For the 2022 financial year, Appen announced a Statutory Loss of $239.1 million, primarily reflecting the impairment of the Company’s investment in its New Markets business. After carefully reviewing the carrying values of all assets, a non-cash impairment charge of $204.3 million was taken.
As noted during the year, challenging external operating and macro conditions resulted in weaker digital advertising revenue and a slowdown in spending by some of our major customers. Total revenue declined 13.1% to $388.1 million. Underlying EBITDA (before foreign exchange) declined from $78.8 million to $13.6 million. While these results are disappointing, they are in line with the guidance provided on 6 October 2022. It is pleasing however, that excluding Global Product, New Markets revenue increased 15.4% to $70.2 million, underpinned by strong growth in China.
During the year, the board has focused on maintaining adequate liquidity and an appropriate allocation of capital. As a reflection of Appen’s 2022 financial performance, we did not pay an interim or final dividend.
On 15 December 2022, we appointed Armughan Ahmad as our new CEO & President. He officially joined Appen on 9 January 2023. Armughan is one of the technology industry’s most successful and respected executives, with deep technology expertise in international markets.
Armughan’s experience in driving growth, operational excellence and delivering best-in-class innovation will be critically important for Appen. His mandate includes reviewing our strategy, so Appen is well positioned to fully capture the long-term growth prospects in the global AI market and improve returns for our shareholders.
On behalf of the Board, I thank Mark Brayan for his considerable contributions to Appen during his more than seven years as CEO. He has been instrumental in growing the business from around $60 million revenue in 2015 to more than $440 million revenue in 2021. He leaves with our best wishes for the future.
During the year, we continued to focus on our program of Board renewal – filling the vacancies created by the retirement of several longstanding directors. We identified three new Non-executive Directors with deep skills in technology, marketing and finance. The appointments of Stuart Davis, Lynn Mickleburgh and Mini Peiris come at a pivotal time for Appen. Collectively, their experience, skills and detailed knowledge will greatly benefit the board. Their full biographies are detailed on pages 60 and 61.
Commencing in FY22, we reset our remuneration strategy in line with shareholder expectations. Our executive remuneration remains heavily weighted towards performance and at-risk equity‑based pay. The board continues to set challenging short and long-term targets.
Our short-term incentive (STI) scorecard for key management personnel also now includes a combination of financial and non-financial metrics to reflect our focus on customer, crowd and employee satisfaction. While we saw improvements in customer NPS and employee engagement, our crowd NPS score was disappointing. We are working hard to improve the crowd experience and lift crowd satisfaction.
In recognition of the improvements in customer NPS and employee engagement, a partial STI was paid to key management personnel. There was no STI payable for the company’s financial performance.
Armughan has been hired on a remuneration package that reflects the North American technology sector where Appen operates and Armughan lives. This package is very heavily weighted to at risk pay, with targets that require a significant improvement in Appen share price.
We received an indicative offer from Telus International. The offer was non‑binding and highly conditional at a price of $9.50. Appen attempted to engage Telus in a confidential discussion regarding the terms of the offer, but details of their proposal became public prior to our AGM, and we were required to disclose the offer. Without any explanation, Telus revoked the offer through their advisors. While this may have created some uncertainty for you as shareholders, you can be assured that at no point did we provide any non-public information to Telus.
The Board’s priority has been to guide Appen through an uncertain operating environment and assist management in implementing the Company’s strategy. We remained focused on maximising near term returns and managing costs through several initiatives. These included the acceleration of productivity improvements; evaluating and increasing the use of offshore facilities for project delivery, engineering and business support; and rightsizing investments to market opportunities. Our transformation office is fulfilling an important element of our strategy – enabling Appen to take a product‑led focus by automating many repeatable functions.
Building a sustainable business and delivering value to all stakeholders is a key priority. We recognise the value of our one million plus crowd and the value our crowd provides to our customers.
When it comes to the treatment of our crowd, the board understands the expectations of all stakeholders. The high ethical treatment of our crowd as defined in our Crowd Code of Conduct, our Global Ethical sourcing, and Modern Slavery Policy is of paramount importance. Through our transformation program we are highly focused on improving the crowd experience and lifting crowd satisfaction.
Data security and data privacy are an integral part of our business. Every day we are trusted with the data of our customers, crowd and employees, and you, our shareholders. Our systems and processes are based on international standards and every quarter the board meets with management to assess our capability. Our inhouse experts remain at the forefront of data security to protect stakeholder data and meet privacy obligations. Promoting a diverse and inclusive culture across all aspects of Appen’s business is also a key focus.
For Al to perform correctly it requires diverse datasets that are representative of the real world. To deliver on our committment to responsible AI we ensure our crowd is sufficiently diverse. We foster Impact Sourcing partnerships to support diversity and offer work opportunities to individuals of varying abilities and backgrounds. Through our partnership with the World Economic Forum, we remain focused on responsible AI standards to increase the value of and trust in AI.
Increasing gender diversity, especially in senior roles among our full-time workforce, is an ongoing priority. In 2022 female representation among the senior leadership team increased from 38% to 43%. We also maintained female representation of 50% among Non‑executive Directors.
Appen is committed to supporting international initiatives to transition to net zero emissions. This year, we set our Net Zero Roadmap to achieve our net zero emissions target.
We also became a signatory to the United Nations Global Compact and have committed to take action to embed the ten principles within our business practices.
We recognise that it’s been a difficult period for shareholders. We sincerely thank you for your patience and ongoing support. On behalf of the board and management, we acknowledge there is more to do to earn your confidence and trust.
While the operating environment may continue to present challenges, we are committed to improving Appen’s performance. Under Armughan’s leadership we are focused on our growth strategy and positioning Appen for a stronger future.
Before closing, I would also like to acknowledge the contribution of our employees during the past 12 months. They have worked tirelessly, and the Board and I thank them for their dedication and continued service to our crowd and customers.
Richard Freudenstein
Non-executive Chair
