Synergistic Growth
Capital Markets Event
London Stock Exchange
Tuesday 14 November 2017

Start 4.20pm

Introduction

KWS - Supporting a large unique global market• Video games are a rapidly growing +$100bn p.a. niche global market – Growing 6% to 8%• Games increasingly more challenging and sophisticated to develop due to• Number of translated languages increasing (40-50 for some mobile games)• More powerful games platforms supporting larger, higher definition games• Move from products to long running services requires continuous new content•

Increased complexity, volume and speed of content generation has driven the trend
towards outsourcing - most of it on a tactical basis to date•

Going forward there will be more strategic outsourcing as publishers need to focus on whatmakes their IP unique and vertically integrated models can be a distraction.

•

We estimate the services market to be worth $5bn in total with 50% of that outsourced
today. In film and TV, 90%+ of production is outsourced.

•

KWS now trusted and relied upon by several major clients due to unparalleled breadth anddepth of industry leading service lines

Strategy is to become the “go to” provider of technical services to the video games industry
3© 2017 Keywords Studios PLC – CONFIDENTIAL

Since IPO we have been building….

39 studios

7service lines

Up from 5 studios€200m

Up from 4 at time of IPO

290%

Pro forma revenue

Adj EPS growth(FY 2013 – FY 2016)24 acquisitions
Earnings enhancing

62%
CAGR in revenue(FY 2012 – FY 2016)…a broad service delivery platform organically and through consolidation
4© 2017 Keywords Studios PLC – CONFIDENTIAL

Becoming the “Go to global services platform”•

Achieved a lot since IPO•••

Demonstrated we can grow organically while also making acquisitions and integrating them
Proven the synergies that exist through both operational benefits of scale and through cross selling

The current market structure remains imbalanced and will not be fit for purpose in the mid term••

Highly fragmented service providers vs a client base of major global players

A clear opportunity to become the “go to global services platform”:
 Focus on organic growth and consolidation to achieve breadth and depth of services and a full, balanced geographic spread Continue to make 6 to 10 “add on” acquisitions per year plus 1 or 2 larger transactions and integrate them as appropriate
 Drive synergies and cross selling opportunities across our extended footprint Increasingly becoming a strategic partner to our clients5© 2017 Keywords Studios PLC – CONFIDENTIAL

Acquisition strategy

Acquisition opportunities in a highly fragmented market
Art

Engineering

Audio

Functional Testing$1bn –$1.5bn –50% outsourced

30% outsourced$150m –
90%+ of voiced
audio isoutsourced$800m – 70% in
sourced in the west.
Mostly outsourcedin Japan.

100+

50+ specialist

50+

10+

Market Size*

Number of
Suppliers

Localisation

Localisation Testing Customer Support$200m –

$150m –

$1.2bn –85% outsourced

c.70% outsourced

40% outsourced

50+ including large
MLVs

10+

Few specialised•Competitors offer one or two service lines with limited geographical reach•Global clients require services differentiated by cost, flexibility, time zone, scalability and languages offered•

Focus on carefully selected, earnings accretive businesses which extend services, market penetration or client base:•Continuing to review acquisitions in our established businesses of testing and localisation•

Most acquisition activity focussed on newer services like Engineering, Art and on building out Audio Services•

Few acquisition opportunities in Customer Support•

Consolidation is underway – started by Keywords but others may follow•

We are seeing a strong pipeline of acquisitions across the services; mix of sizes and in various geographies*Keywords estimates

7© 2017 Keywords Studios PLC – CONFIDENTIAL

Acquisition track record
Year

Art Creation

2014

SoftwareEngineering

Audio

Functional
Testing

Localisation

Localisation
Testing

Lakshya
DigitalLiquidVioletBinariSonori

Babel
Media

Babel Media
Binari Sonori

Babel Media

2015

LiquidDevelopment

ReverbKite Team2016

Mindwalk
Volta

Synthesis
Sonox

EnzymePlayerResearch

Synthesis
Sonox

2017

SPOV
RedHot

La MarqueRose
Dune Sound
Asrec

VMC

XLOC
La Marque Rose
Dune Sound
Asrec

GameSimd3t

ReverbKite Team

Customer
Support

Total Cost*€19.0mAlchemicDream€10.9mSynthesis
EnzymeAnkama€32.6m

VMC

VMC€79.7m* Includes all cash, deferred and equity portions of consideration

8© 2017 Keywords Studios PLC – CONFIDENTIAL

Deal origination
Own network
We have been in the market for 20 years• Meet at tradeshows• Visit studios when travelling• Talk about who’s who - reputation

