Director 50 40 Manager 56 61 Our people Delivery 613 Product, technology and engineering 163 Corporate 125 Crowd 212 Revenue, solutions and marketing 45 Executive 13 26 1 Data from Appen University. 2 Data from Appen University, excludes China employees. Training and development In FY24, our employees averaged 2 hours of training per month via Appen University, with a total training time of 29,280 hours 1. Our courses focused on building knowledge about AI and large language models, along with leading teams and team management. Working ethically Our people are required to complete mandatory annual training in critical areas such as data privacy, security awareness and sexual harassment. Our Business Ethics training which sets out employees’ obligations to act honestly and ethically is also mandatory for all employees and contractors. In FY24, we achieved an 90% completion rate for our Business Ethics and Code of Conduct training 2. Impact through inclusion and volunteering This year, our Employee Service Committee (ESC) team led impactful initiatives that celebrated diversity, promoted employee well-being, and strengthened our commitment to giving back. We hosted TedChat sessions on topics such as emotional intelligence, mental health, and leadership, fostering meaningful conversations and professional growth across the organisation. Our health and wellness programs included the annual flu vaccination drive, our inaugural fitness challenge, and the Steptember activity, which encouraged physical activity while supporting disability-focused causes. Key highlights included the Biggest Morning Tea fundraiser, where employees came together to support cancer research, and our Community Outreach Program in the Philippines, which brought meaningful support to local communities. These efforts exemplify our dedication to creating a positive impact beyond the workplace. Diversity and inclusion remained at the heart of our initiatives, with celebrations like Women’s Month, Pride Month, and National Disability Week fostering awareness and belonging. Cultural and community-building events, such as Flores de Mayo and Juneteenth, strengthened employee engagement and connection. A standout initiative this year was our partnership with Na’amal, through which employees mentored refugees and underrepresented communities in Ethiopia and Kenya. This program provided vital guidance and support for mentees as they developed digital skills and pursued remote work opportunities. Through these programs and more, the ESC team has continued to inspire connection, growth, and meaningful impact, reflecting our shared commitment to making a difference. FY25 focus We remain focused on creating an environment where our employees can thrive, grow, and contribute to Appen's success. In 2025, our emphasis will be on creating additional learning opportunities including investing in leadership development, and enhancing our overall employee experience. 27Appen 2024 Annual Report For personal use only
Page 30
US$M (unless stated otherwise) FY24 FY23 Change Group revenue and other income 235.7 274.2 -14.0% Operating revenue 234.3 273.0 -14.2% Adjusted operating revenue 1 220.9 190.4 16.0% Gross Margin % 2 39.3% 36.3% 3.0pp Underlying EBITDA 3 7. 8 (24.5) nm% Underlying EBITDA 3 before FX 3.5 (20.4) nm% Underlying NPAT 4 (10.5) (52.8) nm% Statutory NPAT 5 (20.0) (118.1) nm% Dividend cents per share Nil Nil Financial Appen’s financial results reflect a transformative year for the company. A strong focus on cost and operational efficiency whilst capturing revenue growth enabled Appen to achieve its cash EBITDA profitability objective in early H1 2024. Appen is now well positioned for profitable growth. Financial performance summary Appen’s financial performance was impacted by the termination of the Google contract which ended on 19 March 2024. Following the loss of the contract, a $13.5 million incremental cost out program was announced and was fully executed by the end of H1 FY24. With disciplined cost management, streamlined operations, and strong a focus on data quality and speed, Appen returned to EBITDA profitability in H2 FY24. A summary of Appen’s financial performance for FY24 is as follows: Operating revenue decreased 14.2% to $234.3 million, reflecting the loss of the Google contract. Excluding the impact of Google, operating revenue grew 16.0% to $220.9 million. Global Services revenue down 38.3% to $118.1 million. Excluding the impact of Google, down 3.9% to $104.7 million. New Market revenue grew 42.6% to $116.2 million, driven by strong growth in China and Global Product. China finished the year strongly with Q4 revenue of $17.7 million representing a quarterly record and quarter on quarter growth across all four quarters. Product development investment (excluding amortisation) decreased 43.3% to $19.6 million and represented 8.4% of revenue. Underlying EBITDA (before the impact of foreign exchange losses) increased $23.9 million to $3.5 million due to revenue growth, and cost out programs executed in FY24 and FY23. Priority SDG 1 Excludes the impact of Google contract termination. 2 Gross margin refers to revenue less crowd expenses. 3 Underlying EBITDA excludes impairment loss, earn-out adjustment, restructure costs, transaction costs, and acquisition -related and one-time share-based payment expense. 4 Underlying NPAT excludes after tax impact of impairment loss, earn-out adjustment, restructure costs, transaction costs, acquisition-related and one-time share-based payment expense, amortisation of acquisition related intangibles, and deemed interest on earn-out liability. 5 FY23 includes non-cash impairment of $69.2 million. Value drivers 28 Underlying EBITDA (including the impact of foreign exchange gains and losses) increased $32.3 million to $7.8 million. Underlying net loss after tax improved by $42.3 million to $10.5 million from an underlying net loss of $52.8 million in FY23. The improvement was driven by revenue growth, and cost out programs executed in FY24 and FY23. Statutory net loss after tax improved by $98.1 million to $20.0 million from a net loss of $118.1 million in FY23. FY23 includes a non-cash impairment charge of $69.2 million. No dividend was paid to ensure appropriate allocation of capital. Cash balance of $54.8 million at 31 December 2024 and no debt. Operating revenue Group operating revenue decreased 14.2% to $234.3 million, reflecting the loss of the Google contract. Excluding the impact of Google, operating revenue grew 16.0% to $220.9 million, largely driven by generative AI related projects within our Global and China divisions. In FY24, generative AI related work represented 22% of group revenue ¹, compared to 4% in FY23. On 22 January 2024, Appen advised that it had received notification from a material customer, Google LLC, that as part of a strategic review process it was terminating its global inbound services contract with Appen. All Google projects ceased on or before 19 March 2024. Appen’s FY24 revenue from Google was $13.4 million compared to $82.8 million in FY23. Group revenue, excluding Google was $220.9 million, compared to $190.2 million in FY23. Revenue by operating division Global Services revenue decreased 38.3% to $118.1 million (FY23: $191.5 million) and was impacted by the Google contract termination. Excluding the impact of Google, revenue decreased 3.9% to $104.7 million (FY23: $108.9 million). The small decrease excluding the impact of Google reflects a continuation of the stabilisation of the revenue in H2 FY23 following the declines experienced H1 FY23. Compared to H2 FY23, H1 FY24 increased 5.9% to $50.8 million and H2 FY24 increased 7.7% to $54.5 million. Growth within our Global customers is primarily driven by generative AI related projects. For these projects we saw a significant increase in the volume of work utilising our AI Data Platform (ADAP). This growth is reported in the New Markets segment. New Markets revenue increased 42.6% to $116.2 million, driven by strong growth in China and Global Product. Second half revenue from New Markets grew 55.6% to $66.4 million from $42.6 million in H2 FY23. Global Product revenue increased 221.9% to $31.3 million due to growth in generative AI related projects. These projects utilised our AI Data Platform (ADAP). Customers selected ADAP over internal annotation tools for the ability to rapidly setup and customise annotation tasks. China which includes Japan and Korea grew 70.7% to $58.9 million compared to $34.5 million in FY23. The business grew quarter on quarter throughout FY24 and finished the year strongly, delivering a record Q4 revenue performance of $17.7 million. Growth in China was largely driven by continued traction in generative AI related projects, with China continuing to support leading LLM model builders. Growth came from expansion within existing large technology customers as well as new customer wins. China remained focused on growth and maintaining its position as a leading AI data company. Enterprise and Government revenue combined decreased 30.2% to $26.0 million compared to $37.3 million in FY23. Enterprise was impacted lower volumes within existing large projects. Government revenue was impact by limited opportunities during FY24 given awards are generally linked to infrequent government budget cycles. Further detail can be found in the Customer and Brand value driver on page 22 . 1 Excludes Google. 29Appen 2024 Annual Report For personal use only
Page 31
US$M (unless stated otherwise) FY24 FY23 Change Group revenue and other income 235.7 274.2 -14.0% Operating revenue 234.3 273.0 -14.2% Adjusted operating revenue 1 220.9 190.4 16.0% Gross Margin % 2 39.3% 36.3% 3.0pp Underlying EBITDA 3 7. 8 (24.5) nm% Underlying EBITDA 3 before FX 3.5 (20.4) nm% Underlying NPAT 4 (10.5) (52.8) nm% Statutory NPAT 5 (20.0) (118.1) nm% Dividend cents per share Nil Nil Financial Appen’s financial results reflect a transformative year for the company. A strong focus on cost and operational efficiency whilst capturing revenue growth enabled Appen to achieve its cash EBITDA profitability objective in early H1 2024. Appen is now well positioned for profitable growth. Financial performance summary Appen’s financial performance was impacted by the termination of the Google contract which ended on 19 March 2024. Following the loss of the contract, a $13.5 million incremental cost out program was announced and was fully executed by the end of H1 FY24. With disciplined cost management, streamlined operations, and strong a focus on data quality and speed, Appen returned to EBITDA profitability in H2 FY24. A summary of Appen’s financial performance for FY24 is as follows: Operating revenue decreased 14.2% to $234.3 million, reflecting the loss of the Google contract. Excluding the impact of Google, operating revenue grew 16.0% to $220.9 million. Global Services revenue down 38.3% to $118.1 million. Excluding the impact of Google, down 3.9% to $104.7 million. New Market revenue grew 42.6% to $116.2 million, driven by strong growth in China and Global Product. China finished the year strongly with Q4 revenue of $17.7 million representing a quarterly record and quarter on quarter growth across all four quarters. Product development investment (excluding amortisation) decreased 43.3% to $19.6 million and represented 8.4% of revenue. Underlying EBITDA (before the impact of foreign exchange losses) increased $23.9 million to $3.5 million due to revenue growth, and cost out programs executed in FY24 and FY23. Priority SDG 1 Excludes the impact of Google contract termination. 2 Gross margin refers to revenue less crowd expenses. 3 Underlying EBITDA excludes impairment loss, earn-out adjustment, restructure costs, transaction costs, and acquisition -related and one-time share-based payment expense. 4 Underlying NPAT excludes after tax impact of impairment loss, earn-out adjustment, restructure costs, transaction costs, acquisition-related and one-time share-based payment expense, amortisation of acquisition related intangibles, and deemed interest on earn-out liability. 5 FY23 includes non-cash impairment of $69.2 million. Value drivers 28 Underlying EBITDA (including the impact of foreign exchange gains and losses) increased $32.3 million to $7.8 million. Underlying net loss after tax improved by $42.3 million to $10.5 million from an underlying net loss of $52.8 million in FY23. The improvement was driven by revenue growth, and cost out programs executed in FY24 and FY23. Statutory net loss after tax improved by $98.1 million to $20.0 million from a net loss of $118.1 million in FY23. FY23 includes a non-cash impairment charge of $69.2 million. No dividend was paid to ensure appropriate allocation of capital. Cash balance of $54.8 million at 31 December 2024 and no debt. Operating revenue Group operating revenue decreased 14.2% to $234.3 million, reflecting the loss of the Google contract. Excluding the impact of Google, operating revenue grew 16.0% to $220.9 million, largely driven by generative AI related projects within our Global and China divisions. In FY24, generative AI related work represented 22% of group revenue ¹, compared to 4% in FY23. On 22 January 2024, Appen advised that it had received notification from a material customer, Google LLC, that as part of a strategic review process it was terminating its global inbound services contract with Appen. All Google projects ceased on or before 19 March 2024. Appen’s FY24 revenue from Google was $13.4 million compared to $82.8 million in FY23. Group revenue, excluding Google was $220.9 million, compared to $190.2 million in FY23. Revenue by operating division Global Services revenue decreased 38.3% to $118.1 million (FY23: $191.5 million) and was impacted by the Google contract termination. Excluding the impact of Google, revenue decreased 3.9% to $104.7 million (FY23: $108.9 million). The small decrease excluding the impact of Google reflects a continuation of the stabilisation of the revenue in H2 FY23 following the declines experienced H1 FY23. Compared to H2 FY23, H1 FY24 increased 5.9% to $50.8 million and H2 FY24 increased 7.7% to $54.5 million. Growth within our Global customers is primarily driven by generative AI related projects. For these projects we saw a significant increase in the volume of work utilising our AI Data Platform (ADAP). This growth is reported in the New Markets segment. New Markets revenue increased 42.6% to $116.2 million, driven by strong growth in China and Global Product. Second half revenue from New Markets grew 55.6% to $66.4 million from $42.6 million in H2 FY23. Global Product revenue increased 221.9% to $31.3 million due to growth in generative AI related projects. These projects utilised our AI Data Platform (ADAP). Customers selected ADAP over internal annotation tools for the ability to rapidly setup and customise annotation tasks. China which includes Japan and Korea grew 70.7% to $58.9 million compared to $34.5 million in FY23. The business grew quarter on quarter throughout FY24 and finished the year strongly, delivering a record Q4 revenue performance of $17.7 million. Growth in China was largely driven by continued traction in generative AI related projects, with China continuing to support leading LLM model builders. Growth came from expansion within existing large technology customers as well as new customer wins. China remained focused on growth and maintaining its position as a leading AI data company. Enterprise and Government revenue combined decreased 30.2% to $26.0 million compared to $37.3 million in FY23. Enterprise was impacted lower volumes within existing large projects. Government revenue was impact by limited opportunities during FY24 given awards are generally linked to infrequent government budget cycles. Further detail can be found in the Customer and Brand value driver on page 22 . 1 Excludes Google. 29Appen 2024 Annual Report For personal use only
Page 32
Growth strategy and FY25 priorities Appen plays a key role in powering both deep learning applications and generative AI. Appen’s strategy remains focused on delivering high-quality data that powers cutting-edge AI models. Customers are increasingly demanding faster turnaround times and higher -quality data, which requires the seamless integration of our project delivery teams, advanced technology platforms, and skilled crowd workforce. Appen’s AI data services for deep learning and generative AI is illustrated on page 2 in the About Appen section. Appen is focused on the following to support its customers and deliver profitable growth. 1. Target Customer Segments: Appen's efforts will centre on providing high quality data for companies building or utilising leading AI models. The market segments we address will remain the same as FY24, focusing on US hyperscalers, China, government entities, and other technology enabled enterprises. 2. Technology Evolution: Continue to advance ADAP to meet the sophisticated requirements of generative AI projects, while enhancing our crowd management platform to support faster ramp times and specialised expertise. Technology is key to our delivery operations. 3. Operational AI: Leveraging AI within our operations to drive efficiency in quality assessment, workforce onboarding, and support functions. 4. Talent Development: Investing in our people by fostering growth and attracting new talent to meet the evolving demands of the AI landscape. 5. Financial discipline: Continued cost control remains a high priority to deliver profitable growth. Appen 2024 Annual Report 31 Product development Technology continues to play a critical role in Appen’s business and underpins our ability to deliver large scale data requirements for our customers. Investment in product development in FY24 (excluding amortisation) decreased 43.3% to $19.6 million and represented 8.4% of revenue (FY23: $34.6 million or 12.7% of revenue). While the quantum of our product development spend was lower in FY24, we remain committed to the development of industry-leading products and tools. For more information on these initiatives see the Technology processes and systems value driver on page 12 . Amortisation of product development was $11.8 million down from $19.7 million in FY23. The decrease predominately reflects lower spend in relation to product development in FY24 and FY23. Underlying financial performance Underlying earnings before interest, tax, depreciation, and amortisation (EBITDA) was $7.8 million, a $32.3 million improvement from ($24.5 million) in FY23. Before the impact of foreign exchange gains or losses, underlying EBITDA was $3.5 million, a $23.9 million improvement from ($20.4 million) in FY23. The significant improvement was driven by revenue growth, and cost out programs executed in FY24 and FY23. Crowd expenses was down as a percentage of revenue at 60.7% compared to 63.7% for FY23. This is primarily due to a change in customer and project mix, resulting in improved gross margin 1 (FY24: 39.3%, FY23: 36.3%). Employee expenses 2, excluding direct project workers (included in crowd expense) decreased 29.2% to $55.1 million from $77.8 million in FY23. All other expenses 3 for FY24 decreased 19.6% to $30.3 million compared to $37.6 million in FY23. The decrease in employee and other expenses reflects the benefit of the cost reduction programs completed over the course of FY23 and FY24. The Global Services segment reported EBITDA of $14.7 million down 15.8% from $17.5 million in FY23. Despite the loss of the Google contract, the impact on EBITDA was minimised due to improved gross margins and cost out programs executed during FY24. The New Markets segment EBITDA improved by $24.6 million to ($8.1 million) compared to EBITDA of ($32.7 million) in FY23. The improvement reflects revenue growth and improved gross margin in both China and Global Product. Underlying net loss after tax improved by $42.3 million to ($10.5 million) compared to ($52.8 million) in FY23. Increase predominately due to the factors noted above as well as lower depreciation and amortisation in FY24 compared to FY23. Statutory net loss after tax improved by $98.1 million to ($20.0 million) and includes one-off restructure costs of $3.0 million associated with the implementation of the cost reduction program and a leadership refresh implemented during FY24. Included in FY23 is non-cash impairment of $69.2 million in relation to the Global Services cash generating unit. Cost reduction program In response to the loss of the Google contract, the Group announced and delivered a $13.5 million 4 cost savings program that was executed in H1 FY24. The initiatives completed enabled Appen to achieve its cash EBITDA profitability objective in H2 FY24. Balance Sheet Net assets at 31 December 2024 were $114.3 million (31 December 2023: $92.8 million). The increase in net assets was a result of equity raised in H2 FY24, offset by trading performance during the year. Trade and other receivables combined with contract assets were $0.9 million higher at 31 December 2024 compared to 31 December 2023 due to the timing of customer receipts. Current liabilities were $3.8 million lower at 31 December 2024 compared to 31 December 2023. The decrease was mainly due to finalisation of the Quadrant earnout liability, settled via the issue of ordinary shares in January 2024. Cash balance increased by $22.7 million to $54.8 million at 31 December 2024 from $32.2 million at 31 December 2023. The balance includes net proceeds of $42.1 million from the issuance of shares during the period. The cash balance as at 31 December 2024 was impacted by foreign exchange, working capital requirements from a strong Q4 FY24 as well as timing of customer receipts, with $10.0 million received from a major customer on 4 January 2025 versus last week of December as scheduled. In H2 FY24, Appen raised ~A$65 million equity. A$50 million fully underwritten institutional placement completed on 14 October 2024, and A$15 million Share Purchase Plan completed on 7 November 2024. Net proceeds of $42.1 million through the issue of 33,854,167 shares. Financial 1 Gross margin refers to revenue less crowd expenses. 2 Employee expenses per management reporting. Excludes direct project workers included in gross margin calculation (i.e. crowd expenses). 3 All other expenses excludes non-cash share based payment expense but all other expenses included in underlying EBITDA before FX. 4 $13.5 million annualised cash opex savings (comparing June 2024 vs January 2024 planned opex. Cash opex refers to opex included in underlying EBITDA calculation, adding platform development capitalised from the profit and loss, less non-cash share-based payments expense. 30 For personal use only
Page 33
Growth strategy and FY25 priorities Appen plays a key role in powering both deep learning applications and generative AI. Appen’s strategy remains focused on delivering high-quality data that powers cutting-edge AI models. Customers are increasingly demanding faster turnaround times and higher -quality data, which requires the seamless integration of our project delivery teams, advanced technology platforms, and skilled crowd workforce. Appen’s AI data services for deep learning and generative AI is illustrated on page 2 in the About Appen section. Appen is focused on the following to support its customers and deliver profitable growth. 1. Target Customer Segments: Appen's efforts will centre on providing high quality data for companies building or utilising leading AI models. The market segments we address will remain the same as FY24, focusing on US hyperscalers, China, government entities, and other technology enabled enterprises. 2. Technology Evolution: Continue to advance ADAP to meet the sophisticated requirements of generative AI projects, while enhancing our crowd management platform to support faster ramp times and specialised expertise. Technology is key to our delivery operations. 3. Operational AI: Leveraging AI within our operations to drive efficiency in quality assessment, workforce onboarding, and support functions. 4. Talent Development: Investing in our people by fostering growth and attracting new talent to meet the evolving demands of the AI landscape. 5. Financial discipline: Continued cost control remains a high priority to deliver profitable growth. Appen 2024 Annual Report 31 Product development Technology continues to play a critical role in Appen’s business and underpins our ability to deliver large scale data requirements for our customers. Investment in product development in FY24 (excluding amortisation) decreased 43.3% to $19.6 million and represented 8.4% of revenue (FY23: $34.6 million or 12.7% of revenue). While the quantum of our product development spend was lower in FY24, we remain committed to the development of industry-leading products and tools. For more information on these initiatives see the Technology processes and systems value driver on page 12 . Amortisation of product development was $11.8 million down from $19.7 million in FY23. The decrease predominately reflects lower spend in relation to product development in FY24 and FY23. Underlying financial performance Underlying earnings before interest, tax, depreciation, and amortisation (EBITDA) was $7.8 million, a $32.3 million improvement from ($24.5 million) in FY23. Before the impact of foreign exchange gains or losses, underlying EBITDA was $3.5 million, a $23.9 million improvement from ($20.4 million) in FY23. The significant improvement was driven by revenue growth, and cost out programs executed in FY24 and FY23. Crowd expenses was down as a percentage of revenue at 60.7% compared to 63.7% for FY23. This is primarily due to a change in customer and project mix, resulting in improved gross margin 1 (FY24: 39.3%, FY23: 36.3%). Employee expenses 2, excluding direct project workers (included in crowd expense) decreased 29.2% to $55.1 million from $77.8 million in FY23. All other expenses 3 for FY24 decreased 19.6% to $30.3 million compared to $37.6 million in FY23. The decrease in employee and other expenses reflects the benefit of the cost reduction programs completed over the course of FY23 and FY24. The Global Services segment reported EBITDA of $14.7 million down 15.8% from $17.5 million in FY23. Despite the loss of the Google contract, the impact on EBITDA was minimised due to improved gross margins and cost out programs executed during FY24. The New Markets segment EBITDA improved by $24.6 million to ($8.1 million) compared to EBITDA of ($32.7 million) in FY23. The improvement reflects revenue growth and improved gross margin in both China and Global Product. Underlying net loss after tax improved by $42.3 million to ($10.5 million) compared to ($52.8 million) in FY23. Increase predominately due to the factors noted above as well as lower depreciation and amortisation in FY24 compared to FY23. Statutory net loss after tax improved by $98.1 million to ($20.0 million) and includes one-off restructure costs of $3.0 million associated with the implementation of the cost reduction program and a leadership refresh implemented during FY24. Included in FY23 is non-cash impairment of $69.2 million in relation to the Global Services cash generating unit. Cost reduction program In response to the loss of the Google contract, the Group announced and delivered a $13.5 million 4 cost savings program that was executed in H1 FY24. The initiatives completed enabled Appen to achieve its cash EBITDA profitability objective in H2 FY24. Balance Sheet Net assets at 31 December 2024 were $114.3 million (31 December 2023: $92.8 million). The increase in net assets was a result of equity raised in H2 FY24, offset by trading performance during the year. Trade and other receivables combined with contract assets were $0.9 million higher at 31 December 2024 compared to 31 December 2023 due to the timing of customer receipts. Current liabilities were $3.8 million lower at 31 December 2024 compared to 31 December 2023. The decrease was mainly due to finalisation of the Quadrant earnout liability, settled via the issue of ordinary shares in January 2024. Cash balance increased by $22.7 million to $54.8 million at 31 December 2024 from $32.2 million at 31 December 2023. The balance includes net proceeds of $42.1 million from the issuance of shares during the period. The cash balance as at 31 December 2024 was impacted by foreign exchange, working capital requirements from a strong Q4 FY24 as well as timing of customer receipts, with $10.0 million received from a major customer on 4 January 2025 versus last week of December as scheduled. In H2 FY24, Appen raised ~A$65 million equity. A$50 million fully underwritten institutional placement completed on 14 October 2024, and A$15 million Share Purchase Plan completed on 7 November 2024. Net proceeds of $42.1 million through the issue of 33,854,167 shares. Financial 1 Gross margin refers to revenue less crowd expenses. 2 Employee expenses per management reporting. Excludes direct project workers included in gross margin calculation (i.e. crowd expenses). 3 All other expenses excludes non-cash share based payment expense but all other expenses included in underlying EBITDA before FX. 4 $13.5 million annualised cash opex savings (comparing June 2024 vs January 2024 planned opex. Cash opex refers to opex included in underlying EBITDA calculation, adding platform development capitalised from the profit and loss, less non-cash share-based payments expense. 30 For personal use only
Page 34
Year ended 31 December 2024 Year ended 31 December 2023 Change $ 000 $ 000 Global Services revenue 118,093 191,533 (38.3%) New Markets revenue 116,192 81,479 42.6% Other income 1,420 1,153 Total sales revenue and other income from principal activities 235,705 274,165 (14.0%) Underlying net loss after tax (NPAT) 1 (10,546) (52,810) nm% (Less)/add underlying adjustments (net of tax) Impairment loss – (61,663) Amortisation of acquisition-related identifiable Intangible assets (6,140) (6,158) Earn-out adjustment – 11,196 Restructure costs (2,273) (6,515) Transaction costs (166) (380) Deemed interest on earn-out liability 2 – (248) Acquisition-related and one-time share-based payments (884) (1,501) Statutory NPAT (20,009) (118,079) nm% Add/less: tax expense/(benefit) 16 (6,870) Add: net interest expense 335 805 Add: deemed interest on earn-out liability 2 – 354 EBIT 3 (19,658) (123,790) nm% Add: depreciation and amortisation 23,320 35,147 Statutory EBITDA 4 3,662 (88,643) nm% Add/(less): underlying adjustments Impairment loss – 69,182 Earn-out adjustment – (15,994) Restructure costs 3,039 8,967 Transaction costs 234 542 Acquisition-related and one-time share-based payments 884 1,501 Underlying EBITDA 1 7,819 (24,445) nm% Statutory diluted earnings per share (cents) (8.74) (83.10) Underlying diluted earnings per share (cents) (4.61) (37.17) % Statutory EBITDA/revenue 1.6% (32.3%) % Underlying EBITDA/revenue 3.3% (8.9%) 1 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 impairment loss, restructure costs, transaction costs, earn-out adjustment, inventory losses and acquisition-related and one-time share-based payments expense. 2 Liability with respect to the Quadrant acquisition which settled in January 2024 via the issue of ordinary shares. 3 EBIT is defined as earnings before interest and tax. 4 EBITDA is EBIT before depreciation and amortisation. The following table summarises the Group’s financial results for the current and prior year and provides a reconciliation between our statutory and underlying results The following table summarises the Group’s financial results for the current and prior year and provides a reconciliation between our statutory and underlying results. Financial 32 Identifying and managing risks Embedding robust risk management practices is critical to achieving a balance between risk and reward in the dynamic, high-growth market we operate in. Our approach ensures that strategic innovation and business growth are grounded in a thoughtful evaluation of potential risks, supported by comprehensive mitigation strategies. By integrating risk management into all levels of the business, we enable sustainable value creation while safeguarding our long-term operational resilience. Governance Risk appetite Our defined risk appetite is designed to enable agile, informed decision-making while supporting innovation and sustainable growth. At a category level, our risk appetite provides clear boundaries to guide daily operations and ensure alignment with strategic priorities. This framework is reviewed annually during our strategic planning session and approved by the Board, ensuring it remains consistent with our evolving goals and external market dynamics. Risk culture Risk management is deeply integrated into our strategic planning and day-to-day operations. This approach fosters a culture of transparency, accountability, and proactive decision-making, reinforced by our company values. Our risk culture is supported by the Code of Conduct, comprehensive policies, and regular training programs. By implementing practical, cost-effective controls, we empower teams to make decisions that align with our risk appetite while driving operational excellence. Key changes in our principal risks Each year, we reassess our principal risks as part of the strategic planning process to ensure alignment with our strategic priorities and value drivers. This process was undertaken alongside our materiality assessment to ensure alignment with stakeholder expectations. Principal risks are evaluated for year-on-year movement, capturing shifts driven by internal changes or external market forces. This year’s reassessment highlighted a continued focus on risks related to Generative AI, contributor wellbeing, and geopolitical and economic uncertainty, reflecting the broader operating environment. Emerging risks Emerging risks represent uncertainties that are not yet fully understood but could significantly impact our business in the future. Through horizon scanning and annual strategic reviews, we monitor these risks and assess their potential implications. External sources, such as the World Economic Forum Global Risk Report, provide valuable context to inform our understanding. Once these risks are better defined, they are integrated into our principal risk reporting to ensure they are addressed within our broader risk management framework. Examples include the ethical and operational implications of Generative AI and the evolving regulatory landscape for data privacy and security. 33Appen 2024 Annual Report For personal use only
Page 35
Year ended 31 December 2024 Year ended 31 December 2023 Change $ 000 $ 000 Global Services revenue 118,093 191,533 (38.3%) New Markets revenue 116,192 81,479 42.6% Other income 1,420 1,153 Total sales revenue and other income from principal activities 235,705 274,165 (14.0%) Underlying net loss after tax (NPAT) 1 (10,546) (52,810) nm% (Less)/add underlying adjustments (net of tax) Impairment loss – (61,663) Amortisation of acquisition-related identifiable Intangible assets (6,140) (6,158) Earn-out adjustment – 11,196 Restructure costs (2,273) (6,515) Transaction costs (166) (380) Deemed interest on earn-out liability 2 – (248) Acquisition-related and one-time share-based payments (884) (1,501) Statutory NPAT (20,009) (118,079) nm% Add/less: tax expense/(benefit) 16 (6,870) Add: net interest expense 335 805 Add: deemed interest on earn-out liability 2 – 354 EBIT 3 (19,658) (123,790) nm% Add: depreciation and amortisation 23,320 35,147 Statutory EBITDA 4 3,662 (88,643) nm% Add/(less): underlying adjustments Impairment loss – 69,182 Earn-out adjustment – (15,994) Restructure costs 3,039 8,967 Transaction costs 234 542 Acquisition-related and one-time share-based payments 884 1,501 Underlying EBITDA 1 7,819 (24,445) nm% Statutory diluted earnings per share (cents) (8.74) (83.10) Underlying diluted earnings per share (cents) (4.61) (37.17) % Statutory EBITDA/revenue 1.6% (32.3%) % Underlying EBITDA/revenue 3.3% (8.9%) 1 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 impairment loss, restructure costs, transaction costs, earn-out adjustment, inventory losses and acquisition-related and one-time share-based payments expense. 2 Liability with respect to the Quadrant acquisition which settled in January 2024 via the issue of ordinary shares. 3 EBIT is defined as earnings before interest and tax. 4 EBITDA is EBIT before depreciation and amortisation. The following table summarises the Group’s financial results for the current and prior year and provides a reconciliation between our statutory and underlying results The following table summarises the Group’s financial results for the current and prior year and provides a reconciliation between our statutory and underlying results. Financial 32 Identifying and managing risks Embedding robust risk management practices is critical to achieving a balance between risk and reward in the dynamic, high-growth market we operate in. Our approach ensures that strategic innovation and business growth are grounded in a thoughtful evaluation of potential risks, supported by comprehensive mitigation strategies. By integrating risk management into all levels of the business, we enable sustainable value creation while safeguarding our long-term operational resilience. Governance Risk appetite Our defined risk appetite is designed to enable agile, informed decision-making while supporting innovation and sustainable growth. At a category level, our risk appetite provides clear boundaries to guide daily operations and ensure alignment with strategic priorities. This framework is reviewed annually during our strategic planning session and approved by the Board, ensuring it remains consistent with our evolving goals and external market dynamics. Risk culture Risk management is deeply integrated into our strategic planning and day-to-day operations. This approach fosters a culture of transparency, accountability, and proactive decision-making, reinforced by our company values. Our risk culture is supported by the Code of Conduct, comprehensive policies, and regular training programs. By implementing practical, cost-effective controls, we empower teams to make decisions that align with our risk appetite while driving operational excellence. Key changes in our principal risks Each year, we reassess our principal risks as part of the strategic planning process to ensure alignment with our strategic priorities and value drivers. This process was undertaken alongside our materiality assessment to ensure alignment with stakeholder expectations. Principal risks are evaluated for year-on-year movement, capturing shifts driven by internal changes or external market forces. This year’s reassessment highlighted a continued focus on risks related to Generative AI, contributor wellbeing, and geopolitical and economic uncertainty, reflecting the broader operating environment. Emerging risks Emerging risks represent uncertainties that are not yet fully understood but could significantly impact our business in the future. Through horizon scanning and annual strategic reviews, we monitor these risks and assess their potential implications. External sources, such as the World Economic Forum Global Risk Report, provide valuable context to inform our understanding. Once these risks are better defined, they are integrated into our principal risk reporting to ensure they are addressed within our broader risk management framework. Examples include the ethical and operational implications of Generative AI and the evolving regulatory landscape for data privacy and security. 33Appen 2024 Annual Report For personal use only
Page 36
Ultimate responsibility Board through the Audit & Risk Management Committee • Provides oversight of risk management and culture which contributes to the ability to achieve strategic objectives. • Approve the risk management framework. • Approve the risk appetite statement and subsequent addressing of escalated risk appetite triggers. • Have oversight of strategic and related ESG risks (including climate related risks and impacts). Oversight Executive and Senior Leadership Team • Responsible for the implementation of the risk management framework and risk aware culture within their teams. • Assess, manage and monitor risk profiles for identified strategic risks. • Identify where risk appetite statement triggers may be met and further escalation is required. • Promote a positive and appropriate attitude towards risk management and ensure employees are aware of their responsibilities. • Attest that key risks in their area have been identified and managed through controls and mitigants on a bi-annual basis. Identifying and managing risks Ownership Operational management • Identify, prioritise, assess and monitor risks which may arise in the business operations. • Implement and comply with all controls, policies and procedures within their area of responsibility, including devising and implementing controls to address identified operational risks. Monitoring and partnering Risk management function • Defines the risk management process to be followed by the business (including risk appetite). • Reviews and challenges the strategic and operational risks ensuring controls identified are operating, and tracks closure of items. • Facilitates risk process, collating risk registers and consolidating the strategic risk register. Governance Risk is inherent in doing business, and effective risk management remains a cornerstone of our corporate governance framework. Our approach empowers the business to pursue opportunities while maintaining oversight and accountability. By embedding risk assessment into our governance processes, we ensure decisions are supported by sound judgement, enabling us to remain innovative without compromising the integrity of our operations. This foundation is bolstered by ongoing reviews of our governance practices to align with evolving business needs and market conditions. 34 Principal risk Mitigation Value Driver Business model Strategic direction of business The AI market continues to evolve at a rapid pace, with client needs and end-user expectations frequently reshaped by technological advancements, regulatory developments, and competitive pressures. Demand for services is influenced by emerging AI technologies such as generative AI, alongside global economic and geopolitical challenges. Incorporated emerging risk: Geoeconomic confrontations Change While this risk has shown fluctuations throughout the year due to macroeconomic and geopolitical developments, the overall risk has decreased compared to the prior year. This reflects the operationalisation of our revised strategy under new leadership and ongoing alignment with market needs. • We maintain a dedicated strategy team tasked with monitoring AI and technology markets, insights which are then actively used to inform our technology roadmap. and go-to-market strategies, ensuring relevance and competitiveness. • We continuously assess opportunities for market expansion and technological diversification to enhance our existing offerings and mitigate risks from over reliance on specific segments. • Macroeconomic and geopolitical risks are integrated into our strategic planning processes, with scenario analyses conducted to address potential political or economic uncertainties in key markets and geographies. Customer and brand Global crowd Technology, processes, systems Financial Key: Increase Decrease Stable A summary of our principal risks, and how these have changed during the year, mitigation strategies and related trends are detailed in the following tables. This reflects the risks identified by the Board for the year ended 31 December 2024. The risk landscape is continually evolving and we regularly monitor and identify risks on a proactive basis. This means the risk register and associated strategies are not exhaustive and are reflective of efforts at a set point in time. 35Appen 2024 Annual Report For personal use only
Page 37
Ultimate responsibility Board through the Audit & Risk Management Committee • Provides oversight of risk management and culture which contributes to the ability to achieve strategic objectives. • Approve the risk management framework. • Approve the risk appetite statement and subsequent addressing of escalated risk appetite triggers. • Have oversight of strategic and related ESG risks (including climate related risks and impacts). Oversight Executive and Senior Leadership Team • Responsible for the implementation of the risk management framework and risk aware culture within their teams. • Assess, manage and monitor risk profiles for identified strategic risks. • Identify where risk appetite statement triggers may be met and further escalation is required. • Promote a positive and appropriate attitude towards risk management and ensure employees are aware of their responsibilities. • Attest that key risks in their area have been identified and managed through controls and mitigants on a bi-annual basis. Identifying and managing risks Ownership Operational management • Identify, prioritise, assess and monitor risks which may arise in the business operations. • Implement and comply with all controls, policies and procedures within their area of responsibility, including devising and implementing controls to address identified operational risks. Monitoring and partnering Risk management function • Defines the risk management process to be followed by the business (including risk appetite). • Reviews and challenges the strategic and operational risks ensuring controls identified are operating, and tracks closure of items. • Facilitates risk process, collating risk registers and consolidating the strategic risk register. Governance Risk is inherent in doing business, and effective risk management remains a cornerstone of our corporate governance framework. Our approach empowers the business to pursue opportunities while maintaining oversight and accountability. By embedding risk assessment into our governance processes, we ensure decisions are supported by sound judgement, enabling us to remain innovative without compromising the integrity of our operations. This foundation is bolstered by ongoing reviews of our governance practices to align with evolving business needs and market conditions. 34 Principal risk Mitigation Value Driver Business model Strategic direction of business The AI market continues to evolve at a rapid pace, with client needs and end-user expectations frequently reshaped by technological advancements, regulatory developments, and competitive pressures. Demand for services is influenced by emerging AI technologies such as generative AI, alongside global economic and geopolitical challenges. Incorporated emerging risk: Geoeconomic confrontations Change While this risk has shown fluctuations throughout the year due to macroeconomic and geopolitical developments, the overall risk has decreased compared to the prior year. This reflects the operationalisation of our revised strategy under new leadership and ongoing alignment with market needs. • We maintain a dedicated strategy team tasked with monitoring AI and technology markets, insights which are then actively used to inform our technology roadmap. and go-to-market strategies, ensuring relevance and competitiveness. • We continuously assess opportunities for market expansion and technological diversification to enhance our existing offerings and mitigate risks from over reliance on specific segments. • Macroeconomic and geopolitical risks are integrated into our strategic planning processes, with scenario analyses conducted to address potential political or economic uncertainties in key markets and geographies. Customer and brand Global crowd Technology, processes, systems Financial Key: Increase Decrease Stable A summary of our principal risks, and how these have changed during the year, mitigation strategies and related trends are detailed in the following tables. This reflects the risks identified by the Board for the year ended 31 December 2024. The risk landscape is continually evolving and we regularly monitor and identify risks on a proactive basis. This means the risk register and associated strategies are not exhaustive and are reflective of efforts at a set point in time. 35Appen 2024 Annual Report For personal use only
Page 38
Principal risk Mitigation Value Driver Market demand and competition In an increasingly competitive landscape, some areas of our business face pressure from niche and low-cost providers offering specialised services. The profile of customer projects continues to evolve, with growing emphasis on generative AI and complex data solutions, requiring us to adapt quickly to stay competitive and relevant. Change The risk associated with market demand and competition has remained stable compared to the prior year. While there has been rapid expansion of the generative AI sector, where new entrants and cost-driven providers have intensified competition, we have been able to position ourselves strongly to capitalise on the growth in the sector. • We continue to monitor new entrants and investments in the data annotation and AI sectors to stay ahead of emerging competitors. This includes assessing the strategies and offerings of niche providers and low-cost operators to identify potential threats and opportunities. • Through targeted investments in account management, we aim to deepen relationships with existing customers, fostering long-term partnerships that prioritise collaboration and shared success. • We are increasing investments in automation, AI-driven annotation tools, and advanced quality assurance capabilities to differentiate our offerings. These advancements enable us to meet the growing demand for high-quality, scalable data services in generative AI. Customer and brand Technology, processes, systems Financial Changing customer strategy and needs A significant portion of revenue continues to come from a few large global technology companies, whose AI training data requirements represent a substantial percentage of our business. These customers can rapidly shift their spending priorities, which creates unpredictability in our revenue streams. This dynamic requires us to remain highly adaptive and aligned with their evolving strategies. Change This risk has increased due to heightened competition and rapid advancements in AI technologies like generative AI. However, it is stabilising as our efforts to diversify our client base, deepen relationships with key customers, and develop tailored product offerings have started to mitigate the immediate impacts. • Maintain proactive communication and collaboration with our largest customers, enabling us to anticipate shifts in their strategies and respond effectively to changing priorities. • By closely analysing regulatory, technological, and market trends, we can better understand potential headwinds for our clients and tailor our offerings to align with their future needs. • Our continued investment in product development ensures we can adapt to evolving customer requirements. This includes enhancing solutions for generative AI applications and offering scalable, high-quality data services. • Incorporating customer NPS targets into executive STI plans ensures that customer satisfaction remains a core priority across the organisation. Customer and brand Technology, processes, systems Identifying and managing risks 36 Principal risk Mitigation Value Driver Ability to execute on operational requirements The dynamic nature of the AI industry requires us to maintain agility and operational excellence to meet client expectations. Customers expect seamless delivery of increasingly complex projects, often with rapid turnaround times, while relying on our ability to adapt to their evolving requirements. Change While the fast-moving nature of the sector remains a constant challenge, we have maintained stability in our ability to execute operationally. Our focus on refining internal processes, streamlining our delivery model, and enhancing client satisfaction measures, such as the NPS program, has allowed us to keep pace with customer demands effectively. • Dedicated quick response teams remain in place for major clients, ensuring we can address their rapidly evolving needs with minimal disruption. These teams are trained to operate in high-pressure scenarios, maintaining service quality and delivery timelines. • The refinement of our customer NPS program has provided clearer insights into operational gaps and opportunities for improvement. These insights are used to inform process adjustments, resource allocation, and client-focused initiatives. • Investments in workflow automation and AI-driven project management tools have enabled us to handle complex client projects more efficiently while maintaining delivery standards. • Client feedback is incorporated into operational reviews to ensure continuous improvement and alignment with customer requirements. This approach strengthens execution capabilities while maintaining high satisfaction levels. Technology, processes, systems Customer and brand Global crowd Resilient operational model The loss of critical data, physical facilities, or key employees could significantly disrupt operations, impact customer deliverables, and damage our revenue and reputation. As our reliance on internal tools and proprietary systems grows, the potential consequences of system failures or security breaches become more pronounced, amplifying the importance of operational resilience. Change This risk has increased over the past year due to the company’s increasing reliance on internal tools and technology to support operations and deliverables. While this dependence enhances efficiency and scalability, it also heightens vulnerability to system failures, outages, or security breaches. • We store critical data on enterprise-grade, cloud-based servers with duplication and redundancy measures to ensure minimal disruption in the event of a system failure. • Our engineering team prioritises resilience in the development and maintenance of internal tools, ensuring systems are robust and capable of withstanding disruptions. • We have strengthened our business continuity and disaster recovery plans to address risks related to physical sites and critical systems. These plans are regularly updated to reflect operational dependencies on internal tools. • Our flexible work-from-home model for data annotators continues to provide operational resilience by mitigating risks related to physical site disruptions. Customer and brand Technology, processes, systems Social and environment Key: Increase Decrease Stable 37Appen 2024 Annual Report For personal use only
Page 39
Principal risk Mitigation Value Driver Market demand and competition In an increasingly competitive landscape, some areas of our business face pressure from niche and low-cost providers offering specialised services. The profile of customer projects continues to evolve, with growing emphasis on generative AI and complex data solutions, requiring us to adapt quickly to stay competitive and relevant. Change The risk associated with market demand and competition has remained stable compared to the prior year. While there has been rapid expansion of the generative AI sector, where new entrants and cost-driven providers have intensified competition, we have been able to position ourselves strongly to capitalise on the growth in the sector. • We continue to monitor new entrants and investments in the data annotation and AI sectors to stay ahead of emerging competitors. This includes assessing the strategies and offerings of niche providers and low-cost operators to identify potential threats and opportunities. • Through targeted investments in account management, we aim to deepen relationships with existing customers, fostering long-term partnerships that prioritise collaboration and shared success. • We are increasing investments in automation, AI-driven annotation tools, and advanced quality assurance capabilities to differentiate our offerings. These advancements enable us to meet the growing demand for high-quality, scalable data services in generative AI. Customer and brand Technology, processes, systems Financial Changing customer strategy and needs A significant portion of revenue continues to come from a few large global technology companies, whose AI training data requirements represent a substantial percentage of our business. These customers can rapidly shift their spending priorities, which creates unpredictability in our revenue streams. This dynamic requires us to remain highly adaptive and aligned with their evolving strategies. Change This risk has increased due to heightened competition and rapid advancements in AI technologies like generative AI. However, it is stabilising as our efforts to diversify our client base, deepen relationships with key customers, and develop tailored product offerings have started to mitigate the immediate impacts. • Maintain proactive communication and collaboration with our largest customers, enabling us to anticipate shifts in their strategies and respond effectively to changing priorities. • By closely analysing regulatory, technological, and market trends, we can better understand potential headwinds for our clients and tailor our offerings to align with their future needs. • Our continued investment in product development ensures we can adapt to evolving customer requirements. This includes enhancing solutions for generative AI applications and offering scalable, high-quality data services. • Incorporating customer NPS targets into executive STI plans ensures that customer satisfaction remains a core priority across the organisation. Customer and brand Technology, processes, systems Identifying and managing risks 36 Principal risk Mitigation Value Driver Ability to execute on operational requirements The dynamic nature of the AI industry requires us to maintain agility and operational excellence to meet client expectations. Customers expect seamless delivery of increasingly complex projects, often with rapid turnaround times, while relying on our ability to adapt to their evolving requirements. Change While the fast-moving nature of the sector remains a constant challenge, we have maintained stability in our ability to execute operationally. Our focus on refining internal processes, streamlining our delivery model, and enhancing client satisfaction measures, such as the NPS program, has allowed us to keep pace with customer demands effectively. • Dedicated quick response teams remain in place for major clients, ensuring we can address their rapidly evolving needs with minimal disruption. These teams are trained to operate in high-pressure scenarios, maintaining service quality and delivery timelines. • The refinement of our customer NPS program has provided clearer insights into operational gaps and opportunities for improvement. These insights are used to inform process adjustments, resource allocation, and client-focused initiatives. • Investments in workflow automation and AI-driven project management tools have enabled us to handle complex client projects more efficiently while maintaining delivery standards. • Client feedback is incorporated into operational reviews to ensure continuous improvement and alignment with customer requirements. This approach strengthens execution capabilities while maintaining high satisfaction levels. Technology, processes, systems Customer and brand Global crowd Resilient operational model The loss of critical data, physical facilities, or key employees could significantly disrupt operations, impact customer deliverables, and damage our revenue and reputation. As our reliance on internal tools and proprietary systems grows, the potential consequences of system failures or security breaches become more pronounced, amplifying the importance of operational resilience. Change This risk has increased over the past year due to the company’s increasing reliance on internal tools and technology to support operations and deliverables. While this dependence enhances efficiency and scalability, it also heightens vulnerability to system failures, outages, or security breaches. • We store critical data on enterprise-grade, cloud-based servers with duplication and redundancy measures to ensure minimal disruption in the event of a system failure. • Our engineering team prioritises resilience in the development and maintenance of internal tools, ensuring systems are robust and capable of withstanding disruptions. • We have strengthened our business continuity and disaster recovery plans to address risks related to physical sites and critical systems. These plans are regularly updated to reflect operational dependencies on internal tools. • Our flexible work-from-home model for data annotators continues to provide operational resilience by mitigating risks related to physical site disruptions. Customer and brand Technology, processes, systems Social and environment Key: Increase Decrease Stable 37Appen 2024 Annual Report For personal use only
