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2023 ReportPeers and competitors of Appen:
Redcentric plc2023
Annual Report
Contents
Overview
02
04
06
08
About Appen
2023 at a glance
Chair message
CEO message
Value drivers
10
How we create value
12 Technology, processes, systems
15 Global crowd
18 Customer and brand
22 Our people
27 Financial
32 Social and environment
Governance
39
50
52
54
Identifying and managing risk
Our approach to governance
Board of Directors
Executive team
Directors’ report
58
Directors’ report
62 Remuneration report
Financial report
87
Financial report
135 Directors’ declaration
136
Independent auditor’s report
140 Additional information
143 Materiality assessment
144
Prioritised United Nations
Sustainable Development Goals
145 Non-financial data metrics
148 Corporate directory
Appen Limited
ABN 60 138 878 298
All amounts in this report are
in United States (US) dollars
unless otherwise stated.
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 31
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 144 we have identified five SDGs as priority SDGs
where we believe we can best contribute.
Reporting currency
Appen reports its financial results in United Stated (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 143.
Operating and Financial Review
The sections of this report from pages 10 to 51 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.
Real world AI
transforming the lives of
our customers and crowd
Appen 2023 Annual Report
1
1
12 Technology, processes, systems
15 Global crowd
18 Customer and brand
22 Our people
27 Financial
32 Social and environment
of this report.
Contents
Overview
02
04
06
08
About Appen
2023 at a glance
Chair message
CEO message
Value drivers
10
How we create value
Governance
39
50
52
54
Identifying and managing risk
Our approach to governance
Board of Directors
Executive team
Directors’ report
58
Directors’ report
62 Remuneration report
Financial report
87
Financial report
135 Directors’ declaration
136
Independent auditor’s report
140 Additional information
143 Materiality assessment
144
Prioritised United Nations
Sustainable Development Goals
145 Non-financial data metrics
148 Corporate directory
Appen Limited
ABN 60 138 878 298
All amounts in this report are
in United States (US) dollars
unless otherwise stated.
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 31
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 144 we have identified five SDGs as priority SDGs
where we believe we can best contribute.
Reporting currency
Appen reports its financial results in United Stated (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 143.
Operating and Financial Review
The sections of this report from pages 10 to 51 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.
Real world AI
transforming the lives of
our customers and crowd
Appen 2023 Annual Report
1
1
About
Appen
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,
we enable organisations to launch the world’s most innovative
artificial intelligence systems.
Our expertise includes a global crowd of more than one million skilled contractors who speak more than
500 languages 1, in over 200 countries 2, as well as our advanced 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.
In 2023 Appen re-positioned itself to take advantage of its full growth potential and to capture all available
opportunities in the generative AI space. We launched a new set of generative AI or LLM products that
provide a comprehensive data platform for customers to generate meaningful value when they build
and integrate generative AI models in their organisations. Our vision is to expand our addressable market,
which will help to diversify our customer base, deliver margin improvement, increase revenue visibility
and deliver strong return on investment.
Deep-learning AI
Generative AI
Data collection
Data annotation
Relevance
Fine tuning
Assurance
Point of interest
Annotation
Search relevance
Human feedback
A/B testing
Speech
Categorisation
Content moderation
Instruction datasets
Benchmarking
Custom collections
Synthetic data
Ad evaluation
Model evaluation
Certification
AI feedback
Monitoring
Appen Data Annotation Platform
Appen Crowd marketplace
1 Self-reported.
2 Self-reported, includes territories.
2
Our purpose
This year, we defined our new purpose and values to support our
transformation and create an environment where everyone can
thrive, feel valued, and grow to their full potential. We are excited
by the opportunities that lie ahead and our purpose talks to our role
in unlocking the power of AI for Good to build a better world. Our new
values unite us – they guide our decision making and how we behave.
We unlock the power of ‘AI for good’ to build a better world
Our purpose:
Perspective:
We are a learn-it-all culture and embrace that comfort
and growth do not coexist
Our values
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.
Appen 2023 Annual Report
3
About
Appen
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,
we enable organisations to launch the world’s most innovative
artificial intelligence systems.
Our expertise includes a global crowd of more than one million skilled contractors who speak more than
500 languages 1, in over 200 countries 2, as well as our advanced 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.
In 2023 Appen re-positioned itself to take advantage of its full growth potential and to capture all available
opportunities in the generative AI space. We launched a new set of generative AI or LLM products that
provide a comprehensive data platform for customers to generate meaningful value when they build
and integrate generative AI models in their organisations. Our vision is to expand our addressable market,
which will help to diversify our customer base, deliver margin improvement, increase revenue visibility
and deliver strong return on investment.
Deep-learning AI
Generative AI
Data collection
Data annotation
Relevance
Fine tuning
Assurance
Point of interest
Annotation
Search relevance
Human feedback
A/B testing
Speech
Categorisation
Content moderation
Instruction datasets
Benchmarking
Custom collections
Synthetic data
Ad evaluation
Model evaluation
Certification
AI feedback
Monitoring
Appen Data Annotation Platform
Appen Crowd marketplace
1 Self-reported.
2 Self-reported, includes territories.
2
Our purpose
This year, we defined our new purpose and values to support our
transformation and create an environment where everyone can
thrive, feel valued, and grow to their full potential. We are excited
by the opportunities that lie ahead and our purpose talks to our role
in unlocking the power of AI for Good to build a better world. Our new
values unite us – they guide our decision making and how we behave.
Our purpose:
We unlock the power of ‘AI for good’ to build a better world
Perspective:
We are a learn-it-all culture and embrace that comfort
and growth do not coexist
Our values
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.
Appen 2023 Annual Report
3
2023
at a glance
Financial
Revenue (US$M)
$273.0M
29.7% from $388.1m in FY22
Underlying EBITDA
$(24.5)M
compared to $11.0 million in FY22
Underlying EBITDA excluding FX
$(20.4)M
compared to $13.6m in FY22
Statutory NPAT
$(118.1)M
compared to $(239.1)m in FY22
Customers
35
Customer NPS
from 22 in FY22
171
New Market customers
22
LLM model builders
as customers
83
New projects for
Global Services
Our people
Our crowd
75%
Employee engagement
from 78%
27
Crowd NPS
from 31
Global
Ethical and
Modern
Slavery policy
50%
Female representation
amongst our board
22%
Female representation
amongst our senior leadership
8
Nil
secure ISO 27001
certified facilities
reported material
data breaches
95%
Completion rate of mandatory
compliance training
Ethical
Improving
the crowd experience
with technology upgrades
AI
through our Crowd
code of ethics
Technology
$34.6M
99.9%
product investment
system uptime
Social & Environment
Signatory to the
UN Global
Compact
Net
zero
by 2030
‘AI for
Good’
Committee
established
5
impact sourcing
partnerships
with NGOs
4
Appen 2023 Annual Report
5
2023
at a glance
Financial
Revenue (US$M)
$273.0M
29.7% from $388.1m in FY22
Underlying EBITDA
$(24.5)M
compared to $11.0 million in FY22
Underlying EBITDA excluding FX
$(20.4)M
compared to $13.6m in FY22
Statutory NPAT
$(118.1)M
compared to $(239.1)m in FY22
Customers
35
Customer NPS
from 22 in FY22
171
New Market customers
22
LLM model builders
as customers
83
New projects for
Global Services
Our people
Our crowd
75%
Employee engagement
from 78%
27
Crowd NPS
from 31
Global
Ethical and
Modern
Slavery policy
50%
Female representation
amongst our board
22%
Female representation
amongst our senior leadership
95%
Completion rate of mandatory
compliance training
Ethical
AI
through our Crowd
code of ethics
Improving
the crowd experience
with technology upgrades
Technology
$34.6M
99.9%
product investment
system uptime
8
Nil
secure ISO 27001
certified facilities
reported material
data breaches
Social & Environment
Signatory to the
UN Global
Compact
Net
zero
by 2030
‘AI for
Good’
Committee
established
5
impact sourcing
partnerships
with NGOs
4
Appen 2023 Annual Report
5
Chair message
Resetting
Resetting
our business
our business
2023 has been a disappointing year for shareholders
and a challenging time for Appen. While the rise
of generative AI has created significant excitement,
difficult macro conditions and a slowdown in tech
spending persisted. This year our immediate focus
has been to reset the business by refreshing our
leadership, removing costs and positioning Appen
to participate in the generative AI services market.
FY23 impacted by external conditions
For the 2023 financial year, Appen announced a Statutory
Loss of $118.1 million reflecting a non-cash impairment
of $69.2 million. The impairment relates to Appen’s investment
in its Global Services business. Importantly, the non-cash post
tax impairment does not affect Appen’s liquidity.
At the end of the year, Appen had $32.1 million (equivalent
to A$48.6 million) 1 in cash.
Once again, the board made the decision not to declare
an interim or final dividend in 2023 due to Appen’s financial
performance and to ensure an appropriate allocation
of capital.
Total operating revenue declined 29.7% to $273.0 million
and Appen recorded an underlying EBITDA (before foreign
exchange) loss of ($20.4) million, compared to $13.6 million
in the prior year. Appen’s results reflect a challenging external
environment as customers continued to optimise their
tech spend and evaluate their AI strategies.
Pleasingly, China recorded annual revenue growth of 2.7%
compared to the prior year as it achieved a quarterly revenue
record of $11.1 million in Q4FY23. The Quadrant business,
which has been fully integrated into New Markets, also
recorded a strong revenue uplift, albeit from a small base.
There have also been some early benefits from Appen’s
generative AI offerings; however, these have been
insufficient to offset the revenue and earnings declines
in our global and non-global business.
The board remained focused on maintaining adequate
balance sheet flexibility. In support of our strategy
reset, Appen raised A$60 million of equity in June 2023
and a further A$30 million of equity in December 2023.
Resetting Appen
Critical to Appen’s ongoing success is to ensure we operate
efficiently and sustainably.
At the beginning of 2023, we began a transformation
process to reset Appen to better capture the growth in
generative AI 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.
During the year, Appen also launched a new set of large
language models (LLMs) for fine tuning and assurance
to enable enterprise customers to capture value from
generative AI models. Increasing Appen’s market channels
was also a key focus and the partnership with NVIDIA
1 Assumes FY23 average exchange rate AUD|USD 0.66.
6
6
has produced tangible benefits with the signing of our first
Operating sustainably
million-dollar Fortune 500 company deal.
We remain committed to sizing our cost base in line with
our revenue opportunity. In response to Google’s decision
to terminate its global services contract by 19 March 2024,
we will further reduce our cost base by $13.5 million.
Change in leadership
On 5 February 2024, we appointed Ryan Kolln as our new
CEO and Managing Director. Ryan has made extraordinary
Our commitment to our stakeholders including our crowd,
our customers and people remain as strong as ever.
We recognise the value of our one million plus crowd and
the value our crowd provides to our customers. Despite
the challenges faced by our business, we invested in
systems and processes to improve the crowd and customer
experience. Customer NPS has lifted significantly, however
crowd NPS declined primarily due to lower project availability.
contributions to Appen during his time with the company.
The high ethical treatment of our crowd remains a key priority.
He has an intimate understanding of Appen’s history,
We stand by our commitment to the crowd as defined in our
a strong technical understanding of the AI market, and
Crowd Code of Conduct, and our Global Ethical Sourcing
a proven strategy background. The unique combination
and Modern Slavery Policy.
of his skills and experience makes Ryan the ideal leader
to guide Appen through its next phase and navigate the
evolving generative AI market.
To deliver on our commitment to responsible AI and ensure
that AI performs correctly, it requires diverse datasets that
reflect the real world. This year, our teams conducted further
On behalf of the Board, I want to acknowledge Armughan
research programs to understand representation across the
Ahmad’s tenure as CEO. He held this position during a period
Crowd and address any gaps. We also focused on our social
of great change at Appen and oversaw a new strategic direction
impact – establishing five partnerships with global non-profits
and re-sizing of the business. We wish him well for the future.
to foster diversity and offer work opportunities within our
Board governance
There have been no changes to the Board in 2023.
The appointments of Lynn Mickleburgh and Mini Peiris
to the Appen Board on 29 July 2022 and 4 November 2022
respectively and their endorsement by shareholders at our
AGM in May 2023 completes our process of Board renewal.
Executive remuneration
Commencing in FY22, 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 and assigns these metrics an STI weighting of 70%.
Non-financial metrics reflect Appen’s focus on its customers,
crowd and people and are assigned an STI weighting of 30%.
The board understands that shareholders are disappointed
with Appen’s business and financial performance. Reflecting
Closing
on the shareholder experience and 2023 financial outcomes
there is no STI payable for the company’s financial
performance as revenue and earnings performance targets
were not met.
This year, customer NPS was 140% of target and employee
engagement was 91.9% of target (which was above the 90%
payout threshold). In recognition of these results a partial
STI will be paid to key management personnel to reward
performance for these two metrics only. The STI equates
to 10.6% of the maximum payable.
There was no STI payable to the former CEO.
I would encourage shareholders to read the remuneration
report, commencing on page 62.
Crowd to underrepresented individuals, including refugees.
Promoting a diverse and inclusive culture across all
aspects of Appen’s business has been a long-held priority.
In 2023 Appen achieved 55% female representation among
its employees. We also maintained female representation
of 50% among non-executive directors, however female
representation among the senior leadership team
declined from 30% to 22%. We acknowledge the extent
of organisational change within Appen has adversely
impacted female representation at senior levels.
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 are also working
towards assurance for our emissions data and remain
committed to the Science Based Target initiative.
Our people have worked hard to instil a greater level
of operational rigour and reset Appen’s business
in an incredibly challenging environment. I thank them
for their perseverance and ongoing commitment
in supporting our crowd and customers.
While Appen’s business returned to cash EBITDA
profitability in December 2023 there is still much work to do.
I am confident that under the stewardship of our new CEO,
Ryan Kolln, together with the commitment of our people
that Appen is on the right path.
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
Appen 2023 Annual Report
7
Chair message
Resetting
Resetting
our business
our business
2023 has been a disappointing year for shareholders
and a challenging time for Appen. While the rise
of generative AI has created significant excitement,
difficult macro conditions and a slowdown in tech
spending persisted. This year our immediate focus
has been to reset the business by refreshing our
leadership, removing costs and positioning Appen
to participate in the generative AI services market.
FY23 impacted by external conditions
At the end of the year, Appen had $32.1 million (equivalent
to A$48.6 million) 1 in cash.
For the 2023 financial year, Appen announced a Statutory
Loss of $118.1 million reflecting a non-cash impairment
of $69.2 million. The impairment relates to Appen’s investment
in its Global Services business. Importantly, the non-cash post
tax impairment does not affect Appen’s liquidity.
Once again, the board made the decision not to declare
an interim or final dividend in 2023 due to Appen’s financial
performance and to ensure an appropriate allocation
of capital.
Total operating revenue declined 29.7% to $273.0 million
and Appen recorded an underlying EBITDA (before foreign
Resetting Appen
exchange) loss of ($20.4) million, compared to $13.6 million
Critical to Appen’s ongoing success is to ensure we operate
in the prior year. Appen’s results reflect a challenging external
efficiently and sustainably.
environment as customers continued to optimise their
tech spend and evaluate their AI strategies.
At the beginning of 2023, we began a transformation
process to reset Appen to better capture the growth in
Pleasingly, China recorded annual revenue growth of 2.7%
generative AI and improve performance of our core business.
compared to the prior year as it achieved a quarterly revenue
This included a new strategy to deliver long term growth
record of $11.1 million in Q4FY23. The Quadrant business,
and revenue diversification along with a $60 million cost
which has been fully integrated into New Markets, also
reduction program.
recorded a strong revenue uplift, albeit from a small base.
There have also been some early benefits from Appen’s
included a leadership and strategy refresh, operational
generative AI offerings; however, these have been
improvements to project delivery and crowd management
insufficient to offset the revenue and earnings declines
and strengthening of Appen’s sales and marketing functions.
Some of the key areas identified for improvement
in our global and non-global business.
The board remained focused on maintaining adequate
balance sheet flexibility. In support of our strategy
reset, Appen raised A$60 million of equity in June 2023
and a further A$30 million of equity in December 2023.
During the year, Appen also launched a new set of large
language models (LLMs) for fine tuning and assurance
to enable enterprise customers to capture value from
generative AI models. Increasing Appen’s market channels
was also a key focus and the partnership with NVIDIA
1 Assumes FY23 average exchange rate AUD|USD 0.66.
6
6
has produced tangible benefits with the signing of our first
million-dollar Fortune 500 company deal.
We remain committed to sizing our cost base in line with
our revenue opportunity. In response to Google’s decision
to terminate its global services contract by 19 March 2024,
we will further reduce our cost base by $13.5 million.
Change in leadership
On 5 February 2024, we appointed Ryan Kolln as our new
CEO and Managing Director. Ryan has made extraordinary
contributions to Appen during his time with the company.
He has an intimate understanding of Appen’s history,
a strong technical understanding of the AI market, and
a proven strategy background. The unique combination
of his skills and experience makes Ryan the ideal leader
to guide Appen through its next phase and navigate the
evolving generative AI market.
On behalf of the Board, I want to acknowledge Armughan
Ahmad’s tenure as CEO. He held this position during a period
of great change at Appen and oversaw a new strategic direction
and re-sizing of the business. We wish him well for the future.
Board governance
There have been no changes to the Board in 2023.
The appointments of Lynn Mickleburgh and Mini Peiris
to the Appen Board on 29 July 2022 and 4 November 2022
respectively and their endorsement by shareholders at our
AGM in May 2023 completes our process of Board renewal.
Executive remuneration
Commencing in FY22, 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 and assigns these metrics an STI weighting of 70%.
Non-financial metrics reflect Appen’s focus on its customers,
crowd and people and are assigned an STI weighting of 30%.
The board understands that shareholders are disappointed
with Appen’s business and financial performance. Reflecting
on the shareholder experience and 2023 financial outcomes
there is no STI payable for the company’s financial
performance as revenue and earnings performance targets
were not met.
This year, customer NPS was 140% of target and employee
engagement was 91.9% of target (which was above the 90%
payout threshold). In recognition of these results a partial
STI will be paid to key management personnel to reward
performance for these two metrics only. The STI equates
to 10.6% of the maximum payable.
There was no STI payable to the former CEO.
I would encourage shareholders to read the remuneration
report, commencing on page 62.
Operating sustainably
Our commitment to our stakeholders including our crowd,
our customers and people remain as strong as ever.
We recognise the value of our one million plus crowd and
the value our crowd provides to our customers. Despite
the challenges faced by our business, we invested in
systems and processes to improve the crowd and customer
experience. Customer NPS has lifted significantly, however
crowd NPS declined primarily due to lower project availability.
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.
To deliver on our commitment to responsible AI and ensure
that AI performs correctly, it requires diverse datasets that
reflect the real world. This year, our teams conducted further
research programs to understand representation across the
Crowd and address any gaps. We also focused on our social
impact – establishing five partnerships with global non-profits
to foster diversity and offer work opportunities within our
Crowd to underrepresented individuals, including refugees.
Promoting a diverse and inclusive culture across all
aspects of Appen’s business has been a long-held priority.
In 2023 Appen achieved 55% female representation among
its employees. We also maintained female representation
of 50% among non-executive directors, however female
representation among the senior leadership team
declined from 30% to 22%. We acknowledge the extent
of organisational change within Appen has adversely
impacted female representation at senior levels.
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 are also working
towards assurance for our emissions data and remain
committed to the Science Based Target initiative.
Closing
Our people have worked hard to instil a greater level
of operational rigour and reset Appen’s business
in an incredibly challenging environment. I thank them
for their perseverance and ongoing commitment
in supporting our crowd and customers.
While Appen’s business returned to cash EBITDA
profitability in December 2023 there is still much work to do.
I am confident that under the stewardship of our new CEO,
Ryan Kolln, together with the commitment of our people
that Appen is on the right path.
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
Appen 2023 Annual Report
7
CEO message
Pivoting to
Generative AI
I am honoured to have been appointed CEO of Appen.
I also acknowledge that it’s been a disappointing year for
shareholders. Despite a challenging operating environment,
we have made significant progress to reset the business.
As CEO my priority is to continue evolving Appen, return our
core business to profitability, and positioning the company
to capture the full potential of generative AI.
FY23 operating performance
Our full year results are disappointing. FY23 revenue declined
circa 30% to $273.0 million and we recorded an underlying
EBITDA loss (excluding foreign exchange) of ($20.4) million,
compared to $13.6 million in FY22.
In 2023, despite our presence in a rapidly expanding market,
we encountered significant challenges affecting our revenue.
This was driven by three primary market factors. Firstly,
a large customer materially reduced their spend on human
annotation work which had an outsized impact on Appen.
Secondly, the introduction of mainstream generative AI
in late 2022 resulted in many customers evaluating their
AI strategies and slowed down investment in ramping
existing AI models. Thirdly, many of Appen’s customers
were impacted by the broader technology slowdown which
resulted in cost reduction measures.
While we can’t control market conditions, we can control
our operations and have focused on ensuring we have
a sustainable business model. In 2023 we completed
a $60 million cost out program that enabled the business
to exit the year profitability on a cash EBITDA basis. The cost
out program focused on some of the direct costs related
to revenue, streamlining our existing operations, delayering
the organisation, and optimising growth investments.
2023 was a breakout year for AI thanks to the mainstream
introduction of generative AI. Open AI’s ChatGPT was
launched in late 2022 and showcased the potential of this
new technology.
Despite the external challenges and their impact on
our revenue, we saw a large volume of new opportunities
in generative AI from existing and new customers, particularly
in the second half of 2023. We are currently working with
22 large language model builders globally that are building
generative AI foundation models. We also saw significant
interest from Fortune 1000 companies that are looking
to deploy generative AI in their operations. We anticipate
that generative AI will materially expand our total addressable
market, and we are well positioned to support companies
involved in developing foundational models as well as those
customising them.
Appen’s Data Annotation Platform (ADAP) and crowd
management platforms remain critical to how we deliver
high quality data for our customers, including supporting
generative AI. We have stepped up our product velocity
and released new generative AI focused products including
several features to support the new requirements
of generative AI customers. In 2023 Appen’s investment in
product development was $34.6 million, or 12.7% of revenue.
We also opened a new technology hub in Hyderabad India
On 22 January 2024, we reported that one of our largest
to support Appen’s global engineering function.
Building a world class go-to market function by driving a more
consultative selling approach and standardising our sales
and go-to market efforts is a key initiative. The sales team is
now fully established. Our go-to-market function has been
matched with our partnership ecosystem, as we collaborate
with companies like NVIDIA to help expand our reach to more
customers globally.
AI for Good focus underpins everything we do. Our customers
value our commitment to promote responsible and ethical
AI. We continue to support important initiatives, including
the active recruitment of impact sourced contributors from
Africa, where we provide work opportunities to refugees and
other disadvantaged people.
Appen’s future in a dynamic market
2023 has been the year of AI. It is an exciting time
for AI as the demand and expectations around
generative AI continue to grow. From our perspective,
it is also a transition period as companies continue to
customers, Google, will terminate its global contract.
We have carefully assessed our strategic options for the
business and will implement a further cost out program
of $13.5 million annualised. The loss of the Google contract
is disappointing and was very unexpected.
As we look forward, I am highly optimistic about the future
of Appen. Our focus remains on creating high quality data
for the world’s leading AI. Appen has evolved in the past
and will continue to evolve as the market shifts.
Management change
As part of resetting Appen, we have transitioned to a leaner
company and are focused on ensuring our executive team
has deep operational expertise.
During the year, several changes were made to the executive
team and we consolidated some functions.
Justin Miles has been appointed as Chief Financial Officer
(CFO) effective 27 February 2024. Since August 2023, he has
been acting as our interim CFO and was previously Deputy
CFO. Justin is a seasoned finance leader who has been with
evaluate their AI strategies considering not only generative AI,
but also the challenging external environment.
Appen since 2016.
While we see a great opportunity for Appen in the generative
AI space, the benefits from generative AI are yet to show
meaningful results. Most Enterprise customers were piloting
large language models in FY23, as there are few customers
using it in large scale production.
There is however, one constant. That is, humans play a critical
role due to the subjective nature of generative AI outcomes.
Technology used to develop generative AI relies on vast
amounts of data to train base models. These models can
be prone to error and human interaction is vital to align model
outcomes with human values and reduce hallucinations,
bias and toxicity.
Mike Davie was appointed as our new Chief Product Officer
in August 2023 and has now also taken on the role of Chief
Technology Officer in addition to his existing responsibilities.
Andrew Ettinger is our new Chief Revenue Officer. He leads
Appen’s sales and marketing functions.
Details of the team can be found on pages 54 to 57
of this report.
It would be remiss of me not to acknowledge and thank the
people who have left Appen due to our restructuring program.
I extend my heartfelt thanks and best wishes to them.
Strategy and prospects
Our strategy remains focused on the three large customer
segments of the AI data market. Firstly, customers that are
developing deep learning models. This is our traditional
customer base and we are focused on optimising how we
Closing
In closing, I would like to thank the Board, management
and Appen employees for their support. I am truly excited
to be leading Appen and could not be prouder of the positive
impact we create by promoting responsible and ethical AI.
deliver high quality data with more AI automation embedded
While the external environment will continue to present
in the process. We are making good progress in automation,
challenges, I am confident we can return Appen to profitability
with several customers now benefiting from automated
and make further inroads into the generative AI space.
I sincerely thank shareholders for their ongoing support.
We will continue working hard to ensure a better future.
data creation as a core element of our offering.
Secondly, we will support generative AI foundation model
builders with their data needs. As mentioned, as at the
end of FY23 we are working with the vast majority of large
language model builders globally and expect to see growth
in this customer segment continue.
Finally, we will support enterprises that are customising
RYAN KOLLN
large language models for their internal use cases. Our focus
CEO and Managing Director
is to provide a software suite that enables internal data science
teams to connect with internal experts for model training
data and feedback. This solution uses Appen’s existing data
annotation platform known as ADAP.
8
8
Appen 2023 Annual Report
9
CEO message
Pivoting to
Generative AI
I am honoured to have been appointed CEO of Appen.
I also acknowledge that it’s been a disappointing year for
shareholders. Despite a challenging operating environment,
we have made significant progress to reset the business.
As CEO my priority is to continue evolving Appen, return our
core business to profitability, and positioning the company
to capture the full potential of generative AI.
FY23 operating performance
Our full year results are disappointing. FY23 revenue declined
circa 30% to $273.0 million and we recorded an underlying
EBITDA loss (excluding foreign exchange) of ($20.4) million,
compared to $13.6 million in FY22.
In 2023, despite our presence in a rapidly expanding market,
we encountered significant challenges affecting our revenue.
This was driven by three primary market factors. Firstly,
a large customer materially reduced their spend on human
annotation work which had an outsized impact on Appen.
Secondly, the introduction of mainstream generative AI
in late 2022 resulted in many customers evaluating their
AI strategies and slowed down investment in ramping
existing AI models. Thirdly, many of Appen’s customers
were impacted by the broader technology slowdown which
resulted in cost reduction measures.
While we can’t control market conditions, we can control
our operations and have focused on ensuring we have
a sustainable business model. In 2023 we completed
a $60 million cost out program that enabled the business
to exit the year profitability on a cash EBITDA basis. The cost
out program focused on some of the direct costs related
to revenue, streamlining our existing operations, delayering
the organisation, and optimising growth investments.
2023 was a breakout year for AI thanks to the mainstream
introduction of generative AI. Open AI’s ChatGPT was
launched in late 2022 and showcased the potential of this
new technology.
Despite the external challenges and their impact on
our revenue, we saw a large volume of new opportunities
in generative AI from existing and new customers, particularly
in the second half of 2023. We are currently working with
22 large language model builders globally that are building
generative AI foundation models. We also saw significant
interest from Fortune 1000 companies that are looking
to deploy generative AI in their operations. We anticipate
that generative AI will materially expand our total addressable
market, and we are well positioned to support companies
involved in developing foundational models as well as those
customising them.
Appen’s Data Annotation Platform (ADAP) and crowd
management platforms remain critical to how we deliver
high quality data for our customers, including supporting
generative AI. We have stepped up our product velocity
and released new generative AI focused products including
several features to support the new requirements
of generative AI customers. In 2023 Appen’s investment in
product development was $34.6 million, or 12.7% of revenue.
We also opened a new technology hub in Hyderabad India
to support Appen’s global engineering function.
Building a world class go-to market function by driving a more
consultative selling approach and standardising our sales
and go-to market efforts is a key initiative. The sales team is
now fully established. Our go-to-market function has been
matched with our partnership ecosystem, as we collaborate
with companies like NVIDIA to help expand our reach to more
customers globally.
AI for Good focus underpins everything we do. Our customers
value our commitment to promote responsible and ethical
AI. We continue to support important initiatives, including
the active recruitment of impact sourced contributors from
Africa, where we provide work opportunities to refugees and
other disadvantaged people.
Appen’s future in a dynamic market
2023 has been the year of AI. It is an exciting time
for AI as the demand and expectations around
generative AI continue to grow. From our perspective,
it is also a transition period as companies continue to
evaluate their AI strategies considering not only generative AI,
but also the challenging external environment.
While we see a great opportunity for Appen in the generative
AI space, the benefits from generative AI are yet to show
meaningful results. Most Enterprise customers were piloting
large language models in FY23, as there are few customers
using it in large scale production.
There is however, one constant. That is, humans play a critical
role due to the subjective nature of generative AI outcomes.
Technology used to develop generative AI relies on vast
amounts of data to train base models. These models can
be prone to error and human interaction is vital to align model
outcomes with human values and reduce hallucinations,
bias and toxicity.
Strategy and prospects
Our strategy remains focused on the three large customer
segments of the AI data market. Firstly, customers that are
developing deep learning models. This is our traditional
customer base and we are focused on optimising how we
deliver high quality data with more AI automation embedded
in the process. We are making good progress in automation,
with several customers now benefiting from automated
data creation as a core element of our offering.
Secondly, we will support generative AI foundation model
builders with their data needs. As mentioned, as at the
end of FY23 we are working with the vast majority of large
language model builders globally and expect to see growth
in this customer segment continue.
Finally, we will support enterprises that are customising
large language models for their internal use cases. Our focus
is to provide a software suite that enables internal data science
teams to connect with internal experts for model training
data and feedback. This solution uses Appen’s existing data
annotation platform known as ADAP.
On 22 January 2024, we reported that one of our largest
customers, Google, will terminate its global contract.
We have carefully assessed our strategic options for the
business and will implement a further cost out program
of $13.5 million annualised. The loss of the Google contract
is disappointing and was very unexpected.
As we look forward, I am highly optimistic about the future
of Appen. Our focus remains on creating high quality data
for the world’s leading AI. Appen has evolved in the past
and will continue to evolve as the market shifts.
Management change
As part of resetting Appen, we have transitioned to a leaner
company and are focused on ensuring our executive team
has deep operational expertise.
During the year, several changes were made to the executive
team and we consolidated some functions.
Justin Miles has been appointed as Chief Financial Officer
(CFO) effective 27 February 2024. Since August 2023, he has
been acting as our interim CFO and was previously Deputy
CFO. Justin is a seasoned finance leader who has been with
Appen since 2016.
Mike Davie was appointed as our new Chief Product Officer
in August 2023 and has now also taken on the role of Chief
Technology Officer in addition to his existing responsibilities.
Andrew Ettinger is our new Chief Revenue Officer. He leads
Appen’s sales and marketing functions.
Details of the team can be found on pages 54 to 57
of this report.
It would be remiss of me not to acknowledge and thank the
people who have left Appen due to our restructuring program.
I extend my heartfelt thanks and best wishes to them.
Closing
In closing, I would like to thank the Board, management
and Appen employees for their support. I am truly excited
to be leading Appen and could not be prouder of the positive
impact we create by promoting responsible and ethical AI.
While the external environment will continue to present
challenges, I am confident we can return Appen to profitability
and make further inroads into the generative AI space.
I sincerely thank shareholders for their ongoing support.
We will continue working hard to ensure a better future.
RYAN KOLLN
CEO and Managing Director
8
8
Appen 2023 Annual Report
9
How we create value
Value Driver
Value Driver
Principle risks
Principle risks
How we deliver value
How we deliver value
Creating and measuring value
Creating and measuring value
Investment in technology,
Investment in technology,
innovation and transformation
innovation and transformation
Compliance with security,
Compliance with security,
privacy and other data regulations
privacy and other data regulations
Through our technology and innovative solutions,
Through our technology and innovative solutions,
we look to streamline and automate processes
we look to streamline and automate processes
so we can deliver AI training data at scale
so we can deliver AI training data at scale
Our engineer, privacy, and cyber security teams
Our engineer, privacy, and cyber security teams
work to ensure that data availability targets are met,
work to ensure that data availability targets are met,
and data is protected and secure
and data is protected and secure
Crowd conditions
Crowd conditions
Crowd supply meets
Crowd supply meets
customer demand
customer demand
Changing customer strategy
Changing customer strategy
and needs
and needs
Ability to execute on operational
Ability to execute on operational
requirements
requirements
Talent strategy and employee
Talent strategy and employee
value proposition
value proposition
Managing a culture of growth
Managing a culture of growth
through change
through change
Strategic direction of the business
Strategic direction of the business
Financial sustainability
Financial sustainability
We are committed to treating our crowd fairly
We are committed to treating our crowd fairly
in accordance with our Crowd Code of Ethics
in accordance with our Crowd Code of Ethics
Whistleblower and Speak Up Policy is available
Whistleblower and Speak Up Policy is available
to support crowd grievances
to support crowd grievances
Our Impact Sourcing strategy provides jobs to people
Our Impact Sourcing strategy provides jobs to people
who have limited prospects for secure employment
who have limited prospects for secure employment
We do great work for our customers and deliver
We do great work for our customers and deliver
a superior customer experience
a superior customer experience
Our LLM capabilities provide customers with
Our LLM capabilities provide customers with
resources to fine-tune and assure their AI models,
resources to fine-tune and assure their AI models,
helping to improve their customer experiences
helping to improve their customer experiences
Constantly monitoring relevant market and customer
Constantly monitoring relevant market and customer
trends to meet the evolving needs of customers
trends to meet the evolving needs of customers
By focusing on making Appen a great place to work
By focusing on making Appen a great place to work
and creating a culture where our people can thrive,
and creating a culture where our people can thrive,
grow and feel valued
grow and feel valued
Investing in our people and HR systems to build
Investing in our people and HR systems to build
a workforce for the future and optimise the
a workforce for the future and optimise the
employee experience
employee experience
Embedding diversity principles across our business
Embedding diversity principles across our business
via our Diversity and Inclusion policy
via our Diversity and Inclusion policy
We aim to grow the business and to deliver
We aim to grow the business and to deliver
increased revenue and earnings to support returns
increased revenue and earnings to support returns
for shareholders
for shareholders
Capture the potential of generative AI
Capture the potential of generative AI
Technology,
Technology,
processes
processes
systems
systems
Global crowd
Global crowd
Customer
Customer
and brand
and brand
Our people
Our people
Financial
Financial
Compliance with legal, statutory
Compliance with legal, statutory
and ethical obligations
and ethical obligations
We are taking steps to reduce the impact
We are taking steps to reduce the impact
of our operations on the environment
of our operations on the environment
Social and
Social and
environment
environment
Environmental, social and
Environmental, social and
governance (ESG) risks and
governance (ESG) risks and
performance
performance
Our platform removes traditional barriers to work
Our platform removes traditional barriers to work
and increases global participation and representation
and increases global participation and representation
in the development of emerging technologies
in the development of emerging technologies
We are committed to achieving fair AI and creating
We are committed to achieving fair AI and creating
responsible AI standards
responsible AI standards
1 Due to budget constraints, the net zero emissions target for business operations has been revised from 2025 to 2030.
1 Due to budget constraints, the net zero emissions target for business operations has been revised from 2025 to 2030.
10
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.
SDGs
SDGs
Pages 12-14
Pages 12-14
Invested $34.6 million in technology and systems, including enhancements to ADAP
Invested $34.6 million in technology and systems, including enhancements to ADAP
to support LLM products and better support the crowd and customers
to support LLM products and better support the crowd and customers
Development of a China intelligent LLM development platform
Development of a China intelligent LLM development platform
No material privacy breaches
No material privacy breaches
Met or exceeded 99.9% uptime across all our platforms
Met or exceeded 99.9% uptime across all our platforms
Maintained certification for ISO 27001 and SOC 2
Maintained certification for ISO 27001 and SOC 2
Gained ISO 14001/ISO 45001 for four sites
Gained ISO 14001/ISO 45001 for four sites
We provided flexible, work-from-home opportunities to our global crowd of one million+ contractors
We provided flexible, work-from-home opportunities to our global crowd of one million+ contractors
We helped make AI ethical and fair through our Crowd Code of Ethics
We helped make AI ethical and fair through our Crowd Code of Ethics
In response to crowd NPS we delivered initiatives to improve the crowd experience
In response to crowd NPS we delivered initiatives to improve the crowd experience
Partnered with Mercy Corps, Na’amal, Generation and Konexio to bring digital work
Partnered with Mercy Corps, Na’amal, Generation and Konexio to bring digital work
Pages 15-17
Pages 15-17
to underprivileged communities
to underprivileged communities
Piloted demographic surveys to understand representation across the Crowd and identify gaps
Piloted demographic surveys to understand representation across the Crowd and identify gaps
Improved customer satisfaction with a significant uplift in our Net Promoter Score
Improved customer satisfaction with a significant uplift in our Net Promoter Score
Enhanced the customer experience through the launch of LLM fine tuning and assurance products
Enhanced the customer experience through the launch of LLM fine tuning and assurance products
We demonstrated leadership in promoting responsible and ethical AI through our AI
We demonstrated leadership in promoting responsible and ethical AI through our AI
for Good strategy which also helps to enhance our brand
for Good strategy which also helps to enhance our brand
Pages 18-21
Pages 18-21
We have a target of 30% female representation of women in senior management positions
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
and on the board. We exceeded this target at board level
Continue to respond to employee feedback to drive future engagement scores higher
Continue to respond to employee feedback to drive future engagement scores higher
Established and implemented Appen’s new culture code
Established and implemented Appen’s new culture code
Pages 22-26
Pages 22-26
Completed equity raisings in June 2023 and December 2023 to support Appen’s strategy refresh
Completed equity raisings in June 2023 and December 2023 to support Appen’s strategy refresh
Determined not to pay a dividend due to Appen’s financial performance
Determined not to pay a dividend due to Appen’s financial performance
Continued disclosure of scopes 1,2 and 3 and commenced work on assuring of the data
Continued disclosure of scopes 1,2 and 3 and commenced work on assuring of the data
Continued implementation of our Net Zero Roadmap and working towards net zero across
Continued implementation of our Net Zero Roadmap and working towards net zero across
operations by 2030 1
operations by 2030 1
Compact commitments
Compact commitments
Commenced development of reporting on progress against United Nations Global
Commenced development of reporting on progress against United Nations Global
Pages 27-31
Pages 27-31
Pages 32-38
Pages 32-38
Appen 2023 Annual Report
11
How we create value
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.
Value Driver
Value Driver
Principle risks
Principle risks
How we deliver value
How we deliver value
Creating and measuring value
Creating and measuring value
Invested $34.6 million in technology and systems, including enhancements to ADAP
Invested $34.6 million in technology and systems, including enhancements to ADAP
to support LLM products and better support the crowd and customers
to support LLM products and better support the crowd and customers
Development of a China intelligent LLM development platform
Development of a China intelligent LLM development platform
No material privacy breaches
No material privacy breaches
Met or exceeded 99.9% uptime across all our platforms
Met or exceeded 99.9% uptime across all our platforms
Maintained certification for ISO 27001 and SOC 2
Maintained certification for ISO 27001 and SOC 2
Gained ISO 14001/ISO 45001 for four sites
Gained ISO 14001/ISO 45001 for four sites
We provided flexible, work-from-home opportunities to our global crowd of one million+ contractors
We provided flexible, work-from-home opportunities to our global crowd of one million+ contractors
We helped make AI ethical and fair through our Crowd Code of Ethics
We helped make AI ethical and fair through our Crowd Code of Ethics
In response to crowd NPS we delivered initiatives to improve the crowd experience
In response to crowd NPS we delivered initiatives to improve the crowd experience
Partnered with Mercy Corps, Na’amal, Generation and Konexio to bring digital work
Partnered with Mercy Corps, Na’amal, Generation and Konexio to bring digital work
to underprivileged communities
to underprivileged communities
Piloted demographic surveys to understand representation across the Crowd and identify gaps
Piloted demographic surveys to understand representation across the Crowd and identify gaps
SDGs
SDGs
Pages 12-14
Pages 12-14
Pages 15-17
Pages 15-17
Changing customer strategy
Changing customer strategy
We do great work for our customers and deliver
We do great work for our customers and deliver
Improved customer satisfaction with a significant uplift in our Net Promoter Score
Improved customer satisfaction with a significant uplift in our Net Promoter Score
Enhanced the customer experience through the launch of LLM fine tuning and assurance products
Enhanced the customer experience through the launch of LLM fine tuning and assurance products
We demonstrated leadership in promoting responsible and ethical AI through our AI
We demonstrated leadership in promoting responsible and ethical AI through our AI
for Good strategy which also helps to enhance our brand
for Good strategy which also helps to enhance our brand
Pages 18-21
Pages 18-21
We have a target of 30% female representation of women in senior management positions
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
and on the board. We exceeded this target at board level
Continue to respond to employee feedback to drive future engagement scores higher
Continue to respond to employee feedback to drive future engagement scores higher
Established and implemented Appen’s new culture code
Established and implemented Appen’s new culture code
Pages 22-26
Pages 22-26
Strategic direction of the business
Strategic direction of the business
We aim to grow the business and to deliver
We aim to grow the business and to deliver
Completed equity raisings in June 2023 and December 2023 to support Appen’s strategy refresh
Completed equity raisings in June 2023 and December 2023 to support Appen’s strategy refresh
Financial sustainability
Financial sustainability
Determined not to pay a dividend due to Appen’s financial performance
Determined not to pay a dividend due to Appen’s financial performance
Continued disclosure of scopes 1,2 and 3 and commenced work on assuring of the data
Continued disclosure of scopes 1,2 and 3 and commenced work on assuring of the data
Continued implementation of our Net Zero Roadmap and working towards net zero across
Continued implementation of our Net Zero Roadmap and working towards net zero across
operations by 2030 1
operations by 2030 1
Commenced development of reporting on progress against United Nations Global
Commenced development of reporting on progress against United Nations Global
Compact commitments
Compact commitments
Pages 27-31
Pages 27-31
Pages 32-38
Pages 32-38
Appen 2023 Annual Report
11
Technology,
Technology,
processes
processes
systems
systems
Global crowd
Global crowd
Customer
Customer
and brand
and brand
Investment in technology,
Investment in technology,
Through our technology and innovative solutions,
Through our technology and innovative solutions,
innovation and transformation
innovation and transformation
we look to streamline and automate processes
we look to streamline and automate processes
Compliance with security,
Compliance with security,
so we can deliver AI training data at scale
so we can deliver AI training data at scale
privacy and other data regulations
privacy and other data regulations
Our engineer, privacy, and cyber security teams
Our engineer, privacy, and cyber security teams
work to ensure that data availability targets are met,
work to ensure that data availability targets are met,
and data is protected and secure
and data is protected and secure
Crowd conditions
Crowd conditions
Crowd supply meets
Crowd supply meets
customer demand
customer demand
We are committed to treating our crowd fairly
We are committed to treating our crowd fairly
in accordance with our Crowd Code of Ethics
in accordance with our Crowd Code of Ethics
Whistleblower and Speak Up Policy is available
Whistleblower and Speak Up Policy is available
to support crowd grievances
to support crowd grievances
Our Impact Sourcing strategy provides jobs to people
Our Impact Sourcing strategy provides jobs to people
who have limited prospects for secure employment
who have limited prospects for secure employment
Ability to execute on operational
Ability to execute on operational
Our LLM capabilities provide customers with
Our LLM capabilities provide customers with
a superior customer experience
a superior customer experience
and needs
and needs
requirements
requirements
resources to fine-tune and assure their AI models,
resources to fine-tune and assure their AI models,
helping to improve their customer experiences
helping to improve their customer experiences
Constantly monitoring relevant market and customer
Constantly monitoring relevant market and customer
trends to meet the evolving needs of customers
trends to meet the evolving needs of customers
Talent strategy and employee
Talent strategy and employee
By focusing on making Appen a great place to work
By focusing on making Appen a great place to work
value proposition
value proposition
and creating a culture where our people can thrive,
and creating a culture where our people can thrive,
Our people
Our people
Managing a culture of growth
Managing a culture of growth
through change
through change
grow and feel valued
grow and feel valued
Investing in our people and HR systems to build
Investing in our people and HR systems to build
a workforce for the future and optimise the
a workforce for the future and optimise the
employee experience
employee experience
Embedding diversity principles across our business
Embedding diversity principles across our business
via our Diversity and Inclusion policy
via our Diversity and Inclusion policy
increased revenue and earnings to support returns
increased revenue and earnings to support returns
for shareholders
for shareholders
Capture the potential of generative AI
Capture the potential of generative AI
Financial
Financial
Compliance with legal, statutory
Compliance with legal, statutory
We are taking steps to reduce the impact
We are taking steps to reduce the impact
and ethical obligations
and ethical obligations
of our operations on the environment
of our operations on the environment
Social and
Social and
environment
environment
Environmental, social and
Environmental, social and
governance (ESG) risks and
governance (ESG) risks and
performance
performance
Our platform removes traditional barriers to work
Our platform removes traditional barriers to work
and increases global participation and representation
and increases global participation and representation
in the development of emerging technologies
in the development of emerging technologies
We are committed to achieving fair AI and creating
We are committed to achieving fair AI and creating
responsible AI standards
responsible AI standards
1 Due to budget constraints, the net zero emissions target for business operations has been revised from 2025 to 2030.
1 Due to budget constraints, the net zero emissions target for business operations has been revised from 2025 to 2030.
10
Value drivers
Technology
processes,
systems
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.
$34.6M
in product development
Nil
reported material
data breaches
Priority SDG
Our comprehensive range of technology products and data services
encompasses both deep learning and generative AI. This includes Appen
Connect 2.0 and our Appen Data Annotation Platform (ADAP), a solution
that allows internal teams and external customers to design and manage
human annotation projects. Through the acquisition of Quadrant, we have
integrated the data collection services of Geolancer and Hydra into our
product suite. We also offer specialised services through our China
platform tailored for the Chinese market.
Global Services, Global Product, Enterprise, Government
China
Appen
Connect 2.0
Sources crowd
Matches to projects
and annotation tasks
Handles crowd payments
Leverage crowd support
capabilities
Appen
Data Annotation
Platform (ADAP)
Collect and annotate
training data
Draw on powerful LLM
capabilities (fine tuning
and assurance)
Data Collection
China Platform
Provides crowd
management and
annotation for China
markets
Harness intelligent
LLM platform
Geolancer – Provides
in-field data
collection including
point of interest data
Hydra – Allows mobile
location DaaS data
collection
QCMP – Manage user
consent and data
privacy compliance
Product development
In FY23, investment in product development (excluding
amortisation) decreased 16.0% to $34.6 million and
represented 12.7% of revenue (2022: $41.2 million
or 10.6% of revenue).
This year we delivered several initiatives to improve
the crowd and customer experience. As the industry
evolves and projects become more complex, customers
require a crowd with a more advanced skill set. In turn,
we developed and upgraded the Appen Connect platform
to enable a simpler, more effective creation and management
of projects while providing functionality to rapidly source
and match the right crowd contributors to the right project.
By the end of FY23, all contributor and project records
were migrated to Appen Connect 2.0. In addition,
all project teams were using the upgraded platform
for project creation and project management of their crowd.
The upgraded Appen Connect 2.0 platform is expected
to be fully functional by Q3 in 2024.
We have seen some early benefits associated with the
upgraded platform with reduced dependency on human
input to manage project recruitment. Appen’s recruitment
function has become more automated, with the team
reduced from 70 to seven employees.
Within the Appen Connect 2.0 platform, we have
upgraded the following functionality:
modernised and expanded our reporting
and analytics capabilities to collect contributor,
productivity, and quality data for individual projects.
built a new fraud screening functionality which includes
more sophisticated identity measures including ID
validation, facial recognition, and proof of address.
began piloting a new payment service to be used
for all contributors, providing rapid payment
functionality and increased flexibility of payment
methods, while supporting a global crowd. Expected
use of this new payment service is Q1 of 2024.
built a more comprehensive profile record for
individual contributors to record NPS score, support
issues, parsed resume data, contributor skills such
as language, domain expertise and educational records.
This helps increase the knowledge Appen has on any
individual contributor, enabling better crowd sourcing
and recruitment outcomes.
updated our communication platform to better
support the demands of our project teams and
improve support of the crowd.
To create a better user experience and seamless point
of contact between Appen and our contributors, we merged
Appen Mobile into Appen Connect 2.0. Our Crowd can
access Appen Connect 2.0 on the web, on their phone
or via an app.
Within ADAP we released enhancements and new features
to support our LLM data products which enable Enterprises
to fine tune, evaluate and monitor their LLM models.
These products include AI chat feedback functionality,
benchmarking solutions and text tools.
The AI Chat Feedback solution allows domain experts to have
live conversations with Chatbots and review, rate and rewrite
responses in real time. While the benchmarking solution
addresses the challenge of model selection by enabling
the efficient comparison of multiple models. Further detail
of these offerings can be found in the Customer and Brand
section on page 18.
We also added writing assistance tools in ADAP which include
reinforcement learning with human feedback functionality
and response writing such as rich text editors, gibberish
detection and advanced duplicate detection.
Within ADAP, quality flow features were upgraded to provide
customers with enhanced assurance methodology and highly
flexible data annotation workflow capabilities. Other areas
of investment included improving contributor productivity,
increasing quality of data and reducing fraud.
Separately, Appen China developed its own intelligent
LLM development platform which offers a comprehensive
one-stop solution for AI clients in the industry. It integrates
mainstream open-source large language models and covers
a wide range of capabilities, including data set management,
data annotation, computational resource scheduling, model
evaluation, model fine-tuning, and model deployment.
By leveraging the platform, Appen China provides end-to-end
solutions for customised data and model development,
enabling enterprises to easily adopt large language models
and create high quality generative AI applications for
transformative user experiences.
12
Appen 2023 Annual Report
13
Value drivers
Technology
processes,
systems
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.
$34.6M
in product development
Nil
reported material
data breaches
Priority SDG
Our comprehensive range of technology products and data services
encompasses both deep learning and generative AI. This includes Appen
Connect 2.0 and our Appen Data Annotation Platform (ADAP), a solution
that allows internal teams and external customers to design and manage
human annotation projects. Through the acquisition of Quadrant, we have
integrated the data collection services of Geolancer and Hydra into our
product suite. We also offer specialised services through our China
platform tailored for the Chinese market.
Global Services, Global Product, Enterprise, Government
China
Appen
Data Collection
China Platform
Appen
Connect 2.0
Sources crowd
Matches to projects
and annotation tasks
Handles crowd payments
Leverage crowd support
capabilities
Data Annotation
Platform (ADAP)
Collect and annotate
training data
Draw on powerful LLM
capabilities (fine tuning
and assurance)
Provides crowd
management and
annotation for China
markets
Harness intelligent
LLM platform
Geolancer – Provides
in-field data
collection including
point of interest data
Hydra – Allows mobile
location DaaS data
collection
QCMP – Manage user
consent and data
privacy compliance
Product development
In FY23, investment in product development (excluding
amortisation) decreased 16.0% to $34.6 million and
represented 12.7% of revenue (2022: $41.2 million
or 10.6% of revenue).
This year we delivered several initiatives to improve
the crowd and customer experience. As the industry
evolves and projects become more complex, customers
require a crowd with a more advanced skill set. In turn,
we developed and upgraded the Appen Connect platform
to enable a simpler, more effective creation and management
of projects while providing functionality to rapidly source
and match the right crowd contributors to the right project.
By the end of FY23, all contributor and project records
were migrated to Appen Connect 2.0. In addition,
all project teams were using the upgraded platform
for project creation and project management of their crowd.
The upgraded Appen Connect 2.0 platform is expected
to be fully functional by Q3 in 2024.
We have seen some early benefits associated with the
upgraded platform with reduced dependency on human
input to manage project recruitment. Appen’s recruitment
function has become more automated, with the team
reduced from 70 to seven employees.
Within the Appen Connect 2.0 platform, we have
upgraded the following functionality:
modernised and expanded our reporting
and analytics capabilities to collect contributor,
productivity, and quality data for individual projects.
built a new fraud screening functionality which includes
more sophisticated identity measures including ID
validation, facial recognition, and proof of address.
began piloting a new payment service to be used
for all contributors, providing rapid payment
functionality and increased flexibility of payment
methods, while supporting a global crowd. Expected
use of this new payment service is Q1 of 2024.
built a more comprehensive profile record for
individual contributors to record NPS score, support
issues, parsed resume data, contributor skills such
as language, domain expertise and educational records.
This helps increase the knowledge Appen has on any
individual contributor, enabling better crowd sourcing
and recruitment outcomes.
updated our communication platform to better
support the demands of our project teams and
improve support of the crowd.
To create a better user experience and seamless point
of contact between Appen and our contributors, we merged
Appen Mobile into Appen Connect 2.0. Our Crowd can
access Appen Connect 2.0 on the web, on their phone
or via an app.
Within ADAP we released enhancements and new features
to support our LLM data products which enable Enterprises
to fine tune, evaluate and monitor their LLM models.
These products include AI chat feedback functionality,
benchmarking solutions and text tools.
The AI Chat Feedback solution allows domain experts to have
live conversations with Chatbots and review, rate and rewrite
responses in real time. While the benchmarking solution
addresses the challenge of model selection by enabling
the efficient comparison of multiple models. Further detail
of these offerings can be found in the Customer and Brand
section on page 18.
We also added writing assistance tools in ADAP which include
reinforcement learning with human feedback functionality
and response writing such as rich text editors, gibberish
detection and advanced duplicate detection.
Within ADAP, quality flow features were upgraded to provide
customers with enhanced assurance methodology and highly
flexible data annotation workflow capabilities. Other areas
of investment included improving contributor productivity,
increasing quality of data and reducing fraud.
Separately, Appen China developed its own intelligent
LLM development platform which offers a comprehensive
one-stop solution for AI clients in the industry. It integrates
mainstream open-source large language models and covers
a wide range of capabilities, including data set management,
data annotation, computational resource scheduling, model
evaluation, model fine-tuning, and model deployment.
By leveraging the platform, Appen China provides end-to-end
solutions for customised data and model development,
enabling enterprises to easily adopt large language models
and create high quality generative AI applications for
transformative user experiences.
12
Appen 2023 Annual Report
13
Technology, processes, systems
Value drivers
Managing and protecting data
Cyber security
At Appen, we manage and protect massive amounts
of data, in line with security, privacy, and other data
regulations. We are also mindful of the increasing risk
posed by cyber security attacks and continue to adopt
industry best practices to guard against this risk.
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. 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.
Customers with even higher data security requirements
are able to use one of our eight ISO 27001 certified secure
facilities in the Philippines, the UK and China.
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 2023, China achieved BSI certification
ISO 14001/ISO 45001 for four sites.
There were no reported material breaches in 2023 1.
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 FY23,
we continued to meet or exceed 99.9% 2 uptime across
all our platforms.
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 a third-party specialist, we have ISO 27001: 2013 certified
facilities and our ADAP platform is SOC 2 Type-2 attested.
Additionally, our UK and China facilities are ISO 9001
certified, and our UK facility is Cyber Essential Plus
certified in line with UK requirements. Appen also achieved
Payment Card Industry (PCI) compliance for its ADAP
platform as per industry requirements.
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 several incident response tabletop
exercises annually.
In 2022, a cybersecurity maturity assessment was
conducted by an independent third party (PwC) utilising
the NIST framework. The assessment showed that Appen’s
maturity level had improved. The results of this review
continue to form the program of works to further mature
Appen’s cybersecurity capability.
In 2023, we enhanced the security posture of Appen
by implementing Attack surface management, Security
validation and Zero Fox takedown from Mandiant.
Five of the ten project recommendations were completed
in FY23, and the remainder will be finished by the end
of FY24 in time for re-evaluation.
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. Privilege access
and vendor security reviews are conducted as per
our standards.
FY24 focus
Appen is committed to innovation and excellence. We remain
focused on revamping the crowd experience to foster a more
engaging environment, advancing our annotation platform
to support classified or sensitive projects, and automating
processes through AI-based productivity enhancements.
Advancing our cybersecurity maturity through dedicated
programs, as well as data classification and loss prevention
projects also remain key priorities.
1 Based on report from Privacy and Counsel team.
2 Based on report from third-party website monitoring company, StatusCake.
1 Self-reported, includes territories.
2 Self-reported.
14
Appen 2023 Annual Report
15
Global
crowd
Our skilled and diverse crowd of more than 1 million contributors
is key to our purpose of unlocking the power of AI to build a better
world. Spanning more than 200 countries 1, speaking 500+ 2
languages, and comprising a multitude of specialised areas
of expertise we’ve assembled a crowd that’s unmatched.
Ethical AI
through our
Crowd code
of ethics
27
Crowd NPS
4 points from 31 FY22
Priority SDG
Purpose of our crowd
Our crowd is our most valued asset,
providing clients certainty that AI
solutions will work, are aligned with
their values, and with human values.
Our platform enables our
contributors to work with our
clients in deploying AI that is both
responsible and ethical. Our clients
deeply value the broad diversity
of skills and capabilities our crowd
has to offer.
Appen’s flexible work from home
model attracts the most trusted,
qualified, and capable contributors
from around the world.
Our crowd appreciate the
opportunity to participate in the
dynamic and growing AI market,
developing technology skills and
on projects that fit with their
personal goals and lifestyle.
At Appen, we believe that AI has
the power to solve some of the
world’s biggest challenges when it
is developed and deployed ethically,
responsibly, and aligned with
human values. We also believe that
humans play a crucial role in the
safe and effective deployment of AI.
We have built a diverse crowd
which spans many cultures,
ethnicities, age groups, life stages
and occupations. Our crowd offers
clients access to a rich diversity
needed to train and align AI models
with human values.
Human involvement is not a stage
in AI development – it’s the core.
Human alignment helps to minimise
hallucinations, bias and toxicity and
should be incorporated at every
stage. Keeping humans in the loop
throughout AI development and
deployment ensures AI is steered
towards a future where technology
augments human potential.
Our crowd Net Promoter
Score (NPS) declined 4 points
from 31 to 27 during the year.
the lack of project availability,
duration of projects, amount of
pay, support and communication.
With development of Appen
Connect 2.0 we hope to address
some of these concerns.
Importance of people in AI
Responders raised concerns about
AI knowledge while earning money
Crowd engagement
Technology, processes, systems
Value drivers
Global
crowd
Our skilled and diverse crowd of more than 1 million contributors
is key to our purpose of unlocking the power of AI to build a better
world. Spanning more than 200 countries 1, speaking 500+ 2
languages, and comprising a multitude of specialised areas
of expertise we’ve assembled a crowd that’s unmatched.
Ethical AI
through our
Crowd code
of ethics
27
Crowd NPS
4 points from 31 FY22
Priority SDG
1 Based on report from Privacy and Counsel team.
2 Based on report from third-party website monitoring company, StatusCake.
1 Self-reported, includes territories.
2 Self-reported.
Purpose of our crowd
Our crowd is our most valued asset,
providing clients certainty that AI
solutions will work, are aligned with
their values, and with human values.
Our platform enables our
contributors to work with our
clients in deploying AI that is both
responsible and ethical. Our clients
deeply value the broad diversity
of skills and capabilities our crowd
has to offer.
Appen’s flexible work from home
model attracts the most trusted,
qualified, and capable contributors
from around the world.
