Appen Limited (APX) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Appen Limited FY '20 Full Year Results Conference Call. [Operator Instructions] I would now like to hand the conference over to Mr. Mark Brayan, CEO. Please go ahead.

Yes. Thank you very much, and hello, everybody. Welcome to the conference call for Appen's results for the full year ending December 31, 2020. My name is Mark Brayan. I'm the Chief Executive. And I'm joined today by our Chief Financial Officer, Kevin Levine; and Head of Investor Relations, Linda Carroll. Our results presentation was loaded this morning and is available on the ASX website, and I'll be referring to that throughout. And we will take questions after the presentation. So to Page 3 to commence. Appen makes artificial intelligence work in the real world. Products that use AI are developed using a process called machine learning, in which an algorithm learns [indiscernible] pattern that enable it to mimic human functions such as reading, speech, vision and making choices. The examples are known as training data, and the more data, the better the AI performs. Importantly, the training data must match the use case in the real-world situation. The AI won't function correctly if the data doesn't represent the real world. Appen is the world's largest provider of AI training data. We leverage our unique technology and our crowd of over 1 million global workers to collect and prepare large volumes of high-quality training data for the world's leading technology, automotive, financial services, retail and health care companies as well as government agencies. And we do this across a variety of use cases, some of which are on Page 4. We provide human relevance data to search engine providers to ensure they serve up relevant information and advertisements and do so consistently and, importantly, without bias. We provide 2-dimensional and 3-dimensional image training data to autonomous vehicle companies for their self-driving car initiatives as well as speech data so drivers can safely access technology hands-free. We're providing image data for augmented and virtual reality that will train the systems to recognize the actions of the users. This is an exciting new area for us that opens up markets such as gaming. We have a long track record and considerable expertise in speech and natural language data, and we continue to support the development of chat box and other customer experience technologies. Finally, e-commerce, a growth area in the recent pandemic, requires our expertise in search and natural language process. If you could turn to Page 5 for our 2020 full year results. We're very pleased to deliver another solid year of growth for shareholders. The growth is not to our usual standards for reason we'll get to, but we are nonetheless very pleased to deliver this result, given all the challenges in 2020. To borrow a sporting metaphor, 2020 was a year of 2 halves. We had a very strong first half with revenue up 25% on the back of relevant revenue growth and an FX tailwind. The second half is a different story, as we know, from the December trading update. Revenue was slightly down on the first half due to factors that I'll go into, and we also faced a stiff FX headwind. Overall, though, 2020 growth was solid on 2019, and our long-term prospects remain very strong. Revenue in 2020 was up 12% to $599.9 million. Underlying EBITDA of $108.6 million was up 8% at a margin of 18.1%. And we're pleased to announce a full year dividend of $0.10 per share, up 11% on the 2019 dividend. In addition to the FX headwind, and you can see the effect of that on Slide 17. The second half was impacted by a number of pandemic-related factors, including: COVID-19 resulted in an unsurprising slowdown in online advertising in the middle of the year. Our major customers rely on advertising as their major source of revenue, and hence, they reacted by deferring some projects and reallocating resources to new product developments to lessen their reliance on advertising. This, in turn, impacted our revenue to the extent that we did not see the uplift in revenue from our major customers in Q4 that we have seen in other years. Further, our B2B selling motion was impacted by the shift to working from home caused by the pandemic. Our sales teams and our customers took a quarter or 2 to move from survival mode, including setting up at-home offices and technology, to business as close as possible to usual mode and a return to prepandemic deal cadence. Finally, many of our small customers were and continue to be impacted by the pandemic, although the overall impact of them on us is not material in the scheme of things. If you can turn to Page 6. 2020 was a breakout year for new customer wins. We added 136 new customers last year, and you can clearly see the slowdown caused by the pandemic and the strong uplift in Q4 as the sales motion recovered. These wins were across all data modalities and many use cases, and we'll share some of them later in the presentation. These wins were enabled by our investments in sales and marketing as well as our annotation platform, which we acquired with Figure Eight in 2019. These customers are small and/or early in their AI journey, and hence, they won't have a material impact on our revenue in the near term, but they provide us foundation to build upon and give us confidence that our offerings are attractive and competitive in the market. We also had a substantial increase in new projects across our top 5 customers. Many of these were enabled by the customers' use of our annotation platform. They can cover more use cases and more data types using our platform than their own technology, and the platform integrates with their operation, improving productivity and quality as well as increasing customer retention. These new projects are doubly important because these are the projects that our customers are investing in to reduce their reliance on advertising, that is, the projects where resources were reallocated to late last year. These products are early in their life cycle and haven't replaced the revenue impact we saw in the second half, but they will grow in time. We're also very pleased to report a high growth in China. Revenue is up 60% quarter-on-quarter, and we count China's major technology companies as our customers as well as many others in autonomous vehicles, health and education. On Page 7. And we're also pleased to report a material increase in committed revenue to 31% of our total revenue in the second half, up from 12% in the first. The increase in committed revenue is significant because it gives us more revenue visibility and predictability over time. The chart on the left shows annual contract value, or ACV, at the end of each half as well as at the 1st of February. Clearly, we had some substantial renewals early in 2021, but the dip from the first half to the second half 2020 shows the impact of the pandemic on our smaller customers, many of whom have committed contracts with us. While we continue to grow our committed revenue, our cohort chart on Page 8 shows a high degree of revenue repeatability year-on-year regardless of the contract type. This is because our customers rely on us for an ongoing supply of training data to ensure their products stay relevant and improve in quality and