Client recommendation
Clients are often willing to facilitate introductions. They know we are buyers and most suppliers are sellers• We share our strategic priorities• Talk about where our gaps lie – expertise, geographies, scale

Investor and analyst introductions
Analysts and investors share ideas and make introductions

9© 2017 Keywords Studios PLC – CONFIDENTIAL

Approach to screening
Cultural fit
This is our most important criterium• Normally we don’t even talk if there is a cultural misalignment• We have acquired businesses with different cultures and successfully changed them

Valuation
We don’t overpay but are fair – we become colleagues the next day!
• Most targets have a fragility despite being very good suppliers eg client concentration and lack of visibility• Valuations have averaged at 1 times revenue or 5 - 10 times EBITDA• Clearly defined and standardised deal structure

Financial performanceThis is the least important criterium• We know how to make money from the businesses we operate through operational excellence• So a target that is not already performing well financially is an opportunity for us
10© 2017 Keywords Studios PLC – CONFIDENTIAL

Audio in focus: Targeting acquisitions
Strategy: to build the first “fully owned” network of audio studios in key territories where the video games
industry is already well established• Enables Keywords to both offer local and specific audio solutions and support client’s larger multilingual audio
needs, underpinned by investment in innovative tools and process engineering
Acquisition strategy:• Well established local audio entities with a good reputation that want to be part of a bigger, global operation• Having been in the market for more than 20 years, we have established relationships with most of the key
players and owners and have a good handle on their industry reputations• We are becoming the reference buyers, and more and more frequently audio companies are now reaching out
to us to see if there is any interest in having them as part of Keywords

11© 2017 Keywords Studios PLC – CONFIDENTIAL

What makes Keywords an attractive acquirer?
Functional
Testing

Reputation
as a serious
and goodbuyer

12Financial
Security

Geographic
reach

Focus ongames andstrong client
base

Localisation
Testing

Welcomingand openculture© 2017 Keywords Studios PLC - CONFIDENTIAL

Gain market
share

Diversity ofserviceFewoffering
specialised
suppliersDriving returns from acquisitions

15-30%
10%‘Entry’ ROI for mostacquisitions

13

15%
ROI typically in 1 year•

Given growth and improved
operational efficiency© 2017 Keywords Studios PLC – CONFIDENTIAL

ROI in 2-3 years

•
•
•
•
•

Babel - operational synergies
Enzyme - growth + operational synergies
Alchemic Dream - leveraging KW studios
Lakshya - international growth & efficiency
Liquid Violet - organic growthSummary• A clear acquisition strategy• Abundant opportunities that we are using our industry knowledge and screening processes to select from
• A strong track record of delivering returns from acquisitions to date

Any questions?
14© 2017 Keywords Studios PLC – CONFIDENTIAL

Start 4.20pm

Integration and driving synergies

Driving synergies from acquisitions
Approach to integration, driving synergies and margins tailored to each business•Standalone studios (new territories, new service lines):• Focus on business processes to optimise margins over time
• Access to larger client base improves pipeline and increases utilisation•

Studios with strong overlap (e.g. next to a Keywords hub/no new services added):• Focus both on gross margins and on SG&A and opex costs, with immediate impacts• In the Montreal hub, Babel went from making losses to achieving 20%+ EBITDA
in the second year•

Acquired companies almost always grow revenues strongly under Keywords ownership• Encouraged to grow, to be bold, to invest• Benefit from being part of well respected Group with known behaviour (easy to dobusiness with, flexible, scalable, puts the interests of the project first, good and open
communications, financially solid and transparent)16© 2017 Keywords Studios PLC – CONFIDENTIAL

Joining the Keywords family

The First 60-100 Days
Warming up the engine

Preliminary stages during due diligence• Understand the chemistry of the company and what the real success factors have been
• Share our Integration Memorandum – a charter that governs our approach to integration• Build an integration plan
• Pre acquisition: build trust and develop a communication plan with top management• Post acquisition: internal communication to employees with integration plan
Post acquisition• Share the Keywords vision and story with new team members• Consolidate financial reporting• Introduce group policies and blend with existing policies and local norms• Showcase a wider scenario of opportunities for growth for the company and the employees• Implement the plan: integration within service lines, with business development and within regional support
In all but one case, the sellers have stayed to play a leadership role in the larger Keywords ecosystem...and we love that!
17© 2017 Keywords Studios PLC – CONFIDENTIAL

