Thank you for standing by, and welcome to the Appen Limited first half of 2022 results release. All participants are in a listen only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference call over to Mr. Mark Brayan, the CEO. Mr. Brayan, the floor is yours, sir. Thank you very much, and good morning, everybody. Welcome to our FY 2022 first half results presentation. My name is Mark Brayan. I'm the Chief Executive Officer of Appen. I'm joined this morning by our CFO, Kevin Levine, as well as our Head of Investor Relations, Rosalie Duff. Presentation will take about 20 or 30 minutes, and then we'll take questions, and we aim to finish around 12:00 noon Sydney time. As a reminder, before we get going, all the financials are reported in US dollars. Turning first of all to the agenda on slide three. Our presentation today follows our first half update of the second of August. Today, we'll discuss the results in more detail and provide further commentary on the outlook for the second half. Please turn to slide five. As we announced earlier this month, our half year results reflect lower earnings due to challenging external operating and macro conditions. Our large customers are being impacted by weaker demand for digital advertising. This has led them to cut costs and reprioritize their spend, and this has impacted some of our large ad-related programs and had a flow-on effect to non-ad related projects. Pleasingly, our China team continues to deliver growth, and the enterprise business is building momentum. The fundamentals of our business are strong. Our business produces good cash flow conversion and is backed by a strong balance sheet with cash of AUD 42.2 million. As we communicated in February this year, our costs are higher in the half due to investments in product, technology, and transformation and in anticipation of second half growth. The board is determined not to pay a dividend to ensure appropriate allocation of capital. Importantly, we're committed to our long-term strategy. We will continue to invest for growth, including investments in new markets to diversify revenue and lift productivity. We will also prudently manage costs. I'll now turn to the market environment in more detail. Over to slide six. Some of our global customers are feeling the effects of a downturn in the digital ad market, and this makes them more cost conscious and has impacted the work we do for them. We've seen a reduction in spending on large global programs. As an important part of our strategy, we're very committed to growing and diversifying our revenue. Today, revenue from our non-global customers represents 19% of our total revenue, and that's up from 13% last year. China has continued to grow and the enterprise business is building momentum. While we're heading in the right direction, we need to further accelerate our strategy to achieve revenue diversification. We're very confident in the long-term prospects for data labeling market. The market is expected to grow strongly. Also, our global project count this half is at an all-time high, but it's been insufficient to offset the reduction in programs, in core programs. Please turn to page seven. We are a clear market leader when it comes to the provision of data for the AI life cycle, and we remain confident of our prospects in the high-growth AI market. We offer the broadest range of data modalities amongst all of our competitors, and we'll continue to expand this capability to win more customers and to deliver scale, quality, and margin expansion. We'll maintain our focus on our strategic pillars of grow, automate, expand, and evolve. While our long-term strategy remains unchanged, we'll focus on near-term returns and productivity. In practical terms, this means we'll look to accelerate investments in New Markets with the greatest revenue potential to boost returns, such as data collection. We'll also look for ongoing improvements to our products and processes to improve productivity with a focus on crowd and project management. We'll prudently manage costs. This includes the increased use of offshoring facilities and right-sizing of our investments for growth opportunities. Turning now to our financial highlights on slide nine. Our revenue performance primarily reflects a lower contribution from the global division. Key driver is the slowdown in spending from some of our global customers, which has caused a reduction in revenue in Global Services and Global Product. Excluding Global Product, our New Markets revenue was up 35%, and that was driven by a strong performance in China. Underlying EBITDA before foreign exchange fell 66% to $9.6 million, and that was driven by lower revenue as well as increased costs associated with investments in product, technology, and transformation. As I mentioned earlier, the board has decided not to pay a dividend. To slide 10 and looking at Global Services in more detail. As stated previously, our customers are facing weaker demand for digital advertising. As a result, some of our major customers have reduced their spend with us in their advertising programs, and we've seen a flow on impact of that to some of our non-ad programs. The chart on the left shows revenue and earnings by half, and you can see the reduction in both. Revenue reduced 7% to $137.8 million, and EBITDA fell 24% to $26.2 million. Pleasingly, we saw a slight increase in gross margins due to more favorable customer and project mix as well as internal efficiencies. However, EBITDA margins of 19% were impacted by lower revenue. To our New Markets business on slide 11. Revenue for New Markets fell 6% to $45 million, mainly impacted by lower Global Product, which declined 52%. Excluding Global Product, New Markets revenue was up 35%. China played a big role in this growth, as we'll see in later slides. We also saw good momentum in enterprise. Team has 71 new logo wins and are progressively signing larger deals. The government team had a disappointing half, reporting lower revenue. This was due to the non-renewal of a large contract. The sales and budget cycles are also typically longer for government work, and it's taken the team longer than anticipated to get traction. While the EBITDA loss is disappointing, it does in part reflect higher investment spending during the half. As I stated earlier, our strategy remains unchanged, and we will continue to strategically invest in new product and new processes to transform our