Our crowd appreciate the
opportunity to participate in the
dynamic and growing AI market,
developing technology skills and
AI knowledge while earning money
on projects that fit with their
personal goals and lifestyle.
Importance of people in AI
At Appen, we believe that AI has
the power to solve some of the
world’s biggest challenges when it
is developed and deployed ethically,
responsibly, and aligned with
human values. We also believe that
humans play a crucial role in the
safe and effective deployment of AI.
We have built a diverse crowd
which spans many cultures,
ethnicities, age groups, life stages
and occupations. Our crowd offers
clients access to a rich diversity
needed to train and align AI models
with human values.
Human involvement is not a stage
in AI development – it’s the core.
Human alignment helps to minimise
hallucinations, bias and toxicity and
should be incorporated at every
stage. Keeping humans in the loop
throughout AI development and
deployment ensures AI is steered
towards a future where technology
augments human potential.
Crowd engagement
Our crowd Net Promoter
Score (NPS) declined 4 points
from 31 to 27 during the year.
Responders raised concerns about
the lack of project availability,
duration of projects, amount of
pay, support and communication.
With development of Appen
Connect 2.0 we hope to address
some of these concerns.
14
Appen 2023 Annual Report
15
Managing and protecting data
Cyber security
At Appen, we manage and protect massive amounts
Our cyber security risk management framework
of data, in line with security, privacy, and other data
is based on internationally recognised NIST standards
regulations. We are also mindful of the increasing risk
and is structured to identify, detect, protect against,
posed by cyber security attacks and continue to adopt
respond and recover to cyber security threats.
industry best practices to guard against this risk.
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. 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.
Customers with even higher data security requirements
are able to use one of our eight ISO 27001 certified secure
facilities in the Philippines, the UK and China.
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 2023, China achieved BSI certification
ISO 14001/ISO 45001 for four sites.
There were no reported material breaches in 2023 1.
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 FY23,
we continued to meet or exceed 99.9% 2 uptime across
all our platforms.
Security penetration testing is conducted annually
by a third-party specialist, we have ISO 27001: 2013 certified
facilities and our ADAP platform is SOC 2 Type-2 attested.
Additionally, our UK and China facilities are ISO 9001
certified, and our UK facility is Cyber Essential Plus
certified in line with UK requirements. Appen also achieved
Payment Card Industry (PCI) compliance for its ADAP
platform as per industry requirements.
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 several incident response tabletop
exercises annually.
In 2022, a cybersecurity maturity assessment was
conducted by an independent third party (PwC) utilising
the NIST framework. The assessment showed that Appen’s
maturity level had improved. The results of this review
continue to form the program of works to further mature
Appen’s cybersecurity capability.
In 2023, we enhanced the security posture of Appen
by implementing Attack surface management, Security
validation and Zero Fox takedown from Mandiant.
Five of the ten project recommendations were completed
in FY23, and the remainder will be finished by the end
of FY24 in time for re-evaluation.
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. Privilege access
and vendor security reviews are conducted as per
our standards.
FY24 focus
Appen is committed to innovation and excellence. We remain
focused on revamping the crowd experience to foster a more
engaging environment, advancing our annotation platform
to support classified or sensitive projects, and automating
processes through AI-based productivity enhancements.
Advancing our cybersecurity maturity through dedicated
programs, as well as data classification and loss prevention
projects also remain key priorities.
Global crowd
Crowd NPS 1
2023
2022
2021
2020
27
31
40
47
Our strategy to get the right crowd
We deploy a variety of strategies and technology to ensure
our Crowd includes the diversity of skills, experience
and backgrounds required for our clients’ projects.
Requirements for more specific, specialised, and verified
skills such as finance, coding, law, health, and creative
writing are increasing as more clients work to develop and
enhance generative AI and large language models (LLMs).
In 2023, we fundamentally overhauled most of our crowd
facing systems. These enhancements deliver a better
user experience, by providing a more efficient qualification
process, without compromising our trust and safety
standards for our customers.
We also expanded and upgraded our reporting and
analytics capabilities to include richer contributor profiles
– with hundreds of searchable profile skills and attributes
now available. This helps to increase the knowledge
that Appen has on an individual contributor. These
enhancements also include quality data for individual
projects which provide valuable insights for our customers.
Upgrades were also made to our communication platform
to better support the crowd and we began piloting a new
payment service with improved functionality and flexibility.
More details on Appen’s technology initiatives to support
its crowd can be found in the Technology process
and systems section on page 12.
Crowd care
The fair and ethical treatment of our contractors, and
our ongoing commitment to their wellbeing is a priority.
As a company, we uphold responsible and sustainable
labour and supply chain practices. We recognise this
is the right thing to do and our customers also expect
that their business partners uphold such standards.
Our Crowd Code of Ethics is central to how we care for
our contractors. It includes our goal of fair pay and having
our hourly rates exceed the minimum wage in markets
where our managed services are used by customers.
We continue to monitor hourly rates of pay of our crowd
to ensure that any pay gaps are identified and resolved.
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.
Our Global Ethical Sourcing and Modern Slavery
Policy outlines what we expect of our suppliers.
Our policy is published on our website at
Global Ethical Sourcing and Modern Slavery Policy.
We also support our contractors under our
Whistleblower and Speak Up Policy. This policy
is also published on our website at Whistleblower
Speak Up Policy.
Crowd diversity and inclusion
One of the six pillars of our Crowd Code of Ethics
is inclusion and we are dedicated to offering
opportunities to individuals of all abilities
and backgrounds.
Our Impact Sourcing Partnerships between our
customers and community partners continue to grow,
bringing in people who would not otherwise have
opportunities for meaningful employment.
More information about our impact sourcing
partnerships can be found in the Social and
environment section on page 32.
Our Crowd
Code of Ethics
Fair pay – Our goal is to pay our crowd
above minimum wage in every market
around the world where we operate.
Inclusion – A diverse and inclusive
culture is vital to our mission of helping
build better AI. We offer opportunities for
individuals of all abilities and backgrounds.
Crowd voice – Our crowd has a valued
voice at Appen and their feedback helps
us to continuously improve.
Privacy and confidentiality –
Any information collected about the crowd
is requested solely for the purposes of the
project. We take precautions to protect
that information and do not release private
data on individuals to third parties without
lawful basis.
Communication – We believe
in helpful, transparent and responsive
lines of communication with our crowd.
Wellbeing – We promote wellness,
community and connections through
online forums and best practices.
Our Crowd Code of Ethics
Statement is available at:
Our diverse global Crowd of 1M
Contributors is Unmatched
(appen.com)
FY24 focus
Our crowd is key to our ability to meet the needs of our clients. Attracting and retaining qualified people to work
with clients to deploy AI that is effective and safe is critical to our operations and essential for the development
of responsible AI. We remain focused on further enhancing the crowd experience to improve engagement.
16
Appen 2023 Annual Report
17
Global crowd
Crowd NPS 1
2023
2022
2021
2020
27
31
40
47
Our strategy to get the right crowd
We deploy a variety of strategies and technology to ensure
our Crowd includes the diversity of skills, experience
and backgrounds required for our clients’ projects.
Requirements for more specific, specialised, and verified
skills such as finance, coding, law, health, and creative
writing are increasing as more clients work to develop and
enhance generative AI and large language models (LLMs).
In 2023, we fundamentally overhauled most of our crowd
facing systems. These enhancements deliver a better
user experience, by providing a more efficient qualification
process, without compromising our trust and safety
standards for our customers.
We also expanded and upgraded our reporting and
analytics capabilities to include richer contributor profiles
– with hundreds of searchable profile skills and attributes
now available. This helps to increase the knowledge
that Appen has on an individual contributor. These
enhancements also include quality data for individual
projects which provide valuable insights for our customers.
Upgrades were also made to our communication platform
to better support the crowd and we began piloting a new
payment service with improved functionality and flexibility.
More details on Appen’s technology initiatives to support
its crowd can be found in the Technology process
and systems section on page 12.
Crowd care
The fair and ethical treatment of our contractors, and
our ongoing commitment to their wellbeing is a priority.
As a company, we uphold responsible and sustainable
labour and supply chain practices. We recognise this
is the right thing to do and our customers also expect
that their business partners uphold such standards.
Our Crowd Code of Ethics is central to how we care for
our contractors. It includes our goal of fair pay and having
our hourly rates exceed the minimum wage in markets
where our managed services are used by customers.
We continue to monitor hourly rates of pay of our crowd
to ensure that any pay gaps are identified and resolved.
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.
Our Global Ethical Sourcing and Modern Slavery
Policy outlines what we expect of our suppliers.
Our policy is published on our website at
Global Ethical Sourcing and Modern Slavery Policy.
We also support our contractors under our
Whistleblower and Speak Up Policy. This policy
is also published on our website at Whistleblower
Speak Up Policy.
Crowd diversity and inclusion
One of the six pillars of our Crowd Code of Ethics
is inclusion and we are dedicated to offering
opportunities to individuals of all abilities
and backgrounds.
Our Impact Sourcing Partnerships between our
customers and community partners continue to grow,
bringing in people who would not otherwise have
opportunities for meaningful employment.
More information about our impact sourcing
partnerships can be found in the Social and
environment section on page 32.
Our Crowd
Code of Ethics
Fair pay – Our goal is to pay our crowd
above minimum wage in every market
around the world where we operate.
Inclusion – A diverse and inclusive
culture is vital to our mission of helping
build better AI. We offer opportunities for
individuals of all abilities and backgrounds.
Crowd voice – Our crowd has a valued
voice at Appen and their feedback helps
us to continuously improve.
Privacy and confidentiality –
Any information collected about the crowd
is requested solely for the purposes of the
project. We take precautions to protect
that information and do not release private
data on individuals to third parties without
lawful basis.
Communication – We believe
in helpful, transparent and responsive
lines of communication with our crowd.
Wellbeing – We promote wellness,
community and connections through
online forums and best practices.
Our Crowd Code of Ethics
Statement is available at:
Our diverse global Crowd of 1M
Contributors is Unmatched
(appen.com)
FY24 focus
Our crowd is key to our ability to meet the needs of our clients. Attracting and retaining qualified people to work
with clients to deploy AI that is effective and safe is critical to our operations and essential for the development
of responsible AI. We remain focused on further enhancing the crowd experience to improve engagement.
16
Appen 2023 Annual Report
17
Value drivers
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 on creating stronger, smarter, and more efficient AI
systems for our clients and to help shape a future where human
intellect and machine learning seamlessly collaborate.
We believe that the success of our clients 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.
35
Customer NPS
13 points from 22
in FY22
171
new customers
22
LLM model builders
as customers
Priority SDG
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 35, up 13 points from
22 in FY22. This score was above target and reflected
a high level of customer satisfaction with Appen’s service
offerings and project delivery. Customers saw the benefit
of organisational change at Appen, with the company’s
internal resources and process better aligned and able
to pivot to deliver higher quality project outcomes.
In addition to the scoring process, we also receive
qualitative feedback from our surveys. This feedback
provides valuable insights and helps us to identify
opportunities to further refine our product offerings and
delivery services. We undertook several initiatives within
our quality and engineering teams to ensure enterprise AI
models delivered accurate and timely data for customers.
Increasing channels to market
Establishing meaningful ecosystem partnerships
to increase our channels to market has been a key
focus. These relationships provide important access
to enterprise customers and will enable our sales
organisation to reach more customers.
NVIDIA: Our collaboration with NVIDIA, announced
3 May 2023, is a solution that combines Appen’s AI data
expertise with the NVIDIA AI Enterprise platform. The
NVIDIA AI Enterprise platform provides a comprehensive
suite of AI and data analytics software, while Appen
complements this with data sourcing, annotation and
labelling, and Reinforcement Learning with Human
Feedback services. The collaboration between Appen
and NVIDIA empowers our enterprise clients to elevate
customer interactions through AI-enabled experiences.
In 1H23, we signed our first million-dollar deal to service
a global Fortune 500 company together with NVIDIA.
REKA: The Appen + Reka AI partnership, announced
4 May 2023 aims to accelerate the LLM journey for
enterprises, providing them with the tools and expertise
to overcome these challenges. Together, we deliver
customised multi-modal LLM applications that improve
productivity, improve customer experiences, and ensure
data security and privacy.
Amazon Web Services (AWS): In November 2023,
Appen selected AWS as its primary cloud for its
AI solutions and innovation. Through a multi-year
agreement, Appen and AWS have expanded their
relationship as Appen develops new enterprise
solutions for AI data sourcing, annotation and model
evaluation. By leveraging AWS’s cloud infrastructure,
including machine learning and AI capabilities, Appen’s
AI data platform ensures the delivery of high-quality
training data for market-leading generative AI products.
This expanded partnership enables Appen to integrate
cutting-edge services from AWS, further enhancing its AI
data platform as a vital interface between humans and AI.
18
Appen 2023 Annual Report
19
Value drivers
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 on creating stronger, smarter, and more efficient AI
systems for our clients and to help shape a future where human
intellect and machine learning seamlessly collaborate.
We believe that the success of our clients 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.
35
Customer NPS
13 points from 22
in FY22
171
new customers
22
LLM model builders
as customers
Priority SDG
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 35, up 13 points from
22 in FY22. This score was above target and reflected
a high level of customer satisfaction with Appen’s service
offerings and project delivery. Customers saw the benefit
of organisational change at Appen, with the company’s
internal resources and process better aligned and able
to pivot to deliver higher quality project outcomes.
In addition to the scoring process, we also receive
qualitative feedback from our surveys. This feedback
provides valuable insights and helps us to identify
opportunities to further refine our product offerings and
delivery services. We undertook several initiatives within
our quality and engineering teams to ensure enterprise AI
models delivered accurate and timely data for customers.
Increasing channels to market
Establishing meaningful ecosystem partnerships
to increase our channels to market has been a key
focus. These relationships provide important access
to enterprise customers and will enable our sales
organisation to reach more customers.
NVIDIA: Our collaboration with NVIDIA, announced
3 May 2023, is a solution that combines Appen’s AI data
expertise with the NVIDIA AI Enterprise platform. The
NVIDIA AI Enterprise platform provides a comprehensive
suite of AI and data analytics software, while Appen
complements this with data sourcing, annotation and
labelling, and Reinforcement Learning with Human
Feedback services. The collaboration between Appen
and NVIDIA empowers our enterprise clients to elevate
customer interactions through AI-enabled experiences.
In 1H23, we signed our first million-dollar deal to service
a global Fortune 500 company together with NVIDIA.
REKA: The Appen + Reka AI partnership, announced
4 May 2023 aims to accelerate the LLM journey for
enterprises, providing them with the tools and expertise
to overcome these challenges. Together, we deliver
customised multi-modal LLM applications that improve
productivity, improve customer experiences, and ensure
data security and privacy.
Amazon Web Services (AWS): In November 2023,
Appen selected AWS as its primary cloud for its
AI solutions and innovation. Through a multi-year
agreement, Appen and AWS have expanded their
relationship as Appen develops new enterprise
solutions for AI data sourcing, annotation and model
evaluation. By leveraging AWS’s cloud infrastructure,
including machine learning and AI capabilities, Appen’s
AI data platform ensures the delivery of high-quality
training data for market-leading generative AI products.
This expanded partnership enables Appen to integrate
cutting-edge services from AWS, further enhancing its AI
data platform as a vital interface between humans and AI.
18
Appen 2023 Annual Report
19
Customer and brand
Large Language Models
Growing and diversifying our customer base
Taking the industry to new heights
At Appen, we understand the importance of trust and
accountability in AI. Our Large Language Models (LLMs)
released during 2023 serve as an essential trust layer,
ensuring that AI tools are truly helpful and not harmful
to the public. This year Appen launched various LLM tools
for fine tuning and assurance, including AI chat feedback
and benchmarking solutions. Collectively, these help
enterprises to build more complex and high-performing
LLMs that provide helpful, harmless, and honest
responses while reducing bias and toxicity.
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 FY23, our top five customers accounted for 74.8%
of revenue, down from 81.9% in FY22 . Revenue from
New Markets (excluding Global Product) accounted
for 26.3% of revenue, up from 18.1% in FY22.
This year, Appen delivered multiple projects related
to generative AI model development and evaluation,
for leading model builders, large tech and enterprise
customers. These 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. More complex projects required
domain-specific expertise, multilingual expansion and
multimodal datasets.
Generative AI revenue significantly increased in 2H23,
up 410% compared to 1H23. Most projects are delivered
using Appen’s Data Annotation Platform (ADAP);
however, we are seeing new platform-only projects
emerge with LLM startups. Appen is currently working
with 22 LLM model builders globally.
Generative AI
AI Chat Feedback:
Allows domain experts to assess multi-turn
live conversations, enabling them to review,
rate, and rewrite each response. This ensures
that LLMs are tested in complex conversations
that extend over multiple turns or dialogues,
mirroring real-world applications.
Benchmarking:
Addresses the challenge of model selection
by enabling customers to evaluate the
performance of various models across common
or fully custom dimensions. By leveraging
a curated crowd of our AI training specialists,
we evaluate performance along demographic
dimensions such as gender, ethnicity, and
language. A configurable dashboard enables
efficient comparison of multiple models,
providing invaluable insights for informed
decision-making.
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
Case Study: Enhancing
internet safety through
search relevance
Appen data ensures online safety
for children through search relevance
The Project: A popular video platform for
children identified a need to improve search
results and implement content filtering
to ensure only appropriate content is readily
available on the platform. A dedicated quality
team was established to oversee the publication
of content and a thorough quality check was
conducted to flag and filter out inappropriate
material before it is shared with children.
and developments in AI. In FY23, Appen released its State
The Challenge: With a massive volume
of AI Automotive Report. The report offers specific insights
of content being published on the platform,
into how the transportation and automotive industries
the company needed to scale quickly.
are leveraging artificial intelligence to improve driver and
Specialised tasks were used to address child
passenger experience, safety and comfort.
Appen partnered with The Harris Poll to deliver the
research which identified that AI has tremendous
potential to make the automotive experience safer
and more innovative. The findings also noted optimism
about the future of autonomous vehicles. Almost 80%
safety thresholds and protection in search
results. This allows users of all ages to enjoy
relevant search results while being shielded
from inappropriate content. The company also
needed to validate that age-appropriate content
filtering was working accurately.
of respondents indicated that they currently feel safe with
The Solution: Appen’s ability to quickly
autonomous vehicles on the road. Those surveyed also
implement and scale projects made us the
indicated their confidence in a number of AI applications.
preferred data provider. We assembled
Appen’s research also uncovered the importance of
human oversight to ensure an accurate and safe rollout
of AI across the transportation space. In fact, 97%
of respondents noted that human-in-the-loop evaluation
is important for accurate model performance, which
allows for more collaboration and oversight to improve
the effectiveness of AI and machine learning models.
The report can be accessed on the web: The State of AI
and Machine Learning for Automotive 2023 (appen.com).
a dedicated quality team to provide precise
rating guidance with detailed instructions for the
crowd to clarify the defined age groups, content
types, and definitions of inappropriate material.
The Result: The project is an ongoing effort
to consistently deliver appropriate and filtered
content to each defined age group. The team
diligently reviews tens of thousands of video
tasks each month, swiftly identifying videos
that may initially appear safe for children but
contain inappropriate voiceover content.
Such videos are promptly flagged for offensive
content, effectively deterring the viewing of
inappropriate material by children, and creating
a safer platform experience for users of all ages.
FY24 focus
In a dynamic and fast-paced AI market new opportunities are endless. Appen will continue to leverage its position
as a global leader in data to deliver great outcomes for its customers and build new relationships. In FY24, we will
continue to build on our expertise in LLM tools and evolve our offerings, including advancements to our annotation
platform and automate processes through AI-based productivity initiatives.
20
Appen 2023 Annual Report
21
Customer and brand
At Appen, we understand the importance of trust and
accountability in AI. Our Large Language Models (LLMs)
released during 2023 serve as an essential trust layer,
ensuring that AI tools are truly helpful and not harmful
to the public. This year Appen launched various LLM tools
for fine tuning and assurance, including AI chat feedback
and benchmarking solutions. Collectively, these help
LLMs that provide helpful, harmless, and honest
responses while reducing bias and toxicity.
enterprises to build more complex and high-performing
In FY23, our top five customers accounted for 74.8%
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.
of revenue, down from 81.9% in FY22 . Revenue from
New Markets (excluding Global Product) accounted
for 26.3% of revenue, up from 18.1% in FY22.
This year, Appen delivered multiple projects related
to generative AI model development and evaluation,
for leading model builders, large tech and enterprise
customers. These 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. More complex projects required
domain-specific expertise, multilingual expansion and
multimodal datasets.
Generative AI revenue significantly increased in 2H23,
up 410% compared to 1H23. Most projects are delivered
using Appen’s Data Annotation Platform (ADAP);
however, we are seeing new platform-only projects
emerge with LLM startups. Appen is currently working
with 22 LLM model builders globally.
Generative AI
AI Chat Feedback:
Allows domain experts to assess multi-turn
live conversations, enabling them to review,
rate, and rewrite each response. This ensures
that LLMs are tested in complex conversations
that extend over multiple turns or dialogues,
mirroring real-world applications.
Benchmarking:
Addresses the challenge of model selection
by enabling customers to evaluate the
performance of various models across common
or fully custom dimensions. By leveraging
a curated crowd of our AI training specialists,
we evaluate performance along demographic
dimensions such as gender, ethnicity, and
language. A configurable dashboard enables
efficient comparison of multiple models,
providing invaluable insights for informed
decision-making.
Large Language Models
Growing and diversifying our customer base
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 FY23, Appen released its State
of AI Automotive Report. The report offers specific insights
into how the transportation and automotive industries
are leveraging artificial intelligence to improve driver and
passenger experience, safety and comfort.
Appen partnered with The Harris Poll to deliver the
research which identified that AI has tremendous
potential to make the automotive experience safer
and more innovative. The findings also noted optimism
about the future of autonomous vehicles. Almost 80%
of respondents indicated that they currently feel safe with
autonomous vehicles on the road. Those surveyed also
indicated their confidence in a number of AI applications.
Appen’s research also uncovered the importance of
human oversight to ensure an accurate and safe rollout
of AI across the transportation space. In fact, 97%
of respondents noted that human-in-the-loop evaluation
is important for accurate model performance, which
allows for more collaboration and oversight to improve
the effectiveness of AI and machine learning models.
The report can be accessed on the web: The State of AI
and Machine Learning for Automotive 2023 (appen.com).
Case Study: Enhancing
internet safety through
search relevance
Appen data ensures online safety
for children through search relevance
The Project: A popular video platform for
children identified a need to improve search
results and implement content filtering
to ensure only appropriate content is readily
available on the platform. A dedicated quality
team was established to oversee the publication
of content and a thorough quality check was
conducted to flag and filter out inappropriate
material before it is shared with children.
The Challenge: With a massive volume
of content being published on the platform,
the company needed to scale quickly.
Specialised tasks were used to address child
safety thresholds and protection in search
results. This allows users of all ages to enjoy
relevant search results while being shielded
from inappropriate content. The company also
needed to validate that age-appropriate content
filtering was working accurately.
The Solution: Appen’s ability to quickly
implement and scale projects made us the
preferred data provider. We assembled
a dedicated quality team to provide precise
rating guidance with detailed instructions for the
crowd to clarify the defined age groups, content
types, and definitions of inappropriate material.
The Result: The project is an ongoing effort
to consistently deliver appropriate and filtered
content to each defined age group. The team
diligently reviews tens of thousands of video
tasks each month, swiftly identifying videos
that may initially appear safe for children but
contain inappropriate voiceover content.
Such videos are promptly flagged for offensive
content, effectively deterring the viewing of
inappropriate material by children, and creating
a safer platform experience for users of all ages.
20
Appen 2023 Annual Report
21
FY24 focus
In a dynamic and fast-paced AI market new opportunities are endless. Appen will continue to leverage its position
as a global leader in data to deliver great outcomes for its customers and build new relationships. In FY24, we will
continue to build on our expertise in LLM tools and evolve our offerings, including advancements to our annotation
platform and automate processes through AI-based productivity initiatives.
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 a safe and inclusive work culture to allow them
to perform at their best.
1,037
FTEs
from 1,475 in FY22
75%
Employee
engagement
from 78% in FY22
Priority SDG
Global and diverse work force
As of 31 December 2023, we had 795 full time equivalent employees (FTE),
and approximately 222 fixed term, nine casual employees and 11 interns.
Full time employees total 992 and part time employees total 45. As part
of our transformation and in response to challenging external operating
conditions we flattened our organisational structure and consolidated
functions. This resulted in a 29.7% reduction in our workforce.
1,037
employees
Permanent
Fixed term
Casual
Interns
Full time
Part time
795
222
9
11
992
45
2023 employee distribution
Appen’s people are based in North America, Asia Pacific, UK, Europe,
Australia and India. In 2023, we added two new offices in Canada and India.
1,037
employees
Asia Pacific
North America
Australia/NZ
UK/Europe
725
185
55
72
Commitment to
diversity and inclusion
At Appen, we aim to build a more diverse and
inclusive workforce to improve our performance
and better reflect the communities in which
we operate. We understand the value of a global
workforce and embrace the unique perspectives,
experiences, and backgrounds of our people.
Our diversity policy guides our inclusive work
practices and is focused on increasing gender
and ethnic diversity among employees, in senior
management and on the board.
The Board has set a target of 30% female
representation at all senior leadership levels.
Female representation at the executive team
and senior vice president (SVP) level declined
due to voluntary and involuntary departures
of senior female employees.
As of 31 December, women represented:
Overall workforce
Board director
Executive team/SVP
Vice President
Senior Director
Director
Manager
% female 2
2023
2022
55
50
22
35
47
40
61
57
50
30
32
63
45
57
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 linguistics, knowledge
graphs, computational aptitude, machine learning
and computer science. AI is fast paced and dynamic,
and the with rise of generative AI we recognise
that ongoing upskilling and reskilling is required
to meet and exceed stakeholder expectations.
1,037
employees
Product and engineering
Delivery
Corporate
Crowd
Executive
Revenue and marketing
546
171
111
132
67
10
Employee engagement
We recognise that an engaged and high-performing
workforce is essential for the success of our business.
To ensure we are responding to the needs of our
people, we conduct quarterly engagement surveys.
We continue to receive strong employee participation
rates that allow us to leverage insights from our
employee surveys to drive further improvements.
In FY23, we recorded an employee engagement
score of 75% down from 78% on the previous year.
In part, the decline in our employee engagement
score reflects the challenging external environment
and the realignment of our workforce to create
a leaner and more efficient organisational structure.
We will continue to respond to our employee’s
feedback and drive our engagement scores higher
in the following year.
Employee engagement 1
2023
2022
2021
2020
2019
75%
78%
76%
82%
76%
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.
2 Based on HR report for all permanent employees
generated by Workday.
22
Appen 2023 Annual Report
23
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 a safe and inclusive work culture to allow them
to perform at their best.
1,037
FTEs
from 1,475 in FY22
75%
Employee
engagement
from 78% in FY22
Priority SDG
Global and diverse work force
As of 31 December 2023, we had 795 full time equivalent employees (FTE),
and approximately 222 fixed term, nine casual employees and 11 interns.
Full time employees total 992 and part time employees total 45. As part
of our transformation and in response to challenging external operating
conditions we flattened our organisational structure and consolidated
functions. This resulted in a 29.7% reduction in our workforce.
1,037
employees
Permanent
Fixed term
Casual
Interns
Full time
Part time
2023 employee distribution
Appen’s people are based in North America, Asia Pacific, UK, Europe,
Australia and India. In 2023, we added two new offices in Canada and India.
1,037
employees
Asia Pacific
North America
Australia/NZ
UK/Europe
795
222
9
11
992
45
725
185
55
72
Commitment to
diversity and inclusion
At Appen, we aim to build a more diverse and
inclusive workforce to improve our performance
and better reflect the communities in which
we operate. We understand the value of a global
workforce and embrace the unique perspectives,
experiences, and backgrounds of our people.
Our diversity policy guides our inclusive work
practices and is focused on increasing gender
and ethnic diversity among employees, in senior
management and on the board.
The Board has set a target of 30% female
representation at all senior leadership levels.
Female representation at the executive team
and senior vice president (SVP) level declined
due to voluntary and involuntary departures
of senior female employees.
As of 31 December, women represented:
Overall workforce
Board director
Executive team/SVP
Vice President
Senior Director
Director
Manager
% female 2
2023
2022
55
50
22
35
47
40
61
57
50
30
32
63
45
57
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 linguistics, knowledge
graphs, computational aptitude, machine learning
and computer science. AI is fast paced and dynamic,
and the with rise of generative AI we recognise
that ongoing upskilling and reskilling is required
to meet and exceed stakeholder expectations.
Delivery
Product and engineering
1,037
employees
Corporate
Crowd
Revenue and marketing
Executive
546
171
111
132
67
10
Employee engagement
We recognise that an engaged and high-performing
workforce is essential for the success of our business.
To ensure we are responding to the needs of our
people, we conduct quarterly engagement surveys.
We continue to receive strong employee participation
rates that allow us to leverage insights from our
employee surveys to drive further improvements.
In FY23, we recorded an employee engagement
score of 75% down from 78% on the previous year.
In part, the decline in our employee engagement
score reflects the challenging external environment
and the realignment of our workforce to create
a leaner and more efficient organisational structure.
We will continue to respond to our employee’s
feedback and drive our engagement scores higher
in the following year.
Employee engagement 1
2023
2022
2021
2020
2019
75%
78%
76%
82%
76%
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.
2 Based on HR report for all permanent employees
generated by Workday.
22
Appen 2023 Annual Report
23
Our people
Building our new culture
Training and development
This year, we adopted a new Culture Code to support our
transformation. Through our new Purpose and Perspective,
we are seeking to create an environment where everyone
can thrive, feel valued, and grow their potential. Our people
are further united by our four values that guide how
we pursue individual, team and organisational objectives.
Our values also inform how we work with those within
and outside Appen.
Leaders are responsible for modelling our Culture Code
and fostering it within their teams, and each employee
is expected to conduct themselves in alignment with
Appen’s Culture Code.
Appen’s Culture Code:
Purpose
We unlock the power of AI for Good to build a better world.
Perspective
We are a learn-it-all culture and embrace that comfort
and growth do not coexist.
Values
Four values unite us:
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
in order to drive progress and achieve results.
Courage to innovate: We have the courage
to 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.
A collaborative goal-setting methodology was introduced
in Appen in 2023 with OKRs – Objectives and Key Results.
This framework helps drive our teams and employees
to set challenging and ambitious goals with measurable
results. All employees and managers were provided training
throughout the year on how to cultivate impactful OKRs
and drive meaningful conversations.
During 2023, Appen’s strategic focus progressed towards
Large Language Models (LLMs), and due to the fast-changing
landscape of today, it was important that Appen equipped
its own people with the fundamentals of AI and LLMs.
All employees were upskilled, and a specific focus on
client-facing roles in sales, marketing, solutions, linguists,
and service delivery, as well as an advanced path for more
technical roles.
At the beginning of 2023, Appen rolled out a new leadership
program that included paths for leaders at different levels
from self-leadership to leading the organisation, as well
as a Leadership Collaborative community and quarterly
leadership labs where leaders can share best practices
and collaborate on specific topics.
In FY23, our people averaged one hour of training per
month through Appen University, with a total training time
of 35,156 hours 1.
Working ethically
Our people are required to complete mandatory annual
training in critical areas such as data privacy, security
awareness and sexual harassment. Our Code of Conduct
training which sets out employees’ obligations to act
honestly and ethically is also mandatory for all employees
and contractors. In FY23, we achieved a 95% completion
rate for our Code of Conduct training 2.
Data from Appen University.
1
2 Data from Appen University, excluding China employees.
Giving back
Giving back to our global community is at the core of our
business. In alignment with Appen’s AI for Good strategy,
Appen launched its Volunteering program, giving our
employees one day per year to volunteer for non-profit
organisations in their communities. Appen believes this
will not only benefit the communities in which we operate,
but also enrich the lives of our employees by allowing
them to make a difference.
Some examples of giving back included the Sydney
office coming together to create 50 care packages
in partnership with The Good Box, who support people
experiencing homelessness across Australia.
In the Philippines, our Cavite team partnered with the
Department of Education’s Brigada Eskwela, also known
as School Maintenance Week, and prepped the schools
for the upcoming academic year. The team helped
transform ordinary classrooms into lively spaces that
fuel creativity through donations of cleaning materials,
refreshing the classroom by painting walls and furniture
and cleaning the surroundings.
In addition, Appen’s Employee Service committee
facilitated the following events to raise money, awareness
and show our support:
Appen’s Biggest Morning Tea – held in both Australia
and the Philippines, where Appen raised $2,500
towards making a difference for those impacted
by cancer.
Pride Month – Appen beamed Pride across the globe
during Pride Month with our Philippines team marching
in the Cavite Pride Parade; Exeter hosted ‘Dress Like
The Rainbow’ day (helping to raise awareness of the
state of LGBTQI rights across Europe); Sydney held
a rainbow food-filled Pride lunch bursting with colour,
and Bellevue threw a Pride Party raising funds for
a local LGBTQI youth non-profit organisation.
Cavite Fire Appeal – in 2023, many families were
displaced by fires in Cavite, Philippines. Appen
raised $3,500 to support those in need.
Organised a 10,000 steps per day challenge across
the month of September to help raise money for the
Cerebral Palsy Alliance (CPA), an organisation that
supports people living with Cerebral Palsy. A total
of $5,200 was raised with more than 10 million steps
made by employees globally.
24
Appen 2023 Annual Report
25
Our people
Building our new culture
Training and development
This year, we adopted a new Culture Code to support our
A collaborative goal-setting methodology was introduced
transformation. Through our new Purpose and Perspective,
in Appen in 2023 with OKRs – Objectives and Key Results.
we are seeking to create an environment where everyone
This framework helps drive our teams and employees
can thrive, feel valued, and grow their potential. Our people
to set challenging and ambitious goals with measurable
are further united by our four values that guide how
results. All employees and managers were provided training
we pursue individual, team and organisational objectives.
throughout the year on how to cultivate impactful OKRs
Our values also inform how we work with those within
and drive meaningful conversations.
and outside Appen.
Leaders are responsible for modelling our Culture Code
Large Language Models (LLMs), and due to the fast-changing
and fostering it within their teams, and each employee
landscape of today, it was important that Appen equipped
is expected to conduct themselves in alignment with
its own people with the fundamentals of AI and LLMs.
During 2023, Appen’s strategic focus progressed towards
Appen’s Culture Code.
Appen’s Culture Code:
Purpose
We unlock the power of AI for Good to build a better world.
Perspective
We are a learn-it-all culture and embrace that comfort
and growth do not coexist.
Values
Four values unite us:
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
in order to drive progress and achieve results.
Courage to innovate: We have the courage
to 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.
All employees were upskilled, and a specific focus on
client-facing roles in sales, marketing, solutions, linguists,
and service delivery, as well as an advanced path for more
technical roles.
At the beginning of 2023, Appen rolled out a new leadership
program that included paths for leaders at different levels
from self-leadership to leading the organisation, as well
as a Leadership Collaborative community and quarterly
leadership labs where leaders can share best practices
and collaborate on specific topics.
In FY23, our people averaged one hour of training per
month through Appen University, with a total training time
of 35,156 hours 1.
Working ethically
Our people are required to complete mandatory annual
training in critical areas such as data privacy, security
awareness and sexual harassment. Our Code of Conduct
training which sets out employees’ obligations to act
honestly and ethically is also mandatory for all employees
and contractors. In FY23, we achieved a 95% completion
rate for our Code of Conduct training 2.
1
Data from Appen University.
2 Data from Appen University, excluding China employees.
Giving back
Giving back to our global community is at the core of our
business. In alignment with Appen’s AI for Good strategy,
Appen launched its Volunteering program, giving our
employees one day per year to volunteer for non-profit
organisations in their communities. Appen believes this
will not only benefit the communities in which we operate,
but also enrich the lives of our employees by allowing
them to make a difference.
Some examples of giving back included the Sydney
office coming together to create 50 care packages
in partnership with The Good Box, who support people
experiencing homelessness across Australia.
In the Philippines, our Cavite team partnered with the
Department of Education’s Brigada Eskwela, also known
as School Maintenance Week, and prepped the schools
for the upcoming academic year. The team helped
transform ordinary classrooms into lively spaces that
fuel creativity through donations of cleaning materials,
refreshing the classroom by painting walls and furniture
and cleaning the surroundings.
In addition, Appen’s Employee Service committee
facilitated the following events to raise money, awareness
and show our support:
Appen’s Biggest Morning Tea – held in both Australia
and the Philippines, where Appen raised $2,500
towards making a difference for those impacted
by cancer.
Pride Month – Appen beamed Pride across the globe
during Pride Month with our Philippines team marching
in the Cavite Pride Parade; Exeter hosted ‘Dress Like
The Rainbow’ day (helping to raise awareness of the
state of LGBTQI rights across Europe); Sydney held
a rainbow food-filled Pride lunch bursting with colour,
and Bellevue threw a Pride Party raising funds for
a local LGBTQI youth non-profit organisation.
Cavite Fire Appeal – in 2023, many families were
displaced by fires in Cavite, Philippines. Appen
raised $3,500 to support those in need.
Organised a 10,000 steps per day challenge across
the month of September to help raise money for the
Cerebral Palsy Alliance (CPA), an organisation that
supports people living with Cerebral Palsy. A total
of $5,200 was raised with more than 10 million steps
made by employees globally.
24
Appen 2023 Annual Report
25
Our people
Value drivers
New presence in India
Our Future Ways of Working
Appen completed the resizing and relocation of its
engineering function to Hyderabad, India. This new location
will be home to approximately 100 employees who will help
with the development of cutting-edge software solutions
that will shape the future of AI and Machine Learning.
Launch of our internship program
Appen launched its first internship program in 2023
to harness curiosity, energy, and an irresistible zest
for learning. The interns have actively participated,
tackled substantial challenges, and ignited real business
transformation across product, engineering, sales,
marketing, customer success, IT and HR functions.
Appen partnered with the Coalition of Innovation Leaders
Against Racism (CILAR) and attended the CILAR MyStartr
event in Toronto in March 2023 where we sourced
more than 100 applicants for our eight intern openings
in the US and Canada – all from ethnically diverse
backgrounds with senior level managers for exposure
and coaching during the Summer of 2023. Nearly half
remained during the fall to extend their internships.
For nearly three years, Appen employees have
faced many challenges including working through
the pandemic and responding to the ongoing tech
slowdown as our customers cut costs. During this
time, we transitioned to different working models
and as a company, we embraced resilience and
adjusted to the ever-changing environment and
needs of our customers.
The next evolution of our Future Ways of Working
strategy focuses on flexibility and no-one size fits
all approach. This year, we learnt a lot about what
we need to do in order to thrive at Appen, and a hybrid
model gives us the best of both worlds. This model
fosters flexibility, enhancing employee satisfaction and
drives productivity. Appen has continued to promote
in person social and cultural connections through
the Neighbourhood Connections Program – allowing
employees that live in the same city or community
to build connections with colleagues.
FY24 focus
We recognise that a diverse, engaged and high performing workforce is key to our success.
To that end, we remain focused on investing in our people and culture. We plan to further
embed our new Culture Code throughout the company and develop and empower our leaders.
Across Appen we will continue to champion diversity to help build a more inclusive workplace.
26
Appen 2023 Annual Report
27
Financial
Appen’s financial results reflect challenging external operating and
macroeconomic conditions that have led to a broader technology market
slowdown as customers reduced their spend and evaluated their AI
strategies. In response, we remained focused on areas within our control
and adopted a greater level of operational rigour. This enabled Appen
to achieve its cash EBITDA profitability objective in December 2023.
US$M (unless stated otherwise)
Group revenue and other income
Operating revenue
Gross Margin 1 %
Underlying EBITDA 2
Underlying EBITDA 2 before FX
Underlying NPAT 3
Statutory NPAT 4
Dividend cents per share
FY23
274.2
273.0
36.3%
(24.5)
(20.4)
(52.8)
(118.1)
Nil
FY22
388.5
388.1
37.6%
11.0
13.6
(22.8)
(239.1)
Nil
Change
-29.4%
-29.7%
-130bps
nm%
nm%
nm%
nm%
Financial performance summary
The external operating environment and the response of our
customers’ is reflected in Appen’s financial performance as follows:
• Group revenue and other income decreased 29.4%
• China finished the year strongly with Q4 revenue
to $274.2 million, primarily reflecting a lower contribution
of $11.1 million representing a quarterly record.
from Global Services which recorded a 36.1% reduction
in revenue.
• Product development investment (excluding
amortisation) decreased 16.0% to $34.6 million
• Global Services revenue down 36.1% to $191.5 million.
and represented 12.7% of revenue.
• New Market revenue down 7.8% to $81.5 million,
• Underlying EBITDA (before the impact of foreign
impacted by lower Global Product revenue. Excluding
exchange losses) decreased from $13.6 million
Global Product, New Markets revenue grew 2.2%
to ($20.4) million due to lower revenue, lower gross
to $71.8 million.
margin, proportionally higher cost base versus FY22.
Priority
SDG
1 Gross margin refers to revenue less crowd expenses.
2 Underlying EBITDA excludes impairment loss, earn-out adjustment, restructure costs, transaction costs,
inventory losses, and acquisition-related and one-time share-based payment expense.
3 Underlying NPAT excludes after tax impact of impairment loss, earn-out adjustment, restructure costs,
transaction costs, inventory losses, acquisition-related and one-time share-based payment expense,
amortisation of acquisition related intangibles, and deemed interest on earn-out liability.
4 Includes non-cash impairment of $69.2 million (FY22: non-cash impairment of $204.3 million).
Our people
Value drivers
New presence in India
Our Future Ways of Working
Appen completed the resizing and relocation of its
For nearly three years, Appen employees have
engineering function to Hyderabad, India. This new location
faced many challenges including working through
will be home to approximately 100 employees who will help
the pandemic and responding to the ongoing tech
with the development of cutting-edge software solutions
slowdown as our customers cut costs. During this
that will shape the future of AI and Machine Learning.
time, we transitioned to different working models
Launch of our internship program
Appen launched its first internship program in 2023
to harness curiosity, energy, and an irresistible zest
for learning. The interns have actively participated,
tackled substantial challenges, and ignited real business
transformation across product, engineering, sales,
marketing, customer success, IT and HR functions.
Appen partnered with the Coalition of Innovation Leaders
Against Racism (CILAR) and attended the CILAR MyStartr
event in Toronto in March 2023 where we sourced
more than 100 applicants for our eight intern openings
in the US and Canada – all from ethnically diverse
backgrounds with senior level managers for exposure
and coaching during the Summer of 2023. Nearly half
remained during the fall to extend their internships.
and as a company, we embraced resilience and
adjusted to the ever-changing environment and
needs of our customers.
The next evolution of our Future Ways of Working
strategy focuses on flexibility and no-one size fits
all approach. This year, we learnt a lot about what
we need to do in order to thrive at Appen, and a hybrid
model gives us the best of both worlds. This model
fosters flexibility, enhancing employee satisfaction and
drives productivity. Appen has continued to promote
in person social and cultural connections through
the Neighbourhood Connections Program – allowing
employees that live in the same city or community
to build connections with colleagues.
FY24 focus
We recognise that a diverse, engaged and high performing workforce is key to our success.
To that end, we remain focused on investing in our people and culture. We plan to further
embed our new Culture Code throughout the company and develop and empower our leaders.
Across Appen we will continue to champion diversity to help build a more inclusive workplace.
Financial
Appen’s financial results reflect challenging external operating and
macroeconomic conditions that have led to a broader technology market
slowdown as customers reduced their spend and evaluated their AI
strategies. In response, we remained focused on areas within our control
and adopted a greater level of operational rigour. This enabled Appen
to achieve its cash EBITDA profitability objective in December 2023.
US$M (unless stated otherwise)
Group revenue and other income
Operating revenue
Gross Margin 1 %
Underlying EBITDA 2
Underlying EBITDA 2 before FX
Underlying NPAT 3
Statutory NPAT 4
Dividend cents per share
FY23
274.2
273.0
36.3%
(24.5)
(20.4)
(52.8)
(118.1)
Nil
FY22
388.5
388.1
37.6%
11.0
13.6
(22.8)
(239.1)
Nil
Change
-29.4%
-29.7%
-130bps
nm%
nm%
nm%
nm%
Financial performance summary
The external operating environment and the response of our
customers’ is reflected in Appen’s financial performance as follows:
• Group revenue and other income decreased 29.4%
to $274.2 million, primarily reflecting a lower contribution
from Global Services which recorded a 36.1% reduction
in revenue.
• Global Services revenue down 36.1% to $191.5 million.
• China finished the year strongly with Q4 revenue
of $11.1 million representing a quarterly record.
• Product development investment (excluding
amortisation) decreased 16.0% to $34.6 million
and represented 12.7% of revenue.
• New Market revenue down 7.8% to $81.5 million,
impacted by lower Global Product revenue. Excluding
Global Product, New Markets revenue grew 2.2%
to $71.8 million.
• Underlying EBITDA (before the impact of foreign
exchange losses) decreased from $13.6 million
to ($20.4) million due to lower revenue, lower gross
margin, proportionally higher cost base versus FY22.
Priority
SDG
1 Gross margin refers to revenue less crowd expenses.
2 Underlying EBITDA excludes impairment loss, earn-out adjustment, restructure costs, transaction costs,
inventory losses, and acquisition-related and one-time share-based payment expense.
3 Underlying NPAT excludes after tax impact of impairment loss, earn-out adjustment, restructure costs,
transaction costs, inventory losses, acquisition-related and one-time share-based payment expense,
amortisation of acquisition related intangibles, and deemed interest on earn-out liability.
4 Includes non-cash impairment of $69.2 million (FY22: non-cash impairment of $204.3 million).
26
Appen 2023 Annual Report
27
Financial
• Underlying EBITDA (including the impact of foreign
Operating revenue and customer diversification
exchange gains and losses) decreased from $11.0 million
to ($24.5) million.
• Underlying net loss after tax increased to $52.8 million
from underlying net loss of $22.8 million in FY22, due
to the factors mentioned above, offset by an income
tax benefit of $6.8 million primarily relating to the
reduction of deferred tax liabilities.
• Non-cash impairment of $69.2 million reflecting the
impairment of Goodwill and certain non-current assets
associated with the Global Services cash generating unit.
FY22 included non-cash impairment of $204.3 million
reflecting the impairment of Goodwill and certain
intangibles associated with the New Markets (excl. China)
cash generating unit.
• Statutory net loss after tax and after impairment
of $118.1 million, compared to statutory net loss after
tax of $239.1 million in FY22.
• No dividend was paid due to Appen’s financial
performance and to ensure appropriate allocation
of capital.
• Cash balance of $32.1 million at 31 December 2023
and no debt.
Market conditions
In 2023 global economic growth slowed given the impact
of monetary policy tightening and cost of living pressures.
While activity remained resilient in key markets like the
United States, economic and geopolitical conditions
resulted in an ongoing slowdown in Tech spending as
customers continued to reduce costs and evaluate their
AI strategies. These conditions proved more challenging
than expected. While there were green shoots in generative
AI product offerings, these projects remain small, and they
have not offset revenue declines in Appen’s core deep
learning business.
The emergence of large language models (LLMs) such as
ChatGPT launched at the end of 2022 sparked excitement
and significant interest in generative AI. Throughout 2023,
the potential impact of generative AI continued to grow,
and the acceleration of its adoption is now a key propriety
for many companies. Bloomberg Intelligence expect the
generative AI market to grow at a CAGR of 42% and reach
a total spend of approximately $1.3 trillion in 2032. 1
Human feedback across the full cycle of LLM development
is required to minimise hallucinations, bias and toxicity.
In 2023 we saw the emergence of tools that enabled
developers to use LLMs more effectively with humans
for data curation, testing and monitoring human functions.
To secure the last mile development of LLMs, human in the
loop feedback will be critical to ensure ongoing fine-tuning
and generally supporting a new potential of human led
operating systems.
Group operating revenue decreased 29.7% to $273.0 million,
reflecting a lower contribution from the Global division
and New Markets as our customers optimise their spend,
cut costs, and evaluated their AI strategies. Revenue from
New Markets (excluding Global Product) represented 26.3%
of total group revenue, up from 18.1% in FY22.
In FY23, model testing and relevance work represented
75.9% of group revenue, compared to 76.1% in FY22.
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 will be terminating
its global inbound services contract with Appen, resulting
in the cessation of all projects with Appen by 19 March 2024.
Appen’s FY23 revenue from Google was $82.8 million and
represents 30.3% of total revenue. Group revenue, excluding
Google was $190.2 million, compared to $285.4 million in FY22.
Revenue by operating division
Global Services FY23 revenue decreased 36.1%
to $191.5 million (FY22: $299.8 million) and was impacted
by a reduction in spend from Global customers due to the
ongoing challenging external operating and macroeconomic
conditions. Despite the external environment, Global
Services won 83 new projects (albeit at a lower level when
compared to 156 in FY22), including annotation, content
categorisation and relevance work.
We saw some green shoots as revenue from LLM work
contributed, and all Appen’s Global customers completed
a generative AI project or had a project in the pipeline.
New Markets revenue declined 7.8% to $81.5 million,
impacted by lower Global Product revenue. Second half
revenue from New Markets reduced 1.6% to $42.6 million
from $43.3 million in 2HFY22.
Excluding Global Product, New Markets revenue grew
2.2% to $71.8 million due to growth from China, Quadrant
and Government.
Second half revenue from Enterprise, China, Quadrant
and Government grew 8.8% compared to prior corresponding
period to $39.0 million due to strong contributions from
China and Quadrant. In China, 2H23 revenue grew 23.4%
on the prior corresponding period on the back of new
LLM project launches.
New Markets won a total of 171 new customers
(FY22: 184 new customers). This reflects the good
momentum in Enterprise, China and Quadrant, primarily
for LLM evaluation, autonomous vehicles (AV), in-car cabin
data collection and point-of-interest data collection.
The Enterprise team secured 34 new client wins which
included LLM evaluation and categorisation, search
relevance, taxonomy and annotation work.
Enterprise also secured multiple deals with leading LLM
Amortisation of product development was $19.7 million down
model builder. The average deal size signed was $147,000,
from $20.6 million in 2022. The decrease reflects and reflects
up 5.0% from the average deal size of $140,000 in FY22
a higher lower level of product development investment.
and $61,000 in FY21. In 2H FY23 the average deal size was
$200,000 compared to $106,000 in 1H FY23.
China recorded 2.7% lift in revenue to $34.5 million compared
to FY22. The business finished the year strongly delivering
a record Q4 revenue performance of $11.1 million as business
conditions returned to more normalised levels as the
protracted COVID19 impacts evident in 1H23 subsided.
Underlying financial performance
Underlying earnings before interest, tax, depreciation, and
amortisation (EBITDA) was ($24.5 million) (2022: $11.0 million).
Before the impact of foreign exchange gains or losses,
underlying EBITDA was ($20.4 million) (2022: $13.6 million).
The reduction in Appen’s underlying EBITDA is due
to reduced revenue and gross margin, and a proportionally
Collectively China, Japan and Korea secured 82 new
higher cost base versus FY22.
clients, which included eight clients with 20 LLM projects,
projects with large tech and leading automobile companies,
and a project with a large multinational conglomerate.
Cost of sales, which is predominantly comprised of payments
to our crowd workers was up as a percentage of revenue
at 63.7% compared to 62.4% for FY22. This is primarily
China remained focused on growth and maintaining its
due to the customer and project mix.
position as a leading AI data company. In the first half
of FY23 China released two new platforms, 1) an LLM
Data Training platform, and 2) SaaS Annotation platform.
The China business continues to support 10 of the leading
auto companies, the top 10 internet companies and the
top four mobile companies.
The Quadrant business, which now fully integrated into
the New Markets business, recorded strong revenue growth,
albeit from a small base. This primarily reflects an increase
in data location. Quadrant also secured 55 new clients wins.
Operating expenses 1 for FY23 decreased 11.3% or $14.8 million
compared to FY22. The decrease predominately reflects the
benefit of the cost reduction program completed over the
course of FY23.
The Global Services segment reported EBITDA
of $17.5 million down 67.9% from $54.5 million in FY22,
mainly due to reduction in spend from Global customers
due to the ongoing challenging external operating and
macroeconomic conditions, and a proportionally higher
cost base coming out of FY22. Global Services EBITDA
Government recorded good revenue growth, albeit from
margin of 9.1% primarily impacted by lower revenue on core
a small base. This primarily reflects the delivery of large
high margin projects, and a proportionally higher cost base
contract won in FY22.
coming out of FY22.
Further detail can be found in the Customer and Brand value
The New Markets segment reported EBITDA
driver on page 18.
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 FY23 (excluding amortisation) decreased
16.0% to $34.6 million and represented 12.7% of revenue
(2022: $41.2 million or 10.6% of revenue).
While the quantum of our product development spend was
lower in FY23, we remain committed to the development
of industry-leading products and tools. This year,
we delivered several initiatives to improve the crowd and
customer experiences, and the development of LLM and
annotation platforms in China. Within ADAP we released
enhancements and new features to support our LLM data
products which enable Enterprises to fine tune, evaluate
and monitor their LLM models. These products include AI
chat feedback functionality, benchmarking solutions and
text tools. For more information on these initiatives see the
Technology processes and systems value driver on page 12.
of ($32.7 million) compared to EBITDA of ($36.5 million)
in FY22. The improvement reflects implementation
of the cost reduction program and higher margin project
mix in Global Product.
Underlying net loss after tax was ($52.8 million) compared
to ($22.8 million) in FY22. Increase predominately due
to the factors noted above with the main contributing
factor being a reduction in spend from Global customers
due to the ongoing challenging external operating and
macroeconomic conditions.
Statutory net loss after tax of ($118.1 million) includes
one-off restructure costs of $8.9 million associated
with implementation of the cost reduction programs
implemented during FY23 and one-off costs associated
with changes to the leadership team to align with the
strategy refresh and turn around focus. Also included
is non-cash impairment of $69.2 million in relation to the
Global Services cash generating unit.
1 Bloomberg Intelligence, IDC (June 2023).
28
1 Operating expenses exclude crowd labelling services, share-based payments, depreciation and amortisation, transaction
costs, finance costs and restructure costs.
Appen 2023 Annual Report
29
Financial
• Underlying EBITDA (including the impact of foreign
Operating revenue and customer diversification
of $118.1 million, compared to statutory net loss after
Appen’s FY23 revenue from Google was $82.8 million and
exchange gains and losses) decreased from $11.0 million
to ($24.5) million.
• Underlying net loss after tax increased to $52.8 million
from underlying net loss of $22.8 million in FY22, due
to the factors mentioned above, offset by an income
tax benefit of $6.8 million primarily relating to the
reduction of deferred tax liabilities.
• Non-cash impairment of $69.2 million reflecting the
impairment of Goodwill and certain non-current assets
associated with the Global Services cash generating unit.
FY22 included non-cash impairment of $204.3 million
reflecting the impairment of Goodwill and certain
intangibles associated with the New Markets (excl. China)
cash generating unit.
• Statutory net loss after tax and after impairment
tax of $239.1 million in FY22.
• No dividend was paid due to Appen’s financial
performance and to ensure appropriate allocation
of capital.
and no debt.
Market conditions
In 2023 global economic growth slowed given the impact
of monetary policy tightening and cost of living pressures.
While activity remained resilient in key markets like the
United States, economic and geopolitical conditions
resulted in an ongoing slowdown in Tech spending as
customers continued to reduce costs and evaluate their
AI strategies. These conditions proved more challenging
than expected. While there were green shoots in generative
Group operating revenue decreased 29.7% to $273.0 million,
reflecting a lower contribution from the Global division
and New Markets as our customers optimise their spend,
cut costs, and evaluated their AI strategies. Revenue from
New Markets (excluding Global Product) represented 26.3%
of total group revenue, up from 18.1% in FY22.
In FY23, model testing and relevance work represented
75.9% of group revenue, compared to 76.1% in FY22.
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 will be terminating
its global inbound services contract with Appen, resulting
in the cessation of all projects with Appen by 19 March 2024.
represents 30.3% of total revenue. Group revenue, excluding
Google was $190.2 million, compared to $285.4 million in FY22.
Revenue by operating division
to $191.5 million (FY22: $299.8 million) and was impacted
by a reduction in spend from Global customers due to the
ongoing challenging external operating and macroeconomic
conditions. Despite the external environment, Global
Services won 83 new projects (albeit at a lower level when
compared to 156 in FY22), including annotation, content
categorisation and relevance work.
We saw some green shoots as revenue from LLM work
contributed, and all Appen’s Global customers completed
a generative AI project or had a project in the pipeline.
• Cash balance of $32.1 million at 31 December 2023
Global Services FY23 revenue decreased 36.1%
AI product offerings, these projects remain small, and they
New Markets revenue declined 7.8% to $81.5 million,
have not offset revenue declines in Appen’s core deep
impacted by lower Global Product revenue. Second half
learning business.
revenue from New Markets reduced 1.6% to $42.6 million
from $43.3 million in 2HFY22.
The emergence of large language models (LLMs) such as
ChatGPT launched at the end of 2022 sparked excitement
Excluding Global Product, New Markets revenue grew
and significant interest in generative AI. Throughout 2023,
2.2% to $71.8 million due to growth from China, Quadrant
the potential impact of generative AI continued to grow,
and Government.
and the acceleration of its adoption is now a key propriety
for many companies. Bloomberg Intelligence expect the
generative AI market to grow at a CAGR of 42% and reach
a total spend of approximately $1.3 trillion in 2032. 1
Second half revenue from Enterprise, China, Quadrant
and Government grew 8.8% compared to prior corresponding
period to $39.0 million due to strong contributions from
China and Quadrant. In China, 2H23 revenue grew 23.4%
Human feedback across the full cycle of LLM development
on the prior corresponding period on the back of new
is required to minimise hallucinations, bias and toxicity.
LLM project launches.
In 2023 we saw the emergence of tools that enabled
developers to use LLMs more effectively with humans
for data curation, testing and monitoring human functions.
To secure the last mile development of LLMs, human in the
loop feedback will be critical to ensure ongoing fine-tuning
and generally supporting a new potential of human led
operating systems.
New Markets won a total of 171 new customers
(FY22: 184 new customers). This reflects the good
momentum in Enterprise, China and Quadrant, primarily
for LLM evaluation, autonomous vehicles (AV), in-car cabin
data collection and point-of-interest data collection.
The Enterprise team secured 34 new client wins which
included LLM evaluation and categorisation, search
relevance, taxonomy and annotation work.
Enterprise also secured multiple deals with leading LLM
model builder. The average deal size signed was $147,000,
up 5.0% from the average deal size of $140,000 in FY22
and $61,000 in FY21. In 2H FY23 the average deal size was
$200,000 compared to $106,000 in 1H FY23.
China recorded 2.7% lift in revenue to $34.5 million compared
to FY22. The business finished the year strongly delivering
a record Q4 revenue performance of $11.1 million as business
conditions returned to more normalised levels as the
protracted COVID19 impacts evident in 1H23 subsided.
Collectively China, Japan and Korea secured 82 new
clients, which included eight clients with 20 LLM projects,
projects with large tech and leading automobile companies,
and a project with a large multinational conglomerate.
China remained focused on growth and maintaining its
position as a leading AI data company. In the first half
of FY23 China released two new platforms, 1) an LLM
Data Training platform, and 2) SaaS Annotation platform.
The China business continues to support 10 of the leading
auto companies, the top 10 internet companies and the
top four mobile companies.
The Quadrant business, which now fully integrated into
the New Markets business, recorded strong revenue growth,
albeit from a small base. This primarily reflects an increase
in data location. Quadrant also secured 55 new clients wins.
Government recorded good revenue growth, albeit from
a small base. This primarily reflects the delivery of large
contract won in FY22.
Further detail can be found in the Customer and Brand value
driver on page 18.
