Keywords Studios plc (KWS) Earnings Call Transcript & Summary

Thanks so much for coming to our Capital Markets Day here in London. It's really good to see so many familiar faces and also a good few new faces. So thanks very much for making the effort. Some of you -- well, actually, very few of you saw us do our Capital Markets Day in Montréal in November. And I don't know how many of you would have been brave enough to watch the 3-hour video that emerged from that and is on our website, but just to let you know that this is not going to be a repeat of that Capital Markets Day. Then, we focused very much on a couple of key themes: number one, the integration that we undertake with all our acquisitions; and number two, was the scale in which we are achieving now as a business. And for those of you that were able to come on the tour of our Montréal facility, I think that really hit home. What we're going to do here at this Capital Markets Day in London, instead, is to focus on 2 main areas of our business that we haven't really exposed you to in any depth, thus far. Primarily, that is the Game Development business, which is an activity that we entered about 3 years ago; and Marketing Services, which we've been building up over the last couple of years. In both cases, we have experts from those business units that will take you through some case studies to really illustrate the amazing work that they're doing. We're also going to be covering off all 7 service lines in brief, just to give you a little bit of an update as to where they have got to during 2019 and where they're looking to go in 2020 and beyond. So we can't get through this Capital Markets Day without referring to the trading update that we announced at the end of January. Now these, of course, are preliminary figures, and the full figures and the full results will be released at the end of March, but just to remind people of where we sit today as a business. So our revenues grew by about 30% to EUR 326 million; very pleasingly, though, organic growth, which strips out the effect of currency and so on, that was 15.5% growth in the year. Our adjusted EBITDA climbed 13% to EUR 49.5 million, representing a margin of about 15%. Our PBT margin grew 8%, representing EUR 41 million in absolute terms and a margin of about 12%, 13%. One number that I know did come as a little bit of surprise to some people was the net cash at the end of the year. And fortunately, I have my CFO to rely on to actually take you through the workings behind that later on in the session. But what I would say is that included in the EUR 28 million of M&A spend is actually EUR 15 million related to past acquisitions, so that was acquisitions prior to in 2019. And essentially, in that number of EUR 18 million net debt, that implies a cash conversion rate of a very healthy 85%, which is in line with what we've delivered previously. And again, Jon will take you through the workings behind that given that they are preliminary numbers at this stage. So as a business, we entered 2020 a better balanced business and higher up the value chain. Now what do I mean by that? We measure balance as across our service lines. So you can see the mix of the donut, they're nicely sort of balanced segments. And each of those segments, each of those service lines actually acts on a different part of the development chain within Game Development as a whole and within game publishing, so that breeds sort of robustness into our business model. And in terms of the higher up the value chain services, now, obviously, a service like Game Development, where we're making part of games for our clients or we're actually making the full game for our clients, those are going to be perceived as higher value than, say, our localization in our QA services. That doesn't necessarily make them better businesses, by the way, but they're certainly higher up the value chain. We're also seeing that value exposed in a number of ways in which we're operating. So increasingly, we're integrated in IT terms and in personnel terms with our clients. Either we've got people embedded in our client teams, we have dedicated operations around the world or we're actually integrated in their development pipelines through connected IT systems. I think you guys see this picture year-on-year. We're trying not to make it look busier and busier. But what you do see is increasing numbers of colored dots associated with each location. So year after year, we prove to ourselves the ability to land in a geography, in a territory with a studio that we've either opened organically or that we've acquired, find that it's a really conducive location to do business, and by that we mean it usually has access to talent, it's close to the client and we're able to leverage the infrastructure that we've built there around the support services, the facilities, the facilities management, HR and so on, and seed in other services that we have within our group. And that's a very low-friction process. We talk about Keywords as this amazing sort of growth engine, which I firmly believe we're going to continue to be for some years to come. And the reason I say that is because we've chosen a path in an industry, which benefits itself on a macro level some -- from some very key driving forces. First of all, it is an industry which is fast growing in itself. The revenue from the content in games is growing 8% per annum and is already something like a $150 billion market. There is this trend towards outsourcing, which is something we spotted 10 years ago when we set ourselves up to do what we've been doing, as clients struggle to cope with their increasingly complex environments. That's complexity of production, the size of games, the continuous nature of game development and the number of devices on which games are being played and the way in which games are being distributed. All of that complexity is hard, and we are one way in which those clients of ours can try and simplify an otherwise very, very complicated environment. We're also seeing evidence now of supply chains becoming a little bit more structured in the video games industry. So what do I mean by that? What we've had in the past and we're still living, it's still very much the sort of the norm to have our clients, whether they be a game developer or a game publisher, manage many tens, if not hundreds, of direct relationships for supply into their game development processes. So they might have 10 different art suppliers. They might have 10 or more different localization providers on a single game where everybody is doing a single language, for instance. Year after year, we see that consolidating and our clients coming to us and asking us to basically provide all of the languages or to provide all of the art or most of the art on an outsourced basis. And I think we're likely to see that continue. Again, it's one of the ways in which they can simplify life, while ensuring quality and on-time delivery. The other thing we are seeing, and we made this point particularly clear in Montréal, is that scale begets scale. What does that mean? It's kind of like you have to build it in order for the client to use it. So a lot of our clients, the sort of accepted way of making games for those companies that have been in the games industry for 20-plus years, has been to do everything themselves. So there's a very strong sort of attachment to doing everything internal. But you could see why they did that because, while they were doing that, they weren't creating suppliers of scale to which they would be comfortable outsourcing large chunks of business. Now with companies like Keywords emerging with some considerable scale, those large companies feel more comfortable in putting work into our facilities. And then, of course, the fragmented industry, we've talked about this many times, but this is a highly fragmented industry on the supply side and that creates opportunities for consolidation. And we typically have been buying something like 6 to 10 companies a year. We've been very selective in which businesses we buy. We're actually buying them in order to build this integrated platform. But that opportunity remains. That fragmentation is still there. It's not becoming more fragmented, but the fragmentation exists. And so we have opportunities to work with that fragmentation. As ourselves, what Keywords has built, so far, we are unique in being able to provide the full end-to-end services for all stages along the life cycle of a video game on a service basis. So we have this integrated service platform with an international reach. Individual service lines are in themselves pillars for growth. So each service line has a growth opportunity and a growth objective. And within those service lines, you have individual studios, which also are driving for growth. So all parts of Keywords are looking for growth and trying to satisfy client demand as best they can, while, of course, maintaining the good disciplines of profitability, et cetera. We are fortunate in that we've established, over the years, deep relationships, long-term relationships with pretty much all the top video game companies. We've established ourselves very close to our customers around the globe, which is still important in business. Even though we are connected through the Internet and everything, there's no substitute for being able to pop on-site at your clients and have a face-to-face meeting. And we've got these bridgeheads to talent around the globe, whether that's in Eastern Europe, whether it's in India, whether it's in China, whether it's in Japan or South America, having access to talent is very important to us. Our industry needs that talent to create these very complex worlds and not only create them, but, of course, maintain them in what is becoming ever more continuous form of entertainment games as a service. At this point, I was going to hand over to a colleague of mine to start taking us through the first of 5 presentations on the service lines, which are designed to expose some of the drivers that are behind each of those businesses, also let you understand a bit the barriers to entry that are increasingly being built as we establish some clear water between ourselves and the rest of the fragmented industry that surrounds us. Unfortunately, Ashley Liu, who would do a much better job of this first presentation, today, she is grounded in China, along with most of the population in China, so she's not able to be with us in person, unfortunately. So I'm going to do the very best I can to fill her shoes and present this to you. And while I'm filling her shoes, I'm going to try not to break her heels in the process because I'm a little bit heavier than she is. So I'm going to talk to you about Art Services. Now it's a bit misleading. I think a lot of you will know that within Art Services, we also have a fledgling Marketing Services business tucked in there, and it's getting less and less fledgling-like. It's a fast-growing fledgling, let's put it this way. And at some point in the near future, it's going to leave the nest and create a service line of its own. So what is the Art Service line within Keywords? Today, we have 1,200 people, which does include the Marketing Services part of the organization. And essentially, we're providing art assets for the world's leading video games around the world. So these are concept art, 2D art, 3D art, animation and so on. And most of this work goes into AAA console and PC games. But increasingly, it's also going into high-end mobile games. So we operate at that sort of higher end of the quality spectrum. And time after time, with all of our services, we find that there is a steady trend towards quality. So starting at the quality end of the spectrum, you find that you become -- you capture the trend towards quality. So mobile games a few years ago had very basic 2D assets; increasingly, now, they're using 3D art assets within mobile games, and that plays to our strengths. The business has grown substantially since we first entered the market in 2014 with the acquisition of Lakshya Digital. As you can see, we've tried to separate out for all of these service lines, the portion that is acquired business effectively in our -- where we find ourselves in 2019 and that portion, which is organic growth. Now obviously, where we weren't present in the business in the first place, we can't have grown organically without having first acquired. So that's that picture on the top right. The other message to get across here is the opportunity within the business. So the art business, and we know we've substantially undersized some of these markets, and this is one of them, we sized the art market a while ago at about $1 billion. It's increasingly apparent to us that it's actually substantially larger than that. Most of the art up until -- well, in fact, 10 years ago, this didn't really exist as an activity at all. Five years ago, that was probably something like 30% outsourced. We're now up to about 50% outsourced. And it's an asset type that's part of the game development cycle, which is increasingly being outsourced. And obviously, we are -- actually, today, I think we are the largest provider of art assets for video games in the world on an outsourced basis. So the market is coming towards us. This trend towards outsourcing is a big driver for art. In terms of looking at how we are increasingly differentiating ourselves and how that is creating some clear water between ourselves and some of our sort of smaller competitors, first one to point out to you is that our clients are increasingly integrating their production pipelines directly with our own. So in the past, even 3 years ago, 5 years ago, the normal model was a client could effectively send us an Excel spreadsheet and say, "Hey, we want you to make 20 warriors. We want you to provide a whole bunch of trees. And we need a few houses," or whatever it was. And we would go away and make these art assets, send them back to the client. We'd go backwards and forwards a couple of times, and then the client would accept them. And then they would do whatever they did to get them into their games. Now we're very often working with our clients in figuring out what art assets needed to be built for each level of the game. We're then able to pass that work back to ourselves effectively. We create those art assets, and we plug them straight back into the client's development environment in a fully integrated manner. Now, that's the sort of way of working that you're not going to find with small art studios. That's a very heavy -- it's a very heavy due diligence process from our clients to audit us and to get happy enough with our environments to allow us access with that degree of confidence. And yes, I mean, we're audited by all our major clients as, obviously, as you can imagine, security is paramount, and that audit process actually goes beyond some of our clients because some of our clients are licensing IP from other companies that are not necessarily in the games industry. And those companies want to make sure that their IP is protected. Scale is another factor. The larger you are, the bigger the projects you see. So a few years ago, while we were simply a collection of independent art studios, none of those art studios would have seen very large projects, let's say, projects requiring 100-plus artists. Now we are one of 2, 3 players in the world that actually sees those large projects because we have 1,200 people rather than 100, 150 people in an individual business. And as you saw, the shift towards outsourcing, again, that plays to the whole ability to scale, to invest and to attract and retain talent. And then the fourth point, which is important to stress, particularly as we get more and more into the Game Development side of the business and how that is able to help us in other areas of our business, not only in the art business, but, actually, other service lines in creating tools and technologies that allow us to be more efficient and to produce more assets at a higher quality in a faster period of time. So if we turn to what the future of art business looks like, we are continuing to strive to become this go-to provider. So yes, I said we are like probably #1 in terms of the volume and value of work that we produce, but this is a highly fragmented industry. So we're #1 in a very large market. We can't yet feel the effect of being this go-to provider, as we have been able to experience in, say, our testing businesses or indeed in our Localization business. So we have more to do to get to that point. Expertise, I think we are there. Trustworthiness, I think we're there. Scale, we're still lacking a little bit. I think if we had more scale, it would be more apparent. We are seen as industry innovators, and we're continuing to push the boundaries and to adopt the latest tools, techniques, technology in order to benefit our clients and to produce bigger, higher-definition assets at a -- at the most economical price point. And this next point is not to be underestimated, and you'll get a sense for it as we go through some of the case studies later on today. We are in the process of pursuing a strategy of building what we hope will be the world's first global games marketing agency. And that spans a whole range of different activities. And you'll, as I said, see, get a glimpse of some of those activities, but there's a broader spectrum that we'll be looking to, to build out as well. And when we get to scale, and we've notionally said it's about $30 million or EUR 30 million, we'll look at separating that out so that you as investors can start to assess the value of that particular service in isolation from the rest of the Art Service. So do expect further good organic growth from us in Art Service lines and continue to anticipate acquisitions, particularly in the Marketing Services side of our business. We have a lot to do. We're trying to figure out, because we haven't sized it by the way, that EUR 1 billion number or whatever I put on the slide previously, that is purely for the art asset production side of the business. Marketing Services, we have not yet sized. We were just looking at it earlier, and there is some market data that says the spend in marketing in video games is over $5 billion. I'm not quite sure what's included in that. To me, it sounds a little bit low for an industry that's generating revenues of $150 billion, but it's definitely a big -- it's definitely a big market. And it would seem rude not to help a market of that size to do better and to help them spend some money with us. So at that point, you're probably pleased to hear, you're going to hear from one of my colleagues next, give my voice a break. So I'm delighted to hand over right now to Jamie Campbell. Jamie runs our Game Development service line worldwide.