utility. Now clearly, they have some flexibility in their data needs as we experienced in the second half, but the long-term trend gives us confidence. In regards to our major customers and projects that were deferred or impacted by resource reallocation, we are seeing most of the material projects that were deferred in the second half recommence in the first half of '21, and present indications suggest a steady return of the projects that were impacted late in 2021. On Page 9 now. And relevance continues to be the bedrock of the business. Revenue was up 15% and EBITDA up 8%, with the second half impact that is already explained. I should also point out at this stage that our work-from-home delivery model remained resilient through the pandemic, ensuring that we are always able to our customer requirements. The chart on the right shows healthy year-on-year growth to relevance, and this is due to a few factors. Firstly, AI that relies on relevance data requires constant refresh to stay relevant to users and unbiased. Secondly, delivering relevance data at scale requires a highly specialized set of capabilities that we developed over many years. These include our crowd management technology, our annotation platform and our multinational, multilingual crowd of over 1 million people in over 170 countries. The crowd is especially important. Our customers require data that is culturally and linguistically accurate and only available from in-country workers. It's not amenable to delivery from a single low-cost location, nor is it practical or cost-effective to in-source relevance work, especially when you consider that we paid relevance workers in 87 countries last year. The crowd also provides the necessary human aspect of relevance data, which is essentially a human's judgment between choices, making it near impossible to automate. Our relevance customers are some of the smartest data scientists on the planet, and they would have automated already -- automated it already if they could have. We can improve productivity with our crowd platform, however. We're using AI, for example, to automatically allocate tasks to workers based on their skills and track record. It's not unlike the product recommendation that you get in an online store, more on this later. Finally, the specialized nature of delivering relevance data at scale means there is 2 meaningful players in this space, us and one other. We don't see a change in the competitive environment, especially in relevance, and the general hype around our space is amongst companies we know well and have known for some time. Page 10 in speech and image, which was down on a breakout year last year but still on an upward trend, clearly visible in the chart on the right-hand side of the page. AI products that mimic the speech and image capabilities of humans share some data requirements with relevance. The data must fit the use case, represent the real world and be of high quality, but the refresh rate is lower. An AI product that, for example, automatically recognizes speech in a particular language requires modest amounts of data to account for changes like new words or accents or acoustic conditions and only needs a lot of data when it needs to support a new language. As such, data needs are more cyclical and tied to the product development life cycle. Hence, we've seen some ups and downs in the almost 25 years that we've been providing training data, but the long-term trend has always been positive. It's worth noting also that we are doing more image and video work, including in augmented and virtual reality. This is very exciting and could be a growth area with applications in many markets, including gaming. On Page 11, we outline our growth investments for 2020 to be dominated by sales and marketing, most of which was in the first half and as we ramped up our go-to-market capabilities. The chart also shows a tiny FX gain from restating U.S.-denominated debt in our hedge book. Page 12 and our China business. We're pleased to report rapid revenue growth in China at 60% quarter-on-quarter, and our gross margins are improving. This progress validates our market thesis and strategy. We count China's major technology customers -- companies as customers across multiple projects, and we've won other customers in the autonomous vehicle, health and education technology sectors. We're working in all data modalities, speech, relevance, image, video and LiDAR. It's also very pleasing to win speech work in local dialects against local competitors. On Page 13, we highlight some sales and marketing successes, including 136 new customers, and we increased the number of projects in our top 5 customers by 34%. Both outcomes are significant. The high number of new customers, although small and/or early stage, validate the attractiveness and competitiveness of our products and services and provide a solid foundation for future growth. The new project wins in our major customers are the very projects that drew resources from our major programs late in the year. And while early stage, they are exciting new areas, and some could be substantial. They're also driving more volume through our annotation platform, validating the value that our customers derive from it and strengthening our relationship with them. The use cases on the right are rich and varied and all new from the ones presented at the half. Along with more speech and natural language customers in automotive, air traffic control and financial services, we're doing more image work in AR, VR, autonomous vehicles and as well as a lot of document-based OCR, optical character recognition, work for applications that extract information from scanned documents such as invoices or expense receipts. Page 14 includes some technology highlights, and there are a few things here that I'm very excited about. Our crowd management platform, Appen Connect, is maturing in its security, scalability and feature set. We now have an AI engine that automatically manages workers with tasks and greatly accelerates project ramp-up time to value. We're also using AI to catch fraudulent and mischievous workers, which saves us money and improves data quality, which is both good for our customer and for us. The resulting efficiencies improve our productivity and will, over time, improve margins. Our annotation platform is also benefiting from AI. We have AI-assisted annotation or prelabeling for multiple data modalities such as text, speech, image, video and LiDAR, and they increase the speed of annotation by up to 6x. We're also using AI for some labor-intensive data prints such as splitting larger data sets into the discrete data points that our customers require. This lowers our unit costs, yielding higher margins and enabling more competitive pricing, should we need it. And we've recently launched a mobile app enabling crowd workers to engage with us on their phones and tablets, which greatly improves their utility and experience. Our government team on Page 15 is doing well, having faced multiple challenges in 2020, including the pandemic, the U.S. presidential election and Brexit. Growth was a little slower than hoped in 2020, but we're optimistic for 2021, and the government market is still fundamentally attractive. I'd now like to hand it over to Kevin to talk you through the financial slides.

