Keywords Studios PLC

LSE:KWS

Earnings Call Analysis

Strong Revenue and Profit Growth with Strategic M&A

Despite market headwinds, including a well-publicized U.S. entertainment strike and FX headwinds, the company achieved a 13% revenue increase to EUR 780 million and a notable 9% organic growth, excluding strike and FX effects. The company maintained strong profitability with an adjusted operating profit of EUR 122 million, surpassing its 15% margin guidance with 15.6%. A record year in M&A with EUR 225 million in total consideration was highlighted, along with successful integration of new additions like the Multiplayer Group (MPG). The company’s divisions showed resilience, with particular strength in the Create division, which saw a 22% revenue growth driven by organic growth and expansions in Australia and the U.K. Despite a challenging year for the Globalize division due to the strikes, it outperformed the market. Adjusted EBITDA rose by 8%, operating profit by 6%, and the Adjusted cash conversion rate was strong at 82%. The company ended the year with a conservative net leverage of 0.4x EBITDA, signaling efficient capital management and a strong financial position. Looking ahead, the company anticipates a surge in demand post-strike and continues to focus on cost management, technology investment, and efficiencies to fuel further growth.

Sustained Revenue Growth Amidst Market Challenges

In a year marked by resilience and adaptation, the company confronted industry headwinds with strategic acumen. Despite the challenge of a large-scale strike affecting the U.S. entertainment industry, they delivered 13% revenue growth, reaching EUR 780 million. This growth was bolstered by a 9% organic expansion, excluding strike and FX impacts, and buttressed by M&A activities. Operating profit reached the high end of expectations at EUR 122 million, constituting a 15.6% margin, outperforming the 15% forecast. The company also made strides in securing EUR 225 million through mergers and acquisitions, nurturing their record year in this domain.

Cash Flow and Profitability: A Robust Foundation

The firm showcased a solid grasp on its financial levers, maintaining a healthy cash conversion rate of over 82% and profit margins that surpassed guidance. Efforts to streamline costs buttressed both profitability and cash flow health, leading to a performance that aligns with the company's steadfast reputation for fiscal stewardship. Even as the industry navigated disparate performances, the company sustained double-digit revenue growth each year since its public debut, underscoring its unwavering commitment to growth and profitability.

Looking Ahead: Growth and Margin Assurance

While recent strikes have paused, the entertainment sector's recovery is expected to spark increasing demand. In light of this, the company anticipates a continued revenue uptick through organic growth and M&A. As they navigate forward, they have set a target to sustain operating profit margins above 15%, relying on cost control, efficiency programs, and the integration of automation. Margins are forecasted to steadily improve throughout the year, reflective of a recovering industry, with a tax rate stable at around 22%, capital expenditure consistent with previous years at about 23% of sales, and the expectation of maintaining approximately 80% cash conversion.

Earnings Call Transcript 2023-Q4

[Bertrand J. F. Bodson, executive]

Hi, everyone. Thank you for joining us for our full year '23 results. Great to see many of you in the room. Great to have many of you as well on screen. And particularly, thank you as well to the ones who have been following us for a very long time. I can see many family friends here as well and a warm welcome to the ones who are new to the story.

In terms of agenda, Rob and I have a pretty big agenda today. I'll start with a quick summary. Rob will come in to share the financial highlights. We'll then go in strategy, where I'm going to spend a little bit more time on a couple of topics, especially strategic partnerships and how we've been developing relationship more deeply with some of our clients, and I'll go long on some of the tech developments that we have made.

We'll do a section on M&A. I think it's an important topic. We've had a record year last year. I thought that it was worth showing a little bit more of what is under the hood of it before getting to outlook and then Q&A. So in terms of 2023, we've had strong results in a challenging market. We've been extending our market leadership position across the board, across the group. I think it's probably a year of strong resilience as well showing the diversification of the model, showing the resilience of what we can do, staying very close to our clients, at the same time, making sure that we have the right cost controls in place.

It translates in terms of EUR 780 million of revenue for the year, which is 13% growth in AAR, 17% growth in terms of CER. We've had 9% organic growth, excluding the strike and FX. Adjusted operating profit came on the high ends of the range at EUR 122 million, 15.6% margin as we're guiding for 15%. And as I just said, a record year in terms of M&A with EUR 225 million of total consideration. I'll say a little bit more as well about the latest addition to the family called MPG, the Multiplayer Group, very proud to have them on board.