Good afternoon, everyone. I'm very happy to be here today to talk about the Game Development service line within Keywords. My name is Jamie Campbell and I'm the Service Line Director for Game Development. So I look after all of the Game Development activities within the Keywords group. I'm currently responsible for 12 studio locations globally, representing about over 900 employees. We've seen a significant growth in my service line as a contributor to the overall Keywords organization. It's happened over the past 3 years through acquisition, but also strong organic growth as well. We've got a very strong and broad mix of skills in the Game Development service line, and they range from providing engineering resources to clients who need extra programming bandwidth, to more specialized resources for optimization and then onto larger engagements that we'll be taking a deeper dive look at this afternoon, including porting, co-development and full game development. And some of our flagship studios from the service line are here to talk about that in more depth shortly. We've also got some really interesting ancillary services within the service line as well, such as player research, who do user experience and play testing and also analytics. So we're really kind of an incredibly broad spectrum of services. The market, as Andrew has been saying, continues to grow, and we estimate at the moment that the market is around about the $3 billion worth in Game Development. But also the amount of outsourcing that's happening in Game Development is also growing. So we're in a very strong position, and we're seeing more and more requests for larger engagements coming from our clients. So again, that's why we're having a focus this afternoon on co-development and full game development. We're a very highly utilized service line. So we intend to scale up further as we move into the future. We need to continue to grow our existing studios, recruit new talent, retain the existing talent that we've got and also seek out new acquisitions and also look to spin up satellite studios for our existing studios to access new talent pools and geographies. So the state of the industry report from XDS this year stated that quality was the most important factor when developers and publishers were looking for an external development partner. And from my perspective, I don't think there are any better credentials and a glowing portfolio of aspirational titles that our studios have worked on. So we need to continue to work on the best titles that are out there. Success breeds success. We need to align ourselves with the AAA games, their innovative new platforms, but also cult, indie titles. Anywhere where there's quality in computer games, that's where we want to see Keywords Studios represented. Working on AAA games also helps us recruit and retain talent. We're associated with many, many games that are in production that people dream of working on. And we can provide an environment where engineers, designers, programmers, producers can work on a multitude of top-level titles, whereas in other places, they might only get to work on a single title for 2 years. Scale within the Game Development service line isn't just about the breadth of our technical offering or the depth of our technical knowledge, but it's also about the size of the Keywords Game Development community. Scale helps us to create customized teams when we're asked by clients to support them with development of a specific genre of game. But we can also coordinate between service lines and different studios to try and improve efficiency, minimize bench and really kind of deliver in an exemplary fashion. We undertake R&D to improve quality and efficiency of delivery at all of our development studios, but we also have a centralized effort at Electric Square in Brighton, and these guys dovetail with our Keywords Ventures initiative as well. So we're constantly on the lookout for tools and technology that can improve our clients' games and allow us to deliver more efficiently. We've got extremely agile teams and a core competency is being able to adopt different engines. So commercial off-the-shelf engines, like Unreal and Unity, but also proprietary technology from studios who have their own competitive advantage through their game engines. And around that, we've got a DevOps service within the Keywords Game Development service line, who can help us deploy and automate the deployment of developed -- development environments across multiple sites, which is becoming more and more important as teams get bigger and more distributed. So throughout 2020 and beyond, we're going to continue organic growth at our current studio locations. We are opening satellite studios using the current Keywords infrastructure, so that we can access new talent pools and new geographies, but utilizing our existing studio brands. But we'll also be keeping an eye out for relevant acquisitions. We had strong organic growth in the first half of 2019 at over 32%. And we expect -- well, that strong growth has continued through the second half of 2019. We will be taking a look in a short while at some services, including porting, co-development and full game development, and how some of our studios are also making the transition from things like core engineering to these kind of higher-value, multi-disciplined services that Andrew was talking about earlier. It's important, though, that we keep an eye on the whole spectrum of development services that we provide and make sure that we continue to act -- to offer all of those services, so that we don't miss opportunities of low friction ways to onboard new clients. Again, if we look at the 2019 state of the industry report from XDS stating that development capacity is one of the top 5 challenges that developers and publishers are experiencing with external partners. So in summary, we're looking at expansion to meet demand, further acquisitions in all areas of Game Development and reinforcing the studios that we already have. So thank you for listening. There will be a panel with some Q&A shortly. But for the moment, I'm going to hand over to my colleague, Fabio, who is the Service Line Director for Audio within Keywords.

