Appen Limited

Good morning everyone and welcome to Abbott's first half FY26 results webinar. I'm Sam Wells from NWR and joining me from the company today is CEO and Managing Director Ryan Cole and Chief Financial Officer Justin Miles. Following a brief summary of the results released to the ASX this morning, we will have some time for Q&A with the management team. There will be a choice of two options. First, research analysts are able to raise their hand should you wish to ask a verbal question of the management team, or will also take written questions via the Q&A function at the bottom of your screen throughout today's presentation. We'll endeavour to get to the majority of questions asked, in some cases combining questions on the same or similar topic. And with that, I'll pass it over to you, Ryan.

Thanks, Sam, and good morning, everyone. Thanks for joining us today for our H1 FY26 results presentation. My name is Jaron Collin. I'm the CR Managing Director at Appen, and with me is Justin Miles, our CFO. Today's presentation covers four sections. I'll start with the results overview. Justin will then walk through the detailed H1 FY26 financial performance. Then I'll return to cover our strategy and operational update, and we will close with an FY26 outlook and guidance before opening up the questions. Let me start now with an overview of our H1 results on page 5 of the presentation. The first half delivered on the themes that we've been building towards. At the group level, we delivered $119.9 million in revenue. This is 17% growth on the prior corresponding period. Appen China was a standout for the half. Revenue grew 80% to $76.2 million and achieved an annualized revenue run rate exceeding $175 million in June. That is up from $135 million at the end of 2025. The sustained growth reflects the strength of our relationships with the Chinese model builders and the ongoing demand for our data services in the region. Appen Global continues to make progress. Outside of our largest client, Q2 revenue grew 65% on Q1. We're progressing well in our ambition to expand across frontier AI labs in the USA. Capturing cost efficiencies via AI-enabled operations remains a focus for Appen Global. We have identified an incremental $12 million in operational efficiencies. 70% of the $12 million will be executed before the end of the year and the remainder in Q1 FY27. It's important to note that the cost gaps don't impact the ability to grow within Appen Global. On profitability, we delivered an underlying EBITDA of 4FX of $5.3 million for the half, a $7.5 million improvement on the first half of last year. EBITDA margins for the half were 4.5%. Our cash balance at 30 June was $44.7 million, equivalent to $64.8 million Australian dollars. I'll now hand over to Justin, and he'll take us through the financials.

Thank you, Ryan, and good morning, everybody. A reminder that we report in US dollars. and that all comparisons are to the half year ended 30 June 2025 unless stated otherwise. Starting with the H1 FY26 profit and loss on page 7. As Ryan already mentioned, revenue increased 17.5% to $119.9 million. Within our operating segments, Appen China revenue grew by 80.4% to $76.2 million, with Appen Global down 26.9% to $43.7 million. Appen Global made solid progress during the half. However, growth in new areas has not yet offset a reduction in traditional work. Gross margin reduced slightly, down 30 basis points to 36.7%. The decrease reflects a change in customer and project mix, noting China margins are traditionally lower compared to Appen Global. Underlying EBITDA before FX improved $7.5 million to $5.3 million. The increase reflects revenue and gross margin growth, prudent cost management and operational leverage within Appen China. I won't talk to slide 8 as we have just covered this data, so over to Appen Global Revenue and EBITDA on slide 9. The chart on the left shows quarterly revenue and on the right hand side it is underlying EBITDA. The charts demonstrate the progress made during the half. Q2 FY26 revenue reflects growth from expanding projects with leading AI labs. Pleasingly, outside the largest customer, Q2 FY26 revenue grew 65% compared to Q1 FY26. However, as just mentioned, growth in new areas has not yet offset a reduction in traditional work, resulting in revenue of $43.7 million for the half, which is down compared to H1 FY25. An important point to note is that traditional work has currently stabilised. EBITDA reflects some investment in winning new customer projects and does show improvement during the period. Ryan has already mentioned this, but again noting that approximately $12 million in operational efficiencies have been identified in the app and global segment, with 70% to be executed by the end of this year and the remainder in Q1 next year. Over to slide 10, which shows quarterly revenue and underlying EBITDA for Appen China, and reflects the strong market position Appen China continues to hold. Revenue grew each quarter, with Appen China achieving 76.2 million revenue for H1FY26, which was 80% growth on H1FY25. Growth continues to be driven by new and expanding LLM-related projects. Appen China exited the half with annualized revenue exceeding $175 million. Pleasingly, in addition to revenue growth, profitability has improved, with increased gross margins due to a greater mix of Gen AI projects and increased revenue from high-margin pre-built datasets. Appen China is also capturing scaling efficiencies due to tight OPEX controls as revenue expands. Turning to slide 11 for the profit and loss summary. I won't talk to all line items, however there are a few additional points to highlight. There was a decrease in employee and other expenses in Appenglobal, and this is highlighted later in the presentation. Employee expenses for Appenglobal were down 19% on PCP, and other expenses down 29% on PCP. The decrease was achieved through technology, innovation and automation. The decrease in Appen Global was offset by additional expense from the Appen China segment to enable the delivery of strong revenue growth. The $14.9 million NPAT improvement and $8 million improvement to underlying NPAT reflects the improved performance for the half, as well as a decrease in amortization. I'll finish up with the cash flow summary on slide 12. The cash balance at the end of the period was $44.7 million. The Australian dollar equivalent of the cash balance is $64.8 million. Despite the decrease in balance compared to the prior period, a strong balance remains. Cash flow used in operations was $2.7 million. In comparing to the prior period, it is important to note that H1F 125 was positively impacted by the receipt of a payment from a major customer in the first week of January 25 versus December 24 as scheduled. Cash flow used in operations for the period was impacted by the timing of customer receipts, annual payments during the period, and working capital required to support strong Appen China growth. Cash used in investing activities was $1.9 million higher compared to H1FY25 due to higher investment in product development and new facilities for the App and China division. Cash used in finance activities of $2.7 million reflects lease payments. Cash was used to fund operations and CapEx. That concludes the financial performance slides. I'll now hand back to Ryan.