So clearly, there have been some headwinds in the market last year. There still are. I think they are no surprise at all to anyone in the room who follows the industry, but you have seen many of the publishers of our clients who are making sure that they focus on the core IPs where they can really go and win. A lot of those tend to be AAAs when -- which is a space where we naturally operate. You've seen as well quite a few of our clients being more cost conscious. So it hasn't been just growth at all costs. So the cost side has been an important factor in all of this.

You've seen a lot of job losses as well in the market, but it's more publishers restructuring their own model, reshaping for what's coming ahead. This forced us to play a little bit more [indiscernible] we can be at the right place at the right IPs add something that we have the type of agility to most competitors to take that on.

And lastly, the strike, yes, the strike was resolved at the end of last year on the entertainment space. But at the same time, it still takes some time and will take some time to ramp up properly throughout H1. This is very natural. This is the machine that is being brought back to full speed and up and running, you got the producers who are getting back in the studios and have discussions with many of those. We tend to come on the tail end of that, especially on the dubbing side and on the marketing side, once the production are getting ready to go on the streaming platforms as such but with a lot of volume coming on the back of that. Interestingly, when you look at that, I'm very confident about what's coming ahead when you look at the midterm. In terms of medium terms, if you take a mirror of what I just described, many of those trends are really playing in our favor. And actually, even the reason why we exist in the first place.

Firstly, you see many clients where we are very close to them. We -- and their boardrooms where we do CXOs, talking about the business model and how do they use that particular time to reshape their business model in a way that it's probably less fixed cost and more variable cost with some fairly big changes. So we have been trying to promote that as well for many years. This is probably one of the catalysts that helps getting into those. There is also a flight to quality, which is fascinating to see in those times. You want to make sure that you have partners that are robust, that really have a good platform that can do the credit side, they can do the testing side, that can do the engagement side and that are going to be there for the long term. We are known for quality in the market.

Again, we're known for AAA for the quality and the strength of our studios as well. That has helped us as well gain share consistently. Very interesting as well, new trend is that you get to see new players coming into our space, attracted by the 3, 3.5 billion players that are in the industry, a young audience, you have seen Disney putting 1.5 billion investment into Epic very recently. You saw some announcements from others in that space as -- we're also having a very strong presence in the space, Mattel, Lego and others, but that's very interesting because that's fresh content coming in, fresh IP -- this is why they are coming in while looking at partners to develop their presence into the space. I'll share a bit more on that later.

And more importantly of all, if you get to see the stats on Steam in terms of viewers, the players are there. So you have latest count, [indiscernible] players, incredible amount of activity, matching the needs of our clients. I think that's something that probably explains some of the resilience that we have in our model.

But also the more important part to me is more subtle. It's more -- it shows the agility of our model, the ability to keep evolving what Keywords stands for. And it's the first time that -- first year that Create became bigger than globalized. A lot of it driven organically, one of the highest margin side of our business, very strong value added. It's actually more than 50% of EBITDA margin, but also gives you a sense if you fast forward of the agility that we can bring in the model through M&A or organically of also taking on new trends that are coming in, whether it's adjacencies, whether it's technology.

So all in all, when you look at all this, that gives us confidence to reiterate compounding growth, confidence in the resilience of the business itself. As Rob and I have been talking about, and Jon, a lot is 10% sent organic growth on the mid-term level, 15% adjusted operating profit on the cash conversion, we just did 82% this year. And I'll double down a little bit on the M&A story when I come back on it.

So on that note, I'll pass on to Rob to share some of the details on the financial side.

[Robert Kingston, executive]

Great. Good morning, everybody. It's a pleasure to be here. I'm now in the role now for about 8 months, and it's obviously been a busy period with everything going on in the business in the industry, but I'm delighted to present a good set of results for us today.

So turning to the key themes from my perspective then. So we delivered a strong revenue growth despite obviously the more mixed performance in the industry. At the same time, we've taken action on costs, where it makes sense and have delivered profit margins ahead of guidance and a strong performance on cash. We also invested in the future, both in terms of technology and M&A and with our new RCF, we have plenty of liquidity and firepower to deliver on our growth strategy.