Thanks, Jamie. Hi, everyone. I'm Fabio Minazzi. I'm the Director for Localization Services at Keywords Studios. I am here to talk about the Localization and Audio Services, which, together, accounts for almost 30% of our revenues. We have been expanding over the past 2 years, as we pursue the breadth of services that we are planning to offer. This is because our clients have also expanding needs. So they -- if we want to be this one-stop solution, the go-to solution, we need to have more than one simple service, which would be specialistic. Therefore, we now can offer not only voiceover, but also we can do music, sound effects, we can also do music management. And we branched out also into linear dubbing for the traditional linear media, which we have been pretty successful, although it's a growing activity in our organization. From the geographical point of view, we coordinate as many as 20 offices, which is a bit of work, but it's very interesting because this network of resources allows us to serve, on a local level, our clients. At the same time, we create a platform where clients can engage at different levels. And they really like this because, you imagine, you start with a small IP and then you see your IP works and it can work in more regions. And the more it works, they just come to us and buy more services, and we deploy more resources according to different models, by the way, because in some of them, they are outsourced and you want to have like freelancers working in different time zones. Some others, instead, they asked us to concentrate the pool of resources, which are really dedicated, really knowledgeable about their piece in one single place. And we can do both of them, which is quite an amazing thing. So all in all, this allowed us to grow over the years in a pretty nice way in a market which is still very fragmented. And therefore, as it grows, we have the opportunity to grow as well inside market. Talking about the barriers to entry, I mean, by now, there's many. I mean, it's not easy to catch up with where we are now for a number of reasons. One of them is the fact that we own a number of studios. We have very strong relationship with studios that we don't own, but we do coordinate at a daily level. And these studios are really up to standard for the gaming industry. So we have been recording their voiceover for the major IPs. Some of them, we work on in development; and others, we also work on in QA, player support. So we are, little by little, growing this platform, which makes more and more sense as our clients see it happening. And this is kind of really exciting for us because that was the very initial idea that, with Andrew, we've been thinking about that from day 1 or even maybe day minus 1 of this initiative. So the effect of having resources is not enough, as you understand. You also need to be able to manage those resources. So you can imagine that, nowadays, when you do a complex production, you need to manage the actors, the voice directors, the sound engineers, all the assets with security restrictions that are becoming more and more important for our clients, all in a seamless way under pressure, with changes going on all the time because creative people, they like touching their contents in the last minute because that really makes the difference. We don't question, we execute, and we have the power to do that very, very quickly. That's why it's difficult to do what we are doing. And of course, in the meanwhile, we also learn about our -- the contents of our clients, and this is a very big thing for our clients. It's not visible from the outside because it's knowledge. We instill knowledge about the asset, these individual intellectual properties in our teams, in our systems, so the guys come back to us and say, "We'd like you to take care of our next installment, next episode because you know what we are trying to convey to our players." That's an amazing intangible asset that we have built over the years. So when we talk about localization translation, the multilingual capability there, I would say it's unmatched because we have selected -- we select people one by one through very tough tests to make sure that they are savvy on games, savvy on specific type of games and, therefore, when we build these teams for our clients, then we're really able to convey contents in different -- for different locations in a very effective way. That's something that, of course, builds on the credentials of 20 and more years of experience in this very field. Last point, and I know there will be a Q&A session, so everyone will ask about technologies, machines and artificial intelligence, so just to give you an idea. We took the decision, after observing for a few years where the technology would go, we decided not only to adopt technologies for translation, which are, let's say, mainstream in the gaming industry, but also to experiment on new technologies, which are not known yet how to work. But it's -- we believe we have done some experience, may add value, may simplify the work of our translators and retain the quality at the end. So as you can imagine, I'll talk about this also a little bit in our strategy in the future. So first of all, there is a convergence happening. I mean, most of you probably have a TV screen in their house. And more and more the TV screen is a smart TV, that means similar to a mobile phone, but with a bigger screen, which is also similar to a computer. So what happens is that, little by little, things get all together and become more neutral to the platform. And we are there because those global companies, I'm talking about Netflixes, the Apples, the Amazons and so on, they are technology/content company. And not by chance, we are technology/content company, so we are there with the right scale, with the right skills. So this cross-pollination will continue happening between studios with different skills. And we'll, of course, work on securing more and more credibility on those platform owners. We're already qualified for Netflix and have 3 studios in a bit more than a year. So that journey will continue. We'll continue having probably more acquisitions with people with the experience in the linear media. As far as Localization, text localization specifically, we'll probably be less acquisitive, and we'll focus more on the utilization of the latest technologies, which we now own in the process, in the workflow using AI for management, not only of the text of translation, but also managing the resources themselves and see where it makes sense without breaking the machine because content are king, remember. In our industry, content is king. People don't care how you make them, so long as you make them right. You have to be efficient in making them without breaking them. So we'll learn with our clients how to do that, and that's a journey that we are doing with some of our key clients, and we'll continue doing over the past -- in the next few years. And well, of course, the final goal is to keep on leading the market. We have a market share, which is really significant. Our competitors are definitely smaller than us. And by -- for sure, none of them have the breadth of services, which we can learn from or connect to create new services. And therefore, there, we say, it's becoming more and more evident to our clients that we can bring added value and help them develop the next stage of the entertainment industry. So that's it for Localization. Come over, Mathieu, from QA service.

Hi. I'm Mathieu Lachance. I'm the Service Line Director for Testing, which encompasses Functionality QA and Localization QA. So what is testing? What is FQA? What is LQA? Functionality QA is essentially testing games, ensuring or trying to find out and fix any issues and errors that are present in games. Localization QA is very similar, where it's actually testing out the translation within the game, mostly making sure that it's proper and within context. We've got 11 studios globally, a bit more than 2,700 employees right now. And we are overseeing about 28%, at least for last year, of the revenue of the company. We've had an exceptional growth last year, as you can see on the nice bar graph there, and that is actually, despite surprisingly, having no acquisitions going for our service in the last year. We had a very strong organic growth, easily surpassing market growth over the last year. And we're seeing that for a few reasons. I would say, on the Functionality QA side, it's becoming more and more apparent that, especially since we've done the acquisition of VMC, we became the largest, most obvious choice, essentially go-to provider for QA in North America. And obviously, and we'll see that in the next few slides, we want to repeat that success story, not only in that territory, but more and more on a global scale. Barriers to entry. In both Functionality QA and Localization QA, we've got our secure facilities, and that has been touched a bit by both Fabio and Andrew. We are audited, authorized by hardware manufacturers, by a lot of our clients and then some. So we are at a scale right now in terms of secure facility that is starting to become quite hard to rival. In terms of FQA, as I mentioned, we've got an unrivaled scale in North America, which is great. We're seeing essentially a snowball effect in the last 2 years. As soon as we've acquired VMC, everything just keeps coming up and piling down. And the larger we actually grow, the larger -- we have projects coming in and the larger the demand actually comes in. The other big point is we've got very flexible operation on the functionality side. The test thing that is done in one city or one geography is very similar to what we do in other studios. So it's become easier and easier for us to actually move work around, which then makes it easier for us to optimize volume, optimize work and essentially, improve the profitability and the usability of the work that we do. On the Localization QA side, one of the biggest barriers to entry is the complexity of language, very similar to what Fabio was mentioning on Localization, right? We've got a huge client coming in. They want to have a game localized in 30 languages. There's really not a lot of players that can do it all at the same point. Our clients, more and more, especially the bigger ones, they do not want to manage 10 different points of contact to get the game done. They want to talk to one person that essentially manages all these problems in one place. And we can do that. And the last and not least point, specialism in games, there's -- and you might have a question in -- either for me or Fabio, well, there are bigger players in localization and translation across the world. Yes, not specialized in games. And that's the thing, right? We've got our clients, the vast majority of them, they won't trust a company that does not understand what they're doing. They need to have the context, and we have the specialists that actually have the experience. Strategy and outlook. So as I mentioned, continue to consolidate the market leadership, especially outside North America. We're doing it more and more. We're growing, again, further strong organic growth that we have. We're growing in other markets. The plan is essentially to repeat the success story that we now have in North America and do the same in Europe, in India and East Asia, which are, weirdly enough, the way that we actually separate the market in FQA based on workforce. On Localization QA, again, continue the strong organic growth that we've had, essentially, grow what we can and even more in Ottawa, in Katowice. We're growing in our Singapore office. We're growing in our Tokyo office. So it's going well. And then for LQA, improving global resourcing flexibility through the standardization of the tools and processes. I want to bring LQA to the same level of flexibility that we have in FQA, and that increased level of flexibility will essentially make it easier for my team to manage work across multiple studios seamlessly, and that does a lot of things. Again, by being able to have work wherever, whenever, it reduces time. It's better usage. It optimizes resources and volume and essentially, increases the quality, the uptime, the profitability and even the revenue. That's pretty much it for me. I'm going to leave you with Fred Arens - thank you. I'm going to leave you with Fred Arens, my colleague from Player Support.