Bringing people together• At each new acquisition, deployment of a unified acquisition communication package• Linking people up as soon as possible (meetings and social activities)• Different contexts for each company - there are different paths to join the Keywords culture
The Keywords Rule of 9
1. We communicate openly
2. We focus on projects
3. We act as an extension of our clients
4. We empower our people
5. We are passionate about games
6. We love our clients
7. We have a “can do” attitude
8. We recognise the importance of flexibility
9. We learn at every opportunity

18© 2017 Keywords Studios PLC – CONFIDENTIAL

Managing efficiency

19

Art

Localisation & Audio

Localisation & Functionality Testing, Player Support

Engineering© 2017 Keywords Studios PLC – CONFIDENTIAL

Case Study: Tokyo
Functional Testing team launched.

First
year

Focus on building local client base for
Localisation Testing & Localisation
while also serving as an extension of+545%
on first
year

+986%

creates an opportunity to open a

on first
year

Player Support hub in Japan.

Dublin.

2010

Acquisition of Alchemic Dream

2014

2015

Acquisition of Binari Sonori solidifies+96%

Testing services to Japan & Asia.

on first
year

structure and the global brands and

2016

2017

Acquisition of Synthesis further

reputation for Localisation & Audio+673%

reinforces the service offer for+1700%

services in Japan, spurring strongon first
year

Localisation & Audio services.

on first
year

growth in the following years.

20

grow strong utilising the local support
services.

2011

Established to extend Localisation

Remaining service lines continue to© 2017 Keywords Studios PLC – CONFIDENTIAL

Internal recording studio established.

Confessions of a Keywords “Lifer”

How have things changed as we have grown?
 21 Clients Ad-hoc order taker Focus on consoles

400 + clients
Trusted advisor / strategic partner
Balanced sales mix (Consoles, Mobile)

 continuous
Continuous
Improvement
 Work-as-you-go
Work-as-you-go transformed to
improvementConsolidationand documentation
processes
 Ad-hoc
Betterprocess definition, documentation and knowledge sharing
Knowledge consumptionKnowledge sharing & co-creation
entity best ofpractices Single
Recognition
knowledge creation
as a key synergySynergetic
best practices

Integrated management
systems
 information
Global enterprisesolutions
Moved software to thecloudIntegrated management information systems
 Small local setups

technology

Deployed collaboration andCloud-based
communication
systemsCollaboration
andcommunicationtools
Evolved from small local setups to global enterprise solutions
~5,000 employees
employees our portfolio from XX clients to XXX clients 29 IncreasedMore dedicated roles Wearing multiple hats 1 officeMovedfrom ad-hoc order taker to trusted advisor / strategic partner
in Europe39 studios Worldwide
services sales mix between console and mobile games
 2.5Balanced
7 service lines

21© 2017 Keywords Studios PLC – CONFIDENTIAL

CLIENTSPROCESSESSYSTEMSPEOPLE

Confessions of a Keywords “Lifer”

How does growth offer opportunities for our talent?

Organisational Design
Evolving organisational design offers new roles and responsibilities (e.g.
business and operations support functions)

Director
ManagerPM
Lead

Level Up
Stronger focus on career mapping andtalent retention initiatives

Learning & Development
Enhancing our Learning & Development function forour talent through training, mentoring and coaching

Services Portfolio

TesterExpanding services portfolio allows
for careers in new areas

Internal GrowthInternal talent takes priority

22© 2017 Keywords Studios PLC – CONFIDENTIAL

Summary• Approach tailored to each business• Strong emphasis on the integration plan ahead of acquisition• Clear 100 day plan delivered by teams who have already bought into the process• Consistently demonstrated that the Keywords culture supports rapid and meaningful synergies

Any questions?
23© 2017 Keywords Studios PLC – CONFIDENTIAL

Start at 4.40pm

Capturing Cross Selling Opportunities

Games development lifecycle: Cross selling opportunities
1. Pre-production

2. Early stage gamedevelopment

3. Later stage gamedevelopment

4. Launch
6. New content for
games

25

© 2017 Keywords Studios PLC – CONFIDENTIAL

5. Ongoing live
operations support

Management structure & cross selling

26•

Service lines run on a global basis, supported by regional management teams•

Unified global sales team facilitates cross selling•

Leveraging relationships and master services agreements to grow the number of services to existing clients•