So looking at the key KPIs, you'll be familiar with most of the numbers here on this slide, but I'm keen to focus more on the second row. I'm really pleased to continue our investment into M&A as part of our disciplined allocation of capital. And across the year, we announced 5 high-quality deals worth EUR 225 million. And as you know, we can add considerable value to the businesses that we bring into the group, and Bertrand will talk more about that later in the presentation. CapEx was H1 weighted in line with our guidance of 4% to 5%. And really, that supports obviously the organic growth in the business, but also building out our product platform with R&D. And if you turn to the cash conversion, you remember, H1, we are running at around 33% at the half, obviously due to cash flow timings. And it was pleasing to see us coming in just over 82%, which is obviously a very healthy level for the business.

And whilst we deliver strong cash generation, obviously, we accelerated our investment into M&A this year and obviously, meaning that we moved from a net cash to a net debt position. Obviously, it's a highly cash-generative business. We are very comfortable in having a more efficient balance sheet.

So looking at the revenue analysis then on the next slide, you can see we've continued our long-term track record of growth really for 10 years now since we IPO-ed. We've delivered double-digit revenue growth in every year as a public company. 2023 was no different despite the backdrop with our 13% increase in revenue driven by both organic growth and M&A. And I'll go into more detail on organic growth when I talk rather divisions in a minute. But obviously, this has impacted quite significantly by the U.S. entertainment strikes in the second half of the year.

The strikes, as you know, just to recap for them, they were well publicized. There were from mostly major unions, the writers and the actors, and they spent a number of months, which really led to a complete stoppage in Hollywood. We had several marketing and audio businesses that were affected by this because obviously, we work across gaming and film and TV, and this led to around EUR 20 million impact to revenue during the half and that was just about just less than 3% of our overall organic growth.

The strikes are now resolved, but we're still waiting for Hollywood to really to return back to normal. But when it does, we do expect a surge in demand. And in addition, unlike last year's tailwind, FX this year gave us a headwind of around 4% or EUR 29 million. We obviously consistently flagged this during the year, but it was a larger impact in H2 than in H1.

So moving on to the divisions then. Looking at Create first, obviously, which is our production focus division. Create really was the standout performer of the group. It's now our largest division, both in terms of revenue and profitability. The evolution of the business to high-value services provides a bit more visibility to us certainly to our revenues, which grew by -- sorry, grew strongly to EUR 336 million, up 22%, with a combination of 17% organic growth and M&A.

This growth was mainly driven by our Australian and U.K. development hubs as we continued to expand the footprint in each region. Create had strong margin delivery, reflecting the increased weighting of game development within the division, good central cost control and utilization rates from increased collaboration across the studios as well as the strong revenue growth. In terms of Globalize, it was a tricky year, particularly in H2 as we experienced the twin impact of the industry slowdown and the U.S. entertainment strikes on our audio businesses. Globalize, as you know, operates across a broad range of the industry, scaling up to meet demand.

And therefore, when there's less activity, it's more exposed and like Create. This meant that the division experienced negative growth of 4%, but stripping out the impact of the strikes, this would have been closer to a 1% decline, which is still comfortably outperforming the postproduction market, which we estimate was down around 5%. We're increasingly embedding technology into this division.

We've made encouraging progress with our products here, both with clients and internally as we continue to enhance our efficiencies and service delivery, and that process is obviously continuing in 2024. But due to the lower demand we experienced, there was lower utilization rates and pricing is obviously a focus in the current environment. And as a result, we took some action on cost to continue to meet client needs but the lower margins, together with the revenue performance meant that adjusted EBITDA was EUR 49 million.

As we move through 2024, our leading position and investment in technology means that we're ideally placed to capitalize on demand when the content cycle returns -- and turns, sorry, and when Hollywood output increases and together with the action on costs that we're taking, this will improve margins over time.

Looking at Engage then. This is -- this saw the strongest growth as it benefited from recent acquisitions of Helpshift, DMM and 47, with revenues rising 44%. Organic revenue growth was 2%, so a bit slower -- obviously slower, but improved in the second half of the year despite the major impact of the strikes on our marketing businesses in the U.S. This is obviously a very solid performance given the macro backdrop and would have been around 9% growth absent the strikes.

I think for me, what was really pleasing to see was the collaboration across the marketing studios in order to provide a more solutions-based model for our clients, and there's a big opportunity to do more of this in 2024. In terms of Player Engagement, it was a tough H1 market due to weakness in mobile, but this improved in H2 and our tech solutions enable us to meet client needs and to scale quickly, certainly when games are successful. And we're benefiting greatly here from the Helpshift acquisition in '22. We now have a unique offering in the market, combining high levels of AI automation and human support, which Bertrand will obviously talk to you later in the presentation.