business. Slide 12 and our global customers in more detail. Global Services revenue declined 7% to $137.8 million. Non-ad related projects comprised 74% of total revenue, which is closely in line with the 74.5% reported in the prior corresponding period. Global Product revenue was down 52%. This is due to our customers reducing their spend for project work on our platform and a large project from one customer ending in the prior corresponding period. Our performance has also been impacted as some customers have not fulfilled their purchase orders to the same rates as prior years. Importantly, we do not believe we are losing market share with our largest customers. We monitor the website visits to customer annotation sites, which confirms our confidence in our market share position. Despite the challenging external environment, the global business unit won 99 new deals compared to 75 new deals in the prior corresponding period, and most of this work is non-ad related. The chart on the right-hand side of the slide shows the ramp up in new projects. As I mentioned earlier, our global project count is at an all-time high. We're seeing a greater proportion of lower revenue projects, however. At this point in time, size and ramp of these new projects is insufficient to offset the reduction in some of the larger core programs. On slide 13, our other business units, Enterprise China, Government and Quadrant. Excluding Global Product, New Markets revenue was up 35% from the first half of last year, driven by strong growth in China. As I mentioned previously, our revenue from non-global customers is 19% of the total, which is up from 13% in the prior corresponding period. The Enterprise team is building momentum and had some good wins in the half. Some good wins recently, to be correct, including an $8.7 million order with an existing large social media company in July and a $2.5 million contract with a global car manufacturer. Enterprise bookings in the first half were up 9% compared to the first half of 2021, and the average deal size signed in the first half was up 37% from the average deal size in the prior corresponding period. Our Quadrant business is also building momentum, and we are seeing strong opportunities to cross-sell Quadrant into our global and enterprise customers. Over to slide 14. The chart on the left-hand side of the page shows that our China team delivered revenue growth of 141% for the first half of 2021. They secured several new projects and new logo wins. In line with higher revenues, we're seeing a continued improvement in our gross margins. We are a leader of the AI market in China, and we're growing across all data modalities. We support 11 major car manufacturers and 20 other autonomous mobility providers. Around 40% of our revenue in China comes from autonomous vehicle work. We also service nine of the top ten internet companies in China and all of the top mobile companies. We're very pleased with our progress in China. Importantly, we achieved ISO/IEC 27001 and ISO/IEC 27701 certification. This strengthens our leadership, our position, and also improves the confidence that our customers have in us. Leveraging off the growth and support infrastructure in China, we also invested in dedicated local sales teams in Japan and Korea, where we had several new customer wins during the half year. Japan and Korea are relatively new markets for Appen with high growth potential. We're still at an early stage there, but we're excited about the huge growth potential in these countries. I'll now hand it over to Kevin, who will take you through the financials in more detail. Thank you, Mark. Starting on slide 15, our total revenue decreased 6.9% to $182.9 million. This primarily reflects the reduced spend by some of our global customers in response to lower revenues and weaker digital advertising demand they are experiencing. New Markets were also impacted as we saw a decrease in Global Product revenue. If we exclude Global Product revenue, the New Markets business recorded a strong performance with revenue up 35% on the prior corresponding period. China was an important driver of this result. We saw an improvement in gross margins. This is mainly due to improved gross margins in Global Services from a more favorable customer project mix, as well as some internal efficiencies. Pleasingly, we also saw improving gross margins in China in line with increased revenue. As we first flagged in February, expenses were high in this half, primarily due to investment in product and technology, growth investments and transformation costs. These resulted in high employee expenses, recruitment and IT costs. Our retention strategies have resulted in an increase in share-based payment expense. However, this has been offset by true-up adjustments for non-vesting due to performance hurdles not being met. Underlying EBITDA and associated margins have been significantly impacted by the lower than expected revenue, as well as the expected impact of the higher cost base. We record an underlying net loss of $3.8 million, which has been impacted by increased amortization of our investment in product development. The effective tax rate of 20.5% is in line with the prior year. The effective tax rate is subject to fluctuations from the tax effect of movements from expensing and vesting of employee performance shares and differences in overseas tax rates. Excluding these fluctuations, our normalized tax rate is around 25%. Over the page and onto the balance sheet on slide 16. Appen's balance sheet remains strong and resilient, with no debt and with a cash balance of AUD 42.2 million at the end of June. Trade receivables decreased AUD 43.9 million to AUD 45.3 million due to lower volumes. The reduction comes from the comparison of strong Q4 2021 volumes versus lower Q2 2022 volumes. This also excludes work completed in June, not invoiced at the end of June, as time-based billing milestones were not met, and this is reflected in the increase in contract assets. This work was invoiced in early July. Non-current assets comprise mainly goodwill and identifiable intangible assets, IIA, mostly arising through acquisition. Goodwill and IIA were reviewed by management and the auditors for indicators of impairment, with a further review to be conducted at year-end. Goodwill of AUD 45.4 million was initially recorded in respect of the Quadrant acquisition. In the half, it has been adjusted by AUD 5.8 million