Frederic Arens, leading Player Support for Keywords globally. So what is Player Support? You probably have contacted your bank, your phone carrier, Internet provider with questions. As you can imagine, it was different questions and it's not the same way to resolve them. With game comes different set of questions. Our role is to be the link, the bridge between the game developer and the audience. Questions can be about lost currency, step characters from incompatibility of a device, something more technical and something like real-life threat about cyberbullying. So it's a very wide range of interaction, and this is what defines Player Support and it's being the interaction between the brand, between developer and publisher and their community, being on a ticket, on a phone call, on social media, so many in social media. So this is what we are doing and, of course, multilingual. Why do we do Player Support? It's a good question. Before, it was kind of a mandatory task, like we have to. Now, there are real consequences to not be answering your customers, like it's a bad review and it costs a lot of money. So now there is a real value to support new customers who want to play and support your games. At Keywords, the Player Support journey started in 2015 with the acquisition of Alchemic Dream, which I'm from. And then you can see a rapid growth because we have been able to establish, innovate 11 of the studios, and it's kind of convenient. As Mat has been saying, it's very secure, so it does a lot of firsts. We'll come back to that later. In 2019, we wanted to consolidate because we realized that doing something for 200 people, which was the size of Alchemic Dream, and doing that for 1,300 is not the same thing. So we really care about the quality and the dedication we have to our projects. And we said, "Okay, let's consolidate. Let's see how we can scale. Let's see how we can grow." So we prepared ourselves for the next organic growth because we are in a very nice industry. The market is big, $1.2 billion just for gaming support. The customer support is even bigger. And the interesting thing is the nature of games have changed. Before, it was buying the box. So you could not fix it. It was a box. It was a CD, that's it. Now it's game as a service, as people like to say. It's online games. And with online games come a lot of interactions, a lot of monetization. And unfortunately, it increases the chances that something doesn't go right, so it increases the volume of support. So as we progress, not only the gaming market is increasing, but the need for support is. The technology is helping in the back end, and we will talk about that. Barrier to entry. A lot of things have been said about the strength of Keywords establishing this barrier to entry. And I realize that I don't like what I did and I should have really concentrated on expertise. Security and capacity. Expertise goes, as I said before, customer support was, I have to do it. Now it's like, I really need someone who knows what they talk about. Again, like a bank support, game support, very different. So our clients like that we are complete. We have a gaming DNA, and this is what is defining us. Our staff are gamers. They joined us because they like games. They want to serve this industry, not because they like to do customer support, but because they want to do that within games. So the expertise is very important, and it's required. And credential is the best because a lot of our clients are coming because they've been referred to us, because they see what we can do and that we've got a lot of heart into supporting the community. So that's the expertise side. At the same time, the language is important. We are a localization company, Localization QA. We developed a very good strength at recruiting talents that are not only being native of a country, but masters of the language. So this is something that is insanely difficult. And we have seen the studios we have. We have a very good reach now for Player Support, 11 studios, West to East. It's allowing us to have both a cultural diversity and the language proficiency to support the communities that our clients have. So that's the expertise part. Security. As we said, Keywords is rich of very secured facilities. So for me, it's very easy to invade these spaces and develop our service within. So that's something that the clients are more and more aware of. Privacy and security are becoming top concerns. So you really want to be sure that when you share personal information with your support provider, it will be safe. At the same time, the security is, again, the fact that we know what we are doing. Customer support is live. Like we are not preparing something and delivering it. Like when we start, we are live. In social media, a tiny mistake is seen. So they want to be sure that when they give us their community, we will take good care of them. So for me, that's part of the security as well. And capacity because you have seen games generating a lot of money in no time, and they want to be sure that we can follow. Hence, why we have been consolidating, because we need to be able to start with 300 people in no time in various languages. So the capacity is requested because, as Mat said, a client doesn't want to have 2, 3, 4 vendors. If possible, do everything from West to East. They use English language as well as everything that can come. So for me, that's really the 3 pillars that are very critical and what makes us now, like, the go-to provider. So what's next? We want to really capitalize on what we have built, like being the game-specific provider. And sometimes, we have to explain to clients what it is. Like we talk about customer satisfaction, we look at reviews, KPIs. But more than that, what is the value of a good support? Last week, we had this case where we had to explain the client that they were using another vendor. Satisfaction with what we are doing look the same, but the other vendor was reimbursing players, over-reimbursing players, like 60% of the requests. We are reimbursing an item, it doesn't look expensive. It's digital. We can produce a lot, but it's a lack of revenue. And on our side, we are only reimbursing for 20% of the cases. So more than the satisfaction, more than the head count, we were able to prove that we were allowing our clients to earn more, while maintaining the satisfaction of the community, which is the most important. So we want to really explain our clients how everything we are, the best part can be turned into loyalty, into revenues, into growth. At the same time, I talked about social media, and we are -- we spent our 2019 to really build up our social media capacity. It's something we have done from the early age with game mastery. But now it took up different names and different channels. But now we are really specialist that helps our clients to maintaining their various channels and interact with their communities, make sure that it's a safe environment, that like we take care of the message that we are communicating. And with the mobile support, we have different tier of players. Like other people downloading for free playing 10 minutes and deleting the app, and you have the people that are spending hours per day, spending thousands of dollars per day in a game. How do you increase the loyalty of these people? What are you doing to make sure that they are taken care of? So more and more clients, it's no more a transactional relationship. They're not asking us for a head count. They're asking us for advices about how to drive a community, how to support it, which tool should they use, how should we answer, what languages will we focus? And all these expertise we've built, we accumulated, we are now able to share with our clients. I don't like to say consult and stuff like that. It's more like we build a project together about how to support a community because our goal is for the community to be happy, enjoy the game and make the developer successful because they last longer this way. And of course, it's growing. And we cannot keep up with just human time. If I take the example of the moderation, because that's another aspect of customer support, we have to moderate user-generated content, being on forum, social media, even in game, it cannot be done only with humans. Like imagine everything that is creating in social media. Nobody can keep up with that in a timely manner. So that's where technology is showing up. And I don't like to talk about AI yet. It's still learning. But automation is a great term to talk about how we can help customer support. Machines are best at script. We are better at creativity and empathy. So we are working with the technology to save cost where it's better to save cost. Where can we put automation? Where can we use different tools to interact differently? And with Fabio and the Localization department, we were very interested by this machine learning, machine translation that has come down. How can we harness this power to enhance self-service? I still rely on the talent that is our team and they are allowed to deliver VIP service, but we know that for the notion of scale, technology is something that we need to continue investing in. And we already are teaching the machine. Like in all the cases, that automation is there, it's because we are teaching the machine what to do, how to do it right, so you are not speaking to a chatbot that is just making you unhappy. Like they're polite. You want something that is really useful. So we are sharing all these advices with our client and when to use technology and when to rely on the quality of human. So this is our journey. Thank you, and now I think the Q&A?

So does anybody have any questions for any of our speakers or, indeed, for myself, for that matter?

Bernie Ahkong from UBS O'Connor. I have a question for Player Support, please. So this is shown on the chart and you talked about consolidation in 2019, but that flat growth seems to me presuming a very big gap to what has been a very strong underlying market growth. So could you just give us a bit more detail in terms of what exactly did consolidating entail and some of the reasons why we can be confident about growth acceleration from here?

Thank you. So basically, when -- and I think Jamie said that -- or Andrew, sorry, like the bigger we are, the bigger the project. And when you start a project of 20 people and 1 of 100, I mean, it's 5x. It's easy to say, but it's a lot of managers and supervision. And it's -- I used to say that I'm not a call center, meaning that we have an excellent attrition, but it means that we rely on the talent of people to train our guys to deliver a different kind of service. Meaning that, at some point, we realized that -- I mean, basically, I needed more managers, talented one to be able to keep up with the service. And we did not feel ready to take project and just assign new people without training. So we had to slow down for this reason. And as well, we developed, I mean, 11 locations. Mexico is very new, 2019. So we have to make sure that we are ready to deliver the service in these various locations before being able to speed up. In Manila, for instance, we switched location from one office to another to be able to double our capacity. So all these things, like, took time in 2019.