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 FY23 (excluding amortisation) decreased
16.0% to $34.6 million and represented 12.7% of revenue
(2022: $41.2 million or 10.6% of revenue).
While the quantum of our product development spend was
lower in FY23, we remain committed to the development
of industry-leading products and tools. This year,
we delivered several initiatives to improve the crowd and
customer experiences, and the development of LLM and
annotation platforms in China. Within ADAP we released
enhancements and new features to support our LLM data
products which enable Enterprises to fine tune, evaluate
and monitor their LLM models. These products include AI
chat feedback functionality, benchmarking solutions and
text tools. For more information on these initiatives see the
Technology processes and systems value driver on page 12.
Amortisation of product development was $19.7 million down
from $20.6 million in 2022. The decrease reflects and reflects
a higher lower level of product development investment.
Underlying financial performance
Underlying earnings before interest, tax, depreciation, and
amortisation (EBITDA) was ($24.5 million) (2022: $11.0 million).
Before the impact of foreign exchange gains or losses,
underlying EBITDA was ($20.4 million) (2022: $13.6 million).
The reduction in Appen’s underlying EBITDA is due
to reduced revenue and gross margin, and a proportionally
higher cost base versus FY22.
Cost of sales, which is predominantly comprised of payments
to our crowd workers was up as a percentage of revenue
at 63.7% compared to 62.4% for FY22. This is primarily
due to the customer and project mix.
Operating expenses 1 for FY23 decreased 11.3% or $14.8 million
compared to FY22. The decrease predominately reflects the
benefit of the cost reduction program completed over the
course of FY23.
The Global Services segment reported EBITDA
of $17.5 million down 67.9% from $54.5 million in FY22,
mainly due to reduction in spend from Global customers
due to the ongoing challenging external operating and
macroeconomic conditions, and a proportionally higher
cost base coming out of FY22. Global Services EBITDA
margin of 9.1% primarily impacted by lower revenue on core
high margin projects, and a proportionally higher cost base
coming out of FY22.
The New Markets segment reported EBITDA
of ($32.7 million) compared to EBITDA of ($36.5 million)
in FY22. The improvement reflects implementation
of the cost reduction program and higher margin project
mix in Global Product.
Underlying net loss after tax was ($52.8 million) compared
to ($22.8 million) in FY22. Increase predominately due
to the factors noted above with the main contributing
factor being a reduction in spend from Global customers
due to the ongoing challenging external operating and
macroeconomic conditions.
Statutory net loss after tax of ($118.1 million) includes
one-off restructure costs of $8.9 million associated
with implementation of the cost reduction programs
implemented during FY23 and one-off costs associated
with changes to the leadership team to align with the
strategy refresh and turn around focus. Also included
is non-cash impairment of $69.2 million in relation to the
Global Services cash generating unit.
1 Bloomberg Intelligence, IDC (June 2023).
28
1 Operating expenses exclude crowd labelling services, share-based payments, depreciation and amortisation, transaction
costs, finance costs and restructure costs.
Appen 2023 Annual Report
29
Financial
Cost reduction program
Non-cash asset impairment charge
The following table summarises the Group’s financial results for the current and prior year and provides a reconciliation
In line with Appen’s focus on operational rigour, the Group
announced delivered a $60 million1 cost savings program,
with the first full year impact expected to be achieved
in FY24. The initiatives completed over the course
of FY23 enabled Appen to achieve its cash EBITDA
profitability objective in December 2023.
Growth strategy and FY24 priorities
Appen plays a key role in powering both deep learning
applications and generative AI. This year, Appen
re-positioned itself to take advantage of its full growth
potential and to capture available opportunities
in the generative AI space.
Appen’s strategy remains focused on delivering high
quality data for leading AI. Quality data is important for
deep learning model performance and is even more
important for generative AI.
Appen has a comparative advantage over its competitors
by using its +28 years of experience in crowd-based data
collection, annotation and model evaluation and adapt this
expertise to generative AI. 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 five strategic pillars
to support its customers and deliver profitable growth.
1. Building a next generation crowd and project
management platform that improve how we deliver
projects, create a better experience for our crowd,
and reduce our related product and engineering costs.
2. Utilise more AI in our projects to scale the creation
of datasets for our customers.
3. Configure our highly-flexible ADAP platform to support
companies that are customising off-the-shelf generative
AI models for their internal use cases.
4. Modernise our sales and marketing with a stronger focus
on existing customer account management technical
thought leadership.
5. Tightly manage our costs to adjust costs more
proactively to revenue.
Following a review of the value of the Group’s cash
generating units (CGU) and of the carrying value of its assets
in accordance with the relevant accounting standards,
a non-cash, pre-tax impairment charge of $69.2 million was
booked for the year ended 31 December 2023. The carrying
value of non-goodwill intangibles attributable to the Global
Services CGU was reduced by $16.1 million and the carrying
value of Goodwill was reduced by $53.1 million.
The impairment charge is non-cash related and
is a non-operating item. Accordingly, underlying EBITDA
and underlying NPAT is not impacted.
Note 12 of the financial report (pages 107 to 110)
provides further information in relation to the impact
of the impairment charge on the Group’s intangible assets.
Balance sheet
Net assets at 31 December 2023 were $92.8 million
(31 December 2022: $148.0 million). Decrease in net assets
primarily due to trading performance during the year and
non-cash impairment charge noted above.
Trade and other receivables combined with contract assets
were $29.3 million lower at 31 December 2023 compared
to 31 December 2022 due to lower revenue volumes.
Current liabilities were $17.4 million lower at 31 December 2023
compared to 31 December 2022. Decrease is due to lower
trade and other payables ($12.5 million) because of lower
cost of sales and operating expenses. In addition, contract
liabilities are down $7.6 million primarily due to lower
revenue volumes.
Cash balance increased by $8.7 million to $32.1 million
at 31 December 2023 from $23.4 million at 31 December 2022.
This includes net proceeds of $57.4 million from issuance
of shares during the period, partially offset by lower trading
performance and one-off costs associated with cost
reduction programs.
In June Appen completed a fully underwritten ~A$60 million
equity raising and in December 2023, completed a further
fully underwritten ~A$30 million equity raising to support the
company’s refresh. Net proceeds of $57.4 million through the
issue of 86,707,619 shares.
between our statutory and underlying results.
Global Services revenue
New Markets revenue
Other income
Total sales revenue and other income from principal activities
Underlying net loss after tax (NPAT) 1
(Less)/add underlying adjustments (net of tax)
Amortisation of acquisition-related identifiable Intangible assets
Impairment loss
Earn-out adjustment
Restructure costs
Transaction costs
Deemed interest on earn-out liability 2
Losses on inventory
Acquisition-related and one-time share-based payments
Statutory NPAT
Less: tax benefit
Add: net interest expense
Add: deemed interest on earn-out liability 2
EBIT 3
Add: depreciation and amortisation
Statutory EBITDA 4
Add/(less): underlying adjustments
Impairment loss
Earn-out adjustment
Restructure costs
Transaction costs
Inventory losses
Underlying EBITDA 1
Statutory diluted earnings per share (cents)
Underlying diluted earnings per share (cents)
% Statutory EBITDA/revenue
% Underlying EBITDA/revenue
Acquisition-related and one-time share-based payments
Year ended
Year ended
31 December
31 December
Change
(36.1%)
(7.8%)
(29.4%)
(52,810)
(22,739)
nm%
2023
$000
191,533
81,479
1,153
274,165
(61,663)
(6,158)
11,196
(6,515)
(380)
(248)
–
(1,501)
(118,079)
(6,870)
805
354
(123,790)
35,147
69,182
(15,994)
8,967
542
1,501
–
(24,445)
(83.10)
(37.17)
(32.3%)
(8.9%)
2022
$000
299,755
88.378
360
388,493
(204,326)
(9,573)
–
(488)
(1,096)
(540)
(257)
(49)
–
772
813
204,326
–
678
1,556
49
309
11,017
(193.78)
(18.43)
(50.4%)
2.8%
(239,068)
nm%
(237,483)
41,582
nm%
(88,643)
(195,901)
nm%
nm%
1 $60.0 million annualised cash opex savings (comparing December FY23 versus Q1 FY23). 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.
FY23 annualised cash opex included STI at 15.6% achievement (that represents partial achievement for non-financial metrics).
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.
30
Appen 2023 Annual Report
31
Financial
Cost reduction program
Non-cash asset impairment charge
In line with Appen’s focus on operational rigour, the Group
Following a review of the value of the Group’s cash
announced delivered a $60 million1 cost savings program,
generating units (CGU) and of the carrying value of its assets
with the first full year impact expected to be achieved
in accordance with the relevant accounting standards,
in FY24. The initiatives completed over the course
a non-cash, pre-tax impairment charge of $69.2 million was
of FY23 enabled Appen to achieve its cash EBITDA
booked for the year ended 31 December 2023. The carrying
profitability objective in December 2023.
value of non-goodwill intangibles attributable to the Global
Services CGU was reduced by $16.1 million and the carrying
Growth strategy and FY24 priorities
value of Goodwill was reduced by $53.1 million.
Appen plays a key role in powering both deep learning
applications and generative AI. This year, Appen
re-positioned itself to take advantage of its full growth
potential and to capture available opportunities
in the generative AI space.
Appen’s strategy remains focused on delivering high
quality data for leading AI. Quality data is important for
deep learning model performance and is even more
important for generative AI.
The impairment charge is non-cash related and
is a non-operating item. Accordingly, underlying EBITDA
and underlying NPAT is not impacted.
Note 12 of the financial report (pages 107 to 110)
provides further information in relation to the impact
of the impairment charge on the Group’s intangible assets.
Balance sheet
Net assets at 31 December 2023 were $92.8 million
Appen has a comparative advantage over its competitors
(31 December 2022: $148.0 million). Decrease in net assets
by using its +28 years of experience in crowd-based data
primarily due to trading performance during the year and
collection, annotation and model evaluation and adapt this
non-cash impairment charge noted above.
expertise to generative AI. 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 five strategic pillars
to support its customers and deliver profitable growth.
1. Building a next generation crowd and project
management platform that improve how we deliver
projects, create a better experience for our crowd,
and reduce our related product and engineering costs.
2. Utilise more AI in our projects to scale the creation
of datasets for our customers.
3. Configure our highly-flexible ADAP platform to support
companies that are customising off-the-shelf generative
AI models for their internal use cases.
on existing customer account management technical
thought leadership.
5. Tightly manage our costs to adjust costs more
proactively to revenue.
Trade and other receivables combined with contract assets
were $29.3 million lower at 31 December 2023 compared
to 31 December 2022 due to lower revenue volumes.
Current liabilities were $17.4 million lower at 31 December 2023
compared to 31 December 2022. Decrease is due to lower
trade and other payables ($12.5 million) because of lower
cost of sales and operating expenses. In addition, contract
liabilities are down $7.6 million primarily due to lower
revenue volumes.
Cash balance increased by $8.7 million to $32.1 million
at 31 December 2023 from $23.4 million at 31 December 2022.
This includes net proceeds of $57.4 million from issuance
of shares during the period, partially offset by lower trading
performance and one-off costs associated with cost
In June Appen completed a fully underwritten ~A$60 million
equity raising and in December 2023, completed a further
fully underwritten ~A$30 million equity raising to support the
company’s refresh. Net proceeds of $57.4 million through the
issue of 86,707,619 shares.
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.
Global Services revenue
New Markets revenue
Other income
Total sales revenue and other income from principal activities
Underlying net loss after tax (NPAT) 1
(Less)/add underlying adjustments (net of tax)
Impairment loss
Amortisation of acquisition-related identifiable Intangible assets
Earn-out adjustment
Restructure costs
Transaction costs
Deemed interest on earn-out liability 2
Losses on inventory
Acquisition-related and one-time share-based payments
Statutory NPAT
Less: tax benefit
Add: net interest expense
Add: deemed interest on earn-out liability 2
EBIT 3
Add: depreciation and amortisation
Statutory EBITDA 4
Add/(less): underlying adjustments
Impairment loss
Earn-out adjustment
Restructure costs
Transaction costs
Acquisition-related and one-time share-based payments
Inventory losses
Year ended
31 December
2023
$000
Year ended
31 December
2022
$000
191,533
81,479
1,153
274,165
299,755
88.378
360
388,493
Change
(36.1%)
(7.8%)
(29.4%)
(52,810)
(22,739)
nm%
(61,663)
(6,158)
11,196
(6,515)
(380)
(248)
–
(1,501)
(118,079)
(6,870)
805
354
(123,790)
35,147
(204,326)
(9,573)
–
(488)
(1,096)
(540)
(257)
(49)
(239,068)
–
772
813
(237,483)
41,582
nm%
nm%
(88,643)
(195,901)
nm%
69,182
(15,994)
8,967
542
1,501
–
204,326
–
678
1,556
49
309
4. Modernise our sales and marketing with a stronger focus
reduction programs.
Underlying EBITDA 1
(24,445)
11,017
nm%
Statutory diluted earnings per share (cents)
Underlying diluted earnings per share (cents)
% Statutory EBITDA/revenue
% Underlying EBITDA/revenue
(83.10)
(37.17)
(32.3%)
(8.9%)
(193.78)
(18.43)
(50.4%)
2.8%
1 $60.0 million annualised cash opex savings (comparing December FY23 versus Q1 FY23). 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.
FY23 annualised cash opex included STI at 15.6% achievement (that represents partial achievement for non-financial metrics).
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.
30
Appen 2023 Annual Report
31
Value drivers
Social and
environment
The acceleration of generative AI marks an important milestone.
Its adoption can make a positive impact to many aspects of our
lives and deliver far reaching societal benefits. As the use
of AI technology grows, we strive to be at the forefront of the
development of responsible AI.
AI for Good
In Appen, we believe AI can be a powerful tool for positive change
in the world which aligns with our commitment to good business
practices. Hence, we have drafted our ‘AI for Good’ strategy with
the purpose of:
putting ethics and responsibility at the heart of our products,
governance and operations – Be Good
invest our time, products & profit to support communities
where we live and work – Do Good
engage & influence our Customers & the AI industry
to demand ethical and responsible AI – Lead Good
The ‘AI for Good’ Committee was established in the current year
to oversee the delivery and progress of the AI for Good strategy.
The committee, chaired by our CEO and Managing Director, will
provide guidance and advice to ensure that we are achieving the
desired outcomes from the strategy.
Signatory
to the UN Global
Compact
5
impact sourcing
partnerships with
global NGOs
Priority SDG
Governance
Our social and environmental frameworks are underpinned
by our commitment to a high standard of corporate
governance. The Board of Directors is responsible for:
in 2024.
Human rights
Our stance on human rights is
Below is a snapshot of our current progress against the
principles ahead of our formal reporting requirements
overseeing the management of climate change related
Labour
We continue to report on gender
considering the environmental impacts of our activities
setting social and environmental standards
monitoring compliance with our social and sustainability
policies and practices
risks and opportunities
approving climate change related disclosures.
monitoring progress against goals and targets
set for climate related issues
The Audit and Risk Management Committee
is responsible for:
considering environmental and climate change
risk as part of the quarterly risk reporting process
reviewing relevant reporting from management
to ensure management is effectively managing the risks
making recommendations to the Board
Good business practice
Good business practice involves prioritising ethical
conduct towards customers, employees, and stakeholders.
Our Code of Conduct outlines the minimum standards
for our business, our people and stakeholder interactions.
Our Anti-Corruption and Anti-Bribery Policy reinforces
our zero-tolerance approach to bribery and corruption,
including specifically prohibiting the use of corporate
funds for political advocacy and political donations 1.
Mandatory code of conduct training, completed by 95% 2
of eligible employees as of December 31, 2023, ensures
that our people are aware of their obligations. To enhance
compliance and foster accountability, short-term incentive
awards for senior management are linked to divisional
training completion rates during the year.
To demonstrate our commitment, in 2022 we became
a signatory to the United Nations Global Compact (UNGC).
We continue to support the ten principles of UNGC
on human rights, labour, environment, and anti-corruption
and are adopting them to our business strategies
and operations.
underpinned by our Global Ethical
Sourcing and Modern Slavery Policy.
We anticipate that we will commence
risk-based reviews of our suppliers
in line with this policy in 2024.
diversity metrics and have set a target
for 30% female representation across
senior management.
implementation of the net zero
roadmap with the target of net zero
by 2030. Consolidation of offices and
LED lightings installations has helped
reduce electricity consumption and
greenhouse gas emissions.
and included as part of mandatory
compliance training for everyone.
We will continue to monitor and
report on the compliance training
with employees encouraged to report
on potential corruption practices via
our whistleblower hotline.
Environment
We have commenced the
Anti-Corruption
Anti-corruption policy in place
Modern Slavery and respect for Human Rights
We consider any form of modern slavery and human
rights abuse as unacceptable and acknowledge
our role in eradicating it. Our commitment is outlined
in our Global Ethical Sourcing and Modern Slavery Policy,
which sets expectations for us and our suppliers.
The policy opposes forced labour and supports fair
employment, working conditions, freedom of association,
non-discrimination, and whistleblower protections.
We’ve integrated supplier requirements from the policy into
procurement practices, collaborating with suppliers and
customers to mitigate modern slavery and human rights
risks in our supply chain. Any breaches of our commitments
undergo thorough investigation through grievance
or whistleblower processes, with findings reported
to the board. In 2023, there was one modern slavery
breach reported to authorities.
1 Based on financial data from Workday.
2 Data from Appen University. Calculation consistent with FY22 which excludes China and Quadrant.
32
Appen 2023 Annual Report
33
Value drivers
Social and
environment
The acceleration of generative AI marks an important milestone.
Its adoption can make a positive impact to many aspects of our
lives and deliver far reaching societal benefits. As the use
of AI technology grows, we strive to be at the forefront of the
development of responsible AI.
AI for Good
the purpose of:
In Appen, we believe AI can be a powerful tool for positive change
in the world which aligns with our commitment to good business
practices. Hence, we have drafted our ‘AI for Good’ strategy with
putting ethics and responsibility at the heart of our products,
governance and operations – Be Good
invest our time, products & profit to support communities
where we live and work – Do Good
engage & influence our Customers & the AI industry
to demand ethical and responsible AI – Lead Good
The ‘AI for Good’ Committee was established in the current year
to oversee the delivery and progress of the AI for Good strategy.
The committee, chaired by our CEO and Managing Director, will
provide guidance and advice to ensure that we are achieving the
desired outcomes from the strategy.
Signatory
to the UN Global
Compact
5
impact sourcing
partnerships with
global NGOs
Priority SDG
Governance
Our social and environmental frameworks are underpinned
by our commitment to a high standard of corporate
governance. The Board of Directors is responsible for:
considering the environmental impacts of our activities
setting social and environmental standards
monitoring compliance with our social and sustainability
policies and practices
overseeing the management of climate change related
risks and opportunities
Labour
approving climate change related disclosures.
monitoring progress against goals and targets
set for climate related issues
The Audit and Risk Management Committee
is responsible for:
Environment
considering environmental and climate change
risk as part of the quarterly risk reporting process
reviewing relevant reporting from management
to ensure management is effectively managing the risks
making recommendations to the Board
Anti-Corruption
Below is a snapshot of our current progress against the
principles ahead of our formal reporting requirements
in 2024.
Human rights
Our stance on human rights is
underpinned by our Global Ethical
Sourcing and Modern Slavery Policy.
We anticipate that we will commence
risk-based reviews of our suppliers
in line with this policy in 2024.
We continue to report on gender
diversity metrics and have set a target
for 30% female representation across
senior management.
We have commenced the
implementation of the net zero
roadmap with the target of net zero
by 2030. Consolidation of offices and
LED lightings installations has helped
reduce electricity consumption and
greenhouse gas emissions.
Anti-corruption policy in place
and included as part of mandatory
compliance training for everyone.
We will continue to monitor and
report on the compliance training
with employees encouraged to report
on potential corruption practices via
our whistleblower hotline.
Good business practice
Good business practice involves prioritising ethical
conduct towards customers, employees, and stakeholders.
Our Code of Conduct outlines the minimum standards
for our business, our people and stakeholder interactions.
Our Anti-Corruption and Anti-Bribery Policy reinforces
our zero-tolerance approach to bribery and corruption,
including specifically prohibiting the use of corporate
funds for political advocacy and political donations 1.
Mandatory code of conduct training, completed by 95% 2
of eligible employees as of December 31, 2023, ensures
that our people are aware of their obligations. To enhance
compliance and foster accountability, short-term incentive
awards for senior management are linked to divisional
training completion rates during the year.
To demonstrate our commitment, in 2022 we became
a signatory to the United Nations Global Compact (UNGC).
We continue to support the ten principles of UNGC
on human rights, labour, environment, and anti-corruption
and are adopting them to our business strategies
and operations.
Modern Slavery and respect for Human Rights
We consider any form of modern slavery and human
rights abuse as unacceptable and acknowledge
our role in eradicating it. Our commitment is outlined
in our Global Ethical Sourcing and Modern Slavery Policy,
which sets expectations for us and our suppliers.
The policy opposes forced labour and supports fair
employment, working conditions, freedom of association,
non-discrimination, and whistleblower protections.
We’ve integrated supplier requirements from the policy into
procurement practices, collaborating with suppliers and
customers to mitigate modern slavery and human rights
risks in our supply chain. Any breaches of our commitments
undergo thorough investigation through grievance
or whistleblower processes, with findings reported
to the board. In 2023, there was one modern slavery
breach reported to authorities.
32
Appen 2023 Annual Report
33
1 Based on financial data from Workday.
2 Data from Appen University. Calculation consistent with FY22 which excludes China and Quadrant.
Social and environment
Case Study
Appen is proud to partner with Na’amal,
a non-profit who works to change the narrative,
and create pathways to employment for refugees
and underrepresented groups. In Ethiopia and
Kenya, to complement Na’amal’s tech and soft
skills training, Appen ran informational and
onboarding webinars and provided dedicated
support to the students so they could start
earning an income on our platform. Appen
staff also put their hand up to mentor refugees,
and we provided funding for internet access
and ex-Appen laptops so the students on the
program could launch their online careers.
Seid Omer (second from left in first image),
a refugee living in Ethiopia, shared his take
on the experience: “I felt an overwhelming
happiness at having the chance to work
and provide for myself without depending
on anyone. Furthermore, I experienced a sense
of accomplishment for successfully completing
the qualification process, passing the exam,
and coming onboard Appen. Being presented
with an opportunity like this in a refugee-like
environment is truly life-changing, as it instills
hope and a sense of security…. Overall, this
income empowers me to have greater autonomy,
opportunities, and a brighter outlook on life.”
Social Impact
As part of our ongoing commitment to make a positive
social impact, we collaborate with entities to create
employment opportunities for individuals facing
barriers to work. We are particularly focused on helping
individuals from vulnerable or marginalised backgrounds
such as refugees and the long-term unemployed.
In FY23, we focused on partnerships with refugee
communities and organisations.
In 2023, we launched impact sourcing partnerships
with global NGOs such as Re:Coded, Na’amal, Konexio
and Generation, and continued our partnership with
MercyCorps. Our program now spans seven countries
and provides dedicated support to onboard more than
200 refugees and people who have been long-term
unemployed to access work on our platform. To further
support these individuals and help them launch their
online careers, we worked with our partners to provide
internet access, laptops and training in a variety
of technical and soft skills. We also continue to take
a leading role in the IAOP Center for Social Impact,
helping to develop principles around impact sourcing
and collaborating with organisations seeking to engage
in impact sourcing.
Appen employees give back by undertaking pro-bono
work and hold various fundraising events organised
by our Employee Services Committee (ESC) to support
a variety of not-for-profit organisations throughout
the year including the Appen’s Biggest Morning Tea,
Steptember and the Cavite fire appeal where we raised
a total of over $17,000 for charities such as Cancer
Council, Cerebral Palsy Alliance and the International
Red Cross.
Importance of diversity to achieving fair AI
To achieve equitable outcomes for users of AI products,
developers must address bias throughout the AI
lifecycle. This involves mitigating bias in data sourcing,
preparation, evaluation, and quality management.
Our global crowd, with diverse backgrounds, aids
customers in promoting fairness and minimising bias.
We emphasise diversity not only in the data but also
in the individuals involved in the data lifecycle and
product development.
As part of our ongoing commitment to diverse
representation, we piloted demographic surveys for one
of our largest projects to identify and start to address
gaps in representation. We plan to broaden this project
in 2024 with a view to implementing initiatives to create
an even more diverse crowd.
Environmental footprint
Strategy
Our environmental and climate change commitments
Our Net Zero Carbon Roadmap provides pathways towards
are outlined in our revised Environment Position
achieving net zero emissions across Appen’s business
Statement (EPS) which include actions to engage
operations and supply chain by 2030. Originally targeted for
with our external stakeholders (i.e., suppliers, clients,
2025, the net zero emissions target for business operations
contractors) to reduce our environmental footprint,
has been revised to 2030 due to budget constraints.
reducing water consumption within offices
scenario modelling and estimated budget for offsets
provide transparency and disclosure of our progress
and having the governance structure in place to oversee
the management of environmental risk and compliance.
We have a relatively small environmental footprint
within our own operations and have committed
to further reducing the impact of our operations,
including our offices, facilities, travel and data centre
usage by:
reducing electricity consumption and increase
use of renewable energy
optimising our data centre requirements and
working with a cloud supplier that has committed
to using 100% renewable energy
reducing waste generation and water use and
increasing recycling and donating or reprocessing
used technology equipment
minimising travel by using digital conferencing
and collaboration tools
working with our partners and suppliers
on sustainable procurement solutions
creating and implementing new Energy and
Waste Management Guidelines to implement
good energy and waste management practices.
Climate change
We acknowledge the risks associated with
climate change and are committed to playing
our part in supporting the transition
to net zero emissions by signing up to the
Science Based Target initiative (SBTi)
to limit global warming by 1.5°C. We have
created a net zero emissions roadmap
to provide pathways towards achieving our
net zero emissions target. The roadmap
and its proposed funding (excluding offsets)
has been approved by management and will
be adopted across the business.
The key strategic actions include:
sustainable office design
better energy management
energy efficiency
sustainably sourced energy (renewable energy)
engagement with suppliers to pursue net zero emissions
carbon offsets
Given that offsets are a key part of the roadmap, we have
drafted our offset strategy which include:
current and forecasted greenhouse gas emissions
for Appen
value chain and criteria for carbon offsets
This will ensure that the carbon offsets we procure will align
to our company’s values and provide the social and economic
benefits that goes beyond carbon reductions.
Progress
We have commenced the implementation of our net zero
strategy this year and achieved the following:
Conducted feasibility studies for onsite solar across
Signed ‘green’ electricity contracts for our corporate
1. Renewable energy
office sites
office in Australia
2. Energy efficiency
Commenced installation of LED lightings in our
Philippines’ offices
3. Sustainable office design
Created design specification document for offices
Ensured new offices in United States and Canada
are energy efficient
Closure of underutilised offices
4. Carbon offsets
Procured carbon offsets to offset our business
travel emissions
34
Appen 2023 Annual Report
35
Social and environment
Case Study
Appen is proud to partner with Na’amal,
a non-profit who works to change the narrative,
and create pathways to employment for refugees
and underrepresented groups. In Ethiopia and
Kenya, to complement Na’amal’s tech and soft
skills training, Appen ran informational and
onboarding webinars and provided dedicated
support to the students so they could start
earning an income on our platform. Appen
and we provided funding for internet access
and ex-Appen laptops so the students on the
program could launch their online careers.
Seid Omer (second from left in first image),
a refugee living in Ethiopia, shared his take
on the experience: “I felt an overwhelming
happiness at having the chance to work
and provide for myself without depending
on anyone. Furthermore, I experienced a sense
of accomplishment for successfully completing
the qualification process, passing the exam,
and coming onboard Appen. Being presented
with an opportunity like this in a refugee-like
environment is truly life-changing, as it instills
hope and a sense of security…. Overall, this
staff also put their hand up to mentor refugees,
200 refugees and people who have been long-term
income empowers me to have greater autonomy,
a total of over $17,000 for charities such as Cancer
opportunities, and a brighter outlook on life.”
Council, Cerebral Palsy Alliance and the International
Red Cross.
Social Impact
As part of our ongoing commitment to make a positive
social impact, we collaborate with entities to create
employment opportunities for individuals facing
barriers to work. We are particularly focused on helping
individuals from vulnerable or marginalised backgrounds
such as refugees and the long-term unemployed.
In FY23, we focused on partnerships with refugee
communities and organisations.
In 2023, we launched impact sourcing partnerships
with global NGOs such as Re:Coded, Na’amal, Konexio
and Generation, and continued our partnership with
MercyCorps. Our program now spans seven countries
and provides dedicated support to onboard more than
unemployed to access work on our platform. To further
support these individuals and help them launch their
online careers, we worked with our partners to provide
internet access, laptops and training in a variety
of technical and soft skills. We also continue to take
a leading role in the IAOP Center for Social Impact,
helping to develop principles around impact sourcing
and collaborating with organisations seeking to engage
in impact sourcing.
Appen employees give back by undertaking pro-bono
work and hold various fundraising events organised
by our Employee Services Committee (ESC) to support
a variety of not-for-profit organisations throughout
the year including the Appen’s Biggest Morning Tea,
Steptember and the Cavite fire appeal where we raised
Importance of diversity to achieving fair AI
To achieve equitable outcomes for users of AI products,
developers must address bias throughout the AI
lifecycle. This involves mitigating bias in data sourcing,
preparation, evaluation, and quality management.
Our global crowd, with diverse backgrounds, aids
customers in promoting fairness and minimising bias.
We emphasise diversity not only in the data but also
in the individuals involved in the data lifecycle and
product development.
As part of our ongoing commitment to diverse
representation, we piloted demographic surveys for one
of our largest projects to identify and start to address
gaps in representation. We plan to broaden this project
in 2024 with a view to implementing initiatives to create
an even more diverse crowd.
Environmental footprint
Strategy
Our environmental and climate change commitments
are outlined in our revised Environment Position
Statement (EPS) which include actions to engage
with our external stakeholders (i.e., suppliers, clients,
contractors) to reduce our environmental footprint,
provide transparency and disclosure of our progress
and having the governance structure in place to oversee
the management of environmental risk and compliance.
We have a relatively small environmental footprint
within our own operations and have committed
to further reducing the impact of our operations,
including our offices, facilities, travel and data centre
usage by:
reducing electricity consumption and increase
use of renewable energy
optimising our data centre requirements and
working with a cloud supplier that has committed
to using 100% renewable energy
Our Net Zero Carbon Roadmap provides pathways towards
achieving net zero emissions across Appen’s business
operations and supply chain by 2030. Originally targeted for
2025, the net zero emissions target for business operations
has been revised to 2030 due to budget constraints.
The key strategic actions include:
sustainable office design
better energy management
energy efficiency
sustainably sourced energy (renewable energy)
engagement with suppliers to pursue net zero emissions
carbon offsets
Given that offsets are a key part of the roadmap, we have
drafted our offset strategy which include:
current and forecasted greenhouse gas emissions
for Appen
reducing water consumption within offices
scenario modelling and estimated budget for offsets
reducing waste generation and water use and
increasing recycling and donating or reprocessing
used technology equipment
minimising travel by using digital conferencing
and collaboration tools
working with our partners and suppliers
on sustainable procurement solutions
creating and implementing new Energy and
Waste Management Guidelines to implement
good energy and waste management practices.
Climate change
We acknowledge the risks associated with
climate change and are committed to playing
our part in supporting the transition
to net zero emissions by signing up to the
Science Based Target initiative (SBTi)
to limit global warming by 1.5°C. We have
created a net zero emissions roadmap
to provide pathways towards achieving our
net zero emissions target. The roadmap
and its proposed funding (excluding offsets)
has been approved by management and will
be adopted across the business.
value chain and criteria for carbon offsets
This will ensure that the carbon offsets we procure will align
to our company’s values and provide the social and economic
benefits that goes beyond carbon reductions.
Progress
We have commenced the implementation of our net zero
strategy this year and achieved the following:
1. Renewable energy
Conducted feasibility studies for onsite solar across
office sites
Signed ‘green’ electricity contracts for our corporate
office in Australia
2. Energy efficiency
Commenced installation of LED lightings in our
Philippines’ offices
3. Sustainable office design
Created design specification document for offices
Ensured new offices in United States and Canada
are energy efficient
Closure of underutilised offices
4. Carbon offsets
Procured carbon offsets to offset our business
travel emissions
34
Appen 2023 Annual Report
35
Social and environment
Risk management
Metrics and targets
Analysis of risks and opportunities
We assess the potential size and scope of climate
risk through our risk management framework
along with the recommendation of the Task Force
on Climate-related Financial Disclosures (TCFD).
Climate risk is incorporated into our Risk Appetite
Statement which sets out our key risk types, the
thresholds for each, and how we monitor and mitigate
these risks. Management, the Audit and Risk Management
Committee and the Board of Directors all have
responsibilities with respect to overseeing, assessing
and managing climate change risk (see Governance above).
Please refer to the section ‘Analysis of risks and analysis’
for the identification of risks and opportunities associated
with the physical impacts of climate change on business
activities and operations.
As part of the TCFD framework, we have conducted
a scenario analysis of our offices around the world
to identify potential physical risks that will impact
on those sites. Please refer to section ‘TCFD-based
Scenario Analysis’ for further details and outcomes.
Further details of our GHG
inventory, including category
breakdown for scope 3 with
emissions by geography and
energy consumptions can be
found in the Appendix
on page 147.
The GHG emissions inventory (carbon footprint) for 2023
has been completed based on the principles of GHG Protocol
with emissions breakdown in scope 1, 2 and 3 shown in the
following table. The inventory below indicates that 13%
of our overall emissions comes from Appen’s business
operations with the bulk of our emissions coming from
our supply chain (i.e., crowd, suppliers, etc.).
Source
Scope 1 – Natural gas
Scope 2 – Electricity
– Location-Based
Scope 2 – Electricity
– Market-Based
Scope 3
Total Scope
1, 2 & 3 Emissions
2023
tCO2e
309
1,637
2022
tCO2e
263
1,475
1,631
1,466
12,496
15,654
14,442
17,392
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 147 of the annual report.
Outlook
In FY24, we will continue to implement key strategies within the net zero carbon roadmap, engaging with
our crowd and suppliers on emissions reduction and implement our offset strategy with the aim of achieving
Climate Active certification by end of 2025.
We have revised our EPS and will be developing environmental policies for water and waste along with key
initiatives to reduce water consumption and waste generation. We will outline these measures in our 2024
Annual Report.
We are expanding our impact sourcing activities with key objectives of assisting refugee and marginalised
communities and providing a pathway to meaningful employment. We are also expanding our efforts
to manage modern slavery risks through enhanced vendor engagement and assessment.
The AI for Good Committee, established in 2023 and chaired by our CEO and Managing Director, will
ensure that we are continuing to embed AI for Good throughout our governance, products and operations.
We will continue to walk the talk by implementing our social and environmental initiatives in 2024.
Our analysis depicted below indicates that there are significant opportunities and a number of small risks associated with
the physical impacts of climate change. This is due to the dispersed nature of our activities and operations and those of our
key suppliers and customers.
Potential Impact
Response
Transition risks
Policy
and legal
Our customers’ expect
We are addressing these risks
environmentally responsible
by driving more energy-efficient
suppliers as part of their
commitment to net zero
operations and our commitment
to reducing and reporting our carbon
emissions in their supply chains.
footprint. We are also working with our
customers to leverage their initiatives
into our own programs.
Physical risks
Acute
We have offices in locations that
For short-term disruptions, remote
are subject to increased severity
working is a viable option for the
of extreme weather events
majority of our operations with little
due to climate change.
business disruption. We also have
business continuity plans and disaster
recovery plans where adverse weather
events are considered and continue
to review and update these plans as
necessary. Business continuity and
disaster recovery are included and
monitored as a key strategic objective,
which also includes considerations
due to the impact of climate change.
Opportunities
Resource
efficiency
Moving to more resource efficient
We are committed to more
processes may result in reduced
energy-efficient operations including
longer term operating costs
reviewing where additional efficiencies
through efficiency gains but
can be introduced throughout
brings benefits through employee
our operations.
and customer satisfaction.
Energy
source
Using lower-emission sources
We are committed to increasing our
of energy can result in lower costs
utilisation of renewable energy across
as a result of reduced exposure
our operations particularly across
to future fossil fuel price
our physical office locations.
increases, potential changes
to carbon pricing and reputational
benefits with customers and
other stakeholders.
Products
AI will be applied
As the provider of training data for
and
services
in the development of new
AI model development, we anticipate
technologies that reduce reliance
that the demand for our products and
on fossil fuels, cut greenhouse
services will continue to grow as new
gas emissions, improve efficiency
technologies are developed.
and optimise resource allocation.
36
Appen 2023 Annual Report
37
Risk management
Metrics and targets
Analysis of risks and opportunities
Our analysis depicted below indicates that there are significant opportunities and a number of small risks associated with
the physical impacts of climate change. This is due to the dispersed nature of our activities and operations and those of our
key suppliers and customers.
Potential Impact
Response
Transition risks
Policy
and legal
Physical risks
Acute
Our customers’ expect
environmentally responsible
suppliers as part of their
commitment to net zero
emissions in their supply chains.
We have offices in locations that
are subject to increased severity
of extreme weather events
due to climate change.
Opportunities
Resource
efficiency
Energy
source
Products
and
services
Moving to more resource efficient
processes may result in reduced
longer term operating costs
through efficiency gains but
brings benefits through employee
and customer satisfaction.
Using lower-emission sources
of energy can result in lower costs
as a result of reduced exposure
to future fossil fuel price
increases, potential changes
to carbon pricing and reputational
benefits with customers and
other stakeholders.
AI will be applied
in the development of new
technologies that reduce reliance
on fossil fuels, cut greenhouse
gas emissions, improve efficiency
and optimise resource allocation.
We are addressing these risks
by driving more energy-efficient
operations and our commitment
to reducing and reporting our carbon
footprint. We are also working with our
customers to leverage their initiatives
into our own programs.
For short-term disruptions, remote
working is a viable option for the
majority of our operations with little
business disruption. We also have
business continuity plans and disaster
recovery plans where adverse weather
events are considered and continue
to review and update these plans as
necessary. Business continuity and
disaster recovery are included and
monitored as a key strategic objective,
which also includes considerations
due to the impact of climate change.
We are committed to more
energy-efficient operations including
reviewing where additional efficiencies
can be introduced throughout
our operations.
We are committed to increasing our
utilisation of renewable energy across
our operations particularly across
our physical office locations.
As the provider of training data for
AI model development, we anticipate
that the demand for our products and
services will continue to grow as new
technologies are developed.
Social and environment
We assess the potential size and scope of climate
The GHG emissions inventory (carbon footprint) for 2023
risk through our risk management framework
has been completed based on the principles of GHG Protocol
along with the recommendation of the Task Force
with emissions breakdown in scope 1, 2 and 3 shown in the
on Climate-related Financial Disclosures (TCFD).
following table. The inventory below indicates that 13%
Climate risk is incorporated into our Risk Appetite
of our overall emissions comes from Appen’s business
Statement which sets out our key risk types, the
operations with the bulk of our emissions coming from
thresholds for each, and how we monitor and mitigate
our supply chain (i.e., crowd, suppliers, etc.).
these risks. Management, the Audit and Risk Management
Committee and the Board of Directors all have
responsibilities with respect to overseeing, assessing
and managing climate change risk (see Governance above).
Please refer to the section ‘Analysis of risks and analysis’
for the identification of risks and opportunities associated
with the physical impacts of climate change on business
activities and operations.
As part of the TCFD framework, we have conducted
a scenario analysis of our offices around the world
to identify potential physical risks that will impact
on those sites. Please refer to section ‘TCFD-based
Scenario Analysis’ for further details and outcomes.
Source
Scope 1 – Natural gas
Scope 2 – Electricity
– Location-Based
Scope 2 – Electricity
– Market-Based
Scope 3
Total Scope
1, 2 & 3 Emissions
2023
tCO2e
309
1,637
2022
tCO2e
263
1,475
1,631
1,466
12,496
15,654
14,442
17,392
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 147 of the annual report.
Further details of our GHG
inventory, including category
breakdown for scope 3 with
emissions by geography and
energy consumptions can be
found in the Appendix
on page 147.
Outlook
In FY24, we will continue to implement key strategies within the net zero carbon roadmap, engaging with
our crowd and suppliers on emissions reduction and implement our offset strategy with the aim of achieving
Climate Active certification by end of 2025.
We have revised our EPS and will be developing environmental policies for water and waste along with key
initiatives to reduce water consumption and waste generation. We will outline these measures in our 2024
Annual Report.
We are expanding our impact sourcing activities with key objectives of assisting refugee and marginalised
communities and providing a pathway to meaningful employment. We are also expanding our efforts
to manage modern slavery risks through enhanced vendor engagement and assessment.
The AI for Good Committee, established in 2023 and chaired by our CEO and Managing Director, will
ensure that we are continuing to embed AI for Good throughout our governance, products and operations.
We will continue to walk the talk by implementing our social and environmental initiatives in 2024.
36
Appen 2023 Annual Report
37
Social and environment
Governance
TCFD-based scenario analysis
A desktop scenario analysis has been conducted
to help identify potential physical risks that will impact
on Appen offices globally. The below scenarios have been
conducted based on two carbon emissions scenarios
from Intergovernmental Panel on Climate Change (IPCC)
5th Assessment Report: low emissions (RCP 4.5 or 2⁰C
warming) and high emissions (RCP 8.5 or 4⁰C warming).
For each office the above climate scenarios were analysed
in conjunction with the following identified physical risks:
fires – bushfires and wildfires arising from a hotter and
drier climate
heatwave – prolonged high temperatures
drought – reduced rainfall from a hotter and drier climate
flood – from increased storm activities and intensities
(i.e., storm surges, typhoon etc.)
inundation – lands under water due to rising sea levels
from climate change
For each type of risk the associated business impacts were
determined and a risk rating applied. Some of the identified
business impacts included:
damage to property and potential loss of life
rising cost of business operations
scarcity of resources such as water, etc.
Scenario analysis outcomes
Based on the physical risk analysis, the key risks impacting
most of the offices are heatwave and drought especially
in a high emissions scenario (RCP 8.5).
In response to the analysis, we have identified and begun
initiatives within the office sites for mitigation and adaptation
which include:
energy efficient HVAC and installation of LED lightings
water efficient plumbing and water fixtures
sourcing of on-site or off-site renewable energy
(i.e., solar, wind, hydro).
Identifying
and managing risk
Embedding risk management to balance risk and reward is critical
to our continued ability to operate in the high-growth, dynamic market.
Risk appetite
Emerging risks
To support innovation and operate with agility our risk
We define emerging risks as uncertainties that may not
appetite provides direction to support informed risk-taking.
be fully understood. We monitor them through horizon
Our risk appetite has been defined at a category level
scanning during our annual strategic planning, considering
and supports the day-to-day control activities across
external analyses like the World Economic Forum Global
the business. The risk appetite is reviewed annually
Risk Report. These risks, once better understood,
in conjunction with the annual strategy session and
are integrated into our existing risk reporting alongside
principal risks. More details on these risks can be found
in their corresponding sections below.
approved by the Board.
Risk culture
Our approach to risk management is intertwined with
our strategic planning and objectives. Embedding risk
management across the business from strategy development
down to our day-to-day operations, supported by our
company values, promotes transparency and accountability
in decision making. This culture is supported by our
Code of Conduct and other policies, regular training
and implementation of cost-effective controls.
Key changes in our principal risks
Every year as part our strategic planning process,
we revisit our principal risks to ensure congruence with
our strategic direction and value drivers. This exercise was
conducted concurrently with our materiality assessment
to ensure that material risks from all stakeholders were
appropriately captured, and our assessment was not
materially different to that of our stakeholders. Where
there is a direct correlation with previous reported risks
the movement year on year has been reported.
Further information regarding
emerging risks can be found in
their corresponding principal risks
as identified on the following page.
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Appen 2023 Annual Report
39
Social and environment
Governance
TCFD-based scenario analysis
A desktop scenario analysis has been conducted
For each type of risk the associated business impacts were
to help identify potential physical risks that will impact
determined and a risk rating applied. Some of the identified
on Appen offices globally. The below scenarios have been
business impacts included:
conducted based on two carbon emissions scenarios
from Intergovernmental Panel on Climate Change (IPCC)
5th Assessment Report: low emissions (RCP 4.5 or 2⁰C
warming) and high emissions (RCP 8.5 or 4⁰C warming).
damage to property and potential loss of life
rising cost of business operations
scarcity of resources such as water, etc.
For each office the above climate scenarios were analysed
Scenario analysis outcomes
in conjunction with the following identified physical risks:
Based on the physical risk analysis, the key risks impacting
fires – bushfires and wildfires arising from a hotter and
most of the offices are heatwave and drought especially
drier climate
in a high emissions scenario (RCP 8.5).
heatwave – prolonged high temperatures
drought – reduced rainfall from a hotter and drier climate
In response to the analysis, we have identified and begun
initiatives within the office sites for mitigation and adaptation
flood – from increased storm activities and intensities
which include:
(i.e., storm surges, typhoon etc.)
inundation – lands under water due to rising sea levels
from climate change
energy efficient HVAC and installation of LED lightings
water efficient plumbing and water fixtures
sourcing of on-site or off-site renewable energy
(i.e., solar, wind, hydro).
Identifying
and managing risk
Embedding risk management to balance risk and reward is critical
to our continued ability to operate in the high-growth, dynamic market.
Risk appetite
Emerging risks
We define emerging risks as uncertainties that may not
be fully understood. We monitor them through horizon
scanning during our annual strategic planning, considering
external analyses like the World Economic Forum Global
Risk Report. These risks, once better understood,
are integrated into our existing risk reporting alongside
principal risks. More details on these risks can be found
in their corresponding sections below.
To support innovation and operate with agility our risk
appetite provides direction to support informed risk-taking.
Our risk appetite has been defined at a category level
and supports the day-to-day control activities across
the business. The risk appetite is reviewed annually
in conjunction with the annual strategy session and
approved by the Board.
Risk culture
Our approach to risk management is intertwined with
our strategic planning and objectives. Embedding risk
management across the business from strategy development
down to our day-to-day operations, supported by our
company values, promotes transparency and accountability
in decision making. This culture is supported by our
Code of Conduct and other policies, regular training
and implementation of cost-effective controls.
Key changes in our principal risks
Every year as part our strategic planning process,
we revisit our principal risks to ensure congruence with
our strategic direction and value drivers. This exercise was
conducted concurrently with our materiality assessment
to ensure that material risks from all stakeholders were
appropriately captured, and our assessment was not
materially different to that of our stakeholders. Where
there is a direct correlation with previous reported risks
the movement year on year has been reported.
Further information regarding
emerging risks can be found in
their corresponding principal risks
as identified on the following page.
38
Appen 2023 Annual Report
39
Identifying and managing risk
Governance
Risk is an inherent part of doing business and risk management
is a fundamental part of good corporate governance. Our risk
management approach ensures innovation and new possibilities
are underpinned by sound judgement of the potential risks and
identification of risk mitigation strategies.
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.
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.
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.
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 2023. 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.
Principal risk
Mitigation
Value Driver
Business model
Strategic direction of business
The AI market is very dynamic and client needs
and end-user expectations change rapidly.
Demand for services can rapidly change
depending on technological developments
within market segments, geoeconomic
confrontations (including global conflicts) and
regulatory developments which can all impact
our business model.
Incorporated emerging risk:
geoeconomic confrontations
Change
While this risk has fluctuated throughout
the year, the net position compared to the
prior year remains stable as the revised
to be operationalised.
Customer
and brand
Global crowd
Technology,
processes,
systems
Financial
• We have a strategy team that is dedicated
to monitoring AI and technology markets,
customer trends and regulatory changes.
• We use these insights to inform our
strategy and technology roadmap,
and to evolve our product offerings
and go to market strategy.
• We scan for additional opportunities
to expand into other markets
and/or technology to support our
existing offerings.
• Macroeconomic and geopolitical risks,
including consideration of potential
political uncertainty in certain markets
and geographies, are actively factored
into our strategic planning processes
and investment activity.
to monitor potential policy, legal and
regulatory developments that may
impact our ability to operate in particular
industries, markets and geographical
locations. We have plans and processes
in place to react in an agile manner with
minimal business disruption to any
changes that may occur.
strategy under new leadership begins
• We undertake ongoing horizon scanning
40
Appen 2023 Annual Report
41
Identifying and managing risk
Governance
Risk is an inherent part of doing business and risk management
is a fundamental part of good corporate governance. Our risk
management approach ensures innovation and new possibilities
are underpinned by sound judgement of the potential risks and
identification of risk mitigation strategies.
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.
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
• Assess, manage and monitor risk profiles for identified
their teams.
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.
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.
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 2023. 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.
Principal risk
Mitigation
Value Driver
Business model
Strategic direction of business
The AI market is very dynamic and client needs
and end-user expectations change rapidly.
Demand for services can rapidly change
depending on technological developments
within market segments, geoeconomic
confrontations (including global conflicts) and
regulatory developments which can all impact
our business model.
Incorporated emerging risk:
geoeconomic confrontations
Change
While this risk has fluctuated throughout
the year, the net position compared to the
prior year remains stable as the revised
strategy under new leadership begins
to be operationalised.
Customer
and brand
Global crowd
Technology,
processes,
systems
Financial
• We have a strategy team that is dedicated
to monitoring AI and technology markets,
customer trends and regulatory changes.
• We use these insights to inform our
strategy and technology roadmap,
and to evolve our product offerings
and go to market strategy.
• We scan for additional opportunities
to expand into other markets
and/or technology to support our
existing offerings.
• Macroeconomic and geopolitical risks,
including consideration of potential
political uncertainty in certain markets
and geographies, are actively factored
into our strategic planning processes
and investment activity.
• We undertake ongoing horizon scanning
to monitor potential policy, legal and
regulatory developments that may
impact our ability to operate in particular
industries, markets and geographical
locations. We have plans and processes
in place to react in an agile manner with
minimal business disruption to any
changes that may occur.
40
Appen 2023 Annual Report
41
Identifying and managing risk
Principal risk
Mitigation
Value Driver
Principal risk
Mitigation
Value Driver
Market demand and competition
In some parts of our business there is
competition from niche and low-cost providers.
Customers may also choose to do some
data annotation tasks in-house and/or use
their scale to seek better terms on pricing.
The profile of the projects that our customers
are undertaking is also changing.
Change
This risk while high, has remained
stable in the year. While the risk from
competition remains prevalent there
have been no significant changes to the
likelihood or impact.
Changing customer
strategy and needs
Currently a few large global technology
companies are the major buyers of AI training
data. The revenue from these clients is
significantly larger than the revenue from other
clients and the volume can fluctuate. Clients
can also rapidly redirect their spend away from
particular projects impacting their ongoing
needs for training data.
Change
This risk has increased in the past year
due to the rapid emergence of the
LLM sector and the impact of further
concentration of revenue to a smaller
group of global customers.
• We monitor new investments in the
data annotation sector closely.
• We have refreshed our sales and
marketing capabilities, including our
go to market strategy.
• We have invested in new sales and
marketing capabilities to deepen and
expand our relationships with existing
and new customers.
• We continue to invest in technology
to increase the quality of our services
and to deploy new capabilities to remain
ahead of the competition.
• We have embraced an agile approach
to the emerging LLM market and have
been able to capitalise on our expertise
in core Relevance activities to these
new offerings.
• We continue to build relationships with
key clients to ensure we can anticipate
strategy changes and react accordingly.
• We monitor relevant market and
customer trends and regulatory
changes to identify potential headwinds
for our clients which may impact our
future revenue.
• We continue our product-led focus
to meet evolving customer needs.
•
Inclusion of customer NPS targets
within executive STI.
Customer
and brand
Technology,
processes,
systems
Financial
Customer
and brand
Technology,
processes,
systems
Key:
Increase
Decrease
Stable
Ability to execute on
operational requirements
The sector we operate in is fast moving, and
we need to be agile to meet these expectations.
Knowledge and skills need to be developed
at the same rate as our clients to continue
to execute our operations successfully to meet
their expectations.
Change
This risk has remained stable in the
current year as we continue to focus our
attention on execution of high-quality
offerings for our customers.
Resilient operational model
The loss of data, a physical site or critical
employees could result in a major impact to our
customers, revenues and reputation.
Change
This risk has remained high but
stable over the year and continues
to be impacted by external factors
such as the on-going prevalence
of cyber-attacks, extreme weather events,
and impact of geopolitical tensions.
• We have a quick response team for our
major clients to ensure we can keep
pace with their changing needs.
• The restructure of our delivery team has
resulted in more streamlined processes
to ensure we able to execute operations
in an effective and consistent manner.
• Refinement of our customer NPS
program which we use to identify
gaps and areas of improvement in our
operational implementation.
• We store data in enterprise grade,
cloud-based servers which are
duplicated to minimise disruption.
• Our engineering team focuses
on resilience to mitigate the risks
of material or sustained disruption.
• We have business continuity plans
for facilities that require a physical
presence on-site and critical systems.
• We have further matured our business
continuity capabilities into our major
client project plans.
• We conduct scenario testing for our
disaster recovery plans.
• Our work-from-home model for
data annotators makes our business
model extremely flexible and resilient.
Technology,
processes,
systems
Customer
and brand
Global crowd
Customer
and brand
Technology,
processes,
systems
Social and
environment
42
Appen 2023 Annual Report
43
Identifying and managing risk
Key:
Increase
Decrease
Stable
Principal risk
Mitigation
Value Driver
Principal risk
Mitigation
Value Driver
Market demand and competition
In some parts of our business there is
competition from niche and low-cost providers.
Customers may also choose to do some
data annotation tasks in-house and/or use
their scale to seek better terms on pricing.
The profile of the projects that our customers
are undertaking is also changing.
Change
This risk while high, has remained
stable in the year. While the risk from
competition remains prevalent there
have been no significant changes to the
likelihood or impact.
Changing customer
strategy and needs
Currently a few large global technology
companies are the major buyers of AI training
data. The revenue from these clients is
significantly larger than the revenue from other
clients and the volume can fluctuate. Clients
can also rapidly redirect their spend away from
particular projects impacting their ongoing
needs for training data.
Change
This risk has increased in the past year
due to the rapid emergence of the
LLM sector and the impact of further
concentration of revenue to a smaller
group of global customers.
• We monitor new investments in the
data annotation sector closely.
• We have refreshed our sales and
marketing capabilities, including our
go to market strategy.
• We have invested in new sales and
marketing capabilities to deepen and
expand our relationships with existing
and new customers.
• We continue to invest in technology
to increase the quality of our services
and to deploy new capabilities to remain
ahead of the competition.
• We have embraced an agile approach
to the emerging LLM market and have
been able to capitalise on our expertise
in core Relevance activities to these
new offerings.
• We continue to build relationships with
key clients to ensure we can anticipate
strategy changes and react accordingly.
• We monitor relevant market and
customer trends and regulatory
changes to identify potential headwinds
for our clients which may impact our
future revenue.
• We continue our product-led focus
to meet evolving customer needs.
•
Inclusion of customer NPS targets
within executive STI.
Customer
and brand
Technology,
processes,
systems
Financial
Customer
and brand
Technology,
processes,
systems
Ability to execute on
operational requirements
The sector we operate in is fast moving, and
we need to be agile to meet these expectations.
Knowledge and skills need to be developed
at the same rate as our clients to continue
to execute our operations successfully to meet
their expectations.
Change
This risk has remained stable in the
current year as we continue to focus our
attention on execution of high-quality
offerings for our customers.
Resilient operational model
The loss of data, a physical site or critical
employees could result in a major impact to our
customers, revenues and reputation.
Change
This risk has remained high but
stable over the year and continues
to be impacted by external factors
such as the on-going prevalence
of cyber-attacks, extreme weather events,
and impact of geopolitical tensions.
• We have a quick response team for our
major clients to ensure we can keep
pace with their changing needs.
• The restructure of our delivery team has
resulted in more streamlined processes
to ensure we able to execute operations
in an effective and consistent manner.
• Refinement of our customer NPS
program which we use to identify
gaps and areas of improvement in our
operational implementation.
• We store data in enterprise grade,
cloud-based servers which are
duplicated to minimise disruption.
• Our engineering team focuses
on resilience to mitigate the risks
of material or sustained disruption.
• We have business continuity plans
for facilities that require a physical
presence on-site and critical systems.
• We have further matured our business
continuity capabilities into our major
client project plans.
• We conduct scenario testing for our
disaster recovery plans.
• Our work-from-home model for
data annotators makes our business
model extremely flexible and resilient.
Technology,
processes,
systems
Customer
and brand
Global crowd
Customer
and brand
Technology,
processes,
systems
Social and
environment
42
Appen 2023 Annual Report
43
Identifying and managing risk
Principal risk
Mitigation
Value Driver
Principal risk
Mitigation
Value Driver
People
Talent strategy and
employee value proposition
Our business is reliant on specialised skills.
Our ability to grow is dependent on attracting,
developing and motivating our talent.
Change
Ongoing employment market pressure
remains a key contributor to this risk,
however the internal work over the year
has resulted in a lowering of this risk year
on year.
Managing a culture of growth
through change
Our business’s future resilience is anchored
in a large-scale restructure program, where
employee buy-in is pivotal for success.
Change
This risk has increased over the year due
to the reduction in workforce as a result
of the restructures. The pace of change
required from individuals remains
a source of potential increased risk.
• Our Human Resources department
works closely with the business to
understand the skills and capabilities
required to deliver our business
objectives and to ensure those needs
are met. In 2023, this also included
a revision of the way we manage
employee goals and accountability.
• We have listened to the feedback
provided by our employees as part
of the culture work conducted and
have introduced new ways of working,
additional learning pathways and other
programs to improve our employee
value proposition.
• We continue to benchmark our offerings
across the sector to ensure market
competitiveness and introduced
additional employee benefits programs
to retain and attract talent.
•
Inclusion of employee engagement
targets within executive STI.
• We refreshed our values through the
new Culture Code and linked desired
behaviours and attributes to reward
and recognition.
•
In response to the significant
restructuring, specific measures
included clear communication
strategies, ongoing leadership training,
and regular check-ins to address
concerns and maintain morale among
the remaining workforce.
Appen
employees
Social and
environment
Appen
employees
Technology,
processes,
systems
Key:
Increase
Decrease
Stable
Investment in technology, innovation
• We are investing in our technology
Technology and innovation
and transformation
Technology innovation is key to improving
our capabilities, increasing efficiency
and automation, keeping pace with
customer expectations and staying ahead
of our competition.
Change
This risk has remained stable in the
current year as we continued to invest
in our product and engineering teams.
With an increasingly product-led strategy the
need for solid intellectual property protection
strategies are key to delivering outcomes for
our customers.
Change
This risk has increased over the year
due to the changes in the way our
product and engineering teams are
structured which inherently introduces
more temporary risk.
Technology,
processes,
systems
Customer
and brand
Technology,
processes,
systems
offering to improve both customer
and crowd experiences, to deliver
automation benefits, efficiencies and
new offerings.
• We utilise agile methods in our project
delivery to ensure investment in
engineering projects is appropriately
prioritised and oversight is in place.
(IP) Committee that looks at new
technologies through invention
disclosures, develops appropriate
protection strategies for that
technology and ensures alignment with
product directions (including patenting,
copyright, trade secret, defensive
publication etc).
• We have training to ensure employees
are aware of the need to protect
confidential information.
• Access to core technologies is
geographically segmented to improve
IP protection.
• Brands are protected in relevant markets.
Protection of intellectual property
• We have an Intellectual Property
44
Appen 2023 Annual Report
45
Identifying and managing risk
Principal risk
Mitigation
Value Driver
Principal risk
Mitigation
Value Driver
Key:
Increase
Decrease
Stable
People
Talent strategy and
employee value proposition
Our business is reliant on specialised skills.
Our ability to grow is dependent on attracting,
developing and motivating our talent.
