3 August 2022

Keywords Studios plc ("Keywords Studios", "Keywords", the "Group")

Half year trading update and notice of results

Strong organic revenue growth of 22%

Keywords Studios, the international technical and creative services provider to the global video games industry, today provides a trading update for the six months ended 30 June 2022, ahead of half year results which will be announced on 21 September 2022.

Trading update

The Group has performed strongly during the first half, with the Board expecting to report revenues of approximately €320m representing a c.34% increase on the comparative period (H1 2021: €238.7m). On an organic¹ basis, Group revenues are expected to increase by approximately 22% (H1 2021: 22.9%) with robust demand for all of the Group's services.

Adjusted profit before tax² is expected to be approximately €54m, representing an increase of over 35% from €39.7m in the comparative period in the prior year. This reflects a strong margin of c.17% (H1 2021: 16.6%) which includes a ~1% point benefit from foreign exchange, particularly the strong US dollar during the period as we invoice a proportion of our sales in US dollars.

We announced, at our Capital Markets Day in June, a more simplified structure to support collaboration across the business, meaning that for the half year ended 30 June 2022 onwards we will report divisional results in three segments; Create (combining the former Art Services and Game Development service lines); Globalize (the former Audio Services, Localization and Functional and Localization Testing service lines); and Engage (the former Player Support and Marketing service lines).

The newly formed Create and Globalize services lines had very strong performances, as the momentum from the renewed industry focus on developing new content to keep gamers engaged in 2021 continued into 2022, and started to benefit our post production services (Globalize) to a greater extent.  Engage saw more modest growth, with good growth from Player Support partially offset by Marketing, due to the exceptionally strong performance in the first half of last year (H1 2021 organic growth for Marketing of 50.6%), and some delays in work with certain projects moving into H2 and early next year.

As previously outlined, we are actively relocating some of our people and existing work from our only business operating in Russia, Sperasoft, to locations including Poland, Serbia, Armenia and Malta. This has had a more limited impact on H1 performance with the second half of the current financial year being the key transition phase for this process. We are focussed on making this as smooth a transition as possible for both our people and international clients, with the benefit of our global footprint and infrastructure.

Keywords Studios continues to deliver on its acquisition strategy with the acquisition of the Game Development studio, Forgotten Empires, having completed and the acquisition of Mighty Games, as announced separately today. The Forgotten Empires acquisition has extended the reach and scale of the Group's Create service line.  The acquisition of Mighty Games brings an innovative and proprietary AI-based Testing technology platform, which will allow us to do more for our clients and remain at the forefront of our industry, in line with our strategy to develop more technology-enabled solutions. We continue to actively review a healthy pipeline of acquisition opportunities.

As at 30 June 2022, the Group had net cash of €121m (31 December 2021: €105.6m) after cash spend on prior year acquisitions in the first half of the year amounting to €13.6m. The Group's cash balance, strong cash generation and the €150m available under its undrawn committed revolving credit facility, leave the Group well placed to pursue it organic and acquisition growth strategy.

Notification of Half Year Results

The Group expects to announce its half year results for the six months ended 30 June 2022 on 21 September 2022. To register your interest, please use the following link:  https://www.keywordsstudios.com/H1-2022-results/, or contact Keywords@mhpc.com.

Bertrand Bodson, CEO of Keywords Studios commented:

"Keywords has started the year very strongly, building on the momentum achieved in 2021 as we continue to benefit from a renewed focus on content creation post pandemic and the structural trends towards outsourcing.  We would like to thank all Keywordians for their incredible dedication to serving our clients with passion and commitment.

"Whilst we are mindful of a more uncertain macro-economic environment and some volatility in the scheduling of certain projects we continue to see strong demand for our services.  Given this and the Group's strong performance in H1, we are confident of delivering a performance comfortably ahead of current market expectations for the full year, albeit with organic growth rates moderating and margins moving to historic levels of ~15% as we invest in the business, transition our people and work from Russia, and as more costs return with the easing of COVID restrictions.

"We set out, in our Capital Markets Day in June, how we intend to build on the Group's strong platform by developing strategic customer partnerships, introducing new technologies, galvanising the Group's culture of entrepreneurialism and collaboration, establishing Keywords as the destination for talent and leveraging the Group's capabilities into adjacent markets, all complemented by our M&A strategy.  Whilst it is early days, we are making good progress with each of these areas of focus. 

"We were pleased to have completed the acquisitions of Forbidden Empires and Mighty Games and we continue to review a healthy pipeline of acquisitions that extend the services Keywords is able to offer its global video games clients, particularly as we build our Create and Engage service lines.

"Our unrivalled, scale, reach and breadth of services position Keywords well to continue to increase our share of our large addressable market and our strong financial position will enable further selective acquisitions as we cement our position as the 'go to' services platform for the global video games industry and beyond."

¹ Organic Revenue at constant exchange rates is calculated by adjusting the prior year revenues, adding pre-acquisition revenues for the corresponding period of ownership, and applying the prior year foreign exchange rates to both years, when translating studio results into the euro reporting currency. 

² Adjusted profit before tax comprises Profit before taxation as reported in the Consolidated statement of comprehensive income, adjusted for share based payment expense, costs of acquisition and integration, amortisation and impairment of intangible assets, non-controlling interest, foreign exchange gains and losses, and unwinding of discounted liabilities. In order to present the measure consistently year-on-year, the impact of investment income is also excluded.

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About Keywords Studios ( www.keywordsstudios.com )

Keywords Studios is an international technical services provider to the global video games industry. Established in 1998, and now with over 70 facilities in 24 countries strategically located in Asia, Australia, the Americas and Europe, it provides integrated art creation, marketing services, game development, testing, localization, audio and player support services across more than 50 languages and 16 games platforms to a blue-chip client base of over 950 clients across the globe.

Keywords Studios has a strong market position, providing services to 23 of the top 25 most prominent games companies. Across the games and entertainment industry, clients include Activision Blizzard, Bandai Namco, Bethesda, Electronic Arts, Epic Games, Konami, Microsoft, Netflix, Riot Games, Square Enix, Supercell, TakeTwo, Tencent and Ubisoft. Recent titles worked on include Anthem, Star Wars Jedi: Fallen Order, Valorant, League of Legends, Fortnite, Clash Royale and Doom Eternal. Keywords Studios is listed on AIM, the London Stock Exchange regulated market (KWS.L).