Thank you, Mark, and hello to everyone. Total revenue is up 12% on the prior corresponding period, driven by continued strong growth in relevance, which is up 15%. Relevance benefited from increased demand for data annotation in both existing and new projects with existing customers. Our normal historical revenue growth pattern, which sees a skew to the end of the year, was impacted by the strong AUD in the second half as well as our major customers' response to COVID-19 and the changes to their activities and priorities. Overall, though, our major customers have been solid and a source of strength during the pandemic. Speech and image revenue is down 10%. Speech and image products are cyclical in nature, heavily dependent on customer timing, investment in product life cycles and require less ongoing data refresh than relevance projects. As a result, this can significantly influence performance on a half-on-half, year-on-year basis. This was evidenced by some significant project completions and inaugurations in FY '19, awaiting the next product and investment ramp-up cycle. In addition, COVID caused some project cancellations and delays, impacted new business activity and data collection project. This was somewhat offset by growth in China and continued growth in a large transcription project that started in 2019 and continued to ramp up in 2020. Underlying EBITDA of $108.6 million represents an 8% increase over the prior corresponding period. This result was impacted by investment mainly in sales and marketing and China in order to drive long-term, sustainable growth performance. The incremental increase in sales and marketing expense of 50%, an increase in China of 117%, was somewhat offset by strong expense control in the second half of the year. Other expenses reduced by 11.6% half-on-half, and employee expense increased 6.9% half-on-half compared with 37.9% growth for the full year. Management remains committed to prudent management of the cost base and the prioritization of investments that drive future growth and efficiency. As a result, the underlying EBITDA margin of 18.1% was down from 18.8% in the prior corresponding period. Underlying EBITDA includes an FX gain of $6.8 million, comprising a realized gain of $4.7 million on restatement of U.S. dollar-denominated debt drawn to fund Figure Eight earn-out payments. This accounted for most of the first half FX gain of $3.6 million. It is also comprised of a $2.1 million unrealized gain on the restatement of the hedge book. Excluding the impact of the FX gain and the investments mentioned previously of $12.7 million, the resulting underlying EBITDA of $114.5 million is up 13% on the prior year result with a margin of 19.1%. And just a very important point of clarification on this FX gain to explain how we're thinking about this as we feel some people may not be thinking about this in the same way or maybe in the correct way. The strong AUD hit our performance in H2 as our revenue was impacted by $15.8 million and our underlying EBITDA by $4.2 million. This impact is included in our EBITDA result of $108.6 million. On the flip side, because of our hedge positions, we were able to achieve a hedging profit of $6.8 million. So as we include the negative translation impact, so, too, should include the positive hedging impact. Alternative treatment would be to exclude the negative translation earnings impact of $4.2 million and the FX gain of $3.2 million in the second half, which would see a second half year -- second half underlying EBITDA increase by $1 million. Underlying NPAT of $64.4 million represents a 1% decrease on the prior corresponding period. This result was impacted by the after-tax cost of the investments as well as increased amortization resulting from more development work done by more engineers. The effective tax rate for the period has reduced to 20.5% from 24.4%. The effective tax rate is subject to overseas tax rate differential and fluctuations from the tax effects of movements from expensing and vesting of employee performance shares. Excluding this performance share-related movements, the normalized tax rate is circa 28%. Please follow me on Page 17. We'll talk a bit more about the currency impact. We do have the currency impact when we report, and that is because almost all revenue and earnings were generated offshore and mainly in U.S. dollars. And as a result, we always show the constant currency impacts. The full year AU-U.S. rate of $0.6904 was close to our forecast rate of $0.70, resulting in an overall increase to revenue of $6 million and a reduction to underlying EBITDA of $0.6 million. However, the half-on-half swings were very significant. In the first half, FX tailwind increased revenue by $21.8 million or 7.1% and underlying EBITDA by $3.6 million or 7.3%. And as we discussed earlier, in H2, the strong Aussie dollar resulted in reductions to revenue of $15.8 million or 5.4% and to underlying EBITDA of $4.2 million or 7.1%. Over the page on to the balance sheet. And through solid operating performance and effective working capital management, the balance sheet continues to strengthen. Cash on hand at year-end increased by $3.1 million to $78.4 million. The decrease in trade receivables of $51.7 million should be viewed in conjunction with the increase in contract assets of $33 million as the relevant invoices in respect of completed work at year-end are pending satisfaction of customers' billing milestones or billing period. The majority of the contract assets were subsequently invoiced on 1 January '21, and as of 16 February, 80% of these invoices have been paid. Receivables also reduced due to delayed experience with customer receipts around the end of 2019 subsequently received in early '20. Noncurrent assets comprise mainly goodwill and identifiable intangible assets, mostly arising through acquisition. Following a detailed full year review, we report significant headroom in the carrying value of these intangibles. There was no debt at year-end as debt drawn to fund the Figure Eight earn-out payment was repaid in August from cash reserves. Final dividend payment has increased to $0.055, up 10% from the 2019 final dividend and is franked to 50%. Over to the page to the cash flow. The cash balance of $78.4 million was negatively impacted by the year-end conversion of cash held in USD at strong AUD levels. There was positive impact from the receipt timing at the beginning of the year, as mentioned above. Cash flow from operations is strong and has increased by 39%, driven by effective working capital management. Cash has been effectively deployed for debt repayments, tax, dividends, CapEx, operating expenses and growth investments. Cash conversion remains strong at 104%. And I'll now hand you back to Mark for the rest of the presentation.