Change
Ongoing employment market pressure
remains a key contributor to this risk,
however the internal work over the year
has resulted in a lowering of this risk year
on year.
Managing a culture of growth
through change
Our business’s future resilience is anchored
in a large-scale restructure program, where
employee buy-in is pivotal for success.
Change
This risk has increased over the year due
to the reduction in workforce as a result
of the restructures. The pace of change
required from individuals remains
a source of potential increased risk.
• Our Human Resources department
works closely with the business to
understand the skills and capabilities
required to deliver our business
objectives and to ensure those needs
are met. In 2023, this also included
a revision of the way we manage
employee goals and accountability.
• We have listened to the feedback
provided by our employees as part
of the culture work conducted and
have introduced new ways of working,
additional learning pathways and other
programs to improve our employee
value proposition.
• We continue to benchmark our offerings
across the sector to ensure market
competitiveness and introduced
additional employee benefits programs
to retain and attract talent.
•
Inclusion of employee engagement
targets within executive STI.
• We refreshed our values through the
new Culture Code and linked desired
behaviours and attributes to reward
and recognition.
•
In response to the significant
restructuring, specific measures
included clear communication
strategies, ongoing leadership training,
and regular check-ins to address
concerns and maintain morale among
the remaining workforce.
Appen
employees
Social and
environment
Appen
employees
Technology,
processes,
systems
Technology and innovation
Investment in technology, innovation
and transformation
Technology innovation is key to improving
our capabilities, increasing efficiency
and automation, keeping pace with
customer expectations and staying ahead
of our competition.
Change
This risk has remained stable in the
current year as we continued to invest
in our product and engineering teams.
Protection of intellectual property
With an increasingly product-led strategy the
need for solid intellectual property protection
strategies are key to delivering outcomes for
our customers.
Change
This risk has increased over the year
due to the changes in the way our
product and engineering teams are
structured which inherently introduces
more temporary risk.
Technology,
processes,
systems
Customer
and brand
Technology,
processes,
systems
• We are investing in our technology
offering to improve both customer
and crowd experiences, to deliver
automation benefits, efficiencies and
new offerings.
• We utilise agile methods in our project
delivery to ensure investment in
engineering projects is appropriately
prioritised and oversight is in place.
• We have an Intellectual Property
(IP) Committee that looks at new
technologies through invention
disclosures, develops appropriate
protection strategies for that
technology and ensures alignment with
product directions (including patenting,
copyright, trade secret, defensive
publication etc).
• We have training to ensure employees
are aware of the need to protect
confidential information.
• Access to core technologies is
geographically segmented to improve
IP protection.
• Brands are protected in relevant markets.
44
Appen 2023 Annual Report
45
Identifying and managing risk
Principal risk
Mitigation
Value Driver
Principal risk
Mitigation
Value Driver
Crowd
Crowd conditions
Independent contractors are critical to our
business. The attraction and retention of skilled
contractors enables our competitive advantage
and customer value proposition.
Change
This risk remained stable in the
current year. While we continue
to see pressure on conditions we are
working hard to meet or exceed our
stakeholders’ expectations.
Crowd supply meets
customer demand
Our business model relies on our ability
to provide customers with access to a broad
range of skills provided by our global crowd.
Change
This risk remains stable. While
our generative AI projects have
seen an increase in the specificity
of skills requested from customers,
the work we are investing in should
put us in a good position to meet
these requirements.
• Our Crowd Code of Ethics establishes
the conditions that we will adhere to,
above the minimum legal requirements.
• We continue to work to improve our
crowd experience to ensure that
we can make the platform a great
place for users.
• Our Impact Sourcing strategy provides
jobs and career development to people
who otherwise have limited prospects
for formal employment.
• We have partnered with external
organisations to evaluate our crowd
conditions and are working towards
further enshrining fair conditions
to contractors across the sector.
•
Inclusion of crowd NPS targets within
executive STI.
• We have begun new research programs
to understand how the work we provide
fits into the life of a contributor.
• Our new contributor experience will
better tailor the platform to the type
of work that they would like to do.
• We continue to introduce and refine
our strategies to combat contractor
integrity to further guarantee that
our clients have access to the best
quality contributors.
• We have partnerships with sourcing
agencies to increase our reach into
difficult markets and to stimulate
applicant interest.
Global crowd
Customer
and brand
Global crowd
Customer
and brand
Data management
Compliance with security, privacy
and other data regulations
We manage a large amount of data as part
of our operations including a significant
amount of personal information which
requires increased security requirements.
Change
This risk remains stable as we
maintain our focus on ensuring
data governance is embedded in
everything we do against a changing
landscape of increased regulation.
Emerging cyber security issues
We manage sensitive customer information,
increasing our exposure and susceptibility
to cyber attacks. Cyber threats could lead
to a loss of data or service interruption
impacting customers and our reputation.
Change
This risk remains stable as we
continue to invest in our cyber
maturity against an ever growing
complexity of cyber threats.
Key:
Increase
Decrease
Stable
Technology,
processes,
systems
Customer
and brand
Technology,
processes,
systems
Customer
and brand
• We continue to integrate security
and privacy requirements into our
systems and offerings by increasing the
collaboration between our engineering
and privacy teams.
• We have a team that is responsible for
understanding emerging information
security risks. They consult with
external advisors.
•
Information security risk assessments
are conducted on a regular basis
and the IT team undergoes training
in risk management.
• We have maintained certification for
ISO 27001 and SOC 2 as well as gaining
ISO 27701 for our China business.
• We have policies, procedures and
training to ensure employees are aware
of their privacy and security obligations.
• We have implemented a cyber security
risk management framework across the
organisation. It includes the deployment
of physical and technological security
measures to identify, protect, detect
and respond to information and cyber
security risks. We have ISO 27001
and SOC 2 certification.
• We conduct audits of our cyber
security practices, including maturity
assessments, scenario planning,
penetration testing and simulation
exercises, for cyber security
incident management.
• The strength of our control
environment is tested on an ongoing
basis by independent security
experts. Their recommendations are
implemented in a prioritised manner.
• We have policies, procedures and
annual training to ensure employees
are aware of the threat and their
responsibilities, and we conduct
regular synthetic phishing tests.
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Appen 2023 Annual Report
47
Identifying and managing risk
Principal risk
Mitigation
Value Driver
Principal risk
Mitigation
Value Driver
Key:
Increase
Decrease
Stable
Crowd
Crowd conditions
Independent contractors are critical to our
business. The attraction and retention of skilled
contractors enables our competitive advantage
and customer value proposition.
Change
This risk remained stable in the
current year. While we continue
to see pressure on conditions we are
working hard to meet or exceed our
stakeholders’ expectations.
Crowd supply meets
customer demand
Our business model relies on our ability
to provide customers with access to a broad
range of skills provided by our global crowd.
Change
This risk remains stable. While
our generative AI projects have
seen an increase in the specificity
of skills requested from customers,
the work we are investing in should
put us in a good position to meet
these requirements.
• Our Crowd Code of Ethics establishes
the conditions that we will adhere to,
above the minimum legal requirements.
• We continue to work to improve our
crowd experience to ensure that
we can make the platform a great
place for users.
• Our Impact Sourcing strategy provides
jobs and career development to people
who otherwise have limited prospects
for formal employment.
• We have partnered with external
organisations to evaluate our crowd
conditions and are working towards
further enshrining fair conditions
to contractors across the sector.
•
Inclusion of crowd NPS targets within
executive STI.
• We have begun new research programs
to understand how the work we provide
fits into the life of a contributor.
• Our new contributor experience will
better tailor the platform to the type
of work that they would like to do.
• We continue to introduce and refine
our strategies to combat contractor
integrity to further guarantee that
our clients have access to the best
quality contributors.
• We have partnerships with sourcing
agencies to increase our reach into
difficult markets and to stimulate
applicant interest.
Global crowd
Customer
and brand
Global crowd
Customer
and brand
Data management
Compliance with security, privacy
and other data regulations
We manage a large amount of data as part
of our operations including a significant
amount of personal information which
requires increased security requirements.
Change
This risk remains stable as we
maintain our focus on ensuring
data governance is embedded in
everything we do against a changing
landscape of increased regulation.
Emerging cyber security issues
We manage sensitive customer information,
increasing our exposure and susceptibility
to cyber attacks. Cyber threats could lead
to a loss of data or service interruption
impacting customers and our reputation.
Change
This risk remains stable as we
continue to invest in our cyber
maturity against an ever growing
complexity of cyber threats.
Technology,
processes,
systems
Customer
and brand
Technology,
processes,
systems
Customer
and brand
• We continue to integrate security
and privacy requirements into our
systems and offerings by increasing the
collaboration between our engineering
and privacy teams.
• We have a team that is responsible for
understanding emerging information
security risks. They consult with
external advisors.
•
Information security risk assessments
are conducted on a regular basis
and the IT team undergoes training
in risk management.
• We have maintained certification for
ISO 27001 and SOC 2 as well as gaining
ISO 27701 for our China business.
• We have policies, procedures and
training to ensure employees are aware
of their privacy and security obligations.
• We have implemented a cyber security
risk management framework across the
organisation. It includes the deployment
of physical and technological security
measures to identify, protect, detect
and respond to information and cyber
security risks. We have ISO 27001
and SOC 2 certification.
• We conduct audits of our cyber
security practices, including maturity
assessments, scenario planning,
penetration testing and simulation
exercises, for cyber security
incident management.
• The strength of our control
environment is tested on an ongoing
basis by independent security
experts. Their recommendations are
implemented in a prioritised manner.
• We have policies, procedures and
annual training to ensure employees
are aware of the threat and their
responsibilities, and we conduct
regular synthetic phishing tests.
46
Appen 2023 Annual Report
47
Key:
Increase
Decrease
Stable
Environmental, social and
governance (ESG) risks and
performance
Incorporated emerging risk:
climate change
Change
The risk remains stable as we grow
our ESG program against a changing
regulatory landscape.
Social and
environment
• We are a signatory to the United Nations
Global Compact and have committed
to take action to embed the ten
principles within our business practices.
• We have completed our initial Net Zero
Roadmap and have committed to net
zero emissions across our business
(including supply chain) by 2030.
• We have committed to the Science
Based Target Initiative and
disclosing climate-related issues
in accordance with the Task Force
on Climate-related Financial Disclosures
(TCFD) recommendations.
Identifying and managing risk
Principal risk
Mitigation
Value Driver
Principal risk
Mitigation
Value Driver
Support
Financial sustainability
• We naturally hedge foreign exchange
We operate globally and our business can
be affected by foreign exchange, changes
in debt markets and tax obligations.
As a listed entity we also have an obligation
to protect shareholders’ capital and ensure
sustainable earnings.
Change
Global economic uncertainty and the
ongoing tech slow down has resulted
in an increase in this risk in the year.
Compliance with legal, statutory
and ethical obligations
We have a responsibility to not only operate
in a manner that is congruent with our legal
and statutory obligations. We also have
an obligation to disseminate and embed
responsible AI best practices across our
operations and partnerships.
Incorporated emerging risk:
responsible AI
Change
We continue to invest in building our
responsible practices against a rapidly
changing regulatory environment.
Financial
Appen
employees
Social and
environment
Financial
Appen
employees
risk by paying for associated
services in the same currency
we receive revenue.
• We have a formal hedging policy
to provide protection where we make
payments in Australian dollars with
US funds.
• We continue to monitor the external
landscape and conduct scenario
planning to ensure we can appropriately
respond to changes, such as tax rates,
in a timely manner.
• Capital raises during the year provide
balance sheet flexibility and general
working capital to support return
to profitability, and transaction costs.
• We regularly review our material
obligations to ensure appropriate
controls, governance and oversight
are maintained.
• We understand the local labour
and human rights landscapes in the
jurisdictions we operate in and
ensure we comply with modern
slavery requirements.
• Our compliance framework includes
policies, procedures and a suite
of mandatory compliance training
which helps drive positive attitudes
to compliance across the business.
• We have added relevant subject matter
expertise across the business and are
increasing our training program for all
staff to extend our compliance and
reporting capabilities.
• We have partnered with the World
Economic Forum to create responsible
AI standards to increase the value of,
and trust in AI, for businesses and
the community.
48
Appen 2023 Annual Report
49
Principal risk
Mitigation
Value Driver
Principal risk
Mitigation
Value Driver
Key:
Increase
Decrease
Stable
Environmental, social and
governance (ESG) risks and
performance
Incorporated emerging risk:
climate change
Change
The risk remains stable as we grow
our ESG program against a changing
regulatory landscape.
Social and
environment
• We are a signatory to the United Nations
Global Compact and have committed
to take action to embed the ten
principles within our business practices.
• We have completed our initial Net Zero
Roadmap and have committed to net
zero emissions across our business
(including supply chain) by 2030.
• We have committed to the Science
Based Target Initiative and
disclosing climate-related issues
in accordance with the Task Force
on Climate-related Financial Disclosures
(TCFD) recommendations.
Identifying and managing risk
Support
We operate globally and our business can
be affected by foreign exchange, changes
in debt markets and tax obligations.
As a listed entity we also have an obligation
to protect shareholders’ capital and ensure
sustainable earnings.
Change
Global economic uncertainty and the
ongoing tech slow down has resulted
in an increase in this risk in the year.
and ethical obligations
We have a responsibility to not only operate
in a manner that is congruent with our legal
and statutory obligations. We also have
an obligation to disseminate and embed
responsible AI best practices across our
operations and partnerships.
Incorporated emerging risk:
responsible AI
Change
We continue to invest in building our
responsible practices against a rapidly
changing regulatory environment.
Financial sustainability
• We naturally hedge foreign exchange
Compliance with legal, statutory
• We regularly review our material
Financial
Appen
employees
Social and
environment
Financial
Appen
employees
risk by paying for associated
services in the same currency
we receive revenue.
• We have a formal hedging policy
to provide protection where we make
payments in Australian dollars with
US funds.
• We continue to monitor the external
landscape and conduct scenario
planning to ensure we can appropriately
respond to changes, such as tax rates,
in a timely manner.
• Capital raises during the year provide
balance sheet flexibility and general
working capital to support return
to profitability, and transaction costs.
obligations to ensure appropriate
controls, governance and oversight
are maintained.
• We understand the local labour
and human rights landscapes in the
jurisdictions we operate in and
ensure we comply with modern
slavery requirements.
• Our compliance framework includes
policies, procedures and a suite
of mandatory compliance training
which helps drive positive attitudes
to compliance across the business.
• We have added relevant subject matter
expertise across the business and are
increasing our training program for all
staff to extend our compliance and
reporting capabilities.
• We have partnered with the World
Economic Forum to create responsible
AI standards to increase the value of,
and trust in AI, for businesses and
the community.
48
Appen 2023 Annual Report
49
Governance
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.
2023 areas of
governance focus
Key areas of governance focus and
activities undertaken by the Board,
its Committees and management
during 2023 included:
Strategic and financial performance
• conducted an annual Board and
executive strategy session in
October 2023 to focus Appen’s
response on the impact of the
challenging external operating
environment and ongoing
tech slowdown.
Our people
•
reviewed our organisational
structures within each
business unit and functional
areas with a focus on reducing
organisation layers to improve
operational efficiency.
• adopted a new Culture Code
to support our transformation.
• continued roll out of our Future
Ways of Working, including the
Neighbourhood program to help
employees foster and cultivate
deeper connections.
•
strengthened Appen’s executive
team with the addition of members
with sales expertise.
Global crowd
• ongoing focus on our Crowd
Code of Ethics and building our
reputation as a company of fairness
and integrity in how we partner with
our crowd.
• delivered technology and other
initiatives to ensure the crowd are
better matched to projects and
are qualified, onboarded and paid
more efficiently.
• enhanced technology and
capabilities to address trust and
safety in our Crowd.
• conducted further research
programs to understand
representation across the Crowd
and to identify and fill any gaps
and/or targeted skill sets.
• partnered with Mercy Corps,
Na’amal, Generation and Konexio
to open crowd work opportunities
to refugee communities.
Social and environment
• continued disclosure of greenhouse
gas emissions scopes 1, 2 and 3 and
working towards limited assurance
of the data.
• continued implementation of Net
Zero Roadmap and working towards
net zero across operations by 2030.
•
commenced development of reporting
on progress against our United Nations
Global Compact commitments.
Oversight of Financial and
capital management
• completed a fully underwritten
~A$60 million equity raising in June
2023 and completed a further fully
underwritten ~A$30 million equity
raising in December 2023 to support
the company’s strategy refresh.
• given Appen’s financial
performance and to ensure
prudent 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.
•
issued our Modern Slavery Statement.
Compliance and risk management
•
•
internal audit reviewed and
assessed processes across
key operational areas, including
a review of our transformation
projects and processes.
reviewed the risk management
framework, revised the risk
appetite statement and updated
our strategic risks to align with
the strategy as revised in October
2023. Confirmed the identified
risks through our stakeholder
materiality assessment.
• continued focus on cyber security,
ISO27001 compliance across
global sites and SOC2 compliance
on key platforms.
Skill
Description
Skill level
Strategy
Experience in defining strategic objectives, assessing
Board diversity
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/
Experience developing customer/client strategies and
Client
delivering customer/client outcomes.
Capital markets Expertise in considering and implementing efficient
capital management including alternative capital sources
and distributions, yields and markets.
Corporate
Experience in assessing and completing complex
transactions
business transactions, including mergers, acquisitions,
divestments, capital management, major projects and
business integration.
People and
Board Committee or senior executive equivalent
culture
experience relating to people management and human
management
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
Experience and expertise in identifying, assessing,
innovation
implementing and leveraging digital technologies and
other innovations.
International
Experience in international business, trade and/or
business
experience
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.
High competency and experience
Medium competency and experience
50%
of directors
are female
Male
Female
50.0%
50.0%
Non-executive
director tenure
4.1 years
average tenure
of NEDs
0–1 year
1–3 years
3–5 years
5+ years
0%
57%
14%
29%
International
business experience
88%
high level
international
experience
High
Medium
87.5%
12.5%
88%
of directors are
independent
Independent
CEO
7
1
Data and
security
Understanding the use of data and the risks associated
with data security, cyber and privacy.
Director independence
50
Appen 2023 Annual Report
51
Governance
Our approach
to governance
Appen’s governance policies and practices
Our people
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
– the Audit and Risk Management
Committee and the People and
Culture Committee.
2023 areas of
governance focus
Key areas of governance focus and
activities undertaken by the Board,
its Committees and management
during 2023 included:
Strategic and financial performance
executive strategy session in
October 2023 to focus Appen’s
response on the impact of the
challenging external operating
environment and ongoing
tech slowdown.
•
reviewed our organisational
structures within each
business unit and functional
areas with a focus on reducing
organisation layers to improve
operational efficiency.
• adopted a new Culture Code
to support our transformation.
• continued roll out of our Future
Ways of Working, including the
Neighbourhood program to help
employees foster and cultivate
deeper connections.
•
strengthened Appen’s executive
team with the addition of members
with sales expertise.
Global crowd
• ongoing focus on our Crowd
Code of Ethics and building our
reputation as a company of fairness
and integrity in how we partner with
our crowd.
• delivered technology and other
initiatives to ensure the crowd are
better matched to projects and
are qualified, onboarded and paid
more efficiently.
capabilities to address trust and
safety in our Crowd.
• conducted further research
programs to understand
representation across the Crowd
and to identify and fill any gaps
and/or targeted skill sets.
• partnered with Mercy Corps,
Na’amal, Generation and Konexio
to open crowd work opportunities
to refugee communities.
• continued disclosure of greenhouse
gas emissions scopes 1, 2 and 3 and
working towards limited assurance
of the data.
with the execution of its responsibilities
• enhanced technology and
• conducted an annual Board and
Social and environment
• continued implementation of Net
Zero Roadmap and working towards
net zero across operations by 2030.
•
commenced development of reporting
on progress against our United Nations
Global Compact commitments.
Oversight of Financial and
capital management
• completed a fully underwritten
~A$60 million equity raising in June
2023 and completed a further fully
underwritten ~A$30 million equity
raising in December 2023 to support
the company’s strategy refresh.
• given Appen’s financial
performance and to ensure
prudent 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.
•
issued our Modern Slavery Statement.
Compliance and risk management
•
internal audit reviewed and
assessed processes across
key operational areas, including
a review of our transformation
projects and processes.
•
reviewed the risk management
framework, revised the risk
appetite statement and updated
our strategic risks to align with
the strategy as revised in October
2023. Confirmed the identified
risks through our stakeholder
materiality assessment.
• continued focus on cyber security,
ISO27001 compliance across
global sites and SOC2 compliance
on key platforms.
Skill
Description
Skill level
Strategy
Finance
Risk
Industry
experience
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.
Understanding the financial drivers of the business,
experience in financial accounting and reporting, tax,
corporate finance and internal financial controls.
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.
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 strategies 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.
Board diversity
50%
of directors
are female
Male
Female
50.0%
50.0%
Non-executive
director tenure
4.1 years
average tenure
of NEDs
0–1 year
1–3 years
3–5 years
5+ years
0%
57%
14%
29%
International
business experience
88%
high level
international
experience
High
Medium
87.5%
12.5%
Data and
security
Understanding the use of data and the risks associated
with data security, cyber and privacy.
Director independence
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.
High competency and experience
Medium competency and experience
88%
of directors are
independent
Independent
CEO
7
1
50
Appen 2023 Annual Report
51
Governance
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
Richard is a director of Coles Group Limited (ASX:
COL), REA Group Ltd (ASX: REA) and Cricket
Australia. Previously, he was Chair of REA Group
Ltd. He is a former director of Ten Network Holdings
Ltd (ASX: TEN), Foxtel and Astro Malaysia Holdings
Berhad. Richard was also a member of the Advisory
Board of artificial intelligence software company,
Afiniti Ltd (2017–2022). Richard 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.
Steve Hasker
BCom, MBA, MIA, ACAA
Independent non-executive
Director
Appointed: 7 April 2015
Board Committee:
Chair of the People and
Culture Committee
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 Low
BCom, FCA, FAICD
Independent non-executive
Director
Appointed: 30 October 2014
Board Committee:
Chair of the Audit and Risk
Management Committee
Robin is a non-executive director who serves on the
boards IPH Limited (ASX: IPH), Guide Dogs NSW/ACT
and the Sax Institute. Robin is a member of the
University of New South Wales audit committee and
is a Fellow of the Institute of Chartered Accountants
Australia and New Zealand. 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. She is a former director at AUB Group Limited
(ASX: AUB), Marley Spoon (ASX: MMM) and is a past
Deputy Chair of the Auditing and Assurance
Standards Board.
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
Vanessa has a deep understanding of emerging
technology trends and enterprise uptake of artificial
intelligence, especially in the US market. She is the
Founder and CEO of SaaS technology company
Sugarwork, and is an non-executive director
of Goodman Group (ASX: GMG). Most recently
she was Vice President of SAP.iO, the early-stage
venture arm of SAP. Prior, Vanessa was the COO
at Trigger Media Group, a digital media incubator.
Before that, she was Associate Partner at McKinsey
where she served clients in media and high-tech
sectors on issues of digital strategy, emerging
market strategy, growth and innovation.
Stuart Davis
LLB
Independent non-executive
Director
Appointed: 30 March 2022
Board Committee:
Member of the Audit and Risk
Management Committee
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.
Lynn Mickleburgh
BSc (Hons) in Mathematics,
MBA
Director
Independent non-executive
Appointed: 29 July 2022
Board Committee:
Member of the People
and Culture Committee
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.
Mini Peiris
BSc
Director
Independent non-executive
Appointed: 4 November 2022
Board Committee:
Member of the People
and Culture Committee
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 Doma (NYSE: DOMA), a real estate technology
company. Prior to that, she was the CMO at
Elementum (a Lightspeed company) and Ambra
Health (acquired by Hg’s Intelerad). 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 US$750 million.
52
Appen 2023 Annual Report
53
Governance
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
Richard is a director of Coles Group Limited (ASX:
COL), REA Group Ltd (ASX: REA) and Cricket
Australia. Previously, he was Chair of REA Group
Ltd. He is a former director of Ten Network Holdings
Ltd (ASX: TEN), Foxtel and Astro Malaysia Holdings
Berhad. Richard was also a member of the Advisory
Board of artificial intelligence software company,
Afiniti Ltd (2017–2022). Richard 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.
Steve Hasker
BCom, MBA, MIA, ACAA
Independent non-executive
Director
Appointed: 7 April 2015
Board Committee:
Chair of the People and
Culture Committee
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 Low
BCom, FCA, FAICD
Robin is a non-executive director who serves on the
boards IPH Limited (ASX: IPH), Guide Dogs NSW/ACT
Independent non-executive
and the Sax Institute. Robin is a member of the
Director
Appointed: 30 October 2014
Board Committee:
Chair of the Audit and Risk
Management Committee
University of New South Wales audit committee and
is a Fellow of the Institute of Chartered Accountants
Australia and New Zealand. 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. She is a former director at AUB Group Limited
(ASX: AUB), Marley Spoon (ASX: MMM) and is a past
Deputy Chair of the Auditing and Assurance
Standards Board.
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
Vanessa has a deep understanding of emerging
technology trends and enterprise uptake of artificial
intelligence, especially in the US market. She is the
Founder and CEO of SaaS technology company
Sugarwork, and is an non-executive director
of Goodman Group (ASX: GMG). Most recently
she was Vice President of SAP.iO, the early-stage
venture arm of SAP. Prior, Vanessa was the COO
at Trigger Media Group, a digital media incubator.
Before that, she was Associate Partner at McKinsey
where she served clients in media and high-tech
sectors on issues of digital strategy, emerging
market strategy, growth and innovation.
Stuart Davis
LLB
Independent non-executive
Director
Appointed: 30 March 2022
Board Committee:
Member of the Audit and Risk
Management Committee
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.
Lynn Mickleburgh
BSc (Hons) in Mathematics,
MBA
Independent non-executive
Director
Appointed: 29 July 2022
Board Committee:
Member of the People
and Culture Committee
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.
Mini Peiris
BSc
Independent non-executive
Director
Appointed: 4 November 2022
Board Committee:
Member of the People
and Culture Committee
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 Doma (NYSE: DOMA), a real estate technology
company. Prior to that, she was the CMO at
Elementum (a Lightspeed company) and Ambra
Health (acquired by Hg’s Intelerad). 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 US$750 million.
52
Appen 2023 Annual Report
53
Governance
Executive
team
Corporate Services
Ryan Kolln
CEO & Managing Director
Joined: October 2018
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. His successive promotions culminated in the role
of Chief Operating Officer in August 2023, overseeing global operations and strategy.
Justin Miles
Chief Financial Officer
Joined: March 2016
GradDipCA (Chartered Accounting)
B. Bus (Accounting)
Justin was appointed Chief Financial Officer (CFO) on 27 February 2024. He has been
acting as interim CFO since 1 August 2023 with responsibility for Appen’s finance and
accounting functions. During his tenure at Appen, Justin has held senior finance roles
including Deputy CFO (2023–2024) and VP of Finance (2017–2023). Prior to joining
Appen he worked in senior leadership roles in ASX listed businesses and various roles
within public practice.
Corporate Services (continued)
Andrea Clayton
Chief People Officer
Joined: February 2022
MBA, BA (International Management)
Andrea has more than 20 years of experience in building innovative people programs,
leading people operations teams, and transforming company cultures. Andrea has
served in a variety of global human resource (HR) leadership roles, in listed and
unlisted companies, lived and worked in five countries, and has experience leading
HR in 30+ countries.
Prior to Appen, Andrea served as Chief People Officer at Thrive Pet Healthcare,
one of the largest and fastest growing veterinary companies in the United States.
Through the introduction of industry first programs, flexible policies and achievement
of significant gender diversity at all levels of leadership, Thrive was recognised as the
#1 company in the industry for women by InHerSight. Andrea was also a global HR
leader at General Electric Financial Assurance (now Genworth) for 11 years, including
HR Director for Genworth Australia through its IPO in 2014.
Mike Davie
Chief Product and
Technology Officer
Joined: September 2021
BBA, MSc (Database management)
and business intelligence)
Mike is the Chief Product and Technology Officer. He brings a strong background
of experience in location data and location-based business solutions that are fit for
purpose, easy to use, and simple to organise.
Prior to Appen, Mike was the founder and CEO of Quadrant, growing the business’s
mobile location data services to a portfolio of more than 450 million unique devices
per month, enabling companies to see and understand movement patterns in the
real world. With Quadrant he also developed a proprietary platform, ‘Geolancer’,
which provides authentic, accurate, and up-to-date Point-of-Interest data, manually
verified on the ground.
edge technologies.
Previously, Mike provided leadership and strategy to the Advanced Mobile
Product Strategy team at Samsung where he developed GTM strategies for cutting
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.
54
Appen 2023 Annual Report
55
Governance
Executive
team
Corporate Services
Ryan Kolln
CEO & Managing Director
Joined: October 2018
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. His successive promotions culminated in the role
of Chief Operating Officer in August 2023, overseeing global operations and strategy.
Justin Miles
Chief Financial Officer
Joined: March 2016
GradDipCA (Chartered Accounting)
B. Bus (Accounting)
Justin was appointed Chief Financial Officer (CFO) on 27 February 2024. He has been
acting as interim CFO since 1 August 2023 with responsibility for Appen’s finance and
accounting functions. During his tenure at Appen, Justin has held senior finance roles
including Deputy CFO (2023–2024) and VP of Finance (2017–2023). Prior to joining
Appen he worked in senior leadership roles in ASX listed businesses and various roles
within public practice.
Corporate Services (continued)
Andrea Clayton
Chief People Officer
Joined: February 2022
MBA, BA (International Management)
Andrea has more than 20 years of experience in building innovative people programs,
leading people operations teams, and transforming company cultures. Andrea has
served in a variety of global human resource (HR) leadership roles, in listed and
unlisted companies, lived and worked in five countries, and has experience leading
HR in 30+ countries.
Prior to Appen, Andrea served as Chief People Officer at Thrive Pet Healthcare,
one of the largest and fastest growing veterinary companies in the United States.
Through the introduction of industry first programs, flexible policies and achievement
of significant gender diversity at all levels of leadership, Thrive was recognised as the
#1 company in the industry for women by InHerSight. Andrea was also a global HR
leader at General Electric Financial Assurance (now Genworth) for 11 years, including
HR Director for Genworth Australia through its IPO in 2014.
Mike Davie
Chief Product and
Technology Officer
Joined: September 2021
BBA, MSc (Database management)
and business intelligence)
Mike is the Chief Product and Technology Officer. He brings a strong background
of experience in location data and location-based business solutions that are fit for
purpose, easy to use, and simple to organise.
Prior to Appen, Mike was the founder and CEO of Quadrant, growing the business’s
mobile location data services to a portfolio of more than 450 million unique devices
per month, enabling companies to see and understand movement patterns in the
real world. With Quadrant he also developed a proprietary platform, ‘Geolancer’,
which provides authentic, accurate, and up-to-date Point-of-Interest data, manually
verified on the ground.
Previously, Mike provided leadership and strategy to the Advanced Mobile
Product Strategy team at Samsung where he developed GTM strategies for cutting
edge technologies.
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.
54
Appen 2023 Annual Report
55
Governance
Corporate Services (continued)
Sales and delivery (continued)
Sales and delivery
Carl Middlehurst
General Counsel and Company Secretary
Joined: February 2019
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.
Andrew Ettinger
Chief Revenue Officer
Joined: May 2023
BSc (Business Marketing)
Andrew oversees Appen’s revenue strategies and driving growth in the field of AI and
has overall responsibility for the company’s Sales & Marketing function. He has more
than 25 years of sales experience in the technology industry.
Andrew’s expertise extends to harnessing the power of data to drive insights and
optimise processes. As the Chief Revenue Officer at Astronomer, he grew the
adoption of their open-source data solution, leading to a remarkable increase
in monthly downloads and revenue. Prior to Astronomer, he served as the VP of Sales
at Pivotal Software. Under his leadership, the company achieved three consecutive
years of significant revenue growth, fuelling digital transformations for Fortune 500
companies in various sectors.
Brian Haskett
SVP Client management and operations
Joined: March 2023
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.
Roc Tian
SVP and General Manager,
China, Japan and Korea
Joined: August 2019
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.
Helen Giddings
VP Client delivery
Joined: August 2020
BA (Psychology)
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 Page
VP Client delivery, strategic accounts
Joined: April 2012
BA (Hons)
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.
56
Appen 2023 Annual Report
57
Corporate Services (continued)
Sales and delivery (continued)
Governance
Sales and delivery
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.
Andrew Ettinger
Chief Revenue Officer
Joined: May 2023
BSc (Business Marketing)
Andrew oversees Appen’s revenue strategies and driving growth in the field of AI and
has overall responsibility for the company’s Sales & Marketing function. He has more
than 25 years of sales experience in the technology industry.
Andrew’s expertise extends to harnessing the power of data to drive insights and
optimise processes. As the Chief Revenue Officer at Astronomer, he grew the
adoption of their open-source data solution, leading to a remarkable increase
in monthly downloads and revenue. Prior to Astronomer, he served as the VP of Sales
at Pivotal Software. Under his leadership, the company achieved three consecutive
years of significant revenue growth, fuelling digital transformations for Fortune 500
companies in various sectors.
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.
Roc Tian
SVP and General Manager,
China, Japan and Korea
Joined: August 2019
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.
Helen Giddings
VP Client delivery
Joined: August 2020
BA (Psychology)
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 Page
VP Client delivery, strategic accounts
Joined: April 2012
BA (Hons)
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.
56
Appen 2023 Annual Report
57
Directors’
report
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 2023.
Directors
The Directors of the Company during the financial year and up to date of this report were as follows:
Richard Freudenstein – Chair
Ryan Kolln – CEO and Managing Director from 5 February 2024
Armughan Ahmad – CEO, President and Managing Director (appointed CEO & President 9 January 2023
and appointed Managing Director 25 January 2023; all appointments ceased 5 February 2024)
Stuart Davis
Stephen Hasker
Vanessa Liu
Robin Low
Lynn Mickleburgh
Sithumini (Mini) Peiris
Changes in Chief Financial Officer
Justin Miles was appointed Deputy Chief Financial Officer on 26 June 2023 and acted as Interim Chief Financial Officer from
1 August 2023.
Kevin Levine was Chief Financial Officer until 1 May 2023. Kevin Levine was replaced by Helen Johnson on 1 May 2023
who resigned for personal reasons effective 31 July 2023. Kevin Levine remained with the business until 1 September 2023
in an advisory capacity.
Principal activities
Appen is a global leader in providing data services for deep learning and generative artificial intelligence (AI) systems. With over
28 years’ of experience in data sourcing, data annotation, and model evaluation by humans, Appen enables many of the world’s
largest technology and Fortune 500 customers globally to launch innovative AI systems.
Our expertise includes a global crowd of more than one million skilled contractors who speak over 500 languages1, in over
200 countries2, as well as our advanced 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.
Appen was founded in 1996 and listed on the Australian Securities Exchange on 7 January 2015. The Group has evolved
significantly since then, from a language data service provider to become a leading provider of deep learning and generative
AI data and tools.
expense and excluded from underlying EBITDA for FY24.
Appointment of Chief Executive Officer
Appen has customers and operations globally, and currently has five 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
and Managing Director.
technology customers;
• Enterprise: responsible for leveraging our product suite and AI-driven automation to efficiently grow revenue outside
of Global customers to serve new customers as they invest in AI;
• Government: responsible for serving the emerging AI needs of Government;
• China: responsible for capturing share in the high growth market in China; and
• Quadrant: in September 2021, Appen acquired Quadrant Global Pte Ltd (“Quadrant”), a global leader in mobile location
and Point-of-Interest (POI) data, thus expanding our addressable market, product offering and data annotation capabilities.
1 Self-reported.
2 Self-reported, includes territories.
58
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 also includes revenue derived using Quadrant’s geolocation and POI data capabilities. New
Markets customers benefit from our high-quality data collection, annotation and evaluation products, coupled with the provision
of at-scale crowd management with Appen Connect 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.
Dividends
No dividends have been declared or paid during the year.
Non-cash asset impairment
Following a review of the value of the Group’s cash generating units (CGU) and of the carrying value of its assets in accordance
with the relevant accounting standards, a non-cash, pre-tax impairment charge of $69.2 million was booked for the year ended
31 December 2023.
The carrying value of non-goodwill assets attributable to the Global Services CGU was reduced by $16.1 million and the carrying
value of Goodwill was reduced by $53.1 million. The impairment charge is non-cash related and is a non-operating item.
Matters subsequent to the end of the year
Material customer loss
On 22 January 2024, the Board announced that Appen received notification on Saturday, 20 January 2024 AEDT from a material
customer, Google LLC, that as part of a strategic review process it will be terminating its global inbound services contract
with Appen, resulting in the cessation of all projects with Appen by 19 March 2024. Appen had no prior knowledge of Google’s
decision to terminate the contract.
Revenue recognised for the year ended 31 December 2023 relating to Google LLC was $82.8 million at 26% gross margin.
Gross margin refers to revenue less crowd expenses.
Implementation of cost saving measures
On 12 February 2024, the Board announced that Appen will implement measures to achieve $13.5 million in annualised cost
savings. The cost initiatives represent direct and indirect costs associated with the delivery of Google LLC projects.
Appen expects to complete 80% of the cost initiatives by March 2024 and the remainder by June 2024. The bulk of the costs
are direct costs, however indirect costs have been further scrutinised resulting in the eventual closure of the Toronto and
Bellevue offices in North America.
The first full year benefit of these cost savings is expected to be realised in FY25. The one-off costs associated with implementing
the cost reduction initiatives are expected to be approximately $1.5 million to $2.5 million and will be reported as a non recurring
On 5 February 2024, Appen announced the appointment of Ryan Kolln, formerly the Chief Operating Officer (COO) as CEO
Armughan Ahmad stepped down from his role as CEO, President and Managing Director on 5 February 2024. Mr Ahmad
will receive his statutory entitlements and payment in lieu of notice (12 months – US$600,000).
Mr Ahmad’s LTI grant was forfeited upon his termination. The board exercised its discretion and no STI was awarded
to Mr Ahmad. However, Mr Ahmad’s share-based sign-on bonus will remain on-foot and continue to vest in accordance
with the terms of this contract.
Other than the above, 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 pursue its strategy to return to profitability and remains committed to sizing its cost base in line with
the revenue opportunity. Appen’s strategy and FY24 priorities can be found in the financial value driver on page 30.
Appen 2023 Annual Report
59
Directors’
report
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 2023.
The Directors of the Company during the financial year and up to date of this report were as follows:
Richard Freudenstein – Chair
Ryan Kolln – CEO and Managing Director from 5 February 2024
Armughan Ahmad – CEO, President and Managing Director (appointed CEO & President 9 January 2023
and appointed Managing Director 25 January 2023; all appointments ceased 5 February 2024)
Directors
Stuart Davis
Stephen Hasker
Vanessa Liu
Robin Low
Lynn Mickleburgh
Sithumini (Mini) Peiris
1 August 2023.
in an advisory capacity.
Principal activities
Changes in Chief Financial Officer
Justin Miles was appointed Deputy Chief Financial Officer on 26 June 2023 and acted as Interim Chief Financial Officer from
Kevin Levine was Chief Financial Officer until 1 May 2023. Kevin Levine was replaced by Helen Johnson on 1 May 2023
who resigned for personal reasons effective 31 July 2023. Kevin Levine remained with the business until 1 September 2023
Appen is a global leader in providing data services for deep learning and generative artificial intelligence (AI) systems. With over
28 years’ of experience in data sourcing, data annotation, and model evaluation by humans, Appen enables many of the world’s
largest technology and Fortune 500 customers globally to launch innovative AI systems.
Our expertise includes a global crowd of more than one million skilled contractors who speak over 500 languages1, in over
200 countries2, as well as our advanced 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.
Appen was founded in 1996 and listed on the Australian Securities Exchange on 7 January 2015. The Group has evolved
significantly since then, from a language data service provider to become a leading provider of deep learning and generative
AI data and tools.
technology customers;
Appen has customers and operations globally, and currently has five 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
• Enterprise: responsible for leveraging our product suite and AI-driven automation to efficiently grow revenue outside
of Global customers to serve new customers as they invest in AI;
• Government: responsible for serving the emerging AI needs of Government;
• China: responsible for capturing share in the high growth market in China; and
• Quadrant: in September 2021, Appen acquired Quadrant Global Pte Ltd (“Quadrant”), a global leader in mobile location
and Point-of-Interest (POI) data, thus expanding our addressable market, product offering and data annotation capabilities.
1 Self-reported.
2 Self-reported, includes territories.
58
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 also includes revenue derived using Quadrant’s geolocation and POI data capabilities. New
Markets customers benefit from our high-quality data collection, annotation and evaluation products, coupled with the provision
of at-scale crowd management with Appen Connect 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.
Dividends
No dividends have been declared or paid during the year.
Non-cash asset impairment
Following a review of the value of the Group’s cash generating units (CGU) and of the carrying value of its assets in accordance
with the relevant accounting standards, a non-cash, pre-tax impairment charge of $69.2 million was booked for the year ended
31 December 2023.
The carrying value of non-goodwill assets attributable to the Global Services CGU was reduced by $16.1 million and the carrying
value of Goodwill was reduced by $53.1 million. The impairment charge is non-cash related and is a non-operating item.
Matters subsequent to the end of the year
Material customer loss
On 22 January 2024, the Board announced that Appen received notification on Saturday, 20 January 2024 AEDT from a material
customer, Google LLC, that as part of a strategic review process it will be terminating its global inbound services contract
with Appen, resulting in the cessation of all projects with Appen by 19 March 2024. Appen had no prior knowledge of Google’s
decision to terminate the contract.
Revenue recognised for the year ended 31 December 2023 relating to Google LLC was $82.8 million at 26% gross margin.
Gross margin refers to revenue less crowd expenses.
Implementation of cost saving measures
On 12 February 2024, the Board announced that Appen will implement measures to achieve $13.5 million in annualised cost
savings. The cost initiatives represent direct and indirect costs associated with the delivery of Google LLC projects.
Appen expects to complete 80% of the cost initiatives by March 2024 and the remainder by June 2024. The bulk of the costs
are direct costs, however indirect costs have been further scrutinised resulting in the eventual closure of the Toronto and
Bellevue offices in North America.
The first full year benefit of these cost savings is expected to be realised in FY25. The one-off costs associated with implementing
the cost reduction initiatives are expected to be approximately $1.5 million to $2.5 million and will be reported as a non recurring
expense and excluded from underlying EBITDA for FY24.
Appointment of Chief Executive Officer
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 his role as CEO, President and Managing Director on 5 February 2024. Mr Ahmad
will receive his statutory entitlements and payment in lieu of notice (12 months – US$600,000).
Mr Ahmad’s LTI grant was forfeited upon his termination. The board exercised its discretion and no STI was awarded
to Mr Ahmad. However, Mr Ahmad’s share-based sign-on bonus will remain on-foot and continue to vest in accordance
with the terms of this contract.
Other than the above, 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 pursue its strategy to return to profitability and remains committed to sizing its cost base in line with
the revenue opportunity. Appen’s strategy and FY24 priorities can be found in the financial value driver on page 30.
Appen 2023 Annual Report
59
Directors' report
for the year ended 31 December 2023
Directors' report
for the year ended 31 December 2023
Board and Committee meetings
Details of Board and Committee meetings held during the year and individual directors’ attendance at these meetings
is summarised as follows:
Richard Freudenstein
Robin Low
Steve Hasker
Vanessa Liu
Stuart Davis
Lynn Mickleburgh
Sithumini (Mini) Peiris
Armughan Ahmad 1
Board
Audit and Risk Management
Committee
People and Culture
Committee
A
13
13
13
13
13
13
13
12
B
13
13
10
13
12
12
13
12
A
–
5
–
5
5
–
–
–
B
–
5
–
5
5
–
–
–
A
4
–
4
–
–
4
4
–
B
4
–
4
–
–
4
3
–
A: Meetings eligible to attend.
B: Meetings attended.
1 Appointed as a director on 25 January 2023 and resigned on 05 February 2024.
Company Secretary
Carl Middlehurst continues to act as the Company Secretary for Appen.
Shares issued on the exercise of performance rights
1,289,882 (2022: 371,440) ordinary shares of the Company were issued on the exercise of performance rights during the year
ended 31 December 2023.
Shares under performance rights
Unissued ordinary shares of Appen Limited under performance rights at the 31 December 2023 are as follows:
Plan
2019
2020
2021
2022
2023
Total
Number of
rights
723
16,603
403,188
925,051
11,919,817
13,265,382
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.
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 86 of the report.
During the year, the Group’s auditor KPMG performed certain non-audit services in relation to transfer pricing and financial due
diligence advisory services. 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.
60
Appen 2023 Annual Report
61
Directors' report
for the year ended 31 December 2023
Directors' report
for the year ended 31 December 2023
Board and Committee meetings
is summarised as follows:
Details of Board and Committee meetings held during the year and individual directors’ attendance at these meetings
Board
Committee
Committee
Audit and Risk Management
People and Culture
A
13
13
13
13
13
13
13
12
B
13
13
10
13
12
12
13
12
A
–
5
–
5
5
–
–
–
B
–
5
–
5
5
–
–
–
A
4
–
4
–
–
4
4
–
B
4
–
4
–
–
4
3
–
1 Appointed as a director on 25 January 2023 and resigned on 05 February 2024.
Company Secretary
Carl Middlehurst continues to act as the Company Secretary for Appen.
Shares issued on the exercise of performance rights
1,289,882 (2022: 371,440) ordinary shares of the Company were issued on the exercise of performance rights during the year
ended 31 December 2023.
Shares under performance rights
Unissued ordinary shares of Appen Limited under performance rights at the 31 December 2023 are as follows:
Richard Freudenstein
Robin Low
Steve Hasker
Vanessa Liu
Stuart Davis
Lynn Mickleburgh
Sithumini (Mini) Peiris
Armughan Ahmad 1
A: Meetings eligible to attend.
B: Meetings attended.
Plan
2019
2020
2021
2022
2023
Total
Number of
rights
723
16,603
403,188
925,051
11,919,817
13,265,382
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.
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.
60
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 86 of the report.
During the year, the Group’s auditor KPMG performed certain non-audit services in relation to transfer pricing and financial due
diligence advisory services. 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.
Appen 2023 Annual Report
61
Remuneration
report
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 2023.
2023 performance
FY23 was a challenging year for Appen as the tech
slowdown persisted. These conditions proved far more
challenging than expected resulting in a slowdown
in spending by some of our largest customers as they
continued to cut costs. As a result, Appen’s FY23 group
operating revenue decreased 29.7% to $273.0 million
and the company recorded an underlying EBITDA loss
(excluding foreign exchange) of ($20.4 million), compared
to underlying EBITDA (excluding foreign exchange)
of $13.6 million in FY22.
While Appen saw green shoots in its generative AI product
offerings, these projects remain small and have not offset
the decline in the company’s deep learning business.
In line with Appen’s focus on operational rigour, the group
delivered a $60 million cost savings program, with the
first full year benefit of these cost savings expected
to be realised in FY24. This enabled Appen to achieve its
cash EBITDA profitability objective in December 2023.
Appen also completed a fully underwritten ~A$60 million
equity raising in June 2023 and a second fully underwritten
~A$30 million equity raising in December 2023 to support
the company’s strategy refresh.
Key Management Personnel (KMP) changes
in FY23 and prior to the reporting date
On 15 December 2022, Appen announced the appointment
of Armughan Ahmad as Chief Executive Officer (CEO),
President and Managing Director. Mr Ahmad’s formal
commencement date was 9 January 2023. Mr Ahmad’s
LTI and sign-on bonus were approved by shareholders
at Appen’s 2023 AGM.
On 5 February 2024, Appen announced the appointment
of Ryan Kolln, formerly the Chief Operating Officer (COO)
as CEO and Managing Director. Mr Ahmad stepped down
from this role and from that date ceased to be a KMP.
The FY23 Remuneration Report reports on Mr Ahmad’s
remuneration arrangements during the time he was CEO
and Mr Kolln’s remuneration arrangements during the time
he was COO.
Details of Mr Ahmad’s outgoing CEO remuneration
arrangements and Mr Kolln’s incoming CEO remuneration
arrangements can be found on page 78 under Executive
KMP service contracts.
In addition, Kevin Levine stepped down as CFO on 1 May 2023
and remained with Appen as an advisor to the incoming
CFO, Helen Johnson, until 1 September 2023 to support
a smooth transition. Ms Johnson has also resigned from
her role as CFO after three months of service. Justin Miles
stepped in as the interim CFO from 1 August 2023. Details
of Mr Levine and Ms Johnson’s outgoing remuneration
arrangements can also be found on page 79 under
Executive KMP service contracts.
2023 remuneration outcomes
A summary of remuneration outcomes for FY23
is as follows:
Short term incentive (STI) outcomes
During the FY23 financial year, two KMP (the interim Chief
Financial Officer and Chief Operating Officer) received
an STI of 10.6% of maximum with respect to exceeding
the challenging threshold targets set for some of the
non-financial customer NPS and employee engagement
metrics (weighted 10% each). No STI was paid in relation
to the crowd NPS metric (weighted 10%) or the 70%
financial metrics. Appen will always regard its financial
outcomes as paramount, however the non-financial metrics
associated with customers, crowd and employees are
important. We view that creating a great experience for our
customers, our crowd and our employees is inherent to our
long term achievement of strategic objectives and create
sustainable value. Accordingly, the Board elected to fund
the proportional amount of STI relevant to the achievement
of outperformance on customer NPS and sustained
employee engagement. The STI award was deemed
appropriate, given the achievement of high customer
NPS above the challenging target set and the fact that
the company was able to maintain employee engagement
through a challenging period. The former CEO, Mr Ahmad
did not receive any STI.
Long term incentive (LTI) outcomes
With respect to the 2021 Executive Award (tranche 3), the
relevant performance condition of 20% UBEPS growth has
not been met in FY23. The share based payment expense
in relation to this tranche has been reversed.
Non-executive director fees
Non-executive director fees remained unchanged in FY23
and no change is proposed for FY24.
2023 remuneration framework update
Prior to the start of FY23, the Board conducted a review
of the effectiveness of Appen’s remuneration framework
with specific focus on the STI and LTI plans, with the aim
of ensuring a simple and transparent design and to ensure
continued alignment with our strategic objectives.
The Board concluded that:
• The STI plan, including the mix of financial and
non-financial measures remains fit for purpose,
providing sound alignment of management
against sustainable long term success of Appen’s
strategic objectives.
•
In 2024, Appen intends to increase the STI weighting
of financial performance from 70% to 80%. As a result
Appen’s non-financial metrics will received an STI
weighting of 20%, down from 30%.
• A more appropriate LTI hurdle would provide greater
alignment to our business strategy and shareholder
outcomes in addition to a more simple and transparent
design to help participants focus and be accountable
to our shareholders.
Other than the updated performance hurdle, Appen’s LTI
schemes remain unchanged from FY22. The Company
continues to provide two LTI schemes:
• The Core Executive LTI scheme which is 100%
performance and service based, with all LTI vesting
at the end of year three, subject to meeting the aTSR
performance metric (which was applicable to the CEO
and CFO roles in FY23); and
• The Global Executive LTI scheme (applicable to all
other senior management) which allows us to compete
for talent in the highly competitive technology sector
across multiple countries. The Global Executive LTI
scheme has a performance component (50%) that
aligns with the Core Executive LTI scheme, as well
as a time-based component (50%). The time-based
component vests in three equal tranches annually
over a three-year period. The annual vesting of the
time-based component of LTI ensures Appen remains
competitive in the varied geographical markets
in which executives reside, where often LTI vests
annually, quarterly, or even monthly for many global
technology companies.
In FY23 the LTI performance hurdle was updated to a single
Looking ahead
metric hurdle, with shareholder alignment and simplicity
in mind. The updated single metric hurdle is now Absolute
Total Shareholder Return. This ensures that awards only
vest when Appen’s share price performance has been
strong over the longer term.
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
remuneration structure, framework, and outcomes with
sustainable shareholder value creation, while attracting and
• Absolute TSR (aTSR) is defined as growth in the price
retaining talent in the highly competitive North American
of shares (modified to account for capital adjustments
and Australian technology markets.
The Board is committed to an ongoing review of executive
remuneration arrangements given the commencement
of the new CEO, Mr Kolln, 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.
aTSR provides a comprehensive and transparent
Yours sincerely
where appropriate) together with the value of the
dividends over the performance period, assuming
that all those dividends are re-invested into new shares.
The aTSR will be measured over the three-year vesting
period. The 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,
gauge of a company’s overall financial performance,
encouraging executives to prioritise strategic decisions
that contribute to the company’s long-term success.
In shifting to aTSR, we not only ensure that executives
are incentivised to drive revenue and earnings, but also
that they holistically contribute to sustainable value
creation, which better aligns their interests more closely
with shareholder goals.
Stephen Hasker
Chair of the People and Culture Committee
62
Appen 2023 Annual Report
63
Remuneration
report
(excluding foreign exchange) of ($20.4 million), compared
Short term incentive (STI) outcomes
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 2023.
2023 performance
FY23 was a challenging year for Appen as the tech
slowdown persisted. These conditions proved far more
challenging than expected resulting in a slowdown
in spending by some of our largest customers as they
continued to cut costs. As a result, Appen’s FY23 group
operating revenue decreased 29.7% to $273.0 million
and the company recorded an underlying EBITDA loss
to underlying EBITDA (excluding foreign exchange)
of $13.6 million in FY22.
While Appen saw green shoots in its generative AI product
offerings, these projects remain small and have not offset
the decline in the company’s deep learning business.
In line with Appen’s focus on operational rigour, the group
delivered a $60 million cost savings program, with the
first full year benefit of these cost savings expected
to be realised in FY24. This enabled Appen to achieve its
cash EBITDA profitability objective in December 2023.
Appen also completed a fully underwritten ~A$60 million
equity raising in June 2023 and a second fully underwritten
~A$30 million equity raising in December 2023 to support
the company’s strategy refresh.
Key Management Personnel (KMP) changes
in FY23 and prior to the reporting date
On 15 December 2022, Appen announced the appointment
of Armughan Ahmad as Chief Executive Officer (CEO),
President and Managing Director. Mr Ahmad’s formal
commencement date was 9 January 2023. Mr Ahmad’s
LTI and sign-on bonus were approved by shareholders
On 5 February 2024, Appen announced the appointment
of Ryan Kolln, formerly the Chief Operating Officer (COO)
as CEO and Managing Director. Mr Ahmad stepped down
from this role and from that date ceased to be a KMP.
The FY23 Remuneration Report reports on Mr Ahmad’s
remuneration arrangements during the time he was CEO
and Mr Kolln’s remuneration arrangements during the time
he was COO.
Details of Mr Ahmad’s outgoing CEO remuneration
arrangements and Mr Kolln’s incoming CEO remuneration
arrangements can be found on page 78 under Executive
KMP service contracts.
In addition, Kevin Levine stepped down as CFO on 1 May 2023
and remained with Appen as an advisor to the incoming
CFO, Helen Johnson, until 1 September 2023 to support
a smooth transition. Ms Johnson has also resigned from
her role as CFO after three months of service. Justin Miles
stepped in as the interim CFO from 1 August 2023. Details
of Mr Levine and Ms Johnson’s outgoing remuneration
arrangements can also be found on page 79 under
Executive KMP service contracts.
2023 remuneration outcomes
A summary of remuneration outcomes for FY23
is as follows:
During the FY23 financial year, two KMP (the interim Chief
Financial Officer and Chief Operating Officer) received
an STI of 10.6% of maximum with respect to exceeding
the challenging threshold targets set for some of the
non-financial customer NPS and employee engagement
metrics (weighted 10% each). No STI was paid in relation
to the crowd NPS metric (weighted 10%) or the 70%
financial metrics. Appen will always regard its financial
outcomes as paramount, however the non-financial metrics
associated with customers, crowd and employees are
important. We view that creating a great experience for our
customers, our crowd and our employees is inherent to our
long term achievement of strategic objectives and create
sustainable value. Accordingly, the Board elected to fund
the proportional amount of STI relevant to the achievement
of outperformance on customer NPS and sustained
employee engagement. The STI award was deemed
appropriate, given the achievement of high customer
NPS above the challenging target set and the fact that
the company was able to maintain employee engagement
through a challenging period. The former CEO, Mr Ahmad
did not receive any STI.
With respect to the 2021 Executive Award (tranche 3), the
relevant performance condition of 20% UBEPS growth has
not been met in FY23. The share based payment expense
in relation to this tranche has been reversed.
Non-executive director fees
Non-executive director fees remained unchanged in FY23
and no change is proposed for FY24.
at Appen’s 2023 AGM.
Long term incentive (LTI) outcomes
2023 remuneration framework update
Prior to the start of FY23, the Board conducted a review
of the effectiveness of Appen’s remuneration framework
with specific focus on the STI and LTI plans, with the aim
of ensuring a simple and transparent design and to ensure
continued alignment with our strategic objectives.
The Board concluded that:
• The STI plan, including the mix of financial and
non-financial measures remains fit for purpose,
providing sound alignment of management
against sustainable long term success of Appen’s
strategic objectives.
•
In 2024, Appen intends to increase the STI weighting
of financial performance from 70% to 80%. As a result
Appen’s non-financial metrics will received an STI
weighting of 20%, down from 30%.
• A more appropriate LTI hurdle would provide greater
alignment to our business strategy and shareholder
outcomes in addition to a more simple and transparent
design to help participants focus and be accountable
to our shareholders.
In FY23 the LTI performance hurdle was updated to a single
metric hurdle, with shareholder alignment and simplicity
in mind. The updated single metric hurdle is now Absolute
Total Shareholder Return. This ensures that awards only
vest when Appen’s share price performance has been
strong over the longer term.
• Absolute TSR (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.
The aTSR will be measured over the three-year vesting
period. The 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 a company’s overall financial performance,
encouraging executives to prioritise strategic decisions
that contribute to the company’s long-term success.
In shifting to aTSR, we not only ensure that executives
are incentivised to drive revenue and earnings, but also
that they holistically contribute to sustainable value
creation, which better aligns their interests more closely
with shareholder goals.
Other than the updated performance hurdle, Appen’s LTI
schemes remain unchanged from FY22. The Company
continues to provide two LTI schemes:
• The Core Executive LTI scheme which is 100%
performance and service based, with all LTI vesting
at the end of year three, subject to meeting the aTSR
performance metric (which was applicable to the CEO
and CFO roles in FY23); and
• The Global Executive LTI scheme (applicable to all
other senior management) which allows us to compete
for talent in the highly competitive technology sector
across multiple countries. The Global Executive LTI
scheme has a performance component (50%) that
aligns with the Core Executive LTI scheme, as well
as a time-based component (50%). The time-based
component vests in three equal tranches annually
over a three-year period. The annual vesting of the
time-based component of LTI ensures Appen remains
competitive in the varied geographical markets
in which executives reside, where often LTI vests
annually, quarterly, or even monthly for many global
technology companies.
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
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 given the commencement
of the new CEO, Mr Kolln, 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
62
Appen 2023 Annual Report
63
Remuneration report
for the year ended 31 December 2023
Remuneration report
for the year ended 31 December 2023
Who is covered by this report?