to recognize the identifiable intangible assets as part of the provisional purchase price adjustment process. Total liabilities include an earn-out liability of AUD 18.6 million in respect of Quadrant. As noted by Mark, the board has determined not to pay a dividend this half. Over the page onto slide 17. In the first half of this year, we invested AUD 18.3 million in product developments, representing 10% of revenue. This spend was up 18.4% on the first half spend last year of $15.5 million. This focus is important to drive customer growth and repeatability as well as quality improvements and margin expansion. In this half, 55% of our product development spend was capitalized, which is lower than historical levels as we focus on addressing customer requirements following extensive product review. We expect our investment in product development to be around 10% of annual revenue for this year. Moving on to slide 18, cash flow. Compared to the prior corresponding period, our cash on hand decreased $23.8 million, mainly due to the upfront payment for Quadrant of $25.3 million in September last year. Cash balance and cash conversion were impacted by working capital timing, with collections from the strong Q4 2021 volumes occurring in the first half. Cash flow from operations decreased 34% impacted by reduced trading volumes, which were somewhat offset by working capital impacts and lower tax payments. During the half, we deployed cash to pay for tax, dividends, CapEx and growth investments, including a minority investment in Mindtech. Despite the lower revenues and reduced cash flow from operations, the cash flow conversion from EBITDA improved from 101% to 211% due to cash flow cycle timing, as mentioned previously. Thank you, and I'll hand you back to Mark now. Thanks, Kevin. To slide 20. As at August 2022, our revenue order book, including year-to-date revenue, plus orders in hand, stands at $360 million, and that's in line with August 2021. The customer delivery schedule is skewed to the fourth quarter of FY 2022. In July and August, we haven't seen a material improvement in our trading performance, and there also remains uncertainty about a continued slowdown of spending from our global customers. Compared to prior years, we believe the conversion of forward orders to sales will happen at a lower rate. However, we still expect to see higher volumes in the latter part of the second half from the delivery of seasonal global projects and ramp up in existing global projects, a continued growth in China and the ramp up of Quadrant into global customers and enterprise customers. We expect FY 2022 revenue to be skewed to the second half, although revenue will not be to prior year levels due to the slowdown in global customers. As I explained earlier, we continue to implement the company's long-term strategy, but we'll have a focus on near-term returns, managing costs, and prioritizing several initiatives. We remain focused on investing in technology and expect investment in product development to be around 10% of revenue. Primarily because of lower revenue as well as investments in product technology and transformation, our FY 2022 EBITDA and EBITDA margin is expected to be materially lower than FY 2021. This concludes the presentation. I'll now hand it back to the moderator to take time for questions. Thank you very much. Thank you, sir. We will now begin the question and answer session. To ask a question, you may press star then one on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. If any type of question has been addressed or you'd like to withdraw your question, please press star then two. Again, it is star then one to ask a question. At this time, we'll just pause momentarily to assemble our roster. The first question we have will come from Garry Sherriff of the Royal Bank of Canada. Good morning, Mark and Kevin. Just confirming you can hear me okay. Yeah. Hi, Garry. How are you doing? Yeah, very well. Thank you. Three questions. One on churn, the second one on your outlook, and the third one on strategy. The first one on churn, can you provide us with some revenue churn metrics? Because I've noted you've talked around non-renewals of some sizable contracts. You talked about the government space. Just trying to get a bit more understanding of what's happening from a churn perspective and also what's happening for those larger contracts. Are they going elsewhere? Are they going in-house? Just some more detail there would be great. We don't disclose that level of detail. I can say, Garry, that you know, there's a few things going on. First of all, some projects that we work on don't materialize into larger production level programs. It goes nowhere in effect. In most cases, however, particularly the case with our global customers, they're just reducing the volumes of the large programs in line with their spending reprioritization and cost management. They're still getting data into the algorithms that we support, but just at lower volumes. Occasionally, you know, we lose a program to a competitor, but that tends to be the minority. The vast majority of impact on the current result is just lower volumes on the core programs. The other point to add, Gary, is that as part of our FY 2026 strategy and targets, we moved to focus on pure revenue growth, not necessarily focusing on where it's coming from, the nature of it as to whether it's committed or not committed. As a result of that focus, there's less focus for us around the committed and more focus on revenue growth per se. Okay. That government, that large government contract, did that go to a competitor? I believe some of it did, but it's been also diffused into other areas, other agencies within the government. Okay. The next one on the calendar year 2022 outlook. Should we assume a similar work in hand to revenue conversion in the second half 2022, like we did, say, in second half last year? No, we're specifically pointing out that the order book's gonna convert at lower rates than prior years. Yep. Okay. Just trying to figure that out, like if you're saying that your work-in-hand orders are X, but the revenue conversion is gonna be, it sounds like materially lower, why is that? That's something I don't understand. I guess if your work-in-hand is similar, why would the revenue conversion not be similar? The order book consists of year-to-date revenue, work in hand, and purchase orders received and yet to be