Yes, I think it's important to understand what it means to grow at kind of whatever it was, 300% that they grew at previous year. I mean, the Philippines, Manila, which has become the biggest single center for Fred's operations, we started that with a spinout from one of our clients about 3 years ago, 27 people. He turned that into 700 people in the Philippines. At some stage, you've got to sort of slow down, invest in a single facility with all the right security and fit-out to appropriate for a company of our standard, move people in there and then look for your next phase of growth. So other questions, please? Yes, Will?

Will Wallis from Numis. I have question on scale. Firstly, in Game Development, how big do you think projects could come -- could become, if it's in a blue sky scenario, where if you were doing everything for a AAA game or something like that? And then I've got a second question.

Yes. So I mean, that's like answering question how big is the game. We see AAA games with development budgets of over $100 million for a single title. There are studios -- independent studios that will take on a single IP and work on that 1 IP for maybe 3 years. That may well be a $100 million development project. We're not there yet. We're not at that sort of scale. We're probably working on projects, which, over multiple years, might come to about $40 million or there or thereabouts. Right, Jamie? So at some point in Keywords, we might get comfortable with having -- taking on an entire $100 million kind of development project. But for now, we'd rather spread our bets a little bit beyond -- across multiple titles and perhaps smaller engagements. Am I...

Absolutely. I mean it's -- we're at a stage -- certainly, from a full game development point of view, we're in a fairly early stage in the kind of the life cycle if you compare where -- how far art has progressed over the past 10 years. So art started out being very transactional, and you're hearing now about how integrated that solution is. People are very, very protective about their IP. We have to -- it takes years to build up a fully kind of trusted relationship. We've got some guys who are going to be talking about that this afternoon a little bit. So it's one step at a time. We've got the added complexity as well of constant technological change that our clients are dealing with as well. So as we prove our value over time and continue to deliver for people, we expect these engagements to get bigger and bigger over time.

I have a similar question on Localization and Audio. How much of the time are you working on the whole global solution for a game? And how much of it are you doing really just only a bit of that alongside lots of other providers?

It's the full spectrum. It's really -- I don't think I can give you the percentage breakdown. We have quite a few clients for whom we do all languages and all audio on single game on a sort of evergreen basis, where we're continuously working on those titles. For a lot of the AAA games, they're still working a little bit on the kind of older model, where they'll have a number of different vendors providing different language mixes for translation and audio across a single title. But we're, generally speaking, increasingly being asked to package more and more languages together.

Yes. I mean the way our clients are operating on Localization is very different. We've got more than 300 clients, and I couldn't name 2 of them that work the same way. You have different geographies spread, where they are, where they sell. They've got different type of games, size, genre. They've got different development cycles as well. Therefore, they have -- there are different needs. When we talk about the translation and audio side, what we are seeing more and more is that we are assigned to do the audio of the games that we do translation for, which is first part of the consolidation process on their side, simplify the pipeline, the production pipeline. But also, we are working more and more with our colleagues because we see that there are, for example, areas where we translate, but then the Player Support, the people catch things that are being said in the game, which would make sense that we have a shared knowledge. But our clients still see them as 2 completely separate pillars. So I can say that right now, it's not a huge interaction between these different services. But there is a direction that every year, we see more consistent, larger engagement in terms of services.

[ Riley ] from Stifel. I suppose I was just wondering, given how quickly you've grown through acquisition, and it seems that on the whole, you tend to keep the underlying studio brands of anything that you acquire. Do your customers actually understand the scale of the group today? Or do they still think of it as a sort of a collection of smaller studios? Do you think that you're yet actually seeing the benefit of the scale that you're talking about, say?

It -- I think it depends. Some of our clients interact with us as the Keywords group, and they very much see the scale of the Keywords group and understand the way in which we work together across studios. But one of the reasons why we retain the brands, at least for a period of time, is that there are plenty of clients out there that have a very strong association directly with that particular brand. And we don't necessarily want to cut that association. So we're very much an organization that tries to -- what's the right word, tries to sort of mesh around our clients and how they want to interact with us. But what we do find over time, and we see this very strongly in art, we've certainly seen it in the testing businesses, is that over time, maintaining those distinct brands sometimes becomes obvious not to do that because the clients don't value the separate nature of the individual brands. They want to interact with the service on a more global scale. It is going to depend a little bit, I think, service line by service line, how that develops. So for something like Localization and testing, those brands have largely fallen away in terms of the engagement with clients and how the clients see us. But I should imagine that in something like Marketing and potentially in Game Development and so on, those brands endure for a bit longer. But we do what makes sense. So nobody at Keywords is forcing a change in brand. It normally becomes very obvious from the way in which clients are interacting and in the way in which our studios themselves want to be seen and branded.

Chirag Vadhia from HSBC. Just one on Game Development. Could you give some more details on the proprietary software solutions and the behavioral research consulting side that you've put in?

Yes. Absolutely. So we've got player research offices in Brighton and Montréal. And the work that goes on there is a consultation process where, at basically any stage of the Game Development cycle, the researchers there can analyze the game. So they can do market analysis, they can measure what attraction that particular game is going to have. Are you going to hit your target market? But then even on paper prototypes, they can investigate how well the game play will work, whether it's frustrating for players to engage with. They can take playable prototypes, do the same studies. And they can even take post-release games and run user play testing there as well. So they have fully equipped lab facilities where they can monitor where people struggle with games, where they enjoy them. Do they have problems with the interfaces and things like that? And it's got a huge amount of value to the game developers and publishers to understand the audience, figure out the frustrations and fix them hopefully before they even reach the market.

Richard Williamson from Edison. I was just interested to -- with the conversation about moving into more linear media, particularly from the audio side I suppose. But also, you see the questions from the audience to talk about -- to ask about AI and sort of technology solutions. To what degree when -- is the equation for linear media similar to the nonlinear games media? Or are you sort of having to crack a completely new nut there? And then how does technology -- or how is technology going to help you in that process?

I think I'll take that question if I might. So if you look at linear media and what they call subtitling and dubbing, and you look at games and what we call Localization and Audio, they're very similar in discipline. On the one hand, you're translating entertainment content. And on the other hand, you're doing -- having actors come into studios, record a voice to do the voice part of the experience, either the Italian voice for the actor that's in the movie, or indeed, with a game, it's the Italian voice that's associated with the character in the game. But that's where the similarity stops. Games are far more complex than movies. Movies are predefined. When a movie goes into localization or to audio, it's totally linear. You know the script. You know the character progression from start to finish over a 2-hour period or 3 hours, if you happen to have seen a very famous movie recently. Whereas a game is completely nonlinear. Your ability to understand the story in the first place is really quite hard because basically, the story is being driven by the interactions that are happening with the player and the nonplayable characters. When you look at the script, the script that you're actually translating is littered with placeholders, computer code placeholders that are acting on the content, the textual content and indeed, on the verbal content within the game. So it's a very, very much more complicated process and a larger process. Add to that the fact that in video games, we have since day dot lived with a process of simultaneous release into multiple languages; whereas in linear media, be that for television or film, they've always followed a waterfall model. So first, you produce that film in Hollywood. Then you get a release date in France. And after the English version has been done, you're probably dubbing the French version. At some point, you'll separately be dubbing the German version and so on. So what's happening now is you've got people like Netflix and Amazon and so on that have come into the market, and they're wanting to release their content simultaneously. The vendor structure in that market has been sort of struggling to adapt to that new way of working; whereas we -- that's the way we've always worked. We know no other way of doing it. So of course, there's a certain attraction for these companies in trying to engage with Keywords. Problem is of course, we're busy doing lots of other things as well. So there's only so much of that sort of work we can take on. But we're increasingly becoming successful and I think demonstrating our value in that space. I think we will move on to the next session. So thanks very much, guys. Actually, Jamie, you're up next, I believe. So I will hand back to you to talk about Game Development.

