Keywords Studios PLC Studios Keywords Annual Report and Accounts 2018 Accounts and Report Annual Strengthening our market leading position Annual Report and Accounts 2018 Support | Deliver | Evolve The video games industry represents the pinnacle of interactive digital content. At Keywords, we are using our passion for games, technology and media to create a global services platform for video games and beyond. Our vision is to be the world’s leading technical and creative services platform for the video games industry and beyond. Support | Deliver | Evolve Visit the website for further information www.keywordsstudios.com 2018 Highlights Contents Revenue (€m) Proforma Revenue1(€m) Strategic Report 1–33 Highlights 1 2018 250.8 2018 265.4 At a Glance 2 Investment Summary 4 2017 151.4 2017 220.7 Chairman’s Statement 6 Our Culture 8 2016 96.6 2016 112.8 Market Overview 12 Our Business Model 14 €250.8m €265.4m Our Strategy 16 Chief Executive’s Review 18 +66% +20% Financial and Operating Review 27 (growth in 2018 on 2017) (growth in 2018 on 2017) KPIs 30 Principal Risks and Uncertainties 32 Adjusted Profit Before Tax2 (€m) Adjusted Basic Earnings Per Share2 (c) Governance 34–55 Board of Directors 34 2018 37.9 2018 47.75 Chairman’s Introduction 36 Corporate Governance 37 2017 23.0 2017 31.18 Directors’ Report 40 Statement of Directors’ Responsibilities 42 2016 14.9 2016 20.59 Audit Committee Report 43 Directors’ Remuneration Report 46 €37.9 m 47.75c Report of the Nomination Committee 55 +65% +53% Financial Statements 56-104 (growth in 2018 on 2017) (growth in 2018 on 2017) Independent Auditor’s Report 56 Consolidated Statement of Comprehensive Income 60 Dividend per share (p) Consolidated Statement of Financial Position 61 Consolidated Statement 2018 1.61 of Changes in Equity 62 2017 1.46 Consolidated Statement of Cash Flows 63 2016 1.33 Company Statement of Financial Position 64 Company Statement 1.61p of Changes in Equity 65 Company Statement +10% of Cash Flows 66 (growth in 2018 on 2017) Notes Forming Part of the Consolidated and Company Financial Statements 67 Alternative Performance Measures The business uses a number of adjusted measures that are not defined or recognised under IFRS. For full definitions and explanations of these measures and a reconciliation to the most directly Supplementary referenceable IFRS line item, please see pages 105 to 107. Information 105-108 1 Pro forma revenue includes the annualised sales of all acquisitions made in each year, in Alternative Performance Measures 105 order to provide a better overview of the balance of the business at the end of each year. Company Information 108 2 Adjusted Earnings Per Share and Profit Before Tax are calculated before one-time costs of acquisitions and integration, share option charges, amortisation of intangibles, and foreign exchange movements. Annual Report and Accounts 2018 1 Strategic Report At a Glance A global, integrated service provider The Group now has more than 50 studios strategically located in 40 cities worldwide providing full, integrated services by combining a presence that is local to our clients in key gaming clusters with lower cost production sites across four continents. Since the beginning of 2018, we have expanded further organically and by acquisitions, adding to our capabilities in regions where we have an existing presence, including Brighton, Los Angeles, Sao Paulo, Katowice, Ottawa and London. 6,000+ 50+ 23 52 People on the payroll Providing services across Serving 23 out of the top 25 Studios in 21 countries at peak time more than 50 languages games companies measured by revenue Brighton Liverpool St. Petersburg London Beijing Tokyo Montreal Dublin (HQ) Volgograd The Hague Quebec City Paris Dalian Krakow Zhengzhou Seattle Ottawa Katowice Saint Jerome Chengdu Shanghai Portland Raleigh Taipei New Delhi Milan Orlando Madrid Los Angeles Rome Pune Manila Barcelona Mexico City Hamburg Rio de Janeiro Singapore São Paulo Yogyakarta See key on opposite page. 2 Keywords Studios plc Keywords Studios continues to build world-leading capabilities in services that video game and similar interactive content creators need. We stand shoulder-to-shoulder with our clients working as their external or co-development partner to provide dedicated outsourced or embedded services, providing access to our teams of experts where and when needed, so they don’t have to carry unnecessary fixed costs to cater for peaks in activity. Today we have breadth and depth in seven service lines. Revenue breakdown by service: Audio Player Support Engineering Multi-language voiceover 365/24/7, multilingual support Game development services This also includes our proprietary recording, original language for gamers when games are in including full game development, software solutions for analytics, voice production, Hollywood live operation, forum monitoring co-development, porting of games social media integration, production, music management, and moderation services & social from one platform to another procedural generation of art sound effects & related services. media engagement on behalf including remastering, tool assets and player behaviour of the game brand. development and consulting research consulting services services on a work for hire basis. 