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
STATUS
TERM AS KMP
Non-Executive KMP:
Richard Freudenstein
Independent director and non-executive Chair
Full year
Stephen Hasker
Independent non-executive director
Vanessa Liu
Robin Low
Stuart Davis
Independent non-executive director
Independent non-executive director
Independent non-executive director
Lynn Mickleburgh
Independent non-executive director
Sithumini (Mini) Peiris
Independent non-executive director
Full year
Full year
Full year
Full year
Full year
Full year
Executive KMP:
Armughan Ahmad (Canada) 1
Chief Executive Officer (CEO)
and Managing Director
Part year
from 9 January 2023
Kevin Levine (Australia)
Chief Financial Officer (CFO)
Part year
to 30 April 2023
Helen Johnson (United States) Chief Financial Officer (CFO)
Part year
from 1 May 2023 to 31 July 2023
Justin Miles (Australia)
Interim Chief Financial Officer (CFO)
Part year
from 1 August 2023
Ryan Kolln (Canada)
Chief Operating Officer (COO)
Part year
from 25 August 2023
1 Armughan Ahmad commenced as CEO, President, and Managing Director of the Appen Group on 9 January 2023, and was a KMP from this
date. On 5 February 2024, Appen announced the appointment of Ryan Kolln as CEO and Managing Director. Mr Ahmad stepped down from
this role and from that date ceased to be a KMP. Details of Mr Ahmad and Mr Kolln’s remuneration arrangements can be found on page 78
under Executive KMP service contracts.
Our remuneration framework
Link between business strategy and remuneration framework
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 remuneration framework and outcomes are designed to:
• Enhance executive remuneration alignment by linking the Group STI scorecard and LTI measures to Appen’s annual
business plans, long-term growth objectives and strategy which is key to delivering sustainable and superior returns
for shareholders. Exceeding the challenging growth targets set for each of the financial and non-financial metrics is key
to delivery of our strategy. First and foremost, all employees are incentivised to deliver strong and diversified revenue and
underlying EBITDA each year. Employees are also incentivised to ensure that the business is underpinned by delighted
customers and crowd and fully engaged employees. These three non-financial metrics must always be top-of-mind
each and every day for all Appen employees, when communicating with customers, our crowd and each other, as strong
relationships with these three groups will drive future financial growth for Appen.
• Strengthen alignment of executives with shareholders by setting challenging STI and LTI targets; and
• Provide for differentiated remuneration structures that reflect local market practices in North America and Australia and
enable Appen to successfully compete for talent in these highly competitive labour markets.
Our remuneration strategy
and 2023 remuneration principles
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. The key objectives that underpin Appen’s 2023 remuneration framework are as follows:
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
Ensure employees
think and act
like long-term
short and long-term
owners through
Independently
benchmarked
annually against
industry peers
strategy, which is
performance-based
to ensure that
underpinned by, and
pay, challenging
remuneration is
targets, and equity.
appropriate in
dependent upon,
strong financial and
non-financial success.
each of the global
markets in which
Appen operates
and competes with
for talent.
Formalised policy
providing for
Transparency on
metrics, targets,
Board discretion in
assessment, and
outcomes.
relation to malus
and clawback of
both STI and LTI.
64
Appen 2023 Annual Report
65
Remuneration report
for the year ended 31 December 2023
Remuneration report
for the year ended 31 December 2023
Who is covered by this report?
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
STATUS
TERM AS KMP
Non-Executive KMP:
Richard Freudenstein
Independent director and non-executive Chair
Full year
Stephen Hasker
Independent non-executive director
Vanessa Liu
Robin Low
Stuart Davis
Independent non-executive director
Independent non-executive director
Independent non-executive director
Lynn Mickleburgh
Independent non-executive director
Sithumini (Mini) Peiris
Independent non-executive director
Executive KMP:
Full year
Full year
Full year
Full year
Full year
Full year
Armughan Ahmad (Canada) 1
Chief Executive Officer (CEO)
Part year
from 9 January 2023
and Managing Director
Kevin Levine (Australia)
Chief Financial Officer (CFO)
Part year
to 30 April 2023
Helen Johnson (United States) Chief Financial Officer (CFO)
Part year
from 1 May 2023 to 31 July 2023
Justin Miles (Australia)
Interim Chief Financial Officer (CFO)
Part year
from 1 August 2023
Ryan Kolln (Canada)
Chief Operating Officer (COO)
Part year
from 25 August 2023
1 Armughan Ahmad commenced as CEO, President, and Managing Director of the Appen Group on 9 January 2023, and was a KMP from this
date. On 5 February 2024, Appen announced the appointment of Ryan Kolln as CEO and Managing Director. Mr Ahmad stepped down from
this role and from that date ceased to be a KMP. Details of Mr Ahmad and Mr Kolln’s remuneration arrangements can be found on page 78
under Executive KMP service contracts.
Our remuneration framework
Link between business strategy and remuneration framework
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 remuneration framework and outcomes are designed to:
• Enhance executive remuneration alignment by linking the Group STI scorecard and LTI measures to Appen’s annual
business plans, long-term growth objectives and strategy which is key to delivering sustainable and superior returns
for shareholders. Exceeding the challenging growth targets set for each of the financial and non-financial metrics is key
to delivery of our strategy. First and foremost, all employees are incentivised to deliver strong and diversified revenue and
underlying EBITDA each year. Employees are also incentivised to ensure that the business is underpinned by delighted
customers and crowd and fully engaged employees. These three non-financial metrics must always be top-of-mind
each and every day for all Appen employees, when communicating with customers, our crowd and each other, as strong
relationships with these three groups will drive future financial growth for Appen.
• Strengthen alignment of executives with shareholders by setting challenging STI and LTI targets; and
• Provide for differentiated remuneration structures that reflect local market practices in North America and Australia and
enable Appen to successfully compete for talent in these highly competitive labour markets.
Our remuneration strategy
and 2023 remuneration principles
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. The key objectives that underpin Appen’s 2023 remuneration framework are as follows:
Heavy
weighting to
performance-
based pay
Alignment
to creation
of long-term
shareholder
value
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.
Fair and
competitive
to attract
and retain
top talent
globally
Independently
benchmarked
annually against
industry peers
to ensure that
remuneration is
appropriate in
each of the global
markets in which
Appen operates
and competes with
for talent.
Reinforce
responsible
business
practice
Simple
and clear
Formalised policy
providing for
Board discretion in
relation to malus
and clawback of
both STI and LTI.
Transparency on
metrics, targets,
assessment, and
outcomes.
64
Appen 2023 Annual Report
65
Remuneration report
for the year ended 31 December 2023
Remuneration report
for the year ended 31 December 2023
Executive 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 and lead the delivery of our growth strategy.
Structure
Cash salary, superannuation, and additional benefits. Additional benefits
are in the form of Canadian RRSP retirement plan and insurance benefits
provided to Canadian-based executives.
the scope of the executive’s role
the executive’s skills, experience, and qualifications, and
individual performance.
Current year approach and alignment to strategy
Fixed remuneration reflects:
•
•
•
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.
Short-term incentive (STI)
Objective
Linked to challenging performance-related key
annual financial and non-financial metrics, which
are consistent with the execution of our annual
business plans, which focuses on year-on-year
financial success, and long-term strategy,
which is underpinned by both financial and
non-financial success.
Structure
STI are performance-based incentives designed for executives (and
employees) to deliver and outperform key financial and non-financial
metrics to lead to sustainable, superior returns for shareholders.
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. For the purposes
of measuring STI, the performance period is 12 months.
revenue (45%): split 25% total revenue and 20% revenue from non-global customers to incentivise customer diversification,
Current year approach and alignment to strategy
The Group STI scorecard comprises:
•
• underlying EBITDA (UEBITDA) (25%),
• customer net promoter score (NPS) (10%),
• crowd NPS (10%), and
• employee engagement (10%).
These measures directly align to our long-term growth strategy by focusing on revenue and earnings growth, diversified
revenue, 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.
The diagrams below show the timeline for the remuneration arrangements under the Core Executive and Global Executive
Long-term incentive (LTI)
Objective
Incentivise the achievement of long-term
sustainable growth in earnings and shareholder
value, designed to strongly align with
long-term shareholder wealth creation, and
support the attraction and retention of high
performing executives.
Structure
LTI is a form of equity-based compensation that is 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. Appen operates in a dynamic, fast paced and
extremely competitive industry, with executives operating primarily
in North America and Australia. To ensure that the LTI scheme is relevant
and appropriate in the hiring, motivation, and retention of key staff,
the People and Culture Committee undertakes regular reviews of the LTI
practices in both these markets.
Current year approach and alignment to strategy
Appen has two LTI schemes: one for the CEO and CFO (the Core Executive LTI Scheme), and one for all other executives (the
Global Executive LTI scheme) and staff for whom the Company offers a scheme more relevant and competitive to their local
markets, which typically provides vesting on performance and separately on time. The reason for separate LTI schemes is to
remain competitive in the varied markets in which the company operates. LTI is set at relatively quite modest levels, compared
to our competitors in other markets, and annual time-based vesting is critical for us to attract and retain key talent, particularly
as the company competes with other North American technology companies for talent. These North American technology
companies typically offer LTI that vests annually, quarterly, or even monthly and sometimes with no performance hurdles.
While our growth strategy is long-term, the Board considers that LTI, which focuses on the delivery of Absolute Total
Shareholder Return over a three-year period provides sufficient time for the executives to demonstrate their ability to create
long term sustainable value for shareholders.
Executive KMP remuneration mix (percentage of total remuneration)
The diagram below illustrates the target 2023 remuneration mix (including the target STI opportunity and LTI grant value),
for each Executive KMP that was set at the start of FY23 (or upon the date of appointment in the case of new KMP’s who
Fixed remuneration
STI
Equity-based LTI
Variable remuneration
10%
10%
80% 1
27%
14%
59%
12%
6%
82% 1
43%
17%
40%
23%
11%
66%
For all Executive KMP, there is a heavy skew towards pay-for-performance, leading to lower fixed remuneration (FR)
and higher at-risk variable remuneration, in the form of STI and LTI.
STI % of FR
LTI % FR
100%
50%
50%
40%
50%
833% 1
218%
667% 1
93%
286%
The diagram below shows the vesting timeline for all remuneration payable to CEO1 and CFO.
Core executives:
Vesting timeline
Year 1
2024
Year 2
2025
Year 3
2026
Year 4
2027
Year 5
2028
joined in 2023).
Armughan Ahmad
Kevin Levine
Helen Johnson
Justin Miles
Ryan Kolln
1 Note LTI is a 3 year award.
Armughan Ahmad
Kevin Levine
Helen Johnson
Justin Miles
Ryan Kolln
1 Note LTI in 2023 is a 3 year award.
LTI schemes.
Core Executives:
Year O
2023
FR: Cash
STI: Cash + Deferred equity Deferred equity
LTI: Performance rights (subject to aTSR)
MSR: 100% of FR for CEO, 50% of FR for KMP to be achieved over 5 years
Cash awarded
Equity granted
Equity vests/unrestricted
Global executives:
1 STI deferral is applicable to CEO only.
66
Appen 2023 Annual Report
67
Remuneration report
for the year ended 31 December 2023
Executive remuneration elements
Total fixed remuneration (FR)
Objective
Structure
design and lead the delivery of our growth strategy.
Current year approach and alignment to strategy
Fixed remuneration reflects:
the scope of the executive’s role
the executive’s skills, experience, and qualifications, and
individual performance.
•
•
•
Provide market competitive base salary and
Cash salary, superannuation, and additional benefits. Additional benefits
benefits commensurate with skills and experience
are in the form of Canadian RRSP retirement plan and insurance benefits
to attract the best people around the world to
provided to Canadian-based executives.
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.
Short-term incentive (STI)
Objective
Structure
Linked to challenging performance-related key
STI are performance-based incentives designed for executives (and
annual financial and non-financial metrics, which
employees) to deliver and outperform key financial and non-financial
are consistent with the execution of our annual
metrics to lead to sustainable, superior returns for shareholders.
business plans, which focuses on year-on-year
STI is delivered in the form of an annual cash bonus payment to all
financial success, and long-term strategy,
employees, other than the CEO where 25% of any STI earned will
which is underpinned by both financial and
be deferred into equity with a holding lock of one year. For the purposes
non-financial success.
of measuring STI, the performance period is 12 months.
•
revenue (45%): split 25% total revenue and 20% revenue from non-global customers to incentivise customer diversification,
Current year approach and alignment to strategy
The Group STI scorecard comprises:
• underlying EBITDA (UEBITDA) (25%),
• customer net promoter score (NPS) (10%),
• crowd NPS (10%), and
• employee engagement (10%).
These measures directly align to our long-term growth strategy by focusing on revenue and earnings growth, diversified
revenue, 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
Structure
Incentivise the achievement of long-term
LTI is a form of equity-based compensation that is awarded in the form
sustainable growth in earnings and shareholder
of performance rights. The LTI plan is designed to incentivise and
value, designed to strongly align with
challenge senior management to achieve long-term sustainable growth
long-term shareholder wealth creation, and
in earnings and shareholder value. It also supports the retention of high
support the attraction and retention of high
performing executives. Appen operates in a dynamic, fast paced and
performing executives.
extremely competitive industry, with executives operating primarily
in North America and Australia. To ensure that the LTI scheme is relevant
and appropriate in the hiring, motivation, and retention of key staff,
the People and Culture Committee undertakes regular reviews of the LTI
practices in both these markets.
Current year approach and alignment to strategy
Appen has two LTI schemes: one for the CEO and CFO (the Core Executive LTI Scheme), and one for all other executives (the
Global Executive LTI scheme) and staff for whom the Company offers a scheme more relevant and competitive to their local
markets, which typically provides vesting on performance and separately on time. The reason for separate LTI schemes is to
remain competitive in the varied markets in which the company operates. LTI is set at relatively quite modest levels, compared
to our competitors in other markets, and annual time-based vesting is critical for us to attract and retain key talent, particularly
as the company competes with other North American technology companies for talent. These North American technology
companies typically offer LTI that vests annually, quarterly, or even monthly and sometimes with no performance hurdles.
While our growth strategy is long-term, the Board considers that LTI, which focuses on the delivery of Absolute Total
Shareholder Return over a three-year period provides sufficient time for the executives to demonstrate their ability to create
long term sustainable value for shareholders.
Remuneration report
for the year ended 31 December 2023
Executive KMP remuneration mix (percentage of total remuneration)
The diagram below illustrates the target 2023 remuneration mix (including the target STI opportunity and LTI grant value),
for each Executive KMP that was set at the start of FY23 (or upon the date of appointment in the case of new KMP’s who
joined in 2023).
Armughan Ahmad
Kevin Levine
Helen Johnson
Justin Miles
Ryan Kolln
1 Note LTI is a 3 year award.
Fixed remuneration
STI
Equity-based LTI
Variable remuneration
10%
10%
80% 1
27%
14%
59%
12%
6%
82% 1
43%
17%
40%
23%
11%
66%
For all Executive KMP, there is a heavy skew towards pay-for-performance, leading to lower fixed remuneration (FR)
and higher at-risk variable remuneration, in the form of STI and LTI.
Armughan Ahmad
Kevin Levine
Helen Johnson
Justin Miles
Ryan Kolln
1 Note LTI in 2023 is a 3 year award.
STI % of FR
LTI % FR
100%
50%
50%
40%
50%
833% 1
218%
667% 1
93%
286%
The diagrams below show the timeline for the remuneration arrangements under the Core Executive and Global Executive
LTI schemes.
Core Executives:
Core executives:
The diagram below shows the vesting timeline for all remuneration payable to CEO1 and CFO.
Vesting timeline
Year O
2023
FR: Cash
Year 1
2024
Year 2
2025
Year 3
2026
Year 4
2027
Year 5
2028
STI: Cash + Deferred equity Deferred equity
LTI: Performance rights (subject to aTSR)
MSR: 100% of FR for CEO, 50% of FR for KMP to be achieved over 5 years
Cash awarded
Equity granted
Equity vests/unrestricted
Global executives:
1 STI deferral is applicable to CEO only.
66
Appen 2023 Annual Report
67
Remuneration report
for the year ended 31 December 2023
Remuneration report
for the year ended 31 December 2023
Global Executives:
The diagram below shows the vesting timeline for all remuneration payable to Global Executives (all other executives).
Global executives:
Vesting timeline
Year 1
2024
Year 2
2025
Year 3
2026
Year 4
2027
Year 5
2028
Year 0
2023
FR: Cash
STI: Cash
LTI: Time-based equity
LTI: Time-based equity
LTI: Time-based equity
LTI: Performance rights (subject to aTSR)
Cash awarded
Equity granted
Equity vests/unrestricted
Appen’s five year performance
One of the key principles of the Company’s remuneration framework is to align Executive KMP remuneration outcomes with
the Company’s performance and shareholder returns.
Short-term incentive measures
Long-term incentive measures Shareholder returns
Revenue
Underlying
EBITDA 1
Underlying
basic EPS 1
Underlying
NPAT 1
Share price
at 31 Dec
Dividend
(full year)
(US$’000)
(US$’000)
(US¢ per share)
(US$’000)
(A$)
(A¢ per share)
Payment table for non-financial measures
Executive KMP remuneration detail and outcomes
Short-term incentive (STI)
2023 STI detail
The STI is weighted 70% to financial metrics and 30% to non-financial metrics and such design is critical to the long-term
success of Appen. These metrics were designed to challenge Executive KMP, aligning shareholder interests with executive
remuneration outcomes.
Target STI opportunity for the relevant executives is 0% to 167% of the executive’s fixed remuneration (excluding retirement
and insurance benefits for non-Australian based executives). Maximum STI opportunity is capped at 150% of target for all
executives. Payout for each STI measure is calculated separately subject to meeting threshold targets.
For the 2023 STI plan year, the Board People and Culture Committee took the decision to cap non-financial performance
measures at 100%, rather than 150% as in years prior. In parallel, the Committee took the decision to increase the cap
on financial measures from 150% to 171%, rather than 150% in years prior. The overall impact of these decisions provided
an overall STI plan opportunity to earn from 0% to 150%, which is the same opportunity as in years prior.
Refer to the tables below for details on threshold targets and the associated STI payouts.
Payment table for financial measures
Achievement – % against target
Actual award – % of target payout
Below 90%
90%
100%
120% or more
Below 90%
90%
100% or more
Nil
50%
100%
171%
Nil
50%
100%
The Board has discretion to adjust the level of STI to prevent any inappropriate outcomes, for example, relative to the
shareholder experience.
7
7
,
6
8
4
,
7
5
4
3
9
7
0
,
1
7
6
3
8
3
7 3
3
,
4
4
9
0
2
4
5
,
2
7
5
,
4
0
5
9
7
.
2
4
6
9
.
2
2
4
6
1
0
0
.
1
0
0
.
.
9
0
Achievement – % against target
Actual award – % of target payout
4
4
7
,
2
7
4
,
4
1
2
9
9
6
3
8
8
4
9
3
,
3
7
2
,
1
8
1
2
7
4
,
1
6
5
(
1
8
)
(
3
7
)
(
2
2
,
7
3
9
)
,
(
5
2
8
1
0
)
1
1
,
0
1
7
,
(
2
4
4
4
5
)
1
1
.
1
6
.
2
4
9
2
0
1
9
2
0
2
0
2
0
2
1
2
0
2
2
2
0
2
3
2
0
1
9
2
0
2
0
2
0
2
1
2
0
2
2
2
0
2
3
2
0
1
9
2
0
2
0
2
0
2
1
2
0
2
2
2
0
2
3
2
0
1
9
2
0
2
0
2
0
2
1
2
0
2
2
2
0
2
3
2
0
1
9
2
0
2
0
2
0
2
1
2
0
2
2
.
0
6
3
2
0
2
3
––
2
0
1
9
2
0
2
0
2
0
2
1
2
0
2
2
2
0
2
3
Short-term incentive payments are
linked to revenue and underlying
EBITDA for our KMP and Executives.
Long-term incentive awards are linked
to Absolute Total Shareholder Return
which ensures shareholder alignment
and that awards only vest when
Appen’s share price performance has
been strong over the longer term.
Appen’s FY23 share price
performance reflects challenging
external operating conditions.
Appen did not pay an interim or full
year dividend to ensure appropriate
allocation of capital.
1 Underlying NPAT, EBITDA and EPS excludes impairment losses, restructure costs, transaction costs, inventory losses and acquisition-related
and one-time share-based payments expenses.
68
Appen 2023 Annual Report
69
Remuneration report
for the year ended 31 December 2023
Remuneration report
for the year ended 31 December 2023
Executive KMP remuneration detail and outcomes
Short-term incentive (STI)
2023 STI detail
The STI is weighted 70% to financial metrics and 30% to non-financial metrics and such design is critical to the long-term
success of Appen. These metrics were designed to challenge Executive KMP, aligning shareholder interests with executive
remuneration outcomes.
Target STI opportunity for the relevant executives is 0% to 167% of the executive’s fixed remuneration (excluding retirement
and insurance benefits for non-Australian based executives). Maximum STI opportunity is capped at 150% of target for all
executives. Payout for each STI measure is calculated separately subject to meeting threshold targets.
For the 2023 STI plan year, the Board People and Culture Committee took the decision to cap non-financial performance
measures at 100%, rather than 150% as in years prior. In parallel, the Committee took the decision to increase the cap
on financial measures from 150% to 171%, rather than 150% in years prior. The overall impact of these decisions provided
an overall STI plan opportunity to earn from 0% to 150%, which is the same opportunity as in years prior.
Refer to the tables below for details on threshold targets and the associated STI payouts.
Payment table for financial measures
Achievement – % against target
Actual award – % of target payout
Below 90%
90%
100%
120% or more
Nil
50%
100%
171%
(US$’000)
(US$’000)
(US¢ per share)
(US$’000)
(A$)
(A¢ per share)
Payment table for non-financial measures
Achievement – % against target
Actual award – % of target payout
Below 90%
90%
100% or more
Nil
50%
100%
The Board has discretion to adjust the level of STI to prevent any inappropriate outcomes, for example, relative to the
shareholder experience.
Global Executives:
Global executives:
The diagram below shows the vesting timeline for all remuneration payable to Global Executives (all other executives).
Vesting timeline
Year 1
2024
Year 2
2025
Year 3
2026
Year 4
2027
Year 5
2028
Year 0
2023
FR: Cash
STI: Cash
LTI: Time-based equity
LTI: Time-based equity
LTI: Time-based equity
LTI: Performance rights (subject to aTSR)
Cash awarded
Equity granted
Equity vests/unrestricted
Appen’s five year performance
One of the key principles of the Company’s remuneration framework is to align Executive KMP remuneration outcomes with
the Company’s performance and shareholder returns.
Short-term incentive measures
Long-term incentive measures Shareholder returns
Revenue
Underlying
EBITDA 1
Underlying
basic EPS 1
Underlying
NPAT 1
Share price
at 31 Dec
Dividend
(full year)
7
7
,
6
8
4
7
5
,
4
3
9
7
0
,
1
7
6
3
8
3
7 3
3
4
4
,
9
0
2
4
5
,
2
7
5
4
0
,
5
9
7
2
4
.
6
9
2
2
.
4
6
1
0
.
0
1
0
.
0
9
.
0
4
4
7
,
2
7
4
4
1
2
,
9
9
6
3
8
8
,
4
9
3
3
7
2
,
1
8
1
2
7
4
,
1
6
5
(
1
8
)
(
3
7
)
(
2
2
,
7
3
9
)
(
5
2
,
8
1
0
)
1
1
,
0
1
7
(
2
4
,
4
4
5
)
2
0
1
9
2
0
2
0
2
0
2
1
2
0
2
2
2
0
2
3
2
0
1
9
2
0
2
0
2
0
2
1
2
0
2
2
2
0
2
3
2
0
1
9
2
0
2
0
2
0
2
1
2
0
2
2
2
0
2
3
2
0
1
9
2
0
2
0
2
0
2
1
2
0
2
2
2
0
2
3
2
0
1
9
2
0
2
0
2
0
2
1
2
0
2
2
2
0
1
9
2
0
2
0
2
0
2
1
2
0
2
2
2
0
2
3
––
Short-term incentive payments are
Long-term incentive awards are linked
Appen’s FY23 share price
linked to revenue and underlying
to Absolute Total Shareholder Return
performance reflects challenging
EBITDA for our KMP and Executives.
which ensures shareholder alignment
external operating conditions.
and that awards only vest when
Appen did not pay an interim or full
Appen’s share price performance has
year dividend to ensure appropriate
been strong over the longer term.
allocation of capital.
1 Underlying NPAT, EBITDA and EPS excludes impairment losses, restructure costs, transaction costs, inventory losses and acquisition-related
and one-time share-based payments expenses.
1
1
.
1
6
2
.
4
9
0
.
6
3
2
0
2
3
68
Appen 2023 Annual Report
69
Remuneration report
for the year ended 31 December 2023
Remuneration report
for the year ended 31 December 2023
Performance and 2023 STI outcomes
With respect to the 70% financial metric component, the FY23 revenue target was approximately 17% higher than 2022 actuals,
revenue diversification target 60% higher, and underlying EBITDA 679% higher. The achievement percentage outcomes for
each of the financial metrics was well below the minimum payout threshold of 90%, and as a result no STI was paid with respect
to these metrics.
With respect to the 30% non-financial metric component, customer NPS was set at 36% higher than FY22, crowd NPS 37%
higher and employee engagement was increased by a modest amount given the target would already place the company goal
in the upper quartile range of technology companies.
The executive KMP exceeded the minimum payout threshold for two of the non-financial metrics, being customer and
employee engagement ratings, which were above the 90% minimum threshold for the CEO (Mr Ahmad), interim CFO and COO.
The overall FY23 customer rating was 140% of target and the overall FY23 employee engagement rating was 91.9% of target.
The non-financial metrics are important to ensure that we have customers that have full confidence in Appen to deliver high
quality AI data promptly and ensure that we have crowd workers and employees that are highly engaged, motivated to work
for us, and excited about Appen’s future. Delivering the challenging targets set for non-financial metrics is the key component
to building a long term, financially sustainable business and will assist in exceeding the challenging targets set for the
financial metrics.
Hence, interim CFO, and COO received an STI for exceeding the non-financial metric threshold for customer and employee
engagement rating(s), resulting in a FY23 STI of US$9,779 2 (10.6% of maximum) and US$9,7372 (10.6% of maximum)
respectively. The Board exercised its discretion and did not award an STI to the former CEO (Mr Ahmad). Neither Mr Levine
nor Ms Johnson received a pro-rata award in relation to their contributions to the FY23 STI plan year.
The below table discloses the performance of executive KMP and discloses whether they have met or exceeded the target
or hurdle associated with each financial and non-financial STI scorecard metric.
Metric and weighting
Group revenue
(25%)
Performance
relative to target set Outcome
Below target
Group operating revenue of $273.0 million, was down 29.7% from the
prior year, as challenging macro conditions and a slowdown in tech
spending persisted. This saw Global Services revenue decline by 36.1%
as some of our large Global customers continued to reduce costs and
evaluate their AI strategies. New Markets revenue declined 7.8%, primarily
impacted by lower global product revenue. Excluding Global Product,
New Markets revenue grew 2.2% due higher contributions from China
and Quadrant.
Revenue diversification
(20%)
Below target
Non-Global revenue was 29.3% of total group revenue up from 18.1%
in the prior year.
Group underlying EBITDA
(25%)
Below target
Customer NPS
(10%)
Above target
Group underlying EBITDA of ($24.5 million) was down from $11.0 million
in the prior year, and reflected lower revenue, lower gross margin and
increased costs to support Appen’s strategy refresh.
FY23 customer rating was 140% of target, which was well above the 90%
payout threshold. Above target NPS reflected a high level of customer
satisfaction with Appen’s service offerings and project delivery.
Customers saw the benefit of organisational change at Appen, with the
company’s internal resources and process better aligned and able to pivot
to deliver higher quality project outcomes.
Appen has built trusted relationships with its customers and has
undertaken several initiatives within its quality and engineering teams
to ensure enterprise AI models delivered accurate and timely data for
customers. These initiatives are designed to improve and enhance
Appen’s relationships with its customers even further.
For further information and initiatives undertaken, please refer to the
value drivers’ section of the annual report relating to Technology
processes and systems, and Customer and Brand.
2 Amount reflects STI attributable to their part-year term as KPM for Mr Miles and Mr Kolln.
Metric and weighting
relative to target set Outcome
Performance
Crowd NPS (10%)
Below target
Crowd NPS showed varied results from quarter-to-quarter in FY23.
Employee engagement
Below target
The FY23 Employee engagement rating was 91.9% of target, which was
(10%)
The overall FY23 crowd rating was 51.1% of target, which was below the
90% payout threshold.
Responders raised concerns about the lack of project availability,
duration of projects, amount of pay, support and communication.
To better support our crowd Appen overhauled most of its crowd
facing systems. These enhancements deliver a better user experience,
by providing a more efficient qualification process, without compromising
our trust and safety standards for our customers. Upgrades were also
made to Appen’s communication platform, and a new payment service
with improved functionality and flexibility is being piloted.
For further information and initiatives undertaken, please refer to the
value drivers’ section of the annual report relating to Global Crowd and
Technology systems and processes.
above the 90% payout threshold. Appen recognises that its people are
paramount to the ongoing success of Appen, because highly engaged
and motivated employees are critical to the delivery of higher revenue
and earnings. In FY23, we implemented a number of key initiatives for the
benefit of employees, designed to promote flexibility, choice, teamwork
connections, diversity, and inclusion:
• Continued and deepened the Future Ways of Working Initiative which
has two key elements:
(i) Neighbourhood connections program, focusing on providing
more opportunities for employees that live in the same city, town,
or community to connect and exchange ideas.
(ii) Face-to-Face (F2F) collaboration, which provides employees
and teams with the flexibility to decide how they wish to work
and from where, without prescriptive mandates or policies, while
encouraging in-person teamwork.
• Opened Hyderabad (India) in support of Appen’s global
engineering team.
• Continued pay and promotion transparency initiative, allowing
for maximum opportunity for qualified internal talent to apply
for a role, with greater transparency on what the role is and the
specific requirements.
• Launched Large Language Model (LLM) Learning Foundations
program to support all employees in upskilling in generative AI.
• Launched Objectives and Key Results (OKRs) methodology and
tools throughout Appen to support a culture of accountability,
ownership and alignment to business strategy.
• Launched the Leadership Collaborative, provide a social learning
platform to connect, learn, and grow with other leaders.
• Launched Leadership learning paths and independent coaching
for varied leadership levels, supporting the growth and learning
of leaders across the company.
70
Appen 2023 Annual Report
71
Remuneration report
for the year ended 31 December 2023
Performance and 2023 STI outcomes
With respect to the 70% financial metric component, the FY23 revenue target was approximately 17% higher than 2022 actuals,
revenue diversification target 60% higher, and underlying EBITDA 679% higher. The achievement percentage outcomes for
each of the financial metrics was well below the minimum payout threshold of 90%, and as a result no STI was paid with respect
to these metrics.
With respect to the 30% non-financial metric component, customer NPS was set at 36% higher than FY22, crowd NPS 37%
higher and employee engagement was increased by a modest amount given the target would already place the company goal
in the upper quartile range of technology companies.
The executive KMP exceeded the minimum payout threshold for two of the non-financial metrics, being customer and
employee engagement ratings, which were above the 90% minimum threshold for the CEO (Mr Ahmad), interim CFO and COO.
The overall FY23 customer rating was 140% of target and the overall FY23 employee engagement rating was 91.9% of target.
The non-financial metrics are important to ensure that we have customers that have full confidence in Appen to deliver high
quality AI data promptly and ensure that we have crowd workers and employees that are highly engaged, motivated to work
for us, and excited about Appen’s future. Delivering the challenging targets set for non-financial metrics is the key component
to building a long term, financially sustainable business and will assist in exceeding the challenging targets set for the
financial metrics.
Hence, interim CFO, and COO received an STI for exceeding the non-financial metric threshold for customer and employee
engagement rating(s), resulting in a FY23 STI of US$9,779 2 (10.6% of maximum) and US$9,7372 (10.6% of maximum)
respectively. The Board exercised its discretion and did not award an STI to the former CEO (Mr Ahmad). Neither Mr Levine
nor Ms Johnson received a pro-rata award in relation to their contributions to the FY23 STI plan year.
The below table discloses the performance of executive KMP and discloses whether they have met or exceeded the target
or hurdle associated with each financial and non-financial STI scorecard metric.
Metric and weighting
relative to target set Outcome
Performance
Group revenue
Below target
Group operating revenue of $273.0 million, was down 29.7% from the
prior year, as challenging macro conditions and a slowdown in tech
spending persisted. This saw Global Services revenue decline by 36.1%
as some of our large Global customers continued to reduce costs and
evaluate their AI strategies. New Markets revenue declined 7.8%, primarily
impacted by lower global product revenue. Excluding Global Product,
New Markets revenue grew 2.2% due higher contributions from China
and Quadrant.
in the prior year.
Revenue diversification
Below target
Non-Global revenue was 29.3% of total group revenue up from 18.1%
Group underlying EBITDA
Below target
Group underlying EBITDA of ($24.5 million) was down from $11.0 million
in the prior year, and reflected lower revenue, lower gross margin and
increased costs to support Appen’s strategy refresh.
Customer NPS
Above target
FY23 customer rating was 140% of target, which was well above the 90%
(25%)
(20%)
(25%)
(10%)
payout threshold. Above target NPS reflected a high level of customer
satisfaction with Appen’s service offerings and project delivery.
Customers saw the benefit of organisational change at Appen, with the
company’s internal resources and process better aligned and able to pivot
to deliver higher quality project outcomes.
Appen has built trusted relationships with its customers and has
undertaken several initiatives within its quality and engineering teams
to ensure enterprise AI models delivered accurate and timely data for
customers. These initiatives are designed to improve and enhance
Appen’s relationships with its customers even further.
For further information and initiatives undertaken, please refer to the
value drivers’ section of the annual report relating to Technology
processes and systems, and Customer and Brand.
2 Amount reflects STI attributable to their part-year term as KPM for Mr Miles and Mr Kolln.
Remuneration report
for the year ended 31 December 2023
Metric and weighting
Performance
relative to target set Outcome
Crowd NPS (10%)
Below target
Employee engagement
(10%)
Below target
Crowd NPS showed varied results from quarter-to-quarter in FY23.
The overall FY23 crowd rating was 51.1% of target, which was below the
90% payout threshold.
Responders raised concerns about the lack of project availability,
duration of projects, amount of pay, support and communication.
To better support our crowd Appen overhauled most of its crowd
facing systems. These enhancements deliver a better user experience,
by providing a more efficient qualification process, without compromising
our trust and safety standards for our customers. Upgrades were also
made to Appen’s communication platform, and a new payment service
with improved functionality and flexibility is being piloted.
For further information and initiatives undertaken, please refer to the
value drivers’ section of the annual report relating to Global Crowd and
Technology systems and processes.
The FY23 Employee engagement rating was 91.9% of target, which was
above the 90% payout threshold. Appen recognises that its people are
paramount to the ongoing success of Appen, because highly engaged
and motivated employees are critical to the delivery of higher revenue
and earnings. In FY23, we implemented a number of key initiatives for the
benefit of employees, designed to promote flexibility, choice, teamwork
connections, diversity, and inclusion:
• Continued and deepened the Future Ways of Working Initiative which
has two key elements:
(i) Neighbourhood connections program, focusing on providing
more opportunities for employees that live in the same city, town,
or community to connect and exchange ideas.
(ii) Face-to-Face (F2F) collaboration, which provides employees
and teams with the flexibility to decide how they wish to work
and from where, without prescriptive mandates or policies, while
encouraging in-person teamwork.
• Opened Hyderabad (India) in support of Appen’s global
engineering team.
• Continued pay and promotion transparency initiative, allowing
for maximum opportunity for qualified internal talent to apply
for a role, with greater transparency on what the role is and the
specific requirements.
• Launched Large Language Model (LLM) Learning Foundations
program to support all employees in upskilling in generative AI.
• Launched Objectives and Key Results (OKRs) methodology and
tools throughout Appen to support a culture of accountability,
ownership and alignment to business strategy.
• Launched the Leadership Collaborative, provide a social learning
platform to connect, learn, and grow with other leaders.
• Launched Leadership learning paths and independent coaching
for varied leadership levels, supporting the growth and learning
of leaders across the company.
70
Appen 2023 Annual Report
71
50%
95,894
–
–
–
–
–
–
–
–
–
–
191,788
550,000
50%
275,000
22.5%
15.0%
61,988
42,274
–
–
–
114,128
50%
57,064
–
–
–
–
0% 5
–
0% 5
–
0%
–
0%
–
–
–
–
–
–
–
–
Armughan
Ahmad 1
Ryan
Kolln 1
Justin
Miles 1
Helen
Johnson 1
Kevin
Levine 1
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
CAD
CAD
CAD
CAD
AUD
AUD
USD
USD
AUD
AUD
700,895
100% 700,895
–
–
–
0% 4
–
0%
–
–
–
–
–
165,240
50%
82,620
15.9%
10.6%
13,137
9,737
–
–
–
–
–
–
–
231,333
40%
92,533
15.9%
10.6%
14,713
9,779
Remuneration report
for the year ended 31 December 2023
Remuneration report
for the year ended 31 December 2023
STI outcomes
The STI amounts earned and associated achievement and payout percentages are disclosed in the table below:
Executive
KMP
Currency
Fixed
remuneration 2
STI target
% of fixed
remuneration 3
%
STI target
$
% STI
earned as a
% of target
%
% STI
earned
as a % of
maximum
%
Total STI
earned
$
Total STI
earned
(USD)
$
Total STI
deferred
(USD)
$
Feature
Description
Vesting conditions
The Core Executive LTI scheme is 100% hurdle-based with all LTI vesting in year three, subject
to hurdle achievement and tenure, with no re-testing. This aligns with Australian market practice
and our long-term strategic goals. The Core Executive LTI scheme applies to Mr Ahmad and did
apply to Mr Levine and Ms Johnson.
As mentioned above, the Global Executive LTI scheme is tailored to the North American market
with 50% of rights issued subject to a time-based vesting condition only, that vest annually. The
remaining 50% is subject to the same performance-based hurdles that apply to Core Executives
and these rights may vest after three years, like the Core Executive LTI scheme. It also contains the
continuation of employment service condition. The Global Executive LTI scheme applies to Mr Miles
and Mr Kolln.
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. For the purpose of calculating TSR, the starting
share price was A$2.63 for the FY23 LTI Plan awards. The starting share price was calculated
using the volume weighted average price of a Share over the 20 business days immediately prior
to 31 December 2022. Vesting (if any) of performance-based Rights 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 that vest
TSR is below 190%
TSR is 190%
Nil
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%
The Board retains discretion to alter the Absolute TSR Condition in exceptional circumstances,
including matters outside of management’s influence, to ensure there is no material advantage
or disadvantage that would materially affect achievement of the Absolute TSR Condition.
Performance period
Core Executives (aka the CEO and CFO): 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.
Global Executives: 50% of performance rights granted may vest annually, which is typical for
North American remuneration practices, subject to the achievement of the continuous employment
hurdles. The other 50% of performance rights granted may vest at the end of three years subject
to the achievement of the performance and employment hurdles for grants issued during the year,
like the Core Executive LTI scheme.
Malus and Clawback
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.
1 Part year term as KMP. See table on page 64 for applicable term as KMP.
2 Includes superannuation contributions for Australian executive KMP.
3 Percentage of fixed remuneration (excluding retirement and insurance benefits for US and CA Executive KMP).
4 The Board exercised its discretion and did not award an STI to Mr Ahmad.
5 No pro-rata award given in relation to their contributions to the FY23 STI plan year.
Long term incentives (LTI)
Performance and 2023 LTI outcomes
For performance rights to vest, executive KMP must meet service and performance conditions.
With respect to the 2020 Executive Award (tranche 3), the relevant performance condition of 20% UBEPS growth has not been
met in FY23 and no performance rights have vested for any executive KMP.
With respect to the 2021 Executive Retention Award (tranche 1) and the 2022 Executive Award (Tranche 1), the relevant service
condition has been met in FY23 and performance rights have vested for each eligible executive KMP.
With respect to the 2023 CEO Sign On Bonus Award (tranche 1), the relevant service condition has been met in FY23 and
performance rights have vested.
2023 LTI granted details
The table below outlines key features of both of our LTI schemes.
Feature
Description
Rules applicable
to both LTI schemes
of share rights
Annual grants, with the exception of the CEO, of performance rights (with quantum determined
at Board discretion based on market remuneration analysis).
Performance rights cannot be traded on the ASX and do not have any dividend or voting rights
until they vest and are exercised.
The number of performance rights granted is based on face value (actual share price) rather than
a discounted fair value.
No amount is payable in return for the grant of the performance rights.
No amount is payable in return for the issue or transfer of APX Shares.
Conversion to shares
Australian executives: Rights convert to shares, assuming all the performance and employment
conditions are met once the executive submits a conversion notice.
North American executives: Rights convert to shares on the vesting date, assuming all the
performance and employment conditions are met.
72
Appen 2023 Annual Report
73
Remuneration report
for the year ended 31 December 2023
Remuneration report
for the year ended 31 December 2023
Feature
Description
Vesting conditions
The Core Executive LTI scheme is 100% hurdle-based with all LTI vesting in year three, subject
to hurdle achievement and tenure, with no re-testing. This aligns with Australian market practice
and our long-term strategic goals. The Core Executive LTI scheme applies to Mr Ahmad and did
apply to Mr Levine and Ms Johnson.
As mentioned above, the Global Executive LTI scheme is tailored to the North American market
with 50% of rights issued subject to a time-based vesting condition only, that vest annually. The
remaining 50% is subject to the same performance-based hurdles that apply to Core Executives
and these rights may vest after three years, like the Core Executive LTI scheme. It also contains the
continuation of employment service condition. The Global Executive LTI scheme applies to Mr Miles
and Mr Kolln.
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. For the purpose of calculating TSR, the starting
share price was A$2.63 for the FY23 LTI Plan awards. The starting share price was calculated
using the volume weighted average price of a Share over the 20 business days immediately prior
to 31 December 2022. Vesting (if any) of performance-based Rights 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 that vest
TSR is below 190%
TSR is 190%
Nil
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%
The Board retains discretion to alter the Absolute TSR Condition in exceptional circumstances,
including matters outside of management’s influence, to ensure there is no material advantage
or disadvantage that would materially affect achievement of the Absolute TSR Condition.
Core Executives (aka the CEO and CFO): 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.
Global Executives: 50% of performance rights granted may vest annually, which is typical for
North American remuneration practices, subject to the achievement of the continuous employment
hurdles. The other 50% of performance rights granted may vest at the end of three years subject
to the achievement of the performance and employment hurdles for grants issued during the year,
like the Core Executive LTI scheme.
With respect to the 2021 Executive Retention Award (tranche 1) and the 2022 Executive Award (Tranche 1), the relevant service
Performance period
condition has been met in FY23 and performance rights have vested for each eligible executive KMP.
With respect to the 2023 CEO Sign On Bonus Award (tranche 1), the relevant service condition has been met in FY23 and
Malus and Clawback
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.
72
Appen 2023 Annual Report
73
The STI amounts earned and associated achievement and payout percentages are disclosed in the table below:
STI outcomes
Executive
KMP
Armughan
Ahmad 1
Ryan
Kolln 1
Justin
Miles 1
Helen
Kevin
Levine 1
2023
2022
2023
2022
2023
2022
2023
2023
2022
Johnson 1
2022
CAD
CAD
CAD
CAD
AUD
AUD
USD
USD
AUD
AUD
Fixed
STI target
% of fixed
% STI
% STI
earned
earned as a
as a % of
Total STI
Currency
remuneration 2
remuneration 3
STI target
% of target
maximum
earned
Total STI
earned
(USD)
Total STI
deferred
(USD)
700,895
100% 700,895
165,240
50%
82,620
15.9%
10.6%
13,137
9,737
231,333
40%
92,533
15.9%
10.6%
14,713
9,779
%
–
–
–
–
$
–
–
–
–
%
0% 4
–
–
–
–
%
0%
–
–
–
–
0%
0%
$
–
–
–
–
–
–
–
$
–
–
–
–
–
–
–
191,788
550,000
50%
95,894
0% 5
50%
275,000
22.5%
15.0%
61,988
42,274
114,128
50%
57,064
0% 5
–
–
–
–
$
–
–
–
–
–
–
–
–
–
–
1 Part year term as KMP. See table on page 64 for applicable term as KMP.
2 Includes superannuation contributions for Australian executive KMP.
3 Percentage of fixed remuneration (excluding retirement and insurance benefits for US and CA Executive KMP).
4 The Board exercised its discretion and did not award an STI to Mr Ahmad.
5 No pro-rata award given in relation to their contributions to the FY23 STI plan year.
Long term incentives (LTI)
Performance and 2023 LTI outcomes
For performance rights to vest, executive KMP must meet service and performance conditions.
With respect to the 2020 Executive Award (tranche 3), the relevant performance condition of 20% UBEPS growth has not been
met in FY23 and no performance rights have vested for any executive KMP.
performance rights have vested.
2023 LTI granted details
The table below outlines key features of both of our LTI schemes.
Feature
Description
Rules applicable
Annual grants, with the exception of the CEO, of performance rights (with quantum determined
to both LTI schemes
at Board discretion based on market remuneration analysis).
of share rights
Performance rights cannot be traded on the ASX and do not have any dividend or voting rights
until they vest and are exercised.
a discounted fair value.
The number of performance rights granted is based on face value (actual share price) rather than
No amount is payable in return for the grant of the performance rights.
No amount is payable in return for the issue or transfer of APX Shares.
Conversion to shares
Australian executives: Rights convert to shares, assuming all the performance and employment
conditions are met once the executive submits a conversion notice.
North American executives: Rights convert to shares on the vesting date, assuming all the
performance and employment conditions are met.
As described above, the ex CFO’s LTI is 100% weighted to absolute TSR as part of the Core Executive LTI scheme. The vesting
requirement for other KMP is 50% weighted to annual service (i.e., tenure) conditions over three tranches, with each tranche
vesting annually over a three year period. The remaining 50% is weighted to absolute TSR, consistent with the Core Executive
Exercise
Performance
target
Plan
date
(AUD)
Tranche
measurement
target
date
achieved
condition
date
Expiry
price
Performance
Performance
measurement
Target
Vesting
Vesting
Value
per right
# of
at grant
Fair value
rights
granted
date
at grant
(AUD)
date (AUD)
1 Mar 23 N/A N/A
1
aTSR
190%
31 Dec 25
Pending Employed
Release of
469,038
2.25
1,055,336
Remuneration report
for the year ended 31 December 2023
Remuneration report
for the year ended 31 December 2023
The following awards were granted to executive KMP for the 2023 year.
Executive KMP (Non-CEO)
CEO
The 2023 Chief Executive LTI award for Mr Ahmad represented an upfront long term incentive award for combining 2023,
2024, and 2025 performance years. The grant of performance rights to Mr Ahmad was approved by shareholders at the
Annual General Meeting on 26 May 2023. Mr Ahmad’s LTI grant terminated on 5 February 2024. Mr Ahmad also received
a sign on bonus payable in shares over a 24 month period from 9 January 2023. This grant continues in accordance with his
contractual entitlement.
Plan
Grant
date
Expiry
date
Exercise
price
(AUD)
Tranche
Performance
measurement
Performance
target
2023 SO 9 Jan 23 N/A
N/A
1 -5
Service only N/A
2023 SO 9 Jan 23 N/A
N/A
2023 SO 9 Jan 23 N/A
N/A
2023 SO 9 Jan 23 N/A
N/A
2023 SO 9 Jan 23 N/A
N/A
6
7
8
9
Service only N/A
Service only N/A
Service only N/A
Service only N/A
2023 SO 9 Jan 23 N/A
N/A
10
Service only N/A
2023 SO 9 Jan 23 N/A
N/A
11
Service only N/A
2023 SO 9 Jan 23 N/A
N/A
2023 SO 9 Jan 23 N/A
N/A
2023 SO 9 Jan 23 N/A
N/A
2023 SO 9 Jan 23 N/A
N/A
2023 SO 9 Jan 23 N/A
N/A
2023 SO 9 Jan 23 N/A
N/A
2023 SO 9 Jan 23 N/A
N/A
2023 SO 9 Jan 23 N/A
N/A
12
13
14
15
16
17
18
19
Service only N/A
Service only N/A
Service only N/A
Service only N/A
Service only N/A
Service only N/A
Service only N/A
Service only N/A
2023 SO 9 Jan 23 N/A
N/A
20
Service only N/A
2023 SO 9 Jan 23 N/A
N/A
21
Service only N/A
2023 SO 9 Jan 23 N/A
N/A
22
Service only N/A
2023 SO 9 Jan 23 N/A
N/A
23
Service only N/A
2023 SO 9 Jan 23 N/A
N/A
24
Service only N/A
Performance
target
measurement
date
Target
achieved
Vesting
condition
Vesting
date
Value
per right
at grant
date
(AUD)
# of
rights
granted
Fair value
at grant
date
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Employed
at 9 Jun 23
Employed
at 9 Jul 23
14 Jul 23
230,868
2.67
616,418
14 Jul 23
46,173
2.67
123,282
1 Mar 23 N/A N/A
Service only N/A
Yes
Employed
Release of
31,269
2.25
70,355
Employed
at 9 Aug 23
Release of
23 results
Employed
at 9 Sep 23
Release of
23 results
Employed
at 9 Oct 23
Release of
23 results
Employed
at 9 Nov 23
Release of
23 results
Employed
at 9 Dec 23
Release of
23 results
46,173
2.67
123,282
1 Mar 23 N/A N/A
Service only N/A
Pending Employed
Release of
31,269
2.25
70,355
46,173
2.67
123,282
1 Mar 23 N/A N/A
Service only N/A
Pending Employed
Release of
31,269
2.25
70,355
46,173
2.67
123,282
1 Mar 23 N/A N/A
aTSR
190%
31 Dec 25
Pending Employed
Release of
93,808
2.25
211,068
46,173
2.67
123,282
2023
23 May
N/A N/A
Service only N/A
Yes
Employed
Release of
101,686
2.23
226,760
46,173
2.67
123,282
2023
3 May 23 N/A N/A
Service only N/A
Pending Employed
Release of
101,686
2.23
226,760
Pending Employed
at 9 Jan 24
Release of
23 results
Pending Employed
at 9 Feb 24
Release of
23 results
46,173
2.67
123,282
3 May 23 N/A N/A
Service only N/A
Yes
Employed
Release of
33,895
2.23
75,586
46,173
2.67
123,282
3 May 23 N/A N/A
Service only N/A
Pending Employed
Release of
33,895
2.23
75,586
Pending Employed
at 9 Mar 24
Pending Employed
at 9 Apr 24
Pending Employed
at 9 May 24
Pending Employed
at 9 Jun 24
Pending Employed
at 9 Jul 24
Pending Employed
at 9 Aug 24
Pending Employed
at 9 Sep 24
Pending Employed
at 9 Oct 24
Pending Employed
at 9 Nov 24
Pending Employed
at 9 Dec 24
Pending Employed
at 9 Feb 25
9 Mar 24
46,173
2.67
123,282
3 May 23 N/A N/A
Service only N/A
Pending Employed
Release of
33,895
2.23
75,586
9 Apr 24
46,173
2.67
123,282
3 May 23 N/A N/A
aTSR
190%
31 Dec 25
Pending Employed
Release of
101,687
2.23
226,762
9 May 24
46,173
2.67
123,282
Justin Miles
9 Jun 24
46,173
2.67
123,282
9 Jul 24
46,173
2.67
123,282
9 Aug 24
46,173
2.67
123,282
9 Sep 24
46,173
2.67
123,282
9 Oct 24
46,173
2.67
123,282
9 Nov 24
46,173
2.67
123,282
9 Dec 24
46,173
2.67
123,282
9 Jan 25
46,173
2.67
123,282
26 Sep 23N/A N/A
Service only N/A
Yes
Employed
Release of
21,887
1.23
26,921
26 Sep 23N/A N/A
Service only N/A
Pending Employed
Release of
21,887
1.23
26,921
26 Sep 23N/A N/A
Service only N/A
Pending Employed
Release of
21,756
1.23
26,760
26 Sep 23N/A N/A
aTSR
190%
31 Dec 25
Pending Employed
Release of
65,529
1.23
80,601
2023
26 Sep 23N/A N/A
Service only N/A
Yes
Employed
Release of
121,669
1.23
149,653
2023
26 Sep 23N/A N/A
Service only N/A
Pending Employed
Release of
121,669
1.23
149,653
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
at 1 Jan 26
25 results
at 1 Jan 24
23 results
at 1 Jan 25
24 results
at 1 Jan 26
25 results
at 1 Jan 26
25 results
at 1 Jan 24
23 results
at 1 Jan 25
24 results
at 1 Jan 24
23 results
at 1 Jan 25
24 results
at 1 Jan 26
25 results
at 1 Jan 26
25 results
at 1 Jan 24
23 results
at 1 Jan 25
24 results
at 1 Jan 26
25 results
at 1 Jan 26
25 results
at 1 Jan 24
23 results
at 1 Jan 25
24 results
2023
One-time
9 Jan 23 N/A
N/A
One-
time
aTSR
190%
31 Dec 25
Pending Employed
at 1 Jan 26
Release of
25 results
2,770,387
2.67
7,396,933
LTI scheme.
Grant
date
Kevin Levine
Ryan Kolln
One-time
23
One-time
2023
Exec
2023
Exec
2023
Exec
2023
Exec
2023
Exec
2023
Exec
2023
Exec
2023
Exec
2023
Exec
2023
Exec
2023
Exec
2023
Exec
2023
Exec
Retention
Retention
1
2
3
4
1
2
1
2
3
4
1
2
3
4
1
2
74
Appen 2023 Annual Report
75
Remuneration report
for the year ended 31 December 2023
Remuneration report
for the year ended 31 December 2023
The following awards were granted to executive KMP for the 2023 year.
Executive KMP (Non-CEO)
As described above, the ex CFO’s LTI is 100% weighted to absolute TSR as part of the Core Executive LTI scheme. The vesting
requirement for other KMP is 50% weighted to annual service (i.e., tenure) conditions over three tranches, with each tranche
vesting annually over a three year period. The remaining 50% is weighted to absolute TSR, consistent with the Core Executive
LTI scheme.
Exercise
price
(AUD)
Expiry
date
Tranche
Performance
measurement
Performance
target
Performance
target
measurement
date
Target
achieved
Vesting
condition
Vesting
date
Value
per right
at grant
date
(AUD)
# of
rights
granted
Fair value
at grant
date (AUD)
Plan
Grant
date
Kevin Levine
2023
Exec
1 Mar 23 N/A N/A
1
aTSR
190%
31 Dec 25
Pending Employed
at 1 Jan 26
Release of
25 results
469,038
2.25
1,055,336
Ryan Kolln
2023
Exec
2023
Exec
2023
Exec
2023
Exec
1 Mar 23 N/A N/A
1 Mar 23 N/A N/A
1 Mar 23 N/A N/A
1 Mar 23 N/A N/A
2023
One-time
23 May
23
N/A N/A
2023
One-time
3 May 23 N/A N/A
2023
Exec
2023
Exec
2023
Exec
2023
Exec
3 May 23 N/A N/A
3 May 23 N/A N/A
3 May 23 N/A N/A
3 May 23 N/A N/A
2023 SO 9 Jan 23 N/A
N/A
Service only N/A
Pending Employed
9 May 24
46,173
2.67
123,282
Justin Miles
2023
Exec
2023
Exec
2023
Exec
2023
Exec
26 Sep 23N/A N/A
26 Sep 23N/A N/A
26 Sep 23N/A N/A
26 Sep 23N/A N/A
2023
Retention
2023
Retention
26 Sep 23N/A N/A
26 Sep 23N/A N/A
1
2
3
4
1
2
1
2
3
4
1
2
3
4
1
2
Service only N/A
Service only N/A
Service only N/A
N/A
N/A
N/A
aTSR
190%
31 Dec 25
Service only N/A
Service only N/A
Service only N/A
Service only N/A
Service only N/A
N/A
N/A
N/A
N/A
N/A
aTSR
190%
31 Dec 25
Yes
Employed
at 1 Jan 24
Release of
23 results
Pending Employed
at 1 Jan 25
Release of
24 results
Pending Employed
at 1 Jan 26
Release of
25 results
Pending Employed
at 1 Jan 26
Release of
25 results
Yes
Employed
at 1 Jan 24
Release of
23 results
Pending Employed
at 1 Jan 25
Release of
24 results
Yes
Employed
at 1 Jan 24
Release of
23 results
Pending Employed
at 1 Jan 25
Release of
24 results
Pending Employed
at 1 Jan 26
Release of
25 results
Pending Employed
at 1 Jan 26
Release of
25 results
31,269
2.25
70,355
31,269
2.25
70,355
31,269
2.25
70,355
93,808
2.25
211,068
101,686
2.23
226,760
101,686
2.23
226,760
33,895
2.23
75,586
33,895
2.23
75,586
33,895
2.23
75,586
101,687
2.23
226,762
Service only N/A
Service only N/A
Service only N/A
N/A
N/A
N/A
aTSR
190%
31 Dec 25
Service only N/A
Service only N/A
N/A
N/A
Yes
Employed
at 1 Jan 24
Release of
23 results
Pending Employed
at 1 Jan 25
Release of
24 results
Pending Employed
at 1 Jan 26
Release of
25 results
Pending Employed
at 1 Jan 26
Release of
25 results
Yes
Employed
at 1 Jan 24
Release of
23 results
Pending Employed
at 1 Jan 25
Release of
24 results
21,887
1.23
26,921
21,887
1.23
26,921
21,756
1.23
26,760
65,529
1.23
80,601
121,669
1.23
149,653
121,669
1.23
149,653
CEO
The 2023 Chief Executive LTI award for Mr Ahmad represented an upfront long term incentive award for combining 2023,
2024, and 2025 performance years. The grant of performance rights to Mr Ahmad was approved by shareholders at the
Annual General Meeting on 26 May 2023. Mr Ahmad’s LTI grant terminated on 5 February 2024. Mr Ahmad also received
a sign on bonus payable in shares over a 24 month period from 9 January 2023. This grant continues in accordance with his
contractual entitlement.
Plan
Grant
date
Expiry
price
date
(AUD)
Performance
Performance
measurement
Target
Vesting
Vesting
Tranche
measurement
target
achieved
condition
date
Exercise
Performance
target
Value
per right
# of
at grant
Fair value
rights
granted
date
(AUD)
at grant
date
2023 SO 9 Jan 23 N/A
N/A
1 -5
Service only N/A
Yes
Employed
14 Jul 23
230,868
2.67
616,418
2023 SO 9 Jan 23 N/A
N/A
Service only N/A
Yes
Employed
14 Jul 23
46,173
2.67
123,282
2023 SO 9 Jan 23 N/A
N/A
Service only N/A
Yes
Employed
Release of
46,173
2.67
123,282
2023 SO 9 Jan 23 N/A
N/A
Service only N/A
Yes
Employed
Release of
46,173
2.67
123,282
2023 SO 9 Jan 23 N/A
N/A
Service only N/A
Yes
Employed
Release of
46,173
2.67
123,282
2023 SO 9 Jan 23 N/A
N/A
10
Service only N/A
Yes
Employed
Release of
46,173
2.67
123,282
2023 SO 9 Jan 23 N/A
N/A
11
Service only N/A
Yes
Employed
Release of
46,173
2.67
123,282
2023 SO 9 Jan 23 N/A
N/A
Service only N/A
Pending Employed
Release of
46,173
2.67
123,282
2023 SO 9 Jan 23 N/A
N/A
Service only N/A
Pending Employed
Release of
46,173
2.67
123,282
2023 SO 9 Jan 23 N/A
N/A
Service only N/A
Pending Employed
9 Mar 24
46,173
2.67
123,282
2023 SO 9 Jan 23 N/A
N/A
Service only N/A
Pending Employed
9 Apr 24
46,173
2.67
123,282
at 9 Jun 23
at 9 Jul 23
at 9 Aug 23
23 results
at 9 Sep 23
23 results
at 9 Oct 23
23 results
at 9 Nov 23
23 results
at 9 Dec 23
23 results
at 9 Jan 24
23 results
at 9 Feb 24
23 results
2023 SO 9 Jan 23 N/A
N/A
Service only N/A
Pending Employed
9 Jun 24
46,173
2.67
123,282
2023 SO 9 Jan 23 N/A
N/A
Service only N/A
Pending Employed
9 Jul 24
46,173
2.67
123,282
2023 SO 9 Jan 23 N/A
N/A
Service only N/A
Pending Employed
9 Aug 24
46,173
2.67
123,282
2023 SO 9 Jan 23 N/A
N/A
20
Service only N/A
Pending Employed
9 Sep 24
46,173
2.67
123,282
2023 SO 9 Jan 23 N/A
N/A
21
Service only N/A
Pending Employed
9 Oct 24
46,173
2.67
123,282
2023 SO 9 Jan 23 N/A
N/A
22
Service only N/A
Pending Employed
9 Nov 24
46,173
2.67
123,282
2023 SO 9 Jan 23 N/A
N/A
23
Service only N/A
Pending Employed
9 Dec 24
46,173
2.67
123,282
2023 SO 9 Jan 23 N/A
N/A
24
Service only N/A
Pending Employed
9 Jan 25
46,173
2.67
123,282
2023
9 Jan 23 N/A
N/A
aTSR
190%
31 Dec 25
Pending Employed
Release of
2,770,387
2.67
7,396,933
One-time
One-
time
at 1 Jan 26
25 results
at 9 Mar 24
at 9 Apr 24
at 9 May 24
at 9 Jun 24
at 9 Jul 24
at 9 Aug 24
at 9 Sep 24
at 9 Oct 24
at 9 Nov 24
at 9 Dec 24
at 9 Feb 25
date
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
6
7
8
9
12
13
14
15
16
17
18
19
74
Appen 2023 Annual Report
75
Remuneration report
for the year ended 31 December 2023
Statutory remuneration for executive KMP
The table below details the statutory accounting expense of all remuneration-related items for the executive KMP. All figures
are presented in US dollars, which is Appen’s presentational currency. Except for Ms Johnson, the remuneration of all KPMs
has been translated to US dollars, even though they are paid in either Canadian or Australian dollars. The average AUD/USD
exchange rates used were 0.6647 for 2023 and 0.6950 for 2022. The 31 December closing AUD/USD exchange rates used were
0.6806 for 2023 and 0.6816 for 2022. The average CAD/USD exchange rate for 2023 was 0.7412. The 31 December 2023 closing
CAD/USD exchange rate was 0.7459.