Page 40
Principal risk Mitigation Value Driver People Talent strategy and employee value proposition Our business depends on a highly skilled workforce to drive growth and innovation. The ability to attract, develop, and retain top talent with specialised skills remains critical to achieving our business objectives. Maintaining a compelling employee value proposition is essential in a competitive talent market. Change This risk has decreased compared to the prior year, driven by greater stability in leadership and organisational structure, which has enhanced alignment across teams and strengthened employee engagement. • Our Human Resources team continues to collaborate closely with the business to ensure skills and capabilities align with our strategic objectives. This includes ongoing refinement of employee goal setting and accountability processes to drive alignment and performance. • Programs introduced in response to employee feedback – including flexible work arrangements and enhanced career development opportunities – have strengthened our employee value proposition. • We regularly benchmark our total rewards packages, including compensation, benefits, and development opportunities, to ensure competitiveness within the industry. • Improved stability in leadership and organisational structure has provided employees with clarity and direction, fostering greater trust and engagement. Appen employees Social and environment Managing a culture of growth through change Our business’s future resilience depends on successfully embedding a large-scale restructure program. Employee buy-in and alignment with the organisation’s direction are critical for fostering engagement and sustaining a culture of innovation, adaptability, and performance through ongoing change. Change This risk has decreased due to greater stability achieved following the restructuring efforts in prior years. Clear communication and an increased focus in clear communication which has contributed to higher levels of trust and engagement among the workforce. • Transparent and consistent communication continues to be central to our approach, providing employees with a clear understanding of the organisation’s direction and the rationale behind changes. Town halls, regular updates, and feedback sessions are used to maintain an open dialogue. • We conduct pulse surveys and engagement check-ins to identify pain points, address concerns proactively, and ensure that employees feel supported and valued throughout the change process. • Additional support, such as access to wellness resources and confidential assistance programs, is available to help employees navigate change both professionally and personally. Appen employees Technology, processes, systems Identifying and managing risks 38 Principal risk Mitigation Value Driver Technology and innovation Investment in technology, innovation and transformation Automation, and staying competitive. As customer expectations evolve, the ability to deliver high-quality, scalable solutions is critical. The recent release of CrowdGen and the organisation’s increasing reliance on proprietary technology have elevated the importance of ensuring sustained investment and strategic oversight. Change This risk has increased due to the release of new products that heighten operational reliance on proprietary technology and the need to maintain pace with a rapidly changing AI landscape. While these advancements position the business for long-term growth, they also introduce higher dependencies on the success of our engineering and technology teams to deliver robust, scalable, and reliable systems. • Agile methodologies are employed across engineering projects to ensure resources are allocated effectively, priorities are clear, and investments align with strategic objectives. Oversight mechanisms are in place to track progress and ensure timely delivery. • Comprehensive risk assessments are conducted at key project milestones to identify and mitigate potential issues early in the development cycle, minimising disruptions to product timelines. • Customer insights and feedback are used to refine our technology roadmaps, ensuring product development aligns with client needs and expectations. • We actively monitor emerging technologies, such as generative AI, to incorporate relevant advancements into our offerings and maintain a leadership position in the market. Technology, processes, systems Customer and brand Protection of intellectual property With an increasingly product-led strategy, protecting intellectual property (IP) is critical to ensuring the delivery of innovative outcomes for customers. Strong IP protection measures safeguard our competitive advantage, maintain customer trust, and secure long-term value from our technology investments. Change This risk has decreased compared to the prior year, reflecting the increased alignment between technology development and protection strategies. Improved organisational awareness around IP protection, has reduced vulnerabilities. Continued investments in segmented access controls and market-specific brand protections further strengthen our position. • Our dedicated IP Committee continues to evaluate new technologies through invention disclosures, ensuring alignment with product strategies. This includes implementing appropriate protection mechanisms such as patents, copyrights, trade secrets, and defensive publications to secure innovations effectively. • Core technologies are segmented geographically, limiting access to sensitive IP based on location and role, thereby mitigating risks of unauthorised exposure or misuse. • Efforts to protect our brands in relevant markets continue, ensuring trademarks are registered and upheld in key regions to maintain our market presence. Technology, processes, systems Key: Increase Decrease Stable 39Appen 2024 Annual Report For personal use only
Page 41
Principal risk Mitigation Value Driver People Talent strategy and employee value proposition Our business depends on a highly skilled workforce to drive growth and innovation. The ability to attract, develop, and retain top talent with specialised skills remains critical to achieving our business objectives. Maintaining a compelling employee value proposition is essential in a competitive talent market. Change This risk has decreased compared to the prior year, driven by greater stability in leadership and organisational structure, which has enhanced alignment across teams and strengthened employee engagement. • Our Human Resources team continues to collaborate closely with the business to ensure skills and capabilities align with our strategic objectives. This includes ongoing refinement of employee goal setting and accountability processes to drive alignment and performance. • Programs introduced in response to employee feedback – including flexible work arrangements and enhanced career development opportunities – have strengthened our employee value proposition. • We regularly benchmark our total rewards packages, including compensation, benefits, and development opportunities, to ensure competitiveness within the industry. • Improved stability in leadership and organisational structure has provided employees with clarity and direction, fostering greater trust and engagement. Appen employees Social and environment Managing a culture of growth through change Our business’s future resilience depends on successfully embedding a large-scale restructure program. Employee buy-in and alignment with the organisation’s direction are critical for fostering engagement and sustaining a culture of innovation, adaptability, and performance through ongoing change. Change This risk has decreased due to greater stability achieved following the restructuring efforts in prior years. Clear communication and an increased focus in clear communication which has contributed to higher levels of trust and engagement among the workforce. • Transparent and consistent communication continues to be central to our approach, providing employees with a clear understanding of the organisation’s direction and the rationale behind changes. Town halls, regular updates, and feedback sessions are used to maintain an open dialogue. • We conduct pulse surveys and engagement check-ins to identify pain points, address concerns proactively, and ensure that employees feel supported and valued throughout the change process. • Additional support, such as access to wellness resources and confidential assistance programs, is available to help employees navigate change both professionally and personally. Appen employees Technology, processes, systems Identifying and managing risks 38 Principal risk Mitigation Value Driver Technology and innovation Investment in technology, innovation and transformation Automation, and staying competitive. As customer expectations evolve, the ability to deliver high-quality, scalable solutions is critical. The recent release of CrowdGen and the organisation’s increasing reliance on proprietary technology have elevated the importance of ensuring sustained investment and strategic oversight. Change This risk has increased due to the release of new products that heighten operational reliance on proprietary technology and the need to maintain pace with a rapidly changing AI landscape. While these advancements position the business for long-term growth, they also introduce higher dependencies on the success of our engineering and technology teams to deliver robust, scalable, and reliable systems. • Agile methodologies are employed across engineering projects to ensure resources are allocated effectively, priorities are clear, and investments align with strategic objectives. Oversight mechanisms are in place to track progress and ensure timely delivery. • Comprehensive risk assessments are conducted at key project milestones to identify and mitigate potential issues early in the development cycle, minimising disruptions to product timelines. • Customer insights and feedback are used to refine our technology roadmaps, ensuring product development aligns with client needs and expectations. • We actively monitor emerging technologies, such as generative AI, to incorporate relevant advancements into our offerings and maintain a leadership position in the market. Technology, processes, systems Customer and brand Protection of intellectual property With an increasingly product-led strategy, protecting intellectual property (IP) is critical to ensuring the delivery of innovative outcomes for customers. Strong IP protection measures safeguard our competitive advantage, maintain customer trust, and secure long-term value from our technology investments. Change This risk has decreased compared to the prior year, reflecting the increased alignment between technology development and protection strategies. Improved organisational awareness around IP protection, has reduced vulnerabilities. Continued investments in segmented access controls and market-specific brand protections further strengthen our position. • Our dedicated IP Committee continues to evaluate new technologies through invention disclosures, ensuring alignment with product strategies. This includes implementing appropriate protection mechanisms such as patents, copyrights, trade secrets, and defensive publications to secure innovations effectively. • Core technologies are segmented geographically, limiting access to sensitive IP based on location and role, thereby mitigating risks of unauthorised exposure or misuse. • Efforts to protect our brands in relevant markets continue, ensuring trademarks are registered and upheld in key regions to maintain our market presence. Technology, processes, systems Key: Increase Decrease Stable 39Appen 2024 Annual Report For personal use only
Page 42
Identifying and managing risks Principal risk Mitigation Value Driver Crowd Crowd conditions Independent contractors form the backbone of our operations, contributing directly to our competitive advantage and customer value proposition. The ability to attract and retain skilled contributors is critical to delivering high-quality outcomes for customers. However, the evolving nature of work requests, combined with regional legislative changes and shifts in contractor expectations, has added complexity to maintaining consistent conditions. Change This risk has increased due to growing complexity in the types of projects being requested, requiring heightened attention to contributor conditions. Factors such as more sensitive or challenging content types and broader global shifts in employment legislation have compounded the need for rigorous standards and proactive engagement with our contractor base. • Our Crowd Code of Ethics establishes clear standards for working conditions, going beyond legal minimums toensure ethical and fair treatment of all contractors. This code is regularly reviewed to reflect evolving expectations and best practices. • We actively engage with customers and other industry bodies to promote the value of fair work practices, encouraging them to integrate these principles into their procurement processes. This collaborative approach helps ensure consistent contractor conditions across the value chain. • Including crowd NPS targets in executive short-term incentive (STI) plans ensures that contractor satisfaction remains a strategic priority at the highest levels of the organisation. • Additional wellness programs and resources have been introduced to support contractors working on more sensitive or challenging projects, helping to mitigate the impact of potentially harmful content. Global crowd Customer and brand Crowd supply meets customer demand Our business model is dependent on providing customers with access to a diverse and skilled global crowd. As project complexity continues to increase, maintaining a reliable supply of contributors with the required expertise across various regions and industries is essential for fulfilling customer needs and delivering high-quality outcomes. Change This risk remains stable as the challenges associated with sourcing contributors for increasingly complex projects were identified in the prior year. While the trend toward more demanding customer requirements has persisted, the mitigations implemented have allowed us to maintain a steady supply of skilled contractors. • New strategies have been introduced to address contractor integrity, ensuring that customers have access to a pool of reliable and high-quality contributors. This includes verification measures and performance monitoring. • Upskilling initiatives have been developed to equip contributors with the skills needed for complex projects, ensuring the supply chain aligns with evolving customer demands. • Investments in platform scalability and usability support an improved experience for contractors, encouraging sustained participation and accessibility to more specialised contributors. Global crowd Customer and brand 40 Key: Increase Decrease Stable Principal risk Mitigation Value Driver Data management Compliance with security, privacy and other data regulations As part of our operations, we manage significant volumes of sensitive data, including personal information, which necessitates robust security and privacy measures. With regulatory landscapes evolving rapidly and the increasing sophistication of cyber threats, ensuring compliance with global data regulations remains critical to safeguarding our operations and reputation. Change This risk has increased due to the rapid introduction of stricter data privacy laws in key markets, heightened scrutiny of cross-border data transfers, and the complexity of managing compliance across multiple jurisdictions. Additionally, the sophistication and frequency of cyberattacks continue to rise, necessitating more advanced measures to protect data integrity. • We continue to embed security and privacy requirements into our systems and product offerings, ensuring collaboration between engineering and privacy teams to address regulatory and operational risks proactively. • Our dedicated information security team monitors emerging risks and collaborates with external advisors to stay ahead of new threats. This includes horizon scanning for new cyberattack vectors and assessing the implications of regulatory updates. • We have maintained ISO 27001 and SOC 2 certifications and expanded compliance with ISO 27701 to include our China business. These certifications reinforce our commitment to adhering to global security standards. • Comprehensive training programs ensure employees are well-versed in their privacy and security obligations. Policies and procedures are regularly reviewed and updated to reflect emerging risks and regulatory changes. • Privacy and data security remain standing agenda items for our Audit and Risk Management Committee, ensuring continuous oversight at the highest levels. Technology, processes, systems Customer and brand Emerging cyber security issues As custodians of sensitive customer and contributor information, we face a growing threat landscape characterised by increasingly sophisticated cyberattacks. These threats heighten the risk of data breaches or service disruptions, which could negatively impact customers and damage our reputation. Staying ahead of emerging risks requires continuous vigilance and the adoption of advanced protective measures. Change This risk has increased slightly due to the escalation in the frequency and sophistication of cyberattacks globally. The rise in targeted attacks against organisations managing sensitive data underscores the importance of maintaining a robust cybersecurity posture. • Our cybersecurity risk management framework is implemented across the organisation, deploying a multi-layered approach to identify, protect, detect, and respond to cybersecurity risks. This includes maintaining ISO 27001 and SOC 2 certifications as a testament to our robust security practices. • Regular audits, penetration testing, and simulated incident exercises ensure the strength of our control environment. Independent security experts conduct maturity assessments and provide prioritised recommendations, which are implemented to address vulnerabilities effectively. • Employees undergo annual training on cybersecurity responsibilities and threats, complemented by regular phishing simulations to enhance awareness and reduce susceptibility to attacks. • We are progressing toward implementing a zero-trust architecture to strengthen access controls, ensuring that users and systems are verified at every interaction. Technology, processes, systems Customer and brand 41Appen 2024 Annual Report For personal use only
Page 43
Identifying and managing risks Principal risk Mitigation Value Driver Crowd Crowd conditions Independent contractors form the backbone of our operations, contributing directly to our competitive advantage and customer value proposition. The ability to attract and retain skilled contributors is critical to delivering high-quality outcomes for customers. However, the evolving nature of work requests, combined with regional legislative changes and shifts in contractor expectations, has added complexity to maintaining consistent conditions. Change This risk has increased due to growing complexity in the types of projects being requested, requiring heightened attention to contributor conditions. Factors such as more sensitive or challenging content types and broader global shifts in employment legislation have compounded the need for rigorous standards and proactive engagement with our contractor base. • Our Crowd Code of Ethics establishes clear standards for working conditions, going beyond legal minimums toensure ethical and fair treatment of all contractors. This code is regularly reviewed to reflect evolving expectations and best practices. • We actively engage with customers and other industry bodies to promote the value of fair work practices, encouraging them to integrate these principles into their procurement processes. This collaborative approach helps ensure consistent contractor conditions across the value chain. • Including crowd NPS targets in executive short-term incentive (STI) plans ensures that contractor satisfaction remains a strategic priority at the highest levels of the organisation. • Additional wellness programs and resources have been introduced to support contractors working on more sensitive or challenging projects, helping to mitigate the impact of potentially harmful content. Global crowd Customer and brand Crowd supply meets customer demand Our business model is dependent on providing customers with access to a diverse and skilled global crowd. As project complexity continues to increase, maintaining a reliable supply of contributors with the required expertise across various regions and industries is essential for fulfilling customer needs and delivering high-quality outcomes. Change This risk remains stable as the challenges associated with sourcing contributors for increasingly complex projects were identified in the prior year. While the trend toward more demanding customer requirements has persisted, the mitigations implemented have allowed us to maintain a steady supply of skilled contractors. • New strategies have been introduced to address contractor integrity, ensuring that customers have access to a pool of reliable and high-quality contributors. This includes verification measures and performance monitoring. • Upskilling initiatives have been developed to equip contributors with the skills needed for complex projects, ensuring the supply chain aligns with evolving customer demands. • Investments in platform scalability and usability support an improved experience for contractors, encouraging sustained participation and accessibility to more specialised contributors. Global crowd Customer and brand 40 Key: Increase Decrease Stable Principal risk Mitigation Value Driver Data management Compliance with security, privacy and other data regulations As part of our operations, we manage significant volumes of sensitive data, including personal information, which necessitates robust security and privacy measures. With regulatory landscapes evolving rapidly and the increasing sophistication of cyber threats, ensuring compliance with global data regulations remains critical to safeguarding our operations and reputation. Change This risk has increased due to the rapid introduction of stricter data privacy laws in key markets, heightened scrutiny of cross-border data transfers, and the complexity of managing compliance across multiple jurisdictions. Additionally, the sophistication and frequency of cyberattacks continue to rise, necessitating more advanced measures to protect data integrity. • We continue to embed security and privacy requirements into our systems and product offerings, ensuring collaboration between engineering and privacy teams to address regulatory and operational risks proactively. • Our dedicated information security team monitors emerging risks and collaborates with external advisors to stay ahead of new threats. This includes horizon scanning for new cyberattack vectors and assessing the implications of regulatory updates. • We have maintained ISO 27001 and SOC 2 certifications and expanded compliance with ISO 27701 to include our China business. These certifications reinforce our commitment to adhering to global security standards. • Comprehensive training programs ensure employees are well-versed in their privacy and security obligations. Policies and procedures are regularly reviewed and updated to reflect emerging risks and regulatory changes. • Privacy and data security remain standing agenda items for our Audit and Risk Management Committee, ensuring continuous oversight at the highest levels. Technology, processes, systems Customer and brand Emerging cyber security issues As custodians of sensitive customer and contributor information, we face a growing threat landscape characterised by increasingly sophisticated cyberattacks. These threats heighten the risk of data breaches or service disruptions, which could negatively impact customers and damage our reputation. Staying ahead of emerging risks requires continuous vigilance and the adoption of advanced protective measures. Change This risk has increased slightly due to the escalation in the frequency and sophistication of cyberattacks globally. The rise in targeted attacks against organisations managing sensitive data underscores the importance of maintaining a robust cybersecurity posture. • Our cybersecurity risk management framework is implemented across the organisation, deploying a multi-layered approach to identify, protect, detect, and respond to cybersecurity risks. This includes maintaining ISO 27001 and SOC 2 certifications as a testament to our robust security practices. • Regular audits, penetration testing, and simulated incident exercises ensure the strength of our control environment. Independent security experts conduct maturity assessments and provide prioritised recommendations, which are implemented to address vulnerabilities effectively. • Employees undergo annual training on cybersecurity responsibilities and threats, complemented by regular phishing simulations to enhance awareness and reduce susceptibility to attacks. • We are progressing toward implementing a zero-trust architecture to strengthen access controls, ensuring that users and systems are verified at every interaction. Technology, processes, systems Customer and brand 41Appen 2024 Annual Report For personal use only
Page 44
Identifying and managing risks Principal risk Mitigation Value Driver Support Financial sustainability Operating in a global market exposes us to financial risks, including foreign exchange fluctuations, debt market changes, and evolving tax obligations. As a publicly listed entity, we are committed to protecting shareholder capital and ensuring sustainable earnings to maintain stakeholder confidence. Change This risk has decreased compared to the prior year due to successful capital-raising initiatives and increased revenue, which have strengthened our financial position and provided greater flexibility to navigate market challenges. • Our operational model naturally hedges foreign exchange risk by matching revenue currencies with associated service costs, reducing exposure to currency fluctuations. • Regular scenario planning and external landscape monitoring enable us to respond proactively to changes, such as shifts in tax rates or other regulatory requirements, ensuring compliance and adaptability. • Investments in operational efficiencies, including automation and process improvements, ensure profitability and cost containment while supporting sustainable earnings. Financial Appen employees Compliance with legal, statutory and ethical obligations We are committed to meeting our legal and statutory obligations while fostering trust and transparency through the dissemination and embedding of responsible AI practices. As the regulatory landscape evolves, compliance remains critical to maintaining operational integrity and supporting ethical standards across our business and partnerships. Incorporated emerging risk: Responsible AI Change This risk remains stable, reflecting consistent efforts to enhance governance and compliance capabilities across the business. However, the complexity of global legal and ethical standards requires ongoing vigilance and investment in compliance capabilities. • We conduct regular reviews of our material obligations to ensure controls, governance, and oversight mechanisms remain robust and adapt to new legal and ethical requirements. • Collaborations with industry organisations to support the development and implementation of responsible AI standards, reinforcing trust and value in AI for businesses and the broader community. • Regular compliance audits, supplemented by independent reviews, ensure adherence to statutory and ethical obligations while identifying areas for improvement. • Engagement with customers, partners, and regulators helps to align expectations, foster transparency, and ensure that compliance efforts reflect broader stakeholder priorities. Social and environment Financial Appen employees 42 Key: Increase Decrease Stable Principal risk Mitigation Value Driver Environmental, social and governance (ESG) risks and performance The increasing emphasis on sustainability and corporate responsibility from investors, regulators, and customers makes effective ESG performance a critical priority. Meeting evolving stakeholder expectations and regulatory requirements, while ensuring alignment with global sustainability standards, is vital to preserving trust, enhancing market competitiveness, and mitigating potential reputational and financial risks. Incorporated emerging risk: Climate change Change This risk remains stable as our existing commitments and initiatives, including our Net Zero Roadmap and alignment with the Science Based Target Initiative (SBTi), provide a solid foundation. • As a signatory to the United Nations Global Compact, we are committed to embedding its ten principles related to human rights, labour, environment, and anti-corruption into our business practices, reinforcing our alignment with global sustainability standards. • We have developed and implemented an initial Net Zero Roadmap, with a commitment to achieve net zero by 2030. This roadmap includes actionable plans to reduce emissions, improve energy efficiency, and explore renewable energy solutions. • Our participation in the Science Based Target Initiative (SBTi) and reporting in accordance with the Task Force on Climate-related Financial Disclosures (TCFD) recommendations demonstrate our commitment to measurable, science-based approaches to climate action and transparency in climate- related risks and opportunities. Social and environment 43Appen 2024 Annual Report For personal use only
Page 45
Identifying and managing risks Principal risk Mitigation Value Driver Support Financial sustainability Operating in a global market exposes us to financial risks, including foreign exchange fluctuations, debt market changes, and evolving tax obligations. As a publicly listed entity, we are committed to protecting shareholder capital and ensuring sustainable earnings to maintain stakeholder confidence. Change This risk has decreased compared to the prior year due to successful capital-raising initiatives and increased revenue, which have strengthened our financial position and provided greater flexibility to navigate market challenges. • Our operational model naturally hedges foreign exchange risk by matching revenue currencies with associated service costs, reducing exposure to currency fluctuations. • Regular scenario planning and external landscape monitoring enable us to respond proactively to changes, such as shifts in tax rates or other regulatory requirements, ensuring compliance and adaptability. • Investments in operational efficiencies, including automation and process improvements, ensure profitability and cost containment while supporting sustainable earnings. Financial Appen employees Compliance with legal, statutory and ethical obligations We are committed to meeting our legal and statutory obligations while fostering trust and transparency through the dissemination and embedding of responsible AI practices. As the regulatory landscape evolves, compliance remains critical to maintaining operational integrity and supporting ethical standards across our business and partnerships. Incorporated emerging risk: Responsible AI Change This risk remains stable, reflecting consistent efforts to enhance governance and compliance capabilities across the business. However, the complexity of global legal and ethical standards requires ongoing vigilance and investment in compliance capabilities. • We conduct regular reviews of our material obligations to ensure controls, governance, and oversight mechanisms remain robust and adapt to new legal and ethical requirements. • Collaborations with industry organisations to support the development and implementation of responsible AI standards, reinforcing trust and value in AI for businesses and the broader community. • Regular compliance audits, supplemented by independent reviews, ensure adherence to statutory and ethical obligations while identifying areas for improvement. • Engagement with customers, partners, and regulators helps to align expectations, foster transparency, and ensure that compliance efforts reflect broader stakeholder priorities. Social and environment Financial Appen employees 42 Key: Increase Decrease Stable Principal risk Mitigation Value Driver Environmental, social and governance (ESG) risks and performance The increasing emphasis on sustainability and corporate responsibility from investors, regulators, and customers makes effective ESG performance a critical priority. Meeting evolving stakeholder expectations and regulatory requirements, while ensuring alignment with global sustainability standards, is vital to preserving trust, enhancing market competitiveness, and mitigating potential reputational and financial risks. Incorporated emerging risk: Climate change Change This risk remains stable as our existing commitments and initiatives, including our Net Zero Roadmap and alignment with the Science Based Target Initiative (SBTi), provide a solid foundation. • As a signatory to the United Nations Global Compact, we are committed to embedding its ten principles related to human rights, labour, environment, and anti-corruption into our business practices, reinforcing our alignment with global sustainability standards. • We have developed and implemented an initial Net Zero Roadmap, with a commitment to achieve net zero by 2030. This roadmap includes actionable plans to reduce emissions, improve energy efficiency, and explore renewable energy solutions. • Our participation in the Science Based Target Initiative (SBTi) and reporting in accordance with the Task Force on Climate-related Financial Disclosures (TCFD) recommendations demonstrate our commitment to measurable, science-based approaches to climate action and transparency in climate- related risks and opportunities. Social and environment 43Appen 2024 Annual Report For personal use only
Page 46
Our approach to governance Appen’s governance policies and practices are consistent with the 4th edition of the ASX Corporate Governance Council’s Principles and Recommendations (ASX Corporate Governance Principles) throughout the year. Governance framework Our governance framework ensures accountability, both of the Board and senior management. To clarify the roles and responsibilities of directors and management and to assist the Board in discharging its responsibilities, the Board operates under a formal Charter which sets out the functions reserved to the Board and provides for the delegation of functions to Board Committees and to senior management. The Board is responsible for demonstrating leadership, defining the company’s purpose, establishing strategic objectives, approving our values and the Code of Conduct, and oversight of the management of the company. The Board has established two standing Committees which assist with the execution of its responsibilities. The Audit and Risk Management Committee and the People and Culture Committee. 2024 areas of governance focus Key areas of governance focus and activities undertaken by the Board, its Committees and management during 2024 included: Strategic and financial performance • conducted a Board and executive strategy review to focus Appen’s options for future growth considering the external operating and technology environment. Our people • reviewed our organisational structures within each business unit and functional areas with a focus on reducing organisation layers to improve operational efficiency. • strengthened Appen’s executive team. Oversight of financial and capital management • completed a fully underwritten ~A$50 million institutional placement on 14 October 2024 along with a ~A$15M share purchase plan completed on 7 November 2024 to bolster the balance sheet and provide additional liquidity to fund working capital. • to ensure an appropriate allocation of capital, the Board determined not to pay any dividends. Compliance and risk management • internal audit program – reviewed and assessed processes across key operational areas, including a review of our cyber security maturity. • to ensure an appropriate allocation of capital, the Board determined not to pay any dividends. Ethics and responsible decision making • partnered with our key customers to establish projects to identify and monitor our impact on social impact activities. • published an updated Modern Slavery Statement, outlining the steps taken to mitigate risks of forced labor and exploitation within the supply chain. Global crowd • continued focus on upholding the Crowd Code of Ethics, reinforcing fairness, integrity, and responsible practices in our partnerships with the global crowd. • delivered significant enhancements to our platform, including new user experiences tailored to feedback from contributors to better support their engagement and performance. • strengthened partnerships with organisations such as Na’amal, Generation, and Konexio, opening new opportunities for underserved populations, including refugee communities, to access work. • introduced contractor wellness programs to support crowd contributors engaged in sensitive work, aligning with trust and safety priorities. Social and environment • continued disclosure of greenhouse gas emissions scopes 1, 2 and 3 and achieved limited assurance of the data. • continued implementation of Net Zero Roadmap and working towards net zero across operations by 2030. • continued tracking performance against United Nations Global Compact commitments, aligning with principles for human rights, labor, environment, and anti corruption. Governance 44 Skill Description Skill level Strategy Experience in defining strategic objectives, assessing business plans and driving execution. Ability to think strategically and identify and critically assess opportunities and threats and develop effective strategies in the context of changing market conditions. Finance Understanding the financial drivers of the business, experience in financial accounting and reporting, tax, corporate finance and internal financial controls. Risk Experience in the identification, monitoring and management of material financial and non-financial risks, the oversight of compliance frameworks and controls, and the ability to identify and oversee mitigation strategies for emerging risk and compliance issues in the organisation. Industry experience Experience and broad understanding of the application of language technology, machine learning, artificial intelligence and specifically AI, including market drivers, risks and trends and encompassing policies, competitors, end users, regulatory policy and frameworks. Customer/Client Experience developing customer/client strategy and delivering customer/client outcomes. Capital markets Expertise in considering and implementing efficient capital management including alternative capital sources and distributions, yields and markets. Corporate transactions Experience in assessing and completing complex business transactions, including mergers, acquisitions, divestments, capital management, major projects and business integration. People and culture management Board Committee or senior executive equivalent experience relating to people management and human resources, corporate culture, diversity and inclusion, and remuneration issues of a global organisation. Governance Knowledge and experience in best practice governance structures, policies and processes. Technology and innovation Experience and expertise in identifying, assessing, implementing and leveraging digital technologies and other innovations. Data and security Understanding the use of data and the risks associated with data security, cyber and privacy. International business experience Experience in international business, trade and/or investment at a senior executive level and exposure to global markets and a range of different political, regulatory, and business environments. ESG Expertise in the areas of environment, social and governance (ESG), and the ability to advise the Company of required policies, actions and disclosures on these matters. Board diversity Male Female 50% of Directors are female 50.0% 50.0% Non-executive director tenure 5.1 years average tenure of NEDs 0–1 year 1–3 years 0.0% 43.0% 3–5 years 5+ years 28.5% 28.5% International business experience 87.5% Director's have a high level of international experience High Medium 87.5% 12.5% Director independence 87.5% of directors are independent Independent CEO 87.5% 12.5% Medium competency and experienceHigh competency and experience 45Appen 2024 Annual Report For personal use only
Page 47
Our approach to governance Appen’s governance policies and practices are consistent with the 4th edition of the ASX Corporate Governance Council’s Principles and Recommendations (ASX Corporate Governance Principles) throughout the year. Governance framework Our governance framework ensures accountability, both of the Board and senior management. To clarify the roles and responsibilities of directors and management and to assist the Board in discharging its responsibilities, the Board operates under a formal Charter which sets out the functions reserved to the Board and provides for the delegation of functions to Board Committees and to senior management. The Board is responsible for demonstrating leadership, defining the company’s purpose, establishing strategic objectives, approving our values and the Code of Conduct, and oversight of the management of the company. The Board has established two standing Committees which assist with the execution of its responsibilities. The Audit and Risk Management Committee and the People and Culture Committee. 2024 areas of governance focus Key areas of governance focus and activities undertaken by the Board, its Committees and management during 2024 included: Strategic and financial performance • conducted a Board and executive strategy review to focus Appen’s options for future growth considering the external operating and technology environment. Our people • reviewed our organisational structures within each business unit and functional areas with a focus on reducing organisation layers to improve operational efficiency. • strengthened Appen’s executive team. Oversight of financial and capital management • completed a fully underwritten ~A$50 million institutional placement on 14 October 2024 along with a ~A$15M share purchase plan completed on 7 November 2024 to bolster the balance sheet and provide additional liquidity to fund working capital. • to ensure an appropriate allocation of capital, the Board determined not to pay any dividends. Compliance and risk management • internal audit program – reviewed and assessed processes across key operational areas, including a review of our cyber security maturity. • to ensure an appropriate allocation of capital, the Board determined not to pay any dividends. Ethics and responsible decision making • partnered with our key customers to establish projects to identify and monitor our impact on social impact activities. • published an updated Modern Slavery Statement, outlining the steps taken to mitigate risks of forced labor and exploitation within the supply chain. Global crowd • continued focus on upholding the Crowd Code of Ethics, reinforcing fairness, integrity, and responsible practices in our partnerships with the global crowd. • delivered significant enhancements to our platform, including new user experiences tailored to feedback from contributors to better support their engagement and performance. • strengthened partnerships with organisations such as Na’amal, Generation, and Konexio, opening new opportunities for underserved populations, including refugee communities, to access work. • introduced contractor wellness programs to support crowd contributors engaged in sensitive work, aligning with trust and safety priorities. Social and environment • continued disclosure of greenhouse gas emissions scopes 1, 2 and 3 and achieved limited assurance of the data. • continued implementation of Net Zero Roadmap and working towards net zero across operations by 2030. • continued tracking performance against United Nations Global Compact commitments, aligning with principles for human rights, labor, environment, and anti corruption. Governance 44 Skill Description Skill level Strategy Experience in defining strategic objectives, assessing business plans and driving execution. Ability to think strategically and identify and critically assess opportunities and threats and develop effective strategies in the context of changing market conditions. Finance Understanding the financial drivers of the business, experience in financial accounting and reporting, tax, corporate finance and internal financial controls. Risk Experience in the identification, monitoring and management of material financial and non-financial risks, the oversight of compliance frameworks and controls, and the ability to identify and oversee mitigation strategies for emerging risk and compliance issues in the organisation. Industry experience Experience and broad understanding of the application of language technology, machine learning, artificial intelligence and specifically AI, including market drivers, risks and trends and encompassing policies, competitors, end users, regulatory policy and frameworks. Customer/Client Experience developing customer/client strategy and delivering customer/client outcomes. Capital markets Expertise in considering and implementing efficient capital management including alternative capital sources and distributions, yields and markets. Corporate transactions Experience in assessing and completing complex business transactions, including mergers, acquisitions, divestments, capital management, major projects and business integration. People and culture management Board Committee or senior executive equivalent experience relating to people management and human resources, corporate culture, diversity and inclusion, and remuneration issues of a global organisation. Governance Knowledge and experience in best practice governance structures, policies and processes. Technology and innovation Experience and expertise in identifying, assessing, implementing and leveraging digital technologies and other innovations. Data and security Understanding the use of data and the risks associated with data security, cyber and privacy. International business experience Experience in international business, trade and/or investment at a senior executive level and exposure to global markets and a range of different political, regulatory, and business environments. ESG Expertise in the areas of environment, social and governance (ESG), and the ability to advise the Company of required policies, actions and disclosures on these matters. Board diversity Male Female 50% of Directors are female 50.0% 50.0% Non-executive director tenure 5.1 years average tenure of NEDs 0–1 year 1–3 years 0.0% 43.0% 3–5 years 5+ years 28.5% 28.5% International business experience 87.5% Director's have a high level of international experience High Medium 87.5% 12.5% Director independence 87.5% of directors are independent Independent CEO 87.5% 12.5% Medium competency and experienceHigh competency and experience 45Appen 2024 Annual Report For personal use only
Page 48
Board of Directors Richard Freudenstein BEc, LLB (Hons) Non-executive Chair Appointed: Chair on 28 October and joined as non-executive Director on 12 August 2021 Board Committee: Member of the People and Culture Committee Steve Hasker BCom, MBA, MIA, ACAA Independent non-executive Director Appointed: 7 April 2015 Board Committee: Chair of the People and Culture Committee Robin Low BCom, FCA, FAICD Independent non-executive Director Appointed: 30 October 2014 Board Committee: Chair of the Audit and Risk Management Committee Richard was appointed Chair in October 2021 and has been a non-executive director since August 2021. Richard is a director of Coles Group Limited (ASX: COL), REA Group Ltd (ASX: REA) and Cricket Australia. Previously, he was Chairman of REA Group Ltd. He is a former director of Ten Network Holdings Ltd (ASX: TEN), Foxtel and Astro Malaysia Holdings Berhad. Richard has extensive experience as a media executive in Australia and overseas. He was previously the Chief Executive Officer (CEO) at Foxtel (2011-2016), CEO of The Australian newspaper and News Digital Media at News Ltd (2006–2010) and Chief Operating Officer (COO) at British Sky Broadcasting (2000–2006). He is currently Deputy Chancellor and Fellow of the Senate at the University of Sydney. Richard has a Bachelor of Laws (Hons) and a Bachelor of Economics from the University of Sydney. Steve has extensive experience as a CEO, COO and Advisor in the US. Steve has been President and CEO of Thomson Reuters since March 2020. He was a Senior Advisor to private equity firm TPG Capital (2019–2020) and CEO of CAA Global, a TPG Capital portfolio company (2018–2019). At Nielsen Holdings PLC, he served as Global President and COO (2015–2017) and President, Global Products (2009–2014). Steve was a partner with McKinsey (1998–2009). Before that, he spent five years in several financial roles in the U.S. and other countries. Robin has extensive finance, risk and business experience from her 28-year career at PricewaterhouseCoopers, where she was a partner specialising in assurance and risk, mainly in financial services. She was previously deputy chair of the Auditing and Assurance Standards Board. Robin is an experienced non-executive director and is currently on the board of Articore Limited (ASX: ATG). Her previous ASX board roles include AUB Group Limited (ASX:AUB), CSG Limited (ASX: CSV), IPH Limited (ASX:IPH) and Marley Spoon SE (ASX: MMM). Robin is also a director of the Guide Dogs NSW/ACT and the Sax Institute, a member of Anacacia’s Business Advisory Council and she is a member of the Audit Committee for the University of NSW. Robin has a Bachelor of Commerce from the University of New South Wales and is a Fellow of the Institute of Chartered Accountants Australia and New Zealand and a Fellow of the Australian Institute of Company Directors. Governance 46 Vanessa Liu AB Psychology (magna cum laude with highest honors); JD (cum laude) Independent non-executive Director Appointed: 27 March 2020 Board Committee: Member of the Audit and Risk Management Committee Stuart Davis LLB Independent non-executive Director Appointed: 30 March 2022 Board Committee: Member of the Audit and Risk Management Committee Lynn Mickleburgh BSc (Hons) in Mathematics, MBA Independent non-executive Director Appointed: 29 July 2022 Board Committee: Member of the People and Culture Committee Mini Peiris BSc Independent non-executive Director Appointed: 4 November 2022 Board Committee: Member of the People and Culture Committee Vanessa has deep expertise of emerging technology trends and enterprise uptake of artificial intelligence, especially in the U.S. market. She is the Founder and CEO of SaaS technology company Sugarwork and is a non-executive director of Goodman Group (ASX: GMG). Most recently she was the Vice President of SAP.iO, the early-stage venture arm of SAP. Prior, Vanessa was the Chief Operating Officer at Trigger Media Group, a digital media incubator. Before that, Vanessa was Associate Partner at McKinsey & Company’s Media and Entertainment Practice, where she served clients in media and high-tech sectors on issues of digital media strategy, emerging market strategy, growth and innovation. Vanessa graduated magna cum laude with an AB in Psychology from Harvard University and cum laude with a JD from Harvard Law School. She serves as a member of the Board of Overseers of Harvard University. Stuart is a director of NEXTDC Limited (ASX: NXT) and Chair of the Remuneration Committee, a non-executive director of Bank of South Pacific Limited and PayPal Australia Ltd where he serves as Chair of the Risk Committee at both companies. He has more than 30 years’ experience as an international banker with the HSBC Group where he was CEO, HSBC India (2009-2012), CEO and Executive Director for HSBC Bank Australia Limited (2002-2009) and CEO HSBC Taiwan (1999-2002). He was a member of the Australian Bankers Association from 2002-2009 and Deputy Chair from 2006-2009. Stuart holds a LLB from Adelaide University and is a Graduate of the Australian Institute of Company Directors. Lynn has experience as an ASX non-executive director, a board advisor and transformational leader of both Fortune 500 companies and high-growth SaaS companies. Lynn is a former non-executive Director of ASX listed Altium Limited (ASX: ALU), where she chaired the HR Committee and served on the Audit and Risk Committee. Previously, she was Head of Business Optimisation at Atlassian Inc, VP Finance at Citrix Systems and held various global and operational roles at Adobe Systems and Apple Computer. She holds a Bachelor of Science in Mathematics and an MBA in Business Management. Mini is a go-to-market advisor for high-growth SaaS companies within the portfolio of Scale Venture Partners and is Chief Marketing Officer (CMO) of Nintex, a global leader in intelligent automation and application generation. Prior to that, she was the CMO at Doma (NYSE: DOMA), Elementum (a Lightspeed company) and Ambra Health (acquired by Hg’s Interlerad). Mini spent 12+ years at cloud-pioneer company NetSuite (NYSE: N), from its early stages through to its IPO and beyond. She helped drive product growth as VP of Product Management, then went on to lead a global team as VP Worldwide Marketing that delivered go-to-market scale from US$100 million to almost US$1 bullion in revenue. She holds a Bachelor of Science from the University of Michigan. 47Appen 2024 Annual Report For personal use only
Page 49