Thanks, Kevin. To Slide 20. We've made good progress on our ESG initiatives in 2020. Our crowd NPS score is strong at 48, and we're implementing our crowd code of ethics that provides fair pay and open communication and protects privacy. We tackle issues as they arise and entered '21 with a much improved process than the year before. Our employees are understandably a large focus of our attention this year as we tackled the pandemic together. I'm proud to say that we lived our values, grit in particular, and worked hard, stayed healthy and saw improved employee engagement despite the challenges of COVID. We continue to focus on material social and environmental issues, including our work with the World Economic Forum and Translators without Borders, and we have released a new environment position statement. In conclusion, the market opportunity for us remains strong. The chart on Page 21 shows ongoing high growth, and this is due to the expansion of use cases, projects and data refresh. We feel fortunate and privileged to contribute to such a dynamic and expanding market. To Page 22 and the outlook. It is a uniquely challenging year to provide guidance as the pulse of the guidance from other companies shows, but we're trying to be as transparent as we can despite this. Our order book is solid at $240 million, and this is expressed in constant currency to allow comparisons last year, and it includes the large recently resigned ACV contract also to allow comparison last year -- exclude, sorry. Underlying EBITDA for the year is expected to be in the range of $120 million to $130 million, again, expressed in constant currency, and that's 18% to 28% up on last year. In USD, that's $83 million to $90 million. And that's growth in the business of 17% to 27%, and we're providing the USD figures to assist year-on-year comparison. Finally, we anticipate EBITDA margins in the high teens. The outlook reflects some near-term uncertainty due to the pace of the economic recovery, the evolving regulatory environment facing our major customers that could necessitate some changes in their priorities. The pace of these changes may weigh on our first half growth. That said, we're happy to be closely aligned with our customers now and in the future. They are some of the world's most forward-thinking and dynamic businesses, and along with all of our new customers and projects, the AI industry tailwinds, our position as the largest player in the market, more committed revenue, our crowd and our technology, all put us in an enviable position of strength for continued growth. To the final slide, and thank you for your attendance on the call and ongoing support and interest in our business. Before we open the call for questions, I'd like to thank all of my teammates at Appen for their hard work and dedication into delivering this result to all of you. And now back to the moderator for questions. Thank you.