delivered. Purchase orders that we received at the beginning of the year, you know, we're getting less work from the customer as they pull back. Those purchase orders aren't committed. It provides an indication for us of the amount of budget, for example, that they've allocated for the program. They do not commit to that spend. As we've seen in the first half of this year, and we expect it to continue into the second half, they're spending at a lower rate than those purchase orders. Yeah. Garry, in essence, it does absolutely reflect, you know, the situation that we're in, and that means these purchase orders were approved by the customer in line with their budget at the start of the year. However, you know, given the impact that they are experiencing around the digital ad market, and other macroeconomic conditions, as well as, you know, some of our customers reporting a downturn in revenue for the first time in their history, have got them to actually reconsider that spend, notwithstanding that it was approved and it was for a certain standing value. Therefore, the fact that we have the order for a certain value, that's not necessarily the amount of spend that they're actually gonna translate, is what we've seen so far and what we expect to continue to see for the rest of the half. Okay. I mean, shouldn't that therefore mean that the work in hand number gets revised lower? I mean, what's a realistic work in hand number then? That's, I don't quite get the, I sort of get what you're saying, but, doesn't that therefore mean your work in hand number should be revised lower? The order book is, you know, we have a methodology around the order book and we report that very consistently. It includes year-to-date revenue, project work that we've got ongoing, that are yet to bring to revenue and then the open purchase orders. We've reported that on exactly the same metric as, or, you know, in exactly the same way as last year. It's gonna convert to revenue at a lower rate. We're basing that decision on what we've seen year to date. The order book reflects what the purchase orders we've got. It's not a forecast. Yeah. I think, Garry, the other key point here is what we're making is that, you know, in the past, I think when you guys try and take the order book as an indicator of revenue and you look at last year's conversion of orders to revenue, what we're really saying is that is not representative this year. Just given from what we've seen and what we're experiencing, what we're calling out is that if you apply that ratio to the order book, that's not what we're expecting to see. Okay, understood. The last question, just around the strategy. You mentioned you're very confident in the data labeling market. What gives you that confidence? You know, you've also talked about a big Q4 customer delivery schedule. If that doesn't drop as expected, I mean, does that mean the strategy gets reviewed? The confidence comes from the work we're doing outside of the global customers. Our global customers are heavily skewed to digital advertising and weaker digital ad demand has got them to rethink not only their ad-related programs but some of their other programs as well. However, outside of that, we see growth in China. We see strong momentum in the enterprise business. We see, you know, a large uptick in the number of projects that we're doing. We see some big wins outside of the globals, and we point to a couple of those with the enterprise business, for example. You know, there's a lot of healthy signals outside of our global customers. You know, we've just got to ride through this passage with the global customers, but outside of that, we see strong demand for training data. Of course, the mega trends around AI are unchanged. Okay, thank you. I'll step back in the queue. Next we have Bob Chen of JP Morgan. Morning, guys. Just a few questions from me, maybe one follow-up just on that order book and how that sort of converts into revenue. I think historically, that order book, when you sort of present that number, there's a probability weighted basis on, you know, what gets included and what doesn't get included. But it sounds like because that conversion to revenue is a little bit slower, shouldn't that mean that that probability weight towards some of these projects that you don't think will get included should be reduced and sort of stripped out of that $360 million number? Hey, Bob. The order book is. It's a pretty simple construct. We get year-to-date revenue, your work in progress and outstanding POs. Now, the number of POs that we've got between when we last provided the order book and now is lower than prior years. That's indicative of the market conditions. The conversion of those POs is happening at a lower rate than last year. That order book is converting to revenue at a lower rate. We don't factor the order book, we just report it. We don't make any statistical-based adjustment to that order book. We add it up, we report it, and what we're saying now is that the conversion rates you've used historically aren't gonna apply going forward because of what we've seen year to date. Okay, perfect. And then just some of the comments you made in your trading update a few weeks ago around reviewing investments across the business to look at margin improvements. Can you just elaborate a little bit on, you know, what you're looking at and how do you measure the returns from some of these investments that you're currently making as well? Yeah. We're investing in technology that supports our internal operations as well as technology that our customers and our crowd use. Some of those investments are gonna yield near-term returns, and some are gonna be yielding longer-term returns. Given where we are, we're gonna focus in on those ones that are gonna yield near-term returns. For example, you know, driving up the productivity of the way that we allocate crowd workers to projects will give us, you know, a near-term return because the crowd workers flow directly to revenue. We're gonna accelerate investments in those areas, for example. There may be other things that we're working on that are a little more long term, and we're just gonna tap the brakes on those and allocate the resources for the near-term things. We're not, you know, gonna derail our strategy here. We're just gonna prioritize things in order to stay on strategy, but to get more immediate returns. Okay, great. No, that makes sense. Maybe