All combine to extend the number of cross selling opportunities•

Continued investment in the team and key functions supports further growth© 2017 Keywords Studios PLC – CONFIDENTIAL

Cross selling metrics
Portion of revenue for clients using 3 ormore services

Clients using more than 3 services
90
80
70
60
50
40
30
20
10
0

84

80%

80%

64

72%

75%

51

70%

66%

65%

FY 2014

FY 2015

65%

30

60%
55%
50%
FY 14

27

85%

FY 15

FY 16

© 2017 Keywords Studios PLC – CONFIDENTIAL

H1 17

FY 2016

H1 2017

Cross selling XLOC increases our integration with our clients
Technology solution added to translation services
A closer, comprehensive approach• Provide tools and a framework for consulting on localisation asset
management• Integrates with existing translation and localisation services
Benefits• Unique set of integrated services• Opportunity to fund further developments of the technology• As a well-renowned tool in the industry, enhances Keywords Studios’ credibility further

28© 2017 Keywords Studios PLC – CONFIDENTIAL

Case study: Leading mobile game developer/publisher
The road to providing multiple services
Growing with the client and looking for cross-selling opportunities
2014:

2016:

2017:

Overall:

Started providing
translation services – 1
game, 11 languages

Localising 3 games, now
to 32 languages. Added
Art Services.

Added Xloc, Localisation
Testing, Player Supportand Functionality Testing

Grew from:•

1 to 3 games

Revenue: c.€1m

Revenue c.€5.0m

Revenue c.€11m•

11 to 34 languages

Shift from vendor to trusted partner
Focus on providing solutionsc.€11m• Created dedicated internal teams in Europe and Asia to managetranslation flow with 200 external linguists• Provided dedicated hardware and IT backbone for Player
Support services to ensure security and connectivity• Sent a Client Success Specialist at client office29© 2017 Keywords Studios PLC – CONFIDENTIALArt

Case Study: A leading online games developer/publisher
A leading online game company
Cross-selling opportunities in a live environment
2015:

2016:

2017:

Overall:

Started providing Art
services – basic
gaming assets

Increased Art services
and added 3 additional
Service Lines (FQA,
LQA, LOC)

Added Player Support
to the other 4 service
lines to total 5 services•

Grew from 1 to 5
service lines•

Revenue: $100,000

Revenue: $700,000

Expect to growfurther in 2018

Revenue $1.1m

Shift from vendor to trusted partner
Focus on providing solutions• Created integrated Functional Testing team working from 3 global
locations• Added community management, customer support, fraud
detection to protect the game economy
30© 2017 Keywords Studios PLC – CONFIDENTIAL

Case study: A multi-platform game developer
Extended our relationship organically and by acquisition to become a strategic partner:
2009:

2013:

Localisation
testing originallyprovided forEurope

Added
Localisation in
new languages

2014:

2015:

2016:

2017:

Added Americas
Localisation and
Art through
LakshyaEstablished as
Asian suppliers

Synthesis
acquisition adds
Audio &
Localisation

Entered StrategicPartnership toprovide end to
end services

Increased sales by 600% over the period31Summary• Continuous nature of game development lends itself well to cross selling• We have a strong and clear management structure which encourages a culture of pursuing more and morecross selling opportunities• Approach is clearly achieving results and we are constantly working on cross-selling opportunities

Any questions?
32© 2017 Keywords Studios PLC – CONFIDENTIAL

Strategic Partnerships

The times they are a changin´
Packaged Goods

Digital Distribution

Strong local power: National, Regional
Local sales
One studio development
Games business model: Fire & forget
Innovation: Content or hardware driven
Lower margins
Innovation: Driven by dev not services
Immature industry
Multiple vendors
Tactical outsourcing

Central powerCentral sales
Distributed development partners
Games business model: Software as a service
Innovation: Automation, predictive analytics
Higher margins
Innovation: Partnership dev and services
Mature Players emerging in the industry
One stop shop
Strategic outsourcing

34© 2017 Keywords Studios PLC – CONFIDENTIAL

The evolution of strategic outsourcing
Strategic Partnership Model
Spin off production centres
Dedicated teams••