[Operator Instructions] The first question comes from Michael Aspinall with Jefferies.

So just to start off with, you mentioned that some of the large material projects that impacted the latter half of FY '20 are recommencing. Has it started in earnest yet? Or is it still to come over the next few months?

It's -- Michael, it's more the latter. There's -- as I said, a steady return to these projects. So we're monitoring how that improves through the year, but we're absolutely seeing a return of some of that work.

Okay. Yes. Just thinking about the timing in FY '21 and '22, so that's helpful. And so some of that impact was customers reprioritizing resources. Do you have a sense of how your large customers are progressing in terms of increasing the total available resources for them?

So we do know that our large customers are busily ramping up technical resources, engineers and the like, and there's been some public statements to that effect. We also know, though, that companies that used to work very collaboratively and closely in an in-office environment, taking a while for systems and processes and cultures and everything to be replicated in the current at-home environment. So that is to say that they're actively ramping up resources, but it's taking that a little longer under the current working conditions at home.

Okay. That makes sense. And the new product areas that they're investing in, is it safe to assume that you're working on pilots across majority of those at the moment?

I don't know whether we're across -- I don't know all of the things they're working on. So it's hard to say what percentage of those things that we're working on, but the 34% increase in projects is an indication that we're working in a bunch of new areas.

Okay. And then just the last one for me. On some of those new product areas for those large customers, can we just think about how they might progress in terms of growing into the larger projects like your more mature ones?

It's hard to know for sure, Michael, because a lot of the growth or the growth in data requirement can depend upon the rollout of the product. For example, it might work in one country, and they want to roll it out in -- country-by-country or 10 countries at once, and that changes the data dynamic. However, the nature of the products, some of the products that I'm aware of that we're working on, they are data-heavy. So there's potential there, but it's a little early to know for sure. I think overall, we're -- I think overall, Michael, we're pleased that we're involved in so many new projects rather than just being -- which shows from our customers' perspective that they regard us as an important contributor to their growth. Rather than just sort of pushing us to one side as they reprioritize, they're actively including us in these developments.