just a broader question around so the weak performances that happened over the last couple of years. Can you just provide a bit of color on yeah how much of that was you know largely driven just by your clients versus you know what's actually in your control? What you guys could have done better to yeah limit that impact? We're heavily skewed to the tech giants, as you know. You know, if you reflect their journey over the last few years, it's been a bit choppy and that's had a flow-on effect to our business. If we could have done anything, we could have implemented our strategy quicker. We've got good momentum. China's a great example. Enterprise is building momentum. You know, our strategy is really on two core pillars. One, to expand our customers and revenue beyond the Internet giants, beyond the globals. Then it's also about technology that enables us to deliver higher levels of service to our customers and, you know, improve internal productivity. I'm very confident that we're on the right path, Bob. I wish we'd gone a bit quicker, but I think CEOs are generally impatient. I'm very confident we're on the right path. Yeah. Thanks, guys. Just to that point as well, though. I think, you know, the strategy around revenue diversification, you know, has been well thought out and has been in play for quite a while. Essentially, it is largely organic, right? You know, the China buildup is organic, you know, and building into other markets. Where we have made investment, for example, Quadrant, you know, that's early stage. Government, same thing. Essentially, you know, strategy there, but it's largely organic, which means it takes time, it needs time. I think we're just in an unfortunate position right now where we've had this reduction in some of the globals and, you know, just haven't had the sufficient time yet in terms of this organic build-out as part of our revenue diversification strategy. Thanks, guys. Next, we have Siraj Ahmed of Citi. Hi, Mark. Hi, Kevin. Just in terms of the order book conversion, just maybe if you could just help us in terms of the first half that just passed, or maybe the month of May and June, can you give the percentage of where the conversion actually is declining to? Like, if you're expecting, let's say 60%, it actually came in at 50%. Because that'll be quite helpful for us. We haven't, I mean, we've done some internal modeling, Siraj, but all we can tell you is that it's gonna be the lower rate. That's our view presently. Okay. Okay, just clarifying on that. You're saying full-year revenue is expected to be down. Should we also be thinking that second half revenue will be down in similar rates as first half? Because you are cycling a record half from last year. Yes, I think that that's exactly right. We're lapping a very strong second half last year, particularly a strong Q4. We're not seeing that at the moment. We're seeing the opposite, right? We're seeing a reduction in spend from some of the core programs. I think, you know, take all of those factors to say you're actually comparing a very strong half and a very strong Q4 with a much weaker half and a much weaker Q4 this time around. Kevin, would that sort of mean that the decline in the second half is actually higher than the, I think, 7% or whatever that you delivered in first half? Is that the way? Yeah. We should be thinking about? Well, yeah, I mean, if you just consider everything that I've said. Yeah. You know, you'll probably get to those kind of conclusions. Okay. Just a couple more. In terms of, just clarifying. Mark, you're clearly saying you've not lost market share based on trends that you're looking at. Just your, I mean, your key competitor is calling out accelerating towards 40% year-on-year growth. Just keen to understand, this weakness that you're seeing, is it just one customer? Is it broad-based? Or if you could just give us some color, that'd be quite helpful. I think there's a couple of things. First of all, it's not 100% clear whether it's apples to apples in terms of what, you know, what they consider in their, you know, directly competitive with us. Secondly, when we say we're not losing share, we don't see that in our major customers. You know, that doesn't mean they're not winning business in other places. But we don't see a loss of share in our major customers. Yeah. From your perspective, the performance that you're seeing with a weakness in terms of projects, it's not just one customer specific, it's across multiple customers? Well, we call out our largest customers. You know, many of our big customers rely on digital advertising, and they're the ones that have been impacted by the current slowdown, and that's having a slowdown effect to us. Okay, thanks. Last one, in terms of your investment, just how we should think about OpEx, right? I think your first half OpEx was around $65 million, excluding cost of sales. Is that, like, do we expect that to come down, or should we expect that to increase in the second half? Yeah, you know, I think the way to think about that is, you know, as you've said, we're gonna, we've got our strategies. We're looking at reprioritizing, but at the same time, we're still working on strategy and we're also working. I guess we're gonna be favoring, you know, process improvements, you know, over time rather than accelerated. I think all of that is to suggest that, you know, there's not gonna be much factored into the rest of this year around some of that reprioritization. We're taking a short-term to medium-term view on that. I think just, you know, consider the OpEx accordingly with that and we're talking about similar levels, you know, maybe with some slight increases. Okay. Some slight increases in terms of OpEx. All right. Thank you. Thanks, Kevin. Thanks, Mark. Next, we have Josh Kannourakis of Barrenjoey. Excuse me. Hi, Mark and Kevin. Thanks for taking my call. First question, just with regard to the New Markets business, still obviously investing quite heavily in that. Can you give us a bit of an idea of the flight path or the guide path in terms of, you know, margin profile and leverage and where that business should be able to get to at a more mature state? Yeah. Hey, Josh. We're seeing a fairly good trend in China, and you can see that in the deck, and we're also seeing improvements in gross margins there. Over time, we expect to see fairly consistent revenue growth in China and steady improvements in gross margins. The