Thank you for standing by, and welcome to the Appen Limited company update. All participants are in listen only mode. There will be a presentation followed by a question- and- answer session. If you would like to ask a question, you'll need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Mr. Mark Brayan, CEO. Please go ahead. Yeah. Thank you, Darcy, and good morning and hello everybody. My name is Mark Brayan and I'm the Chief Executive Officer of Appen. I'm joined this morning by our Chief Financial Officer, Kevin Levine, as well as our Head of Investor Relations, Rosalie Duff. This morning we provide an update on our first half results and FY 2022 outlook. Today's call is focused on high level commentary in relation to the half year, and we will provide further details about the first half and our FY 2022 outlook when we release our results on the 25th of August, 2022. In May, we provided a trading update advising that our revenue was lower than the prior corresponding period. We also advised that our first half FY 2022 EBITDA was expected to be materially lower than the prior corresponding period. In light of our main trading update and how our results are shaping up, we wanted to provide an update. The numbers released this morning are unaudited and still subject to board approval. However, they are expected to be. Group revenue of AUD 182.8 million, down 7%, primarily reflects a lower contribution from the global division due to weaker digital advertising demand and a result of slowdown in spending by some of our large customers. New markets revenue of AUD 45 million is down 5.7%, impacted mainly by lower global product revenue. Excluding global product, new market revenue was up 35%. Underlying EBITDA after foreign exchange impact of AUD 8.4 million was down 70% due to lower revenue and investments in transformation, product and technology, as well as a foreign exchange loss. Statutory net loss after tax of AUD 9.4 million compared to a AUD 6.7 million statutory net profit after tax in the first half of 2021, impacted by higher amortization on product development. Underlying net loss after tax of AUD 3.8 million compared to a AUD 12.5 million net profit after tax in the first half of FY 2021. Cash balance of AUD 42.1 million on the thirtieth of June, 2022 with high cash flow conversion. The first half result has been characterized by challenging external operating and macro conditions resulting in weaker digital advertising demand and a slowdown in spending by some of our major customers. This has especially impacted our global division, particularly those customers with a high exposure to digital advertising. While only 26% of our first half global revenue supports digital advertising, we are seeing a flow on effect to non-ad related projects and some of our core programs as our customers reduce their overall spend. As stated in February, costs in this half are higher, primarily due to transformation costs and investment in product and technology resulted in higher employee expenses, recruitment and IT costs. Together with lower than expected revenue, this has impacted earnings and margins. In China, however, despite a three-month COVID lockdown, we have continued to grow with first half revenue up 141% to AUD 18 million. The enterprise business is also showing growing momentum. Second half has started well, with orders of AUD 9.3 million in July. In the first half, we saw solid free cash flow generation and cash conversion from EBITDA increase from 101% to 211% in the half. Importantly, the fundamentals of our business remain strong and our operational performance and the quality of our service we provide our customers continues to improve, evidenced by higher Net Promoter Scores. We are increasing our range of products and through our product investments remain well positioned to serve our customers. To the FY 2022 outlook. We moved away from short-term guidance at the full year result, so our comments on that, on the outlook are fairly brief. We expect to achieve higher volumes in the latter part of the second half due to the delivery of seasonal projects and ramp up in existing projects. However, with no improvement in July trading, there remains uncertainty about a continued slowdown of spending from our global customers and their exposure to weaker digital advertising demand. As a result, conversion of forward orders to sales is less certain this year compared to prior years. Given the revenue skew and fixed cost operating leverage of the business, we expect FY 2022 EBITDA to be weighted to the second half. We are reviewing all areas of the business to accelerate productivity improvements and margin expansion. While some of our customers are reducing the pace of their investments in AI, the use of AI and their AI product development is expected to increase. We remain confident that the AI training data market will continue to grow in the longer term. Despite the current challenging operating conditions, we remain committed to our longer term growth strategy. I will now invite questions, noting that we will provide further details about the first half performance and outlook when we release our results on the 25th of August, 2022. Thank you. Back to you, Darcy. If you'd like to ask a question, please press star one on your telephone and wait for your name to be announced. If you'd like to cancel your request, please press star two. If you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from Garry Sherriff of RBC. Please go ahead. Yeah. Hi, Mark and Kevin. Question is how does today's result reflect on your strategy? Will there be any changes to the strategy? How should we think about your spending plans going forward? Yeah. Hi, Gary. No change to the strategy. You know, with reference to spending plans, as I mentioned, you know, we're looking at all areas of the business to accelerate productivity improvements and margin expansions. Overall, no change to the strategy overall. How do you get comfort on future revenue visibility? I guess the