Keywords Studios plc Studios Keywords Annual Report Annual Report and Accounts 2019 and Accounts 2019 Building our platform for growth Keywords Studios plc Overview Strategic report Annual Report and Accounts 2019 Pages 1–6 Pages 8–44 Highlights 1 Q&A with Andrew Day 8 At a glance 2 Chief Executive’s review 10 Investment summary 4 Market outlook 16 Chairman’s statement 6 Business model 18 Our strategy 22 Service line review 24 Our people, our culture 28 KPIs 34 Financial and operating review 36 Responsible Business report 40 Board engagement with our stakeholders 43 Principal risks and uncertainties 45 2019 Highlights Our vision is to be the world’s leading technical and creative services platform for the video games industry and beyond. At Keywords Studios (Keywords), we are using our passion for games, technology and media to create a global services platform. In 2019, we delivered strong growth as we invested in a strengthened and more diversified services platform. Alternative performance measures* The Group reports certain Alternative performance measures (APMs) to present the financial performance of the business which are not GAAP measures as defined by International Financial Reporting Standards (IFRS). Management believes these measures provide valuable additional information for the users of the financial information to understand the underlying trading performance of the business. In particular, adjusted profit measures are used to provide the users of the accounts a clear understanding of the underlying profitability of the business over time. For full definitions and explanations of these measures and a reconciliation to the most directly referenceable IFRS line item, please see pages 135 to 143. Please note, to aid comparability, these explanations also present the current year APMs excluding the impact of IFRS 16, and also highlight where a number of APMs have been restated to reflect the current year presentation. Governance Financial statements Supplementary information Pages 48–73 Pages 74–134 Pages 135–144 1 Board of Directors 48 Independent Auditor’s Company statement Alternative performance measures 135 Chairman’s introduction 50 report to the members of financial position 83 Company information 144 Corporate governance 51 of Keywords Studios plc 74 Company statement Audit Committee report 54 Consolidated statement of changes in equity 84 Directors’ remuneration report 57 of comprehensive income 79 Company statement Report of the Nomination Committee 70 Consolidated statement of cash flows 85 of financial position 80 Directors’ report 71 Notes forming part of the Consolidated statement consolidated and company Statement of Directors’ responsibilities 73 of changes in equity 81 financial statements 86 Consolidated statement of cash flows 82 Revenue EBITDA* Profit before tax (€m) (€m) (€m) 2019 326.5 2019 43.4 2019 17.4 2018 250.8 2018 34.3 2018 22.1 2017 151.4 2017 21.9 2017 12.0 €326.5m 30.2% €43.4m 26.4% €17.4 m 21.4% Margin 13.3% (2018: 13.7%) Margin 5.3% (2018: 8.8%) Organic Revenue growth* Adjusted EBITDA (pre IFRS 16)* Adjusted profit before tax* (€m) (€m) (€m) 2019 314.7 2019 49.5 2019 40.9 2018 272.5m 2018 43.7 2018 37.9 2017 26.3 2017 23.0 15.5% €49.5 m 13.2% €40.9m 7.9 % (2018: 10.1%) Margin 15.2% (2018: 17.4%) Margin 12.5% (2018: 15.1%) Basic earnings per share Adjusted earnings per share* (c) (c) 2019 15.23 2019 48.78 2018 23.16 2018 45.50 2017 12.37 2017 31.18 15.23c 34.2% 48.78c 7. 2 % Total dividend per share (p) 2019 0.58 2018 1.61 2017 1.46 0.58p 64% Keywords Studios plc Overview Strategic report 2 Annual Report and Accounts 2019 At a glance 23 out of the top 25 games companies are serviced by Keywords Keywords Studios now has 59 Continuing studios, in over 40 cities, across 21 different countries worldwide. We provide a full set of integrated to build our services, combining a presence that is local to our clients in key gaming clusters with good access to skilled global services talent pools across four continents. Throughout 2019, we have continued to invest behind platform growing demand. We have expanded our existing facilities and created new operating bases, while also adding capabilities and capacity through acquisitions. We added over 1,400 workstations in the period and welcomed 8 new businesses to the Group. All of this targeted investment has increased our scale, extended our global footprint, brought us closer to our clients and prospective talent, while adding to the vision of becoming the ‘go to’ external development partner to the video games industry. A full set of integrated services Keywords Studios is building world-leading capabilities in services that video game and similar interactive content creators need. We stand shoulder-to-shoulder with our customers