enterprise business is a little behind that. We're seeing a good uptick in bookings, in orders, and we call out a couple of those in the deck. You know, we're also seeing healthy gross margins in that business as well, with improvement to go or to come, sorry. In terms of operating expense for both businesses, you know, managing that fairly, prudently, but also investing in growth where we can. You know, we've laid out our long-term targets and both enterprise and China will contribute to all of that, both the revenue and the margin targets over time. Suffice to say, we just expect continued improvement from where we are today over the course of the next few years. Got it. Just in terms of into the second half, that continued growth in revenue and sort of strengthening GP should see that loss narrowing half on half? You know, we're not calling out anything in the near term. Looking more long term. Okay. You know, I think you can draw your conclusions from the charts and the trajectory. Okay. Got it. Thank you. Just maybe one for Kevin. Just in terms of the cost base, into the second half. On the share-based payments, you mentioned that true-up that happened. Could you quantify or give us a bit more detail on that and just how we should be thinking of, you know, a reasonable go forward for share-based payments both into sort of second half and into the following years? Yeah. Yeah, Josh. The share-based payment is a driver, certainly a driver of an increase in cost H2 over H1, given that H1 we had the true-up adjustment. Essentially absent of any other true-up adjustments, you know, we expect the share-based payment will get back to more normal kind of levels, and obviously that is gonna be one of the drivers in the comment I made earlier just around that increase in the cost in H2. Just final one for me. A lot of people, obviously inflation's on the mind of a lot of companies at the moment this reporting season. Could we talk a little bit about that just in terms of your general cost base, but more specifically to the crowd and I guess your ability to pass that on to your customers? Yeah. It's mixed. In some cases we see an impact on crowd rates and we are passing that on to the customers. In other cases the impact isn't as high. We also, you know, on the full-time workforce, I think it's been ongoing for a little while now, a bit of salary pressure in the tech market, but I don't think that's unusual to us. We will be making greater use of our offshore facilities over time as we grow. We found that to be a really good solution for us in terms of productivity. I think in general, Josh, where it's material, we're able to pass it on and where it's not, we carry on. Okay. Great. Thanks, Mark and Kevin. No worries. Thank you. Next we have Chris Savage of Bell Potter. Thank you. Morning, Mark and Kevin. Without getting too granular on the outlook statement, you made one comment saying revenue's not expected to be at prior year levels, the emphasis being on levels being plural. Easy conclusion is you expect revenue to be below 2021, but does levels imply you also expect it to be below 2020 as well as in multiple years gone by? Yeah, I think maybe Chris reading a bit too much into that. I think we're just really comparing, you know, to the prior year there. Okay. Secondly, can you just give us some idea around the conversations you're having with your key global customers? Are they saying to you to sort of, you know, sit tight when digital advertising comes back, their levels of spend will rebound? Or are they staying mute? I'm just trying to work out, is this structural or is this a cyclical change, do you think, from these customers? It's certainly more the former. As in the conversation that is. It's a cyclical issue. They value what we do. We have positive and collaborative relationships with our largest customers. You know, as I said, we're winning, or as the deck shows, we're winning a lot of new projects with our large customers. They continue to invest in training data and AI. You know, however, they've got this headwind around weaker demand for digital advertising for reasons that they've, you know, been very clear about. That's impacting their spend, and it's a flow on effect to us. It's definitely a collaborative situation and, you know, they view what we do for them very important and, you know, we've just gotta ride through this phase. They are literally saying they do expect their spend to rebound at some stage. They're saying that they've got to tighten down costs in the current environment. I think the implication is that when the environment changes, they'll be able to, you know, increase their spending. They're certainly giving us the impression that it's a temporary matter. Yeah. Just last question, maybe one more for Kevin. In the notes there was a loss on revaluation of inventory, and you called out cryptocurrency. Have you actually invested in crypto? Are you getting paid in crypto, or what's the story there? Firstly, it's a very small part of the business, and it came alongside with the Quadrant acquisition. Actually one of the key strengths, you know, that Quadrant has in terms of how they manage their crowd is they pay their crowd in crypto. There's benefits with that. There are two benefits with that. The first is that near real-time settlement is the first one. The second one is micropayments, because a lot of the tasks that the GeoLancers perform, you know, are very small amounts, and so it can handle kind of micropayments without necessarily imposing fees, et cetera, onto the recipients. That's very much part and parcel of the business. They operate their platform under a blockchain protocol and have associated payments to crowd workers in crypto. In order to manage the payments to the Geolancers and also to do further development and data collection work of datasets, we maintain a balance in crypto assets, and then we convert those crypto assets into the digital currency that's used to pay the Geolancers. Essentially that reduction that we talk about was largely a revaluation relating to our holding in Ethereum. Which once again, a small amount, but necessary just to maintain the economics and the ecosystem that Quadrant maintains. It sounds like that's not gonna change. Quadrant's gonna continue to pay out in crypto. Yeah. I mean, we, you know, we don't see any need to change right now. As I said, there are some benefits. They haven't experienced