Specialist teams working solely
on one client / project•

Operate within existing
Keywords offices•

Look and feel like client offices,
but using Keywords’ platforms
and expertise•

Operating on this basis for 4
clients

35

•

•
•

Transferring client´s team andoffices to Keywords
Building on existing talent andinfrastructure to create broader
service delivery hub
Outsourcing agreements inplace with two clients
Clients focusing internal talenton core strengths. Competitive
pressures are accelerating theprocess© 2017 Keywords Studios PLC – CONFIDENTIAL•

Deep partnerships, integrated intechnology, processes, talent•

Common innovation roadmap, involving
multiple services•

Custom made solutions, adaptive
approach, regional or global solutions,large scale•

Keywords unique talent, technology,
knowledge and scale•

Happening NOW•

Supplier client interdependency

Keywords Studios: Raising the bar
The Four Pillars of Our Platform
Scale

End to End

Innovation

Risk Management•

Multi-studio,
multidisciplinary••

Multiyear roadmaps
and investments•

Size, redundancy,transparency•

Across countries,
continents, time
zones

•

•

Pipelines integrated
into customers
technology•

Financial and talentmuscleWith the client, close
to the client or on theother side of the world••

Compliantinfrastructure•

Accelerated learning:
we see everything•

Proprietary
technology•

Multi-studio end to end
outsourcing of game art
from concept to live
services for Japan client36

All services, always
on, concept to sunset
Relationship lesstransactional, moreconsultancy
One Stop Shop (ormenu of services,global or local)

Multi-studio end to end
outsourcing of game art
from concept to live
services for Japan client© 2017 Keywords Studios PLC – CONFIDENTIAL

Regional testing centre, acombination of analytics& testing disciplines for
major AAA

Regional testing centre, acombination of analytics& testing disciplines for
major AAAScale – End to End•

Bandwidth on demand – Multiple locations combining multiple services• 14 studios + 2 support offices• UK, North America, India, China, Japan, Singapore• Worldwide time zone client communications and service delivery• 1,200 Team Members• Artists, art directors, project managers and support team members• Diverse, from multiple cultural backgrounds, able to work on all gamegenres and styles• Deep partnerships with clients• Design and concept cooperation from pitch to sunset• Complete skill set: design, production, technical and final delivery• Leadership and expert advisor position37© 2017 Keywords Studios PLC – CONFIDENTIAL

Innovation – Risk Management
Innovation partnership business case•

Discussing with four AAA clients long term
multiyear innovation partnerships•

Areas of interest are player insights, data
science, predictive analytics and AI,
pipeline automation•

Innovation partnerships are high added
value, high margin, create opportunities for
new services and cross selling existingones, are predictable in revenue andgenerate long term loyalty•

Further differentiates Keywords•

Player Research + Testing + VMC

38© 2017 Keywords Studios PLC – CONFIDENTIALVMC Acquisition – Accelerating strategic partnerships•

Additional scale & end to end services• Strong West Coast presence• Synergies in clients• Reputation and world class track record• Additional size allows and strong US presence unlocks access to additional clients• Accelerating innovation• GBTN accelerates our Player Network deployment• Embedded Technical Services allows us to partner with our clients at a different
level on analytics, player support and technical testing services• Risk management• More redundancy and better US presence• High technical skillset• Mature processes39© 2017 Keywords Studios PLC – CONFIDENTIAL

Summary• The business model change provides drivers for accelerated increases in outsourcing• Keywords already leads the field in outsourced services for the games industry• Keywords scale, talent, diversity of services, reputation and global services platform positions our company as
the ideal partner for strategic partnership models• The VMC acquisition and our continued progress in engineering services provide additional scale, relationships,
reputation, talent and tools that will accelerate the move to strategic outsourcing

Any questions?
40© 2017 Keywords Studios PLC – CONFIDENTIAL

Closing remarks

Becoming the “Go to global services platform”•

Achieved a lot since IPO•••

Demonstrated we can grow organically while also making acquisitions and integrating them
Proven the synergies that exist through both operational benefits of scale and through cross selling

The current market structure remains imbalanced and will not be fit for purpose in the mid term••

Highly fragmented services market

A clear opportunity to become the “go to global services platform”

42© 2017 Keywords Studios PLC – CONFIDENTIAL

Investment summary
Access to a large, high growth market
Key drivers:
Market growth; continuous & higher definition content; outsourcing trend

Strong track record of growth, both organically and through acquisition
Significant opportunity to grow our geographicalpenetration, service capabilities and client relationships
Business model and management structure that supports growth43© 2017 Keywords Studios PLC – CONFIDENTIAL

Please join us for drinks and canapes