Adjusted EBITDA rose slightly to EUR 16 million, but margins were lower in Engage due to utilization rates as the businesses scale for growth. We've taken action here both in terms of headcount reductions and footprint rationalization but we're also preparing for a pickup in demand, both of which will improve margins. So looking at costs, as Bertrand said, during the downturn, there's really 2 ways to run a business, hunker down, defend and protect or as we have done, use it as an opportunity to gain competitive advantage. So against the mix market backdrop, we've carefully managed our cost to maintain profitability and restructure element -- sorry, maintain profitability and restructure elements of our Globalize business to position us better for the future.

As part of this, we've taken a small impairment around the rationalization of our property footprint and historic IT spend, and we'll take a further small charge in '24 relating to redundancy costs. At the same time, we've also invested in the business, whether that's in our talent, our technology, our innovation center or making sure we have the right backbone within the organization. And of course, through our M&A program, where we've more than doubled our baseline spend this year, which places us well for the future.

Looking forward, we've launched a multiyear efficiency program to see where we can eke out further cost savings, reduce duplication and become more effective across the organization. Not only will this help us manage our cost base but also provide the fuel to invest in further growth and take advantage of that significant opportunity ahead. So if you put all that together, you can see here on this chart, our margin performance over time has remained strong, above the 15% guidance level. Obviously, the business really benefit during COVID with less travel and less office costs. This year, we expected margins to normalize and they have done so, although we have remained slightly stronger than anticipated due to continued action on costs.

Moving on to the core financials then. We've talked through most of these already but we delivered an 8% increase in adjusted EBITDA. Operating profit rose slightly slower with growth of 6%, although margins were strong, as I've mentioned. And EPS was flat, mainly reflecting the lower margins post-COVID normalization and increased interest costs due to M&A.

And finally, we've maintained growth in the dividend, in line with our policy. We've increased the final payout by 10%, bringing the full year dividend to 2.61p per share and while small, I think it's a small -- it's an important discipline for the business as it allocates capital.

So looking at adjusted free cash flow, it was strong at EUR 94 million. The largest impact in the year-on-year difference was working capital of movements of around EUR 13 million, with EUR 8 million relating to the timing of tax credits and EUR 4 million from other working capital outflows compared to small inflow last year. CapEx was slightly higher as a proportion of sales than in '22 due to M&A. We obviously have now have a higher lease costs from our larger property footprint and also a higher interest charge. And as you've heard, adjusted cash conversion was 82%. It was strong second half weighted as it is every year and due to the timing of payments linked to subsidy regimes.

So the business has a strong financial position, as you can see on this slide, we delivered strong cash flow and invested in future growth both in CapEx and in significant M&A activity. We also bought back 15 million of shares on behalf of our EBT to manage dilution from share plans, which we believe is a good discipline. As a result, we moved into a small net debt position with net leverage of 0.4x EBITDA, but continue to have plenty of flexibility to invest in future growth with EUR 260 million of capacity within the RCF.

I thought it was useful today to lay out how we think about capital allocation as we believe it's been the core strength of the business over time. Clearly, our priority is to invest in the business to drive organic growth. Some of that will be CapEx, some will be OpEx, but we'll continue to make sure we have the right people, relationships and technology to drive that growth. The second area is to augment that organic growth M&A. Bertrand will talk to the successes we've had over the past 10 years on that front, and we think there's a long runway ahead.

Finally, we do provide shareholder cash returns, whether in the form of a small dividend, the buyback of shares on behalf of EBT and we'll continue -- and we'll consider additional returns if we believe we have excess capital or the return profile changes, although investing for growth remains our priority. Importantly, whilst the business can comfortably handle leverage of up to 2x net debt to EBITDA, we want to maintain a strong balance sheet, given the uncertain environment.

So turning to guidance. Really no change from what we said in January. We expect strong growth in revenue and profit, driven by organic growth and M&A. We do expect organic growth to progressively improve as we move through the year, obviously, due to content generation in Hollywood picking up as the industry starts to move through the current difficult headwinds.

