Company for language and search data services Appen is optimistic about the opportunities in China, because it has already won a small number of contracts in the region.
The company, which provides data for large corporations to train artificial intelligence algorithms and voice assistants, and to improve the search results of websites, is optimistic about the potential of the big Asian market, with President Mark Brayan telling investors and analysts that he expects that expansion to substantially influence the company.
"We work with large companies in China and the appetite for data and AI is just as sharp as in the US. We are pretty positive about China in the longer term but it comes with a unique set of challenges," he said.
"We have to be on the ground there … firstly, to be alert to opportunities because the Chinese tech market is moving so fast, and secondly for data security.
"We will have an operation in China, but we will do it on a sensible basis and it requires a measured approach."
Appen sales grew by 106 percent and reached $ 152.8 million in the first half to June 30 – less than $ 14 million compared to the full year result of 2017 – thanks to the significant $ 105 million Leapforce acquisition last year, which added contracts for the company, as well as strong "organic" growth in the content relevance division.
The company also recorded a 87 percent increase in statutory earnings before interest tax, amortization and amortization (EBITDA) to $ 23.9 million and a statutory net profit growth of 73 percent to $ 14 million.
Based on the result, Appen increased underlying EBITDA guidance for the full year from $ 50 million to $ 55 million to $ 54 million to $ 59 million. As a result, the share price of the company fell 6.2 percent from Tuesday to $ 15.01, after a new price of $ 16 was reached earlier in the day.
The price increase was the result of a wave last week, when it fell under the spell of investors who bought up technology shares because of strong results from companies such as WiseTech Global and Altium.
At that time, Appen had to respond to a ASX competition when the stock price of the company increased by more than 25% between Tuesday and Thursday.
For the year, the company's shares have risen by 228 percent.
"I think it's simply investors who are looking for quality stocks and as long as a company delivers consistently and delivers well, they will be attractive to investors and that will push up the price," said Mr Brayan.
Appen uses a crowd of 1 million people to collect and process data and also employs nearly 400 full-time employees.
The company declared a fully prepaid interim dividend of 4 ¢ per share, an increase of 33 percent compared to this time last year. But Appen warned that future dividends would probably only have partial or no franking credits.
The content-relevant division of the company, which helps companies in the field of e-commerce and social media to improve their search engine results, was the star of this period, with growth excluding the Leapforce contribution of 146 percent thanks to the need for companies to constantly improve and refresh their search functions.
The company experienced much slower growth (4 percent) from the smaller language sources segment, which is responsible for providing large amounts of language data to companies investing in natural language processing for projects such as speech recognition or virtual assistants such as Siri or Cortana, thanks to a delay of the government projects.
Mr Brayan said the work that the company did with governments was usually more complex and therefore had a higher margin than its technological sector projects in this area.
"Governments often want languages that are more difficult to extract from a wider range of countries, with a broader range of accents," he said.
"Much of the technology works in languages of densely populated countries such as the US."
But Brayan had confidence in the long-term growth prospects of the division, saying that the reduction of government projects was only based on temporary financing issues for the projects.
Appen is in the process of moving its client-oriented projects to the crowd management platform of Leapforce, which is called Appen Connect. The company expects that this will increase productivity and improve the margins within the company and it will be used in the first quarter of 2019.
"We routinely pay 30,000 to 40,000 people a month who work for us, so recruiting and boarding and sending work to so many people, retrieving, checking quality and then paying is a whole logistical exercise – a much more automated series of workflows."