follow on being how can you provide calendar year 2026 targets but not a calendar year 2022 guide? You know, clearly at the beginning of the year. Well, conditions have changed through the year and you know, the conditions that we're facing at the moment make near-term guidance or near-term visibility a little tougher. Longer term, we're banking on what we believe is the very strong trend around AI and the very strong need for AI training data. In our longer-term views, we had taken fairly conservative views to revenues that we'd expect from our global customers and you know, more growth rates consistent with the market for customers outside of that set. Thank you. Your next question comes from Josh Kannourakis from Barrenjoey. Please go ahead. Hi, Mark and Kevin. Thanks for taking my call. First question just around, you know, and I know you've talked about the conversion ratio of work in hand revenue being different. Has that work in hand and revenue number actually changed as well? Or is it mainly like, maybe just to give a bit more context around the conversion versus the actual work in hand that you've got today. Yeah. Hi, Josh. We haven't provided an update of that number from the number we provided at the AGM. We'll be doing so with the first half results in August, and we can comment further on that at that time. Okay. Got it. Cool. Just a clarification on the ad spend and your ad revenue, you mentioned 26% of global revenue. Usually you sort of benchmark that to your global customer revenues. What number should we be sort of linking that 26% to, in terms of the ones you've provided there? Yes, that's related to the global division revenue, and we haven't provided a full update or a full breakout at this point. In the table, we've got global services and new markets, but we haven't broken it out, which we'll do so at the first half as well. Yeah. Okay. Cool. No, perfect. Final one, just in terms of the competitive environment, Mark, can you just give us a bit of context like, does this feel like it's just total sector spend driven? Are you seeing any sort of increased competitive tensions in any particular areas of the market? Maybe you could just comment on that more broadly as well, please. It feels like a sector spend issue, Josh. We monitor a variety of signals that tell us that there is, you know, we're maintaining share with our major customers. We think or we're fairly confident this is a sector slowdown rather than a competitive situation. Okay. Thanks. I'll give someone else a go. Cheers. Thank you. Thank you. Your next question comes from Siraj Ahmed of Citi. Please go ahead. Hi, Mark. Just the first question on the second half, right? Given the start in July, I understand you expect to see a skew to the second half, but do you reckon global services revenue can be up year-on-year, or do you reckon it's still down year-on-year in the second half as well? Yeah. Hi, Siraj. We'll comment further on the full year at the full release in August. Yeah, we've come to the market with the information that we have to hand and that's what's in the release, and we can provide further information at the first half release. Just on the second one on the ad-related versus non-ad-related. It seems like the non-ad-related work has declined faster in this half, based on your commentary you made. Just, can you add any comments on that? Because I understand the ad-related work being down, but it seems like non-ad's been impacted a bit more. Yes. All revenue to our global customers has been impacted and per the release, while 26% of the revenue is tied to ad-related programs. Revenue overall is down because that's filtered across to the other programs, as we say in the release. Okay. Any gross margin pressures you're seeing? Again, this is the information we have to hand at the moment. We'll comment more on the full release at the first half. Okay. Just last one for Kevin. Just on the in terms of cash balance, you're given the cash flow conversion, so you know understand that. Around AUD 20 million of operating cash flow. Just, is the CapEx higher? Or just trying to bridge the gap between what you've mentioned conversion to the cash balance. Yeah. The main driver of the conversion is you recall we had, you know, the strong Q4 finish last year, and a lot of, obviously a lot of revenue tied up in receivables at the year end. That's subsequently been collected. And then when you actually compare the consistency of the volumes, you know, the Q4 last year to the Q2 this year, and then obviously the resultant working capital, trading cycle impacts from that's what's driven. That's the large driver behind the increased conversion. Yep. Is the CapEx higher or something? Just trying to understand why your cash balance is down to AUD 44 million. Yeah. Look consistent with everything else. We'll provide more commentary on that as part of the full year, but that's the main driver for the higher conversion. Okay, thanks. Thank you. Your next question comes from Bob Chen of JP Morgan. Please go ahead. Morning, guys. Just a few from me. Can you provide a bit more color on those comments around reviewing the investments to accelerate productivity and margin expansion? Are you looking to spend a little bit more here to sort of accelerate these things, or are you looking at cost out? Yeah. Hi, Bob. We're looking at all areas of the business with a view to improving productivity and expanding margins. Again, we'll provide further commentary on that when we get to the full release at the 25th of August. Okay, no worries. In terms of your comments earlier around having baked in fairly conservative views around revenues from your global customers into your 26 numbers, like how does this update to track against those fairly conservative views? Again, we'll provide more information at the half, Bob. This is the information we have on hand currently. Okay, no probs. Just a final one. I mean, in terms of the slowdown from your customers, I mean, was this broad-based across all your large