Fixed
Variable
salary
annuation 4
entitlements
payments
STI
Super-
Leave
Termination
Cash
$
LTI 8
$
Total
$
1,979,102
2,596,929
Armughan
2023
571,413
5,208
41,206
Executive
KMP
Ahmad 1
Ryan
Kolln1
Justin
Miles1
Helen
Johnson1
Kevin
Levine1
Mark
Brayan2
Tom
Sharkey3
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
–
–
–
–
–
–
114,128
121,384
365,280
122,482
8,202
9,737
423,467
563,888
146,173
7,588
8,266
9,779
174,438
346,244
8,777 5
122,905
6,093
16,979
12,523
259,535 6
57,698
457,233
27,539
42,274
(176,058)
276,014
$
–
–
–
–
–
–
–
–
$
–
–
–
–
–
–
$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
504,283
16,979
38,316
90,885 7
149,342
(771,531)
28,274
301,863
27,000
3,692
248,503
(605,042)
(23,984)
1 Part year term as KMP. See table on page 64 for applicable term as KMP.
2 To 31 December 2022.
3 To 1 September 2022.
5 $8,777 payment for unused annual leave.
6 A$381,333 termination payment.
7 FY22 portion of A$625,000 total termination payment.
4 Superannuation contributions for Australian executive KMP and retirement benefits (RRSP) for Canadian Executive KMP.
8 The values for equity-settled 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 FY22 statutory LTI figures are negative because they
include a true-up adjustment of share-based payments expense in relation to the 2020 and 2021 Long-Term Incentive Plans, for rights that did
not vest or are not expected to vest.
$
–
–
–
–
–
–
–
–
–
–
Remuneration report
for the year ended 31 December 2023
Remuneration received
Actual remuneration received by executive KMP
The table below details the actual remuneration that was received by current and former executive KMP for FY23 and FY22.
The remuneration is disclosed in the currency each KMP receives their remuneration. This table differs to the statutory
remuneration table on page 77 which is prepared in accordance with accounting standards. The STI amount (if any) is the
payment made in recognition of performance for that year. 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.
Executive
KMP
Armughan
Ahmad 1
Ryan
Kolln 1
Justin
Miles 1
Helen
Johnson 1
Kevin
Levine 1
Mark
Brayan 2
Tom
Sharkey 3
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
Fixed
Cash
salary
$
Super-
annuation 4
$
Termination
payments
$
Currency
CAD
700,895
7,027
219,917
11,416
–
–
–
–
–
–
8,777 5
–
–
–
–
–
–
–
9,167
554,696 6
24,430
–
–
–
CAD
–
CAD
165,240
–
–
114,128
–
182,621
525,570
–
CAD
AUD
AUD
USD
USD
AUD
AUD
AUD
AUD
USD
USD
LTI value
at vesting
date 8
STI
LTI value
at grant
date
$
Total
value
$
$
$
–
–
581,389 9
1,289,311
663,379 9
–
–
–
13,137
8,342
186,719
25,322
–
–
–
–
14,713
14,898
260,944
89,144
–
–
–
–
–
–
–
–
–
122,905
–
746,484
–
–
–
–
61,988
325,865
937,853
826,662
–
–
–
–
725,570
24,430
133,333 7
218,983
651,729
1,754,045
1,653,323
–
–
–
301,863
27,000
283,251
–
–
–
–
–
612,114
–
–
1 Part year term as KMP. See table on page 64 for applicable term as KMP.
2 To 31 December 2022.
3 To 1 September 2022.
4 Superannuation contributions for Australian executive KMP and retirement benefits (RRSP) for Canadian Executive KMP.
5 $8,777 payment for unused annual leave.
6 A$381,333 termination payment and A$173,363 payment for unused annual leave and long service leave.
7 FY22 portion of A$625,000 total termination payment.
8 Value of LTI at vesting date is based on market price of shares at the date that the LTI vest.
9 277,041 of 1,108,155 rights in relation to Mr Ahmad’s one time sign on bonus vested on 14 July 2023. $581,389 reflects 277,041 shares at A$2.34
market price at time of vesting, converted to Canadian dollars. Value at grant date was A$2.67. The remaining rights will continue to vest
as outlined in the table on page 74.
76
Appen 2023 Annual Report
77
Remuneration report
for the year ended 31 December 2023
Remuneration received
Actual remuneration received by executive KMP
The table below details the actual remuneration that was received by current and former executive KMP for FY23 and FY22.
The remuneration is disclosed in the currency each KMP receives their remuneration. This table differs to the statutory
remuneration table on page 77 which is prepared in accordance with accounting standards. The STI amount (if any) is the
payment made in recognition of performance for that year. 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.
Executive
KMP
Currency
$
Armughan
2023
CAD
700,895
Cash
Super-
Termination
salary
annuation 4
payments
CAD
165,240
13,137
8,342
186,719
25,322
219,917
11,416
14,713
14,898
260,944
89,144
Fixed
$
7,027
–
–
–
–
–
–
–
–
8,777 5
9,167
554,696 6
$
–
–
–
–
–
–
–
–
–
–
$
–
–
–
–
–
–
–
–
–
–
LTI value
at vesting
date 8
STI
LTI value
at grant
date
581,389 9
1,289,311
663,379 9
Total
value
$
122,905
746,484
–
–
–
–
–
–
$
–
–
–
–
–
–
–
–
–
$
–
–
–
–
–
–
–
–
–
24,430
61,988
325,865
937,853
826,662
725,570
24,430
133,333 7
218,983
651,729
1,754,045
1,653,323
301,863
27,000
283,251
612,114
Ahmad 1
Ryan
Kolln 1
Justin
Miles 1
Helen
Johnson 1
Kevin
Levine 1
Mark
Brayan 2
Tom
Sharkey 3
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
–
–
–
–
–
–
114,128
182,621
525,570
CAD
CAD
AUD
AUD
USD
USD
AUD
AUD
AUD
AUD
USD
USD
1 Part year term as KMP. See table on page 64 for applicable term as KMP.
2 To 31 December 2022.
3 To 1 September 2022.
4 Superannuation contributions for Australian executive KMP and retirement benefits (RRSP) for Canadian Executive KMP.
5 $8,777 payment for unused annual leave.
6 A$381,333 termination payment and A$173,363 payment for unused annual leave and long service leave.
7 FY22 portion of A$625,000 total termination payment.
8 Value of LTI at vesting date is based on market price of shares at the date that the LTI vest.
9 277,041 of 1,108,155 rights in relation to Mr Ahmad’s one time sign on bonus vested on 14 July 2023. $581,389 reflects 277,041 shares at A$2.34
market price at time of vesting, converted to Canadian dollars. Value at grant date was A$2.67. The remaining rights will continue to vest
as outlined in the table on page 74.
Remuneration report
for the year ended 31 December 2023
Statutory remuneration for executive KMP
The table below details the statutory accounting expense of all remuneration-related items for the executive KMP. All figures
are presented in US dollars, which is Appen’s presentational currency. Except for Ms Johnson, the remuneration of all KPMs
has been translated to US dollars, even though they are paid in either Canadian or Australian dollars. The average AUD/USD
exchange rates used were 0.6647 for 2023 and 0.6950 for 2022. The 31 December closing AUD/USD exchange rates used were
0.6806 for 2023 and 0.6816 for 2022. The average CAD/USD exchange rate for 2023 was 0.7412. The 31 December 2023 closing
CAD/USD exchange rate was 0.7459.
Fixed
Variable
Executive
KMP
Armughan
Ahmad 1
Ryan
Kolln1
Justin
Miles1
Helen
Johnson1
Kevin
Levine1
Mark
Brayan2
Tom
Sharkey3
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
Cash
salary
$
Super-
annuation 4
$
Leave
entitlements
$
Termination
payments
$
571,413
5,208
41,206
–
8,202
–
8,266
–
8,777 5
–
–
122,482
–
–
–
–
146,173
7,588
–
114,128
–
121,384
365,280
–
–
–
–
6,093
16,979
–
–
–
–
–
–
–
–
–
STI
$
–
–
LTI 8
$
Total
$
1,979,102
2,596,929
–
–
9,737
423,467
563,888
–
–
–
9,779
174,438
346,244
–
–
–
–
–
–
–
–
122,905
–
57,698
457,233
12,523
259,535 6
27,539
–
–
–
42,274
(176,058)
276,014
–
–
–
504,283
16,979
38,316
90,885 7
149,342
(771,531)
28,274
–
–
–
–
301,863
27,000
3,692
248,503
–
–
–
–
(605,042)
(23,984)
1 Part year term as KMP. See table on page 64 for applicable term as KMP.
2 To 31 December 2022.
3 To 1 September 2022.
4 Superannuation contributions for Australian executive KMP and retirement benefits (RRSP) for Canadian Executive KMP.
5 $8,777 payment for unused annual leave.
6 A$381,333 termination payment.
7 FY22 portion of A$625,000 total termination payment.
8 The values for equity-settled 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 FY22 statutory LTI figures are negative because they
include a true-up adjustment of share-based payments expense in relation to the 2020 and 2021 Long-Term Incentive Plans, for rights that did
not vest or are not expected to vest.
76
Appen 2023 Annual Report
77
Remuneration report
for the year ended 31 December 2023
Remuneration report
for the year ended 31 December 2023
Executive KMP service contracts
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
Armughan Ahmad
CEO, President, and Managing Director
(from 9 January 2023)
Kevin Levine
Helen Johnson
Justin Miles
Ryan Kolln
CFO
CFO
Interim CFO
COO
Contract term
Annual
salary review
Notice period
by either party
No fixed term
1 March
12 months
No fixed term
1 March
No fixed term
1 March
No fixed term
1 March
No fixed term
1 March
6 months
9 months
2 months
6 months
Outgoing arrangements for Mr Ahmad (former CEO)
On 15 December 2022, Appen announced the appointment of Armughan Ahmad as CEO, President and Managing Director.
Mr Ahmad’s formal commencement date was 9 January 2023.
Mr Ahmad’s remuneration arrangements for the time that he was CEO are set out below. Mr Ahmad’s LTI grant and sign-on
bonus were approved by shareholders at Appen’s 2023 AGM:
• Base salary of US$600,000.
• Target STI of 100% of base salary with the opportunity to earn up to 150% of base salary.
• LTI equity grant valued at US$5,000,000, designed to vest over a three-year performance period, subject to stretching
Absolute TSR hurdles. It was intended that Mr Ahmad would not be eligible for another LTI grant until after 31 December 2025.
• Sign-on bonus, designed to replace a portion of Mr Ahmad’s incentives forgone with his previous employer valued
The total non-executive director remuneration pool in 2023 was A$1,400,000 per annum, unchanged from 2022.
at US$2,000,000, vesting in equal monthly tranches over two years.
Mr 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.
Mr Ahmad will receive his statutory entitlements and payment in lieu of notice (12 months). Mr Ahmad’s LTI grant was forfeited
upon his termination. The board exercised its discretion and no STI was awarded to Mr Ahmad. However, Mr Ahmad’s sign-on
bonus will remain on-foot and continue to vest in accordance with the terms of this contract.
Incoming arrangements for Mr Kolln (new CEO)
On 5 February 2024, Appen announced the appointment of Mr Kolln as CEO and Managing Director. Mr 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.
Further information on Mr Kolln’s remuneration arrangements will be provided in the FY24 remuneration report.
Outgoing arrangements for Mr Levine (former CFO)
Mr Levine stepped down as CFO on 1 May 2023 and remained with Appen on the same fixed remuneration, as an advisor to the
incoming CFO, until 1 September 2023 to ensure a smooth transition.
On termination, all performance rights granted to Mr Levine under the LTI plans received the default treatment of the Plan
Terms. For all outstanding equity grants from 2022, all share rights lapsed. For the outstanding 2023 grant, the default
treatment provided that a pro-rata number (based on the portion of the performance period that has elapsed at the time
of cessation, calculated based on the number of days elapsed) of the participant’s unvested plan interests would continue
under the plan and may vest at the end of the relevant performance period.
Given Mr Levine’s considerable contribution to Appen over his more than seven years as CFO and influential relationships
across the market, to protect Appen’s business interests, Mr Levine is subject to competitor restraints and non-solicitation
clauses for 12 months from the date of cessation with the Company. In addition to his contractual entitlement to payment in lieu
of notice (six months), the Board determined another two months’ fixed remuneration be paid to enforce the restraints in place.
In total, this represents A$381,333 or 8/12ths of his fixed remuneration, paid on 1 September 2023. Mr Levine did not receive
any other termination or severance payments, other than his statutory annual and long-service leave entitlements.
Outgoing arrangements for Ms Johnson (former CFO)
Ms Johnson, having commenced and resigned from Appen after three months of service, had all outstanding LTI lapse
on termination. No other payments other than fixed remuneration through to her last day of employment, were paid
to Ms Johnson.
Non-executive director remuneration arrangements
Non-executive director remuneration framework
Non-executive director remuneration reflects the Company’s desire to attract, motivate, and retain experienced directors
and to ensure their active participation in advocating for the interests of shareholders, in areas such as strategy, corporate
governance, remuneration, compliance, risk, and ESG. The size of the remuneration pool that can be paid to non-executive
directors is governed by resolutions passed at a General Meeting of shareholders.
The Company aims to provide a level of remuneration for non-executive directors comparable with its general industry peer
group. In Australia, non-executive directors receive an annual fee for Board membership and for service as Chair of Board
Committees. No additional payment is made for being a Member of Board Committees. There has been no change to the level
and quantum of fees payable to the non-executive directors in FY23 relative to what was paid in FY22.
Role
Board Chair
Non-executive director
Audit and Risk Management Committee Chair
People and Culture Committee Chair
Fee
2023 A$
$240,000
$120,000
$20,000
$20,000
All fees presented above include statutory superannuation for Australian directors.
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.
There are no changes to the level of non-executive director fees proposed for 2024.
78
Appen 2023 Annual Report
79
Remuneration report
for the year ended 31 December 2023
Executive KMP service contracts
Service contracts
in any executive service contracts.
Details of the other key terms are as follows:
Executive KMP
Role
(from 9 January 2023)
Kevin Levine
Helen Johnson
Justin Miles
Ryan Kolln
CFO
CFO
COO
Interim CFO
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
Armughan Ahmad
CEO, President, and Managing Director
No fixed term
1 March
12 months
Contract term
salary review
Annual
Notice period
by either party
No fixed term
1 March
No fixed term
1 March
No fixed term
1 March
No fixed term
1 March
6 months
9 months
2 months
6 months
Outgoing arrangements for Mr Ahmad (former CEO)
On 15 December 2022, Appen announced the appointment of Armughan Ahmad as CEO, President and Managing Director.
Mr Ahmad’s formal commencement date was 9 January 2023.
Mr Ahmad’s remuneration arrangements for the time that he was CEO are set out below. Mr Ahmad’s LTI grant and sign-on
bonus were approved by shareholders at Appen’s 2023 AGM:
• Base salary of US$600,000.
• Target STI of 100% of base salary with the opportunity to earn up to 150% of base salary.
• LTI equity grant valued at US$5,000,000, designed to vest over a three-year performance period, subject to stretching
Absolute TSR hurdles. It was intended that Mr Ahmad would not be eligible for another LTI grant until after 31 December 2025.
at US$2,000,000, vesting in equal monthly tranches over two years.
Mr 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.
Mr Ahmad will receive his statutory entitlements and payment in lieu of notice (12 months). Mr Ahmad’s LTI grant was forfeited
upon his termination. The board exercised its discretion and no STI was awarded to Mr Ahmad. However, Mr Ahmad’s sign-on
bonus will remain on-foot and continue to vest in accordance with the terms of this contract.
Incoming arrangements for Mr Kolln (new CEO)
On 5 February 2024, Appen announced the appointment of Mr Kolln as CEO and Managing Director. Mr 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.
Further information on Mr Kolln’s remuneration arrangements will be provided in the FY24 remuneration report.
Remuneration report
for the year ended 31 December 2023
Outgoing arrangements for Mr Levine (former CFO)
Mr Levine stepped down as CFO on 1 May 2023 and remained with Appen on the same fixed remuneration, as an advisor to the
incoming CFO, until 1 September 2023 to ensure a smooth transition.
On termination, all performance rights granted to Mr Levine under the LTI plans received the default treatment of the Plan
Terms. For all outstanding equity grants from 2022, all share rights lapsed. For the outstanding 2023 grant, the default
treatment provided that a pro-rata number (based on the portion of the performance period that has elapsed at the time
of cessation, calculated based on the number of days elapsed) of the participant’s unvested plan interests would continue
under the plan and may vest at the end of the relevant performance period.
Given Mr Levine’s considerable contribution to Appen over his more than seven years as CFO and influential relationships
across the market, to protect Appen’s business interests, Mr Levine is subject to competitor restraints and non-solicitation
clauses for 12 months from the date of cessation with the Company. In addition to his contractual entitlement to payment in lieu
of notice (six months), the Board determined another two months’ fixed remuneration be paid to enforce the restraints in place.
In total, this represents A$381,333 or 8/12ths of his fixed remuneration, paid on 1 September 2023. Mr Levine did not receive
any other termination or severance payments, other than his statutory annual and long-service leave entitlements.
Outgoing arrangements for Ms Johnson (former CFO)
Ms Johnson, having commenced and resigned from Appen after three months of service, had all outstanding LTI lapse
on termination. No other payments other than fixed remuneration through to her last day of employment, were paid
to Ms Johnson.
Non-executive director remuneration arrangements
Non-executive director remuneration framework
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 a General Meeting of shareholders.
• Sign-on bonus, designed to replace a portion of Mr Ahmad’s incentives forgone with his previous employer valued
The total non-executive director remuneration pool in 2023 was A$1,400,000 per annum, unchanged from 2022.
The Company aims to provide a level of remuneration for non-executive directors comparable with its general industry peer
group. In Australia, non-executive directors receive an annual fee for Board membership and for service as Chair of Board
Committees. No additional payment is made for being a Member of Board Committees. There has been no change to the level
and quantum of fees payable to the non-executive directors in FY23 relative to what was paid in FY22.
Role
Board Chair
Non-executive director
Audit and Risk Management Committee Chair
People and Culture Committee Chair
Fee
2023 A$
$240,000
$120,000
$20,000
$20,000
All fees presented above include statutory superannuation for Australian directors.
All Non-executive directors are remunerated by way of Board and Committee fees. These fees reflect the workload associated
with a complex global business and the governance oversight required to implement our long-term growth objective and key
strategic pillars and to oversee the business transformation process. Non-executive directors do not receive any short-term
or long-term incentive.
There are no changes to the level of non-executive director fees proposed for 2024.
78
Appen 2023 Annual Report
79
Remuneration report
for the year ended 31 December 2023
Remuneration report
for the year ended 31 December 2023
Amounts paid to non-executive directors in USD
Details of fees paid to non-executive directors for FY23 and FY22 in US Dollars are outlined below.
Remuneration governance
Director
Richard Freudenstein
Stephen Hasker
Vanessa Liu
Robin Low
Stuart Davis 1
Lynn Mickleburgh 2
Mini Peiris 3
Deena Shiff 4
2023
Super-
annuation
US$
–
–
–
2,305
–
–
–
–
Fees
US$
159,522
93,054
79,761
90,749
79,761
79,761
72,295
–
Total
US$
Fees
US$
159,522
166,804
93,054
102,203 5
79,761
93,054
79,761
79,761
72,295
–
83,402
97,302
62,547
33,680
12,541
35,583
2022
Super-
annuation
US$
–
–
–
–
86
–
–
–
Total
US$
166,804
102,203
83,402
97,302
62,633
33,680
12,541
35,583
654,903
2,305
657,208
594,062
86
594,148
Variances in fees for those non-executive directors that have served a full-year term in FY23 and FY22 is due to the impact
of FX translation from Australian dollars to US dollars. All the above non-executive directors provided services for the full year
unless stated otherwise.
1 Stuart Davis was appointed on 29 March 2022.
2 Lynn Mickleburgh was appointed on 29 July 2022.
3 Mini Peiris was appointed on 4 November 2022.
4 Deena Shiff retired on 27 May 2022.
5 $4,085 paid to Mr Hasker in FY22 relates to Mr Hasker’s FY21 fee as Chair of the People and Culture Committee.
Amounts paid to non-executive directors in AUD
Details of fees paid to non-executive directors for FY23 and FY22 in Australian Dollars are outlined below. The total amount
paid in FY23 and FY22 is less than the A$1,400,000 limit approved by shareholders at the 2021 AGM.
Director
Richard Freudenstein
Stephen Hasker
Vanessa Liu
Robin Low
Stuart Davis 1
Lynn Mickleburgh 2
Mini Peiris 3
Deena Shiff 4
2023
Super-
annuation
A$
–
–
–
Total
A$
Fees
A$
240,000
240,000
140,000
120,000
147,051 5
120,000
3,468
140,000
140,000
–
–
–
–
120,000
120,000
108,768
–
91,259
50,461
18,768
49,229
2022
Super-
annuation
A$
–
–
–
–
126
–
–
–
Fees
A$
240,000
140,000
120,000
136,532
120,000
120,000
108,768
–
Total
A$
240,000
147,051
120,000
140,000
91,385
50,461
18,768
49,229
985,300
3,468
988,768
856,768
126
856,894
All the above non-executive directors provided services for the full year unless stated otherwise.
1 Stuart Davis was appointed on 29 March 2022.
2 Lynn Mickleburgh was appointed on 29 July 2022.
3 Mini Peiris was appointed on 4 November 2022.
4 Deena Shiff retired on 27 May 2022.
5 A$7,051 paid to Mr Hasker in FY22 relates to Mr Hasker’s FY21 fee as Chair of the People and Culture Committee.
The role of the People and Culture Committee is to focus on our strategic human resources objectives, including the
well-being of our employees and culture, as well as provide advice, recommendations, and assistance to the Board in relation
to compensation arrangements for Directors and executives. The members of the People and Culture Committee during the
reporting period were:
Stephen Hasker, Member and Committee Chair for the whole financial year
Richard Freudenstein, Member for the whole financial year
Lynn Mickleburgh, Member for the whole financial year
Mini Peiris, Member for the whole financial year
The graphic below shows the relationship between the People and Culture Committee and the Board, Executive team,
and Audit and Risk Committee.
Board
Approves and has oversight of Appen’s
remuneration policy including Executive
and Non-executive KMP remuneration.
Independent external advisors
To ensure the Committee is appropriately
informed, advice and information is sought
from independent external advisors,
as required.
People
and Culture
Committee
Members:
Stephen Hasker
Richard Freudenstein
Lynn Mickleburgh
Audit and Risk Committee
Advises the People and Culture
Committee of material risk
issues, behaviours and/or
compliance breaches.
Executive team
succession plans, policies,
remuneration structures and
outcomes to the People and Culture
Committee for review and approval
or recommendation to the Board.
Mini Peiris
Proposes executive appointments,
The number of Committee meetings and attendance by members during the reporting period is set out in the Meetings
of directors section on page 60.
80
Appen 2023 Annual Report
81
Remuneration report
for the year ended 31 December 2023
Remuneration report
for the year ended 31 December 2023
Amounts paid to non-executive directors in USD
Details of fees paid to non-executive directors for FY23 and FY22 in US Dollars are outlined below.
Remuneration governance
Director
Richard Freudenstein
Stephen Hasker
Vanessa Liu
Robin Low
Stuart Davis 1
Lynn Mickleburgh 2
Mini Peiris 3
Deena Shiff 4
2022
Super-
annuation
US$
2023
Super-
annuation
US$
2,305
Fees
US$
159,522
93,054
79,761
90,749
79,761
79,761
72,295
–
Total
US$
Fees
US$
159,522
166,804
93,054
102,203 5
79,761
93,054
79,761
79,761
72,295
–
83,402
97,302
62,547
33,680
12,541
35,583
654,903
2,305
657,208
594,062
86
594,148
Variances in fees for those non-executive directors that have served a full-year term in FY23 and FY22 is due to the impact
of FX translation from Australian dollars to US dollars. All the above non-executive directors provided services for the full year
unless stated otherwise.
1 Stuart Davis was appointed on 29 March 2022.
2 Lynn Mickleburgh was appointed on 29 July 2022.
3 Mini Peiris was appointed on 4 November 2022.
4 Deena Shiff retired on 27 May 2022.
5 $4,085 paid to Mr Hasker in FY22 relates to Mr Hasker’s FY21 fee as Chair of the People and Culture Committee.
Amounts paid to non-executive directors in AUD
Details of fees paid to non-executive directors for FY23 and FY22 in Australian Dollars are outlined below. The total amount
paid in FY23 and FY22 is less than the A$1,400,000 limit approved by shareholders at the 2021 AGM.
Director
Richard Freudenstein
Stephen Hasker
Vanessa Liu
Robin Low
Stuart Davis 1
Lynn Mickleburgh 2
Mini Peiris 3
Deena Shiff 4
2022
Super-
annuation
A$
2023
Super-
annuation
A$
Fees
A$
240,000
140,000
120,000
136,532
120,000
120,000
108,768
–
3,468
140,000
140,000
Total
A$
Fees
A$
240,000
240,000
140,000
120,000
147,051 5
120,000
120,000
120,000
108,768
–
91,259
50,461
18,768
49,229
985,300
3,468
988,768
856,768
126
856,894
Total
US$
166,804
102,203
83,402
97,302
62,633
33,680
12,541
35,583
Total
A$
240,000
147,051
120,000
140,000
91,385
50,461
18,768
49,229
–
–
–
–
–
–
–
86
–
–
–
–
–
–
–
126
–
–
–
–
–
–
–
–
–
–
–
–
–
–
All the above non-executive directors provided services for the full year unless stated otherwise.
1 Stuart Davis was appointed on 29 March 2022.
2 Lynn Mickleburgh was appointed on 29 July 2022.
3 Mini Peiris was appointed on 4 November 2022.
4 Deena Shiff retired on 27 May 2022.
5 A$7,051 paid to Mr Hasker in FY22 relates to Mr Hasker’s FY21 fee as Chair of the People and Culture Committee.
The role of the People and Culture Committee is to focus on our strategic human resources objectives, including the
well-being of our employees and culture, as well as provide advice, recommendations, and assistance to the Board in relation
to compensation arrangements for Directors and executives. The members of the People and Culture Committee during the
reporting period were:
Stephen Hasker, Member and Committee Chair for the whole financial year
Richard Freudenstein, Member for the whole financial year
Lynn Mickleburgh, Member for the whole financial year
Mini Peiris, Member for the whole financial year
The graphic below shows the relationship between the People and Culture Committee and the Board, Executive team,
and Audit and Risk Committee.
Board
Approves and has oversight of Appen’s
remuneration policy including Executive
and Non-executive KMP remuneration.
Independent external advisors
To ensure the Committee is appropriately
informed, advice and information is sought
from independent external advisors,
as required.
People
and Culture
Committee
Members:
Stephen Hasker
Richard Freudenstein
Lynn Mickleburgh
Mini Peiris
Audit and Risk Committee
Advises the People and Culture
Committee of material risk
issues, behaviours and/or
compliance breaches.
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.
The number of Committee meetings and attendance by members during the reporting period is set out in the Meetings
of directors section on page 60.
80
Appen 2023 Annual Report
81
Remuneration report
for the year ended 31 December 2023
Other remuneration tables
Securities holdings of executive KMP
Executive KMP
Armughan Ahmad
Ryan Kolln
Justin Miles
Number
Number of ordinary
of performance
shares held
rights held
(direct and indirect)
3,601,501
634,350
403,039
277,041
10,061
35,576
Performance rights holdings of executive KMP
The movement during the reporting period of performance rights held by Executive KMP is outlined in the table below:
Held at
Granted
1 January
during the
Exercised
during the
Held at
Vested
31 December
during the
Name
Plan
2023
year
year
Forfeited
Forfeited %
2023
year
Armughan Ahmad
2023
–
3,878,542
(277,041)
–
3,601,501
(277,041)
Ryan Kolln
(5,884)
(100%)
Justin Miles
(12,323)
(100%)
50,009
594,359
(4,134)
(5,884)
634,350
(10,712)
–
–
–
–
–
–
–
5,884
19,319
24,806
12,323
17,460
20,552
48,828
51,249
156,250
2020
2021
2022
2023
2020
2021
2022
2023
2020
2021
2022
2023
–
594,359
–
374,397
–
–
–
–
–
–
–
–
–
–
469,038
256,327
469,038
(4,134)
(5,945)
(3,425)
–
–
–
–
–
–
–
–
–
–
(48,828)
(51,249)
(156,250)
(364,950)
(621,277)
(100%)
(100%)
(100%)
(78%)
–
19,319
20,672
594,359
–
11,515
17,127
374,397
–
–
–
104,088
104,088
(6,578)
(4,134)
(5,945)
(3,425)
–
–
–
–
–
–
–
–
–
Remuneration report
for the year ended 31 December 2023
Board oversight of remuneration
The Board ensures variable rewards are only paid when a senior executive creates value for shareholders through meeting their
financial and non-financial targets and exceeding their agreed work plan objectives. The Board reviews all targets on an annual
basis to ensure that they are sufficiently challenging and are consistent with the Company’s long-term business strategy.
Consistent with good governance and to address shareholder expectations, during the year the Board formalised a policy with
respect to malus and clawback, such that the Board may forfeit any entitlement to performance-based remuneration (both LTI
and STI), if in the opinion of the Board, the employee may receive an inappropriate benefit. Examples where Board discretion
may be applied include: if the employee acts fraudulently or dishonestly, is in breach of their obligations to the Group,
mismanages a material risk affecting the Group, or any other circumstance which the Board determines to have resulted
in an inappropriate benefit.
The Board also has the discretion to determine that a portion or all of an employee’s unvested or vested STI and LTI awards
be forfeited if, in the Board’s opinion, negative or adverse circumstances affecting the performance or reputation of the Appen
Group have come to the Board’s attention where circumstances, had they been known at the time when the STI or LTI was
awarded, would have caused the Board to make a lower award or no award.
No Board discretion in relation to malus or clawback was applied in FY23.
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/
Independent remuneration advisors
Where appropriate, the Board and the People and Culture Committee engage external and independent remuneration
advisors to 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. In 2023, no remuneration recommendations were provided.
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/
Kevin Levine
50,335
374,397
(9,370)
(12,323)
403,039
(9,370)
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 value of such shares is based on their price at the time of acquisition. 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.
CEO and other executive KMP
From 1 January 2022, the formal MSR is 100% of fixed remuneration for the CEO and 50% of fixed remuneration for other
Executive KMP over a five-year period.
This is in addition to the requirement for the CEO to defer 25% of any STI earned in equity for a 12-month period. Note, any deferred
STI for the CEO counts towards the achievement of MSR.
As at the date of this report, all Executive KMP have been employed as a KMP less than five years and will be measured for
compliance in a future report.
Non-executive directors
Non-executive directors are required to hold Appen shares to the value of at least 100% of the annual non-executive director
pre-tax base fee within three years of their appointment, using the base fee at the time of appointment (excluding Committee fees).
As at the date of this report, all non-executive directors that have served on the Board for at least three years are in compliance
with the MSR.
82
Appen 2023 Annual Report
83
Remuneration report
for the year ended 31 December 2023
Board oversight of remuneration
The Board ensures variable rewards are only paid when a senior executive creates value for shareholders through meeting their
financial and non-financial targets and exceeding their agreed work plan objectives. The Board reviews all targets on an annual
basis to ensure that they are sufficiently challenging and are consistent with the Company’s long-term business strategy.
Consistent with good governance and to address shareholder expectations, during the year the Board formalised a policy with
respect to malus and clawback, such that the Board may forfeit any entitlement to performance-based remuneration (both LTI
and STI), if in the opinion of the Board, the employee may receive an inappropriate benefit. Examples where Board discretion
may be applied include: if the employee acts fraudulently or dishonestly, is in breach of their obligations to the Group,
mismanages a material risk affecting the Group, or any other circumstance which the Board determines to have resulted
in an inappropriate benefit.
The Board also has the discretion to determine that a portion or all of an employee’s unvested or vested STI and LTI awards
be forfeited if, in the Board’s opinion, negative or adverse circumstances affecting the performance or reputation of the Appen
Group have come to the Board’s attention where circumstances, had they been known at the time when the STI or LTI was
awarded, would have caused the Board to make a lower award or no award.
No Board discretion in relation to malus or clawback was applied in FY23.
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/
Independent remuneration advisors
Where appropriate, the Board and the People and Culture Committee engage external and independent remuneration
advisors to 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. In 2023, no remuneration recommendations were provided.
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/
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 value of such shares is based on their price at the time of acquisition. 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.
CEO and other executive KMP
Executive KMP over a five-year period.
From 1 January 2022, the formal MSR is 100% of fixed remuneration for the CEO and 50% of fixed remuneration for other
This is in addition to the requirement for the CEO to defer 25% of any STI earned in equity for a 12-month period. Note, any deferred
STI for the CEO counts towards the achievement of MSR.
As at the date of this report, all Executive KMP have been employed as a KMP less than five years and will be measured for
Non-executive directors are required to hold Appen shares to the value of at least 100% of the annual non-executive director
pre-tax base fee within three years of their appointment, using the base fee at the time of appointment (excluding Committee fees).
As at the date of this report, all non-executive directors that have served on the Board for at least three years are in compliance
compliance in a future report.
Non-executive directors
with the MSR.
82
Remuneration report
for the year ended 31 December 2023
Other remuneration tables
Securities holdings of executive KMP
Executive KMP
Armughan Ahmad
Ryan Kolln
Justin Miles
Number
of performance
rights held
Number of ordinary
shares held
(direct and indirect)
3,601,501
634,350
403,039
277,041
10,061
35,576
Performance rights holdings of executive KMP
The movement during the reporting period of performance rights held by Executive KMP is outlined in the table below:
Name
Plan
Held at
1 January
2023
Granted
during the
year
Exercised
during the
year
Forfeited
Forfeited %
Held at
31 December
2023
Vested
during the
year
Armughan Ahmad
2023
–
3,878,542
(277,041)
–
–
3,601,501
(277,041)
Ryan Kolln
Justin Miles
Kevin Levine
2020
2021
2022
2023
2020
2021
2022
2023
2020
2021
2022
2023
5,884
19,319
24,806
–
–
–
–
594,359
–
–
(4,134)
–
(5,884)
(100%)
–
–
–
–
19,319
20,672
594,359
–
(6,578)
(4,134)
–
50,009
594,359
(4,134)
(5,884)
634,350
(10,712)
12,323
17,460
20,552
–
–
–
–
374,397
–
(12,323)
(100%)
(5,945)
(3,425)
–
–
–
–
–
11,515
17,127
374,397
–
(5,945)
(3,425)
–
50,335
374,397
(9,370)
(12,323)
403,039
(9,370)
48,828
51,249
156,250
–
–
–
–
469,038
256,327
469,038
–
–
–
–
–
(48,828)
(51,249)
(156,250)
(364,950)
(621,277)
(100%)
(100%)
(100%)
(78%)
–
–
–
104,088
104,088
–
–
–
–
–
Appen 2023 Annual Report
83
Remuneration report
for the year ended 31 December 2023
Remuneration report
for the year ended 31 December 2023
Performance rights vesting table
The performance details relating to the rights exercised during the year, are shown in the table below:
Grant date
Tranche
Performance
measurement
Performance
target
Performance target
measurement date
Vesting
condition
Vesting date
9 Jan 23
9 Jan 23
9 Jan 23
9 Jan 23
9 Jan 23
9 Jan 23
1 Jan 22
22 Mar 22
1
2
3
4
5
6
1
1
Service only
Service only
Service only
Service only
Service only
Service only
Service only
Service only
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Employed at 9 Feb 23
9 Feb 23
Employed at 9 Mar 23
9 Mar 23
Employed at 9 Apr 23
9 Apr 23
Employed at 9 May 23
9 May 23
Employed at 9 Jun 23
9 Jun 23
Employed at 9 Jul 23
9 Jul 23
Employed at 1 Jan 23
28 Feb 23
Employed at 1 Jan 23
28 Feb 23
Performance rights exercised during the year by executive KMP
Executive
Armughan Ahmad
Ryan Kolln
Justin Miles
Number of
rights exercised
Value of rights
at grant date
(US$)
Value of rights
at exercisable
date (US$)
277,041
4,134
9,370
$491,660
$19,245
$60,365
$434,576
$6,182
$9,903
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.
Unvested performance rights held by executive KMP
The number of unvested performance rights held by Executive KMP at 31 December 2023 are:
Plan
2021
2022
2023
Total
Armughan Ahmad
Ryan Kolln
Justin Miles
Kevin Levine
–
–
3,601,501
3,601,501
12,741
20,672
594,359
627,772
11,515
17,127
374,397
403,039
–
–
104,088
104,088
Executive and non-executive director shareholdings
Director
1 January 2023
during the year
Sold during
the year
Ceased
31 December
to be KMP
Number of shares
Purchased/
exercised
Richard Freudenstein
Armughan Ahmad
Stephen Hasker
Vanessa Liu
Robin Low
Stuart Davis
Lynn Mickleburgh
Mini Peiris
44,975
50,000
4,000
172,946
–
–
–
–
21,872
277,041
8,333
21,200
84,105
72,830
–
–
271,921
485,381
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2023
66,847
277,041
58,333
25,200
257,051
72,830
–
–
757,302
This report is made in accordance with a resolution of Directors, pursuant to section 298(2)(a) of the Corporations Act 2001.
On behalf of the directors.
Richard Freudenstein
Non-executive Chair
27 February 2024
Sydney
84
Appen 2023 Annual Report
85
Remuneration report
for the year ended 31 December 2023
Remuneration report
for the year ended 31 December 2023
Performance rights vesting table
The performance details relating to the rights exercised during the year, are shown in the table below:
Grant date
Tranche
Performance
measurement
Performance
Performance target
Vesting
target
measurement date
condition
Vesting date
9 Jan 23
9 Jan 23
9 Jan 23
9 Jan 23
9 Jan 23
9 Jan 23
1 Jan 22
22 Mar 22
1
2
3
4
5
6
1
1
Service only
Service only
Service only
Service only
Service only
Service only
Service only
Service only
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Employed at 9 Feb 23
9 Feb 23
Employed at 9 Mar 23
9 Mar 23
Employed at 9 Apr 23
9 Apr 23
Employed at 9 May 23
9 May 23
Employed at 9 Jun 23
9 Jun 23
Employed at 9 Jul 23
9 Jul 23
Employed at 1 Jan 23
28 Feb 23
Employed at 1 Jan 23
28 Feb 23
Performance rights exercised during the year by executive KMP
Executive
Armughan Ahmad
Ryan Kolln
Justin Miles
Number of
rights exercised
277,041
4,134
9,370
Value of rights
at grant date
(US$)
$491,660
$19,245
$60,365
Value of rights
at exercisable
date (US$)
$434,576
$6,182
$9,903
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.
Unvested performance rights held by executive KMP
The number of unvested performance rights held by Executive KMP at 31 December 2023 are:
Plan
2021
2022
2023
Total
Armughan Ahmad
Ryan Kolln
Justin Miles
Kevin Levine
–
–
3,601,501
3,601,501
12,741
20,672
594,359
627,772
11,515
17,127
374,397
403,039
–
–
104,088
104,088
Executive and non-executive director shareholdings
Director
1 January 2023
Number of shares
Purchased/
exercised
during the year
Sold during
the year
Ceased
to be KMP
31 December
2023
Richard Freudenstein
Armughan Ahmad
Stephen Hasker
Vanessa Liu
Robin Low
Stuart Davis
Lynn Mickleburgh
Mini Peiris
44,975
–
50,000
4,000
172,946
–
–
–
21,872
277,041
8,333
21,200
84,105
72,830
–
–
271,921
485,381
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
66,847
277,041
58,333
25,200
257,051
72,830
–
–
757,302
This report is made in accordance with a resolution of Directors, pursuant to section 298(2)(a) of the Corporations Act 2001.
On behalf of the directors.
Richard Freudenstein
Non-executive Chair
27 February 2024
Sydney
84
Appen 2023 Annual Report
85
Lead Auditor’s Independence Declaration under
Section 307C of the Corporations Act 2001
to the directors of Appen Limited
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 2023 there have been:
i. no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation
Notes to the consolidated financial statements
to the audit; and
ii. no contraventions of any applicable code of professional conduct in relation to the audit.
KPMG
Cameron Slapp
Partner
Sydney
27 February 2024
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.
86
Appen 2023 Annual Report
87
l
a
i
c
n
a
n
i
F
t
r
o
p
e
r
Contents
Consolidated financial statements
Consolidated statement of profit or loss and other
comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
About this report
Note 1. General information
Note 2. Basis of preparation
Group performance
Note 3. Segment information
Note 4. Revenue
Note 5. Expenses
Note 6. Earnings per share and dividends
Note 7.
Income tax
Note 8.
Reconciliation of loss after income tax
to net cash from operating activities
Group core assets and liabilities
Note 9. Cash and cash equivalents
Note 10. Trade and other receivables
Note 11. Contract assets
Note 12.
Intangible assets
Note 13. Property, plant and equipment
Note 14. Right of use assets and lease liabilities
Note 15. Trade and other payables
Note 16. Provisions
Note 17. Contract liabilities
Investment, capital and risk management
Note 18. Earn-out liability
Note 19. Derivative financial instruments
Note 20.
Investments
Note 21. Fair value measurement
Note 22. Borrowings
Note 23. Equity
Note 24. Financial risk management
Other information
Note 25. Contingent liabilities
Note 26. Parent entity information
Note 27. Subsidiaries
Note 28. Deed of cross guarantee
Note 29. Related party transactions
Note 30. Share-based payments
Note 31. Remuneration of auditors
Note 32. Events after the reporting period
Directors’ declaration
Independent auditor’s report
88
89
90
91
92
92
95
97
98
100
101
104
105
105
106
107
111
112
113
113
114
115
115
116
117
118
118
121
126
126
127
128
130
131
133
134
135
136
i. no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation
Notes to the consolidated financial statements
Contents
Consolidated financial statements
Consolidated statement of profit or loss and other
comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
About this report
Note 1. General information
Note 2. Basis of preparation
Group performance
Note 3. Segment information
Note 4. Revenue
Note 5. Expenses
Note 6. Earnings per share and dividends
Note 7.
Income tax
Note 8.
Reconciliation of loss after income tax
to net cash from operating activities
Group core assets and liabilities
Note 9. Cash and cash equivalents
Note 10. Trade and other receivables
Note 11. Contract assets
Note 12.
Intangible assets
Note 13. Property, plant and equipment
Note 14. Right of use assets and lease liabilities
Note 15. Trade and other payables
Note 16. Provisions
Note 17. Contract liabilities
Investment, capital and risk management
Note 18. Earn-out liability
Note 19. Derivative financial instruments
Note 20.
Investments
Note 21. Fair value measurement
Note 22. Borrowings
Note 23. Equity
Note 24. Financial risk management
Other information
Note 25. Contingent liabilities
Note 26. Parent entity information
Note 27. Subsidiaries
Note 28. Deed of cross guarantee
Note 29. Related party transactions
Note 30. Share-based payments
Note 31. Remuneration of auditors
Note 32. Events after the reporting period
Directors’ declaration
Independent auditor’s report
Lead Auditor’s Independence Declaration under
Section 307C of the Corporations Act 2001
to the directors of Appen Limited
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 2023 there have been:
to the audit; and
ii. no contraventions of any applicable code of professional conduct in relation to the audit.
KPMG
Cameron Slapp
Partner
Sydney
27 February 2024
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.
88
89
90
91
92
92
95
97
98
100
101
104
105
105
106
107
111
112
113
113
114
115
115
116
117
118
118
121
126
126
127
128
130
131
133
134
135
136
l
i
a
c
n
a
n
F
i
t
r
o
p
e
r
86
Appen 2023 Annual Report
87
Consolidated statement of profit or loss
and other comprehensive income
for the year ended 31 December 2023
Consolidated statement of financial position
as at 31 December 2023
Revenue
Revenue from contract with customers
4
273,012
388,133
Note
2023
$ 000
2022
$ 000
Note
2023
$ 000
2022
$ 000
Other income
Interest income
Expenses
Crowd service costs
Employee expenses
Recruitment costs
Professional fees
Information technology costs
Communication and travel expenses
Other expenses
Depreciation and amortisation
Share-based payments expense
Net foreign exchange loss
Transaction costs
Restructure costs
Finance costs
Deemed interest on earn-out liability
Earn-out adjustment
Impairment
Loss before income tax
Income tax benefit
782
371
177
183
(168,099)
(237,712)
5
(83,525)
(94,221)
(3,642)
(9,278)
(6,143)
(9,994)
(12,592)
(12,829)
(3,044)
(9,837)
(2,982)
(9,718)
12–14
(35,147)
(41,582)
5
5
5
18
18
(5,691)
(4,032)
(542)
(8,967)
(1,176)
(354)
15,994
(1,492)
(2,560)
(1,556)
(678)
(996)
(772)
–
12–14
(69,182)
(204,326)
(124,949)
(239,068)
7
6,870
–
Loss after income tax for the year attributable to the owners of the Group
(118,079)
(239,068)
Other comprehensive income/(expense)
Items that will not be reclassified subsequently to profit or loss:
Unrealised loss on fair value investment
Items that may be reclassified subsequently to profit or loss:
Foreign currency translation
Other comprehensive income for the period, net of tax
20
(1,600)
–
1,281
(319)
(1,291)
(1,291)
Total comprehensive loss for the period attributable to the owners of the Group
(118,398)
(240,359)
Basic earnings per share
Diluted earnings per share
Cents
(83.10)
(83.10)
Cents
(193.78)
(193.78)
6
6
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.
The above consolidated statement of financial position should be read in conjunction with the accompanying notes to the
88
Appen 2023 Annual Report
89
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Contract assets
Inventory
Prepayments and other assets
Income tax receivables
Derivative financial instruments
Total current assets
Non-current assets
Prepayments and other assets
Investments
Intangible assets
Property, plant and equipment
Right of use assets
Deferred tax assets
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Provisions
Contract liabilities
Lease liabilities
Earn-out liability
Borrowings
Total current liabilities
Non-current liabilities
Provisions
Lease liabilities
Earn-out liability
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Accumulated losses
Total equity
financial statements.
9
10
11
19
20
12
13
14
7
15
16
17
14
18
22
16
14
18
7
23
23
23
32,152
49,933
23,429
64,282
15,536
30,448
106,751
124,674
39,870
109,560
48,407
130,267
155,158
254,941
27,232
39,740
649
3,112
2,492
262
424
2,418
3,726
9,061
5,078
3,390
18,737
3,152
–
–
510
7,025
19,131
15,270
41,936
106,955
147,986
1,069
5,813
2,144
104
30
1,446
1,475
3,095
2,491
2,407
11,142
3,125
3,750
–
306
9,309
–
5,090
14,705
62,361
92,797
47,656
65,019
320,435
262,917
133,526
128,154
(361,164)
(243,085)
92,797
147,986
Consolidated statement of profit or loss
and other comprehensive income
for the year ended 31 December 2023
Consolidated statement of financial position
as at 31 December 2023
Revenue from contract with customers
4
273,012
388,133
Revenue
Other income
Interest income
Expenses
Crowd service costs
Employee expenses
Recruitment costs
Professional fees
Information technology costs
Communication and travel expenses
Other expenses
Depreciation and amortisation
Share-based payments expense
Net foreign exchange loss
Deemed interest on earn-out liability
Transaction costs
Restructure costs
Finance costs
Earn-out adjustment
Impairment
Loss before income tax
Income tax benefit
Loss after income tax for the year attributable to the owners of the Group
(118,079)
(239,068)
Other comprehensive income/(expense)
Items that will not be reclassified subsequently to profit or loss:
Unrealised loss on fair value investment
Items that may be reclassified subsequently to profit or loss:
Foreign currency translation
Other comprehensive income for the period, net of tax
Basic earnings per share
Diluted earnings per share
Total comprehensive loss for the period attributable to the owners of the Group
(118,398)
(240,359)
Note
2023
$ 000
2022
$ 000
782
371
177
183
(168,099)
(237,712)
5
(83,525)
(94,221)
(12,592)
(12,829)
(3,642)
(9,278)
(3,044)
(9,837)
(5,691)
(4,032)
(542)
(8,967)
(1,176)
(354)
15,994
(6,143)
(9,994)
(2,982)
(9,718)
(1,492)
(2,560)
(1,556)
(678)
(996)
(772)
–
5
5
5
18
18
12–14
(35,147)
(41,582)
12–14
(69,182)
(204,326)
(124,949)
(239,068)
7
6,870
–
20
(1,600)
–
1,281
(319)
(1,291)
(1,291)
Cents
(83.10)
(83.10)
Cents
(193.78)
(193.78)
6
6
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Contract assets
Inventory
Prepayments and other assets
Income tax receivables
Derivative financial instruments
Total current assets
Non-current assets
Prepayments and other assets
Investments
Intangible assets
Property, plant and equipment
Right of use assets
Deferred tax assets
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Provisions
Contract liabilities
Lease liabilities
Earn-out liability
Borrowings
Total current liabilities
Non-current liabilities
Provisions
Lease liabilities
Earn-out liability
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Accumulated losses
Total equity
Note
2023
$ 000
2022
$ 000
9
10
11
19
20
12
13
14
7
15
16
17
14
18
22
16
14
18
7
23
23
23
32,152
49,933
23,429
64,282
15,536
30,448
1,069
5,813
2,144
104
649
3,112
2,492
262
106,751
124,674
30
1,446
424
2,418
39,870
109,560
1,475
3,095
2,491
3,726
9,061
5,078
48,407
130,267
155,158
254,941
27,232
39,740
2,407
11,142
3,125
3,750
–
3,390
18,737
3,152
–
–
47,656
65,019
306
9,309
–
5,090
14,705
62,361
92,797
510
7,025
19,131
15,270
41,936
106,955
147,986
320,435
262,917
133,526
128,154
(361,164)
(243,085)
92,797
147,986
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.
The above consolidated statement of financial position should be read in conjunction with the accompanying notes to the
financial statements.
88
Appen 2023 Annual Report
89
Consolidated statement of changes in equity
for the year ended 31 December 2023
Consolidated statement of cash flows
for the year ended 31 December 2023
Balance at 1 January 2023
Loss after income tax for the period
Other comprehensive expense, net of tax
Total comprehensive loss for the period
Transactions with owners in their capacity as owners:
Issue of ordinary shares, net of transaction costs
Share-based payments
Balance at 31 December 2023
Equity attributable to owners of the Group
Issued
Capital
$000
262,917
Reserves
$000
Accumulated
Losses
$000
Total
equity
$000
128,154
(243,085)
147,986
–
–
–
57,518
–
–
(319)
(319)
–
5,691
(118,079)
(118,079)
–
(319)
(118,079)
(118,398)
–
–
57,518
5,691
320,435
133,526
(361,164)
92,797
Balance at 1 January 2022
Loss after income tax for the period
Other comprehensive expense, net of tax
Total comprehensive loss for the period
Transactions with owners in their capacity as owners:
Share-based payments
Dividends paid
262,917
132,972
(4,017)
391,872
–
–
–
–
–
–
(239,068)
(239,068)
(1,291)
(1,291)
1,492
(5,019)
–
(1,291)
(239,068)
(240,359)
–
–
1,492
(5,019)
Balance at 31 December 2022
262,917
128,154
(243,085)
147,986
Cash flows from operating activities
Receipts from customers (GST inclusive)
Payments to suppliers and employees (GST inclusive)
Interest received
Interest and other finance costs paid
Income tax received
Net cash from operating activities
Cash flows from investing activities
Payments for property, plant and equipment
Payments for intangibles
Payments for investment
Transaction costs
Net cash used in investing activities
Cash flows from financing activities
Lease payments
Proceeds from borrowings
Repayment of borrowings
Net proceeds from issuance of shares
Dividend paid
Net cash used in financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effect of foreign exchange rate changes
Note
2023
$ 000
2022
$ 000
294,551
395,568
(317,952)
(380,816)
371
(435)
526
183
(491)
3,784
18,228
8
(22,939)
13
20
14
(1,808)
(3,039)
(18,045)
(24,892)
(500)
(542)
(2,633)
(1,556)
(20,895)
(32,120)
(4,763)
4,000
(4,000)
57,437
–
52,674
(4,508)
–
–
–
(5,019)
(9,527)
8,840
(23,419)
23,429
(117)
47,878
(1,030)
Cash and cash equivalents at the end of the year
9
32,152
23,429
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes to the
financial statements.
financial statements.
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes to the
90
Appen 2023 Annual Report
91
Consolidated statement of changes in equity
for the year ended 31 December 2023
Consolidated statement of cash flows
for the year ended 31 December 2023
Balance at 1 January 2023
Loss after income tax for the period
Other comprehensive expense, net of tax
Total comprehensive loss for the period
Transactions with owners in their capacity as owners:
Issue of ordinary shares, net of transaction costs
Share-based payments
Balance at 31 December 2023
Balance at 1 January 2022
Loss after income tax for the period
Other comprehensive expense, net of tax
Total comprehensive loss for the period
Transactions with owners in their capacity as owners:
Share-based payments
Dividends paid
Equity attributable to owners of the Group
Issued
Capital
$000
262,917
Reserves
$000
Accumulated
Losses
$000
Total
equity
$000
128,154
(243,085)
147,986
(118,079)
(118,079)
(118,079)
(118,398)
–
–
–
(319)
57,518
5,691
57,518
–
–
–
–
–
–
–
–
–
–
(319)
(319)
–
5,691
(1,291)
(1,291)
1,492
(5,019)
320,435
133,526
(361,164)
92,797
262,917
132,972
(4,017)
391,872
–
(239,068)
(239,068)
–
(1,291)
(239,068)
(240,359)
–
–
1,492
(5,019)
Balance at 31 December 2022
262,917
128,154
(243,085)
147,986
Cash flows from operating activities
Receipts from customers (GST inclusive)
Payments to suppliers and employees (GST inclusive)
Interest received
Interest and other finance costs paid
Income tax received
Net cash from operating activities
Cash flows from investing activities
Payments for property, plant and equipment
Payments for intangibles
Payments for investment
Transaction costs
Net cash used in investing activities
Cash flows from financing activities
Lease payments
Proceeds from borrowings
Repayment of borrowings
Net proceeds from issuance of shares
Dividend paid
Net cash used in financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effect of foreign exchange rate changes
Note
2023
$ 000
2022
$ 000
294,551
395,568
(317,952)
(380,816)
371
(435)
526
8
(22,939)
183
(491)
3,784
18,228
13
20
14
(1,808)
(3,039)
(18,045)
(24,892)
(500)
(542)
(2,633)
(1,556)
(20,895)
(32,120)
(4,763)
4,000
(4,000)
57,437
–
52,674
(4,508)
–
–
–
(5,019)
(9,527)
8,840
(23,419)
23,429
(117)
47,878
(1,030)
Cash and cash equivalents at the end of the year
9
32,152
23,429
financial statements.
90
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes to the
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes to the
financial statements.
Appen 2023 Annual Report
91
Notes to the consolidated financial statements
for the year ended 31 December 2023
Notes to the consolidated financial statements
for the year ended 31 December 2023
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 27 February 2024.
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 2023 and the
results for all subsidiaries for the year ended 31 December 2023. 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, which is reclassified
where appropriate for consistency with the current period presentation.
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 2023 of $118,079,000 (31 December 2022 $239,068,000).
The Group has net assets of $92,797,000 (31 December 2022 $147,986,000) and net current assets of $59,095,000 (31
December 2022 $59,655,000).
Cash and cash equivalents at 31 December 2023 were $32,152,000 (31 December 2022 $23,429,000). Operating cash outflow
for the year was $22,939,000 (31 December 2022 inflow $18,228,000). Investing cash outflow (including product development
costs) for the year was $20,895,000 (31 December 2022 $32,120,000). Financing cash inflow for the year was $52,674,000
(31 December 2022 outflow $9,527,000).
Following the expiry of the $A10,000,000 debt facility on 3 January 2024, there are no debt facilities in place.
Note 2. Basis of preparation (continued)
On 20 January 2024 Appen received notice from a material customer, Google LLC, that as part of a strategic review process
it will be terminating its global inbound services contract with Appen, resulting in the cessation of all projects with Appen
by 19 March 2024 (refer Note 32.). Revenue recognised for the year ended 31 December 2023 relating to Google LLC was
$82,800,000 at 26% gross margin (31 December 2022 $102,700,000 at 27% gross margin). Gross margin refers to revenue
less crowd expenses.
In response, Appen announced on 12 February 2024 it will implement measures to achieve $13.5 million in annualised
cost savings. The cost initiatives represent direct and indirect costs associated with the delivery of Google LLC projects.
Appen expects to complete 80% of the cost initiatives by March 2024 and the remainder by June 2024 Refer Note. 32.
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 subject to certain risks and uncertainties which may cause
results to differ from those expected, including the following:
• Achieving revenue forecasts. A large proportion of the Group’s revenue has historically been delivered from the top
five customers, being large global technology companies. During the year ended 31 December 2023, approximately
74.8% (2022: 81.9%) of the Group’s revenue was derived from sales to the top five customers.
Customers can reprioritise spend away from areas of innovation at short notice or reduce/increase spend based
on specific short term business goals and strategies. In addition, a substantial part of existing revenue is generated
from individual case by case projects rather than long-term contracts, albeit some large projects have been running
• Achieving additional cost out measures that were announced on 12 February 2024 (refer Note 32.) at the level and
timeframe forecast. This risk is assessed as low given cost out measures have been identified and recent proven track
over multiple years.
record of reducing costs.
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.
The risks to the Board approved cashflow forecasts noted above and the cash demands of the business at certain points
through the 24 month cashflow forecast period represents a material uncertainty as to whether the Group would continue
as a going concern.