Okay. And then just the last one from me. You're debt-free again. Are you seeing plenty of options for value-added acquisitions at the moment? And how would you prioritize something that may add capability or access to new verticals?

So probably the latter. We're pretty pleased with the capabilities we've got and particularly, the technical capabilities we've got. And many of the companies that are highly technical in our space are very early stage and then probably not of interest or are probably not financially attractive. So getting into new areas with businesses that are growing well and profitable is the focus for us.

The next question comes from Garry Sherriff with RBC.

7 Yes. A few questions. The first one, just on your calendar year '21 EBITDA guidance. That's at spot rates of $0.79 -- or sorry, is it $0.69? I just wanted to clarify or confirm the FY '21 guidance at current spot rates, firstly, if that's possible.

Garry, no, we specifically provided guidance at constant currency in U.S. dollar rates. Essentially, the volatility in the FX makes it very difficult to really draw a comparison. And so therefore, Mark called out the U.S. dollar numbers, and those growth rates, 17% to 27%, is a really good barometer, gets rid of all the noise, I guess, in terms of spot cut -- and whatever view that's been taken. So we don't -- I mean spot changes day by day. Therefore, the view we've taken just around the guide is constant currency but also the barometer in USD to help analysts, I guess, compare what we are saying is the growth rate compared to what growth rate they had in terms of what they had year-on-year for growth.

Okay. Yes. Just good. I'm just trying to -- I was just looking at the -- you seem to exclude FX gain from underlying EBITDA when calculating the implied calendar year '21 growth, yet really include it. Yes. Just trying to get some clarity there, but that's fine. We can do that offline.

Thanks. To [ authenticate ] it now, I think we'd love to address that. So we've talked about, obviously, what the means were in 2020. We obviously had restatement of performance, obviously, at spot. And then we had obviously hedge positions, which have been at. When we think about '21, essentially from a '21 point of view, there's no kind of assessment in terms of what that future FX is. There's no, obviously, impact in terms of what that restatement is relative to what was expected. And so therefore, in order to get like-for-like, certainly, there's no -- we haven't assumed anything from an FX gain or loss into '21. At the same time, we haven't assumed any type of movement from the translation in terms of how the currency should move. So essentially, the difference there is in order to get that like-for-like, because there's no restatement factored in and there's no FX assumption, then we take out the FX because essentially, there's -- that was only there as a resultant of, I guess, hedging around the translation. As there's no impact or assumption of the translation in '21, therefore, there's no room there -- not relevant in terms of having the one-off FX position included in there.

So calendar year '21 EBITDA margin being in the high teens, could you maybe just clarify, do you expect them to be flat or grow? And I guess the second question around that is, what sort of first half/second half earnings skew should we be thinking about because I did note that you did flag, I guess, it sounds like quite a weak first half and a big second half. So I just wanted to get some sort of sense around margins and also that skew, if possible.

Yes. Garry, so we're planning for margin growth in the year. However, due to the uncertainty we flagged in the first half, we still think it will be in the high-teen levels. In terms of the first half/second half split, again, uncertainty in the first half, you can probably see a skew to the second half. But time will tell as we get through the first half as to exactly what that is.

Yes. I think the point we're calling out, Garry, is in terms of what you'd normally have seen for us in terms of those splits, this would be -- this is quite different in this year for the reasons we've mentioned.

Okay. And the last question, just in terms of the content's relevant revenue, what portion of that is advertising related? I imagine the vast majority, but I just, I guess, wanted to clarify that first.

It's substantial. We don't split it out like that, but it is a substantial portion.

And are you, I guess, looking forward -- back in December, is it fair to assume that now when you look at advertising-related revenue growth or the profile growth, do you think that's now materially different or more permanent maybe might be a bit more accurate? I mean should we be thinking that the growth path, the content relevance growth is maybe lower from advertising revenue specifically? Any guide on that would be interesting.