2018 2018 2018 €34.2m €35.9m €26.1m +66% +292% +632% (growth in 2018 on 2017) (growth in 2018 on 2017) (growth in 2018 on 2017) Art Creation Functional Testing Localization Localization Testing The creation of video game Quality assurance, including Translation of in-game text, Testing for out of context graphical art, including concept art, discovery and documentation of audio scripts, cultural and translations, truncations, 2D and 3D art asset production & game defects and testing to verify local adaption, accreditation, overlaps, spelling, grammar, animation. Marketing services the game’s compliance with packaging and marketing age rating issues, geopolitical including game trailers, marketing hardware manufacturers’ and materials in over 50 languages. and cultural sensitivities and art and materials. app stores’ specifications, as well console manufacturer compliance as crowd based and focus Group requirements in over 30 languages testing solutions. using native speakers. 2018 2018 2018 2018 €41.7m €49.1m €44.0m €19.8m +59% +64% +5% 0% (growth in 2018 on 2017) (growth in 2018 on 2017) (growth in 2018 on 2017) (growth in 2018 on 2017) Annual Report and Accounts 2018 3 Strategic Report Investment Summary A further strengthened offering from which to grow Keywords is better placed than ever to continue to capture share of our robustly growing market by deepening our relationships with clients that already trust us with their high value IP, having significantly extended our services and geographical reach during the year. 4 Keywords Studios plc We are a trusted partner to leading companies around the world, with a strong market position, providing services to 23 of the top 25 games companies and 9 of the top 10 mobile games publishers by revenue, including: Access to a dynamic Market leading position Opportunity to grow further growth market Keywords has a market leading position as Having made strong progress in extending Keywords operates in a dynamic growth the only global provider of fully integrated the Group’s client base, market penetration, market but has minimal direct exposure to outsourced creative and technical services geographic footprint and service lines, we now the successes or failures of individual game to the global video games industry. With an see significant potential for increased cross- titles. Our focus on content means we are industry reputation for quality, reliability and pollination of our service lines and geographic platform agnostic and well positioned to take flexibility, our scale and reputation mean we locations, including taking advantage of our dual advantage of the opportunities presented are well placed to take advantage of the trend shore capabilities which enable us to be close by mobile gaming, cloud streaming, next for clients to move to more collaborative to our customers and provide services from generation consoles and AR / VR. The partnerships with fewer, larger suppliers. lower cost studios, as we increasingly become increased sophistication of games and strategic partners to our clients. complexity of the video games market is Strong growth record driving demand for larger, professional, We continue to deliver strong Like-for-Like A strong business model outsourced specialists, such as Keywords, growth as we benefit from both the growth Keywords’ flexible resourcing and charging in a highly fragmented supplier market. in our market and the trend towards greater model, with charges levied for time or output Outsourcing such work is attractive to outsourcing of our services. In addition, we rather than a fixed price, combined with developers and producers because it converts have successfully acquired and integrated relatively low working capital and capital their fixed costs into variable costs, helps 37 acquisitions since IPO. The eight expenditure requirements support its ability remove bottle-necks in capacity by providing acquisitions we completed in 2018 bolstered to grow the business whilst also achieving access to talent as required and enables our capabilities, particularly in engineering, strong cash conversion. them to focus on their core competencies. data analytics, music and marketing services. In addition to extending our existing service Adjacent market