Board of Directors Richard Freudenstein BEc, LLB (Hons) Non-executive Chair Appointed: Chair on 28 October and joined as non-executive Director on 12 August 2021 Board Committee: Member of the People and Culture Committee Steve Hasker BCom, MBA, MIA, ACAA Independent non-executive Director Appointed: 7 April 2015 Board Committee: Chair of the People and Culture Committee Robin Low BCom, FCA, FAICD Independent non-executive Director Appointed: 30 October 2014 Board Committee: Chair of the Audit and Risk Management Committee Richard was appointed Chair in October 2021 and has been a non-executive director since August 2021. Richard is a director of Coles Group Limited (ASX: COL), REA Group Ltd (ASX: REA) and Cricket Australia. Previously, he was Chairman of REA Group Ltd. He is a former director of Ten Network Holdings Ltd (ASX: TEN), Foxtel and Astro Malaysia Holdings Berhad. Richard has extensive experience as a media executive in Australia and overseas. He was previously the Chief Executive Officer (CEO) at Foxtel (2011-2016), CEO of The Australian newspaper and News Digital Media at News Ltd (2006–2010) and Chief Operating Officer (COO) at British Sky Broadcasting (2000–2006). He is currently Deputy Chancellor and Fellow of the Senate at the University of Sydney. Richard has a Bachelor of Laws (Hons) and a Bachelor of Economics from the University of Sydney. Steve has extensive experience as a CEO, COO and Advisor in the US. Steve has been President and CEO of Thomson Reuters since March 2020. He was a Senior Advisor to private equity firm TPG Capital (2019–2020) and CEO of CAA Global, a TPG Capital portfolio company (2018–2019). At Nielsen Holdings PLC, he served as Global President and COO (2015–2017) and President, Global Products (2009–2014). Steve was a partner with McKinsey (1998–2009). Before that, he spent five years in several financial roles in the U.S. and other countries. Robin has extensive finance, risk and business experience from her 28-year career at PricewaterhouseCoopers, where she was a partner specialising in assurance and risk, mainly in financial services. She was previously deputy chair of the Auditing and Assurance Standards Board. Robin is an experienced non-executive director and is currently on the board of Articore Limited (ASX: ATG). Her previous ASX board roles include AUB Group Limited (ASX:AUB), CSG Limited (ASX: CSV), IPH Limited (ASX:IPH) and Marley Spoon SE (ASX: MMM). Robin is also a director of the Guide Dogs NSW/ACT and the Sax Institute, a member of Anacacia’s Business Advisory Council and she is a member of the Audit Committee for the University of NSW. Robin has a Bachelor of Commerce from the University of New South Wales and is a Fellow of the Institute of Chartered Accountants Australia and New Zealand and a Fellow of the Australian Institute of Company Directors. Governance 46 Vanessa Liu AB Psychology (magna cum laude with highest honors); JD (cum laude) Independent non-executive Director Appointed: 27 March 2020 Board Committee: Member of the Audit and Risk Management Committee Stuart Davis LLB Independent non-executive Director Appointed: 30 March 2022 Board Committee: Member of the Audit and Risk Management Committee Lynn Mickleburgh BSc (Hons) in Mathematics, MBA Independent non-executive Director Appointed: 29 July 2022 Board Committee: Member of the People and Culture Committee Mini Peiris BSc Independent non-executive Director Appointed: 4 November 2022 Board Committee: Member of the People and Culture Committee Vanessa has deep expertise of emerging technology trends and enterprise uptake of artificial intelligence, especially in the U.S. market. She is the Founder and CEO of SaaS technology company Sugarwork and is a non-executive director of Goodman Group (ASX: GMG). Most recently she was the Vice President of SAP.iO, the early-stage venture arm of SAP. Prior, Vanessa was the Chief Operating Officer at Trigger Media Group, a digital media incubator. Before that, Vanessa was Associate Partner at McKinsey & Company’s Media and Entertainment Practice, where she served clients in media and high-tech sectors on issues of digital media strategy, emerging market strategy, growth and innovation. Vanessa graduated magna cum laude with an AB in Psychology from Harvard University and cum laude with a JD from Harvard Law School. She serves as a member of the Board of Overseers of Harvard University. Stuart is a director of NEXTDC Limited (ASX: NXT) and Chair of the Remuneration Committee, a non-executive director of Bank of South Pacific Limited and PayPal Australia Ltd where he serves as Chair of the Risk Committee at both companies. He has more than 30 years’ experience as an international banker with the HSBC Group where he was CEO, HSBC India (2009-2012), CEO and Executive Director for HSBC Bank Australia Limited (2002-2009) and CEO HSBC Taiwan (1999-2002). He was a member of the Australian Bankers Association from 2002-2009 and Deputy Chair from 2006-2009. Stuart holds a LLB from Adelaide University and is a Graduate of the Australian Institute of Company Directors. Lynn has experience as an ASX non-executive director, a board advisor and transformational leader of both Fortune 500 companies and high-growth SaaS companies. Lynn is a former non-executive Director of ASX listed Altium Limited (ASX: ALU), where she chaired the HR Committee and served on the Audit and Risk Committee. Previously, she was Head of Business Optimisation at Atlassian Inc, VP Finance at Citrix Systems and held various global and operational roles at Adobe Systems and Apple Computer. She holds a Bachelor of Science in Mathematics and an MBA in Business Management. Mini is a go-to-market advisor for high-growth SaaS companies within the portfolio of Scale Venture Partners and is Chief Marketing Officer (CMO) of Nintex, a global leader in intelligent automation and application generation. Prior to that, she was the CMO at Doma (NYSE: DOMA), Elementum (a Lightspeed company) and Ambra Health (acquired by Hg’s Interlerad). Mini spent 12+ years at cloud-pioneer company NetSuite (NYSE: N), from its early stages through to its IPO and beyond. She helped drive product growth as VP of Product Management, then went on to lead a global team as VP Worldwide Marketing that delivered go-to-market scale from US$100 million to almost US$1 bullion in revenue. She holds a Bachelor of Science from the University of Michigan. 47Appen 2024 Annual Report For personal use only
Page 50
Executive team Ryan Kolln Joined: October 2018 CEO & Managing Director MBA, B.Eng (Electrical) Ryan brings over 20 years of global experience in technology and telecommunications, along with a deep understanding of Appen’s business and the AI industry. His professional career began as an engineer, with a focus on mobile network data engineering in Australia, Asia and North America. On completion of an MBA from New York University, Ryan joined The Boston Consulting Group (BCG) in 2011 as a strategy consultant. During his time at BCG he specialised in technology and telecommunications and gained deep strategy expertise across a variety of growth and operational topics. Joining Appen AI in 2018 as VP of Corporate Development, he led strategic acquisitions like Figure Eight and Quadrant, and supported the establishment of the China and Federal divisions. Successive promotions culminated in his appointment as CEO & Managing Director in February 2024. Corporate Services Justin Miles Joined: March 2016 Chief Financial Officer GradDipCA (Chartered Accounting) B. Bus (Accounting) Justin is responsible for the finance and corporate functions of the company. He brings over 20 years of experience, including extensive exposure to listed companies within the technology and services sectors. He has a passion for supporting fast paced organisations through periods of growth and change. Joining Appen in 2016 he has a deep understanding of Appen’s business. With over 5 years as Vice President Finance, he established the finance structure, systems, and processes that scaled, supported exceptional growth, and successfully executed several finance integrations. Justin was promoted to Interim Chief Financial Officer in August 2023 and was officially appointed Chief Financial Officer in February 2024. Prior to joining Appen, Justin was Group Financial Controller at Rubicor Group Ltd (ASX: RUB) one of the largest networks of specialist recruitment businesses in Australia. Justin holds a Bachelor of Business (Accounting) and is a member of Chartered Accountants Australia and New Zealand. Governance 48 Helen Attia Joined: November 2024 Chief People Officer MCom (Human Resources), BASc Helen joined Appen in November 2024 and is focused on creating a people strategy that supports Appen’s strategic objectives and creating an environment where our people can be their best. Helen brings over 20 years of Human Resources experience from global organisations primarily in the technology and software sector. With a passion for Talent Management and Organisational Development, Helen enjoys supporting organisations through periods of growth and change. Helen holds a Master of Commerce from the University of NSW and an Applied Science degree from the University of Sydney. Kim Stagg Joined: August 2022 Chief Product and Technology Officer PhD (Hydrogeology and Computer Science) Kim Stagg is the Chief Product and Technology Officer at Appen, bringing over 20 years of experience in AI-first strategies, B2B/B2C SaaS, and product leadership across a variety of industries. With deep expertise in product innovation, execution, and operational efficiencies, Kim has successfully led large-scale product transformations that have driven global business growth. Prior to Appen, Kim held senior leadership positions including Vice President of Product at Appen, Chief Technology Officer at Antea Group, and Chief Product Officer at iEHS. Kim holds a PhD in Hydrogeology and Computer Science from the University of Birmingham. Eric de Cavaignac Joined: November 2021 Chief Transformation Officer and GM crowd MBA (Beta Gamma Sigma, Dean’s List), BA (Hons) Eric is responsible for driving programs to scale operations and delivery, and support revenue growth. He brings more than 25 years of experience in partnering with investors and management to transform businesses, and to deliver lasting growth and profit improvement. Before joining Appen, Eric worked across several industries, including technology, media, telecommunications, ecommerce, health, financial services and luxury, where he helped drive digital transformation, international expansion, strategic M&A, and business restructuring. Eric has worked in New York, London, and Sydney including 10 years as an advisor with McKinsey running a strategy and capital advisory business, and a number of executive positions reporting to the CEO of multinational companies executing a turnaround or transformation. Corporate Services ( continued) Si Chen Joined: April 2023 VP , Strategy & Marketing BCom (Actuarial Studies / Finance) Si is the VP, Strategy & Marketing at Appen. Si brings extensive experience in technology leadership roles and her areas of expertise include traditional AI/ML models, generative AI, multimodal AI systems, intelligent robotics, and AI industry solutions. Prior to joining Appen, Si held leadership positions as Head of Strategy, Partnerships & Operations at Tencent AI & Robotics Lab, and Head of Strategy & Business Development at AWS China. Si holds a Bachelor of Commerce from the University of New South Wales. 49Appen 2024 Annual Report For personal use only
Page 51
Executive team Ryan Kolln Joined: October 2018 CEO & Managing Director MBA, B.Eng (Electrical) Ryan brings over 20 years of global experience in technology and telecommunications, along with a deep understanding of Appen’s business and the AI industry. His professional career began as an engineer, with a focus on mobile network data engineering in Australia, Asia and North America. On completion of an MBA from New York University, Ryan joined The Boston Consulting Group (BCG) in 2011 as a strategy consultant. During his time at BCG he specialised in technology and telecommunications and gained deep strategy expertise across a variety of growth and operational topics. Joining Appen AI in 2018 as VP of Corporate Development, he led strategic acquisitions like Figure Eight and Quadrant, and supported the establishment of the China and Federal divisions. Successive promotions culminated in his appointment as CEO & Managing Director in February 2024. Corporate Services Justin Miles Joined: March 2016 Chief Financial Officer GradDipCA (Chartered Accounting) B. Bus (Accounting) Justin is responsible for the finance and corporate functions of the company. He brings over 20 years of experience, including extensive exposure to listed companies within the technology and services sectors. He has a passion for supporting fast paced organisations through periods of growth and change. Joining Appen in 2016 he has a deep understanding of Appen’s business. With over 5 years as Vice President Finance, he established the finance structure, systems, and processes that scaled, supported exceptional growth, and successfully executed several finance integrations. Justin was promoted to Interim Chief Financial Officer in August 2023 and was officially appointed Chief Financial Officer in February 2024. Prior to joining Appen, Justin was Group Financial Controller at Rubicor Group Ltd (ASX: RUB) one of the largest networks of specialist recruitment businesses in Australia. Justin holds a Bachelor of Business (Accounting) and is a member of Chartered Accountants Australia and New Zealand. Governance 48 Helen Attia Joined: November 2024 Chief People Officer MCom (Human Resources), BASc Helen joined Appen in November 2024 and is focused on creating a people strategy that supports Appen’s strategic objectives and creating an environment where our people can be their best. Helen brings over 20 years of Human Resources experience from global organisations primarily in the technology and software sector. With a passion for Talent Management and Organisational Development, Helen enjoys supporting organisations through periods of growth and change. Helen holds a Master of Commerce from the University of NSW and an Applied Science degree from the University of Sydney. Kim Stagg Joined: August 2022 Chief Product and Technology Officer PhD (Hydrogeology and Computer Science) Kim Stagg is the Chief Product and Technology Officer at Appen, bringing over 20 years of experience in AI-first strategies, B2B/B2C SaaS, and product leadership across a variety of industries. With deep expertise in product innovation, execution, and operational efficiencies, Kim has successfully led large-scale product transformations that have driven global business growth. Prior to Appen, Kim held senior leadership positions including Vice President of Product at Appen, Chief Technology Officer at Antea Group, and Chief Product Officer at iEHS. Kim holds a PhD in Hydrogeology and Computer Science from the University of Birmingham. Eric de Cavaignac Joined: November 2021 Chief Transformation Officer and GM crowd MBA (Beta Gamma Sigma, Dean’s List), BA (Hons) Eric is responsible for driving programs to scale operations and delivery, and support revenue growth. He brings more than 25 years of experience in partnering with investors and management to transform businesses, and to deliver lasting growth and profit improvement. Before joining Appen, Eric worked across several industries, including technology, media, telecommunications, ecommerce, health, financial services and luxury, where he helped drive digital transformation, international expansion, strategic M&A, and business restructuring. Eric has worked in New York, London, and Sydney including 10 years as an advisor with McKinsey running a strategy and capital advisory business, and a number of executive positions reporting to the CEO of multinational companies executing a turnaround or transformation. Corporate Services ( continued) Si Chen Joined: April 2023 VP , Strategy & Marketing BCom (Actuarial Studies / Finance) Si is the VP, Strategy & Marketing at Appen. Si brings extensive experience in technology leadership roles and her areas of expertise include traditional AI/ML models, generative AI, multimodal AI systems, intelligent robotics, and AI industry solutions. Prior to joining Appen, Si held leadership positions as Head of Strategy, Partnerships & Operations at Tencent AI & Robotics Lab, and Head of Strategy & Business Development at AWS China. Si holds a Bachelor of Commerce from the University of New South Wales. 49Appen 2024 Annual Report For personal use only
Page 52
Roc Tian Joined: August 2019 SVP and General Manager, China, Japan and Korea PhD (Computer Software), MA (Computer Applications) Roc comes to Appen with more than 20 years of sales, consulting, and management experience from Fortune 100 companies. He is responsible for Appen’s business strategy, sales, marketing, delivery, operations and government relationships in China, Japan and Korea. Most recently, Roc was senior partner of IBM GBS where he led the client services, public sector and enterprise application service lines across the mainland China, Hong Kong and Taiwan markets with remarkable business performance and achievements. Before that, Roc was also a core leader responsible for the growth of IBM’s global delivery centre in China from 4,000 to more than 10,000 people. Prior to IBM, Roc was a business quality director for HP’s global delivery centre in China and a key leader responsible for helping HP grow from a start-up to more than 3,000 people across China. Roc was also the founder and CTO of a technology start-up that grew to more than 100 people. Carl Middlehurst Joined: February 2019 General Counsel and Company Secretary BSc (Hons) Biochemistry, LLB Carl Middlehurst is the General Counsel and Company Secretary of Appen Limited. Prior to joining Appen Carl was the General Counsel and Company Secretary and the executive responsible for commercialisation and new ventures at NICTA (now Data61) and was also responsible for the HR function. Carl was an observer/director for several early-stage companies. He was formerly at Sun Microsystems in Australia and in Silicon Valley. At Sun, Carl had both legal and business roles (covering trademarks, APAC and managing an emerging market fund). Prior to Sun, Carl was at a pharma company and a medical device startup, The Salk Institute in La Jolla and at Baker & McKenzie (in Sydney and San Diego). Carl was an Adjunct Professor at Santa Clara University Law School where he taught Internet and Privacy law. Prior to becoming a lawyer Carl was a research biochemist and was published in a number of scientific journals. Sales and delivery Corporate Services ( continued) Brian Haskett Joined: March 2023 SVP Client management and operations MBA (Information Technology), BSc Brian oversees client relationships, account strategy, and business operations, ensuring high client satisfaction and fostering continued growth. With extensive experience in technology services and consulting, Brian is a seasoned professional adept at guiding major enterprises toward technological innovation. Commencing his career as a software engineer, he later moved into global executive leadership positions at large technology firms, including IBM, CA Technologies, and Ciber (now HTC). Before assuming the role of SVP, Brian held the position of Vice President and General Manager at Appen where he collaborated with global AI technology leaders, contributing to the advancement of machine learning-based products in areas such as deep learning, generative AI, and large language models. 50 Sales and delivery ( continued) Helen Giddings Joined: August 2020 VP Client delivery BA (Psychology) Robert Page Joined: April 2012 VP Client delivery, strategic accounts BA (Hons) Helen leads the delivery teams across all accounts, excluding Appen’s largest client. Her focus and passion is the development of deep client relationships, high quality delivery and driving growth. Prior to joining Appen, Helen was Director at Pureprofile, an online market research company. She led delivery teams in multiple countries and successfully supported new products and growth. Her focus was data quality and developing a high level of understanding of all areas of the business. Helen previously worked at Sony Business Europe heading up marketing and e-services with responsibility for all websites and marketing of broadcast products and services. Robert leads the delivery team for our largest client and is responsible for the overall account strategy and operations. Robert is an industry expert with more than a decade of experience in driving Appen teams to delivery excellence. During this time, he has overseen the delivery of hundreds of successful, diverse projects for Appen’s customers. He has a deep understanding of the evolving needs of clients and flawless project execution. He has a track record of scaling opportunities and driving meaningful cost efficiencies, while navigating the constantly changing landscape of the technology industry. 51Appen 2024 Annual Report For personal use only
Page 53
Roc Tian Joined: August 2019 SVP and General Manager, China, Japan and Korea PhD (Computer Software), MA (Computer Applications) Roc comes to Appen with more than 20 years of sales, consulting, and management experience from Fortune 100 companies. He is responsible for Appen’s business strategy, sales, marketing, delivery, operations and government relationships in China, Japan and Korea. Most recently, Roc was senior partner of IBM GBS where he led the client services, public sector and enterprise application service lines across the mainland China, Hong Kong and Taiwan markets with remarkable business performance and achievements. Before that, Roc was also a core leader responsible for the growth of IBM’s global delivery centre in China from 4,000 to more than 10,000 people. Prior to IBM, Roc was a business quality director for HP’s global delivery centre in China and a key leader responsible for helping HP grow from a start-up to more than 3,000 people across China. Roc was also the founder and CTO of a technology start-up that grew to more than 100 people. Carl Middlehurst Joined: February 2019 General Counsel and Company Secretary BSc (Hons) Biochemistry, LLB Carl Middlehurst is the General Counsel and Company Secretary of Appen Limited. Prior to joining Appen Carl was the General Counsel and Company Secretary and the executive responsible for commercialisation and new ventures at NICTA (now Data61) and was also responsible for the HR function. Carl was an observer/director for several early-stage companies. He was formerly at Sun Microsystems in Australia and in Silicon Valley. At Sun, Carl had both legal and business roles (covering trademarks, APAC and managing an emerging market fund). Prior to Sun, Carl was at a pharma company and a medical device startup, The Salk Institute in La Jolla and at Baker & McKenzie (in Sydney and San Diego). Carl was an Adjunct Professor at Santa Clara University Law School where he taught Internet and Privacy law. Prior to becoming a lawyer Carl was a research biochemist and was published in a number of scientific journals. Sales and delivery Corporate Services ( continued) Brian Haskett Joined: March 2023 SVP Client management and operations MBA (Information Technology), BSc Brian oversees client relationships, account strategy, and business operations, ensuring high client satisfaction and fostering continued growth. With extensive experience in technology services and consulting, Brian is a seasoned professional adept at guiding major enterprises toward technological innovation. Commencing his career as a software engineer, he later moved into global executive leadership positions at large technology firms, including IBM, CA Technologies, and Ciber (now HTC). Before assuming the role of SVP, Brian held the position of Vice President and General Manager at Appen where he collaborated with global AI technology leaders, contributing to the advancement of machine learning-based products in areas such as deep learning, generative AI, and large language models. 50 Sales and delivery ( continued) Helen Giddings Joined: August 2020 VP Client delivery BA (Psychology) Robert Page Joined: April 2012 VP Client delivery, strategic accounts BA (Hons) Helen leads the delivery teams across all accounts, excluding Appen’s largest client. Her focus and passion is the development of deep client relationships, high quality delivery and driving growth. Prior to joining Appen, Helen was Director at Pureprofile, an online market research company. She led delivery teams in multiple countries and successfully supported new products and growth. Her focus was data quality and developing a high level of understanding of all areas of the business. Helen previously worked at Sony Business Europe heading up marketing and e-services with responsibility for all websites and marketing of broadcast products and services. Robert leads the delivery team for our largest client and is responsible for the overall account strategy and operations. Robert is an industry expert with more than a decade of experience in driving Appen teams to delivery excellence. During this time, he has overseen the delivery of hundreds of successful, diverse projects for Appen’s customers. He has a deep understanding of the evolving needs of clients and flawless project execution. He has a track record of scaling opportunities and driving meaningful cost efficiencies, while navigating the constantly changing landscape of the technology industry. 51Appen 2024 Annual Report For personal use only
Page 54
The Directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as the “Group” or “Appen”) consisting of Appen Limited (referred to hereafter as the “Company” or “parent entity”) and the entities it controlled at the end of, or during, the year ended 31 December 2024. Directors The following persons were Directors of Appen Limited during the whole of the financial year and up to the date of this report, unless otherwise stated: Richard Freudenstein – Chairman Ryan Kolln – Chief Executive Officer (CEO) and Managing Director (appointed 5 February 2024) Stuart Davis Steve Hasker Vanessa Liu Robin Low Lynn Mickleburgh Mini Peiris Armughan Ahmad – Chief Executive Officer (CEO), President and Managing Director (all appointments ceased 5 February 2024) Directors’ meetings Details of Board and Committee meetings held during the year and individual directors’ attendance at these meetings is summarised as follows: Board Audit and Risk Management Committee People and Culture Committee A B A B A B Richard Freudenstein 11 11 – – 3 3 Ryan Kolln 1 8 8 – – – – Stuart Davis 11 9 6 6 – – Steve Hasker 11 9 – – 3 3 Vanessa Liu 11 11 6 6 – – Robin Low 11 11 6 6 – – Lynn Mickleburgh 11 10 – – 3 3 Mini Peiris 11 8 – – 3 2 Armughan Ahmad 1 2 1 – – – – A: Meetings eligible to attend. B: Meetings attended. 1 Armughan Ahmad resigned on 5 February 2024. Ryan Kolln was appointed as CEO and Managing Director on 5 February 2024. Company Secretary Carl Middlehurst continues to act as the Company Secretary for Appen. Changes in Chief Financial Officer Justin Miles was appointed Chief Financial Officer on 27 February 2024. Prior to the appointment Justin acted as Interim Chief Financial Officer from 1 August 2023. Directors’ report 52 Principal activities Appen is a global market leader in data for the AI Lifecycle. With over 28 years of experience in data sourcing, data annotation, and model evaluation by humans, we enable organisations to launch the world’s most innovative artificial intelligence systems. Our expertise includes a global crowd of more than 1 million skilled contractors who speak over 500 languages 1, in over 200 countries 2, as well as our AI data platform. Our products and services give leaders in technology, automotive, financial services, retail, healthcare, and governments the confidence to launch world-class AI products. Founded in 1996, Appen has customers and offices globally. Appen currently has four customer-facing business units as follows: • Global: Responsible for delivery of high-quality deep learning and generative AI data services and products for large global technology customers; • Enterprise: Responsible for leveraging our product suite and AI-driven automation to grow revenue outside of Global customers to serve new customers as they invest in AI. Quadrant was fully integrated into the Enterprise business unit from 1 January 2024; • Government: Responsible for serving the emerging AI needs of Government; and • China: Responsible for capturing share in the growing China market. Appen has the following two operating and reporting segments: • Global Services: represents the services that Appen provides to our major US technology customers (Global customers) using the customers’ data annotation platforms and tools. The majority of projects comprise large, at scale deep learning (model evaluation) programs, and rely on Appen’s crowd workforce to complete the work, thus reducing the need for Appen’s Global customers to employ a large and diverse ongoing workforce; and • New Markets: represents Appen’s high growth markets, product-led and data services growth strategy. It comprises Global customer revenue through Appen’s data annotation platform and tools (Global Product), and the Enterprise, Government and China business units. New Markets customers benefit from our high-quality data collection, annotation and evaluation products, coupled with the provision of at-scale crowd management and Appen’s considerable expertise and knowhow built up over the last 28 years. This enables Appen to deliver a full set of AI data services for deep-learning and generative AI for enterprise customers. Significant changes in state of affairs Other than those outlined in the Directors’ report, there have been no other significant changes in the state of affairs of the Group during the year. Matters subsequent to the end of the year The Directors are not aware of any other matter or circumstance not otherwise dealt with in this report that has significantly affected or may significantly affect the operations of the Group, the results of those operations or the state of affairs of the Group in subsequent financial periods. Likely developments and expected results of operations The Group continues to focus on profitability and remains committed to sizing its cost base in line with the revenue opportunity. Appen’s strategy and FY25 priorities can be found in the financial value driver on page 31 . Environmental regulations The Group is not subject to any significant environmental regulation under Australian Commonwealth or State Law. The Board believes that the Group has adequate systems in place for the management of its environmental requirements and is not aware of any breach of those environmental requirements as they may apply to the Group during the period covered by this report. 1 Self-reported. 2 Self-reported, includes territories. 53Appen 2024 Annual Report For personal use only
Page 55
The Directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as the “Group” or “Appen”) consisting of Appen Limited (referred to hereafter as the “Company” or “parent entity”) and the entities it controlled at the end of, or during, the year ended 31 December 2024. Directors The following persons were Directors of Appen Limited during the whole of the financial year and up to the date of this report, unless otherwise stated: Richard Freudenstein – Chairman Ryan Kolln – Chief Executive Officer (CEO) and Managing Director (appointed 5 February 2024) Stuart Davis Steve Hasker Vanessa Liu Robin Low Lynn Mickleburgh Mini Peiris Armughan Ahmad – Chief Executive Officer (CEO), President and Managing Director (all appointments ceased 5 February 2024) Directors’ meetings Details of Board and Committee meetings held during the year and individual directors’ attendance at these meetings is summarised as follows: Board Audit and Risk Management Committee People and Culture Committee A B A B A B Richard Freudenstein 11 11 – – 3 3 Ryan Kolln 1 8 8 – – – – Stuart Davis 11 9 6 6 – – Steve Hasker 11 9 – – 3 3 Vanessa Liu 11 11 6 6 – – Robin Low 11 11 6 6 – – Lynn Mickleburgh 11 10 – – 3 3 Mini Peiris 11 8 – – 3 2 Armughan Ahmad 1 2 1 – – – – A: Meetings eligible to attend. B: Meetings attended. 1 Armughan Ahmad resigned on 5 February 2024. Ryan Kolln was appointed as CEO and Managing Director on 5 February 2024. Company Secretary Carl Middlehurst continues to act as the Company Secretary for Appen. Changes in Chief Financial Officer Justin Miles was appointed Chief Financial Officer on 27 February 2024. Prior to the appointment Justin acted as Interim Chief Financial Officer from 1 August 2023. Directors’ report 52 Principal activities Appen is a global market leader in data for the AI Lifecycle. With over 28 years of experience in data sourcing, data annotation, and model evaluation by humans, we enable organisations to launch the world’s most innovative artificial intelligence systems. Our expertise includes a global crowd of more than 1 million skilled contractors who speak over 500 languages 1, in over 200 countries 2, as well as our AI data platform. Our products and services give leaders in technology, automotive, financial services, retail, healthcare, and governments the confidence to launch world-class AI products. Founded in 1996, Appen has customers and offices globally. Appen currently has four customer-facing business units as follows: • Global: Responsible for delivery of high-quality deep learning and generative AI data services and products for large global technology customers; • Enterprise: Responsible for leveraging our product suite and AI-driven automation to grow revenue outside of Global customers to serve new customers as they invest in AI. Quadrant was fully integrated into the Enterprise business unit from 1 January 2024; • Government: Responsible for serving the emerging AI needs of Government; and • China: Responsible for capturing share in the growing China market. Appen has the following two operating and reporting segments: • Global Services: represents the services that Appen provides to our major US technology customers (Global customers) using the customers’ data annotation platforms and tools. The majority of projects comprise large, at scale deep learning (model evaluation) programs, and rely on Appen’s crowd workforce to complete the work, thus reducing the need for Appen’s Global customers to employ a large and diverse ongoing workforce; and • New Markets: represents Appen’s high growth markets, product-led and data services growth strategy. It comprises Global customer revenue through Appen’s data annotation platform and tools (Global Product), and the Enterprise, Government and China business units. New Markets customers benefit from our high-quality data collection, annotation and evaluation products, coupled with the provision of at-scale crowd management and Appen’s considerable expertise and knowhow built up over the last 28 years. This enables Appen to deliver a full set of AI data services for deep-learning and generative AI for enterprise customers. Significant changes in state of affairs Other than those outlined in the Directors’ report, there have been no other significant changes in the state of affairs of the Group during the year. Matters subsequent to the end of the year The Directors are not aware of any other matter or circumstance not otherwise dealt with in this report that has significantly affected or may significantly affect the operations of the Group, the results of those operations or the state of affairs of the Group in subsequent financial periods. Likely developments and expected results of operations The Group continues to focus on profitability and remains committed to sizing its cost base in line with the revenue opportunity. Appen’s strategy and FY25 priorities can be found in the financial value driver on page 31 . Environmental regulations The Group is not subject to any significant environmental regulation under Australian Commonwealth or State Law. The Board believes that the Group has adequate systems in place for the management of its environmental requirements and is not aware of any breach of those environmental requirements as they may apply to the Group during the period covered by this report. 1 Self-reported. 2 Self-reported, includes territories. 53Appen 2024 Annual Report For personal use only
Page 56
Indemnity and insurance of officers The Company has indemnified the current and former directors and executives of the Company and its controlled entities for costs incurred, in their capacity as a director or executive, for which they may be held personally liable, except where there is a lack of good faith. During the financial year, the Company paid a premium in respect of a contract to insure the current and former directors and executives of the Company and its controlled entities against a liability to the extent permitted by the Corporations Act 2001 . The contract of insurance prohibits disclosure of the nature of the liability covered and the amount of the premium. Executives include all the key management personnel as defined in the remuneration report as well as their direct reports. Indemnity and insurance of auditor The Company has not, during or since the end of the financial year, indemnified or agreed to indemnify the auditors of the Company or any related entity against a liability incurred by the auditor. During the year, the Company did not pay a premium in respect of a contract to insure the auditor of the Company or any related entity. Proceedings on behalf of the Company No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Company, or to intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or part of those proceedings. Auditor’s independence declaration and non-audit services The Directors have received the auditor’s independence declaration, as included on page 72 of the report. During the year, KPMG China performed certain non-audit services in relation to Appen China subsidiaries’ domestic transfer pricing. Remunerations paid or payable to KPMG services are outlined in Note 31 to the financial statements. The Directors are satisfied that the provision of non-audit services during the financial year by the auditor (or another person or firm on the auditor’s behalf), is compatible with the general standard of independence for auditors imposed by the Corporation Act 2001 . Verification and assurance In recognition of the important role that corporate reporting plays in communicating with our investors and other stakeholders, the Board has formalised process to verify the integrity of our periodic corporate reports, which includes the Directors’ report. The approach adopted, to ensure that the report is materially accurate, balanced and provide our investors with appropriate information, are as follows: • Information about how we create value, identifying and managing risk, our approach to governance, and the remuneration report were prepared by management in consultation with the Board. The content of this report is guided by regulatory requirements and our interactions with investors and other stakeholders throughout the year, which helps us to understand what matters most to our investors and what information should be included in the Directors’ report. • The information in the report has been derived from the Group’s internal records and has been through an internal verification process. Rounding off amounts The Group is of a kind referred to in ASIC Legislative Instrument 2016/191, relating to the ‘rounding off’ of amounts in the Directors’ report. Amounts in the Directors’ report have been rounded off in accordance with the instrument to the nearest thousand US dollars, or in certain cases, to the nearest US dollar. Directors' report for the year ended 31 December 2024 54 Dear Shareholder On behalf of Appen’s People and Culture Committee, I am pleased to present our audited Remuneration Report for the year ended 31 December 2024. Key Management Personnel (KMP) changes in FY24 and prior to the reporting date On 5 February 2024, Appen announced the appointment of Ryan Kolln, formerly the Chief Operating Officer (COO) as CEO and Managing Director. Armughan Ahmad stepped down from this role and from that date ceased to be a KMP. The FY24 Remuneration Report reports on Armughan Ahmad’s remuneration arrangements during the time he was CEO and, Ryan Kolln’s remuneration arrangement for his role as CEO, with his actual remuneration combined for his time in each KMP role during the year. On 27 February Justin Miles commenced as Chief Financial Officer (CFO) having previously been interim CFO from 1 August 2023. Further details of Armughan Ahmad’s termination arrangements and Ryan Kolln’s incoming CEO remuneration arrangements can be found on page 67 . 2024 performance FY24 was a transformative year for Appen. Financial performance was impacted by the loss of the Google contract in Q1 FY24. Following the loss of the contract, a $13.5 million incremental cost out program was announced and was fully executed by the end of H1 FY24. Pleasingly operating revenue, excluding the impact of Google, increased 16.0% to $220.9 million, primarily driven by generative AI related projects. Including the impact of Google, revenue decreased 14.2% to $234.3 million. Underlying EBITDA (excluding foreign exchange) improved by $23.9 million to $3.5 million due to revenue growth (excluding Google) and disciplined cost management. Appen reached its target of returning to EBITDA profitability in early H2 FY24. In addition to improved performance, Appen completed a ~A$50 million fully underwritten institutional placement in October 2024, and a ~A$15 million Share Purchase Plan in November 2024. 2024 remuneration outcomes A summary of remuneration outcomes for FY24 is as follows: Short-term incentive (STI) outcomes An assessment of the FY24 STI scorecard resulted in KMPs achieving 85.9% of target: • All financial measures were above the minimum payout thresholds with revenue (30% weighting) being 96% of target and EBITDA (50% weighting) being 90% of target. • All non-financial measures met or exceeded targets with customer NPS (10% weighting) at 118% of target, crowd NPS (5% weighting) at 150% of target, and employee engagement (5% weighting) at 100% of target. The STI achievement reflects the improved financial performance of Appen, and the continued focus and improved outcome for our customers, crowd, and people. No STI was paid to former CEO Armughan Ahmad. Long-term incentive (LTI) outcomes Legacy grants awarded with respect to previous roles held by current KMP were tested during FY24. With respect to 2021 annual award (tranches 1–3), the relevant performance condition of 20% UBEPS growth has not been met in FY24. With respect to 2022 annual awards (tranche 2) and 2023 annual awards (tranche 1), the relevant service conditions were met in FY24. Further details of these outcomes can be found on page 61. Non-executive director fees Non-executive director fees remained unchanged in FY24, and no change is proposed for FY25. Looking ahead Appen remains firmly focused on its long-term growth strategy and we believe our remuneration framework remains fit for purpose. Our aim is to continue to align our remuneration structure, framework, and outcomes with sustainable shareholder value creation, while attracting and retaining talent in the highly competitive North American and Australian technology markets. The Board is committed to an ongoing review of executive remuneration arrangements and strategic direction of the Company. To facilitate this ongoing review, we will engage with proxy advisors, shareholders, and their representatives on matters related to remuneration and welcome feedback on all aspects of our approach. Yours sincerely Stephen Hasker Chair of the People and Culture Committee Remuneration report 55Appen 2024 Annual Report For personal use only
Page 57
Indemnity and insurance of officers The Company has indemnified the current and former directors and executives of the Company and its controlled entities for costs incurred, in their capacity as a director or executive, for which they may be held personally liable, except where there is a lack of good faith. During the financial year, the Company paid a premium in respect of a contract to insure the current and former directors and executives of the Company and its controlled entities against a liability to the extent permitted by the Corporations Act 2001 . The contract of insurance prohibits disclosure of the nature of the liability covered and the amount of the premium. Executives include all the key management personnel as defined in the remuneration report as well as their direct reports. Indemnity and insurance of auditor The Company has not, during or since the end of the financial year, indemnified or agreed to indemnify the auditors of the Company or any related entity against a liability incurred by the auditor. During the year, the Company did not pay a premium in respect of a contract to insure the auditor of the Company or any related entity. Proceedings on behalf of the Company No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Company, or to intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or part of those proceedings. Auditor’s independence declaration and non-audit services The Directors have received the auditor’s independence declaration, as included on page 72 of the report. During the year, KPMG China performed certain non-audit services in relation to Appen China subsidiaries’ domestic transfer pricing. Remunerations paid or payable to KPMG services are outlined in Note 31 to the financial statements. The Directors are satisfied that the provision of non-audit services during the financial year by the auditor (or another person or firm on the auditor’s behalf), is compatible with the general standard of independence for auditors imposed by the Corporation Act 2001 . Verification and assurance In recognition of the important role that corporate reporting plays in communicating with our investors and other stakeholders, the Board has formalised process to verify the integrity of our periodic corporate reports, which includes the Directors’ report. The approach adopted, to ensure that the report is materially accurate, balanced and provide our investors with appropriate information, are as follows: • Information about how we create value, identifying and managing risk, our approach to governance, and the remuneration report were prepared by management in consultation with the Board. The content of this report is guided by regulatory requirements and our interactions with investors and other stakeholders throughout the year, which helps us to understand what matters most to our investors and what information should be included in the Directors’ report. • The information in the report has been derived from the Group’s internal records and has been through an internal verification process. Rounding off amounts The Group is of a kind referred to in ASIC Legislative Instrument 2016/191, relating to the ‘rounding off’ of amounts in the Directors’ report. Amounts in the Directors’ report have been rounded off in accordance with the instrument to the nearest thousand US dollars, or in certain cases, to the nearest US dollar. Directors' report for the year ended 31 December 2024 54 Dear Shareholder On behalf of Appen’s People and Culture Committee, I am pleased to present our audited Remuneration Report for the year ended 31 December 2024. Key Management Personnel (KMP) changes in FY24 and prior to the reporting date On 5 February 2024, Appen announced the appointment of Ryan Kolln, formerly the Chief Operating Officer (COO) as CEO and Managing Director. Armughan Ahmad stepped down from this role and from that date ceased to be a KMP. The FY24 Remuneration Report reports on Armughan Ahmad’s remuneration arrangements during the time he was CEO and, Ryan Kolln’s remuneration arrangement for his role as CEO, with his actual remuneration combined for his time in each KMP role during the year. On 27 February Justin Miles commenced as Chief Financial Officer (CFO) having previously been interim CFO from 1 August 2023. Further details of Armughan Ahmad’s termination arrangements and Ryan Kolln’s incoming CEO remuneration arrangements can be found on page 67 . 2024 performance FY24 was a transformative year for Appen. Financial performance was impacted by the loss of the Google contract in Q1 FY24. Following the loss of the contract, a $13.5 million incremental cost out program was announced and was fully executed by the end of H1 FY24. Pleasingly operating revenue, excluding the impact of Google, increased 16.0% to $220.9 million, primarily driven by generative AI related projects. Including the impact of Google, revenue decreased 14.2% to $234.3 million. Underlying EBITDA (excluding foreign exchange) improved by $23.9 million to $3.5 million due to revenue growth (excluding Google) and disciplined cost management. Appen reached its target of returning to EBITDA profitability in early H2 FY24. In addition to improved performance, Appen completed a ~A$50 million fully underwritten institutional placement in October 2024, and a ~A$15 million Share Purchase Plan in November 2024. 2024 remuneration outcomes A summary of remuneration outcomes for FY24 is as follows: Short-term incentive (STI) outcomes An assessment of the FY24 STI scorecard resulted in KMPs achieving 85.9% of target: • All financial measures were above the minimum payout thresholds with revenue (30% weighting) being 96% of target and EBITDA (50% weighting) being 90% of target. • All non-financial measures met or exceeded targets with customer NPS (10% weighting) at 118% of target, crowd NPS (5% weighting) at 150% of target, and employee engagement (5% weighting) at 100% of target. The STI achievement reflects the improved financial performance of Appen, and the continued focus and improved outcome for our customers, crowd, and people. No STI was paid to former CEO Armughan Ahmad. Long-term incentive (LTI) outcomes Legacy grants awarded with respect to previous roles held by current KMP were tested during FY24. With respect to 2021 annual award (tranches 1–3), the relevant performance condition of 20% UBEPS growth has not been met in FY24. With respect to 2022 annual awards (tranche 2) and 2023 annual awards (tranche 1), the relevant service conditions were met in FY24. Further details of these outcomes can be found on page 61. Non-executive director fees Non-executive director fees remained unchanged in FY24, and no change is proposed for FY25. Looking ahead Appen remains firmly focused on its long-term growth strategy and we believe our remuneration framework remains fit for purpose. Our aim is to continue to align our remuneration structure, framework, and outcomes with sustainable shareholder value creation, while attracting and retaining talent in the highly competitive North American and Australian technology markets. The Board is committed to an ongoing review of executive remuneration arrangements and strategic direction of the Company. To facilitate this ongoing review, we will engage with proxy advisors, shareholders, and their representatives on matters related to remuneration and welcome feedback on all aspects of our approach. Yours sincerely Stephen Hasker Chair of the People and Culture Committee Remuneration report 55Appen 2024 Annual Report For personal use only
Page 58
Key management personnel Key Management Personnel (KMP) are defined as persons having authority and responsibility for planning, directing, and controlling the activities of the Company and the Group. KMP comprise the directors of the Company and executives of the Company and the Group. The current names and titles of KMP are set out below. NAME POSITION TERM AS KMP Non-Executive KMP: Richard Freudenstein Independent director and non-executive Chair Full year Stuart Davis Independent non-executive director Full year Stephen Hasker Independent non-executive director Full year Vanessa Liu Independent non-executive director Full year Robin Low Independent non-executive director Full year Lynn Mickleburgh Independent non-executive director Full year Mini Peiris Independent non-executive director Full year Executive KMP: Ryan Kolln 1 (United States) Chief Executive Officer (CEO) and Managing Director Full year Justin Miles 2 (Australia) Chief Financial Officer (CFO) Full year Previous KMP: Armughan Ahmad 3 (Canada) Former Chief Executive Officer (former CEO) and Managing Director Part year 1 Ryan Kolln commenced as CEO and Managing Director on 5 February 2024 having previously held the Chief Operating Officer role. Since commencing as CEO, Ryan Kolln relocated from Canada to the United States. 2 Justin Miles previously held the Interim CFO role from 1 August 2023 and was officially appointed CFO on 27 February 2024. 3 Armughan Ahmad stepped down as CEO and Managing Director on 5 February 2024 and ceased to be a KMP from this date. Details of Armughan Ahmad’s exit arrangements can be found on page 67 under executive KMP service contracts. Remuneration report for the year ended 31 December 2024 56 Remuneration snapshot Our remuneration framework has been designed to motivate our people to deliver and achieve the company’s annual business plans and long-term growth objectives and strategy. Our goal is to ensure that the level and composition of remuneration aligns with shareholder interests and allows Appen to compete in some of the tightest markets in the world and attract and retain high-performing talent in the highly competitive technology sector. Remuneration principles Heavy weighting to performance- based pay Alignment to creation of long-term shareholder value Fair and competitive to attract and retain top talent globally Reinforce responsible business practice Simple and clear Align the KMP remuneration outcomes to our short and long-term strategy, which is underpinned by, and dependent upon, strong financial and non-financial success. Ensure employees think and act like long-term owners through performance-based pay, challenging targets, and equity. Independently benchmarked against industry peers to ensure that remuneration is appropriate in each of the global markets in which Appen operates and competes with for talent. Formalised policy providing for Board discretion in relation to malus and clawback of both STI and LTI. Transparency on metrics, targets, assessment, and outcomes. Executive remuneration structure The diagram below shows the vesting timeline for all remuneration payable to CEO 1 and CFO. Noting only the CEO receives STI deferred equity. STI: Cash + Deferred equity Deferred equity Vesting timeline Year 3 2027 Year 2 2026 Year O 2024 Year 1 2025 Cash awarded Equity vests/unrestricted Year 4 2028 Year 5 2029 FR: Cash LTI: Performance rights (subject to aTSR) Equity granted MSR: 100% of FR for CEO, 50% of FR for KMP to be achieved over 5 years Core executives: 1 STI deferral is applicable to CEO only. Remuneration report for the year ended 31 December 2024 57Appen 2024 Annual Report For personal use only
Page 59
Key management personnel Key Management Personnel (KMP) are defined as persons having authority and responsibility for planning, directing, and controlling the activities of the Company and the Group. KMP comprise the directors of the Company and executives of the Company and the Group. The current names and titles of KMP are set out below. NAME POSITION TERM AS KMP Non-Executive KMP: Richard Freudenstein Independent director and non-executive Chair Full year Stuart Davis Independent non-executive director Full year Stephen Hasker Independent non-executive director Full year Vanessa Liu Independent non-executive director Full year Robin Low Independent non-executive director Full year Lynn Mickleburgh Independent non-executive director Full year Mini Peiris Independent non-executive director Full year Executive KMP: Ryan Kolln 1 (United States) Chief Executive Officer (CEO) and Managing Director Full year Justin Miles 2 (Australia) Chief Financial Officer (CFO) Full year Previous KMP: Armughan Ahmad 3 (Canada) Former Chief Executive Officer (former CEO) and Managing Director Part year 1 Ryan Kolln commenced as CEO and Managing Director on 5 February 2024 having previously held the Chief Operating Officer role. Since commencing as CEO, Ryan Kolln relocated from Canada to the United States. 2 Justin Miles previously held the Interim CFO role from 1 August 2023 and was officially appointed CFO on 27 February 2024. 3 Armughan Ahmad stepped down as CEO and Managing Director on 5 February 2024 and ceased to be a KMP from this date. Details of Armughan Ahmad’s exit arrangements can be found on page 67 under executive KMP service contracts. Remuneration report for the year ended 31 December 2024 56 Remuneration snapshot Our remuneration framework has been designed to motivate our people to deliver and achieve the company’s annual business plans and long-term growth objectives and strategy. Our goal is to ensure that the level and composition of remuneration aligns with shareholder interests and allows Appen to compete in some of the tightest markets in the world and attract and retain high-performing talent in the highly competitive technology sector. Remuneration principles Heavy weighting to performance- based pay Alignment to creation of long-term shareholder value Fair and competitive to attract and retain top talent globally Reinforce responsible business practice Simple and clear Align the KMP remuneration outcomes to our short and long-term strategy, which is underpinned by, and dependent upon, strong financial and non-financial success. Ensure employees think and act like long-term owners through performance-based pay, challenging targets, and equity. Independently benchmarked against industry peers to ensure that remuneration is appropriate in each of the global markets in which Appen operates and competes with for talent. Formalised policy providing for Board discretion in relation to malus and clawback of both STI and LTI. Transparency on metrics, targets, assessment, and outcomes. Executive remuneration structure The diagram below shows the vesting timeline for all remuneration payable to CEO 1 and CFO. Noting only the CEO receives STI deferred equity. STI: Cash + Deferred equity Deferred equity Vesting timeline Year 3 2027 Year 2 2026 Year O 2024 Year 1 2025 Cash awarded Equity vests/unrestricted Year 4 2028 Year 5 2029 FR: Cash LTI: Performance rights (subject to aTSR) Equity granted MSR: 100% of FR for CEO, 50% of FR for KMP to be achieved over 5 years Core executives: 1 STI deferral is applicable to CEO only. Remuneration report for the year ended 31 December 2024 57Appen 2024 Annual Report For personal use only
Page 60