Yes. It's a good question, and it's one that we ask and hence, flagging uncertainty in the first half. It's -- the thing that's impacting it, Garry, is the speed with which the customers sort of set their overall product priorities. Do they go hard into these new areas and potentially under-invest in current areas like advertising? Or do they ramp them both up at a similar pace? Or do they moderate investment in the new areas and go high in advertising? So that's the nature of the uncertainty that we're flagging. It's the customers' decisions around how they invest in their product portfolio, which is giving us some pause for the first half.

Okay. And the last one, just around the change for the identifiers for advertisers that Apple is proposing for their next iOS update, effectively allowing users to opt out or not share their data. Again, interested to get your views as to how you think this could affect your customers' ability to generate ad revenue and how it might impact you guys once those updates start to roll through in the near future.

Yes. Interesting question. And clearly, our customers benefit from a lot of data that enables them to build highly personalized ad-targeting engines. And if that data source or if a source of data is throttled in some way, they will either have to change the way they do things or look for another source of data. Some of the projects that we work on is about providing representative data sets of different demographies. So for example, our customer may want some enhanced relevance work in a particular country amongst a particular age group of people, and we provide that for them. So overall, this is an interesting area that will cause or may cause or may provide some opportunities for us, if that makes sense, as the customer looks for sources of representative data if they can't get highly personalized data due to changes in technology.

The next question comes from Siraj Ahmed with Citi.

A few questions. Mark, just first thing, are you seeing any -- if you could just break up -- break down the growth into price and volume? Just can you tell us if you're seeing any pricing or price per data point pressures?

Siraj, not overly. It's, I would say, regular pricing pressure. We -- through the year, we -- I mean we have an agreement with one of our major customers with the floor on pricing. We also have strategic agreements with our other customers that keep pricing where it is. Where we do see pricing pressures in some of the new work and the new customers that we do, and it falls into 2 camps. It's kind of there or thereabouts as to where our pricing is or sometimes it's just wildly different, and we don't understand how that pricing comes about. But those instances are amongst -- they're very few and very small projects. So overall, there's no sort of material price pressure in the business.

Got it. And secondly, just on the work-in-hand number, can you just clarify, did you say that it does not include the committed ACV?

Yes. We took that out because it messes up the like-for-like comparison. So it's the same methodology. The order book is comprised in the same way that we did it last year.

Yes. That contract was basically found after the -- we announced in February last year. So the like-for-like, take it out.

Got it. Yes. Okay. So like-for-like. But in the year-to-date revenue number, there will be some pickup in work, but the work-in-hand number you haven't put the ACV in. Is that the way to think about it?

So the large ACV contract has got a February date on it. So it doesn't feature in the January year-to-date number.

Got it. And so just -- maybe just trying to understand this because if you think on constant currency terms, the number has gone 14%, right, year-on-year. I think the second half growth in constant currency is 6%. So you are -- it looks like you've seen a pickup in growth. Is that fair? I mean where is it coming from? Also, are you assuming the same fourth quarter skew this year in your guidance?

Sorry, Siraj, I didn't hear the last bit. But just to answer your question here. So what you're talking about is increase in the order book, 14% at constant currency, correct. I would just caution, obviously, that orders received at a point in time for the rest of the year, and obviously, the timing of receipting down the orders could have a dramatic impact. So it's a guide, but you need to just understand things that can impact that. I'm sorry, can you just repeat that last part?

Yes. No, I got it. In regard to the Q4 skew, Siraj, I think what we're calling out this year is a period of uncertainty in the first half that may -- that will most likely cause a skew to the second half. And we're sort of moderating our view on Q4, given what we experienced in '20, but there's definitely a half-on-half skew due to some uncertainty in the first half.

Got it. And just last one for me. Just looking at the cohort chart delivered in the slide, Slide 8, Mark. It looks like the new customer you had from the pause, that had a bit of slowdown looking at that chart. Can you just talk to that? Is it the dark red one continues to grow, but the other one has slowed down a bit from the looks of it?