We believe Keywords has a very strong business model, as it provides solutions throughout the development cycle. Keywords is an infrastructure play, benefitting from gaming industry tailwinds. 2021 is a step-change year. Thereafter we believe KWS EPS will continue to compound at attractive double-digit % rates.Buy
Companies: Keywords Studios plc
Edison Investment Research is terminating coverage on Keywords Studios (KWS). Please note you should no longer rely on any previous research or estimates for this company. All forecasts should now be considered redundant.
Keywords has delivered exceptional growth in H121, reflecting continued strong demand from video games developers driven by gamers desperate for new content. Expected revenues of €238m are up c 37% y-o-y, with organic growth of 23% as all service lines performed well against a weak H120 comparator (initial impact of COVID-19). Margins were also elevated, with adjusted PBT of €40m, an 80% y-o-y increase and a margin of 16.8%, continuing the uplift in margins seen in H220. With costs expected to s
Having stepped back temporarily in March 2021 for health reasons, Andrew Day has now confirmed that he will take early retirement after 12 years as CEO of Keywords. Accordingly, the board has initiated the search for a full-time replacement. Jon Hauck (CFO, M&A) and Sonia Sedler (COO and operations) will continue to operate as interim CEOs until the search is complete. In parallel, Keywords provided a trading update, with the group reporting 25% l-f-l organic revenue growth and overall revenue g
Keywords’ FY20 results were in line with its trading update (FY20 revenues €373.5m, adjusted PBT €55.0m), with 12% organic growth in FY20 despite COVID-19. Adjusted EBITDA rose 29% to €74.2m, with PBT up 35% to €55.0m and adjusted PBT margins climbing to 14.7%, close to management’s 15% long-term target. We believe the outlook for FY21 looks benign, with demand for Keywords’ services continuing to build in the short to medium term. Sonia Sedler joined in January as COO to strengthen the manageme
Buoyed by exceptional demand for games during lockdown and boosted by the start of the console transition, the global games industry showed year-on-year growth of 20% in FY20 (Newzoo). Benefiting from increased industry development spending and the growth in new releases, Keywords delivered underlying organic revenue growth of 12%, with FY20 revenues rising 14% y-o-y. Assuming no worsening impact from COVID-19, FY21 looks set to be a more settled year. With publishers launching increasing number
Management has confirmed that FY20 revenues and adjusted PBT will be marginally ahead of guidance, with revenues of €373m (guidance c €367m) and adjusted PBT of €55m (guidance c €52m). This outperformance has been driven by a strong close to the year, together with an additional revenue contribution from December’s M&A. Given the headwinds from COVID-19 in FY20, underlying organic revenue growth of 12% (H120: 8.0%, FY19: 15.5%) is a hugely resilient performance. The group is set well for FY21 an
Adding to Keywords’ US$50m acquisition of High Voltage Software earlier in the week, it has announced a further two smaller acquisitions: Indigo Pearl, a UK PR agency specialising in the video games sector, and Jinglebell, a Milan-based studio that provides audio recording, music production and sound design for video games and advertising. Keywords is to pay up to £2m for Indigo Pearl, 1.1x FY20e revenues and 7.1x FY20e adjusted EBITDA, and up to €1.8m for Jinglebell, equating to 0.9x FY20e reve
Keywords has announced its largest deal of the year so far, the acquisition of High Voltage Software (HVS), a US-based, full-service, work-for-hire, AAA games developer for up to US$50m, payable two-thirds up front, with one-third after 12 months subject to performance conditions. Keywords will make an initial payment of US$33.5m, with US$23.75m in cash. The total consideration represents 5.6x HVS FY21e EBITDA (c US$9m), within Keywords’ target range of 5–7x EBITDA. HVS is Keywords’ fifth deal o
In its trading update, management confirmed that adjusted FY20e PBT is expected to be c €52m, a 27% increase y-o-y and 12.7% ahead of our prior estimate, with revenues of €367m, 0.5% ahead of our prior estimate. FY20e margins of 14.2% vs 12.5% in FY19 are driven by improved operational leverage and tight cost control, together with COVID-19 related cost reduction (eg marketing, travel). Having pared back our forecasts at the start of the COVID-19 pandemic, we now upgrade our FY20 estimates for a
Keywords Studios has again showed the resilience of its model in H120, delivering 8% l-f-l revenue growth, 19% adjusted EBITDA growth and 17% adjusted EPS growth despite the impact of COVID-19. Adjusted EBITDA margins of 17.8% have held up better than we expected. Looking ahead, we see sustained industry growth, led by the console transition in Q420, with publishers increasingly recognising the resilience Keywords adds to their development processes. Following its third acquisition of the year,
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