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 accordingly consider that the Group’s financial statements should be prepared on a going concern
basis. Accordingly, the financial statements do not include any adjustments relating to the recoverability and classification
of recorded asset amounts or to the amounts and classification of liabilities that might be necessary should the Group not
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
continue as a going concern.
Critical accounting estimates
are disclosed in the relevant note.
• Note 7. Income tax
• Note 10. Trade and other receivables
• Note 12. Intangible assets
92
Appen 2023 Annual Report
93
Notes to the consolidated financial statements
for the year ended 31 December 2023
Notes to the consolidated financial statements
for the year ended 31 December 2023
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
Appen Limited is a listed public company limited by shares, incorporated and domiciled in Australia. Its registered office
presentation currency.
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 27 February 2024.
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 2023 and the
results for all subsidiaries for the year ended 31 December 2023. 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, which is reclassified
where appropriate for consistency with the current period presentation.
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
Basis of measurement
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 2023 of $118,079,000 (31 December 2022 $239,068,000).
The Group has net assets of $92,797,000 (31 December 2022 $147,986,000) and net current assets of $59,095,000 (31
December 2022 $59,655,000).
Cash and cash equivalents at 31 December 2023 were $32,152,000 (31 December 2022 $23,429,000). Operating cash outflow
for the year was $22,939,000 (31 December 2022 inflow $18,228,000). Investing cash outflow (including product development
costs) for the year was $20,895,000 (31 December 2022 $32,120,000). Financing cash inflow for the year was $52,674,000
(31 December 2022 outflow $9,527,000).
Following the expiry of the $A10,000,000 debt facility on 3 January 2024, there are no debt facilities in place.
Note 2. Basis of preparation (continued)
On 20 January 2024 Appen received notice from a material customer, Google LLC, that as part of a strategic review process
it will be terminating its global inbound services contract with Appen, resulting in the cessation of all projects with Appen
by 19 March 2024 (refer Note 32.). Revenue recognised for the year ended 31 December 2023 relating to Google LLC was
$82,800,000 at 26% gross margin (31 December 2022 $102,700,000 at 27% gross margin). Gross margin refers to revenue
less crowd expenses.
In response, Appen announced on 12 February 2024 it will implement measures to achieve $13.5 million in annualised
cost savings. The cost initiatives represent direct and indirect costs associated with the delivery of Google LLC projects.
Appen expects to complete 80% of the cost initiatives by March 2024 and the remainder by June 2024 Refer Note. 32.
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 subject to certain risks and uncertainties which may cause
results to differ from those expected, including the following:
• Achieving revenue forecasts. A large proportion of the Group’s revenue has historically been delivered from the top
five customers, being large global technology companies. During the year ended 31 December 2023, approximately
74.8% (2022: 81.9%) of the Group’s revenue was derived from sales to the top five customers.
Customers can reprioritise spend away from areas of innovation at short notice or reduce/increase spend based
on specific short term business goals and strategies. In addition, a substantial part of existing revenue is generated
from individual case by case projects rather than long-term contracts, albeit some large projects have been running
over multiple years.
• Achieving additional cost out measures that were announced on 12 February 2024 (refer Note 32.) at the level and
timeframe forecast. This risk is assessed as low given cost out measures have been identified and recent proven track
record of reducing costs.
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.
The risks to the Board approved cashflow forecasts noted above and the cash demands of the business at certain points
through the 24 month cashflow forecast period represents a material uncertainty as to whether the Group would continue
as a going concern.
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 accordingly consider that the Group’s financial statements should be prepared on a going concern
basis. Accordingly, the financial statements do not include any adjustments relating to the recoverability and classification
of recorded asset amounts or to the amounts and classification of liabilities that might be necessary should the Group not
continue as a going concern.
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 10. Trade and other receivables
• Note 12. Intangible assets
92
Appen 2023 Annual Report
93
Notes to the consolidated financial statements
for the year ended 31 December 2023
Notes to the consolidated financial statements
for the year ended 31 December 2023
Note 2. Basis of preparation (continued)
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
Significant 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 there is no
unconditional right to defer the 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 2023 financial report, that materially affects the Group’s accounting policies or any of the amounts
recognised in the financial statements.
Group performance
Note 3. Segment information
Reporting segment
segments are:
Appen’s operating and reportable operating segments are aligned to market opportunities and customer needs. The operating
• Global Services segment: which represents the services the Group provides to our major US technology customers using
their data annotation platforms and tools.
• New Markets segment: which represents our product-led businesses, using Appen’s collection, annotation and
evaluation products and tools conducting work for our Global customers, as well as Enterprise, Government, China
and Quadrant businesses.
These operating segments are based on how the CEO in his capacity as the Chief Operating Decision Maker (CODM) of the
Group assess performance and growth of the business and to determine where to allocate resources. The CODM reviews
a set of financial reports which covers statutory 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. During the year ended 31 December 2023,
approximately 74.8% (2022: 81.9%) of the Group’s revenue was derived from sales to the top five customers.
Segment results
31 December 2023
Revenue
Other income
Interest
Total revenue and other income
Segment EBITDA
Share-based payment – employees
Transformation investment
Foreign exchange losses
Group underlying EBITDA
Depreciation and amortisation
Net interest expense
Restructure costs
Earn-out adjustment
Transaction costs
Impairment loss 1
Loss before income tax
Acquisition related and one-time share-based payments
Deemed interest on earn-out liability
1
Impairment loss is attributable to the Global Services segment.
Global
Services
$ 000
New
Corporate
Markets
unallocated
$ 000
$ 000
191,533
81,479
–
–
742
–
191,533
82,221
17,512
(32,729)
–
40
371
411
Total
$ 000
273,012
782
371
274,165
(15,217)
(4,190)
(1,067)
(3,971)
(24,445)
(35,147)
(805)
(8,967)
(1,501)
(354)
15,994
(542)
(69,182)
(124,949)
94
Appen 2023 Annual Report
95
Notes to the consolidated financial statements
for the year ended 31 December 2023
Notes to the consolidated financial statements
for the year ended 31 December 2023
Note 2. Basis of preparation (continued)
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
Significant 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 there is no
unconditional right to defer the 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
Group performance
Note 3. Segment information
Reporting segment
Appen’s operating and reportable operating segments are aligned to market opportunities and customer needs. The operating
segments are:
• Global Services segment: which represents the services the Group provides to our major US technology customers using
their data annotation platforms and tools.
• New Markets segment: which represents our product-led businesses, using Appen’s collection, annotation and
evaluation products and tools conducting work for our Global customers, as well as Enterprise, Government, China
and Quadrant businesses.
These operating segments are based on how the CEO in his capacity as the Chief Operating Decision Maker (CODM) of the
Group assess performance and growth of the business and to determine where to allocate resources. The CODM reviews
a set of financial reports which covers statutory 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. During the year ended 31 December 2023,
approximately 74.8% (2022: 81.9%) of the Group’s revenue was derived from sales to the top five customers.
The Group has assessed and determined that there are no new or amended accounting standards applicable for the first
time for the 31 December 2023 financial report, that materially affects the Group’s accounting policies or any of the amounts
Segment results
recognised in the financial statements.
31 December 2023
Revenue
Other income
Interest
Total revenue and other income
Segment EBITDA
Share-based payment – employees
Transformation investment
Foreign exchange losses
Group underlying EBITDA
Depreciation and amortisation
Net interest expense
Restructure costs
Acquisition related and one-time share-based payments
Deemed interest on earn-out liability
Earn-out adjustment
Transaction costs
Impairment loss 1
Loss before income tax
1
Impairment loss is attributable to the Global Services segment.
Global
Services
$ 000
New
Markets
$ 000
Corporate
unallocated
$ 000
191,533
81,479
–
–
742
–
191,533
82,221
17,512
(32,729)
–
40
371
411
Total
$ 000
273,012
782
371
274,165
(15,217)
(4,190)
(1,067)
(3,971)
(24,445)
(35,147)
(805)
(8,967)
(1,501)
(354)
15,994
(542)
(69,182)
(124,949)
94
Appen 2023 Annual Report
95
Notes to the consolidated financial statements
for the year ended 31 December 2023
Notes to the consolidated financial statements
for the year ended 31 December 2023
Note 3. Segment information (continued)
Note 4. Revenue
31 December 2022
Revenue
Other income
Interest
Total revenue and other income
Segment EBITDA
Share-based payment – employees
Transformation investment
Foreign exchange losses
Other
Group underlying EBITDA
Depreciation and amortisation
Net interest expense
Loss on inventory cryptocurrency
Restructure costs
Acquisition related share-based payments
Deemed interest on earn-out liability
Transaction costs
Impairment loss
Loss before income tax
Geographical information
Australia
United States of America
Other countries
Total
Global
Services
$ 000
New
Markets
$ 000
Corporate
unallocated
$ 000
299,755
88,378
–
–
–
–
299,755
88,378
54,524
(36,506)
–
183
177
360
Total
$ 000
388,133
183
177
388,493
18,018
(1,443)
(3,048)
(2,560)
50
11,017
(41,582)
(813)
(309)
(678)
(49)
(772)
(1,556)
(204,326)
(239,068)
Revenue
Non-current assets
2023
$ 000
1,578
2022
$ 000
865
218,496
337,594
52,938
49,674
2023
$ 000
11,004
16,489
20,914
2022
$ 000
10,178
96,661
23,428
273,012
388,133
48,407
130,267
Revenue is disaggregated by the type of service and whether the revenue is derived from usage of our products (New Markets)
or the customers’ own platform (Global Services).
31 December 2023
Global customers
New Markets customers
Total revenue
31 December 2022
Global customers
New Markets customers
Total revenue
New
Corporate
Markets
unallocated
$ 000
Global
Services
$ 000
191,533
–
191,533
$ 000
9,721
71,758
81,479
299,755
–
18,177
70,201
299,755
88,378
Total
$ 000
201,254
71,758
273,012
317,932
70,201
388,133
–
–
–
–
–
–
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.
The Group recognises unbilled revenue as contract assets as disclosed in Note 11 and deferred revenue as contract
Contract assets and liabilities
liabilities as disclosed in Note 17.
Other income
Interest 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 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.
96
Appen 2023 Annual Report
97
Total revenue and other income
299,755
88,378
New
Corporate
Markets
unallocated
Global
Services
$ 000
299,755
–
–
$ 000
88,378
–
–
$ 000
–
183
177
360
54,524
(36,506)
31 December 2022
Revenue
Other income
Interest
Segment EBITDA
Share-based payment – employees
Transformation investment
Foreign exchange losses
Other
Group underlying EBITDA
Depreciation and amortisation
Net interest expense
Loss on inventory cryptocurrency
Restructure costs
Acquisition related share-based payments
Deemed interest on earn-out liability
Transaction costs
Impairment loss
Loss before income tax
Geographical information
Australia
United States of America
Other countries
Total
Total
$ 000
388,133
183
177
388,493
18,018
(1,443)
(3,048)
(2,560)
50
11,017
(41,582)
(813)
(309)
(678)
(49)
(772)
(1,556)
(204,326)
(239,068)
Revenue
Non-current assets
2023
$ 000
1,578
2022
$ 000
865
218,496
337,594
52,938
49,674
2023
$ 000
11,004
16,489
20,914
2022
$ 000
10,178
96,661
23,428
273,012
388,133
48,407
130,267
Notes to the consolidated financial statements
for the year ended 31 December 2023
Notes to the consolidated financial statements
for the year ended 31 December 2023
Note 3. Segment information (continued)
Note 4. Revenue
Revenue is disaggregated by the type of service and whether the revenue is derived from usage of our products (New Markets)
or the customers’ own platform (Global Services).
31 December 2023
Global customers
New Markets customers
Total revenue
31 December 2022
Global customers
New Markets customers
Total revenue
New
Markets
$ 000
Corporate
unallocated
$ 000
Global
Services
$ 000
191,533
–
191,533
9,721
71,758
81,479
299,755
–
18,177
70,201
299,755
88,378
Total
$ 000
201,254
71,758
273,012
317,932
70,201
388,133
–
–
–
–
–
–
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.
Contract 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.
96
Appen 2023 Annual Report
97
Notes to the consolidated financial statements
for the year ended 31 December 2023
Notes to the consolidated financial statements
for the year ended 31 December 2023
Note 5. Expenses
Depreciation and amortisation
Depreciation
Leasehold improvements
Fixtures and fittings
Computer and audio equipment
Motor vehicles
Right of use assets
Depreciation sub-total
Amortisation
Systems and software
Capitalised product development
Other intangibles
Amortisation sub-total
Amortisation – acquisition-related
Capitalised product development
Brand
Customer relationship and contracts
Amortisation – acquisition-related sub-total
Total depreciation and amortisation
Finance costs
Interest and finance charges paid/payable on borrowings
Interest and finance charges paid/payable on lease liabilities
Deemed interest on earn-out liability
Finance costs expensed
Share-based payments expense
Share-based payment in respect of Appen performance rights
Share-based payment in respect of the Quadrant acquisition and one-time sign-on arrangement 1
Total share-based payments expense
2023
$ 000
2022
$ 000
389
54
1,484
35
4,301
6,263
758
162
1,363
15
4,930
7,228
163
326
19,776
20,583
324
173
20,263
21,082
8,516
105
–
8,621
35,147
2023
$ 000
435
741
1,176
354
8,932
69
4,271
13,272
41,582
2022
$ 000
491
505
996
772
1,530
1,768
2023
$ 000
4,190
1,501
5,691
2022
$ 000
1,443
49
1,492
1
Includes Mr Ahmad’s one-off sign-on bonus, in receipt of bonuses forgone and is intended to replace a portion of the bonus payments that
Mr Ahmad would have received from his previous employer had he not ceased employment.
2023
$ 000
481
61
542
2023
$ 000
6,090
77,435
83,525
2022
$ 000
–
1,556
1,556
2022
$ 000
5,518
88,703
94,221
Note 5. Expenses (continued)
Transaction costs
Non-capitalised equity raising fees and charges
Other transaction costs
Total transaction costs
Employee expenses
Defined contribution superannuation expense
Employee expenses
Total employee expenses
Accounting policy
Depreciation expense
(excluding land) over their expected useful lives.
Amortisation expense
Depreciation is calculated on a straight-line basis to write-off the net cost of each item of property, plant and equipment
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.
All share-based payments are expensed over the relevant vesting period. The share-based payments expense is based
Share-based payments expense
on expected targets and hurdles.
Employee expenses
Includes all short-term employee benefits (wages, paid annual leave and sick leave and any non-monetary benefits),
post-employment benefits and other long-term or termination employee benefits.
98
Appen 2023 Annual Report
99
Notes to the consolidated financial statements
for the year ended 31 December 2023
Notes to the consolidated financial statements
for the year ended 31 December 2023
Note 5. Expenses
Depreciation and amortisation
Depreciation
Leasehold improvements
Fixtures and fittings
Computer and audio equipment
Motor vehicles
Right of use assets
Depreciation sub-total
Amortisation
Systems and software
Capitalised product development
Other intangibles
Amortisation sub-total
Amortisation – acquisition-related
Capitalised product development
Brand
Customer relationship and contracts
Amortisation – acquisition-related sub-total
Total depreciation and amortisation
Finance costs
Interest and finance charges paid/payable on borrowings
Interest and finance charges paid/payable on lease liabilities
Deemed interest on earn-out liability
Finance costs expensed
Note 5. Expenses (continued)
Transaction costs
Non-capitalised equity raising fees and charges
Other transaction costs
Total transaction costs
Employee expenses
Defined contribution superannuation expense
Employee expenses
Total employee expenses
Accounting policy
Depreciation expense
2023
$ 000
481
61
542
2023
$ 000
6,090
77,435
83,525
2022
$ 000
–
1,556
1,556
2022
$ 000
5,518
88,703
94,221
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
1,530
1,768
Includes all short-term employee benefits (wages, paid annual leave and sick leave and any non-monetary benefits),
post-employment benefits and other long-term or termination employee benefits.
2023
$ 000
2022
$ 000
389
54
1,484
35
4,301
6,263
758
162
1,363
15
4,930
7,228
163
326
19,776
20,583
324
173
20,263
21,082
8,516
105
–
8,621
35,147
2023
$ 000
435
741
1,176
354
2023
$ 000
4,190
1,501
5,691
8,932
69
4,271
13,272
41,582
2022
$ 000
491
505
996
772
2022
$ 000
1,443
49
1,492
Share-based payments expense
Share-based payment in respect of Appen performance rights
Share-based payment in respect of the Quadrant acquisition and one-time sign-on arrangement 1
Total share-based payments expense
1
Includes Mr Ahmad’s one-off sign-on bonus, in receipt of bonuses forgone and is intended to replace a portion of the bonus payments that
Mr Ahmad would have received from his previous employer had he not ceased employment.
98
Appen 2023 Annual Report
99
Notes to the consolidated financial statements
for the year ended 31 December 2023
Notes to the consolidated financial statements
for the year ended 31 December 2023
Note 6. Earnings per share and dividends
Note 7. Income tax
Loss after income tax
2023
$ 000
2022
$ 000
(118,079)
(239,068)
Number
Number
Income tax benefit
Current tax expense
Deferred tax
Weighted average number of ordinary shares used in calculating basic earnings per share
142,087,928
123,371,758
Adjustment recognised for prior periods – current tax
Adjustments for calculation of diluted earnings per share:
Rights over ordinary shares
– 1
–
Income tax benefit
Adjustment recognised for prior periods – deferred tax
Weighted average number of ordinary shares used in calculating diluted earnings per share
142,087,928
123,371,758
Deferred tax included in income tax benefit comprises:
Basic earnings per share
Diluted earnings per share
Cents
(83.10)
(83.10)
Cents
(193.78)
(193.78)
Decrease/(increase) in deferred tax assets
Decrease in deferred tax liabilities
Deferred tax – origination and reversal of temporary differences
Numerical reconciliation of income tax benefit and tax at the statutory rate
1 Whilst there are unvested performance rights at 31 December 2023, 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.
Tax effect amounts which are not deductible/(taxable) in calculating taxable (loss)/income:
(124,949)
(239,068)
(37,485)
(71,720)
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.
No dividends have been declared or paid during the year (2022: no dividends were declared. 2021 final dividend of $5,019,000
was paid in 2022 at AU 5.5 cents per share).
2023
$ 000
2022
$ 000
Franking credits available for subsequent financial years remained at $6,000 as at the end of the financial year, based on a tax
rate of 30%.
Deferred tax assets
Deferred tax asset comprises temporary differences attributable to:
Loss before income tax expense
Tax at the statutory tax rate of 30%
Impairment loss
Share-based payments
Deferred tax adjustments
Sundry items and exchange differences
Adjustment recognised for prior periods
Difference in overseas tax rates
Income tax benefit
Non-assessable purchase price adjustments on prior acquisitions
Other expenses and exchange differences
Amount recognised in profit or loss:
Property, plant and equipment
Tax losses
Revenue received in advance
Employee benefits
Accrued expenses
Deferred tax assets
Movement:
Opening balance
(Debited)/credited to profit or loss
Additions through capital raising
Foreign exchange differences
Closing balance
2023
$ 000
2022
$ 000
432
(5,206)
(665)
(1,431)
(6,870)
3,523
(10,160)
(6,637)
12,485
472
21,562
(4,773)
–
(2,096)
2,965
(6,870)
13
–
5
388
112
1,973
2,491
5,078
(3,523)
1,019
(83)
2,491
2,075
(1,872)
410
(613)
–
(1,289)
(1,194)
(2,483)
61,298
(759)
10,148
342
(203)
894
–
–
6
2,295
1,013
774
355
635
5,078
4,060
1,289
–
(271)
5,078
100
Appen 2023 Annual Report
101
Notes to the consolidated financial statements
for the year ended 31 December 2023
Notes to the consolidated financial statements
for the year ended 31 December 2023
Note 6. Earnings per share and dividends
Note 7. Income tax
Weighted average number of ordinary shares used in calculating basic earnings per share
142,087,928
123,371,758
Adjustment recognised for prior periods – current tax
Adjustments for calculation of diluted earnings per share:
Rights over ordinary shares
– 1
–
Income tax benefit
Adjustment recognised for prior periods – deferred tax
Weighted average number of ordinary shares used in calculating diluted earnings per share
142,087,928
123,371,758
Deferred tax included in income tax benefit comprises:
Income tax benefit
Current tax expense
Deferred tax
Decrease/(increase) in deferred tax assets
Decrease in deferred tax liabilities
Deferred tax – origination and reversal of temporary differences
Numerical reconciliation of income tax benefit and tax at the statutory rate
Loss before income tax expense
Tax at the statutory tax rate of 30%
Tax effect amounts which are not deductible/(taxable) in calculating taxable (loss)/income:
Impairment loss
Share-based payments
Deferred tax adjustments
Non-assessable purchase price adjustments on prior acquisitions
Sundry items and exchange differences
Adjustment recognised for prior periods
Difference in overseas tax rates
Income tax benefit
Loss after income tax
Basic earnings per share
Diluted earnings per share
2023
$ 000
2022
$ 000
(118,079)
(239,068)
Number
Number
Cents
(83.10)
(83.10)
Cents
(193.78)
(193.78)
1 Whilst there are unvested performance rights at 31 December 2023, 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.
Accounting policy
during the financial year.
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
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.
No dividends have been declared or paid during the year (2022: no dividends were declared. 2021 final dividend of $5,019,000
was paid in 2022 at AU 5.5 cents per share).
Franking credits available for subsequent financial years remained at $6,000 as at the end of the financial year, based on a tax
Deferred tax assets
rate of 30%.
Deferred tax asset comprises temporary differences attributable to:
Amount recognised in profit or loss:
Property, plant and equipment
Tax losses
Revenue received in advance
Employee benefits
Accrued expenses
Other expenses and exchange differences
Deferred tax assets
Movement:
Opening balance
(Debited)/credited to profit or loss
Additions through capital raising
Foreign exchange differences
Closing balance
2023
$ 000
2022
$ 000
432
(5,206)
(665)
(1,431)
(6,870)
3,523
(10,160)
(6,637)
2,075
(1,872)
410
(613)
–
(1,289)
(1,194)
(2,483)
(124,949)
(239,068)
(37,485)
(71,720)
12,485
472
21,562
(4,773)
–
(2,096)
2,965
(6,870)
61,298
(759)
10,148
–
342
(203)
894
–
2023
$ 000
2022
$ 000
13
–
5
388
112
1,973
2,491
5,078
(3,523)
1,019
(83)
2,491
6
2,295
1,013
774
355
635
5,078
4,060
1,289
–
(271)
5,078
100
Appen 2023 Annual Report
101
Notes to the consolidated financial statements
for the year ended 31 December 2023
Notes to the consolidated financial statements
for the year ended 31 December 2023
Note 7. Income tax (continued)
Note 7. Income tax (continued)
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.
Deferred tax liability
Deferred tax liability comprises temporary differences attributable to:
Amount recognised in profit or loss:
Intangible assets
Property,plant and equipment
Revenue received in advance
Other expenses and exchange differences
Deferred tax liability
Movement
Opening balance
Debited to profit or loss
Foreign exchange differences
Closing balance
2023
$ 000
2022
$ 000
10,061
(2,924)
1,203
(3,250)
5,090
15,270
(10,160)
(20)
19,391
(86)
1,203
(5,238)
15,270
16,858
(1,194)
(394)
5,090
15,270
China tax losses to be applied in future periods amount to $35 million, of which none have been recognised as a deferred tax
asset. US tax losses to be applied in future periods amounts to $71 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.
102
Appen 2023 Annual Report
103
Notes to the consolidated financial statements
for the year ended 31 December 2023
Notes to the consolidated financial statements
for the year ended 31 December 2023
Note 7. Income tax (continued)
Note 7. Income tax (continued)
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.
2023
$ 000
2022
$ 000
10,061
(2,924)
1,203
(3,250)
5,090
15,270
(10,160)
(20)
19,391
(86)
1,203
(5,238)
15,270
16,858
(1,194)
(394)
5,090
15,270
Deferred tax liability
Deferred tax liability comprises temporary differences attributable to:
Amount recognised in profit or loss:
Intangible assets
Property,plant and equipment
Revenue received in advance
Other expenses and exchange differences
Deferred tax liability
Movement
Opening balance
Debited to profit or loss
Foreign exchange differences
Closing balance
tax asset.
Accounting policy
Deferred tax
China tax losses to be applied in future periods amount to $35 million, of which none have been recognised as a deferred tax
asset. US tax losses to be applied in future periods amounts to $71 million, of which none have been recognised as a deferred
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.
102
Appen 2023 Annual Report
103
Notes to the consolidated financial statements
for the year ended 31 December 2023
Notes to the consolidated financial statements
for the year ended 31 December 2023
Note 8. Reconciliation of loss after income tax to net cash from
operating activities
Loss after income tax for the year
Add back/(deduct):
Income tax benefit
Depreciation and amortisation
Finance costs
Impairment of non-financial assets
Share-based payments expense
Gain on disposal of non-financial assets
Deemed interest on earn-out liability
Earn-out adjustment
Transaction costs
Impairment of trade receivables
Loss on inventory revaluation
Effect of foreign exchange rate changes
Other non-cash items
Change in operating assets and liabilities:
(Increase)/decrease in:
Trade and other receivables and contract assets
Inventory
Prepayments and other assets
Increase/(decrease) in:
Trade and other payables
Provisions
Contract liabilities
Income tax received (net)
Net cash from operating activities
Note
2023
$ 000
2022
$ 000
(118,079)
(239,068)
7
12–14
(6,870)
35,147
1,176
–
41,582
505
12–14
69,182
204,326
5,691
1,492
18
18
5
(39)
354
(15,994)
542
–
669
1,805
(202)
–
772
–
1,556
(46)
–
(911)
–
29,261
4,984
(420)
(2,307)
–
617
(14,599)
(1,869)
(1,187)
(7,595)
526
(22,939)
379
125
3,784
18,228
Accounting policy
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.
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.
Group core assets and liabilities
Note 9. Cash and cash equivalents
Cash on hand and at bank
Total cash and cash equivalents
Accounting policy
Note 10. Trade and other receivables
Trade receivables
Provision for expected credit loss
Net trade receivables
Other receivables
GST/VAT receivable
Total trade and other receivables
Ageing of trade receivables
$000
As at 31 December 2023
Gross carrying amount
Provision for expected credit loss
As at 31 December 2022
Gross carrying amount
Provision for expected credit loss
Movement in the provision for expected credit loss:
Balance at the beginning of the period
Provided for as non-recoverable
Charged to profit or loss
Balance at the end of the period
2023
$ 000
32,152
32,152
2022
$ 000
23,429
23,429
2023
$ 000
2022
$ 000
47,869
61,407
(152)
47,717
1,580
636
(288)
61,119
2,375
788
49,933
64,282
748
(152)
857
(288)
2023
$ 000
288
188
(324)
152
47,869
(152)
61,407
(288)
2022
$ 000
242
169
(123)
288
Current
< 3 months 3–6 months
> 6 months
Total
Days past due
33,969
12,524
–
–
50,400
–
9,163
–
628
–
987
–
104
Appen 2023 Annual Report
105
Notes to the consolidated financial statements
for the year ended 31 December 2023
Notes to the consolidated financial statements
for the year ended 31 December 2023
Note 8. Reconciliation of loss after income tax to net cash from
operating activities
Loss after income tax for the year
Add back/(deduct):
Income tax benefit
Depreciation and amortisation
Finance costs
Impairment of non-financial assets
Share-based payments expense
Gain on disposal of non-financial assets
Deemed interest on earn-out liability
Earn-out adjustment
Transaction costs
Impairment of trade receivables
Loss on inventory revaluation
Effect of foreign exchange rate changes
Other non-cash items
Change in operating assets and liabilities:
(Increase)/decrease in:
Trade and other receivables and contract assets
Inventory
Prepayments and other assets
Increase/(decrease) in:
Trade and other payables
Provisions
Contract liabilities
Income tax received (net)
Net cash from operating activities
Accounting policy
cash flows.
Note
2023
$ 000
2022
$ 000
(118,079)
(239,068)
7
12–14
(6,870)
35,147
1,176
–
41,582
505
12–14
69,182
204,326
5,691
1,492
18
18
5
(39)
354
(15,994)
542
–
669
1,805
(202)
772
–
–
1,556
(46)
(911)
–
–
29,261
4,984
(420)
(2,307)
–
617
(14,599)
(1,869)
(1,187)
(7,595)
526
(22,939)
379
125
3,784
18,228
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
Group core assets and liabilities
Note 9. Cash and cash equivalents
Cash on hand and at bank
Total cash and cash equivalents
2023
$ 000
32,152
32,152
2022
$ 000
23,429
23,429
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
Trade receivables
Provision for expected credit loss
Net trade receivables
Other receivables
GST/VAT receivable
Total trade and other receivables
Ageing of trade receivables
$000
As at 31 December 2023
Gross carrying amount
Provision for expected credit loss
As at 31 December 2022
Gross carrying amount
Provision for expected credit loss
Movement in the provision for expected credit loss:
Balance at the beginning of the period
Provided for as non-recoverable
Charged to profit or loss
Balance at the end of the period
2023
$ 000
2022
$ 000
47,869
61,407
(152)
47,717
1,580
636
(288)
61,119
2,375
788
49,933
64,282
Current
< 3 months 3–6 months
> 6 months
Total
Days past due
33,969
12,524
–
–
50,400
–
9,163
–
628
–
987
–
748
(152)
857
(288)
2023
$ 000
288
188
(324)
152
47,869
(152)
61,407
(288)
2022
$ 000
242
169
(123)
288
104
Appen 2023 Annual Report
105
Notes to the consolidated financial statements
for the year ended 31 December 2023
Notes to the consolidated financial statements
for the year ended 31 December 2023
Note 10. Trade and other receivables (continued)
Note 12. Intangible assets
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
Current assets
Contract assets
Movement during the period:
Balance as the beginning of the period
Contract asset recognised
Subsequent release to billing and receivables for the year
Foreign currency translation
Balance at the end of the period
2023
$ 000
2022
$ 000
15,536
30,448
30,448
10,471
64,461
60,782
(79,311)
(40,919)
(62)
114
15,536
30,448
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.
53,516
17,825
–
(5,264)
(43)
(43)
369
–
–
–
–
–
1,567
159
109,560
18,157
(74)
(58,851)
(6)
–
(106)
–
–
–
(28,292)
(105)
(324)
(28,884)
System and
Capitalised
product
Brand and
customer
Other
Goodwill
software
development
relationship
intangibles
$ 000
$ 000
$ 000
$ 000
$ 000
Total
$ 000
Cost
242,051
2,689
133,301
1,089
2,181
381,311
impairment
(188,937)
(1,695)
(79,785)
(720)
(614)
(271,751)
Balance at 1 January 2023
Accumulated depreciation and
Net carrying value at
1 January 2023
Additions
Disposals
Impairment
Transfers/reclassification
Amortisation
Foreign exchange translation
Balance at 31 December 2023
Accumulated amortisation and
Net carrying value at
31 December 2023
Balance at 1 January 2022
Additions
Disposals
Impairment
Amortisation
53,114
(53,114)
–
–
–
–
–
–
–
–
–
(188,937)
994
173
(6)
(399)
43
(163)
(63)
153
1,235
–
(6)
(326)
(62)
Cost
242,051
2,856
151,068
1,089
2,340
399,404
impairment
(242,051)
(2,277)
(113,369)
(825)
(1,012)
(359,534)
579
37,699
264
1,328
39,870
Net carrying value
241,817
59,743
23,431
–
–
(29,515)
(143)
15,596
4,552
–
(15,383)
(4,340)
(56)
1,521
226
–
–
(173)
(7)
318,830
29,444
–
(204,326)
(34,354)
(34)
Foreign exchange translation
234
Balance at 31 December 2022
Net carrying value
53,114
994
53,516
369
1,567
109,560
During the prior year ended 31 December 2022, customer relationships from previous business acquisition at a carrying value
of $15.4 million were fully impaired.
106
Appen 2023 Annual Report
107
Notes to the consolidated financial statements
for the year ended 31 December 2023
Notes to the consolidated financial statements
for the year ended 31 December 2023
Note 10. Trade and other receivables (continued)
Note 12. Intangible assets
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
Current assets
Contract assets
Movement during the period:
Balance as the beginning of the period
Contract asset recognised
Subsequent release to billing and receivables for the year
Foreign currency translation
Balance at the end of the period
2023
$ 000
2022
$ 000
15,536
30,448
30,448
10,471
64,461
60,782
(79,311)
(40,919)
(62)
114
15,536
30,448
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.
Goodwill
$ 000
System and
software
$ 000
Capitalised
product
development
$ 000
Brand and
customer
relationship
$ 000
Other
intangibles
$ 000
Total
$ 000
Balance at 1 January 2023
Cost
242,051
2,689
133,301
1,089
2,181
381,311
Accumulated depreciation and
impairment
Net carrying value at
1 January 2023
Additions
Disposals
Impairment
Transfers/reclassification
Amortisation
Foreign exchange translation
Balance at 31 December 2023
(188,937)
(1,695)
(79,785)
(720)
(614)
(271,751)
53,114
–
–
(53,114)
–
–
–
994
173
(6)
(399)
43
(163)
(63)
53,516
17,825
–
(5,264)
(43)
(28,292)
(43)
369
1,567
109,560
–
–
–
–
159
–
(74)
–
18,157
(6)
(58,851)
–
(105)
–
(324)
(28,884)
–
(106)
Cost
242,051
2,856
151,068
1,089
2,340
399,404
Accumulated amortisation and
impairment
Net carrying value at
31 December 2023
Balance at 1 January 2022
Net carrying value
Additions
Disposals
Impairment
Amortisation
Foreign exchange translation
Balance at 31 December 2022
(242,051)
(2,277)
(113,369)
(825)
(1,012)
(359,534)
–
579
37,699
264
1,328
39,870
241,817
–
–
(188,937)
–
234
153
1,235
–
(6)
(326)
(62)
59,743
23,431
–
–
(29,515)
(143)
15,596
4,552
–
(15,383)
(4,340)
(56)
1,521
226
–
–
(173)
(7)
318,830
29,444
–
(204,326)
(34,354)
(34)
Net carrying value
53,114
994
53,516
369
1,567
109,560
During the prior year ended 31 December 2022, customer relationships from previous business acquisition at a carrying value
of $15.4 million were fully impaired.
106
Appen 2023 Annual Report
107
Notes to the consolidated financial statements
for the year ended 31 December 2023
Notes to the consolidated financial statements
for the year ended 31 December 2023
Note 12. Intangible assets (continued)
Note 12. Intangible assets (continued)
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:
Value-in-use is defined as the present value of the future cash flows expected to be derived from an asset or CGU from both
its continuing use and ultimate disposal. Cash flows were projected based on forecast operating results over the five-year
period from 2024 to 2028, derived by applying conservative estimates to the Group’s five-year plan as approved by board.
Key assumptions made in calculating the Global Services CGU value-in-use are as follows:
• There are observable indications that an asset’s value has declined during the period more than that which would
Key assumptions
Basis for determining value-in-use assigned to key assumptions
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.
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. Accordingly, management have performed the impairment testing at 31 December 2023,
for the Global Services CGU.
As a result of the annual impairment testing, the Global Services CGU has been identified as requiring impairment as its
recoverable amount is lower than its carrying value.
CGU
Recoverable
amount
Carrying value
before impairment Asset impairment recorded
Carrying value post
impairment
Global Services
$27 million
$96 million
$69 million
Comprising of the following assets
whose net book value have been
fully written down:
-$53 million Goodwill
-$8 million Lease Right-of-use asset
-$2 million Plant and equipment
-$6 million Intangible assets
$27 million
Comprising of cash
and working capital
balances only.
The recoverable amount is the higher of value-in-use (VIU) of the CGU and the fair value less costs of disposal (FVLCD).
Management adopted VIU as the recoverable amount for each CGUs considering it is unlikely that the FVLCD would
be of higher value.
Revenue growth rate
Continued revenue decline in 2024 mirroring the recent historical trending, with no nominal
growth anticipated in outer years (2025–2028).
Such assumption is underpinned by:
• Appen’s internal budget/forecast and strategic plans;
• consideration of customer diversification risk, global economic outlook and impact
on customers’ spending.
Terminal value growth rate
Estimated at a constant rate of 2.5% (2022: 3.0%) reflected management expected long-term
average growth rate.
Discount rate
A post-tax discount rate at 12.5% was applied (2022: 12.5%). The discount rate has taken into
account the group’s risk profile, debt/equity structure and industry comparable information.
For the identified impairment loss relating to Global Services CGU, impairment was taken to reduce the Goodwill first then
other assets pro rata on the basis of the carrying value of each asset in the CGU.
Considering the declining revenue and customer diversification risk specific to the Global Services CGU, management
considered all the non-working capital assets attributable to this CGUs, as outlined in the above table, had minimum future
economic benefits and immaterial residual values. These assets are therefore fully impaired with the impairment loss recorded
in the consolidated statement of profit or loss for the year ended 31 December 2023. The assets remaining under this CGU are
cash and working capital items, which are considered recoverable.
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.
Goodwill and other indefinite life intangible assets
Goodwill is tested at each reporting date. Where the recoverable amount is less than the carrying amount,
an impairment loss is recognised as an expense in the statement of profit or loss. The recoverable amount of each
CGU is determined based on value-in-use calculations. These calculations use cash flow projections based
on financial estimates reviewed by management covering a five-year period. Cash flows beyond this five-year period
are extrapolated using estimated growth rates that do not exceed the long-term average growth rate for the business
in which the CGU operates and are consistent with external sources of information.
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.
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Appen 2023 Annual Report
109
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:
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
• Market interest rates or other market rates of return on investments have increased during the period and are likely
adverse impact on the entity;
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.
for the Global Services CGU.
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. Accordingly, management have performed the impairment testing at 31 December 2023,
As a result of the annual impairment testing, the Global Services CGU has been identified as requiring impairment as its
recoverable amount is lower than its carrying value.
CGU
amount
before impairment Asset impairment recorded
Recoverable
Carrying value
Global Services
$27 million
$96 million
$69 million
Carrying value post
impairment
$27 million
Comprising of cash
and working capital
balances only.
Comprising of the following assets
whose net book value have been
fully written down:
-$53 million Goodwill
-$8 million Lease Right-of-use asset
-$2 million Plant and equipment
-$6 million Intangible assets
The recoverable amount is the higher of value-in-use (VIU) of the CGU and the fair value less costs of disposal (FVLCD).
be of higher value.
Notes to the consolidated financial statements
for the year ended 31 December 2023
Notes to the consolidated financial statements
for the year ended 31 December 2023
Note 12. Intangible assets (continued)
Note 12. Intangible assets (continued)
• There are observable indications that an asset’s value has declined during the period more than that which would
Key assumptions
Basis for determining value-in-use assigned to key assumptions
Value-in-use is defined as the present value of the future cash flows expected to be derived from an asset or CGU from both
its continuing use and ultimate disposal. Cash flows were projected based on forecast operating results over the five-year
period from 2024 to 2028, derived by applying conservative estimates to the Group’s five-year plan as approved by board.
Key assumptions made in calculating the Global Services CGU value-in-use are as follows:
Revenue growth rate
Continued revenue decline in 2024 mirroring the recent historical trending, with no nominal
growth anticipated in outer years (2025–2028).
Such assumption is underpinned by:
• Appen’s internal budget/forecast and strategic plans;
• consideration of customer diversification risk, global economic outlook and impact
on customers’ spending.
Terminal value growth rate
Estimated at a constant rate of 2.5% (2022: 3.0%) reflected management expected long-term
average growth rate.
Discount rate
A post-tax discount rate at 12.5% was applied (2022: 12.5%). The discount rate has taken into
account the group’s risk profile, debt/equity structure and industry comparable information.
For the identified impairment loss relating to Global Services CGU, impairment was taken to reduce the Goodwill first then
other assets pro rata on the basis of the carrying value of each asset in the CGU.
Considering the declining revenue and customer diversification risk specific to the Global Services CGU, management
considered all the non-working capital assets attributable to this CGUs, as outlined in the above table, had minimum future
economic benefits and immaterial residual values. These assets are therefore fully impaired with the impairment loss recorded
in the consolidated statement of profit or loss for the year ended 31 December 2023. The assets remaining under this CGU are
cash and working capital items, which are considered recoverable.
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.
Management adopted VIU as the recoverable amount for each CGUs considering it is unlikely that the FVLCD would
Goodwill and other indefinite life intangible assets
Goodwill is tested at each reporting date. Where the recoverable amount is less than the carrying amount,
an impairment loss is recognised as an expense in the statement of profit or loss. The recoverable amount of each
CGU is determined based on value-in-use calculations. These calculations use cash flow projections based
on financial estimates reviewed by management covering a five-year period. Cash flows beyond this five-year period
are extrapolated using estimated growth rates that do not exceed the long-term average growth rate for the business
in which the CGU operates and are consistent with external sources of information.
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.
108
Appen 2023 Annual Report
109
Notes to the consolidated financial statements
for the year ended 31 December 2023
Notes to the consolidated financial statements
for the year ended 31 December 2023
Note 12. Intangible assets (continued)
Note 13. Property, plant and equipment
Accounting policy
Goodwill
Goodwill arising from a business combination is recognised as an intangible asset and allocated to the Cash Generating
Unit (CGU) that is expected to benefit from the synergies of the business combination. Goodwill is carried at cost less
recognised impairment losses. The CGU to which goodwill has been allocated is tested for impairment annually, or more
frequently when there is an impairment indicator. Any impairment loss for goodwill is recognised directly in profit or loss
and cannot be reversed in subsequent periods.
For the year-ended 31 December 2023, management assessed that the Group continued to have three 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.
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 seven 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 three to seven 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 following:
•
•
•
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 five years.
Other intangibles
Leasehold
Fixtures and
improvements
$ 000
fittings
$ 000
Computer
and Audio
equipment
$ 000
Motor
vehicles
$ 000
4,128
(3,472)
656
738
(514)
–
5
(389)
(11)
4,845
(4,360)
485
1,017
454
–
(758)
(57)
1,198
(940)
258
180
–
(275)
8
(54)
(1)
1,383
(1,267)
116
313
47
–
(162)
60
8,477
(5,700)
2,777
890
(66)
(1,215)
(13)
(1,484)
(15)
9,178
(8,304)
874
1,788
2,488
(5)
(1,363)
(131)
(35)
(1,962)
Total
$ 000
13,853
(10,127)
3,726
1,808
(66)
(2,004)
–
(27)
15,456
(13,981)
1,475
3,118
3,039
(5)
(2,298)
(128)
50
(15)
35
–
–
–
–
–
50
(50)
–
–
50
–
(15)
–
Balance at 1 January 2023
Cost
Accumulated depreciation
Net carrying value at 1 January 2023
Additions
Disposals
Impairment 1
Transfer/reclass
Depreciation
Foreign exchange translation
Balance at 31 December 2023
Cost
Accumulated depreciation and impairment
Net carrying value at 31 December 2023
Balance at 1 January 2022
Net carrying value
Additions
Disposals
Depreciation
Foreign exchange translation
Balance at 31 December 2022
Net carrying value
1 For further details in relation to impairments refer to Note 12.
656
258
2,777
35
3,726
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
Fixture and fittings
Computer and Audio equipment
Motor vehicles
Over the lease term 2–8 years
3–13 years
1–4 years
3–5 years
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 three to five years.
or loss.
Any gain or loss on disposal of an item of plant and equipment is recognised in the consolidated statement of profit
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 seven years. Amortisation starts at the time that the database is available for use or sale to external customers.
110
Appen 2023 Annual Report
111
Notes to the consolidated financial statements
for the year ended 31 December 2023
Notes to the consolidated financial statements
for the year ended 31 December 2023
Note 12. Intangible assets (continued)
Note 13. Property, plant and equipment
Accounting policy
Goodwill
Goodwill arising from a business combination is recognised as an intangible asset and allocated to the Cash Generating
Unit (CGU) that is expected to benefit from the synergies of the business combination. Goodwill is carried at cost less
recognised impairment losses. The CGU to which goodwill has been allocated is tested for impairment annually, or more
frequently when there is an impairment indicator. Any impairment loss for goodwill is recognised directly in profit or loss
and cannot be reversed in subsequent periods.
For the year-ended 31 December 2023, management assessed that the Group continued to have three 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.
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 seven 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 three to seven 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 following:
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 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 five years.
Brand
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 three to five 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 seven years. Amortisation starts at the time that the database is available for use or sale to external customers.
Balance at 1 January 2023
Cost
Accumulated depreciation
Net carrying value at 1 January 2023
Additions
Disposals
Impairment 1
Transfer/reclass
Depreciation
Foreign exchange translation
Balance at 31 December 2023
Cost
Accumulated depreciation and impairment
Net carrying value at 31 December 2023
Balance at 1 January 2022
Net carrying value
Additions
Disposals
Depreciation
Foreign exchange translation
Balance at 31 December 2022
Net carrying value
Leasehold
improvements
$ 000
Fixtures and
fittings
$ 000
Computer
and Audio
equipment
$ 000
Motor
vehicles
$ 000
4,128
(3,472)
656
738
–
(514)
5
(389)
(11)
4,845
(4,360)
485
1,017
454
–
(758)
(57)
1,198
(940)
258
180
–
(275)
8
(54)
(1)
1,383
(1,267)
116
313
47
–
(162)
60
8,477
(5,700)
2,777
890
(66)
(1,215)
(13)
(1,484)
(15)
9,178
(8,304)
874
1,788
2,488
(5)
(1,363)
(131)
50
(15)
35
–
–
–
–
(35)
–
50
(50)
–
–
50
–
(15)
–
Total
$ 000
13,853
(10,127)
3,726
1,808
(66)
(2,004)
–
(1,962)
(27)
15,456
(13,981)
1,475
3,118
3,039
(5)
(2,298)
(128)
656
258
2,777
35
3,726
1 For further details in relation to impairments refer to Note 12.
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
Fixture and fittings
Computer and Audio equipment
Motor vehicles
Over the lease term 2–8 years
3–13 years
1–4 years
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.
110
Appen 2023 Annual Report
111
Notes to the consolidated financial statements
for the year ended 31 December 2023
Notes to the consolidated financial statements
for the year ended 31 December 2023
Note 14. Right of use assets and lease liabilities
Note 15. Trade and other payables
Right of use assets
Balance at the beginning of the period
Additions
Disposals
Impairment 1
Depreciation
Remeasurement
Foreign exchange translation
Balance at the end of the period
1 For further details in relation to impairments refer to Note 12.
Lease liabilities
Balance at the beginning of the period
Additions
Accretion of interests
Payment of interest
Payment of principal
Disposals
Remeasurement
Foreign exchange translation
Balance at the end of the period
Current lease liabilities
Non-current lease liabilities
2023
$ 000
2022
$ 000
9,061
8,403
(1,488)
(8,319)
(4,301)
(251)
(10)
3,095
13,557
903
–
–
(4,930)
–
(469)
9,061
2023
$ 000
2022
$ 000
10,177
8,403
741
(637)
(4,126)
(1,658)
(453)
(13)
12,434
3,125
9,309
15,060
903
506
(485)
(4,023)
–
(1,237)
(547)
10,177
3,152
7,025
Current liabilities
Trade payables
Other payables and accrued expenses
Total trade and other payables
Note 16. Provisions
Current liabilities
Employee benefits
Total current provisions
Non-current liabilities
Employee benefits
Other provisions
Total non-current provisions
Total provisions
The undiscounted lease liabilities’ maturity is analysed in Note 24. Financial risk management.
Employee benefits primarily comprise accrued annual leave and long service leave.
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.
2023
$ 000
2022
$ 000
13,573
13,659
27,232
22,431
17,309
39,740
2023
$ 000
2,407
2,407
238
68
306
2022
$ 000
3,390
3,390
439
71
510
2,713
3,900
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.
112
Appen 2023 Annual Report
113
Notes to the consolidated financial statements
for the year ended 31 December 2023
Notes to the consolidated financial statements
for the year ended 31 December 2023
Note 14. Right of use assets and lease liabilities
Note 15. Trade and other payables
Right of use assets
Balance at the beginning of the period
Additions
Disposals
Impairment 1
Depreciation
Remeasurement
Foreign exchange translation
Balance at the end of the period
1 For further details in relation to impairments refer to Note 12.
Lease liabilities
Balance at the beginning of the period
Additions
Accretion of interests
Payment of interest
Payment of principal
Disposals
Remeasurement
Foreign exchange translation
Balance at the end of the period
Current lease liabilities
Non-current lease liabilities
2023
$ 000
2022
$ 000
2023
$ 000
2022
$ 000
9,061
8,403
(1,488)
(8,319)
(4,301)
(251)
(10)
3,095
10,177
8,403
741
(637)
(4,126)
(1,658)
(453)
(13)
12,434
3,125
9,309
13,557
903
–
–
–
(4,930)
(469)
9,061
15,060
903
506
(485)
(4,023)
–
(1,237)
(547)
10,177
3,152
7,025
Current liabilities
Trade payables
Other payables and accrued expenses
Total trade and other payables
2023
$ 000
2022
$ 000
13,573
13,659
27,232
22,431
17,309
39,740
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
Current liabilities
Employee benefits
Total current provisions
Non-current liabilities
Employee benefits
Other provisions
Total non-current provisions
Total provisions
2023
$ 000
2,407
2,407
238
68
306
2022
$ 000
3,390
3,390
439
71
510
2,713
3,900
The undiscounted lease liabilities’ maturity is analysed in Note 24. Financial risk management.
Employee benefits primarily comprise accrued annual leave and long service leave.
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.
112
Appen 2023 Annual Report
113
Notes to the consolidated financial statements
for the year ended 31 December 2023
Notes to the consolidated financial statements
for the year ended 31 December 2023
Note 16. Provisions (continued)
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
Current liabilities
Invoices issued/deposits received in advance
Contract liabilities are expected to be recognised as revenue in future periods as follows:
Within 3 months
Over 3 months
Total
2023
$ 000
2022
$ 000
11,142
18,737
2023
$ 000
4,340
6,802
11,142
2022
$ 000
4,133
14,604
18,737
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.
Investment, capital and risk management
Note 18. Earn-out liability
Current earn-out liability
Non-current earn-out liability
Total earn-out liability
Movement during the year:
2023
$ 000
3,750
–
3,750
2023
$ 000
19,131
354
(15,735)
2022
$ 000
–
19,131
19,131
2022
$ 000
18,359
772
–
2023
$ 000
2022
$ 000
104
262
At the beginning of the period
Deemed interest
Earn-out adjustment (including foreign currency translation impact)
At the end of the period
3,750
19,131
The earn-out liability relates to the acquisition of Quadrant in September 2021. The liability was settled in January 2024 via the
issue of 7,774,816 fully paid ordinary shares.
Note 19. Derivative financial instruments
Current assets
Forward foreign exchange contract
The Group uses forward foreign exchange contract to manage its exposure to foreign currency exchange risks. Derivatives
are exclusively used for hedging purposes, i.e., not as trading or other speculative instruments.
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.
114
Appen 2023 Annual Report
115
Notes to the consolidated financial statements
for the year ended 31 December 2023
Notes to the consolidated financial statements
for the year ended 31 December 2023
Note 16. Provisions (continued)
Accounting policy
Short-term employee benefits
obligation is settled.
Long-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
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.
Investment, capital and risk management
Note 18. Earn-out liability
Current earn-out liability
Non-current earn-out liability
Total earn-out liability
Movement during the year:
At the beginning of the period
Deemed interest
This relates to office lease makegood provision. The amount recognised as a provision is the best estimate of the
Earn-out adjustment (including foreign currency translation impact)
2023
$ 000
3,750
–
3,750
2023
$ 000
19,131
354
(15,735)
2022
$ 000
–
19,131
19,131
2022
$ 000
18,359
772
–
At the end of the period
3,750
19,131
The earn-out liability relates to the acquisition of Quadrant in September 2021. The liability was settled in January 2024 via the
issue of 7,774,816 fully paid ordinary shares.
Note 19. Derivative financial instruments
Contract liabilities are expected to be recognised as revenue in future periods as follows:
Current assets
Forward foreign exchange contract
2023
$ 000
2022
$ 000
104
262
The Group uses forward foreign exchange contract to manage its exposure to foreign currency exchange risks. Derivatives
are exclusively used for hedging purposes, i.e., not as trading or other speculative instruments.
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.
Other provision
consideration required to settle.
Note 17. Contract liabilities
Current liabilities
Invoices issued/deposits received in advance
Within 3 months
Over 3 months
Total
Accounting policy
2023
$ 000
2022
$ 000
11,142
18,737
2023
$ 000
4,340
6,802
11,142
2022
$ 000
4,133
14,604
18,737
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.
114
Appen 2023 Annual Report
115
Notes to the consolidated financial statements
for the year ended 31 December 2023
Notes to the consolidated financial statements
for the year ended 31 December 2023
Note 20. Investments
Note 21. Fair value measurement
During the year the Group has invested $0.5 million in exchange for a minority interest stake in Reka AI, Inc. (“Reka”),
an AI model start-up specialising in the development of customised and powerful AI models for enterprise customers.
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:
During the prior year, the Group invested GBP2.0 million in exchange for a minority interest stake in Mindtech Global Limited
(“Mindtech”), a provider of synthetic data to create privacy-compliant edge cases.
These investments are carried at fair value as at 31 December.
• Level 1: inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access
• Level 2: inputs other than quoted prices included within Level 1, that are observable for the asset or liability, either directly
at the measurement date;
or indirectly; and
Fair value
• Level 3: inputs are unobservable inputs for the asset or liability.
Investments
Country of incorporation
Mindtech
Reka
Total
UK
USA
2023
$ 000
946
500
2022
$ 000
2,418
–
1,446
2,418
There were no transfers between categories for recurring fair value measurements during the year.
Towards the end of 2023, Mindtech was undergoing a capital raising which was not fully completed at the date of this report.
The latest enterprise valuation through this process indicated a $1.6 million decline in the fair value of Appen’s share of interest
to $0.9 million as at 31 December 2023. The Group has reduced the Mindtech investment’s carrying value accordingly, with the
unrealised loss recorded in the other comprehensive income. Other movements in the carrying value of this investment relate
to foreign exchange translation.
Forward foreign exchange contracts
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.
31 December 2023
Assets
Investments
Total assets
Liabilities
Earn-out liability
Total liabilities
31 December 2022
Assets
Investments
Total assets
Liabilities
Earn-out liability
Total liabilities
Forward foreign exchange contracts
Level 1
$ 000
Level 2
$ 000
Level 3
$ 000
Total
$ 000
–
–
–
–
–
–
–
–
–
–
104
–
104
–
–
262
–
262
–
–
–
1,446
1,446
3,750
3,750
–
2,418
2,418
19,131
19,131
104
1,446
1,550
3,750
3,750
262
2,418
2,680
19,131
19,131
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.
116
Appen 2023 Annual Report
117
Notes to the consolidated financial statements
for the year ended 31 December 2023
Notes to the consolidated financial statements
for the year ended 31 December 2023
Note 20. Investments
Note 21. Fair value measurement
During the year the Group has invested $0.5 million in exchange for a minority interest stake in Reka AI, Inc. (“Reka”),
an AI model start-up specialising in the development of customised and powerful AI models for enterprise customers.
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:
During the prior year, the Group invested GBP2.0 million in exchange for a minority interest stake in Mindtech Global Limited
(“Mindtech”), a provider of synthetic data to create privacy-compliant edge cases.
These investments are carried at fair value as at 31 December.
• 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
Fair value
• 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.
31 December 2023
Assets
Forward foreign exchange contracts
Investments
Total assets
Liabilities
Earn-out liability
Total liabilities
31 December 2022
Assets
Forward foreign exchange contracts
Investments
Total assets
Liabilities
Earn-out liability
Total liabilities
Level 1
$ 000
Level 2
$ 000
Level 3
$ 000
Total
$ 000
–
–
–
–
–
–
–
–
–
–
104
–
104
–
–
262
–
262
–
–
–
1,446
1,446
3,750
3,750
–
2,418
2,418
19,131
19,131
104
1,446
1,550
3,750
3,750
262
2,418
2,680
19,131
19,131
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.
Investments
Country of incorporation
Mindtech
Reka
Total
UK
USA
2023
$ 000
946
500
2022
$ 000
2,418
–
1,446
2,418
Towards the end of 2023, Mindtech was undergoing a capital raising which was not fully completed at the date of this report.
The latest enterprise valuation through this process indicated a $1.6 million decline in the fair value of Appen’s share of interest
to $0.9 million as at 31 December 2023. The Group has reduced the Mindtech investment’s carrying value accordingly, with the
unrealised loss recorded in the other comprehensive income. Other movements in the carrying value of this investment relate
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.
116
Appen 2023 Annual Report
117
Notes to the consolidated financial statements
for the year ended 31 December 2023
Notes to the consolidated financial statements
for the year ended 31 December 2023
Note 22. Borrowings
Note 23. Equity (continued)
The Group has no outstanding borrowings as at year end. The used and unused facilities are as follows:
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
borrowings less cash and cash equivalents.
Capital is regarded as total equity, as recognised in the statement of financial position. Net debt is calculated as total
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.
Facilities
Facility A (Senior debt)
Facility B (Working capital)
Facility C (Acquisition funding)
Total facilities
2023
2022
Used at
reporting
date
$ 000
Unused at
reporting
date
$ 000
Used at
reporting
date
$ 000
Unused at
reporting
date
$ 000
–
–
–
–
–
6,818
–
6,818
–
–
–
–
20,000
13,640
24,137
57,777
Facility A and Facility B expired during 2023. Facility B was resized from A$20 million to $A10 million during the year 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
Balance as at 31 December
Ordinary shares – fully paid
Movement in ordinary share capital
Details
Balance as at
2023
2022
# of shares
$000 # of shares
$000
211,467,054
320,435
123,446,356
262,917
Date
# of shares
$ 000
31 December 2022
123,446,356
262,917
Issue of shares on exercise of performance rights
27 February 2023
872,705
–
Issue of shares – institutional placement and entitlement offer
26 May 2023
Issue of shares – retail placement and entitlement offer
Share issue transaction costs, net of tax
Issue of shares on deferred STI
Issue of shares on exercise of performance rights
Issue of shares on exercise of performance rights
14 June 2023
14 June 2023
23 June 2023
30 June 2023
17 July 2023
16,204,125
15,958,039
–
23,197
140,136
277,041
Issue of shares – institutional placement and entitlement offer
4 December 2023
22,996,263
Issue of shares – retail placement and entitlement offer
15 December 2023
31,549,192
Share issue transaction costs, net of tax
15 December 2023
–
19,867
19,984
(1,428)
–
–
–
8,457
11,576
(938)
Balance as at
31 December 2023
211,467,054
320,435
118
Appen 2023 Annual Report
119
Notes to the consolidated financial statements
for the year ended 31 December 2023
Notes to the consolidated financial statements
for the year ended 31 December 2023
Note 22. Borrowings
Note 23. Equity (continued)
The Group has no outstanding borrowings as at year end. The used and unused facilities are as follows:
Ordinary shares
Facilities
Facility A (Senior debt)
Facility B (Working capital)
Facility C (Acquisition funding)
Total facilities
2023
2022
Used at
reporting
Unused at
reporting
Used at
reporting
Unused at
reporting
date
$ 000
–
–
–
–
date
$ 000
6,818
–
–
6,818
date
$ 000
–
–
–
–
date
$ 000
20,000
13,640
24,137
57,777
Facility A and Facility B expired during 2023. Facility B was resized from A$20 million to $A10 million during the year 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.
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.
They are subsequently measured at amortised cost using the effective interest method.
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.