Overview of remuneration elements Total fixed remuneration (FR) Objective Provide market competitive base salary and benefits commensurate with skills and experience to attract the best people around the world to design to lead the delivery of our growth strategy. Current year approach Cash salary, superannuation, and additional benefits. Additional benefits are in the form of Canadian Registered Retirement Saving Plan (RRSP) and insurance benefits provided to US and Canadian-based executives. Alignment to strategy Fixed remuneration reflects: • the scope of the executive’s role; • the executive’s skills, experience and qualifications; and, • individual performance. Short-term incentive (STI) Objective STI are performance-based incentives designed to reward executives (and employees) to deliver and outperform key financial and non-financial metrics to lead to sustainable, superior returns for shareholders. Current year approach STI is delivered in the form of an annual cash bonus payment to all eligible employees, other than the CEO where 25% of any STI earned will be deferred into equity with a holding lock of one year. Target and maximum opportunities are as follows (respectively): • CEO: 100% of base salary, 150% of base salary • CFO: 75% of base salary, 112.5% of base salary The Group STI scorecard which is assessed over a 12-month period, comprises of the following measures: • Revenue (30%), • EBITDA (50%), • Customer net promoter score (NPS) (10%), • Crowd NPS (5%), and • Employee engagement (5%). Alignment to strategy The Group scorecard measures directly align to our long-term growth strategy by focusing on revenue and earnings growth, delighted customers and crowd workers, and fully engaged employees. Each of these components, both financial and non-financial, are essential for Appen to deliver sustainable growth and superior returns for shareholders. Long-term incentive (LTI) Objective LTI incentivises the achievement of long -term sustainable growth in earnings and shareholder value, designed to strongly align with long -term shareholder wealth creation, and supports the attraction and retention of high performing executives. Current year approach LTI is a form of equity-based compensation that is awarded in the form of performance rights. Individual opportunities are as follows: • CEO: 250% of base salary • CFO: 150% of base salary LTI is subject to Absolute Total Shareholder Return (aTSR) targets over a three-year performance period. Alignment to strategy The aTSR metric focuses directly on delivering shareholder return and growth in value to shareholders, aligning executives’ interests with shareholders’ and ensuring a focus on sustained value creation. Further, aTSR provides a comprehensive and transparent gauge of our overall financial performance, encouraging executives to prioritise strategic decisions that contribute to the company’s long-term success. Remuneration report for the year ended 31 December 2024 58 Remuneration mix Target remuneration mix presented below for each executive comprises of total fixed remuneration, target STI opportunity and total LTI opportunity. CEO CFO Base Salary 22% STI 22% LTI 56% Base Salary 31% STI 24% LTI 45% FY24 performance and remuneration outcomes Appen’s five‑year performance One of the key principles of the Company’s remuneration framework is to align executive remuneration outcomes with the Company’s performance and shareholder returns. Revenue (US$’000) Underlying EBITDA Underlying basic EPS (US$’000) 2020 2021 2022 2023 2024 412,996 447,274 388,493 235,705 274,165 75,439 77,684 11,017 7,819 (24,445) 2020 2021 2022 2023 2024 Underlying NPAT (US$’000) Share price at 31 Dec Dividend (full year) (A$) (A¢ per share) 45,275 40,597 (22,739) (10,546) (52,810) 2020 2021 2022 2023 2024 24.69 11.16 2.49 2.64 0.63 2020 2021 2022 2023 2024 10.0 10.0 – – – 2020 2021 2022 2023 2024 (US¢ per share)37 33 (18) (37) (5) 2020 2021 2022 2023 2024 Long-term incentive measures Shareholder returnsShort-term incentive measures Remuneration report for the year ended 31 December 2024 59Appen 2024 Annual Report For personal use only
Page 61
Overview of remuneration elements Total fixed remuneration (FR) Objective Provide market competitive base salary and benefits commensurate with skills and experience to attract the best people around the world to design to lead the delivery of our growth strategy. Current year approach Cash salary, superannuation, and additional benefits. Additional benefits are in the form of Canadian Registered Retirement Saving Plan (RRSP) and insurance benefits provided to US and Canadian-based executives. Alignment to strategy Fixed remuneration reflects: • the scope of the executive’s role; • the executive’s skills, experience and qualifications; and, • individual performance. Short-term incentive (STI) Objective STI are performance-based incentives designed to reward executives (and employees) to deliver and outperform key financial and non-financial metrics to lead to sustainable, superior returns for shareholders. Current year approach STI is delivered in the form of an annual cash bonus payment to all eligible employees, other than the CEO where 25% of any STI earned will be deferred into equity with a holding lock of one year. Target and maximum opportunities are as follows (respectively): • CEO: 100% of base salary, 150% of base salary • CFO: 75% of base salary, 112.5% of base salary The Group STI scorecard which is assessed over a 12-month period, comprises of the following measures: • Revenue (30%), • EBITDA (50%), • Customer net promoter score (NPS) (10%), • Crowd NPS (5%), and • Employee engagement (5%). Alignment to strategy The Group scorecard measures directly align to our long-term growth strategy by focusing on revenue and earnings growth, delighted customers and crowd workers, and fully engaged employees. Each of these components, both financial and non-financial, are essential for Appen to deliver sustainable growth and superior returns for shareholders. Long-term incentive (LTI) Objective LTI incentivises the achievement of long -term sustainable growth in earnings and shareholder value, designed to strongly align with long -term shareholder wealth creation, and supports the attraction and retention of high performing executives. Current year approach LTI is a form of equity-based compensation that is awarded in the form of performance rights. Individual opportunities are as follows: • CEO: 250% of base salary • CFO: 150% of base salary LTI is subject to Absolute Total Shareholder Return (aTSR) targets over a three-year performance period. Alignment to strategy The aTSR metric focuses directly on delivering shareholder return and growth in value to shareholders, aligning executives’ interests with shareholders’ and ensuring a focus on sustained value creation. Further, aTSR provides a comprehensive and transparent gauge of our overall financial performance, encouraging executives to prioritise strategic decisions that contribute to the company’s long-term success. Remuneration report for the year ended 31 December 2024 58 Remuneration mix Target remuneration mix presented below for each executive comprises of total fixed remuneration, target STI opportunity and total LTI opportunity. CEO CFO Base Salary 22% STI 22% LTI 56% Base Salary 31% STI 24% LTI 45% FY24 performance and remuneration outcomes Appen’s five‑year performance One of the key principles of the Company’s remuneration framework is to align executive remuneration outcomes with the Company’s performance and shareholder returns. Revenue (US$’000) Underlying EBITDA Underlying basic EPS (US$’000) 2020 2021 2022 2023 2024 412,996 447,274 388,493 235,705 274,165 75,439 77,684 11,017 7,819 (24,445) 2020 2021 2022 2023 2024 Underlying NPAT (US$’000) Share price at 31 Dec Dividend (full year) (A$) (A¢ per share) 45,275 40,597 (22,739) (10,546) (52,810) 2020 2021 2022 2023 2024 24.69 11.16 2.49 2.64 0.63 2020 2021 2022 2023 2024 10.0 10.0 – – – 2020 2021 2022 2023 2024 (US¢ per share)37 33 (18) (37) (5) 2020 2021 2022 2023 2024 Long-term incentive measures Shareholder returnsShort-term incentive measures Remuneration report for the year ended 31 December 2024 59Appen 2024 Annual Report For personal use only
Page 62
FY24 STI Group scorecard and assessment The below table provides an overview of the performance of executive KMP against pre-defined threshold, target and stretch performance hurdles associated with each financial and non-financial STI scorecard metric. Financial Metric and weighting Performance vs. target % of target opportunity achieved Commentary EBITDA (50%) Threshold Target Stretch 40% 100% 200% 45.7% Group underlying EBITDA, excluding FX was up $23.9 million to $3.5 million compared to ($20.4 million) in FY23. Targets were set after the loss of the Google contract in Q1 2024 to ensure focus on cost out programs, tight cost control, and return to EBITDA profitability. Minimum achievement threshold set at a lower rate of 40% compared to 90% in previous years, to ensure focus on turnaround efforts and profitability. However, stretch target increased to 200% compared to 120% in previous years. Revenue (30%) Threshold Target Stretch 94% 100% 110% 20.2% Excluding the impact of the Google contract, operating revenue grew 16.0% to $234.3 million. Including the impact of the Google contract, revenue decreased 14.2%. Targets were set after the loss of the Google contract in Q1 2024 to ensure focus on capturing revenue growth outside of Google. Minimum achievement threshold set at a higher rate of 94% compared to 90% in previous years, however stretch target decreased to 110% compared to 120% in previous year to ensure focus on profitable growth (with EBITDA stretch increased to 200%). Non financial Customer NPS (10%) Threshold Target 90% 100% 10% Customer NPS was 118% of target and reflected a high level of customer satisfaction with Appen’s service offerings and project delivery. Customers saw improvements in operational excellence with more streamlined processes to deliver higher quality project outcomes. Non-financial measures capped at 100%. Crowd NPS (5%) Threshold Target 90% 100% 5% Crowd NPS was 150% of target and reflected the resilience of our contributor community and the impact of Appen’s targeted improvements to the contributor experience. Non-financial measures capped at 100%. Employee engagement (5%) Threshold Target 90% 100% 5% Employee engagement was 100% of target. Employee engagement rating was the highest it has been since FY2020 and reflects the focus on employee communication, specifically providing clear, transparent and regular updates from the CEO and Senior Leaders. Non-financial measures capped at 100%. Final scorecard outcome 85.9% Remuneration report for the year ended 31 December 2024 60 STI outcomes The STI amounts earned and associated achievement and payout percentages are disclosed in the table below: Executive KMP Currency Fixed remuneration 4 STI target % of fixed remuneration STI target % STI earned as a % of target % STI earned as a % of maximum Total STI earned Total STI deferred % $ % % $ $ Ryan Kolln 1 2024 USD 583,036 100% 566,441 85.9% 57.3% 486,612 121,653 2023 CAD 165,240 50% 82,620 15.9% 10.6% 13,137 – Justin Miles 2 2024 AUD 528,510 75% 396,383 85.9% 57.3% 340,493 – 2023 AUD 231,333 40% 92,533 15.9% 10.6% 14,713 - Armughan Ahmad 3 2024 CAD 74,815 N/A N/A – – – – 2023 CAD 700,895 100% 700,895 0% 0% – – 1 Commenced in role on 5 February 2024, having previously been the Chief Operating Officer (COO) since 2023. STI target % was 50% during time as COO before increasing to 100% as CEO. 2 Commenced in role on 27 February 2024, having previously been the Interim CFO from August 2023. 3 Armughan Ahmad stepped down as CEO and Managing Director on 5 February 2024. FR has been pro-rated for the period he was KMP. The Board exercised discretion and did not award any STI to Armughan Ahmad for 2023. Armughan Ahmad was not entitled to STI for 2024. 4 Fixed remuneration for Ryan Kolln has been converted for 2024 using actual rates used during his time in Canada. This differs to other tables which are converted at average rates consistent with accounting policy. LTI outcomes Annual LTI grant Legacy annual grants awarded with respect to previous roles held by current KMP were tested during FY24. Plan Tranche Performance measurement Vesting date Vesting condition achieved? # of rights 1 # Vested # Forfeited % Forfeited Ryan Kolln 2021 LTI 1–3 20% UBEPS 27 Feb 24 No 6,163 – 6,163 100% 2022 LTI 2 Service only 1 Jan 24 Yes 4,134 4,134 – – 2023 Exec 1 Service only 1 Jan 24 Yes 33,895 33,895 – – 2023 Exec 1 Service only 1 Jan 24 Yes 31,269 31,269 – – Justin Miles 2021 LTI 1–3 20% UBEPS 27 Feb 24 No 5,570 – 5,570 100% 2022 LTI 2 Service only 1 Jan 24 Yes 3,425 3,425 – – 2023 Exec 1 Service only 1 Jan 24 Yes 21,887 21,887 – – 1 Number of rights unvested and held at the beginning of the year. Other Awards Legacy retention and one-time grants awarded with respect to previous roles held by current KMP were tested during FY24. Plan Tranche Performance measurement Vesting date Vesting condition achieved? # of rights 1 # Vested # Forfeited % Forfeited Ryan Kolln 2021 Retention 2 Service only 1 Jan 24 Yes 6,578 6,578 – – 2023 One-time 1 Service only 1 Jan 24 Yes 101,686 101,686 – – Justin Miles 2021 Retention 2 Service only 1 Jan 24 Yes 5,945 5,945 – – 2023 Retention 1 Service only 1 Jan 24 Yes 121,669 121,669 – – 1 Number of rights unvested and held at the beginning of the year. Remuneration report for the year ended 31 December 2024 61Appen 2024 Annual Report For personal use only
Page 63
FY24 STI Group scorecard and assessment The below table provides an overview of the performance of executive KMP against pre-defined threshold, target and stretch performance hurdles associated with each financial and non-financial STI scorecard metric. Financial Metric and weighting Performance vs. target % of target opportunity achieved Commentary EBITDA (50%) Threshold Target Stretch 40% 100% 200% 45.7% Group underlying EBITDA, excluding FX was up $23.9 million to $3.5 million compared to ($20.4 million) in FY23. Targets were set after the loss of the Google contract in Q1 2024 to ensure focus on cost out programs, tight cost control, and return to EBITDA profitability. Minimum achievement threshold set at a lower rate of 40% compared to 90% in previous years, to ensure focus on turnaround efforts and profitability. However, stretch target increased to 200% compared to 120% in previous years. Revenue (30%) Threshold Target Stretch 94% 100% 110% 20.2% Excluding the impact of the Google contract, operating revenue grew 16.0% to $234.3 million. Including the impact of the Google contract, revenue decreased 14.2%. Targets were set after the loss of the Google contract in Q1 2024 to ensure focus on capturing revenue growth outside of Google. Minimum achievement threshold set at a higher rate of 94% compared to 90% in previous years, however stretch target decreased to 110% compared to 120% in previous year to ensure focus on profitable growth (with EBITDA stretch increased to 200%). Non financial Customer NPS (10%) Threshold Target 90% 100% 10% Customer NPS was 118% of target and reflected a high level of customer satisfaction with Appen’s service offerings and project delivery. Customers saw improvements in operational excellence with more streamlined processes to deliver higher quality project outcomes. Non-financial measures capped at 100%. Crowd NPS (5%) Threshold Target 90% 100% 5% Crowd NPS was 150% of target and reflected the resilience of our contributor community and the impact of Appen’s targeted improvements to the contributor experience. Non-financial measures capped at 100%. Employee engagement (5%) Threshold Target 90% 100% 5% Employee engagement was 100% of target. Employee engagement rating was the highest it has been since FY2020 and reflects the focus on employee communication, specifically providing clear, transparent and regular updates from the CEO and Senior Leaders. Non-financial measures capped at 100%. Final scorecard outcome 85.9% Remuneration report for the year ended 31 December 2024 60 STI outcomes The STI amounts earned and associated achievement and payout percentages are disclosed in the table below: Executive KMP Currency Fixed remuneration 4 STI target % of fixed remuneration STI target % STI earned as a % of target % STI earned as a % of maximum Total STI earned Total STI deferred % $ % % $ $ Ryan Kolln 1 2024 USD 583,036 100% 566,441 85.9% 57.3% 486,612 121,653 2023 CAD 165,240 50% 82,620 15.9% 10.6% 13,137 – Justin Miles 2 2024 AUD 528,510 75% 396,383 85.9% 57.3% 340,493 – 2023 AUD 231,333 40% 92,533 15.9% 10.6% 14,713 - Armughan Ahmad 3 2024 CAD 74,815 N/A N/A – – – – 2023 CAD 700,895 100% 700,895 0% 0% – – 1 Commenced in role on 5 February 2024, having previously been the Chief Operating Officer (COO) since 2023. STI target % was 50% during time as COO before increasing to 100% as CEO. 2 Commenced in role on 27 February 2024, having previously been the Interim CFO from August 2023. 3 Armughan Ahmad stepped down as CEO and Managing Director on 5 February 2024. FR has been pro-rated for the period he was KMP. The Board exercised discretion and did not award any STI to Armughan Ahmad for 2023. Armughan Ahmad was not entitled to STI for 2024. 4 Fixed remuneration for Ryan Kolln has been converted for 2024 using actual rates used during his time in Canada. This differs to other tables which are converted at average rates consistent with accounting policy. LTI outcomes Annual LTI grant Legacy annual grants awarded with respect to previous roles held by current KMP were tested during FY24. Plan Tranche Performance measurement Vesting date Vesting condition achieved? # of rights 1 # Vested # Forfeited % Forfeited Ryan Kolln 2021 LTI 1–3 20% UBEPS 27 Feb 24 No 6,163 – 6,163 100% 2022 LTI 2 Service only 1 Jan 24 Yes 4,134 4,134 – – 2023 Exec 1 Service only 1 Jan 24 Yes 33,895 33,895 – – 2023 Exec 1 Service only 1 Jan 24 Yes 31,269 31,269 – – Justin Miles 2021 LTI 1–3 20% UBEPS 27 Feb 24 No 5,570 – 5,570 100% 2022 LTI 2 Service only 1 Jan 24 Yes 3,425 3,425 – – 2023 Exec 1 Service only 1 Jan 24 Yes 21,887 21,887 – – 1 Number of rights unvested and held at the beginning of the year. Other Awards Legacy retention and one-time grants awarded with respect to previous roles held by current KMP were tested during FY24. Plan Tranche Performance measurement Vesting date Vesting condition achieved? # of rights 1 # Vested # Forfeited % Forfeited Ryan Kolln 2021 Retention 2 Service only 1 Jan 24 Yes 6,578 6,578 – – 2023 One-time 1 Service only 1 Jan 24 Yes 101,686 101,686 – – Justin Miles 2021 Retention 2 Service only 1 Jan 24 Yes 5,945 5,945 – – 2023 Retention 1 Service only 1 Jan 24 Yes 121,669 121,669 – – 1 Number of rights unvested and held at the beginning of the year. Remuneration report for the year ended 31 December 2024 61Appen 2024 Annual Report For personal use only
Page 64
2024 LTI grant The grant of performance rights to the CEO was approved by shareholders at the Annual General Meeting on 24 May 2024. Vesting is 100% weighted to absolute TSR, to be tested on 31 December 2026.The CFO award is aligned to the CEO, with the same performance measures applied. Further details of this plan are provided on page 65 . Grant date Performance measurement Performance target Performance target measurement date Target achieved Vesting condition Vesting date # of rights granted Value per right at grant date (AUD) Fair value at grant date (AUD) Ryan Kolln 5 Feb 24 aTSR 190% (50%) 320% (100%) 31 Dec 26 Pending Employed at 1 Jan 2027 Release of 26 results 7,049,667 0.27 1,903,410 Justin Miles 15 Jul 24 aTSR 190% (50%) 320% (100%) 31 Dec 26 Pending Employed at 1 Jan 2027 Release of 26 results 1,363,636 0.50 681,818 Actual remuneration for executive KMP The table below details the actual remuneration that was received by current and former executive KMP for FY24 and FY23. The remuneration is disclosed in the currency each KMP receives their remuneration. This table differs to the statutory remuneration table on page 68 which is prepared in accordance with accounting standards. The STI amount (if any) is the amount earned in recognition of performance for that year, including any relevant deferred portion. The LTI value at vesting date is the value of shares issued during the year as a result of the vesting of performance rights issued in prior years. Fixed Variable Executive KMP Currency Cash salary $ Super- annuation 4 $ Termination payments $ STI $ LTI Value at vesting date $ Total value $ LTI value at grant date $ Ryan Kolln 1 2024 USD 594,771 – – 486,612 66,779 1,148,162 1,255,872 2023 CAD 165,240 – – 13,137 8,342 186,719 25,322 Justin Miles 2 2024 AUD 499,845 28,665 – 340,493 87,168 956,171 681,818 2023 AUD 219,917 11,416 – 14,713 14,898 260,944 89,144 Previous executive KMP Armughan Ahmad 3 2024 CAD 74,815 3,741 805,500 – 371,122 1,255,178 – 2023 CAD 700,895 7,027 – – 581,389 1,289,311 663,379 1 Commenced in role on 5 February 2024, having previously been the Chief Operating Officer from 2023. 2024 STI includes $121,653 deferred into equity with a holding lock of one year. 2 Commenced in role on 27 February 2024, having previously been the Interim CFO from1 August 2023. 3 Armughan Ahmad stepped down as CEO and Managing Director on 5 February 2024 and ceased to be a KMP from this date. Details of Armughan Ahmad’s exit arrangements can be found on page 67 under executive KMP service contracts. 4 Superannuation contributions for Australian executive KMP and retirement benefits (RRSP) for Canadian Executive KMP. Remuneration report for the year ended 31 December 2024 62 Actual remuneration for executive KMP Total fixed remuneration (FR) Fixed remuneration is benchmarked against North American technology companies, and similarly sized ASX-listed companies on an annual basis. Fixed remuneration is intended to be positioned below the median of peers, with greater emphasis on at-risk pay-for-performance. There is no guarantee of an annual increase in fixed remuneration. FY24 short‑term incentive (STI) key terms STI plan overview Description Appen’s STI plan is a performance-based incentive designed for executives (and eligible employees) to deliver and outperform against key financial and non-financial metrics to lead to sustainable, superior returns for shareholders. Eligibility The CEO and CFO, and certain other employees at the invitation of the CEO are eligible to participate in the STI plan on annual basis. Performance period 1 January 2024 to 31 December 2024. STI opportunity Target: • CEO: 100% of base salary • CFO: 75% of base salary Maximum: • CEO: 150% of base salary • CFO: 112.5% of base salary Delivery STI is delivered in the form of an annual cash bonus payment to all employees, other than the CEO where 25% of any STI earned will be deferred into equity with a holding lock of one year. Performance measures Performance is assessed against targets determined under our STI Group Scorecard which comprises of 80% financial measures and 20% non-financial measures. For the 2024 STI, the Group Scorecard measures were as follows: • EBITDA (50%), • Revenue (30%), • Customer net promoter score (NPS) (10%), • Crowd NPS (5%), and • Employee engagement (5%). Each of these components, both financial and non-financial, are essential for Appen to deliver sustainable growth and superior returns for shareholders. In addition, eligible employees are expected to fulfil fundamental leadership responsibilities in their roles (Good Citizen Requirements). These fundamental leadership responsibilities include setting goals (OKRs), providing feedback, measuring performance and ensure completion of compliance training not just for themselves, but also for those who they manage. Remuneration report for the year ended 31 December 2024 63Appen 2024 Annual Report For personal use only
Page 65
2024 LTI grant The grant of performance rights to the CEO was approved by shareholders at the Annual General Meeting on 24 May 2024. Vesting is 100% weighted to absolute TSR, to be tested on 31 December 2026.The CFO award is aligned to the CEO, with the same performance measures applied. Further details of this plan are provided on page 65 . Grant date Performance measurement Performance target Performance target measurement date Target achieved Vesting condition Vesting date # of rights granted Value per right at grant date (AUD) Fair value at grant date (AUD) Ryan Kolln 5 Feb 24 aTSR 190% (50%) 320% (100%) 31 Dec 26 Pending Employed at 1 Jan 2027 Release of 26 results 7,049,667 0.27 1,903,410 Justin Miles 15 Jul 24 aTSR 190% (50%) 320% (100%) 31 Dec 26 Pending Employed at 1 Jan 2027 Release of 26 results 1,363,636 0.50 681,818 Actual remuneration for executive KMP The table below details the actual remuneration that was received by current and former executive KMP for FY24 and FY23. The remuneration is disclosed in the currency each KMP receives their remuneration. This table differs to the statutory remuneration table on page 68 which is prepared in accordance with accounting standards. The STI amount (if any) is the amount earned in recognition of performance for that year, including any relevant deferred portion. The LTI value at vesting date is the value of shares issued during the year as a result of the vesting of performance rights issued in prior years. Fixed Variable Executive KMP Currency Cash salary $ Super- annuation 4 $ Termination payments $ STI $ LTI Value at vesting date $ Total value $ LTI value at grant date $ Ryan Kolln 1 2024 USD 594,771 – – 486,612 66,779 1,148,162 1,255,872 2023 CAD 165,240 – – 13,137 8,342 186,719 25,322 Justin Miles 2 2024 AUD 499,845 28,665 – 340,493 87,168 956,171 681,818 2023 AUD 219,917 11,416 – 14,713 14,898 260,944 89,144 Previous executive KMP Armughan Ahmad 3 2024 CAD 74,815 3,741 805,500 – 371,122 1,255,178 – 2023 CAD 700,895 7,027 – – 581,389 1,289,311 663,379 1 Commenced in role on 5 February 2024, having previously been the Chief Operating Officer from 2023. 2024 STI includes $121,653 deferred into equity with a holding lock of one year. 2 Commenced in role on 27 February 2024, having previously been the Interim CFO from1 August 2023. 3 Armughan Ahmad stepped down as CEO and Managing Director on 5 February 2024 and ceased to be a KMP from this date. Details of Armughan Ahmad’s exit arrangements can be found on page 67 under executive KMP service contracts. 4 Superannuation contributions for Australian executive KMP and retirement benefits (RRSP) for Canadian Executive KMP. Remuneration report for the year ended 31 December 2024 62 Actual remuneration for executive KMP Total fixed remuneration (FR) Fixed remuneration is benchmarked against North American technology companies, and similarly sized ASX-listed companies on an annual basis. Fixed remuneration is intended to be positioned below the median of peers, with greater emphasis on at-risk pay-for-performance. There is no guarantee of an annual increase in fixed remuneration. FY24 short‑term incentive (STI) key terms STI plan overview Description Appen’s STI plan is a performance-based incentive designed for executives (and eligible employees) to deliver and outperform against key financial and non-financial metrics to lead to sustainable, superior returns for shareholders. Eligibility The CEO and CFO, and certain other employees at the invitation of the CEO are eligible to participate in the STI plan on annual basis. Performance period 1 January 2024 to 31 December 2024. STI opportunity Target: • CEO: 100% of base salary • CFO: 75% of base salary Maximum: • CEO: 150% of base salary • CFO: 112.5% of base salary Delivery STI is delivered in the form of an annual cash bonus payment to all employees, other than the CEO where 25% of any STI earned will be deferred into equity with a holding lock of one year. Performance measures Performance is assessed against targets determined under our STI Group Scorecard which comprises of 80% financial measures and 20% non-financial measures. For the 2024 STI, the Group Scorecard measures were as follows: • EBITDA (50%), • Revenue (30%), • Customer net promoter score (NPS) (10%), • Crowd NPS (5%), and • Employee engagement (5%). Each of these components, both financial and non-financial, are essential for Appen to deliver sustainable growth and superior returns for shareholders. In addition, eligible employees are expected to fulfil fundamental leadership responsibilities in their roles (Good Citizen Requirements). These fundamental leadership responsibilities include setting goals (OKRs), providing feedback, measuring performance and ensure completion of compliance training not just for themselves, but also for those who they manage. Remuneration report for the year ended 31 December 2024 63Appen 2024 Annual Report For personal use only
Page 66
STI plan overview Vesting schedule Payment for financial measures 2024 was a pivotal year or Appen. Achievement thresholds for financial measured were adjusted to ensure a focus on both revenue growth and returning to EBITDA profitability . EBITDA (50% of STI) Achievement – % against target Actual award – % of target payout Below 40% Nil 40% 50% 100% 100% 200% or more 162.5% Revenue (30% of STI) Achievement – % against target Actual award – % of target payout Below 94% Nil 94% 50% 100% 100% 110% or more 162.5% Non‑financial measures (20% of STI) Below 90% Nil 90% 50% 100% or more 100% Assessment of outcomes Fixed remuneration x target incentive x Group scorecard = STI outcome With the exception of his own performance, performance assessments are undertaken by the CEO who retains the discretion to pay or not pay any part of the STI. Performance assessment and payment for the CEO is subject to Board approval. Employees under a formal performance improvement plan or any formal disciplinary procedure will have discretion applied and receive zero STI award. Any noncompliance with the Good Citizen Requirements will delay payment until they are fulfilled. Any delay in excess of 90 days past the performance period end date will result in the forfeiture of any STI payment. Board discretion The Board has discretion to adjust the level of STI (to zero) to prevent any inappropriate outcomes, for example, relative to the shareholder experience. Remuneration report for the year ended 31 December 2024 64 FY24 long‑term incentive (LTI) key terms LTI plan overview Description Appen’s LTI plan is a form of equity-based compensation awarded in the form of performance rights. The LTI plan is designed to incentivise and challenge senior management to achieve long-term sustainable growth in earnings and shareholder value. It also supports the retention of high performing executives. Eligibility The CEO and CFO, and select other executives are eligible to participate in the LTI plan on annual basis. LTI opportunity • CEO: 250% of base salary • CFO: 150% of base salary Vesting Conditions Vesting of performance-based rights is subject to the extent to which the Absolute Total Shareholder Return performance condition (Absolute TSR Condition) is satisfied, as described below. In addition, vesting is subject to continued employment with the Company. TSR measures the growth in the price of shares (modified to account for capital adjustments where appropriate) together with the value of the dividends over the performance period, assuming that all those dividends are re-invested into new shares. Vesting (if any) of rights subject to the Absolute TSR Condition will be determined with reference to the Company’s TSR performance over the performance period as follows: Absolute TSR over the performance period % of rights subject to the Absolute TSR Condition that vest TSR is below 190% 0% TSR is 190% 50% TSR is between 190% and 320% Pro-rata straight line vesting between 50% and 100% TSR is greater than or equal to 320% 100% Note: select non-KMP executives are currently on a different LTI plan which may include alternative performance conditions and timelines. Performance period Performance rights may vest at the end of the three-year vesting period subject to the achievement of the performance and continuing employment hurdles specified above. Board discretion The Board maintains absolute discretion to adjust LTI and all performance-based remuneration that has not been realised or vested if the Board considers that such remuneration would be an unfair or inappropriate benefit to an executive. The Board has absolute discretion to reduce, cancel, or clawback the performance-based remuneration to an executive. For example, this can include such circumstances as: • making a material misstatement or omission in the group financial statements • if the employee acts fraudulently or engages in misconduct, or • any other circumstance that the Board determines in good faith to have resulted in an unfair or inappropriate benefit to the Executive. The Board also has discretion to ensure that the targets are achieved in the right way, and factors like acquisitions may be adjusted for if it unjustly boosts one or more of the financial metrics associated with the STI or LTI. Leaver provisions Unless the Board determines otherwise, where an employee leaves due to voluntary resignation, mutual separation or termination for cause (including gross misconduct), all unvested rights will automatically lapse on cessation. Subject to Board approval, where employment leaves for any other reason (including redundancy, disability, retirement or death) a pro-rata number of unvested rights will remain ‘on-foot’ and vest on the original vesting date (with the service condition deemed to be met). Remuneration report for the year ended 31 December 2024 65Appen 2024 Annual Report For personal use only
Page 67
STI plan overview Vesting schedule Payment for financial measures 2024 was a pivotal year or Appen. Achievement thresholds for financial measured were adjusted to ensure a focus on both revenue growth and returning to EBITDA profitability . EBITDA (50% of STI) Achievement – % against target Actual award – % of target payout Below 40% Nil 40% 50% 100% 100% 200% or more 162.5% Revenue (30% of STI) Achievement – % against target Actual award – % of target payout Below 94% Nil 94% 50% 100% 100% 110% or more 162.5% Non‑financial measures (20% of STI) Below 90% Nil 90% 50% 100% or more 100% Assessment of outcomes Fixed remuneration x target incentive x Group scorecard = STI outcome With the exception of his own performance, performance assessments are undertaken by the CEO who retains the discretion to pay or not pay any part of the STI. Performance assessment and payment for the CEO is subject to Board approval. Employees under a formal performance improvement plan or any formal disciplinary procedure will have discretion applied and receive zero STI award. Any noncompliance with the Good Citizen Requirements will delay payment until they are fulfilled. Any delay in excess of 90 days past the performance period end date will result in the forfeiture of any STI payment. Board discretion The Board has discretion to adjust the level of STI (to zero) to prevent any inappropriate outcomes, for example, relative to the shareholder experience. Remuneration report for the year ended 31 December 2024 64 FY24 long‑term incentive (LTI) key terms LTI plan overview Description Appen’s LTI plan is a form of equity-based compensation awarded in the form of performance rights. The LTI plan is designed to incentivise and challenge senior management to achieve long-term sustainable growth in earnings and shareholder value. It also supports the retention of high performing executives. Eligibility The CEO and CFO, and select other executives are eligible to participate in the LTI plan on annual basis. LTI opportunity • CEO: 250% of base salary • CFO: 150% of base salary Vesting Conditions Vesting of performance-based rights is subject to the extent to which the Absolute Total Shareholder Return performance condition (Absolute TSR Condition) is satisfied, as described below. In addition, vesting is subject to continued employment with the Company. TSR measures the growth in the price of shares (modified to account for capital adjustments where appropriate) together with the value of the dividends over the performance period, assuming that all those dividends are re-invested into new shares. Vesting (if any) of rights subject to the Absolute TSR Condition will be determined with reference to the Company’s TSR performance over the performance period as follows: Absolute TSR over the performance period % of rights subject to the Absolute TSR Condition that vest TSR is below 190% 0% TSR is 190% 50% TSR is between 190% and 320% Pro-rata straight line vesting between 50% and 100% TSR is greater than or equal to 320% 100% Note: select non-KMP executives are currently on a different LTI plan which may include alternative performance conditions and timelines. Performance period Performance rights may vest at the end of the three-year vesting period subject to the achievement of the performance and continuing employment hurdles specified above. Board discretion The Board maintains absolute discretion to adjust LTI and all performance-based remuneration that has not been realised or vested if the Board considers that such remuneration would be an unfair or inappropriate benefit to an executive. The Board has absolute discretion to reduce, cancel, or clawback the performance-based remuneration to an executive. For example, this can include such circumstances as: • making a material misstatement or omission in the group financial statements • if the employee acts fraudulently or engages in misconduct, or • any other circumstance that the Board determines in good faith to have resulted in an unfair or inappropriate benefit to the Executive. The Board also has discretion to ensure that the targets are achieved in the right way, and factors like acquisitions may be adjusted for if it unjustly boosts one or more of the financial metrics associated with the STI or LTI. Leaver provisions Unless the Board determines otherwise, where an employee leaves due to voluntary resignation, mutual separation or termination for cause (including gross misconduct), all unvested rights will automatically lapse on cessation. Subject to Board approval, where employment leaves for any other reason (including redundancy, disability, retirement or death) a pro-rata number of unvested rights will remain ‘on-foot’ and vest on the original vesting date (with the service condition deemed to be met). Remuneration report for the year ended 31 December 2024 65Appen 2024 Annual Report For personal use only
Page 68
Remuneration governance The People and Culture Committee is responsible for developing, monitoring and assessing the remuneration strategy, policies and practices, with a focus on our strategic human resources objectives, including the well-being of our employees and culture. The number of Committee meetings and attendance by members during the reporting period is set out in the Meetings of directors’ section on page 52 . The following diagram shows Appen’s remuneration decision making process. Corporate Governance Statement Corporate Governance Statement Further information about the People and Culture Committee is set out in the Corporate Governance Statement. The Statement is available at: appen.com/investors/corporate-governance/ Securities trading policy KMP (both executive and non-executive directors) must not enter into transactions in associated products that operate to limit the economic risk of security holdings in the Company. A copy of the Company’s Securities Dealing Policy is available at appen.com/investors/corporate-governance/ Independent remuneration advisors Periodically, the Board and the People and Culture Committee seeks input from external and independent remuneration advisors who can provide industry benchmarks, peer comparison information and specific local knowledge of country-specific remuneration practices. External advice is used as a guide only and is not a substitute for the Board and People and Culture Committee’s thorough consideration of the relevant remuneration matter. People and Culture Committee Oversees the application of the remuneration framework and policies, with a focus on Appen’s human resource strategy. Make remuneration recommendations for KMP to the Board. Board Approves and has oversight of Appen’s remuneration policy. Final approval of performance targets and remuneration outcomes for the CEO. Executive team Proposes executive appointments, succession plans, policies, remuneration structures and outcomes to the People and Culture Committee for review and approval, or recommendation to the Board as required. Audit Committee Advises the People and Culture Committee of material risk issues, behaviours and/or compliance breaches. Independent external advisors Insights and information is sought from independent external advisors as required to ensure the People and Culture Committee is appropriately informed. Remuneration report for the year ended 31 December 2024 66 Minimum shareholding requirement (MSR) The Board has adopted a Minimum Shareholding Policy to assist in aligning the interests of all directors and executive KMP with our shareholders. The MSR requirements for KMP are as follows: KMP MSR Period as KMP Compliance Non-executive directors 100% of annual pre-tax base fees 3 years All Board members are compliant CEO 100% of fixed remuneration 5 years To be assessed Feb 2029 Other executives 50% of fixed remuneration 5 years To be assessed Aug 2028 The value of such shares is based on their price at the time of acquisition. Any deferred STI for the CEO counts towards the achievement of MSR. Once the requirement has been met, directors are considered compliant even if there are subsequent changes in the share price. Directors and executive KMP are compliant where Appen securities are held either by them personally or by a related party. Refer to page 69 for further details regarding current securities held by KMP. Service contracts Remuneration and other terms of employment for KMP are formalised in service contracts. All executive KMP service contracts provide for immediate termination in the event of serious misconduct. There are no guaranteed base pay increases in any executive service contracts. Details of the other key terms are as follows: Executive KMP Role Contract term Annual salary review Notice period by either party Ryan Kolln CEO and Managing Director (from 5 February 2024) No fixed term 1 March 12 months Justin Miles CFO (from 27 February 2024) No fixed term 1 March 6 months Armughan Ahmad Former CEO, President, and Managing Director (to 5 February 2024) No fixed term 1 March 12 months Incoming arrangements for Ryan Kolln (new CEO) On 5 February 2024, Appen announced the appointment of Ryan Kolln as CEO and Managing Director. Ryan Kolln’s remuneration arrangements, as previously disclosed to the market are as follows: • Base salary of US$600,000. • Target STI of 100% of base salary with a stretch opportunity of 150%. • Target LTI of 250% of base salary which vest over a three-year performance period. Outgoing arrangements for Armughan Ahmad (former CEO) Armughan Ahmad was appointed as CEO, President and Managing Director on 15 December 2022, and commenced in the role on 9 January 2023. Armughan Ahmad stepped down from his role as CEO, President and Managing Director on 5 February 2024 and ceased to be a KMP from that date. Armughan Ahmad’s remuneration arrangements for the time that he was CEO are set out below. Armughan Ahmad’s LTI grant, and sign-on bonus were approved by shareholders at Appen’s 2023 Annual General Meeting: • Base salary of US$600,000. • Target STI of 100% of base salary with a stretch opportunity of 150%. • LTI equity grant valued at US$5,000,000. • Sign-on bonus, designed to replace a portion of Armughan Ahmad’s incentives forgone with his previous employer valued at US$2,000,000, vesting in equal monthly tranches over two years. As disclosed in the 2023 remuneration report, Armughan Ahmad received his statutory entitlements and payment in lieu of notice (12 months). Armughan Ahmad’s LTI grant was forfeited upon his termination. The Board exercised its discretion and no STI was awarded to Armughan Ahmad. However, Armughan Ahmad’s sign-on bonus remained on-foot with the final tranche vesting in January 2025 in accordance with the terms of his contract. Remuneration report for the year ended 31 December 2024 67Appen 2024 Annual Report For personal use only
Page 69
Remuneration governance The People and Culture Committee is responsible for developing, monitoring and assessing the remuneration strategy, policies and practices, with a focus on our strategic human resources objectives, including the well-being of our employees and culture. The number of Committee meetings and attendance by members during the reporting period is set out in the Meetings of directors’ section on page 52 . The following diagram shows Appen’s remuneration decision making process. Corporate Governance Statement Corporate Governance Statement Further information about the People and Culture Committee is set out in the Corporate Governance Statement. The Statement is available at: appen.com/investors/corporate-governance/ Securities trading policy KMP (both executive and non-executive directors) must not enter into transactions in associated products that operate to limit the economic risk of security holdings in the Company. A copy of the Company’s Securities Dealing Policy is available at appen.com/investors/corporate-governance/ Independent remuneration advisors Periodically, the Board and the People and Culture Committee seeks input from external and independent remuneration advisors who can provide industry benchmarks, peer comparison information and specific local knowledge of country-specific remuneration practices. External advice is used as a guide only and is not a substitute for the Board and People and Culture Committee’s thorough consideration of the relevant remuneration matter. People and Culture Committee Oversees the application of the remuneration framework and policies, with a focus on Appen’s human resource strategy. Make remuneration recommendations for KMP to the Board. Board Approves and has oversight of Appen’s remuneration policy. Final approval of performance targets and remuneration outcomes for the CEO. Executive team Proposes executive appointments, succession plans, policies, remuneration structures and outcomes to the People and Culture Committee for review and approval, or recommendation to the Board as required. Audit Committee Advises the People and Culture Committee of material risk issues, behaviours and/or compliance breaches. Independent external advisors Insights and information is sought from independent external advisors as required to ensure the People and Culture Committee is appropriately informed. Remuneration report for the year ended 31 December 2024 66 Minimum shareholding requirement (MSR) The Board has adopted a Minimum Shareholding Policy to assist in aligning the interests of all directors and executive KMP with our shareholders. The MSR requirements for KMP are as follows: KMP MSR Period as KMP Compliance Non-executive directors 100% of annual pre-tax base fees 3 years All Board members are compliant CEO 100% of fixed remuneration 5 years To be assessed Feb 2029 Other executives 50% of fixed remuneration 5 years To be assessed Aug 2028 The value of such shares is based on their price at the time of acquisition. Any deferred STI for the CEO counts towards the achievement of MSR. Once the requirement has been met, directors are considered compliant even if there are subsequent changes in the share price. Directors and executive KMP are compliant where Appen securities are held either by them personally or by a related party. Refer to page 69 for further details regarding current securities held by KMP. Service contracts Remuneration and other terms of employment for KMP are formalised in service contracts. All executive KMP service contracts provide for immediate termination in the event of serious misconduct. There are no guaranteed base pay increases in any executive service contracts. Details of the other key terms are as follows: Executive KMP Role Contract term Annual salary review Notice period by either party Ryan Kolln CEO and Managing Director (from 5 February 2024) No fixed term 1 March 12 months Justin Miles CFO (from 27 February 2024) No fixed term 1 March 6 months Armughan Ahmad Former CEO, President, and Managing Director (to 5 February 2024) No fixed term 1 March 12 months Incoming arrangements for Ryan Kolln (new CEO) On 5 February 2024, Appen announced the appointment of Ryan Kolln as CEO and Managing Director. Ryan Kolln’s remuneration arrangements, as previously disclosed to the market are as follows: • Base salary of US$600,000. • Target STI of 100% of base salary with a stretch opportunity of 150%. • Target LTI of 250% of base salary which vest over a three-year performance period. Outgoing arrangements for Armughan Ahmad (former CEO) Armughan Ahmad was appointed as CEO, President and Managing Director on 15 December 2022, and commenced in the role on 9 January 2023. Armughan Ahmad stepped down from his role as CEO, President and Managing Director on 5 February 2024 and ceased to be a KMP from that date. Armughan Ahmad’s remuneration arrangements for the time that he was CEO are set out below. Armughan Ahmad’s LTI grant, and sign-on bonus were approved by shareholders at Appen’s 2023 Annual General Meeting: • Base salary of US$600,000. • Target STI of 100% of base salary with a stretch opportunity of 150%. • LTI equity grant valued at US$5,000,000. • Sign-on bonus, designed to replace a portion of Armughan Ahmad’s incentives forgone with his previous employer valued at US$2,000,000, vesting in equal monthly tranches over two years. As disclosed in the 2023 remuneration report, Armughan Ahmad received his statutory entitlements and payment in lieu of notice (12 months). Armughan Ahmad’s LTI grant was forfeited upon his termination. The Board exercised its discretion and no STI was awarded to Armughan Ahmad. However, Armughan Ahmad’s sign-on bonus remained on-foot with the final tranche vesting in January 2025 in accordance with the terms of his contract. Remuneration report for the year ended 31 December 2024 67Appen 2024 Annual Report For personal use only
Page 70
Non-executive director fees Non-executive director remuneration reflects the Company’s desire to attract, motivate, and retain experienced directors and to ensure their active participation in advocating for the interests of shareholders, in areas such as strategy, corporate governance, remuneration, compliance, risk, and ESG. The size of the remuneration pool that can be paid to non-executive directors is governed by resolutions passed at the Annual General Meeting of shareholders. The total non-executive director remuneration pool in 2024 was A$1,400,000 per annum, unchanged from 2022 when the Board last approved an uplift. The Company aims to provide a level of remuneration for non-executive directors comparable with its general industry peer group. Non-executive directors receive a fee for Board membership and for service as Chair of Board Committees. No additional payment is made for being a member of Board Committees. All fees are inclusive of superannuation if applicable. Role Fee 2024 A$ Board Chair $240,000 Non-executive director $120,000 Audit and Risk Management Committee Chair $20,000 People and Culture Committee Chair $20,000 All non-executive directors are remunerated by way of Board and Committee fees. These fees reflect the workload associated with a complex global business and the governance oversight required to implement our long-term growth objective and key strategic pillars and to oversee the business transformation process. Non-executive directors do not receive any short-term or long-term incentive. Statutory disclosures Statutory remuneration for KMP The tables below detail the statutory accounting expense of all remuneration-related items for executive KMP and non-executive Directors. All figures are presented in US dollars, which is Appen’s presentational currency. The 12-month average AUD/USD exchange rates used were 0.6598 for 2024 and 0.6647 for 2023. The 12-month average CAD/USD exchange rates used were 0.73018 for 2024 and 0.7412 for 2023. The values for equity-settled LTI remuneration were measured at grant date in accordance with AASB2 Share-based Payments and represent the current year amortisation of the fair value of the rights over the vesting period. Certain statutory LTI figures are negative due to the true-up adjustment of share-based payments expense in relation share rights that did not vest or are not expected to vest. Fixed Variable Executive KMP Cash salary $ Super- annuation $ Leave entitlements 4 $ Termination payments $ STI $ LTI $ Total value $ Ryan Kolln 1 2024 594,771 – – – 486,612 422,037 1,503,420 2023 122,482 – 8,202 – 9,737 423,467 563,888 Justin Miles 2 2024 329,799 18,914 18,189 – 224,657 158,955 750,514 2023 146,173 7, 588 8,266 – 9,779 174,438 346,244 Previous executive KMP Armughan Ahmad 3 2024 54,628 2,732 – 588,160 – (166,038) 479,482 2023 571,413 5,208 41,206 – – 1,979,102 2,596,929 1 Ryan Kolln commenced as CEO and Managing Director on 5 February 2024 having previously held the Chief Operating Officer role. 2024 STI includes $121,653 deferred into equity with a holding lock of one year. 2 Justin Miles previously held the Interim CFO role from 1 August 2023 and was officially appointed CFO on 27 February 2024. 3 Armughan Ahmad stepped down as CEO and Managing Director on 5 February 2024 and ceased to be a KMP from this date. Details of Armughan Ahmad’s exit arrangement can be found on page 67 under executive KMP service contracts. 4 Leave entitlements include annual and long-service leave entitlements accrued but not taken during the year. Remuneration report for the year ended 31 December 2024 68 2024 2023 Director Fees $ Super- annuation $ Total $ Fees $ Super- annuation $ Total $ Richard Freudenstein 158,352 – 158,352 159,522 – 159,522 Stuart Davis 79,176 – 79,176 79,761 – 79,761 Stephen Hasker 92,372 – 92,372 93,054 – 93,054 Vanessa Liu 79,176 – 79,176 79,761 – 79,761 Robin Low 92,372 – 92,372 90,749 2,305 93,054 Lynn Mickleburgh 79,176 – 79,176 79,761 – 79,761 Mini Peiris 79,176 – 79,176 72,295 – 72,295 659,800 – 659,800 654,903 2,305 657, 208 All non-executive directors provided services for the full year in both 2024 and 2023. Certain variances year-on-year are due to FX translation from Australian dollars to US dollars. Securities holdings of executive KMP The number of securities holdings by executive KMP during the performance period is listed below: Executive KMP Number of performance rights held Number of ordinary shares held (direct and indirect) Ryan Kolln 7,493,714 194,201 Justin Miles 1,608,179 188,502 Performance rights holdings of executive KMP The movement during the reporting period of performance rights held by executive KMP is as follows: Name Plan Held at 1 January 2024 Granted during the year Exercised during the year Forfeited Forfeited % Held at 31 December 2024 Vested during the year Ryan Kolln 2021 19,319 – (13,156) (6,163) 100% – (6,578) 2022 20,672 – (4,134) – – 16,538 (4,134) 2023 594,359 – (166,850) – – 427, 509 (166,850) 2024 – 7,049,667 – – 7,049,667 – 634,350 7,049,667 (184,140) (6,163) 7, 493,714 (177, 562) Justin Miles 2021 11,515 – (5,945) (5,570) 100% – (5,945) 2022 17,127 – (3,425) – – 13,702 (3,425) 2023 374,397 – (143,556) – – 230,841 (143,556) 2024 – 1,363,636 – – 1,363,636 – 403,039 1,363,636 (152,926) (5,570) 1,608,179 (152,926) Previous executive KMP Armughan Ahmad 2023 3,601,501 – (600,249) (2,770,387) 82% 230,865 (600,249) 2024 – – – – – – 3,601,501 – (600,249) (2,770,387) 230,865 (600,249) Remuneration report for the year ended 31 December 2024 69Appen 2024 Annual Report For personal use only
Page 71
Non-executive director fees Non-executive director remuneration reflects the Company’s desire to attract, motivate, and retain experienced directors and to ensure their active participation in advocating for the interests of shareholders, in areas such as strategy, corporate governance, remuneration, compliance, risk, and ESG. The size of the remuneration pool that can be paid to non-executive directors is governed by resolutions passed at the Annual General Meeting of shareholders. The total non-executive director remuneration pool in 2024 was A$1,400,000 per annum, unchanged from 2022 when the Board last approved an uplift. The Company aims to provide a level of remuneration for non-executive directors comparable with its general industry peer group. Non-executive directors receive a fee for Board membership and for service as Chair of Board Committees. No additional payment is made for being a member of Board Committees. All fees are inclusive of superannuation if applicable. Role Fee 2024 A$ Board Chair $240,000 Non-executive director $120,000 Audit and Risk Management Committee Chair $20,000 People and Culture Committee Chair $20,000 All non-executive directors are remunerated by way of Board and Committee fees. These fees reflect the workload associated with a complex global business and the governance oversight required to implement our long-term growth objective and key strategic pillars and to oversee the business transformation process. Non-executive directors do not receive any short-term or long-term incentive. Statutory disclosures Statutory remuneration for KMP The tables below detail the statutory accounting expense of all remuneration-related items for executive KMP and non-executive Directors. All figures are presented in US dollars, which is Appen’s presentational currency. The 12-month average AUD/USD exchange rates used were 0.6598 for 2024 and 0.6647 for 2023. The 12-month average CAD/USD exchange rates used were 0.73018 for 2024 and 0.7412 for 2023. The values for equity-settled LTI remuneration were measured at grant date in accordance with AASB2 Share-based Payments and represent the current year amortisation of the fair value of the rights over the vesting period. Certain statutory LTI figures are negative due to the true-up adjustment of share-based payments expense in relation share rights that did not vest or are not expected to vest. Fixed Variable Executive KMP Cash salary $ Super- annuation $ Leave entitlements 4 $ Termination payments $ STI $ LTI $ Total value $ Ryan Kolln 1 2024 594,771 – – – 486,612 422,037 1,503,420 2023 122,482 – 8,202 – 9,737 423,467 563,888 Justin Miles 2 2024 329,799 18,914 18,189 – 224,657 158,955 750,514 2023 146,173 7, 588 8,266 – 9,779 174,438 346,244 Previous executive KMP Armughan Ahmad 3 2024 54,628 2,732 – 588,160 – (166,038) 479,482 2023 571,413 5,208 41,206 – – 1,979,102 2,596,929 1 Ryan Kolln commenced as CEO and Managing Director on 5 February 2024 having previously held the Chief Operating Officer role. 2024 STI includes $121,653 deferred into equity with a holding lock of one year. 2 Justin Miles previously held the Interim CFO role from 1 August 2023 and was officially appointed CFO on 27 February 2024. 3 Armughan Ahmad stepped down as CEO and Managing Director on 5 February 2024 and ceased to be a KMP from this date. Details of Armughan Ahmad’s exit arrangement can be found on page 67 under executive KMP service contracts. 4 Leave entitlements include annual and long-service leave entitlements accrued but not taken during the year. Remuneration report for the year ended 31 December 2024 68 2024 2023 Director Fees $ Super- annuation $ Total $ Fees $ Super- annuation $ Total $ Richard Freudenstein 158,352 – 158,352 159,522 – 159,522 Stuart Davis 79,176 – 79,176 79,761 – 79,761 Stephen Hasker 92,372 – 92,372 93,054 – 93,054 Vanessa Liu 79,176 – 79,176 79,761 – 79,761 Robin Low 92,372 – 92,372 90,749 2,305 93,054 Lynn Mickleburgh 79,176 – 79,176 79,761 – 79,761 Mini Peiris 79,176 – 79,176 72,295 – 72,295 659,800 – 659,800 654,903 2,305 657, 208 All non-executive directors provided services for the full year in both 2024 and 2023. Certain variances year-on-year are due to FX translation from Australian dollars to US dollars. Securities holdings of executive KMP The number of securities holdings by executive KMP during the performance period is listed below: Executive KMP Number of performance rights held Number of ordinary shares held (direct and indirect) Ryan Kolln 7,493,714 194,201 Justin Miles 1,608,179 188,502 Performance rights holdings of executive KMP The movement during the reporting period of performance rights held by executive KMP is as follows: Name Plan Held at 1 January 2024 Granted during the year Exercised during the year Forfeited Forfeited % Held at 31 December 2024 Vested during the year Ryan Kolln 2021 19,319 – (13,156) (6,163) 100% – (6,578) 2022 20,672 – (4,134) – – 16,538 (4,134) 2023 594,359 – (166,850) – – 427, 509 (166,850) 2024 – 7,049,667 – – 7,049,667 – 634,350 7,049,667 (184,140) (6,163) 7, 493,714 (177, 562) Justin Miles 2021 11,515 – (5,945) (5,570) 100% – (5,945) 2022 17,127 – (3,425) – – 13,702 (3,425) 2023 374,397 – (143,556) – – 230,841 (143,556) 2024 – 1,363,636 – – 1,363,636 – 403,039 1,363,636 (152,926) (5,570) 1,608,179 (152,926) Previous executive KMP Armughan Ahmad 2023 3,601,501 – (600,249) (2,770,387) 82% 230,865 (600,249) 2024 – – – – – – 3,601,501 – (600,249) (2,770,387) 230,865 (600,249) Remuneration report for the year ended 31 December 2024 69Appen 2024 Annual Report For personal use only
