Keywords CEO Says Pandemic has Expanded Video Games Market

Game Localization Firm Keywords Studios Trading Update H1 2020

On August 4, 2020, London-listed game services provider Keywords Studios published a trading update and notice of results for the first six months of financial year 2020 (H1 2020) ended June 30, 2020.

The Ireland-based video games specialist said they expect revenues of around EUR 173.5m (USD 205m) for H1 2020, an increase of ca. 13% from the same period the previous year. Like for like, excluding acquisitions, organic growth is expected to be around 8%.

The company is also set to report adjusted EBITDA of approximately EUR 30.8m (USD 36m), an increase of around 19% from H1 2019. These preliminary numbers are meant to update investors and the market, while the results will be announced on September 17, 2020.

For reference, Keywords brought in EUR 326.5m (USD 353m) in full-year 2019 revenues, and the company generated EUR 49.5m in adjusted EBITDA.

Keywords offers a range of services to game developers and publishers including Localization, Localization Testing, and Functional Testing. It also provides dubbing and voiceover through its Audio Services business line.

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During its annual general meeting in May 2020, Keywords identified its Audio Services and Testing units as experiencing the most disruption from the coronavirus pandemic. Both activities typically take place onsite in studios, many of which were shuttered during the global lockdowns.

Most Audio studios have been reopened since June 2020 and some Testing resumed onsite in July, Keywords said.

Overall, the business performed well under the challenges sparked by the global pandemic, according to Keywords, and CEO Andrew Day described their performance “robust.”

Keywords also remained optimistic about the strong tailwinds for the gaming industry, with Day observing that “demand for video games content has accelerated during the pandemic which has positively expanded the addressable market for our clients.”

He also pointed out longer-term demand drivers, such as the trend toward increased outsourcing, the emergence of new streaming platforms (including Apple Arcade and Google Stadia), and the upcoming releases of new consoles from Sony and Microsoft.

Many of these factors favor Keywords as the largest incumbent provider in a highly-fragmented game services market. Having completed a share placement in May 2020 in which they raised GBP 100m (USD 131) from new and existing investors, Keywords closed H1 2020 with EUR 101m (USD 119) of net cash — dry powder for future acquisitions.

Keywords has made two acquisitions (unrelated to localization) since May 2020 and is on track to “complete further acquisitions from the strong and attractive pipeline of opportunities that we are currently reviewing, over the months ahead,” Day said.

Shares in Keywords Studios (KWS) were up around 1.7% on market open on the day the trading update and notice of results were published. Keywords market capitalization stood at around GBP 1.48bn (USD 1.94bn) at press time.