Note 23. Equity
Issued capital
Balance as at 31 December
Ordinary shares – fully paid
Movement in ordinary share capital
Details
Balance as at
2023
2022
# of shares
$000 # of shares
$000
211,467,054
320,435
123,446,356
262,917
Date
# of shares
$ 000
31 December 2022
123,446,356
262,917
Issue of shares on exercise of performance rights
27 February 2023
872,705
–
Issue of shares – institutional placement and entitlement offer
26 May 2023
Issue of shares – retail placement and entitlement offer
Share issue transaction costs, net of tax
Issue of shares on deferred STI
Issue of shares on exercise of performance rights
Issue of shares on exercise of performance rights
14 June 2023
14 June 2023
23 June 2023
30 June 2023
17 July 2023
16,204,125
15,958,039
–
23,197
140,136
277,041
Issue of shares – institutional placement and entitlement offer
4 December 2023
22,996,263
Issue of shares – retail placement and entitlement offer
15 December 2023
31,549,192
Share issue transaction costs, net of tax
15 December 2023
–
19,867
19,984
(1,428)
–
–
–
8,457
11,576
(938)
Balance as at
31 December 2023
211,467,054
320,435
118
Appen 2023 Annual Report
119
Notes to the consolidated financial statements
for the year ended 31 December 2023
Notes to the consolidated financial statements
for the year ended 31 December 2023
Note 23. Equity (continued)
Reserves
Common control reserve
Foreign currency translation reserve
Share-based payments reserve
Profit reserve
Other reserves
Total reserves
Movement in each category of reserves are as follows:
2023
$ 000
(1,307)
(6,738)
34,902
2022
$ 000
(1,307)
(8,019)
29,211
104,667
106,267
2,002
2,002
133,526
128,154
Note 23. Equity (continued)
Other reserves
Accumulated losses
Accumulated losses at the beginning of the period
Loss after income tax for the period
Accumulated losses at the end of the period
Common
control
reserve
$ 000
Foreign
currency
translation
reserve
$ 000
Share-
based
payments
reserve
$ 000
Profits
reserve
$ 000
Other
reserves
$ 000
Total
$ 000
Balance at 1 January 2023
(1,307)
(8,019)
29,211
106,267
2,002
128,154
Foreign currency translation
Unrealised loss on investment
Share-based payments
Transfer from accumulated losses
Dividend paid
–
–
–
–
–
1,281
–
–
–
–
–
–
5,691
–
–
–
(1,600)
–
–
–
–
–
–
–
–
1,281
(1,600)
5,691
–
–
Balance at 31 December 2023
(1,307)
(6,738)
34,902
104,667
2,002
133,526
Balance at 1 January 2022
(1,307)
Foreign currency translation
Share-based payments
Transfer from accumulated losses
Dividend paid
–
–
–
–
(6,728)
(1,291)
–
–
–
27,719
111,286
2,002
132,972
• Floating interest payables on
Sensitivity analysis
• Hedging derivatives – interest rate swaps
–
1,492
–
–
–
–
–
(5,019)
–
–
–
–
(1,291)
1,492
–
(5,019)
Balance at 31 December 2022
(1,307)
(8,019)
29,211
106,267
2,002
128,154
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.
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.
2023
$ 000
(243,085)
2022
$ 000
(4,017)
(118,079)
(239,068)
(361,164)
(243,085)
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
• Non-USD payments to suppliers
Cash flow forecast
• Economic hedges
– Foreign currency
• Non-USD receipts from customers
• Treasury foreign exchange hedging policy
and sensitivity
analysis
exchange
Market risk
– Interest rate
borrowings
Credit risk
• Cash at bank
Ageing analysis and
• Customer and supplier due diligence
• Trade and other receivables
• Derivative contracts
sensitivity analysis
policies
• Treasury policy over financial instrument
counterpart’s credit rating
Liquidity risk
• Borrowings
Cash flow forecast
• Regular cash flow forecast
• Lease liabilities
• Cash and credit facility management
• Trade payables and other liabilities
• Maintain funding flexibility
and sensitivity
analysis
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.
120
Appen 2023 Annual Report
121
Notes to the consolidated financial statements
for the year ended 31 December 2023
Notes to the consolidated financial statements
for the year ended 31 December 2023
Note 23. Equity (continued)
Reserves
Common control reserve
Foreign currency translation reserve
Share-based payments reserve
Profit reserve
Other reserves
Total reserves
Movement in each category of reserves are as follows:
2023
$ 000
(1,307)
(6,738)
34,902
2022
$ 000
(1,307)
(8,019)
29,211
104,667
106,267
2,002
2,002
133,526
128,154
Balance at 1 January 2023
(1,307)
(8,019)
29,211
106,267
2,002
128,154
Common
control
reserve
$ 000
translation
payments
Profits
reserve
$ 000
Other
reserves
$ 000
Foreign
currency
reserve
$ 000
1,281
–
–
–
–
–
–
–
(6,728)
(1,291)
–
–
–
–
–
–
–
–
–
Share-
based
reserve
$ 000
–
–
–
–
–
–
–
1,492
(1,600)
5,691
–
–
–
–
–
–
–
(5,019)
Total
$ 000
1,281
(1,600)
5,691
–
–
(1,291)
1,492
–
(5,019)
–
–
–
–
–
–
–
–
–
Balance at 31 December 2023
(1,307)
(6,738)
34,902
104,667
2,002
133,526
Balance at 1 January 2022
(1,307)
27,719
111,286
2,002
132,972
Foreign currency translation
Unrealised loss on investment
Share-based payments
Transfer from accumulated losses
Dividend paid
Foreign currency translation
Share-based payments
Transfer from accumulated losses
Dividend paid
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.
The reserve is used to recognise exchange differences arising from translation of the financial statements of foreign operations
Foreign currency translation reserve
to US dollars.
Share-based payments reserve
Profits reserve
The reserve is used to recognise the value of equity benefits provided to employees as part of their remuneration.
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.
Note 23. Equity (continued)
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
Accumulated losses at the beginning of the period
Loss after income tax for the period
Accumulated losses at the end of the period
Note 24. Financial risk management
2023
$ 000
(243,085)
2022
$ 000
(4,017)
(118,079)
(239,068)
(361,164)
(243,085)
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
Market risk
– Interest rate
• Non-USD payments to suppliers
• Non-USD receipts from customers
Cash flow forecast
and sensitivity
analysis
• Economic hedges
• Treasury foreign exchange hedging policy
• Floating interest payables on
Sensitivity analysis
• Hedging derivatives – interest rate swaps
borrowings
Balance at 31 December 2022
(1,307)
(8,019)
29,211
106,267
2,002
128,154
Liquidity risk
• Borrowings
• Lease liabilities
• Trade payables and other liabilities
Credit risk
• Cash at bank
• Trade and other receivables
• Derivative contracts
Ageing analysis and
sensitivity analysis
• Customer and supplier due diligence
policies
Cash flow forecast
and sensitivity
analysis
• Treasury policy over financial instrument
counterpart’s credit rating
• 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.
120
Appen 2023 Annual Report
121
Notes to the consolidated financial statements
for the year ended 31 December 2023
Notes to the consolidated financial statements
for the year ended 31 December 2023
Note 24. Financial risk management (continued)
Note 24. Financial risk management (continued)
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. The maturity, settlement
amounts and the average contractual exchange rates of the Group’s outstanding forward foreign exchange contracts and
foreign exchange – collars at the reporting date were as follows:
Foreign Exchange Forward Contracts
2023
2022
2023
2022
Purchase AUD
Forward exchange rate
Sell USD
Forward contract maturity:
< 3 months
3–6 months
6–12 months
> 12 months
4,889
4,889
–
–
6,370
8,296
9,778
9,778
1.4815
1.4815
–
–
1.4815
1.4815
1.4815
1.4815
The period-end average exchange rates and reporting date exchange rates applied were as follows:
Group applied foreign exchange rates
2023
2022
2023
2022
Average rate
Reporting date rate
29,377
24,146
5,912
3,712
United States Dollars
Australian Dollars
United Kingdom Pound Sterling
European Economic and Monetary Union Euro
Hong Kong Dollars
Philippine Pesos
Chinese Yuan
Japanese Yen
Singapore Dollars
Korean Won
Indian Rupee
Canadian Dollars
1.5070
0.8019
0.9236
7.8306
55.548
7.0825
141.37
1.3418
1,305.4
82.58
1.3493
1.4430
0.8140
0.9521
7.8325
54.538
6.7515
131.77
1.3785
1.291.0
–
–
1.4666
0.7854
0.9060
7.8081
55.170
7.0698
140.99
1.3192
1,293.1
83.04
1.3247
1.4663
0.8261
0.9338
7.8078
55.732
6.8973
131.06
1.3403
1,261.4
–
–
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
Australian Dollars
United Kingdom Pound Sterling
European Economic and Monetary Union Euro
2023
$000
8,477
1,814
1,541
–
678
13,823
1,999
319
398
137
191
2022
$000
4,373
2,130
2,386
–
663
13,589
569
318
118
–
–
2023
$000
2022
$000
23,465
20,434
2023
$000
236
4,861
199
197
–
13
198
–
27
181
–
–
21
16
–
–
–
7
–
–
–
31
2022
$000
1,277
142
–
13
385
1,847
47
–
1
–
–
828
162
154
(1)
44
896
180
32
35
(4)
19
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
$000
Effect on profit
before tax
$000
Equity
$000
United Kingdom Pound Sterling
European Economic Monetary Union Euro
%
10%
10%
10%
10%
10%
10%
10%
10%
10%
10%
10%
10%
$000
–
(21)
(16)
(7)
(31)
–
–
–
–
–
–
(828)
(162)
(154)
1
(44)
(896)
(180)
(32)
(35)
4
(19)
(75)
(2,345)
75
2,345
Hong Kong Dollars
Philippine Pesos
Chinese Yuan
Japanese Yen
Singapore Dollars
Korean Won
Indian Rupee
Canadian Dollars
Total
Net financial assets
2023
Australian Dollars
Hong Kong Dollars
Philippine Pesos
Chinese Yuan
Japanese Yen
Singapore Dollars
Korean Won
Indian Rupee
Canadian Dollars
Total
122
Appen 2023 Annual Report
123
Notes to the consolidated financial statements
for the year ended 31 December 2023
Notes to the consolidated financial statements
for the year ended 31 December 2023
Note 24. Financial risk management (continued)
Note 24. Financial risk management (continued)
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. The maturity, settlement
amounts and the average contractual exchange rates of the Group’s outstanding forward foreign exchange contracts and
foreign exchange – collars at the reporting date were as follows:
Foreign Exchange Forward Contracts
2023
2022
2023
2022
Purchase AUD
Forward exchange rate
The period-end average exchange rates and reporting date exchange rates applied were as follows:
Group applied foreign exchange rates
2023
2022
2023
2022
Average rate
Reporting date rate
Forward contract maturity:
Sell USD
< 3 months
3–6 months
6–12 months
> 12 months
United States Dollars
Australian Dollars
United Kingdom Pound Sterling
European Economic and Monetary Union Euro
Hong Kong Dollars
Philippine Pesos
Chinese Yuan
Japanese Yen
Singapore Dollars
Korean Won
Indian Rupee
Canadian Dollars
4,889
4,889
–
–
6,370
8,296
9,778
9,778
1.4815
1.4815
–
–
1.4815
1.4815
1.4815
1.4815
1.5070
0.8019
0.9236
7.8306
55.548
7.0825
141.37
1.3418
1,305.4
82.58
1.3493
1.4430
0.8140
0.9521
7.8325
54.538
6.7515
131.77
1.3785
1.291.0
–
–
1.4666
0.7854
0.9060
7.8081
55.170
7.0698
140.99
1.3192
1,293.1
83.04
1.3247
1.4663
0.8261
0.9338
7.8078
55.732
6.8973
131.06
1.3403
1,261.4
–
–
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.
Australian Dollars
United Kingdom Pound Sterling
European Economic and Monetary Union Euro
Hong Kong Dollars
Philippine Pesos
Chinese Yuan
Japanese Yen
Singapore Dollars
Korean Won
Indian Rupee
Canadian Dollars
Total
Net financial assets
Financial assets
Financial liabilities
2023
$000
8,477
1,814
1,541
–
678
13,823
1,999
319
398
137
191
2022
$000
4,373
2,130
2,386
–
663
13,589
569
318
118
–
–
2023
$000
199
197
–
13
236
4,861
198
–
27
181
–
2022
$000
1,277
142
–
13
385
1,847
47
–
1
–
–
29,377
24,146
5,912
3,712
2023
$000
2022
$000
23,465
20,434
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:
2023
Australian Dollars
United Kingdom Pound Sterling
European Economic Monetary Union Euro
Hong Kong Dollars
Philippine Pesos
Chinese Yuan
Japanese Yen
Singapore Dollars
Korean Won
Indian Rupee
Canadian Dollars
Total
USD strengthened
USD weakened
change
%
Effect on profit
before tax
$000
Equity
$000
Effect on profit
before tax
$000
Equity
$000
10%
10%
10%
10%
10%
10%
10%
10%
10%
10%
10%
10%
–
(21)
(16)
–
–
–
(7)
(31)
–
–
–
(828)
(162)
(154)
1
(44)
(896)
(180)
(32)
(35)
4
(19)
(75)
(2,345)
–
21
16
–
–
–
7
31
–
–
–
75
828
162
154
(1)
44
896
180
32
35
(4)
19
2,345
122
Appen 2023 Annual Report
123
Notes to the consolidated financial statements
for the year ended 31 December 2023
Notes to the consolidated financial statements
for the year ended 31 December 2023
Note 24. Financial risk management (continued)
Note 24. Financial risk management (continued)
USD strengthened
USD weakened
change
%
Effect on profit
before tax
$000
Equity
$000
Effect on profit
before tax
$000
2022
Australian Dollars
United Kingdom Pound Sterling
European Economic and Monetary Union Euro
Hong Kong Dollars
Philippine Pesos
Chinese Yuan
Japanese Yen
Singapore Dollars
Total
10%
10%
10%
10%
10%
10%
10%
10%
10%
–
(9)
(73)
–
–
–
(8)
(8)
(98)
(310)
(194)
(239)
1
(28)
(1,174)
(52)
(32)
–
9
73
–
–
–
8
8
Equity
$000
310
194
239
(1)
28
1,174
52
32
(2,028)
98
2,028
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 is a core and integral part of Quadrant’s business operations, as cryptocurrency is used to pay geolancers and
some suppliers, because cryptocurrency provides various benefits to Quadrant, such as: (i) real-time settlement and (ii) allows
for micropayments, because a lot of the tasks that geolancers perform involve small data volumes and hence small or micro
payment amounts are provided as consideration. Cryptocurrency allows and can handle these small micropayments, with the
added benefit of not imposing fees on the recipient. 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’s main interest rate risk potentially arises from long-term borrowings. Borrowings issued at variable rates expose
the Group to interest rate risk. At the reporting date, the Group had no borrowings.
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 2023, the Groups held cash and cash equivalents of $32.1 million (2022: $23.4 million).
124
Appen 2023 Annual Report
125
Maturity of financial liabilities are summarised below, based on the contractual undiscounted cash flows. Balances due within
one year equal their carrying values considering the discounting impact is insignificant.
2023
$000
Non–derivatives
Non–interest bearing
Trade payables
Other payables
Interest–bearing – fixed rate
Lease liability 1
Total non–derivatives
2022
$000
Non–derivatives
Non–interest bearing
Trade payables
Other payables
Interest–bearing – fixed rate
Lease liability 1
Total non–derivatives
Contractual maturities
< 1 year
1–2 years
2–5 years
> 5 years
Total cash
flows
Total
carrying
value
13,573
13,659
13,573
13,659
3,323
30,555
2,636
2,636
7,519
7,519
14,000
41,232
12,434
39,666
Contractual maturities
< 1 year
1–2 years
2–5 years
> 5 years
Total cash
flows
Total
carrying
value
13,573
13,659
22,431
17,309
3,277
43,017
–
–
–
–
–
–
–
–
–
–
522
522
–
–
941
941
22,431
17,309
10,868
50,608
22,431
17,309
10,177
49,917
1
Includes interest, weighted average at 6.24% (2022: 3.99%).
2,638
2,638
4,012
4,012
Notes to the consolidated financial statements
for the year ended 31 December 2023
Notes to the consolidated financial statements
for the year ended 31 December 2023
Note 24. Financial risk management (continued)
Note 24. Financial risk management (continued)
Maturity of financial liabilities are summarised below, based on the contractual undiscounted cash flows. Balances due within
one year equal their carrying values considering the discounting impact is insignificant.
2023
$000
Non–derivatives
Non–interest bearing
Trade payables
Other payables
Interest–bearing – fixed rate
Lease liability 1
Total non–derivatives
2022
$000
Non–derivatives
Non–interest bearing
Trade payables
Other payables
Interest–bearing – fixed rate
Lease liability 1
Total non–derivatives
Contractual maturities
< 1 year
1–2 years
2–5 years
> 5 years
Total cash
flows
Total
carrying
value
13,573
13,659
–
–
–
–
3,323
30,555
2,636
2,636
7,519
7,519
Contractual maturities
–
–
522
522
13,573
13,659
13,573
13,659
14,000
41,232
12,434
39,666
< 1 year
1–2 years
2–5 years
> 5 years
Total cash
flows
Total
carrying
value
22,431
17,309
3,277
43,017
–
–
–
–
2,638
2,638
4,012
4,012
–
–
941
941
22,431
17,309
10,868
50,608
22,431
17,309
10,177
49,917
1
Includes interest, weighted average at 6.24% (2022: 3.99%).
124
Appen 2023 Annual Report
125
USD strengthened
USD weakened
change
Effect on profit
before tax
$000
Equity
$000
Effect on profit
before tax
$000
United Kingdom Pound Sterling
European Economic and Monetary Union Euro
2022
Australian Dollars
Hong Kong Dollars
Philippine Pesos
Chinese Yuan
Japanese Yen
Singapore Dollars
Total
%
10%
10%
10%
10%
10%
10%
10%
10%
10%
–
(9)
(73)
–
–
–
(8)
(8)
(98)
(310)
(194)
(239)
1
(28)
(1,174)
(52)
(32)
Equity
$000
310
194
239
(1)
28
1,174
52
32
73
–
9
–
–
–
8
8
(2,028)
98
2,028
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 is a core and integral part of Quadrant’s business operations, as cryptocurrency is used to pay geolancers and
some suppliers, because cryptocurrency provides various benefits to Quadrant, such as: (i) real-time settlement and (ii) allows
for micropayments, because a lot of the tasks that geolancers perform involve small data volumes and hence small or micro
payment amounts are provided as consideration. Cryptocurrency allows and can handle these small micropayments, with the
added benefit of not imposing fees on the recipient. Cryptocurrency assets are classified as inventory and valued in these
financial statements at the lower of cost and net realisable value.
The Group’s main interest rate risk potentially arises from long-term borrowings. Borrowings issued at variable rates expose
the Group to interest rate risk. At the reporting date, the Group had no borrowings.
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
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
Interest rate risk
Credit risk
hold any collateral.
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 2023, the Groups held cash and cash equivalents of $32.1 million (2022: $23.4 million).
Notes to the consolidated financial statements
for the year ended 31 December 2023
Notes to the consolidated financial statements
for the year ended 31 December 2023
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 2023 (2022: 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
Profit/(loss) after income tax
Statement of financial position
Total current assets
Total assets
Total current liabilities
Total liabilities
Net assets
Equity
Issued capital
Share-based payments reserve
Profits reserve
Translation reserve
Other reserves
Accumulated losses
Total equity
2023
$ 000
4,388
2022
$ 000
(205,235)
2023
$ 000
2,848
122,745
1,468
1,468
121,277
2022
$ 000
1,459
63,157
1,247
1,247
61,910
320,435
262,917
34,902
7,355
29,211
7,355
(33,592)
(25,362)
2,002
2,002
(209,825)
(214,213)
121,277
61,910
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
2023. 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 2023.
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 %
Note 27. Subsidiaries
Appen Financial Services Pty Ltd
Entity
Appen AI Pty Ltd 2
Appen AI Inc 1,3
Leapforce Inc.
RaterLabs Inc.
Figure Eight Technologies Inc.
Figure Eight Federal LLC
Appen AI Europe Limited 1
Appen (UK) Limited 1
Mendip Media Group Limited
Appen Butler Hill Limited 1
Beijing Appen Technology Co., Ltd 1
Appen Technology (Wuxi) Co. Ltd
Appen Data Technology (Shanghai) Co. Ltd
Appen Limited Korea 1
Appen Japan Pty Ltd 1
Quadrant Pte Ltd 1
Quadrant Protocol Ltd 1
Appen Canada Limited 1
Appen AI India Private Limited 1
Country of incorporation
Australia
Australia
United States of America
United States of America
United States of America
United States of America
United States of America
Ireland
United Kingdom
United Kingdom
Hong Kong
China
China
China
Korea
Japan
Canada
India
Singapore
British Virgin Islands
2023
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
2022
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
–
–
1 Wholly owned subsidiaries of Appen AI Pty Ltd (previously by entity name Appen Butler Hill Pty Limited).
2 Entity name changed from Appen Butler Hill Pty Limited to Appen AI Pty Ltd on 21 May 2023.
3 Entity name changed from Appen Butler Hill Inc. to Appen AI Inc on 29 May 2023.
Accounting policy
its power over the entity.
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
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.
126
Appen 2023 Annual Report
127
Notes to the consolidated financial statements
for the year ended 31 December 2023
Notes to the consolidated financial statements
for the year ended 31 December 2023
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 2023 (2022: 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
Profit/(loss) after income tax
Statement of financial position
Total current assets
Total assets
Total current liabilities
Total liabilities
Net assets
Equity
Issued capital
Profits reserve
Translation reserve
Other reserves
Accumulated losses
Total equity
Share-based payments reserve
2023
$ 000
4,388
2022
$ 000
(205,235)
2023
$ 000
2,848
122,745
1,468
1,468
121,277
2022
$ 000
1,459
63,157
1,247
1,247
61,910
320,435
262,917
34,902
7,355
29,211
7,355
(33,592)
(25,362)
2,002
2,002
(209,825)
(214,213)
121,277
61,910
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
2023. 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 2023.
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
Appen AI Pty Ltd 2
Appen Financial Services Pty Ltd
Appen AI Inc 1,3
Leapforce Inc.
RaterLabs Inc.
Figure Eight Technologies Inc.
Figure Eight Federal LLC
Appen AI Europe Limited 1
Appen (UK) Limited 1
Mendip Media Group Limited
Appen Butler Hill Limited 1
Beijing Appen Technology Co., Ltd 1
Appen Technology (Wuxi) Co. Ltd
Appen Data Technology (Shanghai) Co. Ltd
Appen Limited Korea 1
Appen Japan Pty Ltd 1
Quadrant Pte Ltd 1
Quadrant Protocol Ltd 1
Appen Canada Limited 1
Appen AI India Private Limited 1
Country of incorporation
Australia
Australia
United States of America
United States of America
United States of America
United States of America
United States of America
Ireland
United Kingdom
United Kingdom
Hong Kong
China
China
China
Korea
Japan
Singapore
British Virgin Islands
Canada
India
2023
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
2022
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
–
–
1 Wholly owned subsidiaries of Appen AI Pty Ltd (previously by entity name Appen Butler Hill Pty Limited).
2 Entity name changed from Appen Butler Hill Pty Limited to Appen AI Pty Ltd on 21 May 2023.
3 Entity name changed from Appen Butler Hill Inc. to Appen AI Inc on 29 May 2023.
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.
126
Appen 2023 Annual Report
127
Notes to the consolidated financial statements
for the year ended 31 December 2023
Notes to the consolidated financial statements
for the year ended 31 December 2023
Note 28. Deed of cross guarantee
Note 28. Deed of cross guarantee (continued)
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 (entity name changed from Appen Butler Hill Pty Limited on 21 May 2023)
• Appen Financial Services Pty Ltd
The consolidated statement of profit or loss and financial position of the entities that are members of the Closed Group
is as follows:
Statement of profit or loss and other comprehensive income
2023
$ 000
43,883
2022
$ 000
55,864
(3,765)
(17,818)
(754)
(2,288)
(1,591)
(1,020)
(7,343)
(3,508)
(1,578)
(2,873)
(519)
(1,959)
(660)
(354)
15,994
(7,675)
(23,689)
(2,034)
(2,067)
(1,201)
(1,388)
(9,692)
(4,206)
569
15,494
(1,209)
(21)
(721)
(772)
–
(4,079)
(204,326)
9,768
(187,074)
(37)
350
9,731
(186,724)
6,530
6,530
16,261
14,798
14,798
(171,926)
Revenue
Expenses
Crowd service costs
Employee expenses
Recruitment costs
Professional fees
Information technology costs
Communication and travel expenses
Other expenses
Depreciation and amortisation
Share-based payments expense
Net foreign exchange gain/(loss)
Transaction costs
Restructure costs
Finance costs
Deemed interest on earn-out liability
Earn-out adjustment
Impairment
Profit/(loss) before income tax
Income tax (expense)/benefit
Profit/(loss) after income tax
Other comprehensive income/(expense)
Items that may be reclassified subsequently to profit or loss:
Foreign currency translation
Other comprehensive income for the period, net of tax
Total comprehensive profit/(loss) for the period
128
Investments accounted for using the equity method
Statement of financial position
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Contract assets
Inventory
Prepayments and other assets
Income tax receivables
Derivative financial instruments
Total current assets
Non-current assets
Prepayments and other assets
Intangible assets
Plant and equipment
Lease right of use assets
Deferred tax assets
Intercompany transactions
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Provisions
Contract liabilities
Lease liabilities
Total current liabilities
Non-current liabilities
Trade and other payables
Lease liabilities
Earn-out liability
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Total equity
Reserves and retained earnings
2023
$ 000
2022
$ 000
16,105
12,200
2,842
3,788
3,774
1,069
2,768
1,760
104
14
7,251
157
756
7,251
3,095
148,523
167,047
183,152
4,254
777
4,698
966
306
3,453
3,750
3,511
11,020
21,715
161,437
1,947
6,036
–
650
1,049
2,256
262
424
9,246
1,363
4,081
7,560
3,095
88,738
114,507
126,707
5,876
1,322
3,374
–
507
4,730
19,131
4,109
28,477
39,049
87,658
10,695
10,572
320,435
262,917
(158,998)
(175,259)
161,437
87,658
Appen 2023 Annual Report
129
Notes to the consolidated financial statements
for the year ended 31 December 2023
Notes to the consolidated financial statements
for the year ended 31 December 2023
Note 28. Deed of cross guarantee
Note 28. Deed of cross guarantee (continued)
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 (entity name changed from Appen Butler Hill Pty Limited on 21 May 2023)
The consolidated statement of profit or loss and financial position of the entities that are members of the Closed Group
Statement of profit or loss and other comprehensive income
• Appen Financial Services Pty Ltd
is as follows:
Revenue
Expenses
Crowd service costs
Employee expenses
Recruitment costs
Professional fees
Information technology costs
Communication and travel expenses
Other expenses
Depreciation and amortisation
Share-based payments expense
Net foreign exchange gain/(loss)
Transaction costs
Restructure costs
Finance costs
Deemed interest on earn-out liability
Earn-out adjustment
Impairment
Profit/(loss) before income tax
Income tax (expense)/benefit
Profit/(loss) after income tax
Other comprehensive income/(expense)
Items that may be reclassified subsequently to profit or loss:
Foreign currency translation
Other comprehensive income for the period, net of tax
Total comprehensive profit/(loss) for the period
2023
$ 000
43,883
2022
$ 000
55,864
(3,765)
(17,818)
(754)
(2,288)
(1,591)
(1,020)
(7,343)
(3,508)
(1,578)
(2,873)
(519)
(1,959)
(660)
(354)
15,994
(7,675)
(23,689)
(2,034)
(2,067)
(1,201)
(1,388)
(9,692)
(4,206)
569
15,494
(1,209)
(21)
(721)
(772)
–
(4,079)
(204,326)
9,768
(187,074)
(37)
350
9,731
(186,724)
6,530
6,530
16,261
14,798
14,798
(171,926)
Statement of financial position
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Contract assets
Inventory
Prepayments and other assets
Income tax receivables
Derivative financial instruments
Total current assets
Non-current assets
Prepayments and other assets
Intangible assets
Plant and equipment
Lease right of use assets
Deferred tax assets
Investments accounted for using the equity method
Intercompany transactions
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Provisions
Contract liabilities
Lease liabilities
Total current liabilities
Non-current liabilities
Trade and other payables
Lease liabilities
Earn-out liability
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves and retained earnings
Total equity
2023
$ 000
2022
$ 000
2,842
3,788
3,774
1,069
2,768
1,760
104
1,947
6,036
–
650
1,049
2,256
262
16,105
12,200
14
7,251
157
756
7,251
3,095
148,523
167,047
183,152
4,254
777
4,698
966
424
9,246
1,363
4,081
7,560
3,095
88,738
114,507
126,707
5,876
1,322
3,374
–
10,695
10,572
306
3,453
3,750
3,511
11,020
21,715
161,437
507
4,730
19,131
4,109
28,477
39,049
87,658
320,435
262,917
(158,998)
(175,259)
161,437
87,658
128
Appen 2023 Annual Report
129
Notes to the consolidated financial statements
for the year ended 31 December 2023
Notes to the consolidated financial statements
for the year ended 31 December 2023
Note 29. Related party transactions
Note 30. Share-based payments
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
Detailed disclosure relating to key management personnel (KMP) are disclosed in the remuneration report included in the
Directors’ Report.
The aggregate remuneration received/receivable by the Directors and other key management personnel of the Group
is as follows:
Short-term benefits
Post-employment benefits
Long-term benefits
Share-based payments
Total compensation
Detailed remuneration disclosures are contained in the remuneration report.
Loans to/from related parties
There were no formal loans to or from related parties during the year or the prior year.
2023
$
2022
$
1,750,025
1,957,104
280,730
400,432
78,973
69,547
2,634,705
(1,552,631)
4,744,433
874,452
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 two LTI schemes: 1) Core Executive LTI scheme which aligns with Australian market practice and 2) Global Executive
LTI scheme is tailored to the North American market.
The Core Executive LTI scheme is 100% performance and service hurdle-based with all LTI vesting at the end of year three,
subject to hurdle requirements relating to key performance metrics and tenure with no re-testing.
The Global Executive LTI scheme is tailored to the North American market with 50% of rights issued subject to a time-based
vesting condition only, that vest annually. The remaining 50% is subject to the same performance-based hurdles that apply
to Core Executives and these rights may vest after three years, like the Core Executive LTI scheme. It also contains the
continuation of employment service condition.
Performance rights lapse on cessation of employment before vesting and no performance rights would be granted under such
circumstances, even if the relevant performance hurdles are met.
For rights to vest for Executive KMP, the requirements are disclosed in detail in the remuneration report. 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%
TSR is 190%
TSR is greater than or equal to 320%
Nil
50%
100%
TSR is between 190% and 320%
Pro-rata straight line vesting between 50% and 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. The aTSR is measured over the three-year vesting period.
The following tables set out an overview of all performance rights granted under the existing plans:
Year ended 31 December 2023
Plans and number of rights
Year ended 31 December 2022
Plans and number of rights
2019
2020
2021
2022
2023
2019
2020
2021
2022
Balance at
the start of
the year
121,459
227,448
583,641
3,830,336
Balance at
the start of
the year
518,733
720,824
787,775
Granted
Exercised
Expired/
forfeited/
other
Balance at
the end of
the year
(2,640)
(72,117)
(118,096)
(138,728)
723
16,603
(16,266)
(164,187)
403,188
(921,818)
(1,983,467)
925,051
–
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
Granted
Exercised
Expired/
forfeited/
other
Balance at
the end of
the year
(185,081)
(212,193)
121,459
(96,841)
(396,535)
227,448
(84,589)
(119,545)
583,641
–
5,044,566
–
(1,214,230)
3,830,336
2,027,332
5,044,566
(366,511)
(1,942,503)
4,762,884
The fair value of the performance rights has been measured based on the share price at the date of the grant less the present
value of the future dividend stream. The weighted average remaining contractual life of performance rights outstanding at the
end of the financial year was 1.30 years (2022: 1.33 years).
Appen 2023 Annual Report
131
130
Notes to the consolidated financial statements
for the year ended 31 December 2023
Notes to the consolidated financial statements
for the year ended 31 December 2023
Note 29. Related party transactions
Note 30. Share-based payments
Appen Limited is the parent entity. Supplementary information of the parent entity is disclosed in Note 26.
Parent entities
Subsidiaries
Interests in subsidiaries are set out in Note 27.
Key management personnel compensation
Detailed disclosure relating to key management personnel (KMP) are disclosed in the remuneration report included in the
The aggregate remuneration received/receivable by the Directors and other key management personnel of the Group
Directors’ Report.
is as follows:
Short-term benefits
Post-employment benefits
Long-term benefits
Share-based payments
Total compensation
Detailed remuneration disclosures are contained in the remuneration report.
Loans to/from related parties
There were no formal loans to or from related parties during the year or the prior year.
2023
$
2022
$
1,750,025
1,957,104
280,730
400,432
78,973
69,547
2,634,705
(1,552,631)
4,744,433
874,452
130
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 two LTI schemes: 1) Core Executive LTI scheme which aligns with Australian market practice and 2) Global Executive
LTI scheme is tailored to the North American market.
The Core Executive LTI scheme is 100% performance and service hurdle-based with all LTI vesting at the end of year three,
subject to hurdle requirements relating to key performance metrics and tenure with no re-testing.
The Global Executive LTI scheme is tailored to the North American market with 50% of rights issued subject to a time-based
vesting condition only, that vest annually. The remaining 50% is subject to the same performance-based hurdles that apply
to Core Executives and these rights may vest after three years, like the Core Executive LTI scheme. It also contains the
continuation of employment service condition.
Performance rights lapse on cessation of employment before vesting and no performance rights would be granted under such
circumstances, even if the relevant performance hurdles are met.
For rights to vest for Executive KMP, the requirements are disclosed in detail in the remuneration report. 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%
TSR is 190%
Nil
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. The aTSR is measured over the three-year vesting period.
The following tables set out an overview of all performance rights granted under the existing plans:
Year ended 31 December 2023
Plans and number of rights
2019
2020
2021
2022
2023
Year ended 31 December 2022
Plans and number of rights
2019
2020
2021
2022
Balance at
the start of
the year
121,459
227,448
583,641
3,830,336
Granted
Exercised
Expired/
forfeited/
other
Balance at
the end of
the year
(2,640)
(72,117)
(118,096)
(138,728)
723
16,603
(16,266)
(164,187)
403,188
(921,818)
(1,983,467)
925,051
–
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
Balance at
the start of
the year
518,733
720,824
787,775
Granted
Exercised
Expired/
forfeited/
other
Balance at
the end of
the year
(185,081)
(212,193)
121,459
(96,841)
(396,535)
227,448
(84,589)
(119,545)
583,641
–
5,044,566
–
(1,214,230)
3,830,336
2,027,332
5,044,566
(366,511)
(1,942,503)
4,762,884
The fair value of the performance rights has been measured based on the share price at the date of the grant less the present
value of the future dividend stream. The weighted average remaining contractual life of performance rights outstanding at the
end of the financial year was 1.30 years (2022: 1.33 years).
Appen 2023 Annual Report
131
Notes to the consolidated financial statements
for the year ended 31 December 2023
Notes to the consolidated financial statements
for the year ended 31 December 2023
Note 30. Share-based payments (continued)
Note 30. Share-based payments (continued)
An overview of the 2023 performance rights granted to employees including KMPs is disclosed in the following table.
Grant
date
Expiry
date
Exercise
price
Tranche
Performance
measurement
Performance
target
Performance
target
measurement
date
Target
achieved
Vesting
condition
9 Jan 23 N/A
N/A
1–11
N/A
9 Jan 23 N/A
N/A
12–24
N/A
N/A
Yes
N/A
Pending
No
performance
condition
No
performance
condition
9 Jan 23 N/A
N/A
aTSR
190%
31 Dec 25
Pending
Plan
One-off
sign on LTI
One-off
sign on LTI
2023
One-time
Employed
at 9 Feb 23
–9 Dec 23
Employed
at 9 Jan 24
–9 Jan 25
Employed
at 1 Jan 26
Employed
at 1 Jan 24
Vesting date
14 Jul 23 /
Release of
23 results
Release of
23 results /
Monthly from
9 Mar 2024
Release of
25 results
Release of
23 results
2023
1 Mar 23 N/A
N/A
2023
1 Mar 23 N/A
N/A
2023
1 Mar 23 N/A
N/A
2023
1 Mar 23 N/A
N/A
2023
2023
2023
2023
2023
2023
2023
2023
2023
2023
2023
2023
22 May
23
22 May
23
22 May
23
22 May
23
24 May
23
24 May
23
24 May
23
24 May
23
26 Sep
23
26 Sep
23
26 Sep
23
26 Sep
23
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
1
1
2
3
4
1
2
3
4
1
2
3
4
1
2
3
4
aTSR
190%
31 Dec 25
Pending
aTSR
190%
31 Dec 25
Pending
N/A
N/A
N/A
No
performance
condition
No
performance
condition
No
performance
condition
N/A
N/A
N/A
No
performance
condition
No
performance
condition
No
performance
condition
N/A
N/A
N/A
No
performance
condition
No
performance
condition
No
performance
condition
N/A
N/A
N/A
No
performance
condition
No
performance
condition
No
performance
condition
N/A
Pending
N/A
Pending
Employed
at 1 Jan 25
Release of
24 results
N/A
Pending
Employed
at 1 Jan 26
Release of
25 results
N/A
Pending
Employed
at 1 Jan 26
Employed
at 1 Jan 24
Release of
25 results
Release of
23 results
N/A
Pending
Employed
at 1 Jan 25
Release of
24 results
N/A
Pending
Employed
at 1 Jan 26
Release of
25 results
N/A
Pending
Employed
at 1 Jan 26
Employed
at 1 Jan 24
Release of
25 results
Release of
23 results
N/A
Pending
Employed
at 1 Jan 25
Release of
24 results
N/A
Pending
Employed
at 1 Jan 26
Release of
25 results
N/A
Pending
Employed
at 1 Jan 26
Employed
at 1 Jan 24
Release of
25 results
Release of
23 results
N/A
Pending
Employed
at 1 Jan 25
Release of
24 results
N/A
Pending
Employed
at 1 Jan 26
Release of
25 results
aTSR
190%
31 Dec 25
Pending
aTSR
190%
31 Dec 25
Pending
Employed
at 1 Jan 26
Release of
25 results
Accounting policy
period of the awards.
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
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:
Audit and review services
Audit or review of the financial statements – Group
Audit of the financial statements-controlled entities
Total audit services
Other services
Tax compliance services – transfer pricing
Other services
Total non-audit services
Total audit and non-audit services
2023
$
2022
$
365,435
309,924
25,145
23,362
390,580
333,286
86,262
150,450
238,395
324,657
7,256
157,706
715,237
490,992
Value
per right
at grant
date
$2.67
$2.67
$2.67
$2.25
$2.25
$2.25
$2.25
$2.34
$2.34
$2.34
$2.34
$2.23
$2.23
$2.23
$2.23
$1.23
$1.23
$1.23
$1.23
132
Appen 2023 Annual Report
133
Notes to the consolidated financial statements
for the year ended 31 December 2023
Notes to the consolidated financial statements
for the year ended 31 December 2023
Note 30. Share-based payments (continued)
Note 30. Share-based payments (continued)
An overview of the 2023 performance rights granted to employees including KMPs is disclosed in the following table.
Plan
date
Tranche
measurement
target
achieved
condition
Vesting date
Expiry
Exercise
Performance
Performance
measurement
Target
Vesting
Grant
date
One-off
9 Jan 23 N/A
1–11
N/A
No
Yes
Employed
14 Jul 23 /
price
N/A
Performance
target
date
N/A
Value
per right
at grant
date
$2.67
One-off
9 Jan 23 N/A
N/A
12–24
N/A
No
N/A
Pending
Employed
Release of
$2.67
2023
9 Jan 23 N/A
N/A
aTSR
190%
31 Dec 25
Pending
Employed
Release of
$2.67
2023
1 Mar 23 N/A
N/A
N/A
No
N/A
Pending
Employed
Release of
$2.25
sign on LTI
sign on LTI
One-time
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.
2023
1 Mar 23 N/A
N/A
N/A
No
N/A
Pending
Employed
Release of
$2.25
2023
1 Mar 23 N/A
N/A
N/A
No
N/A
Pending
Employed
Release of
$2.25
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:
Audit and review services
Audit or review of the financial statements – Group
Audit of the financial statements-controlled entities
Total audit services
Other services
Tax compliance services – transfer pricing
Other services
Total non-audit services
Total audit and non-audit services
2023
$
2022
$
365,435
309,924
25,145
23,362
390,580
333,286
86,262
150,450
238,395
324,657
7,256
157,706
715,237
490,992
at 9 Feb 23
Release of
–9 Dec 23
23 results
at 9 Jan 24
23 results /
–9 Jan 25
Monthly from
9 Mar 2024
at 1 Jan 26
25 results
at 1 Jan 24
23 results
at 1 Jan 25
24 results
at 1 Jan 26
25 results
at 1 Jan 26
25 results
at 1 Jan 24
23 results
at 1 Jan 25
24 results
at 1 Jan 26
25 results
at 1 Jan 26
25 results
at 1 Jan 24
23 results
at 1 Jan 25
24 results
at 1 Jan 26
25 results
at 1 Jan 26
25 results
at 1 Jan 24
23 results
at 1 Jan 25
24 results
at 1 Jan 26
25 results
at 1 Jan 26
25 results
2023
1 Mar 23 N/A
N/A
aTSR
190%
31 Dec 25
Pending
Employed
Release of
$2.25
2023
22 May
N/A
N/A
N/A
No
N/A
Pending
Employed
Release of
$2.34
2023
22 May
N/A
N/A
N/A
No
N/A
Pending
Employed
Release of
$2.34
2023
22 May
N/A
N/A
N/A
No
N/A
Pending
Employed
Release of
$2.34
2023
22 May
N/A
N/A
aTSR
190%
31 Dec 25
Pending
Employed
Release of
$2.34
2023
24 May
N/A
N/A
N/A
No
N/A
Pending
Employed
Release of
$2.23
2023
24 May
N/A
N/A
N/A
No
N/A
Pending
Employed
Release of
$2.23
2023
24 May
N/A
N/A
N/A
No
N/A
Pending
Employed
Release of
$2.23
2023
24 May
N/A
N/A
aTSR
190%
31 Dec 25
Pending
Employed
Release of
$2.23
2023
26 Sep
N/A
N/A
N/A
No
N/A
Pending
Employed
Release of
$1.23
2023
26 Sep
N/A
N/A
N/A
No
N/A
Pending
Employed
Release of
$1.23
2023
26 Sep
N/A
N/A
N/A
No
N/A
Pending
Employed
Release of
$1.23
2023
26 Sep
N/A
N/A
aTSR
190%
31 Dec 25
Pending
Employed
Release of
$1.23
23
23
23
23
23
23
23
23
23
23
23
23
performance
condition
performance
condition
performance
condition
performance
condition
performance
condition
performance
condition
performance
condition
performance
condition
performance
condition
performance
condition
performance
condition
performance
condition
performance
condition
performance
condition
1
1
2
3
4
1
2
3
4
1
2
3
4
1
2
3
4
132
Appen 2023 Annual Report
133
Notes to the consolidated financial statements
for the year ended 31 December 2023
Directors’ declaration
Note 32. Events after the reporting period
In the directors’ opinion:
Material customer loss
On 22 January 2024, the Board announced that Appen received notification on Saturday, 20 January 2024 AEDT from a material
customer, Google LLC, that as part of a strategic review process it will be terminating its global inbound services contract
with Appen, resulting in the cessation of all projects with Appen by 19 March 2024. Appen had no prior knowledge of Google’s
decision to terminate the contract.
Revenue recognised for the year ended 31 December 2023 relating to Google LLC was $82.8 million at 26% gross margin.
Gross margin refers to revenue less crowd expenses.
Implementation of cost saving measures
On 12 February 2024, the Board announced that Appen will implement measures to achieve $13.5 million in annualised cost
savings. The cost initiatives represent direct and indirect costs associated with the delivery of Google LLC projects.
Appen expects to complete 80% of the cost initiatives by March 2024 and the remainder by June 2024. The bulk of the costs
are direct costs, however indirect costs have been further scrutinised resulting in the eventual closure of the Toronto and
Bellevue offices in North America.
The first full year benefit of these cost savings is expected to be realised in FY25. The one-off costs associated with implementing
the cost reduction initiatives are expected to be approximately $1.5 million to $2.5 million and will be reported as a non-recurring
expense and excluded from underlying EBITDA for FY24.
Appointment of Chief Executive Officer
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 his role as CEO, President and Managing Director on 5 February 2024. Mr Ahmad will
receive his statutory entitlements and payment in lieu of notice (12 months – US$600,000).
Mr Ahmad’s LTI grant was forfeited upon his termination. The board exercised its discretion and no STI was awarded
to Mr Ahamd. However, Mr Ahamd’s share-based sign-on bonus will remain on-foot and continue to vest in accordance with
the terms of this contract.
On behalf of the directors
Richard Freudenstein
Non-executive Chair
27 February 2024
Sydney
•
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 2023
and of its performance for the financial year ended on that date;
•
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.
134
Appen 2023 Annual Report
135
Notes to the consolidated financial statements
Directors’ declaration
for the year ended 31 December 2023
Note 32. Events after the reporting period
In the directors’ opinion:
Material customer loss
On 22 January 2024, the Board announced that Appen received notification on Saturday, 20 January 2024 AEDT from a material
customer, Google LLC, that as part of a strategic review process it will be terminating its global inbound services contract
with Appen, resulting in the cessation of all projects with Appen by 19 March 2024. Appen had no prior knowledge of Google’s
decision to terminate the contract.
Revenue recognised for the year ended 31 December 2023 relating to Google LLC was $82.8 million at 26% gross margin.
Gross margin refers to revenue less crowd expenses.
Implementation of cost saving measures
On 12 February 2024, the Board announced that Appen will implement measures to achieve $13.5 million in annualised cost
savings. The cost initiatives represent direct and indirect costs associated with the delivery of Google LLC projects.
Appen expects to complete 80% of the cost initiatives by March 2024 and the remainder by June 2024. The bulk of the costs
are direct costs, however indirect costs have been further scrutinised resulting in the eventual closure of the Toronto and
Bellevue offices in North America.
The first full year benefit of these cost savings is expected to be realised in FY25. The one-off costs associated with implementing
the cost reduction initiatives are expected to be approximately $1.5 million to $2.5 million and will be reported as a non-recurring
expense and excluded from underlying EBITDA for FY24.
Appointment of Chief Executive Officer
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 his role as CEO, President and Managing Director on 5 February 2024. Mr Ahmad will
receive his statutory entitlements and payment in lieu of notice (12 months – US$600,000).
Mr Ahmad’s LTI grant was forfeited upon his termination. The board exercised its discretion and no STI was awarded
to Mr Ahamd. However, Mr Ahamd’s share-based sign-on bonus will remain on-foot and continue to vest in accordance with
the terms of this contract.
•
•
•
•
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 2023
and of its performance for the financial year ended on that date;
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
Non-executive Chair
27 February 2024
Sydney
134
Appen 2023 Annual Report
135
Independent auditor’s report
to the shareholders of Appen Limited
Independent auditor’s report
to the shareholders of Appen Limited
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 is in accordance with the Corporations Act 2001,
including:
• giving a true and fair view of the Group’s financial
position as at 31 December 2023 and of its financial
performance for the year ended on that date; and
The Financial Report comprises:
• Consolidated statement of financial position as at
31 December 2023;
• 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;
• Notes including a summary of material accounting
• complying with Australian Accounting Standards and
policies;
the Corporations Regulations 2001.
• 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.
Material uncertainty related to going concern
We draw attention to Note 2, “Going Concern” in the financial report. The conditions disclosed in Note 2, indicate a material
uncertainty exists that may cast significant doubt on the Group’s ability to continue as a going concern and, therefore,
whether it will realise its assets and discharge its liabilities in the normal course of business, and at the amounts stated
in the financial report. Our opinion is not modified in respect of this matter.
In concluding there is a material uncertainty related to going concern we evaluated the extent of uncertainty regarding
events or conditions casting significant doubt in the Group’s assessment of going concern. Our approach to this involved:
• Evaluating the feasibility, quantum and timing of the Group’s plans to manage business performance and working capital
to address going concern;
• Assessing the Group’s cash flow forecasts for incorporation of the Group’s operations and plans to address going
concern, in particular in light of the recent history of loss making operations;
• Determining the completeness of the Group’s going concern disclosures for the principal matters casting significant
doubt on the Group’s ability to continue as a going concern, the Group’s plans to address these matters, and the
material uncertainty.
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.
Key Audit Matters
Financial Report of the current period.
Key Audit Matters are those matters that, in our professional judgement, were of most significance in our audit of the
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.
In addition to the matter described in the Material uncertainty related to going concern section, we have determined the
matter described below to be the Key Audit Matter.
Valuation of Goodwill
Refer to Note 12 to the Financial Report
The key audit matter
How the matter was addressed in our audit
The Group’s annual testing of goodwill for impairment
Working with our valuation specialists, our procedures
is a key audit matter, due to the size of the balance and the
included:
increased judgement applied by us when evaluating the
forward-looking assumptions including:
• We considered the appropriateness of the value in use
method applied by the Group to perform the annual test
• Forecast cash flows, revenue growth rates and terminal
of goodwill for impairment against the requirements
value growth rates of the Group, which has experienced
of the accounting standards.
a history of operating losses. This impacted the Group
through a reduction in the demand for services, loss
in revenue and margin pressure; and
• Discount rates which are complicated in nature and
vary according to the conditions and environment the
specific cash generating unit (CGU) is subject to.
• We assessed the integrity of the value in use model
used, and the accuracy of the underlying calculations.
• We checked the forecast cash flows in the Group’s value
in use model to the Board approved FY24 budget;
• We assessed the accuracy of the Group’s previous
forecasts to inform our evaluation of forecasts
In addition to the judgements described above, the
incorporated in the model. We applied increased
Group’s model is highly sensitive to small changes in these
scepticism to assumptions in areas where previous
assumptions, reducing available headroom, or increasing
forecasts were not achieved;
impairment. This drives additional audit effort specific
to their feasibility and consistency of application to the
Group’s strategy.
The Group uses complex models to perform their annual
testing of goodwill for impairment. The model uses
adjusted historical performance, and a range of internal
• We challenged the Group’s forecast cash flows,
revenue growth rates and terminal value growth rates
assumptions and considered differences for the Group’s
operations. We used our knowledge of the Group, their
past performance, business and customers, and our
industry understanding;
and external sources as inputs to the assumptions.
• We independently developed a discount rate range using
Complex modelling using forward-looking assumptions
publicly available data for comparable entities, adjusted
tends to be prone to greater risk for potential bias, error
by risk factors specific to the Group and the industry
and inconsistent application. These conditions increase the
it operates in;
possibility of goodwill being impaired, which necessitates
additional scrutiny by us, in particular to address the
objectivity of sources used for assumptions, and their
consistent application.
We involved valuation specialists to supplement our senior
audit team members in assessing this key audit matter.
• We considered the sensitivity of the models by
varying key assumptions, such as revenue growth
rates, terminal value growth rates and discount rates
within a reasonably possible range. We considered the
interdependencies of key assumptions when performing
the sensitivity analysis and what the Group consider
to be reasonably possible. We then identified those
assumptions at a higher risk of bias to focus our further
procedures; and
• We assessed the Group’s disclosures in the financial
report using our understanding obtained from
our testing and against the requirements of the
accounting standards.
136
Appen 2023 Annual Report
137
Independent auditor’s report
to the shareholders of Appen Limited
Independent auditor’s report
to the shareholders of Appen Limited
We have audited the Financial Report of Appen Limited
The Financial Report comprises:
• Consolidated statement of financial position as at
Valuation of Goodwill
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.
In addition to the matter described in the Material uncertainty related to going concern section, we have determined the
matter described below to be the Key Audit Matter.
Refer to Note 12 to the Financial Report
The key audit matter
How the matter was addressed in our audit
The Group’s annual testing of goodwill for impairment
is a key audit matter, due to the size of the balance and the
increased judgement applied by us when evaluating the
forward-looking assumptions including:
• Forecast cash flows, revenue growth rates and terminal
value growth rates of the Group, which has experienced
a history of operating losses. This impacted the Group
through a reduction in the demand for services, loss
in revenue and margin pressure; and
• Discount rates which are complicated in nature and
vary according to the conditions and environment the
specific cash generating unit (CGU) is subject to.
In addition to the judgements described above, the
Group’s model is highly sensitive to small changes in these
assumptions, reducing available headroom, or increasing
impairment. This drives additional audit effort specific
to their feasibility and consistency of application to the
Group’s strategy.
The Group uses complex models to perform their annual
testing of goodwill for impairment. The model uses
adjusted historical performance, and a range of internal
and external sources as inputs to the assumptions.
Complex modelling using forward-looking assumptions
tends to be prone to greater risk for potential bias, error
and inconsistent application. These conditions increase the
possibility of goodwill being impaired, which necessitates
additional scrutiny by us, in particular to address the
objectivity of sources used for assumptions, and their
consistent application.
We involved valuation specialists to supplement our senior
audit team members in assessing this key audit matter.
Working with our valuation specialists, our procedures
included:
• We considered the appropriateness of the value in use
method applied by the Group to perform the annual test
of goodwill for impairment against the requirements
of the accounting standards.
• We assessed the integrity of the value in use model
used, and the accuracy of the underlying calculations.
• We checked the forecast cash flows in the Group’s value
in use model to the Board approved FY24 budget;
• We assessed the accuracy of the Group’s previous
forecasts to inform our evaluation of forecasts
incorporated in the model. We applied increased
scepticism to assumptions in areas where previous
forecasts were not achieved;
• We challenged the Group’s forecast cash flows,
revenue growth rates and terminal value growth rates
assumptions and considered differences for the Group’s
operations. We used our knowledge of the Group, their
past performance, business and customers, and our
industry understanding;
• We independently developed a discount rate range using
publicly available data for comparable entities, adjusted
by risk factors specific to the Group and the industry
it operates in;
• We considered the sensitivity of the models by
varying key assumptions, such as revenue growth
rates, terminal value growth rates and discount rates
within a reasonably possible range. We considered the
interdependencies of key assumptions when performing
the sensitivity analysis and what the Group consider
to be reasonably possible. We then identified those
assumptions at a higher risk of bias to focus our further
procedures; and
• We assessed the Group’s disclosures in the financial
report using our understanding obtained from
our testing and against the requirements of the
accounting standards.
Report on the audit of the Financial Report
Opinion
(the Company).
including:
In our opinion, the accompanying Financial Report of the
31 December 2023;
Company is in accordance with the Corporations Act 2001,
• Consolidated statement of profit or loss and other
• giving a true and fair view of the Group’s financial
position as at 31 December 2023 and of its financial
comprehensive income, Consolidated statement
of changes in equity, and Consolidated statement
of cash flows for the year then ended;
performance for the year ended on that date; and
• Notes including a summary of material accounting
• complying with Australian Accounting Standards and
policies;
the Corporations Regulations 2001.
• 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.
Material uncertainty related to going concern
We draw attention to Note 2, “Going Concern” in the financial report. The conditions disclosed in Note 2, indicate a material
uncertainty exists that may cast significant doubt on the Group’s ability to continue as a going concern and, therefore,
whether it will realise its assets and discharge its liabilities in the normal course of business, and at the amounts stated
in the financial report. Our opinion is not modified in respect of this matter.
In concluding there is a material uncertainty related to going concern we evaluated the extent of uncertainty regarding
events or conditions casting significant doubt in the Group’s assessment of going concern. Our approach to this involved:
• Evaluating the feasibility, quantum and timing of the Group’s plans to manage business performance and working capital
to address going concern;
• Assessing the Group’s cash flow forecasts for incorporation of the Group’s operations and plans to address going
concern, in particular in light of the recent history of loss making operations;
• Determining the completeness of the Group’s going concern disclosures for the principal matters casting significant
doubt on the Group’s ability to continue as a going concern, the Group’s plans to address these matters, and the
material uncertainty.
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.
136
Appen 2023 Annual Report
137
Independent auditor’s report
to the shareholders of Appen Limited
Independent auditor’s report
to the shareholders of Appen Limited
Other Information
Report on the Remuneration Report
Other Information is financial and non-financial information in Appen Limited’s annual reporting 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 that gives a true and fair view in accordance with Australian Accounting Standards and
the Corporations Act 2001
•
implementing necessary internal control to enable the preparation of a Financial Report that gives a true and fair view
and 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/admin/file/content102/c3/ar1_2020.pdf
This description forms part of our Auditor’s Report.
Opinion
Directors’ responsibilities
In our opinion, the Remuneration Report of Appen Limited
The Directors of the Company are responsible for the
for the year ended 31 December 2023, complies with
preparation and presentation of the Remuneration Report in
Section 300A of the Corporations Act 2001.
accordance with Section 300A of the Corporations Act 2001.
Our responsibilities
We have audited the Remuneration Report included
in pages 62–85 of the Directors’ report for the year ended
31 December 2023.
Our responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted
in accordance with Australian Auditing Standards.
KPMG
Cameron Slapp
Partner
Sydney
27 February 2024
138
Appen 2023 Annual Report
139
Independent auditor’s report
to the shareholders of Appen Limited
Independent auditor’s report
to the shareholders of Appen Limited
Other Information
Report on the Remuneration Report
Other Information is financial and non-financial information in Appen Limited’s annual reporting which is provided in addition
Opinion
Directors’ responsibilities
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:
the Corporations Act 2001
• preparing the Financial Report that gives a true and fair view in accordance with Australian Accounting Standards and
•
implementing necessary internal control to enable the preparation of a Financial Report that gives a true and fair view
and 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
•
to obtain reasonable assurance about whether the Financial Report as a whole is free from material misstatement,
Our objective is:
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/admin/file/content102/c3/ar1_2020.pdf
This description forms part of our Auditor’s Report.
In our opinion, the Remuneration Report of Appen Limited
for the year ended 31 December 2023, complies with
Section 300A of the Corporations Act 2001.
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 62–85 of the Directors’ report for the year ended
31 December 2023.
Our responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted
in accordance with Australian Auditing Standards.
KPMG
Cameron Slapp
Partner
Sydney
27 February 2024
138
Appen 2023 Annual Report
139
Additional information
Additional information
Additional information required under ASX Listing Rule 4.10 and not shown elsewhere in this Annual Report is as follows.
This information is current as at 01 February 2024.
Less than marketable parcels of ordinary shares
Distribution of shareholders
The distribution of issued capital is as follows:
Size of holding
100,001 and over
10,001 to 100,000
5,001 to 10,000
1,001 to 5,000
1 to 1,000
Total
Number of
shareholders Ordinary shares
% of issued
capital
183
1,717
1,562
8,045
27,309
133,691,296
47,451,154
11,431,502
18,762,905
7,905,013
60.98
21.64
5.21
8.56
3.60
38,816
219,241,870
100.00
Distribution of performance rights holders
The distribution of unquoted performance rights on issue is as follows:
Size of Holding
100,001 and over
10,001 to 100,000
5,001 to 10,000
1,001 to 5,000
1 to 1,000
Total
Number of
performance
rights holders
Unlisted
performance
rights
% of total
performance
rights
16
86
33
115
49
10,385,897
2,380,138
248,587
296,077
26,668
77.87
17.85
1.86
2.22
0.20
299
13,337,367
100.00
The performance rights on issue are unquoted and have been issued under our employee incentive scheme.
Distribution of warrant holders
The distribution of unquoted performance rights on issue is as follows:
Size of Holding
100,001 and over
10,001 to 100,000
5,001 to 10,000
1,001 to 5,000
1 to 1,000
Total
Number of
performance
rights holders
Unlisted
performance
rights
% of total
performance
rights
1
0
0
0
0
1
2,591,598
0
0
0
0
2,591,598
54.41
0.00
0.00
0.00
0.00
54.41
The warrants on issue are unquoted and were issued in connection with the acquisition of Quadrant.
PENG CHENG INVESTMENT PTY LTD
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