Page 72
Performance rights vesting table The performance details relating to the rights exercised during the year, are shown in the table below: Grant date Tranche Measurement Target Measurement Date Condition Vesting date Ryan Kolln 1-Jan-22 1 Service only N/A N/A Employed at 1 Jan 23 1 Jan 23 1-Jan-22 2 Service only N/A N/A Employed at 1 Jan 24 1 Jan 24 22-Mar-22 2 Service only N/A N/A Employed at 1 Jan 24 1 Jan 24 1-Mar-23 1 Service only N/A N/A Employed at 1 Jan 24 1 Jan 24 24-May-23 1 Service only N/A N/A Employed at 1 Jan 24 1 Jan 24 24-May-23 1 Service only N/A N/A Employed at 1 Jan 24 1 Jan 24 Justin Miles 1-Jan-22 2 Service only N/A N/A Employed at 1 Jan 24 1 Jan 24 22-Mar-22 2 Service only N/A N/A Employed at 1 Jan 24 1 Jan 24 26-Sep-23 1 Service only N/A N/A Employed at 1 Jan 24 1 Jan 24 26-Sep-23 1 Service only N/A N/A Employed at 1 Jan 24 1 Jan 24 Performance rights exercised during the year by executive KMP The rights exercised during the year relate to vesting of the relevant plans as detailed above, upon the successful achievement of the relevant performance and employment hurdles. Executive KMP Number of rights exercised Value of rights at grant date (US$) Value of rights at exercise date (US$) Ryan Kolln 184,140 $245,908 $59,750 Justin Miles 152,926 $116,504 $47, 423 Unvested performance rights held by executive KMP The number of unvested performance rights held by executive KMP at 31 December 2024 are: Plan Ryan Kolln Justin Miles 2022 16,538 13,702 2023 427, 509 230,841 2024 7,049,667 1,363,636 7, 493,714 1,608,179 Remuneration report for the year ended 31 December 2024 70 KMP shareholdings KMP 1 January 2024 Purchased/ exercised during the year Sold during the year Ceased to be KMP 31 December 2024 Non‑Executive KMP Richard Freudenstein 66,847 – – – 66,847 Stuart Davis 72,830 15,625 – – 88,455 Stephen Hasker 58,333 – – – 58,333 Vanessa Liu 25,200 – – – 25,200 Robin Low 257,051 15,625 – – 272,676 Lynn Mickleburgh – 300,000 – – 300,000 Mini Peiris – – – – – Executive KMP Ryan Kolln 10,061 184,140 – – 194,201 Justin Miles 35,576 152,926 – – 188,502 Previous KMP Armughan Ahmad 277,041 – – (277,041) – 802,939 668,316 – (277,041) 1,194,214 Richard Freudenstein Non-executive Chair 26 February 2025 Sydney Remuneration report for the year ended 31 December 2024 71Appen 2024 Annual Report For personal use only
Page 73
Performance rights vesting table The performance details relating to the rights exercised during the year, are shown in the table below: Grant date Tranche Measurement Target Measurement Date Condition Vesting date Ryan Kolln 1-Jan-22 1 Service only N/A N/A Employed at 1 Jan 23 1 Jan 23 1-Jan-22 2 Service only N/A N/A Employed at 1 Jan 24 1 Jan 24 22-Mar-22 2 Service only N/A N/A Employed at 1 Jan 24 1 Jan 24 1-Mar-23 1 Service only N/A N/A Employed at 1 Jan 24 1 Jan 24 24-May-23 1 Service only N/A N/A Employed at 1 Jan 24 1 Jan 24 24-May-23 1 Service only N/A N/A Employed at 1 Jan 24 1 Jan 24 Justin Miles 1-Jan-22 2 Service only N/A N/A Employed at 1 Jan 24 1 Jan 24 22-Mar-22 2 Service only N/A N/A Employed at 1 Jan 24 1 Jan 24 26-Sep-23 1 Service only N/A N/A Employed at 1 Jan 24 1 Jan 24 26-Sep-23 1 Service only N/A N/A Employed at 1 Jan 24 1 Jan 24 Performance rights exercised during the year by executive KMP The rights exercised during the year relate to vesting of the relevant plans as detailed above, upon the successful achievement of the relevant performance and employment hurdles. Executive KMP Number of rights exercised Value of rights at grant date (US$) Value of rights at exercise date (US$) Ryan Kolln 184,140 $245,908 $59,750 Justin Miles 152,926 $116,504 $47, 423 Unvested performance rights held by executive KMP The number of unvested performance rights held by executive KMP at 31 December 2024 are: Plan Ryan Kolln Justin Miles 2022 16,538 13,702 2023 427, 509 230,841 2024 7,049,667 1,363,636 7, 493,714 1,608,179 Remuneration report for the year ended 31 December 2024 70 KMP shareholdings KMP 1 January 2024 Purchased/ exercised during the year Sold during the year Ceased to be KMP 31 December 2024 Non‑Executive KMP Richard Freudenstein 66,847 – – – 66,847 Stuart Davis 72,830 15,625 – – 88,455 Stephen Hasker 58,333 – – – 58,333 Vanessa Liu 25,200 – – – 25,200 Robin Low 257,051 15,625 – – 272,676 Lynn Mickleburgh – 300,000 – – 300,000 Mini Peiris – – – – – Executive KMP Ryan Kolln 10,061 184,140 – – 194,201 Justin Miles 35,576 152,926 – – 188,502 Previous KMP Armughan Ahmad 277,041 – – (277,041) – 802,939 668,316 – (277,041) 1,194,214 Richard Freudenstein Non-executive Chair 26 February 2025 Sydney Remuneration report for the year ended 31 December 2024 71Appen 2024 Annual Report For personal use only
Page 74
I declare that, to the best of my knowledge and belief, in relation to the audit of Appen Limited for the financial year ended 31 December 2024 there have been: i. no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and ii. no contraventions of any applicable code of professional conduct in relation to the audit. KPMG Cameron Slapp Partner Sydney 26 February 2025 KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under Professional Standards Legislation. Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001 to the directors of Appen Limited 72 Contents Financial report Consolidated financial statements Consolidated statement of profit or loss and other comprehensive income 74 Consolidated statement of financial position 75 Consolidated statement of changes in equity 76 Consolidated statement of cash flows 77 Notes to the consolidated financial statements About this report Note 1. General information 78 Note 2. Basis of preparation 78 Group performance Note 3. Segment information 80 Note 4. Revenue 82 Note 5. Expenses 83 Note 6. Earnings per share and dividends 85 Note 7. Income tax 86 Note 8. Reconciliation of loss after income tax to net cash from operating activities 89 Group core assets and liabilities Note 9. Cash and cash equivalents 90 Note 10. Trade and other receivables 90 Note 11. Contract assets 91 Note 12. Intangible assets 92 Note 13. Property, plant and equipment 95 Note 14. Right of use assets and lease liabilities 96 Note 15. Trade and other payables 97 Note 16. Provisions 97 Note 17. Contract liabilities 98 Investment, capital and risk management Note 18. Earn-out liability 99 Note 19. Derivative financial instruments 99 Note 20. Investments 100 Note 21. Fair value measurement 100 Note 22. Borrowings 102 Note 23. Equity 102 Note 24. Financial risk management 105 Other information Note 25. Contingent liabilities 109 Note 26. Parent entity information 109 Note 27. Subsidiaries 110 Note 28. Deed of Cross Guarantee 111 Note 29. Related party transactions 114 Note 30. Share-based payments 114 Note 31. Remuneration of auditors 116 Note 32. Events after the reporting period 116 Consolidated entity disclosure statement 117 Directors’ declaration 118 Independent auditor’s report 119 73Appen 2024 Annual Report For personal use only
Page 75
I declare that, to the best of my knowledge and belief, in relation to the audit of Appen Limited for the financial year ended 31 December 2024 there have been: i. no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and ii. no contraventions of any applicable code of professional conduct in relation to the audit. KPMG Cameron Slapp Partner Sydney 26 February 2025 KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under Professional Standards Legislation. Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001 to the directors of Appen Limited 72 Contents Financial report Consolidated financial statements Consolidated statement of profit or loss and other comprehensive income 74 Consolidated statement of financial position 75 Consolidated statement of changes in equity 76 Consolidated statement of cash flows 77 Notes to the consolidated financial statements About this report Note 1. General information 78 Note 2. Basis of preparation 78 Group performance Note 3. Segment information 80 Note 4. Revenue 82 Note 5. Expenses 83 Note 6. Earnings per share and dividends 85 Note 7. Income tax 86 Note 8. Reconciliation of loss after income tax to net cash from operating activities 89 Group core assets and liabilities Note 9. Cash and cash equivalents 90 Note 10. Trade and other receivables 90 Note 11. Contract assets 91 Note 12. Intangible assets 92 Note 13. Property, plant and equipment 95 Note 14. Right of use assets and lease liabilities 96 Note 15. Trade and other payables 97 Note 16. Provisions 97 Note 17. Contract liabilities 98 Investment, capital and risk management Note 18. Earn-out liability 99 Note 19. Derivative financial instruments 99 Note 20. Investments 100 Note 21. Fair value measurement 100 Note 22. Borrowings 102 Note 23. Equity 102 Note 24. Financial risk management 105 Other information Note 25. Contingent liabilities 109 Note 26. Parent entity information 109 Note 27. Subsidiaries 110 Note 28. Deed of Cross Guarantee 111 Note 29. Related party transactions 114 Note 30. Share-based payments 114 Note 31. Remuneration of auditors 116 Note 32. Events after the reporting period 116 Consolidated entity disclosure statement 117 Directors’ declaration 118 Independent auditor’s report 119 73Appen 2024 Annual Report For personal use only
Page 76
2024 2023 Note $ 000 $ 000 Revenue Revenue from contract with customers 4 234,285 273,012 Other income 938 782 Interest income 482 371 Expenses Crowd service costs (126,933) (168,099) Employee expenses 5 (70,427) (83,525) Recruitment costs (2,045) (3,642) Professional fees (5,676) (9,278) Information technology costs (12,882) (12,592) Communication and travel expenses (1,904) (3,044) Other expenses (8,689) (9,837) Depreciation and amortisation 5, 12-14 (23,320) (35,147) Share-based payments expense 5 (4,077) (5,691) Net foreign exchange gain/(loss) 4,345 (4,032) Transaction costs 5 (234) (542) Restructure costs (3,039) (8,967) Finance costs 5 (817) (1,176) Deemed interest on earn-out liability 5 – (354) Earn-out adjustment – 15,994 Impairment of non-financial assets – (69,182) Loss before income tax (19,993) (124,949) Income tax (expense)/benefit 7 (16) 6,870 Loss after income tax for the year attributable to the owners of the Group (20,009) (118,079) Other comprehensive income Items that will not be reclassified subsequently to profit or loss: Unrealised loss on fair valued investment – (1,600) Items that may be reclassified subsequently to profit or loss: Foreign currency translation (8,828) 1,281 Other comprehensive income for the period, net of tax (8,828) (319) Total comprehensive loss for the period attributable to the owners of the Group (28,837) (118,398) Cents Cents Basic earnings per share 6 (8.74) (83.10) Diluted earnings per share 6 (8.74) (83.10) The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes to the financial statements. Consolidated statement of profit or loss and other comprehensive income for the year ended 31 December 2024 74 2024 2023 Note $ 000 $ 000 Assets Current assets Cash and cash equivalents 9 54,809 32,152 Trade and other receivables 10 46,719 49,933 Contract assets 11 19,717 15,536 Inventory 672 1,069 Prepayments and other assets 4,864 5,813 Income tax receivables 2,394 2,144 Derivative financial instruments 19 – 104 Total current assets 129,175 106,751 Non-current assets Prepayments and other assets 1,220 30 Investments 20 1,432 1,446 Intangible assets 12 30,175 39,870 Property, plant and equipment 13 2,190 1,475 Right of use assets 14 4,090 3,095 Deferred tax assets 7 2,309 2,491 Total non-current assets 41,416 48,407 Total assets 170,591 155,158 Liabilities Current liabilities Trade and other payables 15 28,194 27, 232 Provisions 16 1,797 2,407 Contract liabilities 17 10,287 11,142 Lease liabilities 14 3,583 3,125 Earn-out liability 18 – 3,750 Total current liabilities 43,861 47,656 Non-current liabilities Provisions 16 320 306 Lease liabilities 14 7, 457 9,309 Deferred tax liabilities 7 4,637 5,090 Total non-current liabilities 12,414 14,705 Total liabilities 56,275 62,361 Net assets 114,316 92,797 Equity Issued capital 23 366,714 320,435 Reserves 23 128,775 133,526 Accumulated losses 23 (381,173) (361,164) Total equity 114,316 92,797 The above consolidated statement of financial position should be read in conjunction with the accompanying notes to the financial statements. Consolidated statement of financial position as at 31 December 2024 75Appen 2024 Annual Report For personal use only
Page 77
2024 2023 Note $ 000 $ 000 Revenue Revenue from contract with customers 4 234,285 273,012 Other income 938 782 Interest income 482 371 Expenses Crowd service costs (126,933) (168,099) Employee expenses 5 (70,427) (83,525) Recruitment costs (2,045) (3,642) Professional fees (5,676) (9,278) Information technology costs (12,882) (12,592) Communication and travel expenses (1,904) (3,044) Other expenses (8,689) (9,837) Depreciation and amortisation 5, 12-14 (23,320) (35,147) Share-based payments expense 5 (4,077) (5,691) Net foreign exchange gain/(loss) 4,345 (4,032) Transaction costs 5 (234) (542) Restructure costs (3,039) (8,967) Finance costs 5 (817) (1,176) Deemed interest on earn-out liability 5 – (354) Earn-out adjustment – 15,994 Impairment of non-financial assets – (69,182) Loss before income tax (19,993) (124,949) Income tax (expense)/benefit 7 (16) 6,870 Loss after income tax for the year attributable to the owners of the Group (20,009) (118,079) Other comprehensive income Items that will not be reclassified subsequently to profit or loss: Unrealised loss on fair valued investment – (1,600) Items that may be reclassified subsequently to profit or loss: Foreign currency translation (8,828) 1,281 Other comprehensive income for the period, net of tax (8,828) (319) Total comprehensive loss for the period attributable to the owners of the Group (28,837) (118,398) Cents Cents Basic earnings per share 6 (8.74) (83.10) Diluted earnings per share 6 (8.74) (83.10) The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes to the financial statements. Consolidated statement of profit or loss and other comprehensive income for the year ended 31 December 2024 74 2024 2023 Note $ 000 $ 000 Assets Current assets Cash and cash equivalents 9 54,809 32,152 Trade and other receivables 10 46,719 49,933 Contract assets 11 19,717 15,536 Inventory 672 1,069 Prepayments and other assets 4,864 5,813 Income tax receivables 2,394 2,144 Derivative financial instruments 19 – 104 Total current assets 129,175 106,751 Non-current assets Prepayments and other assets 1,220 30 Investments 20 1,432 1,446 Intangible assets 12 30,175 39,870 Property, plant and equipment 13 2,190 1,475 Right of use assets 14 4,090 3,095 Deferred tax assets 7 2,309 2,491 Total non-current assets 41,416 48,407 Total assets 170,591 155,158 Liabilities Current liabilities Trade and other payables 15 28,194 27, 232 Provisions 16 1,797 2,407 Contract liabilities 17 10,287 11,142 Lease liabilities 14 3,583 3,125 Earn-out liability 18 – 3,750 Total current liabilities 43,861 47,656 Non-current liabilities Provisions 16 320 306 Lease liabilities 14 7, 457 9,309 Deferred tax liabilities 7 4,637 5,090 Total non-current liabilities 12,414 14,705 Total liabilities 56,275 62,361 Net assets 114,316 92,797 Equity Issued capital 23 366,714 320,435 Reserves 23 128,775 133,526 Accumulated losses 23 (381,173) (361,164) Total equity 114,316 92,797 The above consolidated statement of financial position should be read in conjunction with the accompanying notes to the financial statements. Consolidated statement of financial position as at 31 December 2024 75Appen 2024 Annual Report For personal use only
Page 78
Equity attributable to owners of the Group Issued capital Reserves Accumulated losses Total equity $000 $000 $000 $000 Balance at 1 January 2024 320,435 133,526 (361,164) 92,797 Loss after income tax for the period – – (20,009) (20,009) Other comprehensive expense, net of tax – (8,828) – (8,828) Total comprehensive loss for the period – (8,828) (20,009) (28,837) Transactions with owners in their capacity as owners: Issue of ordinary shares, net of transaction costs 46,279 – – 46,279 Share-based payments – 4,077 – 4,077 Balance at 31 December 2024 366,714 128,775 (381,173) 114,316 Balance at 1 January 2023 262,917 128,154 (243,085) 147,986 Loss after income tax for the period – – (118,079) (118,079) Other comprehensive expense, net of tax – (319) – (319) Total comprehensive loss for the period – (319) (118,079) (118,398) Transactions with owners in their capacity as owners: Issue of ordinary shares, net of transaction costs 57, 518 – – 57, 518 Share-based payments – 5,691 – 5,691 Balance at 31 December 2023 320,435 133,526 (361,164) 92,797 The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes to the financial statements. Consolidated statement of changes in equity for the year ended 31 December 2024 76 Note 2024 2023 $ 000 $ 000 Cash flows from operating activities Receipts from customers (GST inclusive) 231,475 294,551 Payments to suppliers and employees (GST inclusive) (232,538) (317,952) Interest received 482 371 Interest and other finance costs paid (15) (435) Income tax (paid)/received (68) 526 Net cash used in operating activities 8 (664) (22,939) Cash flows from investing activities Payments for property, plant and equipment (1,790) (1,808) Payments for intangibles (11,057) (18,045) Payments for investment – (500) Transaction costs (234) (542) Net cash used in investing activities (13,081) (20,895) Cash flows from financing activities Lease payments 14 (4,398) (4,763) Proceeds from borrowings – 4,000 Repayment of borrowings – (4,000) Net proceeds from issuance of shares 42,137 57,437 Net cash from financing activities 37,739 52,674 Net increase in cash and cash equivalents 23,994 8,840 Cash and cash equivalents at the beginning of the year 32,152 23,429 Effect of foreign exchange rate changes (1,337) (117) Cash and cash equivalents at the end of the year 9 54,809 32,152 The above consolidated statement of cash flows should be read in conjunction with the accompanying notes to the financial statements. Consolidated statement of cash flows for the year ended 31 December 2024 77Appen 2024 Annual Report For personal use only
Page 79
Equity attributable to owners of the Group Issued capital Reserves Accumulated losses Total equity $000 $000 $000 $000 Balance at 1 January 2024 320,435 133,526 (361,164) 92,797 Loss after income tax for the period – – (20,009) (20,009) Other comprehensive expense, net of tax – (8,828) – (8,828) Total comprehensive loss for the period – (8,828) (20,009) (28,837) Transactions with owners in their capacity as owners: Issue of ordinary shares, net of transaction costs 46,279 – – 46,279 Share-based payments – 4,077 – 4,077 Balance at 31 December 2024 366,714 128,775 (381,173) 114,316 Balance at 1 January 2023 262,917 128,154 (243,085) 147,986 Loss after income tax for the period – – (118,079) (118,079) Other comprehensive expense, net of tax – (319) – (319) Total comprehensive loss for the period – (319) (118,079) (118,398) Transactions with owners in their capacity as owners: Issue of ordinary shares, net of transaction costs 57, 518 – – 57, 518 Share-based payments – 5,691 – 5,691 Balance at 31 December 2023 320,435 133,526 (361,164) 92,797 The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes to the financial statements. Consolidated statement of changes in equity for the year ended 31 December 2024 76 Note 2024 2023 $ 000 $ 000 Cash flows from operating activities Receipts from customers (GST inclusive) 231,475 294,551 Payments to suppliers and employees (GST inclusive) (232,538) (317,952) Interest received 482 371 Interest and other finance costs paid (15) (435) Income tax (paid)/received (68) 526 Net cash used in operating activities 8 (664) (22,939) Cash flows from investing activities Payments for property, plant and equipment (1,790) (1,808) Payments for intangibles (11,057) (18,045) Payments for investment – (500) Transaction costs (234) (542) Net cash used in investing activities (13,081) (20,895) Cash flows from financing activities Lease payments 14 (4,398) (4,763) Proceeds from borrowings – 4,000 Repayment of borrowings – (4,000) Net proceeds from issuance of shares 42,137 57,437 Net cash from financing activities 37,739 52,674 Net increase in cash and cash equivalents 23,994 8,840 Cash and cash equivalents at the beginning of the year 32,152 23,429 Effect of foreign exchange rate changes (1,337) (117) Cash and cash equivalents at the end of the year 9 54,809 32,152 The above consolidated statement of cash flows should be read in conjunction with the accompanying notes to the financial statements. Consolidated statement of cash flows for the year ended 31 December 2024 77Appen 2024 Annual Report For personal use only
Page 80
About this report Note 1. General information The financial statements cover Appen Limited as a Group consisting of Appen Limited and the entities it controlled at the end of, or during, the year. The financial statements are presented in United States (US) dollars, which is the Group’s presentation currency. Appen Limited is a listed public company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of business is: Level 6 9 Help Street Chatswood NSW 2067 The financial statements were authorised for issue, in accordance with a resolution of directors, on 26 February 2025. Note 2. Basis of preparation Statement of compliance These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (AASB) and the Corporations Act 2001 , as appropriate for for-profit oriented entities. These financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board (IASB). Basis of consolidation The financial statements include the assets and liabilities of all subsidiaries in the Group as at 31 December 2024 and the results for all subsidiaries for the year ended 31 December 2024. Inter-entity transactions, with, or between subsidiaries have been eliminated in full on consolidation. The consolidated financial statements provide comparative information in respect of the previous period. Basis of measurement The financial statements have been prepared on a accruals basis and are based on the historical cost convention, except for, derivative financial instruments, investments, earn-out contingent consideration and share-based payments which are measured at fair value. Going concern The financial statements have been prepared on a going concern basis, which contemplates the continuity of normal business activities and the realisation of assets and discharge of liabilities in the normal course of business. The Group incurred a loss after tax for the year ended 31 December 2024 of $20,009,000 (31 December 2023: $118,079,000). The Group incurred a loss after tax for H2 2024 of $2,256,000 an improvement on H1 2024 loss after tax of $17,753,000. The Group has net assets of $114,316,000 (31 December 2023: $92,797,000) and net current assets of $85,314,000 (31 December 2023 $59,095,000). Cash and cash equivalents at 31 December 2024 were $54,809,000 (31 December 2023: $32,152,000). Operating cash outflow for the year was $664,000 (31 December 2023 outflow $22,939,000). Investing cash outflow (including product development costs) for the year was $13,081,000 (31 December 2023 outflow $20,895,000). Financing cash inflow for the year was $37,739,000 (31 December 2023 inflow $52,674,000). Notes to the consolidated financial statements for the year ended 31 December 2024 78 Following the expiry of the $A10,000,000 debt facility on 3 January 2024, there are no debt facilities in place. In response to the termination of the services contract with a material customer, Google LLC in March 2024, Appen implemented and executed measures to reduce its cost base. Appen successfully completed a A$50 million fully underwritten institutional placement on 14 October 2024, and a A$15 million Share Purchase Plan raising on 7 November 2024. The equity was raised to provide additional liquidity to fund working capital, and provide greater flexibility to pursue generative AI related opportunities. Management have prepared 24-month cashflow forecasts underpinning the basis of preparation as a going concern. The forecasts are based on current available information and forecasting improved financial performance as a result of the implementation of the cost savings measures and continued revenue growth from its New Markets segment. The going concern basis presumes that the Group will continue to fulfil all obligations as and when they fall due for the foreseeable future and that the realisation of assets and settlement of liabilities will occur in the normal course of business. After consideration of the Group’s financial position subsequent to the capital raise and the Board reviewed cashflow forecasts noted above, the directors of Appen consider that the Group will continue to fulfil all obligations as and when they fall due for the foreseeable future and that the Group’s financial statements should be prepared on a going concern basis. Critical accounting estimates The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where the assumptions and estimates are significant to the financial statements are disclosed in the relevant note. • Note 7. Income tax • Note 9. Trade and other receivables • Note 12. Intangible assets Parent entity information In accordance with the Corporations Act 2001 , these financial statements present the results of the Group only. Supplementary information about the parent entity is disclosed in Note 26. Change in accounting policies Material accounting policies adopted in the preparation of these financial statements are disclosed in the relevant notes. The accounting policies adopted are consistent with those of the previous years. Current and non ‑current classification Assets and liabilities are presented in the statement of financial position based on current and non-current classification. An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in the Group’s normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within 12 months after the reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period. All other assets are classified as non-current. A liability is classified as current when: it is either expected to be settled in the Group’s normal operating cycle; it is held primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or it does not have the right at the end of the reporting period to defer settlement of the liability for at least 12 months after the reporting period. All other liabilities are classified as non-current. New, revised or amended Accounting Standards The Group has assessed and determined that there are no new or amended accounting standards applicable for the first time for the 31 December 2024 financial report, that materially affects the Group’s accounting policies or any of the amounts recognised in the financial statements. Note 2. Basis of preparation (continued) Notes to the consolidated financial statements for the year ended 31 December 2024 79Appen 2024 Annual Report For personal use only
Page 81
About this report Note 1. General information The financial statements cover Appen Limited as a Group consisting of Appen Limited and the entities it controlled at the end of, or during, the year. The financial statements are presented in United States (US) dollars, which is the Group’s presentation currency. Appen Limited is a listed public company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of business is: Level 6 9 Help Street Chatswood NSW 2067 The financial statements were authorised for issue, in accordance with a resolution of directors, on 26 February 2025. Note 2. Basis of preparation Statement of compliance These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (AASB) and the Corporations Act 2001 , as appropriate for for-profit oriented entities. These financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board (IASB). Basis of consolidation The financial statements include the assets and liabilities of all subsidiaries in the Group as at 31 December 2024 and the results for all subsidiaries for the year ended 31 December 2024. Inter-entity transactions, with, or between subsidiaries have been eliminated in full on consolidation. The consolidated financial statements provide comparative information in respect of the previous period. Basis of measurement The financial statements have been prepared on a accruals basis and are based on the historical cost convention, except for, derivative financial instruments, investments, earn-out contingent consideration and share-based payments which are measured at fair value. Going concern The financial statements have been prepared on a going concern basis, which contemplates the continuity of normal business activities and the realisation of assets and discharge of liabilities in the normal course of business. The Group incurred a loss after tax for the year ended 31 December 2024 of $20,009,000 (31 December 2023: $118,079,000). The Group incurred a loss after tax for H2 2024 of $2,256,000 an improvement on H1 2024 loss after tax of $17,753,000. The Group has net assets of $114,316,000 (31 December 2023: $92,797,000) and net current assets of $85,314,000 (31 December 2023 $59,095,000). Cash and cash equivalents at 31 December 2024 were $54,809,000 (31 December 2023: $32,152,000). Operating cash outflow for the year was $664,000 (31 December 2023 outflow $22,939,000). Investing cash outflow (including product development costs) for the year was $13,081,000 (31 December 2023 outflow $20,895,000). Financing cash inflow for the year was $37,739,000 (31 December 2023 inflow $52,674,000). Notes to the consolidated financial statements for the year ended 31 December 2024 78 Following the expiry of the $A10,000,000 debt facility on 3 January 2024, there are no debt facilities in place. In response to the termination of the services contract with a material customer, Google LLC in March 2024, Appen implemented and executed measures to reduce its cost base. Appen successfully completed a A$50 million fully underwritten institutional placement on 14 October 2024, and a A$15 million Share Purchase Plan raising on 7 November 2024. The equity was raised to provide additional liquidity to fund working capital, and provide greater flexibility to pursue generative AI related opportunities. Management have prepared 24-month cashflow forecasts underpinning the basis of preparation as a going concern. The forecasts are based on current available information and forecasting improved financial performance as a result of the implementation of the cost savings measures and continued revenue growth from its New Markets segment. The going concern basis presumes that the Group will continue to fulfil all obligations as and when they fall due for the foreseeable future and that the realisation of assets and settlement of liabilities will occur in the normal course of business. After consideration of the Group’s financial position subsequent to the capital raise and the Board reviewed cashflow forecasts noted above, the directors of Appen consider that the Group will continue to fulfil all obligations as and when they fall due for the foreseeable future and that the Group’s financial statements should be prepared on a going concern basis. Critical accounting estimates The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where the assumptions and estimates are significant to the financial statements are disclosed in the relevant note. • Note 7. Income tax • Note 9. Trade and other receivables • Note 12. Intangible assets Parent entity information In accordance with the Corporations Act 2001 , these financial statements present the results of the Group only. Supplementary information about the parent entity is disclosed in Note 26. Change in accounting policies Material accounting policies adopted in the preparation of these financial statements are disclosed in the relevant notes. The accounting policies adopted are consistent with those of the previous years. Current and non ‑current classification Assets and liabilities are presented in the statement of financial position based on current and non-current classification. An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in the Group’s normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within 12 months after the reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period. All other assets are classified as non-current. A liability is classified as current when: it is either expected to be settled in the Group’s normal operating cycle; it is held primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or it does not have the right at the end of the reporting period to defer settlement of the liability for at least 12 months after the reporting period. All other liabilities are classified as non-current. New, revised or amended Accounting Standards The Group has assessed and determined that there are no new or amended accounting standards applicable for the first time for the 31 December 2024 financial report, that materially affects the Group’s accounting policies or any of the amounts recognised in the financial statements. Note 2. Basis of preparation (continued) Notes to the consolidated financial statements for the year ended 31 December 2024 79Appen 2024 Annual Report For personal use only
Page 82
Group performance Note 3. Segment information Identification of operating and reportable operating segments Appen’s operating and reportable operating segments are aligned to market opportunities and customer needs. The operating segments are: • The Global Services segment: which represents the services the Group provides to our major US technology customers using their data annotation platforms and tools. • The New Markets segment: which represents our product-led businesses, using Appen’s products and tools conducting work for our Global customers, as well as Enterprise, Government and China businesses. These operating segments are based on the internal reports that are provided to the CEO in his capacity as the Chief Operating Decision Maker (CODM) of the Appen Group, in order to assess performance and growth of the business and to determine where to allocate resources. The CODM reviews a set of financial reports which covers EBITDA (earnings before interest, tax, depreciation and amortisation), underlying EBITDA, revenue and operating segment reports on a monthly basis. The accounting policies adopted for internal reporting to the CEO/CODM are consistent with those adopted in this financial report. Major customers During the year ended 31 December 2024, approximately 67.3% (2023: 74.8%) of the Group’s revenue was derived from sales to the top five customers. Segment results The following tables show revenue and EBITDA for the reportable segments for the year ended 31 December 2024 and 31 December 2023. Global Services New Markets Corporate unallocated Total 31 December 2024 $ 000 $ 000 $ 000 $ 000 Revenue 118,093 116,192 – 234,285 Other income – 557 381 938 Interest – – 482 482 Total revenue and other income 118,093 116,749 863 235,705 Segment EBITDA 14,749 (8,101) 6,648 Share-based payment – employees (3,193) Foreign exchange gains 4,364 Group underlying EBITDA 7,819 Depreciation and amortisation (23,320) Net interest expense (335) Restructure costs (3,039) Acquisition-related and one-time share-based payments (884) Transaction costs (234) Loss before income tax (19,993) Notes to the consolidated financial statements for the year ended 31 December 2024 80 Global Services New Markets Corporate unallocated Total 31 December 2023 $ 000 $ 000 $ 000 $ 000 Revenue 191,533 81,479 – 273,012 Other income – 742 40 782 Interest – – 371 371 Total revenue and other income 191,533 82,221 411 274,165 Segment EBITDA 17, 512 (32,729) (15,217) Share-based payment - employees (4,190) Transformation investment (1,067) Foreign exchange losses (3,971) Group underlying EBITDA (24,445) Depreciation and amortisation (35,147) Net interest expense (805) Restructure costs (8,967) Acquisition-related and one-time share-based payments (1,501) Deemed interest on earn-out liability (354) Earn-out adjustment 15,994 Transaction costs (542) Impairment loss (69,182) Loss before income tax (124,949) Geographical information Revenue Non-current assets 2024 2023 2024 2023 $ 000 $ 000 $ 000 $ 000 Australia 19,513 13,471 7, 351 9,767 United States of America 146,485 215,584 21,452 28,678 Other countries 68,287 43,957 12,613 9,962 Total 234,285 273,012 41,416 48,407 Geographical information is represented based on the location of the legal entities who possess the ownership of the assets and the customer contracts. The prior period information has been reclassified to conform with this representation and enable comparability. Note 3. Segment information (continued) Notes to the consolidated financial statements for the year ended 31 December 2024 81Appen 2024 Annual Report For personal use only
Page 83
Group performance Note 3. Segment information Identification of operating and reportable operating segments Appen’s operating and reportable operating segments are aligned to market opportunities and customer needs. The operating segments are: • The Global Services segment: which represents the services the Group provides to our major US technology customers using their data annotation platforms and tools. • The New Markets segment: which represents our product-led businesses, using Appen’s products and tools conducting work for our Global customers, as well as Enterprise, Government and China businesses. These operating segments are based on the internal reports that are provided to the CEO in his capacity as the Chief Operating Decision Maker (CODM) of the Appen Group, in order to assess performance and growth of the business and to determine where to allocate resources. The CODM reviews a set of financial reports which covers EBITDA (earnings before interest, tax, depreciation and amortisation), underlying EBITDA, revenue and operating segment reports on a monthly basis. The accounting policies adopted for internal reporting to the CEO/CODM are consistent with those adopted in this financial report. Major customers During the year ended 31 December 2024, approximately 67.3% (2023: 74.8%) of the Group’s revenue was derived from sales to the top five customers. Segment results The following tables show revenue and EBITDA for the reportable segments for the year ended 31 December 2024 and 31 December 2023. Global Services New Markets Corporate unallocated Total 31 December 2024 $ 000 $ 000 $ 000 $ 000 Revenue 118,093 116,192 – 234,285 Other income – 557 381 938 Interest – – 482 482 Total revenue and other income 118,093 116,749 863 235,705 Segment EBITDA 14,749 (8,101) 6,648 Share-based payment – employees (3,193) Foreign exchange gains 4,364 Group underlying EBITDA 7,819 Depreciation and amortisation (23,320) Net interest expense (335) Restructure costs (3,039) Acquisition-related and one-time share-based payments (884) Transaction costs (234) Loss before income tax (19,993) Notes to the consolidated financial statements for the year ended 31 December 2024 80 Global Services New Markets Corporate unallocated Total 31 December 2023 $ 000 $ 000 $ 000 $ 000 Revenue 191,533 81,479 – 273,012 Other income – 742 40 782 Interest – – 371 371 Total revenue and other income 191,533 82,221 411 274,165 Segment EBITDA 17, 512 (32,729) (15,217) Share-based payment - employees (4,190) Transformation investment (1,067) Foreign exchange losses (3,971) Group underlying EBITDA (24,445) Depreciation and amortisation (35,147) Net interest expense (805) Restructure costs (8,967) Acquisition-related and one-time share-based payments (1,501) Deemed interest on earn-out liability (354) Earn-out adjustment 15,994 Transaction costs (542) Impairment loss (69,182) Loss before income tax (124,949) Geographical information Revenue Non-current assets 2024 2023 2024 2023 $ 000 $ 000 $ 000 $ 000 Australia 19,513 13,471 7, 351 9,767 United States of America 146,485 215,584 21,452 28,678 Other countries 68,287 43,957 12,613 9,962 Total 234,285 273,012 41,416 48,407 Geographical information is represented based on the location of the legal entities who possess the ownership of the assets and the customer contracts. The prior period information has been reclassified to conform with this representation and enable comparability. Note 3. Segment information (continued) Notes to the consolidated financial statements for the year ended 31 December 2024 81Appen 2024 Annual Report For personal use only
Page 84
Note 4. Revenue Revenue is disaggregated by the type of service and whether the revenue is derived from usage of our products and tools (New Markets) or the customers’ own platform (Global Services). Global Services New Markets Corporate unallocated Total 31 December 2024 $ 000 $ 000 $ 000 $ 000 Global customers 118,093 31,292 – 149,385 New Markets customers – 84,900 – 84,900 Total revenue 118,093 116,192 – 234,285 31 December 2023 Global customers 191,533 9,721 – 201,254 New Markets customers – 71,758 – 71,758 Total revenue 191,533 81,479 – 273,012 Accounting policy Revenue from contracts with customers Revenue is recognised when control of the goods or services is transferred to the customer and the contract performance obligation is satisfied. Appen derives most of its revenue from two distinct performance obligations, being: • providing platform and tools for subscription customers for a specified period of time; and • delivering collected, annotated and evaluated data. Revenue is recognised over time as the customer receives and uses the services, and as the required data is delivered and accepted by the customer. Stage of completion method is applied where transactions involving the rendering of services is determined by reference to the services performed to date as a percentage of total services to be performed. The amount of revenue recognised is based on the sales prices specified in the contract net of discounts, rebates and refunds, which are variable consideration involving a degree of estimation. Such estimates are determined using either the ‘expected value’ or ‘most likely amount’ method. The measurement of variable consideration is subject to a constraining principle whereby revenue will only be recognised to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur. There is no significant financing component and the credit terms are primarily between 30 to 60 days. Contact assets and liabilities The Group recognises unbilled revenue as contract assets as disclosed in Note 11 and deferred revenue as contract liabilities as disclosed in Note 17. Other income Other income primarily relates to China business obtained government subsidies and is recognised at the time of completion or over period when service is provided and satisfies the performance obligation. Interest income Interest income is recognised on a time proportion basis, by reference to the principal outstanding and the effective interest rate applicable, which is the rate that discounts estimated future cash receipts through the expected life of the financial asset to the assets’ net carrying value. Notes to the consolidated financial statements for the year ended 31 December 2024 82 Note 5. Expenses Loss before income tax includes the following specific expenses: 2024 2023 Depreciation and amortisation $ 000 $ 000 Depreciation Leasehold improvements 391 389 Fixtures and fittings 35 54 Computer and audio equipment 619 1,484 Motor vehicles – 35 Right of use assets 1,848 4,301 Depreciation subtotal 2,893 6,263 Amortisation Systems and software 113 163 Capitalised product development 11,846 19,776 Other intangibles 257 324 Amortisation subtotal 12,216 20,263 Amortisation – acquisition-related Capitalised product development 8,118 8,516 Brand 93 105 Amortisation - acquisition-related subtotal 8,211 8,621 Total depreciation and amortisation 23,320 35,147 Finance costs Interest and finance charges paid/payable on borrowings 15 435 Interest and finance charges paid/payable on lease liabilities 802 741 Interest and finance charges subtotal 817 1,176 Deemed interest on earn-out liability – 354 Total finance costs 817 1,530 Share-based payments expense Share-based payment in respect of Appen performance rights 3,193 4,190 Share-based payment in respect of the Quadrant acquisition and one-time sign-on arrangement 1 884 1,501 Total share-based payments expense 4,077 5,691 Transaction costs Non-capitalised equity raising costs 41 481 Other transaction costs 193 61 Total transaction costs 234 542 Employee expenses Defined contribution superannuation expense 5,621 6,090 Employee expenses 64,806 77,435 Total employee expenses 70,427 83,525 1 Includes former CEO one-off sign-on bonus, in receipt of bonuses forgone and was intended to replace a portion of the bonus payments that the former CEO would have received from his previous employer had he not ceased employment. Notes to the consolidated financial statements for the year ended 31 December 2024 83Appen 2024 Annual Report For personal use only
Page 85
Note 4. Revenue Revenue is disaggregated by the type of service and whether the revenue is derived from usage of our products and tools (New Markets) or the customers’ own platform (Global Services). Global Services New Markets Corporate unallocated Total 31 December 2024 $ 000 $ 000 $ 000 $ 000 Global customers 118,093 31,292 – 149,385 New Markets customers – 84,900 – 84,900 Total revenue 118,093 116,192 – 234,285 31 December 2023 Global customers 191,533 9,721 – 201,254 New Markets customers – 71,758 – 71,758 Total revenue 191,533 81,479 – 273,012 Accounting policy Revenue from contracts with customers Revenue is recognised when control of the goods or services is transferred to the customer and the contract performance obligation is satisfied. Appen derives most of its revenue from two distinct performance obligations, being: • providing platform and tools for subscription customers for a specified period of time; and • delivering collected, annotated and evaluated data. Revenue is recognised over time as the customer receives and uses the services, and as the required data is delivered and accepted by the customer. Stage of completion method is applied where transactions involving the rendering of services is determined by reference to the services performed to date as a percentage of total services to be performed. The amount of revenue recognised is based on the sales prices specified in the contract net of discounts, rebates and refunds, which are variable consideration involving a degree of estimation. Such estimates are determined using either the ‘expected value’ or ‘most likely amount’ method. The measurement of variable consideration is subject to a constraining principle whereby revenue will only be recognised to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur. There is no significant financing component and the credit terms are primarily between 30 to 60 days. Contact assets and liabilities The Group recognises unbilled revenue as contract assets as disclosed in Note 11 and deferred revenue as contract liabilities as disclosed in Note 17. Other income Other income primarily relates to China business obtained government subsidies and is recognised at the time of completion or over period when service is provided and satisfies the performance obligation. Interest income Interest income is recognised on a time proportion basis, by reference to the principal outstanding and the effective interest rate applicable, which is the rate that discounts estimated future cash receipts through the expected life of the financial asset to the assets’ net carrying value. Notes to the consolidated financial statements for the year ended 31 December 2024 82 Note 5. Expenses Loss before income tax includes the following specific expenses: 2024 2023 Depreciation and amortisation $ 000 $ 000 Depreciation Leasehold improvements 391 389 Fixtures and fittings 35 54 Computer and audio equipment 619 1,484 Motor vehicles – 35 Right of use assets 1,848 4,301 Depreciation subtotal 2,893 6,263 Amortisation Systems and software 113 163 Capitalised product development 11,846 19,776 Other intangibles 257 324 Amortisation subtotal 12,216 20,263 Amortisation – acquisition-related Capitalised product development 8,118 8,516 Brand 93 105 Amortisation - acquisition-related subtotal 8,211 8,621 Total depreciation and amortisation 23,320 35,147 Finance costs Interest and finance charges paid/payable on borrowings 15 435 Interest and finance charges paid/payable on lease liabilities 802 741 Interest and finance charges subtotal 817 1,176 Deemed interest on earn-out liability – 354 Total finance costs 817 1,530 Share-based payments expense Share-based payment in respect of Appen performance rights 3,193 4,190 Share-based payment in respect of the Quadrant acquisition and one-time sign-on arrangement 1 884 1,501 Total share-based payments expense 4,077 5,691 Transaction costs Non-capitalised equity raising costs 41 481 Other transaction costs 193 61 Total transaction costs 234 542 Employee expenses Defined contribution superannuation expense 5,621 6,090 Employee expenses 64,806 77,435 Total employee expenses 70,427 83,525 1 Includes former CEO one-off sign-on bonus, in receipt of bonuses forgone and was intended to replace a portion of the bonus payments that the former CEO would have received from his previous employer had he not ceased employment. Notes to the consolidated financial statements for the year ended 31 December 2024 83Appen 2024 Annual Report For personal use only
Page 86
Accounting policy Depreciation expense Depreciation is calculated on a straight-line basis to write-off the net cost of each item of property, plant and equipment (excluding land) over their expected useful lives. Amortisation expense Amortisation is calculated to write-off the cost of intangible assets less their estimated residual values using the straight-line method over their estimated useful lives and is recognised in profit or loss. Goodwill is not amortised. Finance costs All finance costs are expensed in the period in which they are incurred. Share-based payments expense All share-based payments are expensed over the relevant vesting period. The share-based payments expense is based on expected targets and hurdles. Employee expenses Includes all short-term employee benefits (wages, paid leave and any non-monetary benefits), post-employment benefits and other long-term or termination employee benefits. Note 5. Expenses (continued) Notes to the consolidated financial statements for the year ended 31 December 2024 84 Note 6. Earnings per share and dividends 2024 2023 $ 000 $ 000 Loss after income tax (20,009) (118,079) Number Number Weighted average number of ordinary shares used in calculating basic earnings per share 228,916,641 142,087,928 Adjustments for calculation of diluted earnings per share: Rights over ordinary shares –1 – Weighted average number of ordinary shares used in calculating diluted earnings per share 228,916,641 142,087,928 Cent Cent Basic earnings per share (8.74) (83.10) Diluted earnings per share (8.74) (83.10) 1 Whilst there are unvested performance rights at 31 December 2024, potential ordinary shares are antidilutive when their conversion to ordinary shares would increase earnings per share or decrease loss per share. The calculation of diluted earnings per share does not assume exercise of the performance rights, or issue of potential ordinary shares that would have an antidilutive effect on earnings per share. No dividends have been declared or paid during the year. Accounting policy Basic earnings per share is calculated by dividing the profit or loss attributable to the owners of the Group excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year. Diluted earnings per share adjusts the basic earnings per share to take into account the after tax effect of interest and other financing costs associated with dilutive positive ordinary shares and the weighted average number of shares assumed to have been issued for consideration in relation to dilutive potential ordinary shares. Notes to the consolidated financial statements for the year ended 31 December 2024 85Appen 2024 Annual Report For personal use only
Page 87
Accounting policy Depreciation expense Depreciation is calculated on a straight-line basis to write-off the net cost of each item of property, plant and equipment (excluding land) over their expected useful lives. Amortisation expense Amortisation is calculated to write-off the cost of intangible assets less their estimated residual values using the straight-line method over their estimated useful lives and is recognised in profit or loss. Goodwill is not amortised. Finance costs All finance costs are expensed in the period in which they are incurred. Share-based payments expense All share-based payments are expensed over the relevant vesting period. The share-based payments expense is based on expected targets and hurdles. Employee expenses Includes all short-term employee benefits (wages, paid leave and any non-monetary benefits), post-employment benefits and other long-term or termination employee benefits. Note 5. Expenses (continued) Notes to the consolidated financial statements for the year ended 31 December 2024 84 Note 6. Earnings per share and dividends 2024 2023 $ 000 $ 000 Loss after income tax (20,009) (118,079) Number Number Weighted average number of ordinary shares used in calculating basic earnings per share 228,916,641 142,087,928 Adjustments for calculation of diluted earnings per share: Rights over ordinary shares –1 – Weighted average number of ordinary shares used in calculating diluted earnings per share 228,916,641 142,087,928 Cent Cent Basic earnings per share (8.74) (83.10) Diluted earnings per share (8.74) (83.10) 1 Whilst there are unvested performance rights at 31 December 2024, potential ordinary shares are antidilutive when their conversion to ordinary shares would increase earnings per share or decrease loss per share. The calculation of diluted earnings per share does not assume exercise of the performance rights, or issue of potential ordinary shares that would have an antidilutive effect on earnings per share. No dividends have been declared or paid during the year. Accounting policy Basic earnings per share is calculated by dividing the profit or loss attributable to the owners of the Group excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year. Diluted earnings per share adjusts the basic earnings per share to take into account the after tax effect of interest and other financing costs associated with dilutive positive ordinary shares and the weighted average number of shares assumed to have been issued for consideration in relation to dilutive potential ordinary shares. Notes to the consolidated financial statements for the year ended 31 December 2024 85Appen 2024 Annual Report For personal use only
Page 88
Note 7. Income tax 2024 2023 $ 000 $ 000 Income tax expense/(benefit) Current tax (benefit)/expense (254) 432 Deferred tax expense/(benefit) 131 (5,206) Adjustment recognised for prior periods – current tax 139 (665) Adjustment recognised for prior periods – deferred tax – (1,431) Income tax expense/(benefit) 16 (6,870) Deferred tax included in income tax expense/(benefit) comprises: Decrease in deferred tax assets 288 3,523 Decrease in deferred tax liabilities (158) (10,160) Deferred tax - origination and reversal of temporary differences 130 (6,637) Numerical reconciliation of income tax benefit and tax at the statutory rate Loss before income tax expense (19,993) (124,949) Tax at the statutory tax rate of 30% (5,998) (37,485) Tax effect amounts which are not deductible/(taxable) in calculating taxable (loss)/income: Impairment loss (81) 12,485 Share-based payments – 472 Deferred tax adjustments 5,901 21,562 Non-assessable purchase price adjustments on prior acquisitions – (4,773) Sundry items and exchange differences (67) – Adjustment recognised for prior periods 139 (2,096) Difference in overseas tax rates 122 2,965 Income tax expense/(benefit) 16 (6,870) 2024 2023 $000 $000 Deferred tax assets Deferred tax asset comprises temporary differences attributable to: Amount recognised in profit or loss: Lease liabilities 129 13 Revenue received in advance (641) 5 Employee benefits 591 388 Accrued expenses 76 112 Other expenses and exchange differences 2,154 1,973 Deferred tax assets 2,309 2,491 Movement: Opening balance 2,491 5,078 Debited to profit or loss (288) (3,523) Additions through capital raising 336 1,019 Foreign exchange differences (230) (83) Closing balance 2,309 2,491 Notes to the consolidated financial statements for the year ended 31 December 2024 86 2024 2023 $ 000 $ 000 Deferred tax liability Deferred tax liability comprises temporary differences attributable to: Amount recognised in profit or loss: Intangible assets 6,960 10,061 Property, plant and equipment – (541) Right of use assets 32 (1,694) Lease liabilities (525) (689) Revenue received in advance 1,203 1,203 Employee benefits (2,405) (2,243) Other expenses and exchange differences (628) (1,007) Deferred tax liability 4,637 5,090 Movement Opening balance 5,090 15,270 Debited to profit or loss (158) (10,160) Foreign exchange differences (295) (20) Closing balance 4,637 5,090 China tax losses to be applied in future periods amount to $32 million, of which none have been recognised as a deferred tax asset. US tax losses to be applied in future periods amounts to $96 million, of which none have been recognised as a deferred tax asset. Accounting policy Deferred tax Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for: • temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss; • temporary differences related to investments in subsidiaries, associates and joint arrangements to the extent that the Group is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future; and • taxable temporary differences arising on the initial recognition of goodwill. Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax assets against current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to the same taxable authority on either the same taxable entity or different taxable entities which intend to settle simultaneously. Appen Limited (the ‘head entity’) and its wholly-owned Australian subsidiaries have formed an income tax consolidated group under the tax consolidation regime. The head entity and each subsidiary in the tax consolidated group continue to account for their own current and deferred tax amounts. The tax consolidated group has applied the ‘separate taxpayer within group’ approach in determining the appropriate amount of taxes to allocate to members of the tax consolidated group. Note 7. Income tax (continued) Notes to the consolidated financial statements for the year ended 31 December 2024 87Appen 2024 Annual Report For personal use only