Yes. We've got some pretty interesting stuff I hope you find coming up. I just want to provide some context because you've heard me use phrases like co-development, full game development and porting earlier on in the slides. And I wanted to try and illustrate where these sit in the game development landscape within the Game Development service line. So on the top right there, we've got these blocks that represent development activities that our studios undertake. In general, as we go from left to right along that chart, the engagements get larger and get at the more wide skills and discipline mix involved. Sometimes our studios -- well, pretty much all of our studios undertake more than one of these activities as their core competencies and that can really help them maximize utilization. If they've got different size engagement going on at the same time, they can manage resources effectively. Now often an initial engagement will take place on the left-hand side of that chart with a new client. They might have a project that desperately needs resources, and they need bandwidth and engineers. Our studios can help them out with that. We can then demonstrate value, establish trust and build the relationship and start to promote that client along this value chain to larger engagements and more complex engagements. But similar to using that model for client promotion, we can also use that for studio development, studios who maybe come on board with Keywords who have a very core engineering focus. Given access to the right talent, right support from Keywords and the right opportunities for projects, they can develop into more sophisticated studios who are able to offer services that involve more of a disciplined mix, including producers, designers and artists. And some of the -- my colleagues who will be talking in a few minutes will outline how that works. But at Keywords, we can manage that transition of studios and the evolution of studios because we don't have to staff with unnecessary head count. As a studio evolves, we can use other service lines, other studios and really keep control of resources and maximize efficiency. But when studios become co-development or full game development-capable, they provide a unique gateway where clients can access the whole breadth of Keywords services to be able to deliver value to every stage of the game development cycle in each type of Game Development activity, whether that be Art, engineering, Localization, Audio, all of the things that you've heard about today. But we have to manage that evolution of our studios as well. We don't want to homogenize all of the studios and have them all offering the same thing. We -- there's still very high value in engineering resources and optimization specialists. And maintaining that full-spectrum offering is a real USP for us. So we've got 4 presentations coming up, starting with me, which is a fairly short presentation. And then we're going to hear 2 co-development engagements and about a full client development from my colleagues. So I'm going to talk about porting. Porting is the term used, and I'd better get this right, I guess, when a video game designed to run on one platform, be it an arcade cabinet, a console or a PC, is converted to run on a different platform. But there's a whole different -- there's a whole spectrum of porting activities. A client might be developing a game on a current commercial engine, and they're developing on the PC and the Xbox, but they need additional resources to support other platforms like Switch or PlayStation 4 with the technical requirements, optimizations and UI changes that are needed. At the other end of the spectrum, we've got 20-year-old games that have got a very old code base but that people want to play a game, but they need an awful lot of reengineering work to get them to work on current platforms. And that's -- it's the latter that I'm going to be talking about now. The studio that undertook this project is d3t. It's a U.K.-based studio up in Cheshire and joined the Keywords family in 2017 with 45 staff. It's since nearly doubled in size. Very strong technical bias but growing a creative team over time, so moving along that spectrum of offerings that we showed before. Shenmue I was a life simulator role-playing game that was released on the Dreamcast in 1999. And at the time, it was the most expensive video game ever made with a development and marketing budget of $47 million to $70 million estimated. Shenmue II was released in 2001 on Dreamcast and Xbox. And nearly 20 years later, d3t was commissioned to bring these titles back to life on current-generation consoles. So the aim of a technical port is to be as faithful to the original game as possible, especially because games like these have got real cult followings, very hardcore fans. And one thing about 20-year-old games is people tend to have quite a rose-tinted view of them. At the time, standard-definition CRT TVs were quite forgiving of standard-definition graphics. Playing those games on a HD TV now, they're far less forgiving of the screens. So we wanted to allow the original game to be played exactly how it was 20 years ago but in a high-resolution widescreen format. So I'm just going to provide a few examples of why it's technically difficult and where the time and the effort goes in order to actually create something that looks like people remember it looked 20 years ago. It's not as easy as it sounds. There were a lot of technical challenges along the way. It was a huge forensic task to unpick a 20-year-old code base and examine the source code and all of the assets that came with it. These were huge open-world games with thousands of assets and pieces of geometry, sometimes parts of the world that it wasn't immediately obvious even existed. So we had to use lots of QA testers to fully play through the game and map out where all the content of the world would be. And porting legacy titles to modern consoles often involves a change of architecture. So you have to port the entire code base from 32-bit to 64-bit. And that's where working with a studio who's got previous experience of this type of work really pays dividends. d3t in particular has got proven strategies for this type of work. They know the pitfalls to avoid. They know the types of bugs to expect and how to minimize them. And this game was actually shipped on a proprietary d3t game engine as well that was built in order to quickly port this and efficiently to new consoles. A lot of the comments in the source code were in Japanese. And in Shenmue I, even the scripts that drove the game logic were in Japanese language with Japanese function names, Japanese variables. So it was quite a challenge for a Western studio. Dreamcast also had some pretty advanced technology for its time. We had custom hardware to support graphics and audio functions. And we didn't have the original source code for the libraries that ran those devices. So our engineers had to create software versions of these hardware devices and tweak them and play with them and use almost empirical method to try and simulate the output from the original game. And this was fundamental because it affected the way that shadows and lighting looked in the game. And especially if there's any Dreamcast fans out there, there was a feature of the Dreamcast called order-independent alpha sorting, which was -- resulted in a few late nights for some of our guys, but they do like the challenge. Some of the problems were impossible to overcome. When we first switched to widescreen format, there was a cut scene in which Ryo's hands, the lead character, came in from the side of the screen. And when we opened the scaled view, it became apparent that these were disembodied hands with no wrists or upper arms. The game had been optimized so much that specific hands were made for specific scenes. And without reauthoring thousands of assets, we had to put some decorative black bars at the side of the screen and switch back to good old 4:3 for some cut scenes. But that was just a very kind of quick glimpse into some of the technical difficulties and challenges that this type of release project can present. But Shenmue I and II are pretty extreme examples, but our team does love a technical challenge. The results were 2 20-year-old games brought to life on 3 current-generation platforms. And the Metacritic User scores that we got confirmed to the team that they had done a successful and faithful job in recreating the games. Now the technical challenges of these types of projects have got a cumulative effect. They do upskill the team. So although every job is different, technical problem solving does improve within the team, and they get better and better and more and more efficient. And of course, there's lots of legacy games out there that can benefit from this type of treatment. It's also very, very relevant to the time period where we are now, where a new console life cycle is about to start and there'll be lots of content that publishers are wanting to bring to the new consoles. So more experience of a broader, disciplined team involving embedded QA, art, production, designers and things allows d3t to kind of take one step further along the value chain as well, starting to offer more co-development services and potentially full game development. And although the deep technical roots of d3t still will mean that they offer core engineering services into the future, I'm sure they're going to be a very grounded studio profile that's able to take on larger and longer-term engagements. So immediately following a quick video that I'm about to show, I'll -- we'll be hearing Alan from Sperasoft talk about a co-development engagement from Sperasoft in Russia, in Saint Petersburg. Just before that, we'll take a quick look at a short video and hopefully see the original beauty of Shenmue from 20 years ago but in high resolution on current consoles. [Presentation]

Hi, everybody. I'm Alan Van Slyke. I'm in charge of production at Sperasoft. And today, we're going to talk to you a little bit about a co-development effort we had with our longtime partner, Ubisoft, on Assassin's Creed Origins. A little bit about the company. We joined the Keywords family in 2017. We have multiple development studios and we're approaching 600 people, but most of our development efforts are centered in Saint Petersburg, Russia. As Jamie mentioned, we're in the Game Development service line. We have -- of those 600 people, those are multidisciplinary, so it's art, engineering, QA. And we're capable of delivering many types of engagements, but we're probably best known for our AAA work in mobile and on platform games with some of the top publishers like you see here. And these are truly partnerships for us. These are long-term partnerships, sometimes since company inception, 15 years ago, that tend to give us recurring work and grow the opportunities over time. And of course, working with some of these top publishers gives us opportunity to work with many of the top franchises. These are all billion-dollar franchises. And as Andrew mentioned earlier, kind of size, we get size, but also working on franchises like this is also a huge carrot and what allows us to attract and retain the best talent and deliver AAA-quality work. So these are all -- at any given time, we have 20-plus engagements happening of different size. And so this is a small snapshot of either current or recent engagements that have had team sizes from 20 to 120 people plus. But today, we're going to select one of those engagements to dig into more deeply, Assassin's Creed Origins. Two pieces of context that I think will help before we dig in, the first about the franchise itself. If you're unfamiliar with Assassin's Creed, a huge franchise that spans many different media types: games, books, comics, movies. And historically, it's based upon kind of like realism, open-world action adventure, and it always has an actual historical setting. So in this case, we're talking about Assassin's Creed Origins, which took place in ancient Egypt. And about the co-development, Jamie mentioned earlier what is co-development. I'll expand upon it a little bit. And Jon and Xu, as they talk about their case studies, might add to this definition. But co-development is really taking a feature, carving out a feature, multiple features or even an entire game and being creatively ownership over it but also having a multidisciplinary team that will build everything and contribute everything from kind of design and prototyping, fully through implementation and bug fix and support. And these are teams that are embedding into the primary development teams fully. So same source repository, same bug repository, same project methodology, et cetera. Okay. So with that in mind, we will take a look at a trailer that shows some of the goodness that we delivered for the -- within the Assassin's Creed Origins, this open-world action adventure game that took place in ancient Egypt. The features that we carved out from Sperasoft was wildlife. So everything that you see in Assassin's Creed Origins with regards to wildlife was delivered by Sperasoft. So we'll take a look at the trailer, and I'll tell you a little bit more about it. [Presentation]