working as their external development partner to provide dedicated outsourced or embedded services, providing access to our teams of experts where and when needed. Today we have breadth and depth in seven service lines. Revenue breakdown by service: Art Creation Game Development Audio Functional Testing Localization The creation of video game Game development Multi-language voiceover Quality assurance, Translation of in-game graphical art, including services including full recording, original language including discovery and text, audio scripts, cultural concept art, 2D and 3D game development, voice production, music documentation of game and local adaptation, art asset production and co-development, porting management, sound effects defects and testing accreditation, packaging animation. Marketing of games from one and related services. to verify the game’s and marketing materials services include game platform to another compliance with hardware in over 50 languages. trailers, marketing art and including remastering, tool manufacturers’ and Includes our proprietary materials, and full brand development and consulting distribution platforms’ technologies for content campaign strategies. services on a work-for-hire specifications, as well as management, machine basis. This also includes crowd based and focus translation, and workflow our proprietary software group testing solutions. management. solutions for analytics, social media integration, procedural generation of art assets and player behaviour research consulting services. Revenue Revenue Revenue Revenue Revenue 2019 €43.6m €66.3m €40.5m €68.9m €48.5m +28% +88% +18% +44% +10% Year on year growth Year on year growth Year on year growth Year on year growth Year on year growth Governance Financial statements Supplementary information 3 50+ 59 7,424 languages across studios in average number of our services 21 countries employees in 2019 Brighton Liverpool Leamington Spa St. Petersburg London Berlin Beijing Tokyo Dublin (HQ) Vancouver Montreal Volgograd The Hague Quebec City Paris Dalian Krakow Zhengzhou Seattle Ottawa Katowice Shanghai Raleigh Saint Jerome Chengdu Portland New Delhi Taipei Milan Orlando Madrid Los Angeles Manila Rome Barcelona Pune Mexico City Austin Hamburg Rio de Janeiro Singapore São Paulo Yogyakarta Better balanced business higher up the value chain Localization Testing Player Support Business representation by each service: Testing for out of context 365/24/7, multilingual translations, truncations, support for gamers when overlaps, spelling, grammar, games are in live operation, age rating issues, geopolitical forum monitoring and and cultural sensitivities moderation services and 11.1% 13.3% and console manufacturer social media engagement on compliance requirements behalf of the game brand. 6.9% in over 30 languages using native speakers. 20.3% 14.9% 12.4% 21.1% Revenue Revenue 2019 €22.6m €36.1m +15% +1% Revenue (2019) +30.2% Year on year growth Year on year growth €326.5m Year on year growth Keywords Studios plc Overview Strategic report 4 Annual Report and Accounts 2019 Investment summary Strengthened platform in a growth market Access to a dynamic Market leading position Strong growth record growth market Keywords has a market leading We continue to deliver strong Keywords operates in a dynamic position as the only global provider organic revenue growth as we growth market but has minimal direct of fully integrated outsourced benefit from both the growth in exposure to the successes or failures creative and technical services to the the video games industry and the of individual game titles. Our focus global video games industry. With trend towards greater outsourcing on content means we are platform an industry reputation for quality, of our services. In addition, we agnostic and well positioned to take reliability and flexibility, our scale have successfully acquired and advantage of the opportunities and reputation mean we are well integrated 44 acquisitions since IPO. presented by mobile gaming, placed to take advantage of the The 8 acquisitions we completed cloud streaming, next generation trend for customers to move to in 2019 bolstered our capabilities, consoles and AR / VR. The increasing more collaborative partnerships with particularly in Game Development sophistication of games, and the fewer, larger suppliers. Our market and Marketing services. In addition development of new platforms all leading position creates substantial to extending our existing service add to the complexity of the video barriers to entry which we have lines to bring us even closer to our games market which is driving described in more detail on page 20. customers, we have continued to demand for larger, professional, expand our geographical