Page 89
Note 7. Income tax 2024 2023 $ 000 $ 000 Income tax expense/(benefit) Current tax (benefit)/expense (254) 432 Deferred tax expense/(benefit) 131 (5,206) Adjustment recognised for prior periods – current tax 139 (665) Adjustment recognised for prior periods – deferred tax – (1,431) Income tax expense/(benefit) 16 (6,870) Deferred tax included in income tax expense/(benefit) comprises: Decrease in deferred tax assets 288 3,523 Decrease in deferred tax liabilities (158) (10,160) Deferred tax - origination and reversal of temporary differences 130 (6,637) Numerical reconciliation of income tax benefit and tax at the statutory rate Loss before income tax expense (19,993) (124,949) Tax at the statutory tax rate of 30% (5,998) (37,485) Tax effect amounts which are not deductible/(taxable) in calculating taxable (loss)/income: Impairment loss (81) 12,485 Share-based payments – 472 Deferred tax adjustments 5,901 21,562 Non-assessable purchase price adjustments on prior acquisitions – (4,773) Sundry items and exchange differences (67) – Adjustment recognised for prior periods 139 (2,096) Difference in overseas tax rates 122 2,965 Income tax expense/(benefit) 16 (6,870) 2024 2023 $000 $000 Deferred tax assets Deferred tax asset comprises temporary differences attributable to: Amount recognised in profit or loss: Lease liabilities 129 13 Revenue received in advance (641) 5 Employee benefits 591 388 Accrued expenses 76 112 Other expenses and exchange differences 2,154 1,973 Deferred tax assets 2,309 2,491 Movement: Opening balance 2,491 5,078 Debited to profit or loss (288) (3,523) Additions through capital raising 336 1,019 Foreign exchange differences (230) (83) Closing balance 2,309 2,491 Notes to the consolidated financial statements for the year ended 31 December 2024 86 2024 2023 $ 000 $ 000 Deferred tax liability Deferred tax liability comprises temporary differences attributable to: Amount recognised in profit or loss: Intangible assets 6,960 10,061 Property, plant and equipment – (541) Right of use assets 32 (1,694) Lease liabilities (525) (689) Revenue received in advance 1,203 1,203 Employee benefits (2,405) (2,243) Other expenses and exchange differences (628) (1,007) Deferred tax liability 4,637 5,090 Movement Opening balance 5,090 15,270 Debited to profit or loss (158) (10,160) Foreign exchange differences (295) (20) Closing balance 4,637 5,090 China tax losses to be applied in future periods amount to $32 million, of which none have been recognised as a deferred tax asset. US tax losses to be applied in future periods amounts to $96 million, of which none have been recognised as a deferred tax asset. Accounting policy Deferred tax Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for: • temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss; • temporary differences related to investments in subsidiaries, associates and joint arrangements to the extent that the Group is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future; and • taxable temporary differences arising on the initial recognition of goodwill. Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax assets against current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to the same taxable authority on either the same taxable entity or different taxable entities which intend to settle simultaneously. Appen Limited (the ‘head entity’) and its wholly-owned Australian subsidiaries have formed an income tax consolidated group under the tax consolidation regime. The head entity and each subsidiary in the tax consolidated group continue to account for their own current and deferred tax amounts. The tax consolidated group has applied the ‘separate taxpayer within group’ approach in determining the appropriate amount of taxes to allocate to members of the tax consolidated group. Note 7. Income tax (continued) Notes to the consolidated financial statements for the year ended 31 December 2024 87Appen 2024 Annual Report For personal use only
Page 90
Critical accounting judgements, estimates and assumptions – uncertain tax positions The Group is subject to tax in numerous jurisdictions. Significant judgement is required in determining the provision for income tax. There are certain transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. The Group recognises liabilities for any anticipated tax audit issues based on the Group’s current understanding of the application of the tax law. Where the final tax outcome of these matters is different from the carrying amounts, such differences will impact on the current and deferred tax positions in the period that such a determination is made. Recoverability of deferred tax assets Deferred tax assets are recognised for deductible temporary differences and net losses only if the Group considers it is probable that future taxable amounts will be available to utilise those temporary differences and losses. In addition to its own current and deferred tax amounts, the head entity also recognises the current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from each subsidiary in the tax consolidated group. Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as amounts receivable from or payable to other entities in the tax consolidated group. The tax funding arrangement ensures that the intercompany charge equals the current tax liability or benefit of each tax consolidated group member, resulting in neither a contribution by the head entity to the subsidiaries nor a distribution by the subsidiaries to the head entity. Note 7. Income tax (continued) Notes to the consolidated financial statements for the year ended 31 December 2024 88 Note 8. Reconciliation of loss after income tax to net cash from operating activities 2024 2023 Note $ 000 $ 000 Loss after income tax for the year (20,009) (118,079) Add back/(deduct): Income tax expense/(benefit) 7 16 (6,870) Depreciation and amortisation 5 23,320 35,147 Finance costs 5 817 1,176 Impairment of non-financial assets – 69,182 Share-based payments expense 5 4,077 5,691 Gain on disposal of non-financial assets (222) (39) Deemed interest on earn-out liability – 354 Earn-out adjustment – (15,994) Transaction costs 5 234 542 Loss on inventory revaluation – 669 Effect of foreign exchange rate changes (7,122) 1,805 Other non-cash items – (202) Change in operating assets and liabilities: (Increase) / decrease in: Trade and other receivables and contract assets (967) 29,261 Inventory 135 (420) Prepayments and other assets (137) (2,307) Increase / (decrease) in: Trade and other payables 713 (14,599) Provisions (596) (1,187) Contract liabilities (855) (7, 595) Income tax received (net) (68) 526 Net cash used in operating activities (664) (22,939) Cash flows are presented on a gross basis unless otherwise specified. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the tax authority are presented as operating cash flows. Notes to the consolidated financial statements for the year ended 31 December 2024 89Appen 2024 Annual Report For personal use only
Page 91
Critical accounting judgements, estimates and assumptions – uncertain tax positions The Group is subject to tax in numerous jurisdictions. Significant judgement is required in determining the provision for income tax. There are certain transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. The Group recognises liabilities for any anticipated tax audit issues based on the Group’s current understanding of the application of the tax law. Where the final tax outcome of these matters is different from the carrying amounts, such differences will impact on the current and deferred tax positions in the period that such a determination is made. Recoverability of deferred tax assets Deferred tax assets are recognised for deductible temporary differences and net losses only if the Group considers it is probable that future taxable amounts will be available to utilise those temporary differences and losses. In addition to its own current and deferred tax amounts, the head entity also recognises the current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from each subsidiary in the tax consolidated group. Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as amounts receivable from or payable to other entities in the tax consolidated group. The tax funding arrangement ensures that the intercompany charge equals the current tax liability or benefit of each tax consolidated group member, resulting in neither a contribution by the head entity to the subsidiaries nor a distribution by the subsidiaries to the head entity. Note 7. Income tax (continued) Notes to the consolidated financial statements for the year ended 31 December 2024 88 Note 8. Reconciliation of loss after income tax to net cash from operating activities 2024 2023 Note $ 000 $ 000 Loss after income tax for the year (20,009) (118,079) Add back/(deduct): Income tax expense/(benefit) 7 16 (6,870) Depreciation and amortisation 5 23,320 35,147 Finance costs 5 817 1,176 Impairment of non-financial assets – 69,182 Share-based payments expense 5 4,077 5,691 Gain on disposal of non-financial assets (222) (39) Deemed interest on earn-out liability – 354 Earn-out adjustment – (15,994) Transaction costs 5 234 542 Loss on inventory revaluation – 669 Effect of foreign exchange rate changes (7,122) 1,805 Other non-cash items – (202) Change in operating assets and liabilities: (Increase) / decrease in: Trade and other receivables and contract assets (967) 29,261 Inventory 135 (420) Prepayments and other assets (137) (2,307) Increase / (decrease) in: Trade and other payables 713 (14,599) Provisions (596) (1,187) Contract liabilities (855) (7, 595) Income tax received (net) (68) 526 Net cash used in operating activities (664) (22,939) Cash flows are presented on a gross basis unless otherwise specified. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the tax authority are presented as operating cash flows. Notes to the consolidated financial statements for the year ended 31 December 2024 89Appen 2024 Annual Report For personal use only
Page 92
Group core assets and liabilities Note 9. Cash and cash equivalents 2024 2023 $ 000 $ 000 Cash on hand and at bank 54,809 32,152 Total cash and cash equivalents 54,809 32,152 Accounting policy Cash and cash equivalents include cash on hand, deposits held at call with financial institutions, and other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Note 10. Trade and other receivables 2024 2023 $ 000 $ 000 Current assets Trade receivables 46,817 47,869 Provision for expected credit loss (1,453) (152) Net trade receivables 45,364 47,717 Other receivables 430 1,580 GST/VAT receivable 925 636 Total trade and other receivables 46,719 49,933 Ageing of trade receivables Days past due $000 Current < 3 months 3 – 6 months > 6 months Total As at 31 December 2024 Gross carrying amount 32,999 10,618 758 2,442 46,817 Provision for expected credit loss – – – (1,453) (1,453) As at 31 December 2023 Gross carrying amount 33,969 12,524 628 748 47,869 Provision for expected credit loss – – – (152) (152) Movement in the provision for expected credit loss: 2024 2023 $ 000 $ 000 Balance at the beginning of the period 152 288 Increase in provision 1,325 188 Charged to profit or loss (24) (324) Balance at the end of the period 1,453 152 Notes to the consolidated financial statements for the year ended 31 December 2024 90 Accounting policy Trade receivables are initially recognised at fair value. Trade receivables are generally due for settlement within 30–60 days. A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms. Management is of the view that past models and historical experience may not represent current expectations, and greater reliance is placed on up-to-date information about the circumstances about each debtor. Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the tax authority is included in other receivables or other payables in the statement of financial position. Other receivables are recognised at amortised cost, less any provision for impairment. Critical accounting judgements, estimates and assumptions – expected credit losses The provision for expected credit losses assessment requires a degree of estimation and judgement, based on review and circumstances of each amount overdue including recent sales experience and historical collection rates and forward-looking information that is available. Note 11. Contract assets 2024 2023 $ 000 $ 000 Current assets Contract assets 19,717 15,536 Movement during the period: Balance at the beginning of the period 15,536 30,448 Contract asset recognised 84,452 64,461 Subsequent release to billing and receivables for the year (79,998) (79,311) Foreign currency translation (273) (62) Balance at the end of the period 19,717 15,536 Accounting policy Revenue is recognised at the amount to which the Group has the right to invoice based on the contract price and completed performance obligations. Where revenue recognised is in advance of billings (due to timing differences in the Group reporting period and customer billing cycle), a contract asset is recognised; and where cash received or billing issued are in advance of revenue recognition, a contract liability is recognised. Note 10. Trade and other receivables (continued) Notes to the consolidated financial statements for the year ended 31 December 2024 91Appen 2024 Annual Report For personal use only
Page 93
Group core assets and liabilities Note 9. Cash and cash equivalents 2024 2023 $ 000 $ 000 Cash on hand and at bank 54,809 32,152 Total cash and cash equivalents 54,809 32,152 Accounting policy Cash and cash equivalents include cash on hand, deposits held at call with financial institutions, and other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Note 10. Trade and other receivables 2024 2023 $ 000 $ 000 Current assets Trade receivables 46,817 47,869 Provision for expected credit loss (1,453) (152) Net trade receivables 45,364 47,717 Other receivables 430 1,580 GST/VAT receivable 925 636 Total trade and other receivables 46,719 49,933 Ageing of trade receivables Days past due $000 Current < 3 months 3 – 6 months > 6 months Total As at 31 December 2024 Gross carrying amount 32,999 10,618 758 2,442 46,817 Provision for expected credit loss – – – (1,453) (1,453) As at 31 December 2023 Gross carrying amount 33,969 12,524 628 748 47,869 Provision for expected credit loss – – – (152) (152) Movement in the provision for expected credit loss: 2024 2023 $ 000 $ 000 Balance at the beginning of the period 152 288 Increase in provision 1,325 188 Charged to profit or loss (24) (324) Balance at the end of the period 1,453 152 Notes to the consolidated financial statements for the year ended 31 December 2024 90 Accounting policy Trade receivables are initially recognised at fair value. Trade receivables are generally due for settlement within 30–60 days. A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms. Management is of the view that past models and historical experience may not represent current expectations, and greater reliance is placed on up-to-date information about the circumstances about each debtor. Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the tax authority is included in other receivables or other payables in the statement of financial position. Other receivables are recognised at amortised cost, less any provision for impairment. Critical accounting judgements, estimates and assumptions – expected credit losses The provision for expected credit losses assessment requires a degree of estimation and judgement, based on review and circumstances of each amount overdue including recent sales experience and historical collection rates and forward-looking information that is available. Note 11. Contract assets 2024 2023 $ 000 $ 000 Current assets Contract assets 19,717 15,536 Movement during the period: Balance at the beginning of the period 15,536 30,448 Contract asset recognised 84,452 64,461 Subsequent release to billing and receivables for the year (79,998) (79,311) Foreign currency translation (273) (62) Balance at the end of the period 19,717 15,536 Accounting policy Revenue is recognised at the amount to which the Group has the right to invoice based on the contract price and completed performance obligations. Where revenue recognised is in advance of billings (due to timing differences in the Group reporting period and customer billing cycle), a contract asset is recognised; and where cash received or billing issued are in advance of revenue recognition, a contract liability is recognised. Note 10. Trade and other receivables (continued) Notes to the consolidated financial statements for the year ended 31 December 2024 91Appen 2024 Annual Report For personal use only
Page 94
Note 12. Intangible assets Goodwill System and software Capitalised product development Brand and customer relationship Other intangibles Total $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Balance at 1 January 2024 Cost 242,051 2,856 151,068 1,089 2,340 399,404 Accumulated depreciation and impairment (242,051) (2,277) (113,369) (825) (1,012) (359,534) Net carrying value at 1 January 2024 – 579 37,699 264 1,328 39,870 Additions – 11 11,309 – – 11,320 Amortisation – (113) (19,964) (93) (257) (20,427) Foreign exchange translation – – (498) (23) (67) (588) Balance at 31 December 2024 Cost 242,051 2,783 161,311 1,045 2,184 409,374 Accumulated amortisation and impairment (242,051) (2,306) (132,765) (897) (1,180) (379,199) Net carrying value at 31 December 2024 – 477 28,546 148 1,004 30,175 Balance at 1 January 2023 Net carrying value 53,114 994 53,516 369 1,567 109,560 Additions – 173 17,825 – 159 18,157 Disposals – (6) – – – (6) Impairment (53,114) (399) (5,264) – (74) (58,851) Transfers / reclassification – 43 (43) – – – Amortisation – (163) (28,292) (105) (324) (28,884) Foreign exchange translation – (63) (43) – – (106) Balance at 31 December 2023 Net carrying value – 579 37,699 264 1,328 39,870 Management’s impairment assessment At each reporting period, an assessment of the carrying value of non-current assets is performed. AASB 136: Impairment of Assets , requires an entity to perform a detailed recoverable amount assessment for an asset when any of the following impairment indicators are present: • There are observable indications that an asset’s value has declined during the period more than that which would be expected as a result of the passage of time or normal use; • Technological, market, economic, or legal environment in which the entity operates has changed or will change with adverse impact on the entity; • Market interest rates or other market rates of return on investments have increased during the period and are likely to have an impact on discount rates; • Carrying amount of the net assets of the entity is more than its market capitalisation; • Evidence that assets are obsolete or physically damaged; • Significant changes with an adverse impact on the entity have taken place during the period impacting the manner or extent to which an asset is used or expected to be used (restructure etc); or • Evidence is available from internal reporting that indicates that the economic performance of an asset is, or will be, worse than expected. Notes to the consolidated financial statements for the year ended 31 December 2024 92 In addition to the above, Goodwill and indefinite life intangible assets (whether in-use or not ready for-use) must be tested, at least annually, for impairment. For the year ended 31 December 2024, management assessed that the Group continued to have 3 Cash Generating Units (CGUs), Global Services, New Markets (ex. China) and China, on the basis of: • How cashflows are identified and measured; and • How resources are allocated and performance are measured, consistent with Appen’s long-term strategy of revenue and customer diversification. For the year ended 31 December 2024, management has not identified any indicators of impairment. Critical accounting judgements, estimates and assumptions Capitalisation of product development costs The Group uses a degree of judgement in order to determine if product development costs satisfy the recognition and measurement criteria to be capitalised as an asset in accordance with AASB 138 Intangible Assets. This includes the use of Appen’s project management system to tag each project undertaken by the engineering team, as either new feature development or maintenance. Impairment of non ‑financial assets other than goodwill and other indefinite life intangible assets The Group assesses impairment of non-financial assets other than goodwill and other indefinite life intangible assets for each cash-generating unit at each reporting date by evaluating conditions specific to the Group and to the particular asset that may lead to impairment. If an impairment trigger exists, the recoverable amount of the asset is determined. This involves fair value less costs of disposal or value-in-use calculations, which incorporate a number of key estimates and assumptions. Note 12. Intangible assets (continued) Notes to the consolidated financial statements for the year ended 31 December 2024 93Appen 2024 Annual Report For personal use only
Page 95
Note 12. Intangible assets Goodwill System and software Capitalised product development Brand and customer relationship Other intangibles Total $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Balance at 1 January 2024 Cost 242,051 2,856 151,068 1,089 2,340 399,404 Accumulated depreciation and impairment (242,051) (2,277) (113,369) (825) (1,012) (359,534) Net carrying value at 1 January 2024 – 579 37,699 264 1,328 39,870 Additions – 11 11,309 – – 11,320 Amortisation – (113) (19,964) (93) (257) (20,427) Foreign exchange translation – – (498) (23) (67) (588) Balance at 31 December 2024 Cost 242,051 2,783 161,311 1,045 2,184 409,374 Accumulated amortisation and impairment (242,051) (2,306) (132,765) (897) (1,180) (379,199) Net carrying value at 31 December 2024 – 477 28,546 148 1,004 30,175 Balance at 1 January 2023 Net carrying value 53,114 994 53,516 369 1,567 109,560 Additions – 173 17,825 – 159 18,157 Disposals – (6) – – – (6) Impairment (53,114) (399) (5,264) – (74) (58,851) Transfers / reclassification – 43 (43) – – – Amortisation – (163) (28,292) (105) (324) (28,884) Foreign exchange translation – (63) (43) – – (106) Balance at 31 December 2023 Net carrying value – 579 37,699 264 1,328 39,870 Management’s impairment assessment At each reporting period, an assessment of the carrying value of non-current assets is performed. AASB 136: Impairment of Assets , requires an entity to perform a detailed recoverable amount assessment for an asset when any of the following impairment indicators are present: • There are observable indications that an asset’s value has declined during the period more than that which would be expected as a result of the passage of time or normal use; • Technological, market, economic, or legal environment in which the entity operates has changed or will change with adverse impact on the entity; • Market interest rates or other market rates of return on investments have increased during the period and are likely to have an impact on discount rates; • Carrying amount of the net assets of the entity is more than its market capitalisation; • Evidence that assets are obsolete or physically damaged; • Significant changes with an adverse impact on the entity have taken place during the period impacting the manner or extent to which an asset is used or expected to be used (restructure etc); or • Evidence is available from internal reporting that indicates that the economic performance of an asset is, or will be, worse than expected. Notes to the consolidated financial statements for the year ended 31 December 2024 92 In addition to the above, Goodwill and indefinite life intangible assets (whether in-use or not ready for-use) must be tested, at least annually, for impairment. For the year ended 31 December 2024, management assessed that the Group continued to have 3 Cash Generating Units (CGUs), Global Services, New Markets (ex. China) and China, on the basis of: • How cashflows are identified and measured; and • How resources are allocated and performance are measured, consistent with Appen’s long-term strategy of revenue and customer diversification. For the year ended 31 December 2024, management has not identified any indicators of impairment. Critical accounting judgements, estimates and assumptions Capitalisation of product development costs The Group uses a degree of judgement in order to determine if product development costs satisfy the recognition and measurement criteria to be capitalised as an asset in accordance with AASB 138 Intangible Assets. This includes the use of Appen’s project management system to tag each project undertaken by the engineering team, as either new feature development or maintenance. Impairment of non ‑financial assets other than goodwill and other indefinite life intangible assets The Group assesses impairment of non-financial assets other than goodwill and other indefinite life intangible assets for each cash-generating unit at each reporting date by evaluating conditions specific to the Group and to the particular asset that may lead to impairment. If an impairment trigger exists, the recoverable amount of the asset is determined. This involves fair value less costs of disposal or value-in-use calculations, which incorporate a number of key estimates and assumptions. Note 12. Intangible assets (continued) Notes to the consolidated financial statements for the year ended 31 December 2024 93Appen 2024 Annual Report For personal use only
Page 96
Accounting policy Systems and software Significant costs on systems implementation are deferred and amortised on a straight-line basis over the period of their expected useful life, being the finite life of 7 years. Configuration costs associated with the implementation of cloud-based ERP systems are expensed as incurred. Acquired software or software on perpetual license are capitalised and amortised on a straight-line basis over its useful life. Product development Expenditure on research activities is recognised as an expense when incurred. Product development costs are capitalised at the direct costs incurred and amortised on a straight-line basis over the period of their expected useful life being 3 to 7 years. Amortisation starts at the time that the technology is activated and is used either internally or externally. The capitalised costs include directly attributable costs relating to product development, and costs relating to employment of the engineering team, product hosting services, external consultants and IT software and hardware. Development costs are capitalised when the Group can demonstrate all of the followings: • the technical feasibility of completing the asset so that it is available for use or sale; • the intention to complete the asset and use or sell it; • the ability to use or sell it; • how the asset will generate probable future economic benefits; • the availability of adequate technical, financial and other resources to complete the development and to use or sell the asset; and • the ability to measure reliably the expenditure attributable to the asset during its development. Subsequent to initial recognition, internally -generated intangible assets are reported at cost less accumulated amortisation and accumulated impairment losses, on the same basis as intangible assets that are acquired separately. Brand Brand names acquired in a business combination are amortised on a straight-line basis over the period of their expected benefit. This includes the acquisition of the Quadrant brand name which has been estimated to have a finite life of 5 years. Other intangibles Other intangible assets primarily consist of licenses and databases. Costs in relation to other intangibles are capitalised as an asset and amortised on a straight-line basis over the period of their expected useful life being 3–5 years. Off-the-shelf databases are internally generated intangibles and are capitalised only if they meet all of the criteria stated in the accounting policy section with respect to the accounting policy associated with development costs. Costs are capitalised at the direct costs incurred and amortised on a straight-line basis over the period of their expected useful life of 7 years. Amortisation starts at the time that the database is available for use or sale to external customers. Note 12. Intangible assets (continued) Notes to the consolidated financial statements for the year ended 31 December 2024 94 Note 13. Property, plant and equipment Leasehold improvements Fixtures and fittings Computer and Audio equipment Motor vehicles Total $ 000 $ 000 $ 000 $ 000 $ 000 Balance at 1 January 2024 Cost 4,845 1,383 9,178 50 15,456 Accumulated depreciation (4,360) (1,267) (8,304) (50) (13,981) Net carrying value at 1 January 2024 485 116 874 – 1,475 Additions 791 206 793 – 1,790 Disposals – – (1) – (1) Depreciation (391) (35) (619) – (1,045) Foreign exchange translation (2) (2) (25) – (29) Balance at 31 December 2024 Cost 4,833 1,042 9,053 48 14,976 Accumulated depreciation and impairment (3,950) (757) (8,031) (48) (12,786) Net carrying value at 31 December 2024 883 285 1,022 – 2,190 Balance at 1 January 2023 Net carrying value 656 258 2,777 35 3,726 Additions 738 180 890 – 1,808 Disposals – – (66) – (66) Impairment (514) (275) (1,215) – (2,004) Transfer/reclassification 5 8 (13) – – Depreciation (389) (54) (1,484) (35) (1,962) Foreign exchange translation (11) (1) (15) – (27) Balance at 31 December 2023 Net carrying value 485 116 874 – 1,475 Accounting policy Each class of property, plant and equipment is carried at cost or fair value, less any accumulated depreciation or impairment losses. The assets’ depreciation methods, residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. The depreciation rates used for each class of depreciable assets are: Leasehold improvements Over the lease term up to 8 years Fixture and fittings 3–13 years Computer and audio equipment 1–4 years Motor vehicles 3–5 years Any gain or loss on disposal of an item of plant and equipment is recognised in the consolidated statement of profit or loss. Notes to the consolidated financial statements for the year ended 31 December 2024 95Appen 2024 Annual Report For personal use only
Page 97
Accounting policy Systems and software Significant costs on systems implementation are deferred and amortised on a straight-line basis over the period of their expected useful life, being the finite life of 7 years. Configuration costs associated with the implementation of cloud-based ERP systems are expensed as incurred. Acquired software or software on perpetual license are capitalised and amortised on a straight-line basis over its useful life. Product development Expenditure on research activities is recognised as an expense when incurred. Product development costs are capitalised at the direct costs incurred and amortised on a straight-line basis over the period of their expected useful life being 3 to 7 years. Amortisation starts at the time that the technology is activated and is used either internally or externally. The capitalised costs include directly attributable costs relating to product development, and costs relating to employment of the engineering team, product hosting services, external consultants and IT software and hardware. Development costs are capitalised when the Group can demonstrate all of the followings: • the technical feasibility of completing the asset so that it is available for use or sale; • the intention to complete the asset and use or sell it; • the ability to use or sell it; • how the asset will generate probable future economic benefits; • the availability of adequate technical, financial and other resources to complete the development and to use or sell the asset; and • the ability to measure reliably the expenditure attributable to the asset during its development. Subsequent to initial recognition, internally -generated intangible assets are reported at cost less accumulated amortisation and accumulated impairment losses, on the same basis as intangible assets that are acquired separately. Brand Brand names acquired in a business combination are amortised on a straight-line basis over the period of their expected benefit. This includes the acquisition of the Quadrant brand name which has been estimated to have a finite life of 5 years. Other intangibles Other intangible assets primarily consist of licenses and databases. Costs in relation to other intangibles are capitalised as an asset and amortised on a straight-line basis over the period of their expected useful life being 3–5 years. Off-the-shelf databases are internally generated intangibles and are capitalised only if they meet all of the criteria stated in the accounting policy section with respect to the accounting policy associated with development costs. Costs are capitalised at the direct costs incurred and amortised on a straight-line basis over the period of their expected useful life of 7 years. Amortisation starts at the time that the database is available for use or sale to external customers. Note 12. Intangible assets (continued) Notes to the consolidated financial statements for the year ended 31 December 2024 94 Note 13. Property, plant and equipment Leasehold improvements Fixtures and fittings Computer and Audio equipment Motor vehicles Total $ 000 $ 000 $ 000 $ 000 $ 000 Balance at 1 January 2024 Cost 4,845 1,383 9,178 50 15,456 Accumulated depreciation (4,360) (1,267) (8,304) (50) (13,981) Net carrying value at 1 January 2024 485 116 874 – 1,475 Additions 791 206 793 – 1,790 Disposals – – (1) – (1) Depreciation (391) (35) (619) – (1,045) Foreign exchange translation (2) (2) (25) – (29) Balance at 31 December 2024 Cost 4,833 1,042 9,053 48 14,976 Accumulated depreciation and impairment (3,950) (757) (8,031) (48) (12,786) Net carrying value at 31 December 2024 883 285 1,022 – 2,190 Balance at 1 January 2023 Net carrying value 656 258 2,777 35 3,726 Additions 738 180 890 – 1,808 Disposals – – (66) – (66) Impairment (514) (275) (1,215) – (2,004) Transfer/reclassification 5 8 (13) – – Depreciation (389) (54) (1,484) (35) (1,962) Foreign exchange translation (11) (1) (15) – (27) Balance at 31 December 2023 Net carrying value 485 116 874 – 1,475 Accounting policy Each class of property, plant and equipment is carried at cost or fair value, less any accumulated depreciation or impairment losses. The assets’ depreciation methods, residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. The depreciation rates used for each class of depreciable assets are: Leasehold improvements Over the lease term up to 8 years Fixture and fittings 3–13 years Computer and audio equipment 1–4 years Motor vehicles 3–5 years Any gain or loss on disposal of an item of plant and equipment is recognised in the consolidated statement of profit or loss. Notes to the consolidated financial statements for the year ended 31 December 2024 95Appen 2024 Annual Report For personal use only
Page 98
Note 14. Right of use assets and lease liabilities 2024 2023 $ 000 $ 000 Right of use assets Balance at the beginning of the period 3,095 9,061 Additions 2,960 8,403 Disposals – (1,488) Impairment – (8,319) Depreciation (1,848) (4,301) Remeasurement – (251) Foreign exchange translation (117) (10) Balance at the end of the period 4,090 3,095 2024 2023 $000 $000 Lease liabilities Balance at the beginning of the period 12,434 10,177 Additions 2,960 8,403 Accretion of interest 802 741 Payment of interest (802) (637) Payment of principal (3,596) (4,126) Disposals – (1,658) Remeasurement (239) (453) Foreign exchange translation (519) (13) Balance at the end of the period 11,040 12,434 Current lease liabilities 3,583 3,125 Non-current lease liabilities 7, 457 9,309 The undiscounted lease liabilities’ maturity is analysed in Note 24. Financial risk management. Accounting policy The Group’s leases primarily comprise commercial offices and car park facilities, where the Group is the lessee and has right to control the use of the identified lease assets. A right-of-use asset is recognised at the commencement date of a lease and is measured at cost, which comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or before the commencement date net of any lease incentives received. Depreciation is charged on a straight-line basis over the term of the lease and recorded in profit or loss. Right-of-use assets are subject to impairment or adjusted for any remeasurement of lease liabilities. Options to extend leases are assessed for reasonable certainty in assessing the term of the lease to charge the depreciation expense. Short-term leases are those with a lease term of 12 months or less. The Group has elected to take exemptions under AASB 16 and has not recognised the right of use assets or lease liabilities for these leases. Lease payments for these exempted leases are expensed in profit or loss, on a straight-line basis over the lease term. Lease liabilities are recognised at the lease commencement date and are initially measured at the present value of future lease payments using incremental borrowing rate or borrowing rate relevant for the jurisdiction of the lease, at the commencement date. Interest accretion on lease liabilities are recorded in the profit or loss. Lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. Variable lease payments that do not depend on an index or a rate are recognised as expenses in the period incurred. Notes to the consolidated financial statements for the year ended 31 December 2024 96 Note 15. Trade and other payables 2024 2023 $ 000 $ 000 Current liabilities Trade payables 14,083 13,573 Other payables and accrued expenses 14,111 13,659 Total trade and other payables 28,194 27, 232 Maturity analysis of trade and other payables are disclosed in Note 24. Financial risk management. Accounting policy Trade and other payable represent liabilities in relation to goods and services rendered to the Group but not yet paid by the balance sheet date. They are measured at amortised cost and undiscounted due to their short-term nature. The amounts are unsecured and usually paid within agreed payment terms. Note 16. Provisions 2024 2023 $ 000 $ 000 Current liabilities Employee benefits 1,797 2,407 Total current provisions 1,797 2,407 Non-current liabilities Employee benefits 258 238 Other provisions 62 68 Total non-current provisions 320 306 Total provisions 2,117 2,713 Employee benefits primarily comprise accrued annual leave and long service leave. Notes to the consolidated financial statements for the year ended 31 December 2024 97Appen 2024 Annual Report For personal use only
Page 99
Note 14. Right of use assets and lease liabilities 2024 2023 $ 000 $ 000 Right of use assets Balance at the beginning of the period 3,095 9,061 Additions 2,960 8,403 Disposals – (1,488) Impairment – (8,319) Depreciation (1,848) (4,301) Remeasurement – (251) Foreign exchange translation (117) (10) Balance at the end of the period 4,090 3,095 2024 2023 $000 $000 Lease liabilities Balance at the beginning of the period 12,434 10,177 Additions 2,960 8,403 Accretion of interest 802 741 Payment of interest (802) (637) Payment of principal (3,596) (4,126) Disposals – (1,658) Remeasurement (239) (453) Foreign exchange translation (519) (13) Balance at the end of the period 11,040 12,434 Current lease liabilities 3,583 3,125 Non-current lease liabilities 7, 457 9,309 The undiscounted lease liabilities’ maturity is analysed in Note 24. Financial risk management. Accounting policy The Group’s leases primarily comprise commercial offices and car park facilities, where the Group is the lessee and has right to control the use of the identified lease assets. A right-of-use asset is recognised at the commencement date of a lease and is measured at cost, which comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or before the commencement date net of any lease incentives received. Depreciation is charged on a straight-line basis over the term of the lease and recorded in profit or loss. Right-of-use assets are subject to impairment or adjusted for any remeasurement of lease liabilities. Options to extend leases are assessed for reasonable certainty in assessing the term of the lease to charge the depreciation expense. Short-term leases are those with a lease term of 12 months or less. The Group has elected to take exemptions under AASB 16 and has not recognised the right of use assets or lease liabilities for these leases. Lease payments for these exempted leases are expensed in profit or loss, on a straight-line basis over the lease term. Lease liabilities are recognised at the lease commencement date and are initially measured at the present value of future lease payments using incremental borrowing rate or borrowing rate relevant for the jurisdiction of the lease, at the commencement date. Interest accretion on lease liabilities are recorded in the profit or loss. Lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. Variable lease payments that do not depend on an index or a rate are recognised as expenses in the period incurred. Notes to the consolidated financial statements for the year ended 31 December 2024 96 Note 15. Trade and other payables 2024 2023 $ 000 $ 000 Current liabilities Trade payables 14,083 13,573 Other payables and accrued expenses 14,111 13,659 Total trade and other payables 28,194 27, 232 Maturity analysis of trade and other payables are disclosed in Note 24. Financial risk management. Accounting policy Trade and other payable represent liabilities in relation to goods and services rendered to the Group but not yet paid by the balance sheet date. They are measured at amortised cost and undiscounted due to their short-term nature. The amounts are unsecured and usually paid within agreed payment terms. Note 16. Provisions 2024 2023 $ 000 $ 000 Current liabilities Employee benefits 1,797 2,407 Total current provisions 1,797 2,407 Non-current liabilities Employee benefits 258 238 Other provisions 62 68 Total non-current provisions 320 306 Total provisions 2,117 2,713 Employee benefits primarily comprise accrued annual leave and long service leave. Notes to the consolidated financial statements for the year ended 31 December 2024 97Appen 2024 Annual Report For personal use only
Page 100
Accounting policy Short ‑term employee benefits These are expected to be settled wholly within 12 months after the employees render the related service and include wages, salaries and sick leave. These are measured at the undiscounted amounts expected to be paid when the obligation is settled. Long‑term employee benefits Long-term employee benefits are measured at the present value of the expected future payments to be made to employees. When such benefits not expected to be settled within 12 months after balance date it is presented as non-current. Expected future payments incorporate anticipated future wage and salary levels, duration of service and employee departures and are discounted at rates determined by reference to market yields at the end of the reporting period on high quality corporate bonds that have maturity dates that approximate the terms of the obligations. Any re-measurements for changes in assumptions of obligations for long-term employee benefits are recognised in profit or loss in the periods for which the changes occur. Other provision This relates to office lease makegood provision. The amount recognised as a provision is the best estimate of the consideration required to settle. Note 17. Contract liabilities 2024 2023 $ 000 $ 000 Current liabilities Invoices issued/deposits received in advance 10,287 11,142 Contract liabilities are expected to be recognised as revenue in future periods as follows: 2024 2023 $ 000 $ 000 Within 3 months 4,276 4,340 Over 3 months 6,011 6,802 Total 10,287 11,142 Accounting policy Contract liabilities represent the Group’s obligations to render services to a customer and reflects the value of advance payments made by customers who have been invoiced for services that will be provided in the future and are recognised when the customer pays consideration or when the Group recognises a receivable to reflect its unconditional right to consideration (whichever is earlier) before the Group has transferred the services to a customer. The Group does not disclose further qualitative information related to remaining performance obligations, as they are either part of a contract that has an original expected duration of one year or less; or the associated revenue is recognised in the amount of which the Group has a right to invoice. Note 16. Provisions (continued) Notes to the consolidated financial statements for the year ended 31 December 2024 98 Investment, capital and risk management Note 18. Earn-out liability 2024 2023 $ 000 $ 000 Current earn-out liability – 3,750 Total earn-out liability – 3,750 Movement during the year: 2024 2023 $ 000 $ 000 Balance at the beginning of the period 3,750 19,131 Deemed interest – 354 Earn-out adjustment (including foreign currency translation) – (15,735) Earn-out settlement (3,750) – Balance at the end of the period – 3,750 The earn-out liability relates to the acquisition of Quadrant in September 2021. The liability was fully settled in January 2024 via the issue of 7,774,816 fully paid ordinary shares. Note 19. Derivative financial instruments 2024 2023 $ 000 $ 000 Current assets Forward foreign exchange contract – 104 The Group used forward foreign exchange contract to manage its exposure to foreign currency exchange risks. Derivatives were exclusively used for hedging purposes, i.e. not as trading or other speculative instruments. The Group no longer hedges using derivatives given the changes to the cost base over the last two years. Natural hedging is largely in place. The final forward contract was closed out in June 2024. Accounting policy Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to their fair value at each reporting date. The accounting for subsequent changes in fair value depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. Further details are disclosed in Note. 21. Fair value measurement and Note 24. Financial risk management. Notes to the consolidated financial statements for the year ended 31 December 2024 99Appen 2024 Annual Report For personal use only
Page 101
Accounting policy Short ‑term employee benefits These are expected to be settled wholly within 12 months after the employees render the related service and include wages, salaries and sick leave. These are measured at the undiscounted amounts expected to be paid when the obligation is settled. Long‑term employee benefits Long-term employee benefits are measured at the present value of the expected future payments to be made to employees. When such benefits not expected to be settled within 12 months after balance date it is presented as non-current. Expected future payments incorporate anticipated future wage and salary levels, duration of service and employee departures and are discounted at rates determined by reference to market yields at the end of the reporting period on high quality corporate bonds that have maturity dates that approximate the terms of the obligations. Any re-measurements for changes in assumptions of obligations for long-term employee benefits are recognised in profit or loss in the periods for which the changes occur. Other provision This relates to office lease makegood provision. The amount recognised as a provision is the best estimate of the consideration required to settle. Note 17. Contract liabilities 2024 2023 $ 000 $ 000 Current liabilities Invoices issued/deposits received in advance 10,287 11,142 Contract liabilities are expected to be recognised as revenue in future periods as follows: 2024 2023 $ 000 $ 000 Within 3 months 4,276 4,340 Over 3 months 6,011 6,802 Total 10,287 11,142 Accounting policy Contract liabilities represent the Group’s obligations to render services to a customer and reflects the value of advance payments made by customers who have been invoiced for services that will be provided in the future and are recognised when the customer pays consideration or when the Group recognises a receivable to reflect its unconditional right to consideration (whichever is earlier) before the Group has transferred the services to a customer. The Group does not disclose further qualitative information related to remaining performance obligations, as they are either part of a contract that has an original expected duration of one year or less; or the associated revenue is recognised in the amount of which the Group has a right to invoice. Note 16. Provisions (continued) Notes to the consolidated financial statements for the year ended 31 December 2024 98 Investment, capital and risk management Note 18. Earn-out liability 2024 2023 $ 000 $ 000 Current earn-out liability – 3,750 Total earn-out liability – 3,750 Movement during the year: 2024 2023 $ 000 $ 000 Balance at the beginning of the period 3,750 19,131 Deemed interest – 354 Earn-out adjustment (including foreign currency translation) – (15,735) Earn-out settlement (3,750) – Balance at the end of the period – 3,750 The earn-out liability relates to the acquisition of Quadrant in September 2021. The liability was fully settled in January 2024 via the issue of 7,774,816 fully paid ordinary shares. Note 19. Derivative financial instruments 2024 2023 $ 000 $ 000 Current assets Forward foreign exchange contract – 104 The Group used forward foreign exchange contract to manage its exposure to foreign currency exchange risks. Derivatives were exclusively used for hedging purposes, i.e. not as trading or other speculative instruments. The Group no longer hedges using derivatives given the changes to the cost base over the last two years. Natural hedging is largely in place. The final forward contract was closed out in June 2024. Accounting policy Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to their fair value at each reporting date. The accounting for subsequent changes in fair value depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. Further details are disclosed in Note. 21. Fair value measurement and Note 24. Financial risk management. Notes to the consolidated financial statements for the year ended 31 December 2024 99Appen 2024 Annual Report For personal use only
Page 102
Note 20. Investments The Group continued to hold its minority interests in the following investments: • Mindtech Global Limited (“Mindtech”), a provider of synthetic data to create privacy-compliant edge cases; and • Reka AI, Inc. (“Reka”), an AI model start-up specialising in the development of customised and powerful AI models for enterprise customers. These investments are carried at fair value as at 31 December. Fair value 2024 2023 Investments Country of incorporation Elected accounting method $ 000 $ 000 Mindtech UK FVOCI 932 946 Reka USA FVOCI 500 500 Total 1,432 1,446 Based on the best available information, management considered the fair value of both investments remained unchanged as at 31 December 2024, with the reduction in Mindtech due to foreign exchange translation. Accounting policy AASB 9 Financial Instruments allows an irrevocable election on initial recognition to present gains and losses on investments in equity instruments that are not held for trading in other comprehensive income. Management has applied this election with respect to both investments. Any future dividends in respect of this investment that are a return on investment will be recognised in profit or loss and there is no impairment on disposal of the investment. Note 21. Fair value measurement The following tables outlined the Group’s assets and liabilities, measured and disclosed at fair value, using the three-level hierarchy based on the lowest level of input that is significant to the entire fair value measurement, being: • Level 1: inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date; • Level 2: inputs other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and • Level 3: inputs are unobservable inputs for the asset or liability. There were no transfers between categories for recurring fair value measurements during the year. Level 1 Level 2 Level 3 Total $ 000 $ 000 $ 000 $ 000 31 December 2024 Assets Forward foreign exchange contracts – – – – Investments – – 1,432 1,432 Total assets – – 1,432 1,432 Liabilities Earn-out liability – – – – Total liabilities – – – – Notes to the consolidated financial statements for the year ended 31 December 2024 100 Level 1 Level 2 Level 3 Total $ 000 $ 000 $ 000 $ 000 31 December 2023 Assets Forward foreign exchange contracts – 104 – 104 Investments – – 1,446 1,446 Total assets – 104 1,446 1,550 Liabilities Earn-out liability – – 3,750 3,750 Total liabilities – – 3,750 3,750 Accounting policy When an asset or liability is measured at fair value, the fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, and assumes the transaction will take place either in a principal or advantageous market. Assets and liabilities measured at fair value are classified into the three levels discussed above. External valuers may be used for recurring and non-recurring fair value measurements when internal expertise is not available or the amount is material. Note 21. Fair value measurement (continued) Notes to the consolidated financial statements for the year ended 31 December 2024 101Appen 2024 Annual Report For personal use only
Page 103
Note 20. Investments The Group continued to hold its minority interests in the following investments: • Mindtech Global Limited (“Mindtech”), a provider of synthetic data to create privacy-compliant edge cases; and • Reka AI, Inc. (“Reka”), an AI model start-up specialising in the development of customised and powerful AI models for enterprise customers. These investments are carried at fair value as at 31 December. Fair value 2024 2023 Investments Country of incorporation Elected accounting method $ 000 $ 000 Mindtech UK FVOCI 932 946 Reka USA FVOCI 500 500 Total 1,432 1,446 Based on the best available information, management considered the fair value of both investments remained unchanged as at 31 December 2024, with the reduction in Mindtech due to foreign exchange translation. Accounting policy AASB 9 Financial Instruments allows an irrevocable election on initial recognition to present gains and losses on investments in equity instruments that are not held for trading in other comprehensive income. Management has applied this election with respect to both investments. Any future dividends in respect of this investment that are a return on investment will be recognised in profit or loss and there is no impairment on disposal of the investment. Note 21. Fair value measurement The following tables outlined the Group’s assets and liabilities, measured and disclosed at fair value, using the three-level hierarchy based on the lowest level of input that is significant to the entire fair value measurement, being: • Level 1: inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date; • Level 2: inputs other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and • Level 3: inputs are unobservable inputs for the asset or liability. There were no transfers between categories for recurring fair value measurements during the year. Level 1 Level 2 Level 3 Total $ 000 $ 000 $ 000 $ 000 31 December 2024 Assets Forward foreign exchange contracts – – – – Investments – – 1,432 1,432 Total assets – – 1,432 1,432 Liabilities Earn-out liability – – – – Total liabilities – – – – Notes to the consolidated financial statements for the year ended 31 December 2024 100 Level 1 Level 2 Level 3 Total $ 000 $ 000 $ 000 $ 000 31 December 2023 Assets Forward foreign exchange contracts – 104 – 104 Investments – – 1,446 1,446 Total assets – 104 1,446 1,550 Liabilities Earn-out liability – – 3,750 3,750 Total liabilities – – 3,750 3,750 Accounting policy When an asset or liability is measured at fair value, the fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, and assumes the transaction will take place either in a principal or advantageous market. Assets and liabilities measured at fair value are classified into the three levels discussed above. External valuers may be used for recurring and non-recurring fair value measurements when internal expertise is not available or the amount is material. Note 21. Fair value measurement (continued) Notes to the consolidated financial statements for the year ended 31 December 2024 101Appen 2024 Annual Report For personal use only
Page 104