any issues with supply around that. In fact, you know, they engage with a community that's really engaged with that. You know, I think we're reviewing stuff across the board and whether that's, there's some benefits there we can provide or not. At the same time, I think what it's fair to say as well is that if we decide to move, if we had to move off crypto to cash, it doesn't actually preclude us from anything. It doesn't interact with the blockchain technology in any way. We've got flexibility, but at the moment it's working. It's a small investment and we don't see a need to change at this point in time. All right. Thanks, Kevin. Thanks, Mark. The next question we have will come from Zhe Wei Sim of Macquarie. Hi, Kevin. Hi, Mark. Thanks for hosting the call today. Just one question from me, which is regarding in the slide deck, we talk about goodwill being reviewed for indicators of impairment, with full review to be conducted at the end of the year. Just wondering if you could give a bit more detail on that as to you know what initial reviews may have pointed out and you know what kind of risk we could be potentially looking at for impairments at the full year. Thanks. Formally, a full review needs to be done once a year. You know, in the intervening periods, essentially what we do is we perform an analysis, and we look for indicators of impairment. Those kind of things is where, you know, we look at performance, we look at growth, we look at momentum, we look at pipeline, we look at all those things. You know, our modeling is, you know, it's multiyears and particularly with the terminal year, you know, driving a lot of the value. All that is to say, we consider all of that, and we're comfortable that in terms of what we're seeing or how we're seeing things, and given that we're so early into our, I guess, FY 2026 target positioning, that the conclusion was, yeah, we need more time to make an assessment. We don't see anything at the moment, but we'll continue to look at those kind of things and look to see how they're aligned with the growth rates that are in our model and to determine, you know, whether there is any impairment that needs to be taken or not. Okay. Perfect. Understood. Thank you very much. Thanks. Next, we have Ross Barrows of Wilsons Advisory. Great. Thank you. Hi, Mark. Hi, Kevin. A couple questions. Just in terms of the purchase orders, can you just remind us, I guess, how that process works? You know, are there more purchase orders placed in the first half or the second half? Is that purchase order process changing? You know, those type of things, just so we can get a better feel, I guess, for the process and any indication or comments you can make around, you know, first half, second half skew over what you've seen in the past would be helpful as well. Thanks. Yeah. Hey, Ross. The receipt of orders does change over time based on customer wins. You know, our large customers have a cadence around their purchase orders, which might be annual or quarterly. As we win new customers, obviously we get the purchase orders as and when we win those. It does vary from year to year. Having said that, there's a degree of a pattern given the amount of POs we get from our large customers. Hence, you know, per our response to some of the earlier questions, the prior year ratio as a conversion have been helpful to get an indication of where we might end up. Having said that, as we point out in the release this year, the conversion rate's been slower in the first half, and we anticipate it to be slower in the second half as well. Exactly what the change in rate is is too early to tell. Yeah. Thanks. Maybe just expanding on that a little bit more, could you talk about the, I guess, the scope of work within, you know, any given purchase order? If maybe we can focus on your more traditional larger technology customers without naming names, but just holistically, do you feel like the scope of work coming into Appen from them is, you know, higher, the same, or I guess lower than this time last year? I'm not really talking about the volume of purchase orders, but more about, you know, what you're being asked to do within them. Yeah. Clearly the volume is the issue, but the scope's expanding. If you look at the number of orders that we're getting, those orders are expanding, and typically an order relates to a, you know, a different project, which is, you know, if I understand what you mean by scope, is a broader scope. You know, the scope is expanding. It's just the volume of the large programs has come off as a direct result of them looking to manage their costs, given the decline in advertising demand and the impact on their revenue. Okay. Thanks. Just a last quick one on China. You know, it's gone from, you know, not about $7 million to $18 million, and that's taking it from, you know, 4% of revenue to nudging 10%. Obviously, the group revenue's down a little bit, which has helped that, but still, you know, China's still 2.5 times where it was. Can you help us think, or share your thoughts around how we should think about, you know, that opportunity? Obviously, it's grown well. It's, you know, softened a little bit half on half. It's still up considerably year-on-year. Maybe just some more color around that and, you know, I'm not sure you're gonna give us any percentage of revenue going forward, but maybe some thoughts about how we could think about it. Yeah. First of all, just a little bit on the near-term softness. We do a lot of work in the autonomous vehicle space and various cities in China have gone through pretty strict lockdowns and that impacted some of the data collection that our customers did and consequently the work that we did. There was sort of a temporary hit there due to COVID lockdowns. That aside, it continues to grow very well as you point out. You know, we expect good solid growth over time. We've got a really well-established position there, and we've done a good job of winning a broader range of customers and a broader range of data modalities in China than you know elsewhere in the world where we have a very high reliance on relevance and the tech giants. We've done a better job of you know managing customer and revenue diversity there. Yeah, we anticipate strong growth going forward. We're also winning a lot of work off of our competitors. We know that for a fact. There are some public companies in China that we can see their growth slowing