My first few months at Appen have been filled with learning. I have engaged with all staff during our Next all company kickoff events in US, UK, Australia, China and the Philippines, spoken with many crowd contributors and met in person with many of our clients. I have experienced first hand the deep sense of pride within our company in terms of the impactful work we do and our positive impact on society.
Appen’s FY22 results however, reflect the tough times faced by many tech companies, including our large clients. Despite the challenging external environment, we have also seen positive signals in parts of our business. Revenue from our second largest customer grew 20% and revenue from China grew 36% in 2022. We added 184 new clients and secured 25 non-Global deals over $250k. For Enterprise, our average deal size increased to over $120K.
One of the reasons why I joined Appen is because the work we do is impactful and the way we do it has a positive impact on society. We call this AI for Good, and live this through our Be Good, Do Good and Lead Good approach. I strongly believe that Appen’s ethical approach is a competitive differentiator and my focus is to further embed sustainability to represent best practices into everything we do.
We help our clients deliver world-class innovative AI products. Appen helps to power everyday applications such as Automatic Speech Recognition models for drive-through fast chain restaurants. We annotate thousands of flight paths to improve the accuracy of estimated flight times for the defence and space division of Airbus. These are only a couple of examples, but we deliver many more. This year, our customer Net Promoter Score (NPS) was well above target and reflects the great work our people do for our clients.
We are incredibly proud of our diverse crowd which spans many cultures, ethnicities and age groups. Through our crowd code of ethics, we promote their wellbeing and by providing opportunities for people of all abilities and backgrounds. This year, to improve our engagement with the crowd, we invested in our Appen Connect technology platform, and other systems to support our crowd and make it easier for them to work with us.
A key focus is to make Appen a great place to work. We have so many talented people across our organisation with deep expertise in sales go-to-market strategies, project delivery, engineering and crowd management. Our people are critical to our success. In FY22, our engagement scores improved and considering the challenging external environment, this result demonstrates the resiliency of our team.
Beyond the crowd and our people, we also focused on doing our part to promote positive social and environmental impacts. Through our partnership with the World Economic Forum and by becoming a signatory UN Global Compact – our unwavering focus is to Lead Good and promote Ethical AI.
AI is changing the world, and the pace of change is accelerating. It is a dynamic and fast growth market and Appen is a category leader. AI is revolutionising how humans interact with machines and is one of the most important advances that humanity is working on. A large driver of the shift is a generative AI. This AI technology, based on an approach called transformers, is powering some of the most innovative customer experiences including breakout products like ChatGPT.
At Appen we are working with many clients, from big tech companies to medium enterprises on generative AI and transformer-based technologies. In fact, much of our revenue is related to approaches like reinforcement learning with human feedback for transformer based AI.
We expect generative AI to be an ongoing growth driver for Appen. Human feedback is what determines the end experience for the customer. Our expertise in large scale relevance programs is the same as what’s needed for generative AI.
My key mandate is to review Appen’s strategy and reset the business. My overarching first impression is that Appen has enormous potential. Appen has done a great job in growing the market for data for AI. But we now have an opportunity to reset the business and fully capitalise on future growth opportunities being enabled by generative AI. Most successful technology adoption takes time to reach a growth phase, it then enjoys a high growth phase before it reaches a period of more stable growth. Fast growing successful companies that sustain long-term high-growth continually reinvent themselves look to add new s-curves over time.
As a first step in defining Appen’s new s-curve we have announced a vision to expand beyond data for AI and build industry vertical focused AI solutions. Our industry focused solutions will bring together our AI platform services with other leading AI technology and services companies to deliver business outcomes for large enterprises.
We are redefining our position in the AI market from a valuable data provider for AI to a partner that provides products and solutions focused on industry verticals such as Financial Services, Consumer Retail, Industrial Markets and Healthcare segments. We have already seen great success in these verticals in the past year in our Enterprise and China markets.
Expanding from data for AI to a complete AI platform and products significantly increases our tangible addressable market (TAM). Industry sources estimate that the AI data market will reach around $15 billion by 2026, while the total AI platform and services market will be more than $300 billion at the same time. This represents a 20x increase.
My commitment is to turn this growth vision into a well-defined and actionable strategy. I plan to provide shareholders with more detail on our growth vision prior to the AGM in May, including clear milestones and KPIs – so you can monitor and evaluate our progress.
In my first few months, I have identified five immediate priorities to reignite growth. My first priority is to establish a greater level of operational rigour. There is huge potential in our business and realising that potential will require us to assess our resources and expenses across the business.
Second, product velocity is key to our success, and we plan to accelerate product launches to capture new market growth. Automating our systems and processes will underpin momentum in product velocity. The integration of generative AI into our platform and solutions will be key to automating part of our processes.
Third, my focus is to build a consultative sales and a world class go-to-market capability. Appen has a great reputation among our clients. Our brand is synonymous with trust, quality and dedication. Lifting our brand awareness is key.
Fourth, we realise that creating world-class AI cannot be done alone. We will expand our partner ecosystem to reach more clients and drive greater impact within our clients. As part of this we will focus on building industry solutions in key verticals.
Finally, Appen’s ethical approach is a competitive differentiator moving forward and my focus is to further embed AI for Good into everything we do. We are establishing an AI for Good committee dedicated to leading the way in AI for Good by ensuring we ‘do what we say’ through our social and environmental initiatives. I will be proudly chairing this committee.
It would be remiss of me not to comment further on Appen’s FY22 financial performance. Let me just say that I understand your disappointment.
Restoring value and creating long term value for shareholders, clients, employees, and crowd is the ultimate goal. Establishing operational rigour across the business is my top priority to drive positive momentum. Appen has strong fundamentals in a high growth market. Operational rigour will ensure we maximise growth in our current market and set us up for success as we grow into new areas of the market.
Appen is a key partner for the world’s leading AI companies and has the potential to be even greater – and that is what really excites me. Thank you to our shareholders for your ongoing support.
CEO, President and Managing Director
© 2023 Appen Limited