Note 22. Borrowings The Group has no outstanding borrowings as at year end. 2024 2023 Used at reporting date Unused at reporting date Used at reporting date Unused at reporting date Facilities $ 000 $ 000 $ 000 $ 000 Facility A (Senior debt) – – – – Facility B (Working capital) – – – 6,818 Facility C (Acquisition funding) – – – – Total facilities – – – 6,818 Facility A and Facility B expired during 2023. Facility B was resized from A$20 million to $A10 million during 2023 and expired on 3 January 2024. Following the expiry of Facility B, there are no debt facilities in place. Accounting policy Loans and other borrowings are initially recognised at fair value of the consideration received, net of transaction costs. They are subsequently measured at amortised cost using the effective interest method. Note 23. Equity Issued capital 2024 2023 Balance as at 31 December # of shares $000 # of shares $000 Ordinary shares - fully paid 260,735,154 366,714 211,467,054 320,435 Movement in ordinary share capital: Details Date # of shares $ 000 Balance as at 31 December 2023 211, 467,054 320,435 Issue of shares – Quadrant earn-out settlement 19 January 2024 7,774,816 3,750 Issue of shares – exercise of performance rights 18 March 2024 2,094,641 – Issue of shares – exercise of performance rights 21 March 2024 376,742 – Issue of shares – exercise of performance rights 3 May 2024 666,925 – Issue of shares – exercise of performance rights 13 May 2024 46,173 – Issue of shares – exercise of performance rights 13 June 2024 46,173 – Issue of shares – exercise of performance rights 26 June 2024 529,119 – Issue of shares – exercise of performance rights 5 September 2024 92,346 – Issue of shares – exercise of performance rights 30 September 2024 1,195,400 – Issue of shares – institutional placement 17 October 2024 26,041,667 32,524 Issue of shares – conversion of warrants 1 18 October 2024 2,591,598 – Issue of shares – share purchase plan 8 November 2024 7,812, 500 10,005 Balance as at 31 December 2024 260,735,154 366,714 1 Warrants related to the Quadrant acquisition and subsequent earn-out. Notes to the consolidated financial statements for the year ended 31 December 2024 102 Ordinary shares Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the Company in proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par value and the Company does not have a limited amount of authorised capital. On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote. Share buy-back There is no current on-market share buy-back. Capital risk management Capital is regarded as total equity, as recognised in the statement of financial position. Net debt is calculated as total borrowings less cash and cash equivalents. The Group’s objectives when managing capital is to safeguard its ability to continue as a going concern, so that it can provide returns for shareholders and benefits for other stakeholders, as well as to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to improve liquidity. The capital risk management policy remains unchanged from the prior year. Accounting policy Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds. Reserves 2024 2023 $ 000 $ 000 Common control reserve (1,307) (1,307) Foreign currency translation reserve (15,566) (6,738) Share-based payments reserve 38,979 34,902 Profit reserve 104,667 104,667 Other reserves 2,002 2,002 Total reserves 128,775 133,526 Movement in each category of reserves are as follows: Note 23. Equity (continued) Notes to the consolidated financial statements for the year ended 31 December 2024 103Appen 2024 Annual Report For personal use only
Page 105
Note 22. Borrowings The Group has no outstanding borrowings as at year end. 2024 2023 Used at reporting date Unused at reporting date Used at reporting date Unused at reporting date Facilities $ 000 $ 000 $ 000 $ 000 Facility A (Senior debt) – – – – Facility B (Working capital) – – – 6,818 Facility C (Acquisition funding) – – – – Total facilities – – – 6,818 Facility A and Facility B expired during 2023. Facility B was resized from A$20 million to $A10 million during 2023 and expired on 3 January 2024. Following the expiry of Facility B, there are no debt facilities in place. Accounting policy Loans and other borrowings are initially recognised at fair value of the consideration received, net of transaction costs. They are subsequently measured at amortised cost using the effective interest method. Note 23. Equity Issued capital 2024 2023 Balance as at 31 December # of shares $000 # of shares $000 Ordinary shares - fully paid 260,735,154 366,714 211,467,054 320,435 Movement in ordinary share capital: Details Date # of shares $ 000 Balance as at 31 December 2023 211, 467,054 320,435 Issue of shares – Quadrant earn-out settlement 19 January 2024 7,774,816 3,750 Issue of shares – exercise of performance rights 18 March 2024 2,094,641 – Issue of shares – exercise of performance rights 21 March 2024 376,742 – Issue of shares – exercise of performance rights 3 May 2024 666,925 – Issue of shares – exercise of performance rights 13 May 2024 46,173 – Issue of shares – exercise of performance rights 13 June 2024 46,173 – Issue of shares – exercise of performance rights 26 June 2024 529,119 – Issue of shares – exercise of performance rights 5 September 2024 92,346 – Issue of shares – exercise of performance rights 30 September 2024 1,195,400 – Issue of shares – institutional placement 17 October 2024 26,041,667 32,524 Issue of shares – conversion of warrants 1 18 October 2024 2,591,598 – Issue of shares – share purchase plan 8 November 2024 7,812, 500 10,005 Balance as at 31 December 2024 260,735,154 366,714 1 Warrants related to the Quadrant acquisition and subsequent earn-out. Notes to the consolidated financial statements for the year ended 31 December 2024 102 Ordinary shares Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the Company in proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par value and the Company does not have a limited amount of authorised capital. On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote. Share buy-back There is no current on-market share buy-back. Capital risk management Capital is regarded as total equity, as recognised in the statement of financial position. Net debt is calculated as total borrowings less cash and cash equivalents. The Group’s objectives when managing capital is to safeguard its ability to continue as a going concern, so that it can provide returns for shareholders and benefits for other stakeholders, as well as to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to improve liquidity. The capital risk management policy remains unchanged from the prior year. Accounting policy Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds. Reserves 2024 2023 $ 000 $ 000 Common control reserve (1,307) (1,307) Foreign currency translation reserve (15,566) (6,738) Share-based payments reserve 38,979 34,902 Profit reserve 104,667 104,667 Other reserves 2,002 2,002 Total reserves 128,775 133,526 Movement in each category of reserves are as follows: Note 23. Equity (continued) Notes to the consolidated financial statements for the year ended 31 December 2024 103Appen 2024 Annual Report For personal use only
Page 106
Common control reserve Foreign currency translation reserve Share-based payments reserve Profits reserve Other reserves Total $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Balance at 1 January 2024 (1,307) (6,738) 34,902 104,667 2,002 133,526 Foreign currency translation – (8,828) – – – (8,828) Share-based payments – – 4,077 – – 4,077 Balance at 31 December 2024 (1,307) (15,566) 38,979 104,667 2,002 128,775 Balance at 1 January 2023 (1,307) (8,019) 29,211 106,267 2,002 128,154 Foreign currency translation – 1,281 – – – 1,281 Unrealised loss on investment – – – (1,600) – (1,600) Share-based payments – – 5,691 – – 5,691 Balance at 31 December 2023 (1,307) (6,738) 34,902 104,667 2,002 133,526 Common control reserve The reserve represents the difference between the consideration transferred by the Company for the acquisition of commonly controlled entities and the existing book value of those entities immediately prior to the acquisition. Foreign currency translation reserve The reserve is used to recognise exchange differences arising from translation of the financial statements of foreign operations to US dollars. Share-based payments reserve The reserve is used to recognise the value of equity benefits provided to employees as part of their remuneration. Profits reserve The Profits reserve represents current year profits transferred to a reserve to quarantine these profits from being appropriated against present or prior year losses. Any profits are available for the payment of future dividends. Other reserves This reserve represents the equity settled portion of contingent consideration together with any capital raising expenses that are allocated to equity, in connection with the acquisition of Butler Hill. Accumulated losses 2024 2023 $ 000 $ 000 Accumulated losses at the beginning of the period (361,164) (243,085) Loss after income tax for the period (20,009) (118,079) Accumulated losses at the end of the period (381,173) (361,164) Note 23. Equity (continued) Notes to the consolidated financial statements for the year ended 31 December 2024 104 Note 24. Financial risk management The key financial risks faced by the Group are market risks (including foreign currency exchange risk, price risks and interest rate risk), credit risks and liquidity risk. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Group. The Group regularly reviews these risks and related policies to manage the use of financial instruments in mitigating the overall risk exposures to an acceptable level, as summarised below. Risk Exposure Measurement Management Market risk – Foreign currency exchange • Non-USD payments to suppliers • Non-USD receipts from customers Cash flow forecast and sensitivity analysis • Economic hedges • Treasury foreign exchange hedging policy Credit risk • Cash at bank • Trade and other receivables • Derivative contracts Ageing analysis and sensitivity analysis • Customer and supplier due diligence policies • Treasury policy over financial instrument counterpart’s credit rating Liquidity risk • Borrowings • Lease liabilities • Trade payables and other liabilities Cash flow forecast and sensitivity analysis • Regular cash flow forecast • Cash and credit facility management • Maintain funding flexibility The Chief Financial Officer retains overall responsibility for management of financial risks for the Group under policies approved by the Board of Directors (‘the Board’). These policies include identification and analysis of the risk exposure of the Group and appropriate procedures, controls and risk limits. Market risk Foreign currency exchange The Group’s exposure is limited considering majority of the Group’s revenue and assets are denominated in US dollars (USD), the same as its reporting currency. The Group still has certain transactions in foreign currencies, principally in relation to corporate head office costs and ASX listing associated costs in Australian Dollars (AUD). Where appropriate, the Group utilises forward foreign exchange contract to mitigate such risks. And as outlined in Note 19. Derivative financial instruments, the Group has stopped extending its derivative contracts upon expiry in 2024, given the limited exposure remained. Notes to the consolidated financial statements for the year ended 31 December 2024 105Appen 2024 Annual Report For personal use only
Page 107
Common control reserve Foreign currency translation reserve Share-based payments reserve Profits reserve Other reserves Total $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Balance at 1 January 2024 (1,307) (6,738) 34,902 104,667 2,002 133,526 Foreign currency translation – (8,828) – – – (8,828) Share-based payments – – 4,077 – – 4,077 Balance at 31 December 2024 (1,307) (15,566) 38,979 104,667 2,002 128,775 Balance at 1 January 2023 (1,307) (8,019) 29,211 106,267 2,002 128,154 Foreign currency translation – 1,281 – – – 1,281 Unrealised loss on investment – – – (1,600) – (1,600) Share-based payments – – 5,691 – – 5,691 Balance at 31 December 2023 (1,307) (6,738) 34,902 104,667 2,002 133,526 Common control reserve The reserve represents the difference between the consideration transferred by the Company for the acquisition of commonly controlled entities and the existing book value of those entities immediately prior to the acquisition. Foreign currency translation reserve The reserve is used to recognise exchange differences arising from translation of the financial statements of foreign operations to US dollars. Share-based payments reserve The reserve is used to recognise the value of equity benefits provided to employees as part of their remuneration. Profits reserve The Profits reserve represents current year profits transferred to a reserve to quarantine these profits from being appropriated against present or prior year losses. Any profits are available for the payment of future dividends. Other reserves This reserve represents the equity settled portion of contingent consideration together with any capital raising expenses that are allocated to equity, in connection with the acquisition of Butler Hill. Accumulated losses 2024 2023 $ 000 $ 000 Accumulated losses at the beginning of the period (361,164) (243,085) Loss after income tax for the period (20,009) (118,079) Accumulated losses at the end of the period (381,173) (361,164) Note 23. Equity (continued) Notes to the consolidated financial statements for the year ended 31 December 2024 104 Note 24. Financial risk management The key financial risks faced by the Group are market risks (including foreign currency exchange risk, price risks and interest rate risk), credit risks and liquidity risk. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Group. The Group regularly reviews these risks and related policies to manage the use of financial instruments in mitigating the overall risk exposures to an acceptable level, as summarised below. Risk Exposure Measurement Management Market risk – Foreign currency exchange • Non-USD payments to suppliers • Non-USD receipts from customers Cash flow forecast and sensitivity analysis • Economic hedges • Treasury foreign exchange hedging policy Credit risk • Cash at bank • Trade and other receivables • Derivative contracts Ageing analysis and sensitivity analysis • Customer and supplier due diligence policies • Treasury policy over financial instrument counterpart’s credit rating Liquidity risk • Borrowings • Lease liabilities • Trade payables and other liabilities Cash flow forecast and sensitivity analysis • Regular cash flow forecast • Cash and credit facility management • Maintain funding flexibility The Chief Financial Officer retains overall responsibility for management of financial risks for the Group under policies approved by the Board of Directors (‘the Board’). These policies include identification and analysis of the risk exposure of the Group and appropriate procedures, controls and risk limits. Market risk Foreign currency exchange The Group’s exposure is limited considering majority of the Group’s revenue and assets are denominated in US dollars (USD), the same as its reporting currency. The Group still has certain transactions in foreign currencies, principally in relation to corporate head office costs and ASX listing associated costs in Australian Dollars (AUD). Where appropriate, the Group utilises forward foreign exchange contract to mitigate such risks. And as outlined in Note 19. Derivative financial instruments, the Group has stopped extending its derivative contracts upon expiry in 2024, given the limited exposure remained. Notes to the consolidated financial statements for the year ended 31 December 2024 105Appen 2024 Annual Report For personal use only
Page 108
The period-end average exchange rates and reporting date exchange rates applied were as follows: Average rate Reporting date rate Group applied foreign exchange rates 2024 2023 2024 2023 United States Dollars Australian Dollars 1.5156 1.5070 1.6120 1.4666 United Kingdom Pound Sterling 0.7824 0.8019 0.7978 0.7854 European Economic and Monetary Union Euro 0.9242 0.9236 0.9628 0.9060 Hong Kong Dollars 7.8025 7.8306 7.7660 7.8081 Philippine Pesos 57.2091 55.5477 58.1564 55.1700 Chinese Yuan 7.1855 7.0825 7.2995 7.0698 Japanese Yen 151.3088 141.3700 156.8135 140.9900 Singapore Dollars 1.3359 1.3418 1.3627 1.3192 Korean Won 1,375.5 1,305.4 1,473.8 1,293.1 Indian Rupee 83.6610 82.5800 85.6018 83.04 Canadian Dollars 1.3695 1.3493 1.4373 1.3247 Vietnamese Dong 25,125.6 N/A 25,481.6 N/A Foreign exchange risk recognises financial assets and financial liabilities denominated in a currency that is not the US dollar and the risk is measured using sensitivity analysis. The carrying amount of the Group’s foreign currency denominated financial assets and financial liabilities at reporting date were as follows, excluding intangible and fixed assets, intercompany and other non-monetary balances. Financial assets Financial liabilities 2024 2023 2024 2023 $000 $000 $000 $000 Australian Dollars 15,802 8,477 704 199 United Kingdom Pound Sterling 1,008 1,814 106 197 European Economic and Monetary Union Euro 1,116 1,541 – – Hong Kong Dollars – – 13 13 Philippine Pesos 636 678 319 236 Chinese Yuan 16,276 13,823 5,866 4,861 Japanese Yen 1,504 1,999 123 198 Singapore Dollars 148 319 – – Korean Won 1,766 398 48 27 Indian Rupee 885 137 – 181 Canadian Dollars 651 191 – – Vietnamese Dong 188 – 14 – Total 39,980 29,377 7,193 5,912 Note 24. Financial risk management (continued) Notes to the consolidated financial statements for the year ended 31 December 2024 106 Based on the above exposure, had the US dollar weakened by 10% or strengthened by 10% against these foreign currencies with all other variables held constant, the impact on the Group’s profit/loss before tax for the year (excluding translation difference for consolidation purpose) and on the Group’s equity would have been as follows: USD strengthened USD weakened change Effect on profit before tax Equity Effect on profit before tax Equity 2024 % $000 $000 $000 $000 Australian Dollars 10% - (1,510) – 1,510 United Kingdom Pound Sterling 10% (6) (90) 6 90 European Economic Monetary Union Euro 10% (62) (112) 62 112 Hong Kong Dollars 10% – 1 – (1) Philippine Pesos 10% – (32) – 32 Chinese Yuan 10% – (1,041) – 1,041 Japanese Yen 10% (6) (138) 6 138 Singapore Dollars 10% (15) (15) 15 15 Korean Won 10% – (157) – 157 Indian Rupee 10% – (54) – 54 Canadian Dollars 10% – (65) – 65 Vietnamese Dong 10% – (17) – 17 Total (89) (3,230) 89 3,230 2023 Australian Dollars 10% – (828) – 828 United Kingdom Pound Sterling 10% (21) (162) 21 162 European Economic Monetary Union Euro 10% (16) (154) 16 154 Hong Kong Dollars 10% – 1 – (1) Philippine Pesos 10% – (44) – 44 Chinese Yuan 10% – (896) – 896 Japanese Yen 10% (7) (180) 7 180 Singapore Dollars 10% (31) (32) 31 32 Korean Won 10% – (35) – 35 Indian Rupee 10% – 4 – (4) Canadian Dollars 10% – (19) – 19 Total (75) (2,345) 75 2,345 The percentage change is the expected overall volatility of the significant currencies, which is based on management’s assessment of reasonable possible fluctuations taking into consideration movements over the last 12 months each year and the spot rate at each reporting date. Price risk The Group holds an insignificant amount of cryptocurrency assets which, prima facie, may be subject to price risk. Cryptocurrency was part of the acquired Quadrant’s business operations, as it was used to pay geolancers and some suppliers, as it allowed real-time settlement and micropayments with no incremental fees. Cryptocurrency assets are classified as inventory and valued in these financial statements at the lower of cost and net realisable value. Interest rate risk The Group has limited interest rate risk exposure as it no longer hold any long-term borrowings. Note 24. Financial risk management (continued) Notes to the consolidated financial statements for the year ended 31 December 2024 107Appen 2024 Annual Report For personal use only
Page 109
The period-end average exchange rates and reporting date exchange rates applied were as follows: Average rate Reporting date rate Group applied foreign exchange rates 2024 2023 2024 2023 United States Dollars Australian Dollars 1.5156 1.5070 1.6120 1.4666 United Kingdom Pound Sterling 0.7824 0.8019 0.7978 0.7854 European Economic and Monetary Union Euro 0.9242 0.9236 0.9628 0.9060 Hong Kong Dollars 7.8025 7.8306 7.7660 7.8081 Philippine Pesos 57.2091 55.5477 58.1564 55.1700 Chinese Yuan 7.1855 7.0825 7.2995 7.0698 Japanese Yen 151.3088 141.3700 156.8135 140.9900 Singapore Dollars 1.3359 1.3418 1.3627 1.3192 Korean Won 1,375.5 1,305.4 1,473.8 1,293.1 Indian Rupee 83.6610 82.5800 85.6018 83.04 Canadian Dollars 1.3695 1.3493 1.4373 1.3247 Vietnamese Dong 25,125.6 N/A 25,481.6 N/A Foreign exchange risk recognises financial assets and financial liabilities denominated in a currency that is not the US dollar and the risk is measured using sensitivity analysis. The carrying amount of the Group’s foreign currency denominated financial assets and financial liabilities at reporting date were as follows, excluding intangible and fixed assets, intercompany and other non-monetary balances. Financial assets Financial liabilities 2024 2023 2024 2023 $000 $000 $000 $000 Australian Dollars 15,802 8,477 704 199 United Kingdom Pound Sterling 1,008 1,814 106 197 European Economic and Monetary Union Euro 1,116 1,541 – – Hong Kong Dollars – – 13 13 Philippine Pesos 636 678 319 236 Chinese Yuan 16,276 13,823 5,866 4,861 Japanese Yen 1,504 1,999 123 198 Singapore Dollars 148 319 – – Korean Won 1,766 398 48 27 Indian Rupee 885 137 – 181 Canadian Dollars 651 191 – – Vietnamese Dong 188 – 14 – Total 39,980 29,377 7,193 5,912 Note 24. Financial risk management (continued) Notes to the consolidated financial statements for the year ended 31 December 2024 106 Based on the above exposure, had the US dollar weakened by 10% or strengthened by 10% against these foreign currencies with all other variables held constant, the impact on the Group’s profit/loss before tax for the year (excluding translation difference for consolidation purpose) and on the Group’s equity would have been as follows: USD strengthened USD weakened change Effect on profit before tax Equity Effect on profit before tax Equity 2024 % $000 $000 $000 $000 Australian Dollars 10% - (1,510) – 1,510 United Kingdom Pound Sterling 10% (6) (90) 6 90 European Economic Monetary Union Euro 10% (62) (112) 62 112 Hong Kong Dollars 10% – 1 – (1) Philippine Pesos 10% – (32) – 32 Chinese Yuan 10% – (1,041) – 1,041 Japanese Yen 10% (6) (138) 6 138 Singapore Dollars 10% (15) (15) 15 15 Korean Won 10% – (157) – 157 Indian Rupee 10% – (54) – 54 Canadian Dollars 10% – (65) – 65 Vietnamese Dong 10% – (17) – 17 Total (89) (3,230) 89 3,230 2023 Australian Dollars 10% – (828) – 828 United Kingdom Pound Sterling 10% (21) (162) 21 162 European Economic Monetary Union Euro 10% (16) (154) 16 154 Hong Kong Dollars 10% – 1 – (1) Philippine Pesos 10% – (44) – 44 Chinese Yuan 10% – (896) – 896 Japanese Yen 10% (7) (180) 7 180 Singapore Dollars 10% (31) (32) 31 32 Korean Won 10% – (35) – 35 Indian Rupee 10% – 4 – (4) Canadian Dollars 10% – (19) – 19 Total (75) (2,345) 75 2,345 The percentage change is the expected overall volatility of the significant currencies, which is based on management’s assessment of reasonable possible fluctuations taking into consideration movements over the last 12 months each year and the spot rate at each reporting date. Price risk The Group holds an insignificant amount of cryptocurrency assets which, prima facie, may be subject to price risk. Cryptocurrency was part of the acquired Quadrant’s business operations, as it was used to pay geolancers and some suppliers, as it allowed real-time settlement and micropayments with no incremental fees. Cryptocurrency assets are classified as inventory and valued in these financial statements at the lower of cost and net realisable value. Interest rate risk The Group has limited interest rate risk exposure as it no longer hold any long-term borrowings. Note 24. Financial risk management (continued) Notes to the consolidated financial statements for the year ended 31 December 2024 107Appen 2024 Annual Report For personal use only
Page 110
Credit risk Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group has a strict code of credit, including obtaining agency credit information, confirming references and setting appropriate credit limits. The Group obtains guarantees where appropriate to mitigate credit risk. The maximum exposure to credit risk at the reporting date to recognised financial assets is the carrying amount, net of any provisions for impairment of those assets, as disclosed in the statement of financial position and notes to the financial statements. The Group does not hold any collateral. Generally, trade receivables and contract assets are written off when there is no reasonable expectation of recovery. Indicators of this include the failure of a debtor to engage in a repayment plan and a failure to make contractual payments for a period greater than one year. Liquidity risk Liquidity risk management requires the Group to maintain sufficient liquid assets (mainly cash and cash equivalents) and available borrowing facilities to be able to pay debts as and when they become due and payable. The Group manages liquidity risk by maintaining adequate cash reserves and available borrowing facilities by continuously monitoring actual and forecast cash flows and matching the maturity profiles of financial assets and liabilities. As at 31 December 2024, the Group held cash and cash equivalents of $54.8 million (2023: $32.2 million). Maturity of financial liabilities are summarised below, based on the contractual undiscounted cash flows. Balances due within 1 year equal their carrying values considering the discounting impact is insignificant. Contractual maturities 2024 $000 < 1 year 1-2 years 2- 5 years > 5 years Total cash flows Total carrying value Non-derivatives Non-interest bearing Trade payables 14,083 – – – 14,083 14,083 Other payables 14,111 – – – 14,111 14,111 Interest ‑bearing – fixed rate Lease liability 1 3,794 3,147 4,748 – 11,689 11,040 Total non-derivatives 31,988 3,147 4,748 – 39,883 39,234 Contractual maturities 2023 $000 < 1 year 1–2 years 2– 5 years > 5 years Total cash flows Total carrying value Non-derivatives Non-interest bearing Trade payables 13,573 – – – 13,573 13,573 Other payables 13,659 – – – 13,659 13,659 Interest ‑bearing – fixed rate Lease liability 1 3,323 2,636 7, 519 522 14,000 12,434 Total non-derivatives 30,555 2,636 7, 519 522 41,232 39,666 1 Includes interest, weighted average at 5.87% (2023: 6.24%). Note 24. Financial risk management (continued) Notes to the consolidated financial statements for the year ended 31 December 2024 108 Other information Note 25. Contingent liabilities The Group has provided security for bank guarantees regarding contractual obligations on commercial real estate leases. The total amount is A$134,000 as at 31 December 2024 (2023: A$134,000). The Company is a party to the Deed of Cross Guarantee entered into with various Group entities. The operation of the Deed of Cross Guarantee has the effect of joining the Company as a guarantor to the Group’s commitments and contingencies. Further details are disclosed in Note 28. Deed of cross guarantee. Note 26. Parent entity information The Group’s parent entity is Appen Limited, and its supplementary information are as follows: Statement of profit or loss 2024 2023 $ 000 $ 000 Profit/(loss) after income tax (24,523) (4,388) Statement of financial position 2024 2023 $ 000 $ 000 Total current assets 13,960 2,848 Total assets 114,544 122,745 Total current liabilities 230 1,468 Total liabilities 230 1,468 Net assets 114,314 121,277 Equity Issued capital 366,714 320,435 Translation reserve (125,973) (89,220) Share-based payments reserve 38,979 34,902 Profits reserve (39,659) (43,616) Other reserves 2,002 2,002 Accumulated losses (127,749) (103,226) Total equity 114,314 121,277 The accounting policies of the parent entity are consistent with those of the Group, except for that investments in subsidiaries are measured at cost in the parent entity. The parent entity had a deed of cross guarantee in relation to the debtors of its subsidiaries in the prior year and as at 31 December 2024. Further information are disclosed in Note 28. Deed of cross guarantee. The parent entity had no contingent liabilities and no significant capital commitments as at 31 December 2024. Notes to the consolidated financial statements for the year ended 31 December 2024 109Appen 2024 Annual Report For personal use only
Page 111
Credit risk Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group has a strict code of credit, including obtaining agency credit information, confirming references and setting appropriate credit limits. The Group obtains guarantees where appropriate to mitigate credit risk. The maximum exposure to credit risk at the reporting date to recognised financial assets is the carrying amount, net of any provisions for impairment of those assets, as disclosed in the statement of financial position and notes to the financial statements. The Group does not hold any collateral. Generally, trade receivables and contract assets are written off when there is no reasonable expectation of recovery. Indicators of this include the failure of a debtor to engage in a repayment plan and a failure to make contractual payments for a period greater than one year. Liquidity risk Liquidity risk management requires the Group to maintain sufficient liquid assets (mainly cash and cash equivalents) and available borrowing facilities to be able to pay debts as and when they become due and payable. The Group manages liquidity risk by maintaining adequate cash reserves and available borrowing facilities by continuously monitoring actual and forecast cash flows and matching the maturity profiles of financial assets and liabilities. As at 31 December 2024, the Group held cash and cash equivalents of $54.8 million (2023: $32.2 million). Maturity of financial liabilities are summarised below, based on the contractual undiscounted cash flows. Balances due within 1 year equal their carrying values considering the discounting impact is insignificant. Contractual maturities 2024 $000 < 1 year 1-2 years 2- 5 years > 5 years Total cash flows Total carrying value Non-derivatives Non-interest bearing Trade payables 14,083 – – – 14,083 14,083 Other payables 14,111 – – – 14,111 14,111 Interest ‑bearing – fixed rate Lease liability 1 3,794 3,147 4,748 – 11,689 11,040 Total non-derivatives 31,988 3,147 4,748 – 39,883 39,234 Contractual maturities 2023 $000 < 1 year 1–2 years 2– 5 years > 5 years Total cash flows Total carrying value Non-derivatives Non-interest bearing Trade payables 13,573 – – – 13,573 13,573 Other payables 13,659 – – – 13,659 13,659 Interest ‑bearing – fixed rate Lease liability 1 3,323 2,636 7, 519 522 14,000 12,434 Total non-derivatives 30,555 2,636 7, 519 522 41,232 39,666 1 Includes interest, weighted average at 5.87% (2023: 6.24%). Note 24. Financial risk management (continued) Notes to the consolidated financial statements for the year ended 31 December 2024 108 Other information Note 25. Contingent liabilities The Group has provided security for bank guarantees regarding contractual obligations on commercial real estate leases. The total amount is A$134,000 as at 31 December 2024 (2023: A$134,000). The Company is a party to the Deed of Cross Guarantee entered into with various Group entities. The operation of the Deed of Cross Guarantee has the effect of joining the Company as a guarantor to the Group’s commitments and contingencies. Further details are disclosed in Note 28. Deed of cross guarantee. Note 26. Parent entity information The Group’s parent entity is Appen Limited, and its supplementary information are as follows: Statement of profit or loss 2024 2023 $ 000 $ 000 Profit/(loss) after income tax (24,523) (4,388) Statement of financial position 2024 2023 $ 000 $ 000 Total current assets 13,960 2,848 Total assets 114,544 122,745 Total current liabilities 230 1,468 Total liabilities 230 1,468 Net assets 114,314 121,277 Equity Issued capital 366,714 320,435 Translation reserve (125,973) (89,220) Share-based payments reserve 38,979 34,902 Profits reserve (39,659) (43,616) Other reserves 2,002 2,002 Accumulated losses (127,749) (103,226) Total equity 114,314 121,277 The accounting policies of the parent entity are consistent with those of the Group, except for that investments in subsidiaries are measured at cost in the parent entity. The parent entity had a deed of cross guarantee in relation to the debtors of its subsidiaries in the prior year and as at 31 December 2024. Further information are disclosed in Note 28. Deed of cross guarantee. The parent entity had no contingent liabilities and no significant capital commitments as at 31 December 2024. Notes to the consolidated financial statements for the year ended 31 December 2024 109Appen 2024 Annual Report For personal use only
Page 112
Note 27. Subsidiaries The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting policy described in Note 2. Basis of preparation. Interest % Entity Country of incorporation 2024 2023 Appen AI Pty Ltd Australia 100% 100% Appen Financial Services Pty Ltd Australia 100% 100% Appen AI Inc 1 United States of America 100% 100% Crowdgen, Inc. 3 United States of America 100% 100% RaterLabs Inc. United States of America 100% 100% Figure Eight Technologies Inc. United States of America 100% 100% Figure Eight Federal LLC United States of America 100% 100% Appen AI Europe Limited 1 Ireland 100% 100% Appen (UK) Limited 1 United Kingdom 100% 100% Mendip Media Group Limited United Kingdom 100% 100% Appen Data Technology (Shanghai) Co. Ltd China 100% 100% Beijing Appen Technology Co., Ltd 4 China 100% 100% Appen Technology (Wuxi) Co. Ltd China 100% 100% Appen Data Technology (Chongqing) Co., Ltd. China 100% 100% Appen Data Technology (Huainan) Co. Ltd 2 China 100% N/A Appen Butler Hill Limited 1 Hong Kong 100% 100% Appen Limited Korea 1 Korea 100% 100% Appen Japan Pty Ltd 1 Japan 100% 100% Quadrant Pte Ltd 1 Singapore 100% 100% Quadrant Protocol Ltd British Virgin Islands 100% 100% Appen Canada Limited 1 Canada 100% 100% Appen AI India Private Limited 1 India 100% 100% APPEN VIET NAM CO.,LTD 1,2 Vietnam 100% N/A 1 Wholly owned subsidiaries of Appen AI Pty Ltd. 2 Newly incorporated legal entities in 2024. 3 Entity name changed from Leapforce, Inc. to Crowdgen, Inc. on 11 November 2024. 4 100% Ownership transferred to Appen Data Technology (Shanghai) Co. Ltd in August 2024. Notes to the consolidated financial statements for the year ended 31 December 2024 110 Accounting policy The consolidated financial report incorporates all of the assets, liabilities and results of Appen Limited and all of the subsidiaries. Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The assets, liabilities and results of all subsidiaries are fully consolidated into the financial statements of the Group from the date control is obtained by the Group. Acquisition of subsidiaries are accounted for using the acquisition method of accounting. A change in ownership interest without the loss of control, is accounted for as an equity transaction, where the difference between the consideration transferred and the book value of the share of the non-controlling interest acquired is recognised as directly attributable to the parent. The consolidation of a subsidiary is discontinued from the date control ceases. When the Group loses control over a subsidiary, it de-recognises the assets and liabilities of the subsidiary, and any related non-controlling interest and other components of equity. Any resulting gain or loss is recognised in profit or loss. Any interest retained in the former subsidiary is measured at fair value when control is lost. Intercompany transactions, balances and unrealised gains or losses on transactions between Group members/subsidiaries are fully eliminated on consolidation. Accounting policies of subsidiaries are regularly reviewed and adjusted where necessary to ensure uniformity of the accounting policies adopted by the Group. Note 28. Deed of Cross Guarantee The following subsidiaries together with the parent entity are parties to a Deed of Cross Guarantee under which each party has guaranteed to pay any deficiency in the event of the winding up of any of the members in the Closed Group. By entering into the Deed, the wholly-owned entities have been relieved from the requirement to prepare a financial report and directors’ report under ASIC Corporations (Wholly-owned companies) Instrument 2016/785. • Appen AI Pty Ltd • Appen Financial Services Pty Ltd Note 27. Subsidiaries (continued) Notes to the consolidated financial statements for the year ended 31 December 2024 111Appen 2024 Annual Report For personal use only
Page 113
Note 27. Subsidiaries The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting policy described in Note 2. Basis of preparation. Interest % Entity Country of incorporation 2024 2023 Appen AI Pty Ltd Australia 100% 100% Appen Financial Services Pty Ltd Australia 100% 100% Appen AI Inc 1 United States of America 100% 100% Crowdgen, Inc. 3 United States of America 100% 100% RaterLabs Inc. United States of America 100% 100% Figure Eight Technologies Inc. United States of America 100% 100% Figure Eight Federal LLC United States of America 100% 100% Appen AI Europe Limited 1 Ireland 100% 100% Appen (UK) Limited 1 United Kingdom 100% 100% Mendip Media Group Limited United Kingdom 100% 100% Appen Data Technology (Shanghai) Co. Ltd China 100% 100% Beijing Appen Technology Co., Ltd 4 China 100% 100% Appen Technology (Wuxi) Co. Ltd China 100% 100% Appen Data Technology (Chongqing) Co., Ltd. China 100% 100% Appen Data Technology (Huainan) Co. Ltd 2 China 100% N/A Appen Butler Hill Limited 1 Hong Kong 100% 100% Appen Limited Korea 1 Korea 100% 100% Appen Japan Pty Ltd 1 Japan 100% 100% Quadrant Pte Ltd 1 Singapore 100% 100% Quadrant Protocol Ltd British Virgin Islands 100% 100% Appen Canada Limited 1 Canada 100% 100% Appen AI India Private Limited 1 India 100% 100% APPEN VIET NAM CO.,LTD 1,2 Vietnam 100% N/A 1 Wholly owned subsidiaries of Appen AI Pty Ltd. 2 Newly incorporated legal entities in 2024. 3 Entity name changed from Leapforce, Inc. to Crowdgen, Inc. on 11 November 2024. 4 100% Ownership transferred to Appen Data Technology (Shanghai) Co. Ltd in August 2024. Notes to the consolidated financial statements for the year ended 31 December 2024 110 Accounting policy The consolidated financial report incorporates all of the assets, liabilities and results of Appen Limited and all of the subsidiaries. Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The assets, liabilities and results of all subsidiaries are fully consolidated into the financial statements of the Group from the date control is obtained by the Group. Acquisition of subsidiaries are accounted for using the acquisition method of accounting. A change in ownership interest without the loss of control, is accounted for as an equity transaction, where the difference between the consideration transferred and the book value of the share of the non-controlling interest acquired is recognised as directly attributable to the parent. The consolidation of a subsidiary is discontinued from the date control ceases. When the Group loses control over a subsidiary, it de-recognises the assets and liabilities of the subsidiary, and any related non-controlling interest and other components of equity. Any resulting gain or loss is recognised in profit or loss. Any interest retained in the former subsidiary is measured at fair value when control is lost. Intercompany transactions, balances and unrealised gains or losses on transactions between Group members/subsidiaries are fully eliminated on consolidation. Accounting policies of subsidiaries are regularly reviewed and adjusted where necessary to ensure uniformity of the accounting policies adopted by the Group. Note 28. Deed of Cross Guarantee The following subsidiaries together with the parent entity are parties to a Deed of Cross Guarantee under which each party has guaranteed to pay any deficiency in the event of the winding up of any of the members in the Closed Group. By entering into the Deed, the wholly-owned entities have been relieved from the requirement to prepare a financial report and directors’ report under ASIC Corporations (Wholly-owned companies) Instrument 2016/785. • Appen AI Pty Ltd • Appen Financial Services Pty Ltd Note 27. Subsidiaries (continued) Notes to the consolidated financial statements for the year ended 31 December 2024 111Appen 2024 Annual Report For personal use only
Page 114
The consolidated statement of profit or loss and financial positions of the entities that are members of the Closed Group is as follows: Statement of profit or loss and other comprehensive income 2024 2023 $ 000 $ 000 Revenue 17,836 43,883 Expenses Crowd service costs (1,520) (3,765) Employee expenses (12,970) (17,818) Recruitment costs (286) (754) Professional fees (1,532) (2,288) Information technology costs (1,301) (1,591) Communication and travel expenses (693) (1,020) Other expenses (5,382) (7, 343) Depreciation and amortisation (1,751) (3,508) Share-based payments expense (1,094) (1,578) Net foreign exchange gain/(loss) 5,249 (2,873) Transaction costs (134) (519) Restructure costs (207) (1,959) Finance costs (255) (660) Deemed interest on earn-out liability – (354) Earn-out adjustment – 15,994 Impairment – (4,079) Profit/(loss) before income tax (4,040) 9,768 Income tax expense (3) (37) Profit/(loss) after income tax (4,043) 9,731 Other comprehensive income/(expense) Items that may be reclassified subsequently to profit or loss: Foreign currency translation (16,446) 6,530 Other comprehensive income for the period, net of tax (16,446) 6,530 Total comprehensive profit/(loss) for the period (20,489) 16,261 Note 28. Deed of Cross Guarantee (continued) Notes to the consolidated financial statements for the year ended 31 December 2024 112 Statement of financial position 2024 2023 $ 000 $ 000 Assets Current assets Cash and cash equivalents 44,475 2,842 Trade and other receivables 9,665 3,788 Contract assets 6,245 3,774 Inventory 1,069 1,069 Prepayments and other assets 2,013 2,768 Income tax receivables 2,153 1,760 Derivative financial instruments – 104 Total current assets 65,620 16,105 Non-current assets Prepayments and other assets 232 14 Intangible assets 5,011 7, 251 Plant and equipment 233 157 Lease right of use assets – 756 Deferred tax assets 6,647 7, 251 Investments 3,095 3,095 Intercompany transactions 121,798 148,523 Total non-current assets 137,016 167,047 Total assets 202,636 183,152 Liabilities Current liabilities Trade and other payables 3,520 4,254 Provisions 741 777 Contract liabilities 5,032 4,698 Lease liabilities 901 966 Total current liabilities 10,194 10,695 Non-current liabilities Trade and other payables 320 306 Lease liabilities 2,201 3,453 Earn-out liability – 3,750 Deferred tax liabilities 2,694 3,511 Total non-current liabilities 5,215 11,020 Total liabilities 15,409 21,715 Net assets 187,227 161,437 Equity Issued capital 366,714 320,435 Reserves and retained earnings (179,487) (158,998) Total equity 187,227 161,437 Note 28. Deed of Cross Guarantee (continued) Notes to the consolidated financial statements for the year ended 31 December 2024 113Appen 2024 Annual Report For personal use only
Page 115
The consolidated statement of profit or loss and financial positions of the entities that are members of the Closed Group is as follows: Statement of profit or loss and other comprehensive income 2024 2023 $ 000 $ 000 Revenue 17,836 43,883 Expenses Crowd service costs (1,520) (3,765) Employee expenses (12,970) (17,818) Recruitment costs (286) (754) Professional fees (1,532) (2,288) Information technology costs (1,301) (1,591) Communication and travel expenses (693) (1,020) Other expenses (5,382) (7, 343) Depreciation and amortisation (1,751) (3,508) Share-based payments expense (1,094) (1,578) Net foreign exchange gain/(loss) 5,249 (2,873) Transaction costs (134) (519) Restructure costs (207) (1,959) Finance costs (255) (660) Deemed interest on earn-out liability – (354) Earn-out adjustment – 15,994 Impairment – (4,079) Profit/(loss) before income tax (4,040) 9,768 Income tax expense (3) (37) Profit/(loss) after income tax (4,043) 9,731 Other comprehensive income/(expense) Items that may be reclassified subsequently to profit or loss: Foreign currency translation (16,446) 6,530 Other comprehensive income for the period, net of tax (16,446) 6,530 Total comprehensive profit/(loss) for the period (20,489) 16,261 Note 28. Deed of Cross Guarantee (continued) Notes to the consolidated financial statements for the year ended 31 December 2024 112 Statement of financial position 2024 2023 $ 000 $ 000 Assets Current assets Cash and cash equivalents 44,475 2,842 Trade and other receivables 9,665 3,788 Contract assets 6,245 3,774 Inventory 1,069 1,069 Prepayments and other assets 2,013 2,768 Income tax receivables 2,153 1,760 Derivative financial instruments – 104 Total current assets 65,620 16,105 Non-current assets Prepayments and other assets 232 14 Intangible assets 5,011 7, 251 Plant and equipment 233 157 Lease right of use assets – 756 Deferred tax assets 6,647 7, 251 Investments 3,095 3,095 Intercompany transactions 121,798 148,523 Total non-current assets 137,016 167,047 Total assets 202,636 183,152 Liabilities Current liabilities Trade and other payables 3,520 4,254 Provisions 741 777 Contract liabilities 5,032 4,698 Lease liabilities 901 966 Total current liabilities 10,194 10,695 Non-current liabilities Trade and other payables 320 306 Lease liabilities 2,201 3,453 Earn-out liability – 3,750 Deferred tax liabilities 2,694 3,511 Total non-current liabilities 5,215 11,020 Total liabilities 15,409 21,715 Net assets 187,227 161,437 Equity Issued capital 366,714 320,435 Reserves and retained earnings (179,487) (158,998) Total equity 187,227 161,437 Note 28. Deed of Cross Guarantee (continued) Notes to the consolidated financial statements for the year ended 31 December 2024 113Appen 2024 Annual Report For personal use only
Page 116
Note 29. Related party transactions Parent entities Appen Limited is the parent entity. Supplementary information of the parent entity is disclosed in Note 26. Subsidiaries Interests in subsidiaries are set out in Note 27. Key management personnel compensation The aggregate remuneration received/receivable by the Directors and other key management personnel of the Group is as follows: 2024 2023 $ $ Short-term benefits 2,390,705 1,750,025 Post-employment benefits 21,646 21,195 Termination payments 588,160 259,535 Long-term benefits 18,189 78,973 Share-based payments 414,954 2,634,705 Total compensation 3,433,654 4,744,433 Loans to/from related parties There were no formal loans to or from related parties during the year or the prior year. Note 30. Share-based payments The Group provides benefits to employees (including key management personnel) of the Group through share-based incentives. Employees are paid for their services or incentivised for their performance in part through shares or rights over shares. These share-based payments are settled via equity and the expense arising from these transactions is recorded and disclosed in the consolidated statement of profit or loss. Performance rights – Long-term incentive plan Appen has an established employee performance rights plan, designated to provide an incentive to senior managers and above (including executive directors) to deliver long-term shareholder returns. Under the plan, participants are granted performance rights which only vest if certain performance conditions are met. LTI for executive KMP is 100% performance and service hurdle-based which aligns with Australian market practice. Vesting is subject to Absolute Total Shareholder Return (aTSR) targets over a three-year performance period. Further details can be found in the remuneration report. LTI for other executives is tailored to the North American market and the vesting is 50% time-based and 50% performance based over a two-year period. Notes to the consolidated financial statements for the year ended 31 December 2024 114 The vesting levels for the achievement of targets are summarised as follows: Absolute TSR 1 over the performance period % of Rights that vest TSR is below 190% Nil TSR is 190% 50% TSR is between 190% and 320% Pro-rata straight line vesting between 50% and 100% TSR is greater than or equal to 320% 100% 1 Absolute Total Shareholder Return (ATSR) is defined as growth in the price of shares (modified to account for capital adjustments where appropriate) together with the value of the dividends over the performance period, assuming that all those dividends are re-invested into new shares. ATSR is measured over the three-year vesting period. LTI is also granted to non-executive employees on a discretionary basis and the vesting is dependent on continued employment with the Group. The rights are granted on various dates in a year, based on a specified monetary value to each recipient and a share price at the time the offer is determined. There was no exercise price applicable and no expiry date applicable upon granting the rights. The fair value of rights is deemed to be the function of the number of rights granted and the share price at grant date. The fair value is then recognised in consolidated statement of profit or loss over time, to match to each employee’s vesting hurdles. Upon cessation of employment, unvested rights are forfeited and the expense recognised in prior periods in respect of forfeited rights is credited to the consolidated statement of profit or loss. The following tables set out an overview of all performance rights granted under the existing plans: Year ended 31 December 2024 Plans and number of rights Balance at the start of the year Granted Exercised Expired/ forfeited/ other Balance at the end of the year 2019 723 – – – 723 2020 16,603 – (2,816) (4,855) 8,932 2021 403,188 – (238,739) (136,922) 27,527 2022 925,051 – (355,473) (192,508) 377,070 2023 11,919,817 2,598,175 (3,740,651) (5,838,560) 4,938,781 2024 – 21,682,936 (336,839) (1,373,949) 19,972,148 13,265,382 24,281,111 (4,674,518) (7,546,794) 25,325,181 Year‑ended 31 December 2023 Plans and number of rights 2019 121,459 – (2,640) (118,096) 723 2020 227,4 48 – (72,117) (138,728) 16,603 2021 583,641 – (16,266) (164,187) 403,188 2022 3,830,336 – (921,818) (1,983,467) 925,051 2023 – 18,346,408 (277,041) (6,149,550) 11,919,817 4,762,884 18,346,408 (1,289,882) (8,554,028) 13,265,382 The weighted average remaining contractual life of performance rights outstanding at the end of the financial year was 1.33 years (2023:1.33 years). The total share-based payment expense recognised in 2024 was $4.1 million (2023: $5.7 million). Note 30. Share-based payments (continued) Notes to the consolidated financial statements for the year ended 31 December 2024 115Appen 2024 Annual Report For personal use only
Page 117
Note 29. Related party transactions Parent entities Appen Limited is the parent entity. Supplementary information of the parent entity is disclosed in Note 26. Subsidiaries Interests in subsidiaries are set out in Note 27. Key management personnel compensation The aggregate remuneration received/receivable by the Directors and other key management personnel of the Group is as follows: 2024 2023 $ $ Short-term benefits 2,390,705 1,750,025 Post-employment benefits 21,646 21,195 Termination payments 588,160 259,535 Long-term benefits 18,189 78,973 Share-based payments 414,954 2,634,705 Total compensation 3,433,654 4,744,433 Loans to/from related parties There were no formal loans to or from related parties during the year or the prior year. Note 30. Share-based payments The Group provides benefits to employees (including key management personnel) of the Group through share-based incentives. Employees are paid for their services or incentivised for their performance in part through shares or rights over shares. These share-based payments are settled via equity and the expense arising from these transactions is recorded and disclosed in the consolidated statement of profit or loss. Performance rights – Long-term incentive plan Appen has an established employee performance rights plan, designated to provide an incentive to senior managers and above (including executive directors) to deliver long-term shareholder returns. Under the plan, participants are granted performance rights which only vest if certain performance conditions are met. LTI for executive KMP is 100% performance and service hurdle-based which aligns with Australian market practice. Vesting is subject to Absolute Total Shareholder Return (aTSR) targets over a three-year performance period. Further details can be found in the remuneration report. LTI for other executives is tailored to the North American market and the vesting is 50% time-based and 50% performance based over a two-year period. Notes to the consolidated financial statements for the year ended 31 December 2024 114 The vesting levels for the achievement of targets are summarised as follows: Absolute TSR 1 over the performance period % of Rights that vest TSR is below 190% Nil TSR is 190% 50% TSR is between 190% and 320% Pro-rata straight line vesting between 50% and 100% TSR is greater than or equal to 320% 100% 1 Absolute Total Shareholder Return (ATSR) is defined as growth in the price of shares (modified to account for capital adjustments where appropriate) together with the value of the dividends over the performance period, assuming that all those dividends are re-invested into new shares. ATSR is measured over the three-year vesting period. LTI is also granted to non-executive employees on a discretionary basis and the vesting is dependent on continued employment with the Group. The rights are granted on various dates in a year, based on a specified monetary value to each recipient and a share price at the time the offer is determined. There was no exercise price applicable and no expiry date applicable upon granting the rights. The fair value of rights is deemed to be the function of the number of rights granted and the share price at grant date. The fair value is then recognised in consolidated statement of profit or loss over time, to match to each employee’s vesting hurdles. Upon cessation of employment, unvested rights are forfeited and the expense recognised in prior periods in respect of forfeited rights is credited to the consolidated statement of profit or loss. The following tables set out an overview of all performance rights granted under the existing plans: Year ended 31 December 2024 Plans and number of rights Balance at the start of the year Granted Exercised Expired/ forfeited/ other Balance at the end of the year 2019 723 – – – 723 2020 16,603 – (2,816) (4,855) 8,932 2021 403,188 – (238,739) (136,922) 27,527 2022 925,051 – (355,473) (192,508) 377,070 2023 11,919,817 2,598,175 (3,740,651) (5,838,560) 4,938,781 2024 – 21,682,936 (336,839) (1,373,949) 19,972,148 13,265,382 24,281,111 (4,674,518) (7,546,794) 25,325,181 Year‑ended 31 December 2023 Plans and number of rights 2019 121,459 – (2,640) (118,096) 723 2020 227,4 48 – (72,117) (138,728) 16,603 2021 583,641 – (16,266) (164,187) 403,188 2022 3,830,336 – (921,818) (1,983,467) 925,051 2023 – 18,346,408 (277,041) (6,149,550) 11,919,817 4,762,884 18,346,408 (1,289,882) (8,554,028) 13,265,382 The weighted average remaining contractual life of performance rights outstanding at the end of the financial year was 1.33 years (2023:1.33 years). The total share-based payment expense recognised in 2024 was $4.1 million (2023: $5.7 million). Note 30. Share-based payments (continued) Notes to the consolidated financial statements for the year ended 31 December 2024 115Appen 2024 Annual Report For personal use only
Page 118
Accounting policy The grant date fair value of equity-settled share-based payment arrangements granted to employees is generally recognised as an expense, with a corresponding increase in equity – share-based payment reserve, over the vesting period of the awards. The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects the extent to which the vesting period has expired and the proportion of the awards that are expected to ultimately vest. No expense is recognised for awards that do not ultimately vest due to a non-market performance condition not being met. The expense is recognised in full if the awards do not vest (or are not exercised) due to a market performance condition not being met. For share-based payment awards with non-vesting conditions, the grant date fair value of the share-based payment is measured to reflect such conditions and there is no true-up for differences between expected and accrual outcomes. Note 31. Remuneration of auditors During the financial year the following fees were paid or payable for services provided by KPMG, the auditor of the Company, and its network firms: 2024 2023 $ $ Audit and review services Audit or review of the financial statements – Group 295,622 365,435 Audit of the financial statements – controlled entities 26,600 25,145 Total audit services 322,222 390,580 Other services Tax compliance services – transfer pricing 28,231 86,262 Other assurance services 5,655 238,395 Total non-audit services 33,886 324,657 Total audit and non-audit services 356,108 715,237 Note 32. Events after the reporting period The Directors are not aware of any other matter or circumstance not otherwise dealt with in this report that has significantly affected or may significantly affect the operations of the Group, the results of those operations or the state of affairs of the Group in subsequent financial periods. Note 30. Share-based payments (continued) Notes to the consolidated financial statements for the year ended 31 December 2024 116 Entity Body corporate, partnership or trust Country of incorporation % of capital held Australian or Foreign tax resident Jurisdiction for Foreign tax resident Appen Limited Body Corporate Australia N/A Australian N/A Appen AI Pty Ltd Body Corporate Australia 100% Australian N/A Appen Financial Services Pty Ltd Body Corporate Australia 100% Australian N/A Appen AI Inc Body Corporate USA 100% Foreign USA Crowdgen, Inc Body Corporate USA 100% Foreign USA RaterLabs Inc. Body Corporate USA 100% Foreign USA Figure Eight Technologies Inc. Body Corporate USA 100% Foreign USA Figure Eight Federal LLC Body Corporate USA 100% Foreign USA Appen AI Europe Limited Body Corporate Ireland 100% Foreign Ireland Appen (UK) Limited Body Corporate UK 100% Foreign UK Mendip Media Group Limited Body Corporate UK 100% Foreign UK Appen Data Technology (Shanghai) Co. Ltd Body Corporate China 100% Foreign China Beijing Appen Technology Co., Ltd Body Corporate China 100% Foreign China Appen Technology (Wuxi) Co. Ltd Body Corporate China 100% Foreign China Appen Data Technology (Chongqing) Co., Ltd.Body Corporate China 100% Foreign China Appen Data Technology (Huainan) Co. Ltd Body Corporate China 100% Foreign China Appen Butler Hill Limited Body Corporate Hong Kong 100% Foreign Hong Kong Appen Limited Korea Body Corporate Korea 100% Foreign Korea Appen Japan Pty Ltd Body Corporate Japan 100% Foreign Japan Quadrant Pte Ltd Body Corporate Singapore 100% Foreign Singapore Quadrant Protocol Ltd Body Corporate British Virgin Islands 100% Foreign British Virgin Islands Appen Canada Limited Body Corporate Canada 100% Foreign Canada Appen AI India Private Limited Body Corporate India 100% Foreign India APPEN VIET NAM CO.,LTD Body Corporate Vietnam 100% Foreign Vietnam Basis of preparation This consolidated entity disclosure statement (CEDS) has been prepared in accordance with the Corporations Act 2001 and includes information for each entity that was part of the consolidated entity as at the end of the financial year in accordance with AASB 10 Consolidated Financial Statements . Determination of tax residency Section 295 (3A)(vi) of the Corporation Act 2001 defines tax residency as having the meaning in the Income Tax Assessment Act 1997. The determination of tax residency involves judgement as there are different interpretations that could be adopted, and which could give rise to a different conclusion on residency. In determining tax residency, the consolidated entity has applied the following interpretations: • Australian tax residency The consolidated entity has applied current legislation and judicial precedent, including having regard to the Tax Commissioner’s public guidance in Tax Ruling TR 2018/5 . • Foreign tax residency Where necessary, the consolidated entity has used independent tax advisers in foreign jurisdictions to assist in its determination of tax residency to ensure applicable foreign tax legislation has been complied with. Branches (permanent establishments) Foreign branches of Australian subsidiaries are not separate level entities and therefore do not have a separate residency for Australian tax purposes. Generally, the Australian subsidiary that the branch is a part of will be the relevant tax resident, rather than the branch operations. Additional disclosures on the tax status of Australian subsidiaries having a foreign branch with a taxable presence in that jurisdiction have been provided where relevant. Consolidated entity disclosure statement as at 31 December 2024 117Appen 2024 Annual Report For personal use only