So in addition to all the animals that we delivered, which I think was 30-plus animals -- and again, the idea here is we're delivering everything that's required to make the game come to life in this open-world action adventure. So of the 30 animals -- 30-plus animals, each has multiple kind of core deliveries or functionality. The first is that they have to have a fight system. So fighting animal versus animal, animal versus player, animal versus NPC, and that means all the damage, the health indicators, the animations, everything that's required to make the fight systems feel compelling. The second is navigation. And so across air, sea and land, the animals all need the navigation that traverse with the AI to be able to -- the crocodile who's in the water needs to be able to leap from the water and snatch the gazelle that's on land. And so the animals have to have fully aware navigation systems. And lastly, the complex behaviors that you're seeing. So predator, prey, attack, flee, hurting, grazing, all of the rich behaviors that you see, again, like those are critical components for every animal to have and again, is a big part of what makes the player feel like they're immersed. So let's take a look at the rest of the trailer and enjoy. [Presentation]

This is also -- as you can imagine, a title like this, carving out wildlife as an open-world component, it takes a village -- back to Andrew. It takes a village to build a title like this. And this is the architecture kind of like geographically of what the effort that it took to build a title like this. So Ubisoft Montréal as the lead studio and 6 internal Ubisoft studios geographically across the world with Sperasoft as the only external development partner on this engagement. And so again, we're integrated fully into their tool set, their pipeline. We're checking into the same source repository. We are essentially an extension of the Ubisoft Montréal headquarters' development effort. And regarding opportunities for growth and kind of -- Jamie mentioned it earlier but finding surprises and finding opportunities for growth within a game even in the middle of the development cycle, as we took the wildlife mandate and as that trust equity was built with Ubisoft about delivery and quality of deliveries, the scope grew and the team size grew. And they offered for us to additionally expand the team and take an additional component of these epic battles, these war elephants. So the war elephant is something that we initially proposed. We prototyped designs and ultimately ended up delivering 4 of these into the shipped product. And these are really epic moments. And if you're playing the game, this is the water cooler moment that when you're fighting one of these epic war elephants, that's what you're talking to with your colleagues or your friends the day after at the office. And regarding other opportunities, we see many. Serialized engagements, I think this is what Andrew referred to as evergreen work, very similar to that. But as you can imagine, these are 12-, 18-, 24-month engagements when you're working on AAA development. And there's a mutual investment. Our team is flying to Montréal. Montréal team is flying to us. We're sending people around the world. And we're learning the franchise sensibilities, the design sensibilities. There's complete transparency on the teams on both sides. So everybody makes professional relationships on both sides. And so once you have this investment and the engagement and you're delivering a AAA quality, then it opens the door for serialized engagements and additional work. And so this team that you just saw that worked on and delivered Assassin's Creed Origins went on to work on Assassin's Creed Odyssey and shipped that and continues to be engaged with Ubisoft to this day, an increased team size and increased responsibilities. The second is that there's not only a primary development cycle, but there's traditionally a very long tail as well. So we'll sign up usually initially for the primary development engagement. And then -- but as the game is approaching release, the games as a service, live operations, downloadable content, there's that -- again, with that same reduced or eliminated barrier to entry, we can work with the partner to roll the team on to additional content engagements after the primary game is actually shipped and bridge to the next project. And Day 0 studio strategies is something that we're observing that's a more recent opportunity. But what we're seeing is that as these AAA games require 300, 400, 500 people or beyond to build, we're seeing top publishers that are opening studios, intentionally being lean operationally internally and minimizing their kind of like core domain experts but seeking at Day 0 to engage with external co-developers as part of their strategy. So if you can imagine, the studio has 3, 5, 10 people, and they're already reaching out to secure perhaps 100 people on our side, which not only saves them money internally but also bootstraps and accelerates that effort from the Day 0 time where they open the studio to the time that they can actually be delivering and prototyping and delivering product because we can insert and give them 20, 50, 70 people and actually be part of their primary development strategy from Day 0. And finally, with our joining the Keywords family in 2017 -- prior to this day, as part of our kind of like business development strategy and working with potential partners, we always had to kind of expose that we had -- although we're very full service, right? We do other engineering, front end, back end, but we've never done audio at Sperasoft and we don't do cinematics. There's a few areas that are just not in our wheelhouse to do. And those are always things that we would expose to the partners. And now those -- the tables have turned, and those have become opportunities. So we're seeing increased amount of work coming in because we can say not only do we do AAA work in all of these domains and we can do all these things for you. And in addition, our Keywords sister studios can handle these other things. And we can be a one-stop, the go-to shop that allows you to succeed completely on your product. So lots of opportunities. We see continued growth and exciting stuff to work on. So thanks very much. Next is Xu from Studio Gobo.

Good afternoon. My name is Xu. I'm the Game Director from Studio Gobo. Studio Gobo is a co-development studio. We are located in Brighton. We joined Keywords in 2018 and currently have over 100 people working on multiple projects. It is my pleasure today to share with you some of our work on Synced: Off-Planet. It is a project that we are collaborating with Tencent's in-house studio in Shanghai. First, to kick things off, I have a very short video showing some of the early progress of the project. Let's take a look. [Presentation]

The world in Synced is set in 5 to 10 years' time in future. And the world is in crisis and is infected by millions of AI cyborgs. And it is a competitive multiplayer game where over -- about 50 players compete against each other as well as those AI cyborgs. The goal of the game is to escape planet Earth in a space shuttle with your teammates. I think the simpler explanation of the game play will be to think Fortnite or Apex Legends but now add hundreds of robots in it. But I think more seriously, the key differentiator for this product is on top of all those exciting game play, it also has a very engaging story and narrative. Between those -- between runs of exciting matches, you as a player return to this crashed spaceship, a shelter called Haven, where you'll meet other characters and you'll uncover the histories and conspiracies leading up to this huge crisis. And it is this continuous and ambitious narrative development that is really -- sets this game apart. That is not something that is seen in other products of the same genre. And Studio Gobo's main responsibility is actually Haven and your homestead, where the characters and the story are developed, where player progression and monetization take place. And as Alan mentioned, co-development is cross-disciplinary, is creatively led. And we are responsible for the concept, layout, character animations, AIs, visual effects as well as many other features for this project. And we have a team of designers, artists, programmers, visual effects specialists, animators, dub testers all working together on this project. So really excited, covering the whole full development cycle on this product. And similar to the war elephant story that shortly after we started on this project, we have already managed to expand our scope. And now we are taking on a new game mode, which accounts for about 1/3 of the game content. At this stage, I can't reveal any of the details of that game mode, but it is a good example to show very often after we start on a project and win the trust from the clients, we are able to quickly expand our collaboration to take on more work. We're very excited about this opportunity and not because of -- not just because of its high ambition and standards, but this is also our first collaboration with a Chinese developer. And more and more often that I feel we're not just recognized for our capability, our reliability, our capacity to complement and lead their studios. And as highlighted in Clark's quote there, the Creative Director from -- on this project, I think I feel more and more often that we are recognized for our expertise and our experience in what we do. And I think it is our specialist knowledge in the character action genre that initiated this collaboration. Another story is -- worth mentioning is shortly after we started on this project, we noticed the game's visual design as well as user interface can be improved. And we thought this could be a great match between Tencent and SPOV. SPOV is our world-class design agency within the Keywords group. They have worked on many well-known franchises such as Call of Duty. So we made the introduction and very quickly, as always, SPOV quickly impressed Tencent and have started working on a separate engagement from Gobo's work and -- to work on new user interface design for them. And Synced: Off Planet currently is in production. But after its release, it will be operated as a live service. So we very much see, as with our other projects, this grows into a long-term partnership. And we hope this will bring more opportunities for us to work with many other talent at Keywords Studios. I'm now going to hand over to Jon, Studio Head of Electric Square to share his stories of Forza Street.