customers or were there particular customers that were more impacted than others? It's generally across our global customers to greater or lesser degrees across them. That's where most of the impact is. As we point out in the release, if we take out the impact of global products on new markets, new markets is up 35%. Okay, great. Thanks, guys. Thanks, Bob. Thank you. Your next question comes from ZheWei Sim of Macquarie. Please go ahead. Hi, Mark, Kevin and Rosalie. Thanks for the time. A couple of questions from me. The first one is just, you know, probably a bit back towards Gary's question. How are we thinking about balancing investment and cash burn going forward? Investment is important. Hi, Wei. Your line is very faint and a little choppy. Hi, can you guys hear me now? Yeah, much better. Thank you. Okay. It was just regarding how, you know, how we think about balancing investment and cash burn, in this kind of environment and I guess, you know, with revenues being a bit weaker, whether we want to go full steam ahead with, you know, our investment strategy or that's something that, you know, we might pull back on. Yeah. Thanks, Wei. As we say in the release, everything's under review. You know, we are fortunately a cash generative business. Having said that, as we say in the release, everything's under review in order for us to improve productivity and expand margins. Okay. The next one is just regarding costs. You know, how should we think about costs in H2, you know, whether on a half-on-half or year-on-year basis, you know, given 'cause I think our OpEx in this half probably went up, what? Around 3% or so. You know, should we expect something similar in the second half, or, how should we think about that? Again, we'll provide further detail when we get to the full first half release at the end of August. I'd refer again to the comment that everything's all areas are under review. Okay. In order to improve productivity and expand margins. Okay, maybe just the last one. There's some footnotes, I think, missing on page three, for underlying EBITDA. Footnote four is missing. I'm just wondering what that might refer to? Refer to page one, footnotes. Okay, I don't see a footnote four there, four. Yeah. You can come back afterwards if you don't have it on hand. Yeah, we'll do that. Thanks. Yeah. All right. Thank you. Thank you. Your next question comes from Paul Mason of E&P. Please go ahead. Hey, guys. Thanks for the question. I know you've said a few times you can't comment on things, so we'll see how we go here. Just in terms of your revenue mix, there's obviously like a further weighting to China. My understanding is that like the Chinese business' gross margins are quite significantly lower at the moment 'cause of scale versus sort of, you know, the historical North American global customer base. Just from a basic mix perspective, should we like generally be thinking about that mix pulling down gross profit margins or is that sort of too early to call? Hi, Paul. The reason we're deferring a lot of the questions the first half is we haven't done all the work yet, you know. We're reporting on what we have in front of us. Again, I'll have to defer that one to when we get to the full result release in the first half. Sorry. Okay, no worries. That was all from me. Thank you. Thanks. Thank you. Once again, if you would like to register for a question, please press star one on your phone and wait for your name to be announced. Your next question comes from Ross Barrows of Wilsons Advisory. Please go ahead. Hi. Good morning. Thanks for taking a question. I've got two actually. You just mentioned a couple of times that, you know, everything is under review. Could you help us understand, I guess, the timing around that in terms of the review? Is it already underway? Is it starting this week? Or if it has been under review, how long it's been under review? Yeah. Hi, Ross. We've been looking at this for a little while now. Clearly there's some urgency around us improving productivity and margins. We have been looking at things for a little while now. Again, no details to share at this point. Okay, thanks. Just a second question just around timing of, I guess, today's update. You know, it's a month or so after the end of the half, and clearly it takes time to gather the insights around the numbers and the like. Was it just a matter of finalizing the accounts over the balance of July to speak to us today? Or, were you kinda keen to see how July was tracking before, I guess, today's update? It does take a little while to pull the numbers together. Clearly, July is instructive as well. We wanted to make sure that we had certainty and completeness of information, you know, before we went to the market. Okay. Thank you. Thank you. Your next question comes from Conor O'Prey of Canaccord Genuity. Please go ahead. Hi. Good morning. Just if I could dive into the new markets segment and the commentary around the growth of the non-product piece being 35%. If you sort of on my math, which might be a bit shaky, it looks as if the global customer segment within that segment was almost half or perhaps even more than half down year-on-year. Was that a specific project that ran off, or was that something about the underlying kinda conditions you've talked about? 'Cause it's a much more radical decline than we see in the global services segment from the update today. Yeah. Hi, Conor. Again, we'll provide more detail when we get to the full release. You know, global product and global services have been impacted by the spending slowdown. That's fair. Thank you. Thank you. There are no further questions at this time. I would now like to hand back to Mark Brayan for any closing remarks. Yeah. Thank you, Darcy. Thank you to everybody for dialing in this morning. We look forward to engaging with you all when we get to our full first half release on the 25th of August. Thank you very much. That does conclude our conference for today. Thank you all for participating. You may now disconnect.