Page 119
Accounting policy The grant date fair value of equity-settled share-based payment arrangements granted to employees is generally recognised as an expense, with a corresponding increase in equity – share-based payment reserve, over the vesting period of the awards. The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects the extent to which the vesting period has expired and the proportion of the awards that are expected to ultimately vest. No expense is recognised for awards that do not ultimately vest due to a non-market performance condition not being met. The expense is recognised in full if the awards do not vest (or are not exercised) due to a market performance condition not being met. For share-based payment awards with non-vesting conditions, the grant date fair value of the share-based payment is measured to reflect such conditions and there is no true-up for differences between expected and accrual outcomes. Note 31. Remuneration of auditors During the financial year the following fees were paid or payable for services provided by KPMG, the auditor of the Company, and its network firms: 2024 2023 $ $ Audit and review services Audit or review of the financial statements – Group 295,622 365,435 Audit of the financial statements – controlled entities 26,600 25,145 Total audit services 322,222 390,580 Other services Tax compliance services – transfer pricing 28,231 86,262 Other assurance services 5,655 238,395 Total non-audit services 33,886 324,657 Total audit and non-audit services 356,108 715,237 Note 32. Events after the reporting period The Directors are not aware of any other matter or circumstance not otherwise dealt with in this report that has significantly affected or may significantly affect the operations of the Group, the results of those operations or the state of affairs of the Group in subsequent financial periods. Note 30. Share-based payments (continued) Notes to the consolidated financial statements for the year ended 31 December 2024 116 Entity Body corporate, partnership or trust Country of incorporation % of capital held Australian or Foreign tax resident Jurisdiction for Foreign tax resident Appen Limited Body Corporate Australia N/A Australian N/A Appen AI Pty Ltd Body Corporate Australia 100% Australian N/A Appen Financial Services Pty Ltd Body Corporate Australia 100% Australian N/A Appen AI Inc Body Corporate USA 100% Foreign USA Crowdgen, Inc Body Corporate USA 100% Foreign USA RaterLabs Inc. Body Corporate USA 100% Foreign USA Figure Eight Technologies Inc. Body Corporate USA 100% Foreign USA Figure Eight Federal LLC Body Corporate USA 100% Foreign USA Appen AI Europe Limited Body Corporate Ireland 100% Foreign Ireland Appen (UK) Limited Body Corporate UK 100% Foreign UK Mendip Media Group Limited Body Corporate UK 100% Foreign UK Appen Data Technology (Shanghai) Co. Ltd Body Corporate China 100% Foreign China Beijing Appen Technology Co., Ltd Body Corporate China 100% Foreign China Appen Technology (Wuxi) Co. Ltd Body Corporate China 100% Foreign China Appen Data Technology (Chongqing) Co., Ltd.Body Corporate China 100% Foreign China Appen Data Technology (Huainan) Co. Ltd Body Corporate China 100% Foreign China Appen Butler Hill Limited Body Corporate Hong Kong 100% Foreign Hong Kong Appen Limited Korea Body Corporate Korea 100% Foreign Korea Appen Japan Pty Ltd Body Corporate Japan 100% Foreign Japan Quadrant Pte Ltd Body Corporate Singapore 100% Foreign Singapore Quadrant Protocol Ltd Body Corporate British Virgin Islands 100% Foreign British Virgin Islands Appen Canada Limited Body Corporate Canada 100% Foreign Canada Appen AI India Private Limited Body Corporate India 100% Foreign India APPEN VIET NAM CO.,LTD Body Corporate Vietnam 100% Foreign Vietnam Basis of preparation This consolidated entity disclosure statement (CEDS) has been prepared in accordance with the Corporations Act 2001 and includes information for each entity that was part of the consolidated entity as at the end of the financial year in accordance with AASB 10 Consolidated Financial Statements . Determination of tax residency Section 295 (3A)(vi) of the Corporation Act 2001 defines tax residency as having the meaning in the Income Tax Assessment Act 1997. The determination of tax residency involves judgement as there are different interpretations that could be adopted, and which could give rise to a different conclusion on residency. In determining tax residency, the consolidated entity has applied the following interpretations: • Australian tax residency The consolidated entity has applied current legislation and judicial precedent, including having regard to the Tax Commissioner’s public guidance in Tax Ruling TR 2018/5 . • Foreign tax residency Where necessary, the consolidated entity has used independent tax advisers in foreign jurisdictions to assist in its determination of tax residency to ensure applicable foreign tax legislation has been complied with. Branches (permanent establishments) Foreign branches of Australian subsidiaries are not separate level entities and therefore do not have a separate residency for Australian tax purposes. Generally, the Australian subsidiary that the branch is a part of will be the relevant tax resident, rather than the branch operations. Additional disclosures on the tax status of Australian subsidiaries having a foreign branch with a taxable presence in that jurisdiction have been provided where relevant. Consolidated entity disclosure statement as at 31 December 2024 117Appen 2024 Annual Report For personal use only
Page 120
In the Directors’ opinion: • the attached financial statements and notes comply with the Corporations Act 2001 , the Australian Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; • the attached financial statements and notes comply with International Financial Reporting Standards as issued by the International Accounting Standards Board as described in the financial statements; • the attached financial statements and notes give a true and fair view of the Group’s financial position as at 31 December 2024 and of its performance for the financial year ended on that date; • the consolidated entity disclosure statement as at 31 December 2024 is true and correct; • there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable; and • at the date of this declaration, there are reasonable grounds to believe that the members of the Extended Closed Group will be able to meet any obligations or liabilities to which they are, or may become, subject by virtue of the deed of cross guarantee described in note 28 to the financial statements. The directors have been given the declarations required by section 295A of the Corporations Act 2001 . Signed in accordance with a resolution of directors made pursuant to section 295(5)(a) of the Corporations Act 2001 . On behalf of the Directors Richard Freudenstein Director 26 February 2025 Directors’ declaration 118 Report on the audit of the Financial Report Opinion We have audited the Financial Report of Appen Limited (the Company). In our opinion, the accompanying Financial Report of the Company gives a true and fair view, including of the Group ’s financial position as at 31 December 2024 and of its financial performance for the year then ended, in accordance with the Corporations Act 2001 , in compliance with Australian Accounting Standards and the Corporations Regulations 2001 . The Financial Report comprises: • Consolidated statement of financial position as at 31 December 2024 • Consolidated statement of profit or loss and other comprehensive income, Consolidated statement of changes in equity, and Consolidated statement of cash flows for the year then ended • Consolidated entity disclosure statement and accompanying basis of preparation as at 31 December 2024 • Notes, including material accounting policies • Directors’ Declaration. The Group consists of the Company and the entities it controlled at the year end or from time to time during the financial year. Basis for opinion We conducted our audit in accordance with Australian Auditing Standards . We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the Financial Report section of our report. We are independent of the Group in accordance with the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the Financial Report in Australia. We have fulfilled our other ethical responsibilities in accordance with these requirements. Key Audit Matters Key Audit Matters are those matters that, in our professional judgement, were of most significance in our audit of the Financial Report of the current period. This matter was addressed in the context of our audit of the Financial Report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on this matter. KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under Professional Standards Legislation. Independent auditor’s report to the shareholders of Appen Limited 119Appen 2024 Annual Report For personal use only
Page 121
In the Directors’ opinion: • the attached financial statements and notes comply with the Corporations Act 2001 , the Australian Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; • the attached financial statements and notes comply with International Financial Reporting Standards as issued by the International Accounting Standards Board as described in the financial statements; • the attached financial statements and notes give a true and fair view of the Group’s financial position as at 31 December 2024 and of its performance for the financial year ended on that date; • the consolidated entity disclosure statement as at 31 December 2024 is true and correct; • there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable; and • at the date of this declaration, there are reasonable grounds to believe that the members of the Extended Closed Group will be able to meet any obligations or liabilities to which they are, or may become, subject by virtue of the deed of cross guarantee described in note 28 to the financial statements. The directors have been given the declarations required by section 295A of the Corporations Act 2001 . Signed in accordance with a resolution of directors made pursuant to section 295(5)(a) of the Corporations Act 2001 . On behalf of the Directors Richard Freudenstein Director 26 February 2025 Directors’ declaration 118 Report on the audit of the Financial Report Opinion We have audited the Financial Report of Appen Limited (the Company). In our opinion, the accompanying Financial Report of the Company gives a true and fair view, including of the Group ’s financial position as at 31 December 2024 and of its financial performance for the year then ended, in accordance with the Corporations Act 2001 , in compliance with Australian Accounting Standards and the Corporations Regulations 2001 . The Financial Report comprises: • Consolidated statement of financial position as at 31 December 2024 • Consolidated statement of profit or loss and other comprehensive income, Consolidated statement of changes in equity, and Consolidated statement of cash flows for the year then ended • Consolidated entity disclosure statement and accompanying basis of preparation as at 31 December 2024 • Notes, including material accounting policies • Directors’ Declaration. The Group consists of the Company and the entities it controlled at the year end or from time to time during the financial year. Basis for opinion We conducted our audit in accordance with Australian Auditing Standards . We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the Financial Report section of our report. We are independent of the Group in accordance with the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the Financial Report in Australia. We have fulfilled our other ethical responsibilities in accordance with these requirements. Key Audit Matters Key Audit Matters are those matters that, in our professional judgement, were of most significance in our audit of the Financial Report of the current period. This matter was addressed in the context of our audit of the Financial Report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on this matter. KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under Professional Standards Legislation. Independent auditor’s report to the shareholders of Appen Limited 119Appen 2024 Annual Report For personal use only
Page 122
Recognition of revenue from contracts with customers ($234.3m) Refer to Notes 4 and 11 to the Financial Report The key audit matter The Group derives the majority of its revenue from providing platform and tools to subscription customers for a specified period of time, and delivering collected, annotated and evaluated data. The Group’s policy is to recognise this revenue over time using the stage of completion method, as the customer receives and uses the services, and as the required data is delivered and accepted by the customer. Recognition of revenue from contracts with customers is considered to be a key audit matter due to: • The significance of revenue to the Group’s financial statements; and • The high volume of contracts spanning the year end requiring the Group to make manual adjustments to recognise revenue and related contract assets and liabilities. This resulted in significant audit effort for us to assess the revenue recorded by the Group in its financial statements, and the basis for manual adjustments made, in particular to revenue and contract assets, which may be prone to a greater risk of error at the year end. How the matter was addressed in our audit Our procedures included: • We assessed the appropriateness of the Group’s accounting policies for revenue recognition against the requirements of the accounting standards and our understanding of the business. • We obtained an understanding of and tested key internal controls related to the recognition of revenue, such as Management’s review and approval of invoices and contracts and Management’s review of stage of completion for revenue recognition. • We tested a sample of revenue transactions recorded by the Group throughout the year. We checked the: – existence of the underlying arrangement to signed contracts with customers; and – stage of completion and amount of revenue recognised to customer acknowledgements of the services provided and data delivered (customer acknowledgements). • We tested a sample of revenue transactions recognised by the Group either side of the year end (including manual adjustments), to underlying records such as, customer acknowledgements to check revenue was recognised in the period when the service was provided and data accepted by the customer. • We tested a sample of contract assets recorded by the Group at year end, including manual adjustments to recognise contract assets, to underlying records such as customer acknowledgements to check revenue was recognised in the period when the service was provided and data accepted by the customer. • We evaluated the adequacy of disclosures in the financial report using our understanding obtained from our testing and against the requirements of the accounting standards. Independent auditor’s report to the shareholders of Appen Limited 120 Other Information Other Information is financial and non-financial information in Appen Limited’s annual report which is provided in addition to the Financial Report and the Auditor’s Report. The Directors are responsible for the Other Information. Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not express an audit opinion or any form of assurance conclusion thereon, with the exception of the Remuneration Report and our related assurance opinion. In connection with our audit of the Financial Report, our responsibility is to read the Other Information. In doing so, we consider whether the Other Information is materially inconsistent with the Financial Report or our knowledge obtained in the audit, or otherwise appears to be materially misstated. We are required to report if we conclude that there is a material misstatement of this Other Information, and based on the work we have performed on the Other Information that we obtained prior to the date of this Auditor’s Report we have nothing to report. Responsibilities of the Directors for the Financial Report The Directors are responsible for: • preparing the Financial Report in accordance with the Corporations Act 2001 , including giving a true and fair view of the financial position and performance of the Group, and in compliance with Australian Accounting Standards and the Corporations Regulations 2001 • implementing necessary internal control to enable the preparation of a Financial Report in accordance with the Corporations Act 2001 , including giving a true and fair view of the financial position and performance of the Group, and that is free from material misstatement, whether due to fraud or error • assessing the Group and Company’s ability to continue as a going concern and whether the use of the going concern basis of accounting is appropriate. This includes disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless they either intend to liquidate the Group and Company or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the Financial Report Our objective is: • to obtain reasonable assurance about whether the Financial Report as a whole is free from material misstatement, whether due to fraud or error; and • to issue an Auditor’s Report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error. They are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the Financial Report. A further description of our responsibilities for the audit of the Financial Report is located at the Auditing and Assurance Standards Board website at: https://www.auasb.gov.au/media/bwvjcgre/ar1_2024.pdf This description forms part of our Auditor’s Report. Independent auditor’s report to the shareholders of Appen Limited 121Appen 2024 Annual Report For personal use only
Page 123
Recognition of revenue from contracts with customers ($234.3m) Refer to Notes 4 and 11 to the Financial Report The key audit matter The Group derives the majority of its revenue from providing platform and tools to subscription customers for a specified period of time, and delivering collected, annotated and evaluated data. The Group’s policy is to recognise this revenue over time using the stage of completion method, as the customer receives and uses the services, and as the required data is delivered and accepted by the customer. Recognition of revenue from contracts with customers is considered to be a key audit matter due to: • The significance of revenue to the Group’s financial statements; and • The high volume of contracts spanning the year end requiring the Group to make manual adjustments to recognise revenue and related contract assets and liabilities. This resulted in significant audit effort for us to assess the revenue recorded by the Group in its financial statements, and the basis for manual adjustments made, in particular to revenue and contract assets, which may be prone to a greater risk of error at the year end. How the matter was addressed in our audit Our procedures included: • We assessed the appropriateness of the Group’s accounting policies for revenue recognition against the requirements of the accounting standards and our understanding of the business. • We obtained an understanding of and tested key internal controls related to the recognition of revenue, such as Management’s review and approval of invoices and contracts and Management’s review of stage of completion for revenue recognition. • We tested a sample of revenue transactions recorded by the Group throughout the year. We checked the: – existence of the underlying arrangement to signed contracts with customers; and – stage of completion and amount of revenue recognised to customer acknowledgements of the services provided and data delivered (customer acknowledgements). • We tested a sample of revenue transactions recognised by the Group either side of the year end (including manual adjustments), to underlying records such as, customer acknowledgements to check revenue was recognised in the period when the service was provided and data accepted by the customer. • We tested a sample of contract assets recorded by the Group at year end, including manual adjustments to recognise contract assets, to underlying records such as customer acknowledgements to check revenue was recognised in the period when the service was provided and data accepted by the customer. • We evaluated the adequacy of disclosures in the financial report using our understanding obtained from our testing and against the requirements of the accounting standards. Independent auditor’s report to the shareholders of Appen Limited 120 Other Information Other Information is financial and non-financial information in Appen Limited’s annual report which is provided in addition to the Financial Report and the Auditor’s Report. The Directors are responsible for the Other Information. Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not express an audit opinion or any form of assurance conclusion thereon, with the exception of the Remuneration Report and our related assurance opinion. In connection with our audit of the Financial Report, our responsibility is to read the Other Information. In doing so, we consider whether the Other Information is materially inconsistent with the Financial Report or our knowledge obtained in the audit, or otherwise appears to be materially misstated. We are required to report if we conclude that there is a material misstatement of this Other Information, and based on the work we have performed on the Other Information that we obtained prior to the date of this Auditor’s Report we have nothing to report. Responsibilities of the Directors for the Financial Report The Directors are responsible for: • preparing the Financial Report in accordance with the Corporations Act 2001 , including giving a true and fair view of the financial position and performance of the Group, and in compliance with Australian Accounting Standards and the Corporations Regulations 2001 • implementing necessary internal control to enable the preparation of a Financial Report in accordance with the Corporations Act 2001 , including giving a true and fair view of the financial position and performance of the Group, and that is free from material misstatement, whether due to fraud or error • assessing the Group and Company’s ability to continue as a going concern and whether the use of the going concern basis of accounting is appropriate. This includes disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless they either intend to liquidate the Group and Company or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the Financial Report Our objective is: • to obtain reasonable assurance about whether the Financial Report as a whole is free from material misstatement, whether due to fraud or error; and • to issue an Auditor’s Report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error. They are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the Financial Report. A further description of our responsibilities for the audit of the Financial Report is located at the Auditing and Assurance Standards Board website at: https://www.auasb.gov.au/media/bwvjcgre/ar1_2024.pdf This description forms part of our Auditor’s Report. Independent auditor’s report to the shareholders of Appen Limited 121Appen 2024 Annual Report For personal use only
Page 124
Report on the Remuneration Report Opinion In our opinion, the Remuneration Report of Appen Limited for the year ended 31 December 2024, complies with Section 300A of the Corporations Act 2001 . Directors’ responsibilities The Directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with Section 300A of the Corporations Act 2001. Our responsibilities We have audited the Remuneration Report included in pages 55 to 71 of the Directors’ report for the year ended 31 December 2024. Our responsibility is to express an opinion as to whether the Remuneration Report complies in all material respects with Section 300A of the Corporations Act 2001 , based on our audit conducted in accordance with Australian Auditing Standards. KPMG Cameron Slapp Partner Sydney 26 February 2025 Independent auditor’s report to the shareholders of Appen Limited 122 Additional information required under ASX Listing Rule 4.10 and not shown elsewhere in this Annual Report is as follows. The information is current as at 31 January 2025. Distribution of shareholders The distribution of issued capital is as follows: Size of holding Number of shareholders Ordinary shares % of issued capital 100,001 and over 204 164,981,507 63.28 10,001 to 100,000 2,019 55,827,450 21.41 5,001 to 10,000 1,832 13,663,584 5.24 1,001 to 5,000 7,856 18,965,586 7. 27 1 to 1,000 24,483 7, 297,027 2.80 Total 36,394 260,735,154 100.00 Distribution of performance rights holders The distribution of unquoted performance rights on issue is as follows: Size of holding Number of holders Unquoted performance rights % of total rights 100,001 and over 22 21,657,619 86.95 10,001 to 100,000 93 2,824,835 11.34 5,001 to 10,000 42 275,341 1.11 1,001 to 5,000 40 130,614 0.52 1 to 1,000 48 18,523 0.08 Total 245 24,906,932 100.00 The performance rights on issue are unquoted and have been issued under our employee incentive scheme. Less than marketable parcels of ordinary shares There are 11,631 shareholders with unmarketable parcels, holding 891,055 shares. Additional information 123Appen 2024 Annual Report For personal use only
Page 125
Report on the Remuneration Report Opinion In our opinion, the Remuneration Report of Appen Limited for the year ended 31 December 2024, complies with Section 300A of the Corporations Act 2001 . Directors’ responsibilities The Directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with Section 300A of the Corporations Act 2001. Our responsibilities We have audited the Remuneration Report included in pages 55 to 71 of the Directors’ report for the year ended 31 December 2024. Our responsibility is to express an opinion as to whether the Remuneration Report complies in all material respects with Section 300A of the Corporations Act 2001 , based on our audit conducted in accordance with Australian Auditing Standards. KPMG Cameron Slapp Partner Sydney 26 February 2025 Independent auditor’s report to the shareholders of Appen Limited 122 Additional information required under ASX Listing Rule 4.10 and not shown elsewhere in this Annual Report is as follows. The information is current as at 31 January 2025. Distribution of shareholders The distribution of issued capital is as follows: Size of holding Number of shareholders Ordinary shares % of issued capital 100,001 and over 204 164,981,507 63.28 10,001 to 100,000 2,019 55,827,450 21.41 5,001 to 10,000 1,832 13,663,584 5.24 1,001 to 5,000 7,856 18,965,586 7. 27 1 to 1,000 24,483 7, 297,027 2.80 Total 36,394 260,735,154 100.00 Distribution of performance rights holders The distribution of unquoted performance rights on issue is as follows: Size of holding Number of holders Unquoted performance rights % of total rights 100,001 and over 22 21,657,619 86.95 10,001 to 100,000 93 2,824,835 11.34 5,001 to 10,000 42 275,341 1.11 1,001 to 5,000 40 130,614 0.52 1 to 1,000 48 18,523 0.08 Total 245 24,906,932 100.00 The performance rights on issue are unquoted and have been issued under our employee incentive scheme. Less than marketable parcels of ordinary shares There are 11,631 shareholders with unmarketable parcels, holding 891,055 shares. Additional information 123Appen 2024 Annual Report For personal use only
Page 126
Twenty largest shareholders The names of the twenty largest shareholders of quoted equity securities are as follows: Ordinary shares Number held % of issued capital 1 CITICORP NOMINEES PTY LIMITED 19,642,438 7.53 2 J P MORGAN NOMINEES AUSTRALIA PTY LIMITED 17,160,629 6.58 3 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED 15,519,784 5.95 4 MR LINPING FU 10,000,000 3.84 5 C & J VONWILLER PTY LTD <VONWILLER FAMILY A/C> 8,600,827 3.30 6 BNP PARIBAS NOMS (NZ) LTD 6,943,217 2.66 7 BNP PARIBAS NOMS PTY LTD 4,632,901 1.78 8 MATTHEW WONG INVESTMENTS (AUS) PTY LTD <MATTHEW WONG INV (AUS) F A/C> 3,961,110 1.52 9 PACIFIC CUSTODIANS PTY LIMITED APX PLANS CTRL A/C 3,741,675 1.44 10 MORGAN STANLEY AUSTRALIA SECURITIES (NOMINEE) PTY LIMITED 3,578,735 1.37 11 BNP PARIBAS NOMINEES PTY LTD <IB AU NOMS RETAILCLIENT> 3,520,088 1.35 12 PENG CHENG INVESTMENT PTY LTD <PENG CHENG INVESTMENT A/C> 3,315,625 1.27 13 WARBONT NOMINEES PTY LTD <UNPAID ENTREPOT A/C> 3,292,649 1.26 14 MS BO XU 3,006,576 1.15 15 BNP PARIBAS NOMINEES PTY LTD <CLEARSTREAM> 2,433,704 0.93 16 ASB NOMINEES LIMITED <145608 A/C> 2,287,888 0.88 17 BNP PARIBAS NOMINEES PTY LTD <BARCLAYS> 2,134,245 0.82 18 QY LONG RIVER PTY LTD 2,106,326 0.81 19 MS HUA LU 1,961,042 0.75 20 MR GUOXIN HU 1,450,000 0.56 119,289,459 45.75 Remaining quoted equity securities 141,445,695 54.25 Total quoted equity securities 260,735,154 100.00 Unquoted equity securities The Company had the following unquoted securities on issue as at 31 January 2025: Number on issue Number of holders Performance rights 24,906,932 245 Additional information 124 Substantial shareholders The names of the substantial shareholders as disclosed in notices submitted to the ASX as at 31 January 2025 are: Ordinary shares Shareholder Number held % of issued capital C & J VONWILLER PTY LTD 8,600,827 3.30 Restricted securities The Company had no restricted securities on issue as at 31 January 2025. Voting rights In accordance with the Constitution each member present at a meeting whether in person, or by proxy, or by power of attorney, or a duly authorised representative in the case of a corporate member, shall have one vote on a show of hands, and one vote for each fully paid ordinary share, on a poll. Holders of performance rights have no voting rights. On-market buy-backs There is no current on-market buy-back in relation to the Company’s securities. Additional information 125Appen 2024 Annual Report For personal use only
Page 127
Twenty largest shareholders The names of the twenty largest shareholders of quoted equity securities are as follows: Ordinary shares Number held % of issued capital 1 CITICORP NOMINEES PTY LIMITED 19,642,438 7.53 2 J P MORGAN NOMINEES AUSTRALIA PTY LIMITED 17,160,629 6.58 3 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED 15,519,784 5.95 4 MR LINPING FU 10,000,000 3.84 5 C & J VONWILLER PTY LTD <VONWILLER FAMILY A/C> 8,600,827 3.30 6 BNP PARIBAS NOMS (NZ) LTD 6,943,217 2.66 7 BNP PARIBAS NOMS PTY LTD 4,632,901 1.78 8 MATTHEW WONG INVESTMENTS (AUS) PTY LTD <MATTHEW WONG INV (AUS) F A/C> 3,961,110 1.52 9 PACIFIC CUSTODIANS PTY LIMITED APX PLANS CTRL A/C 3,741,675 1.44 10 MORGAN STANLEY AUSTRALIA SECURITIES (NOMINEE) PTY LIMITED 3,578,735 1.37 11 BNP PARIBAS NOMINEES PTY LTD <IB AU NOMS RETAILCLIENT> 3,520,088 1.35 12 PENG CHENG INVESTMENT PTY LTD <PENG CHENG INVESTMENT A/C> 3,315,625 1.27 13 WARBONT NOMINEES PTY LTD <UNPAID ENTREPOT A/C> 3,292,649 1.26 14 MS BO XU 3,006,576 1.15 15 BNP PARIBAS NOMINEES PTY LTD <CLEARSTREAM> 2,433,704 0.93 16 ASB NOMINEES LIMITED <145608 A/C> 2,287,888 0.88 17 BNP PARIBAS NOMINEES PTY LTD <BARCLAYS> 2,134,245 0.82 18 QY LONG RIVER PTY LTD 2,106,326 0.81 19 MS HUA LU 1,961,042 0.75 20 MR GUOXIN HU 1,450,000 0.56 119,289,459 45.75 Remaining quoted equity securities 141,445,695 54.25 Total quoted equity securities 260,735,154 100.00 Unquoted equity securities The Company had the following unquoted securities on issue as at 31 January 2025: Number on issue Number of holders Performance rights 24,906,932 245 Additional information 124 Substantial shareholders The names of the substantial shareholders as disclosed in notices submitted to the ASX as at 31 January 2025 are: Ordinary shares Shareholder Number held % of issued capital C & J VONWILLER PTY LTD 8,600,827 3.30 Restricted securities The Company had no restricted securities on issue as at 31 January 2025. Voting rights In accordance with the Constitution each member present at a meeting whether in person, or by proxy, or by power of attorney, or a duly authorised representative in the case of a corporate member, shall have one vote on a show of hands, and one vote for each fully paid ordinary share, on a poll. Holders of performance rights have no voting rights. On-market buy-backs There is no current on-market buy-back in relation to the Company’s securities. Additional information 125Appen 2024 Annual Report For personal use only
Page 128
This year, our materiality assessment followed a robust three-step process to ensure alignment with strategic objectives and evolving business priorities. Identify We identified material issues by examining Appen’s economic, operational, and societal impacts, alongside associated risks. This process incorporated: 1 Emerging and existing strategic challenges: Including technology advancements like generative AI and evolving workforce dynamics. 2 Market signals: Trends and developments in policy and other market factors impacting Appen’s operations and reputation. 3 Risk landscape evolution: Assessment of key and emerging risks critical to sustaining business resilience. 4 Stakeholder insights: Feedback from contributors, customers, investors, and internal teams captured through ongoing engagement. Evaluate We evaluate each material issue based on its importance to Appen’s business and to our stakeholders. We typically engage with each stakeholder group during the year through many forums such as face-to-face and virtual meetings, surveys and by responding to queries and concerns. Through this process we have identified 28 material issues on which we report. We have also identified and reported on other important issues and risks that are of interest to our stakeholders. Review and report Our risk, trust, and safety team, senior management, and the Board reviewed the material issues to ensure alignment with our business strategy and risk management framework. Material issues guide our reporting and are embedded into our operational measures, allowing us to track progress and drive results across our six value drivers. Additionally, identified risks are integrated into relevant risk registers, ensuring a proactive approach to both opportunity capture and risk mitigation. Value driver 2024 material issues Associated risk Page reference Technology, processes and systems • Data security and governance • Cyber security • Technology innovation • Protection of intellectual property • Managing technology disruptions and business continuity • Platform availability • Ethical and responsible deployment of Generative AI • Investment in technology innovation and transformation • Compliance with security privacy and other data regulations 12–14 Our people • Culture and engagement • Diversity, equity and inclusion • Talent attraction and retention • Wellbeing and safety • Workplace training and development • Talent strategy and employee value proposition 25–27 Customer and brand • Customer experience and satisfaction • Innovative customer solutions • Customer concentration • Crowd integrity • Changing customer strategy and needs • Ability to execute on operational requirements • Crowd supply meets customer demand 22–24 Financial • Sustainable earnings • Ongoing customer demand for data • Evolution of the AI market • Strategic direction of business: – Capture potential of generative AI 28–32 Crowd, social and environment • Fair pay, treatment and wellbeing • Crowd diversity and inclusion • Responsible AI • Environmental impact and climate change • Corporate Governance • Corporate citizenship and reputation • Labour and Human rights • Supply chain management • Wellbeing of crowd workers on high-risk projects, including content moderation • Crowd conditions • Compliance with legal, statutory and ethical obligations • Environmental, social and governance (ESG) risks and performance 15–21 Materiality assessment 126 Sustainable Development Goals (SDGs) Playing our part 9 Industry innovation and infrastructure Our services support technology development, research and innovation across the globe, many of which are used to increase access to technology in developing countries. 8 Decent work and economic growth Our work from anywhere model provides income generating opportunities for individuals whose personal circumstances make it difficult for them to access traditional employment. For many communities, the ability to access digital work through our platform has unlocked a new world of possibilities for economic development, skills training, and the ability to participate in the digital economy. 10 Reduced inequalities We believe in digital equality through responsible AI practices. By ensuring training data is representative of the real world this reduces the potential for technology to introduce further bias and discrimination to underrepresented and marginalised communities. Our diverse global crowd is fundamental to ensuring this and we continue to invest in research to ensure that our crowd reflects the real world. 5 Gender equality We believe in opportunities for all and embed this in our day-to-day practices as guided by our Diversity Policy. We have a 50% gender balance across our board and targeting an increase to female representation in our senior management team. 13 Climate action We believe we can help drive the global net zero agenda by playing our part and have committed to the following: • Net zero across our operations and supply chain by 2030 • Becoming a signatory to the SBTi Prioritised United Nations Sustainable Development Goals 127Appen 2024 Annual Report For personal use only
Page 129
This year, our materiality assessment followed a robust three-step process to ensure alignment with strategic objectives and evolving business priorities. Identify We identified material issues by examining Appen’s economic, operational, and societal impacts, alongside associated risks. This process incorporated: 1 Emerging and existing strategic challenges: Including technology advancements like generative AI and evolving workforce dynamics. 2 Market signals: Trends and developments in policy and other market factors impacting Appen’s operations and reputation. 3 Risk landscape evolution: Assessment of key and emerging risks critical to sustaining business resilience. 4 Stakeholder insights: Feedback from contributors, customers, investors, and internal teams captured through ongoing engagement. Evaluate We evaluate each material issue based on its importance to Appen’s business and to our stakeholders. We typically engage with each stakeholder group during the year through many forums such as face-to-face and virtual meetings, surveys and by responding to queries and concerns. Through this process we have identified 28 material issues on which we report. We have also identified and reported on other important issues and risks that are of interest to our stakeholders. Review and report Our risk, trust, and safety team, senior management, and the Board reviewed the material issues to ensure alignment with our business strategy and risk management framework. Material issues guide our reporting and are embedded into our operational measures, allowing us to track progress and drive results across our six value drivers. Additionally, identified risks are integrated into relevant risk registers, ensuring a proactive approach to both opportunity capture and risk mitigation. Value driver 2024 material issues Associated risk Page reference Technology, processes and systems • Data security and governance • Cyber security • Technology innovation • Protection of intellectual property • Managing technology disruptions and business continuity • Platform availability • Ethical and responsible deployment of Generative AI • Investment in technology innovation and transformation • Compliance with security privacy and other data regulations 12–14 Our people • Culture and engagement • Diversity, equity and inclusion • Talent attraction and retention • Wellbeing and safety • Workplace training and development • Talent strategy and employee value proposition 25–27 Customer and brand • Customer experience and satisfaction • Innovative customer solutions • Customer concentration • Crowd integrity • Changing customer strategy and needs • Ability to execute on operational requirements • Crowd supply meets customer demand 22–24 Financial • Sustainable earnings • Ongoing customer demand for data • Evolution of the AI market • Strategic direction of business: – Capture potential of generative AI 28–32 Crowd, social and environment • Fair pay, treatment and wellbeing • Crowd diversity and inclusion • Responsible AI • Environmental impact and climate change • Corporate Governance • Corporate citizenship and reputation • Labour and Human rights • Supply chain management • Wellbeing of crowd workers on high-risk projects, including content moderation • Crowd conditions • Compliance with legal, statutory and ethical obligations • Environmental, social and governance (ESG) risks and performance 15–21 Materiality assessment 126 Sustainable Development Goals (SDGs) Playing our part 9 Industry innovation and infrastructure Our services support technology development, research and innovation across the globe, many of which are used to increase access to technology in developing countries. 8 Decent work and economic growth Our work from anywhere model provides income generating opportunities for individuals whose personal circumstances make it difficult for them to access traditional employment. For many communities, the ability to access digital work through our platform has unlocked a new world of possibilities for economic development, skills training, and the ability to participate in the digital economy. 10 Reduced inequalities We believe in digital equality through responsible AI practices. By ensuring training data is representative of the real world this reduces the potential for technology to introduce further bias and discrimination to underrepresented and marginalised communities. Our diverse global crowd is fundamental to ensuring this and we continue to invest in research to ensure that our crowd reflects the real world. 5 Gender equality We believe in opportunities for all and embed this in our day-to-day practices as guided by our Diversity Policy. We have a 50% gender balance across our board and targeting an increase to female representation in our senior management team. 13 Climate action We believe we can help drive the global net zero agenda by playing our part and have committed to the following: • Net zero across our operations and supply chain by 2030 • Becoming a signatory to the SBTi Prioritised United Nations Sustainable Development Goals 127Appen 2024 Annual Report For personal use only
Page 130
People Employee Engagement 1 2021 2022 2023 2024 Score (%) 76 78 75 79 1 Measures the likelihood of full time permanent employees (including those in PEOs) referring a friend or colleague to Appen based on their employee experience. The scale is a 5 point Likert resulting in 1–2 Detractor, 3 Passive and 4–5 Promoter. NPS is calculated by subtracting the % of total detractors from the % of total promoters. Survey results are provided by Workday Peakon. Training hours 1 2021 2022 2023 2024 Total training hours 32,527 41,665 35,156 29,280 1 Data from Appen University. Mandatory training completion rates 1 2021 2022 2023 2024 Compliance courses (%) 91 91 95 90 1 Data from Appen University. Employee demographics – gender 1 2021 2022 2023 2024 Female Overall workforce (%) 58 57 55 57 Board director (%) 50 50 50 50 Executive Team/SVP (%) 30 30 22 23 Vice President (%) 28 32 35 57 Senior Director (%) 53 63 47 36 Director (%) 41 45 40 50 Manager (%) 60 57 61 56 Male Overall workforce (%) 42 43 45 43 Board director (%) 50 50 50 50 Executive Team/SVP (%) 70 70 78 77 Vice President (%) 72 68 65 43 Senior Director (%) 47 37 53 64 Director (%) 59 55 60 50 Manager (%) 40 43 39 44 1 HR report for all employees generated from Workday. Refer to link www.appen.com/about-us for Board of directors. Non-financial data metrics 128 Employee demographics – ethnicity 1 US Only 2023 2024 Breakdown Share of total workforce (%) Share in all mgmt. positions (%) Share of total workforce (%) Share in all mgmt. positions (%) Asian 18.1 13.2 10.2 18.6 Black or African American 0.6 0.0 4.6 3.4 Hispanic or Latino 3.6 4.0 3.7 6.8 White 59.5 65.7 57.9 52.5 Indigenous or Native 0.0 0.0 0.5 0.0 Other 4.8 6.6 5.6 8.5 Not disclosed 13.4 10.5 17.6 10.2 All regions 2023 2024 Breakdown Share of total workforce (%) Share in all mgmt. positions (%) Share of total workforce (%) Share in all mgmt. positions (%) Asian 41.5 37.9 36.7 39.1 Black or African American 0.1 0.0 1.2 0.7 Hispanic or Latino 1.1 1.0 1.3 1.3 White 19.5 21.2 20.7 15.8 Indigenous or Native 0.0 0.0 0.1 0.0 Other 1.6 2.2 2.2 2.6 Not disclosed 36.2 37.7 37.8 40.5 1 HR report for all permanent employees generated from Workday. Crowd Crowd NPS 1 2021 2022 2023 2024 Score (%) 40 31 27 33 1 Measures the likelihood of crowd contractors to recommend Appen to a friend or colleague, according to a scale of 1–10 where 10 means extremely likely (0–6 Detractor, 7–8 Passive, 9–10 Promoter). NPS is calculated by subtracting the % of total detractors from the % of total promoters. Scores can range from -100 to +100. Source: Cascade Insights. Customer Customer NPS 1 2021 2022 2023 2024 Score (%) Not disclosed 22 35 57 1 Measures the likelihood of Customer to recommend Appen to a friend or colleague, according to a scale of 1–10 where 10 means extremely likely (0–6 Detractor, 7–8 Passive, 9–10 Promoter). NPS is calculated by subtracting the % of total detractors from the % of total promoters. Scores can range from -100 to +100. Source: ChurnZero. Non-financial data metrics 129Appen 2024 Annual Report For personal use only
Page 131
People Employee Engagement 1 2021 2022 2023 2024 Score (%) 76 78 75 79 1 Measures the likelihood of full time permanent employees (including those in PEOs) referring a friend or colleague to Appen based on their employee experience. The scale is a 5 point Likert resulting in 1–2 Detractor, 3 Passive and 4–5 Promoter. NPS is calculated by subtracting the % of total detractors from the % of total promoters. Survey results are provided by Workday Peakon. Training hours 1 2021 2022 2023 2024 Total training hours 32,527 41,665 35,156 29,280 1 Data from Appen University. Mandatory training completion rates 1 2021 2022 2023 2024 Compliance courses (%) 91 91 95 90 1 Data from Appen University. Employee demographics – gender 1 2021 2022 2023 2024 Female Overall workforce (%) 58 57 55 57 Board director (%) 50 50 50 50 Executive Team/SVP (%) 30 30 22 23 Vice President (%) 28 32 35 57 Senior Director (%) 53 63 47 36 Director (%) 41 45 40 50 Manager (%) 60 57 61 56 Male Overall workforce (%) 42 43 45 43 Board director (%) 50 50 50 50 Executive Team/SVP (%) 70 70 78 77 Vice President (%) 72 68 65 43 Senior Director (%) 47 37 53 64 Director (%) 59 55 60 50 Manager (%) 40 43 39 44 1 HR report for all employees generated from Workday. Refer to link www.appen.com/about-us for Board of directors. Non-financial data metrics 128 Employee demographics – ethnicity 1 US Only 2023 2024 Breakdown Share of total workforce (%) Share in all mgmt. positions (%) Share of total workforce (%) Share in all mgmt. positions (%) Asian 18.1 13.2 10.2 18.6 Black or African American 0.6 0.0 4.6 3.4 Hispanic or Latino 3.6 4.0 3.7 6.8 White 59.5 65.7 57.9 52.5 Indigenous or Native 0.0 0.0 0.5 0.0 Other 4.8 6.6 5.6 8.5 Not disclosed 13.4 10.5 17.6 10.2 All regions 2023 2024 Breakdown Share of total workforce (%) Share in all mgmt. positions (%) Share of total workforce (%) Share in all mgmt. positions (%) Asian 41.5 37.9 36.7 39.1 Black or African American 0.1 0.0 1.2 0.7 Hispanic or Latino 1.1 1.0 1.3 1.3 White 19.5 21.2 20.7 15.8 Indigenous or Native 0.0 0.0 0.1 0.0 Other 1.6 2.2 2.2 2.6 Not disclosed 36.2 37.7 37.8 40.5 1 HR report for all permanent employees generated from Workday. Crowd Crowd NPS 1 2021 2022 2023 2024 Score (%) 40 31 27 33 1 Measures the likelihood of crowd contractors to recommend Appen to a friend or colleague, according to a scale of 1–10 where 10 means extremely likely (0–6 Detractor, 7–8 Passive, 9–10 Promoter). NPS is calculated by subtracting the % of total detractors from the % of total promoters. Scores can range from -100 to +100. Source: Cascade Insights. Customer Customer NPS 1 2021 2022 2023 2024 Score (%) Not disclosed 22 35 57 1 Measures the likelihood of Customer to recommend Appen to a friend or colleague, according to a scale of 1–10 where 10 means extremely likely (0–6 Detractor, 7–8 Passive, 9–10 Promoter). NPS is calculated by subtracting the % of total detractors from the % of total promoters. Scores can range from -100 to +100. Source: ChurnZero. Non-financial data metrics 129Appen 2024 Annual Report For personal use only
Page 132
Environment Geographic distribution of emissions (Scope 1 and 2) 1,2 Gas (MWh) Electricity (MWh) Electricity –renewable (MWh) Scope 1 tCO2e Scope 2 tCO2e Scope 2 (location based) tCO2e Australia – – 52.0 – – 37.9 US and Canada 120.0 210.3 – 21.8 44.6 39.9 China, Japan and Vietnam 1,406.7 1,064.6 – 254.9 892.5 892.5 UK 35.6 26.9 65.5 6.5 1.8 13.6 India – 174.6 – – 173.0 173.0 Philippines – 1,309.4 – – 832.8 832.8 Total 1,562.3 2,785.8 90.6 283.2 1,944.7 1,989.7 1 Greenhouse Gas (GHG) emissions for scope 1 and 2 are calculated based on the GHG Protocol. 2 Electricity and Gas consumptions are based on utility bills (if available) or estimation by leased floor area. Scope 3 1 Category Description Emissions Category 1 – Purchased goods and services 2 Suppliers and Crowd contractors 9,511 Category 5 – Waste generated in operations 3 Disposal and treatment of waste generated in the company’s operations 46 Category 6 – Business travel 4 Business flights and accommodation 403 Category 7 – Employee commuting 5 Employees commuting between their homes and their worksites and employees working from home 1,608 Category 8 – Upstream leased assets 6 Emissions associated with leases such as lifecycle emissions for construction of a leased building 921 Category 11 – Use of sold products 7 End use of goods and services sold 20 1 Scope 3 categories and GHG emissions are calculated based on GHG Protocol Scope 3 value chain reporting. 2 Estimated emissions based on supplier spend data and crowd contractors’ work hours in 2024. 3 Estimated waste generation based on employee attendance in 2024. 4 Based on business travel information retrieved from travel agency Egencia, Navan and credit card bookings. Estimated emissions are calculated using web-based calculators for flight (provided by International Civil Aviation Organisation (ICAO)) and hotel (provided by Greenview). 5 Based on employee attendance in 2024. 6 Lifecycle lease emissions based on annual lease principle payment over the life of the leased assets. 7 Based on carbon footprint report from Amazon Web Service, our third-party cloud service provider. Technology 2021 2022 2023 2024 Data privacy breaches (number) 1 0 0 0 1 System availability 2 (%) 99.9 99.9 99.9 99.9 1 Based on report from Appen legal team. 2024, one non-material security incident involving and limited to Quadrant, a subsidiary of Appen. 2 Based on report from third-party website monitoring company, StatusCake. Governance 2021 $ 2022 $ 2023 $ 2024 $ Political donations 1 0 0 0 0 1 Based on financial data from Workday. Social Philanthropic donations 1 2021 $ 2022 $ 2023 $ 2024 $ Matched Contributions Not disclosed 25,953 9,393 442 Campaigns Not disclosed 18,628 8,093 442 1 Based on Employee Services Committee (ESC) donation report. Non-financial data metrics 130 Registered office Level 6, 9 Help Street Chatswood NSW 2067 +61 2 9468 6300 www.appen.com Company secretary Carl Middlehurst Investor relations +61 2 9468 6300 investorrelations@appen.com www.appen.com/investors Shareholder enquiries MUFG Corporate Markets Locked Bag A14 Sydney South NSW 1235 +61 1300 554 474 support@cm.mpms.mufg.com au.investorcentre.mpms.mufg.com Auditor KPMG Tower Three International Towers Sydney 300 Barangaroo Avenue Sydney NSW 2000 Stock exchange listing Appen Limited shares are listed on the Australian Securities Exchange (ASX code: APX) Corporate Governance Statement www.appen.com/investors/corporate-governance Corporate directory 131Appen 2024 Annual Report For personal use only
Page 133
Environment Geographic distribution of emissions (Scope 1 and 2) 1,2 Gas (MWh) Electricity (MWh) Electricity –renewable (MWh) Scope 1 tCO2e Scope 2 tCO2e Scope 2 (location based) tCO2e Australia – – 52.0 – – 37.9 US and Canada 120.0 210.3 – 21.8 44.6 39.9 China, Japan and Vietnam 1,406.7 1,064.6 – 254.9 892.5 892.5 UK 35.6 26.9 65.5 6.5 1.8 13.6 India – 174.6 – – 173.0 173.0 Philippines – 1,309.4 – – 832.8 832.8 Total 1,562.3 2,785.8 90.6 283.2 1,944.7 1,989.7 1 Greenhouse Gas (GHG) emissions for scope 1 and 2 are calculated based on the GHG Protocol. 2 Electricity and Gas consumptions are based on utility bills (if available) or estimation by leased floor area. Scope 3 1 Category Description Emissions Category 1 – Purchased goods and services 2 Suppliers and Crowd contractors 9,511 Category 5 – Waste generated in operations 3 Disposal and treatment of waste generated in the company’s operations 46 Category 6 – Business travel 4 Business flights and accommodation 403 Category 7 – Employee commuting 5 Employees commuting between their homes and their worksites and employees working from home 1,608 Category 8 – Upstream leased assets 6 Emissions associated with leases such as lifecycle emissions for construction of a leased building 921 Category 11 – Use of sold products 7 End use of goods and services sold 20 1 Scope 3 categories and GHG emissions are calculated based on GHG Protocol Scope 3 value chain reporting. 2 Estimated emissions based on supplier spend data and crowd contractors’ work hours in 2024. 3 Estimated waste generation based on employee attendance in 2024. 4 Based on business travel information retrieved from travel agency Egencia, Navan and credit card bookings. Estimated emissions are calculated using web-based calculators for flight (provided by International Civil Aviation Organisation (ICAO)) and hotel (provided by Greenview). 5 Based on employee attendance in 2024. 6 Lifecycle lease emissions based on annual lease principle payment over the life of the leased assets. 7 Based on carbon footprint report from Amazon Web Service, our third-party cloud service provider. Technology 2021 2022 2023 2024 Data privacy breaches (number) 1 0 0 0 1 System availability 2 (%) 99.9 99.9 99.9 99.9 1 Based on report from Appen legal team. 2024, one non-material security incident involving and limited to Quadrant, a subsidiary of Appen. 2 Based on report from third-party website monitoring company, StatusCake. Governance 2021 $ 2022 $ 2023 $ 2024 $ Political donations 1 0 0 0 0 1 Based on financial data from Workday. Social Philanthropic donations 1 2021 $ 2022 $ 2023 $ 2024 $ Matched Contributions Not disclosed 25,953 9,393 442 Campaigns Not disclosed 18,628 8,093 442 1 Based on Employee Services Committee (ESC) donation report. Non-financial data metrics 130 Registered office Level 6, 9 Help Street Chatswood NSW 2067 +61 2 9468 6300 www.appen.com Company secretary Carl Middlehurst Investor relations +61 2 9468 6300 investorrelations@appen.com www.appen.com/investors Shareholder enquiries MUFG Corporate Markets Locked Bag A14 Sydney South NSW 1235 +61 1300 554 474 support@cm.mpms.mufg.com au.investorcentre.mpms.mufg.com Auditor KPMG Tower Three International Towers Sydney 300 Barangaroo Avenue Sydney NSW 2000 Stock exchange listing Appen Limited shares are listed on the Australian Securities Exchange (ASX code: APX) Corporate Governance Statement www.appen.com/investors/corporate-governance Corporate directory 131Appen 2024 Annual Report For personal use only
Page 134
For personal use only