Thank you, Xu. Sorry, first of all, I should point out that Studio Gobo are based in Hove actually and not Brighton, whereas Electric Square are based in Brighton. So I'm the Studio Head of -- or the Head of Studios for Electric Square, and I'm here to talk about our experience working with Microsoft's Turn 10 Studios on the Forza Street franchise. So Electric Square was founded in 2015. We originally set up as the sister studio to Studio Gobo, and our initial remit was to focus on mobile and free-to-play. We have 3 studios at the moment: Brighton, which is the first studio, our HQ. In November last year, we set up a studio at Leamington Spa. And more recently, in fact, it was announced today in the press, we've set up a studio in Singapore. Now the reason why we picked Leamington Spa and Singapore are really because they are amazing talent bases for the top game development. So that was our driving factor in picking those locations. We're currently at 150 staff across the 3 studios, and we're targeting 200 by the end of 2020, which we feel is very realistic. We focus on full game development. We've done some co-devs. There's a couple of co-devs we've done in the last 5 years. But really, we're equipped to do full kind of end-to-end game development. And we have very specific expertise in racing. Lots of us are from a racing game background. We're mobile-experienced, and we've got lots of experience in free-to-play games and live operations. We've had the pleasure over the last few years of working with some great partners including Microsoft, Mattel and Amazon. So Forza Street is a -- it's a free-to-play casual game based around a fictional street-racing event set in Miami. It was commissioned by Microsoft's Turn 10 Studios back in 2016. They approached us and said they wanted to take Forza, which is one of their top IPs, which at that time only existed on Xbox consoles. They wanted us to help them take it to a wider audience, so people who perhaps liked cars but wouldn't necessarily go out and buy an Xbox and play a simulation racing game. So the game is very much designed for a different audience than the console products. It is a casual game. It's already out on Windows 10. We launched that product last April. And we're currently working on mobile versions, which will follow soon. And the full client development has been done by Electric Square. What I mean by client development is we produce all of the player-facing content, but Microsoft are taking care of back-end services as well as marketing and user acquisition. So now we're going to watch a trailer. [Presentation]

Thank you. So why did Microsoft's Turn 10 come to us? We were a new studio at the time. We'd only sort of been in existence for a few months at that point. But really, it was because of our rich racing game heritage. So most of the original C team for Electric Square worked at a number of companies in Brighton, Climax Racing and Black Rock Studios, and those were racing specialist studios. So a lot of us have over 20 years' experience making racing games. A bunch of us also had some pretty relevant experience making mobile and free-to-play games. Key members of the senior team worked on titles such as Angry Birds Go! and CSR Racing. Now those are 2 of the most commercially successful racing mobile games ever made. So that was also very relevant to Microsoft and Turn 10, and they initially engaged in a prototype phase. So we had 3 months to kind of prove the core concept out. And that involved a bit of sort of mitigating the stuff that happens outside of the game but mostly what the kind of racing experience was. We hit all the right marks with that prototype so that rolled into a full contract. So we took care of the full client development, as I mentioned earlier. So that was everything really from a concept stage right the way through to launching the game on Windows 10 last April. Since then, we've been in what we call the live ops phase. At Electric Square, we have -- we take pretty much -- we've pretty much got every aspect covered. So we have artists, designers, programmers, producers, QA, audio, analytics. And in the last sort of 6 months, we've developed a community management department as well. And since launching on Win10, the team have been -- they've been developing the mobile versions, but they've also been looking at data from the live version. They've been translating that to kind of design changes to target specific KPIs relating to the product's performance, mainly sort of surrounding retention, retaining users as well as monetization. We've had plenty of time to develop a really strong relationship with Microsoft. So it's -- we're running into our fourth year now. And we've got a very close relationship with the Turn 10 Forza Street team -- the Forza Street leadership team. So as well as having weekly one-to-ones on an individual level with our counterparts within Turn 10, we also have weekly team meetings over Skype. So we all sit in a room and their leadership team sits in a room, and we discuss the major issues on the project. And every 6 weeks, to coincide with our milestones and our milestone planning, the leadership team from Seattle come and visit our studio in Brighton. And we sit down and we collaboratively plan the next phase of development. When you're -- particularly when you're in live ops, it's important to be able to kind of plan together and also change, change plans, depending on how users are engaging with your product. So we do that collaboratively, and that system has been working really well. We've also been collaborating with some internal studios within Keywords. I think initially, it's worth calling out Studio Gobo. So when we started Electric Square, we were a small company. We didn't have enough people at that point to complete this project. So we borrowed some people from Studio Gobo, many of whom stayed at Electric Square where they're now fully fledged electrons. But really, we couldn't have done that project without the support of Studio Gobo and without those guys coming and sort of helping us kick-start everything. We've also had testing support from the QA service line, and Environment Art has been supplied and supported by Mindwalk. So those collaborations really came about after we became part of Keywords. And it was very easy when Microsoft came to us and said, "Can you sort of help out in these areas?" to actually kind of bring our colleagues and say, "Can we spin something up? Can you help out on this project?" So that was one of the many benefits of being part of Keywords. So now I'm handing back to you, Andrew. Is that right?

I think we got to do a QA.

Okay. Thank you.

Dan Ridsdale from Edison. A few years ago, you sorted of mooted the opportunity of potentially taking a big outsourcing deal, taking a team perhaps out of a large developer and winning the outsourced business that way. Is that kind of deal still on the table? Or are you winning that business organically and through your current business development initiatives?

Yes. I wish you hadn't reminded me of that but yes. I'm still -- I still believe that at some point, some of the activities that are done internally at the client will be externalized. Maybe it's because -- maybe the reason it hasn't happened as much -- I think we've done 2 of those sort of spinout engagements with clients so far. But I think one of the reasons why it hasn't happened more is perhaps because we haven't had the scale or we haven't been seen to be this go-to provider. I think increasingly, as we're able to sort of differentiate ourselves from the crowd, our clients might become more and more confident and comfortable in that sort of discussion with us. The discussions, by the way, are ongoing. We just haven't seen the execution at scale yet in terms of those.

Ken Rumph from Jefferies. Question for Alan. Ubisoft make a lot of the kind of teamwork and cross-disciplinary teams. They also -- on wildlife, for instance, they made a point about how, as you go up a mountain, you meet different wildlife and stuff like this, that's how detailed it all is. How do you fit into that in a sense? Jon talked a bit about how they work with Turn 10. So how are you working in that kind of seamless cross-disciplinary way with Ubi?

Yes. So a huge part of -- when we spin on to any franchise even before -- almost as soon as we sign the contract, even before we set up the development environments as we're ramping our team around, the first thing that we're doing is familiarizing our team and our designers and producers with the franchise sensibilities. So we're picking up all the previous games. We're understanding all the sensibilities that are set in realism. As you said, historical accuracy and also geographic accuracy, everything else, so that everything that we can do from the time that we engage with the partner is as closely aligned already with their sensibilities so that we can as quickly as possible kind of like be developing into the game. So it's really all about understanding what the franchise is about, doing our homework and becoming familiar with it. And then once we're actually collaborating with a partner, aligning those 2 things as closely as possible, as quickly as possible.

Can I just ask how you go about pricing a co-development or full game development type of contract? And would you ever consider something like a revenue share model?

Maybe I'll do that. So obviously, specific engagements with specific clients are off limits in terms of giving you too much detail into the commercials around those. In terms of rev share, so first of all, if you consider Game Development now, it's very -- I actually ran a software development business for a while. And the nice thing about software development is you can actually specify right upfront exactly what you're going to be delivering. And then it's a question of delivering to the brief. The difficulty with game development is you often don't really know the game you're going to end up with until you get into it, and you kind of find this fun factor and you find the engagement. So it's very important in all our engagements to have that flexibility. So the contractual nature of it needs to allow a certain degree of flexibility because you've got to be able to input to the game. Your client has got to be able to ask you to actually take on a bigger chunk of the work than perhaps they're originally envisaging. When it comes to rev share, what we don't want to do is to risk our own capital in making games. We're very set in our role within the industry of being -- providing a service to our clients. So one of the key differentiators, we believe, between, say, a publisher and the sort of work that we do is that we don't take that risk. The publisher takes the risk to commit $100 million to a development project, expecting to be able to make that back and hopefully 10, 100x more when they get that game to market. So it's inappropriate, I think, for us to do work for free in exchange for a back-end royalty. We do, however, have engagements where we do have a back-end royalty arrangement. It's usually fairly small, but it's normally as a kind of an incentive to produce the best possible game we can produce rather than in compensation for us doing work at a heavily discounted rate or for free.

It's Natasha Brilliant from Citi. I just wanted to get your experience on what it was like to actually join Keywords. You've touched upon some of the benefits and things that go well, but were there any challenges that you encountered? So I'm not asking you. And how quickly did you feel that you were sort of fully integrated within the first month? Or did it take a year to ramp up? Just sort of keen to hear your thoughts on that.

Is your question for me?

Well, okay.

Or who wants to answer it?

Why don't we start with Jon?

Sure. So from my perspective, my -- I've worked in different sort of game development environments, from work-for-hire to kind of self-publishing. And really, the work-for-hire from a -- I'm a designer by trade. And from a creative perspective, work-for-hire is very exciting because you get to work with lots of different partners and lots of different IP. And you could be doing one thing from 1 year to the next which is quite different. So when we initially started talking to Keywords about becoming part of the Keywords family, it was -- it felt like a very natural fit because the business model was the same. So from my perspective, as an independent joining Keywords, we didn't really change the way we operated. All the things that were good about being a work-for-hire studio was still there. None of that changed. But we didn't have the fear of being a kind of small independent studio who could live or die based on whether the next project is canceled or not. So for me, it was great because the business that I love didn't change, but we had this security which Keywords provided. And we also became part of the family, and the whole cross-collaboration aspect of it is really great. It's nice to build those relationships with those studios. It's nice to be able to pick up the phone and ask someone for support rather than having to go out and start building new relationships. So for me, it's been very positive, and the changes have all been positive. And the things I loved about working for Electric Square as an independent work-for-hire company are still there now that we're part of Keywords.