and we think we're having a direct impact on that. Overall, we're pretty positive about China. We also see expanded addressable market into Japan and Korea. It's early days there, but we're investing in sales teams, and we've got a couple of wins and we see potential there to continue to fuel the growth. Thanks. Just super quick, the purchase order profile in China would be similar to what you're experiencing across the broader group in terms of timing and duration? Probably with the nuance that they have a broader sort of probably a better mix of customers. It's probably much more of a steady uptake of POs through the year rather than big ones at the beginning of the year, would be the difference there. probably also more evenly distributed from a value point of view. In terms of value. Very helpful. Yep. That's right. Thank you. Thanks, Ross. Next we have Jacob Lowe of Citi. Hi, Mark. Hi, Kevin. Just a couple of questions from me. How should we in the second half? You saw an improvement in the first half, but again, you're cycling strong volumes in the second half, again, in the prior comparative period. Sorry, your line broke up a second there. I didn't get the question. How should we think about gross margins in the second half? You saw an improvement in the first half, but just because you're cycling strong volumes in the second half in the prior comparable period. Yeah, look, gross margins in the first half were good and impacted by customer and project mix. Once again, that is a very big driver, you know, of the margins. That is gonna dictate, you know, how the second half margins go. It's gonna be very much dependent on which customers and which projects, you know, that activity comes from. That would inform the gross margins. Yep. Just another one. Are you currently seeing any pressure from a pricing perspective, from the Global customers? Not really, no. It's all volume equation is the issue. Sure. Just the last one from me. Just on China, given first half was constrained due to the lockdowns, I mean, should we sort of assume a catch-up in work or revenue in second half? It's a little early in the half to see. As I said, the issue was that, in the world of autonomous vehicles, you know, vehicles drive around, collect data. We get that data, and we label it, but the volumes of that data collection was lower 'cause people couldn't drive their cars around. We certainly know they're on a catch-up, but the extent to which that comes back is not entirely clear just yet. That said, the team continue to win projects in a variety of areas in China, and we're confident in continued growth. It's a little early to see if we'll get all of that AV work back or not. Yep. Great. Thanks. That's all for me. Next, we have Garry Sherriff of Royal Bank of Canada. Hi again. Two questions. Firstly, your intangibles, you've got about $315 million of intangibles on the balance sheet. Can you maybe talk to the impairment risk here? And is there any risk that this may impact debt covenants? Yeah, sure, Garry. Just quickly, so we've got two segments. We've got the Global Services segment, and then we've got the New Markets segments, essentially. When we think about our current position, you know, that we're calling out, and obviously its impact on our global division from our global customers, you know, that's a CGU that has very strong, you know, earnings and cash flow relative to the investments that we've made. Essentially that's a strong CGU. The New Markets segment is one that, you know, has a fair amount. That's where a lot of the recent acquisition has gone in and that's, you know, that's an emerging segment. That's one where we obviously look at performance, we look at growth rates, and we look at things like that, in terms of identifying that. I think the takeaway though is what we're seeing is what's impacting our results here, we don't see any potential impairment from that. We continue to obviously review that and review our New Markets segment as well, as to whether there's any indicators of impairment there. Okay. Got you. When you talk about that New Markets business, what chunk of that intangibles are sitting there? 'Cause it sounds like that's where the risk may be. The Figure Eight acquisition and the Quadrant acquisition. It was the goodwill associated with those acquisitions and the intangibles. Okay. Can you recall just roughly how much that was off the top of your head or if you've got it there? Yeah. I don't have it. Well, I dont have it broken up here in front of me. I can get back to you, but essentially it's yeah, circa $200 million of that. Yeah. Okay. If that did get impacted materially, would that have any impact on debt covenants? We currently we have debt facilities, but they are not drawn. The short answer is no. Obviously, you know, we would review that, but generally we've got EBITDA covenants and interest covenants. Generally we don't have a market cap covenant. Now that's a low exposure there, Garry. Okay. Got you. The last one, just on your 26 targets. To give the market some form of comfort on those long-term targets, well, certainly other companies will provide a revenue bridge on how you get there. Are you planning on giving us that bridge just to try and because I think market estimates are way below that. Are you able to give us some form of bridge on how you'd get to those, you know, lofty targets? We haven't provided that, Garry. We've, you know, we've got our internal models and targets that get us there. You know, the long-term targets are important. The long-term strategy is important. No, we haven't provided a bridge externally. Obviously we do call out key things which are helpful to you in terms of the modeling. That is, you know, you know, at least, well, the doubling of the revenue and where it's coming from. That a third of the revenue is coming from non-global customers. You can pretty much, you know, draw the lines from the data you have, kind of get a sense of that, of that build. Okay, thank you. Well, there are no further questions at this time. I will now hand the conference call back over to Mr. Brayan for any closing remarks. Sir? Yeah. Thank you very much, and thank you everybody for attending today. Thank you also for your questions. We look forward to any follow-up meetings with yourselves or your clients over the next little while. Thanks again for your interest. I hope you all have a good afternoon. Thanks again. Bye for now.