We intend to maintain operating profit margins at 15% -- above the 15% level, I should say, through a combination of tight cost control, our efficiency program and the integration of the automation into the group. And really looking at the rest of the guidance metrics, our tax rate should remain around the 22% mark. CapEx should be in line with 23% as a percentage of sales and cash conversion is expected to remain about 80%. And now that we have some leverage on the balance sheet, I felt it appropriate to provide a marker for net finance charges. But clearly, this will change when we deploy more capital for M&A and if the interest rate environment evolves.

So with that, I'll hand back to Bertrand.

[Bertrand J. F. Bodson, executive]

Thank you, Rob. As we get into strategy, I wanted to take the opportunity to remind ourselves of where we operate and also maybe to reframe a little bit the comparable group that we are typically looking after. First of all, we are very proud to get to operate in that space, again, one of the largest entertainment industry in the world. Some of the biggest names from EA to Ubisoft to Activision, Take-Two, Riot, Microsoft, again, 3-plus billion players in that space. It's a really good space to be in.

But at the same time, we operate without necessarily having the IP risk, as you know, and we have a more diversified view on the entire market. That's why probably many of you have qualified us as being the picks and shovels into a gold rush industry, which is a good place to be. But I would like to argue that actually there's probably more to it and that we're probably more akin to a tech services business with a specialized IT businesses company when you really look under the hood. It's interesting to see that where we stand is really to be the backbone of that industry. And you have many big operators in that space, whether it's in cloud, whether it's in providing the security piece, providing the analytics, providing the payment. We are fortunate to operate into the biggest side of the backbone door, which is a content creation piece, which is about 40% of that backbone in its own right.

So -- and more and more, we are -- as you'll see, we are mission-critical into the pipeline and the missions of our clients themselves. This also lends itself to work outside of the gaming industry. If we wanted to, so it gives optionality in terms of adjacency, in terms of the type of skills, type of technology, type of talent as well that we have on the pitch. And it's interesting to us that the analysis, it's a piece of interest, and I would invite you to have a look at it for yourself.

But if you compare us to the likes of Accenture and others, it's interesting to see that the ratio is strikingly similar in terms of top line growth, many of them being high single digit, we tend to be aiming for 10% plus, similar in terms of cash conversion, similar in terms of margin profile. What we have probably an addition for us is also the M&A machine that we have. But interesting to compare actually to that benchmark. Now how do we cement that very concretely. So no change in terms of strategy.

Many of you have been with us since the CMD, the same 5 pillars of the strategy, probably even more focused on the first 2 in particular, strategic partnerships and technology. On the first one, on strategic partnerships, glad to say that we have seen a meaningful increase in terms of growth among the top 25 clients that we've seen more than even the rest of the business. I'll showcase a couple of examples, 3 examples of clients as well as what we do more concretely, as many of you have been asking. Technology, I'll come back on that later on. On Keywords, I'm very proud of seeing now about 30% of the engagements that we do where you have collaborations across our Create studios.

And you may remember from a standstill about 2.5, 3 years ago, where every studio operate on their own. We now have 30% of the engagement where it's multi-studios to be able to take those engagement. It also gives us access to bigger engagements that we can now take on where we are probably uniquely placed to be able to do this. Lot of investment in talent. And on the adjacent markets, what I would emphasize is clearly a big push on live operations. We've talked about that quite many times, we are starting to be seen as an authority in that space. We're starting to even help advise clients navigate through live services, live operations.

And also DMM, which I think is a fantastic acquisition from -- over a year ago now, the digital media management in the space of social marketing, influence and marketing, where on the back of the strike in particular, but we have never had as many RFPs coming in into that space right now. It's really a sweet spot that I think lends itself for media and entertainment but also for video games. So all in all, very pleased with the progress we've been making across the 5 pillars of the strategy.

Talking about strategic partnerships so how do we work with some of our largest clients. I'm going to take 3 examples without naming them for obvious confidentiality reasons, but hopefully, it gives you a sense of what we mean when we talk about those. Client A is a very big publisher, one of the top 5 publishers in the world, having a strong geographic footprint around the world, strong typically internalized force in terms of globalized services, so in terms of testing.

And actually, we had discussion with them over 1.5 years ago, progressively to look at how can we manage and use the best of their footprint that we have to manage your churn progressively so that we can take on and move some of your fixed costs into variable costs using the best of that, more and more discussions around technology as well. And from zero in H1 2022, we've been ramping that up even hitting a peak of nearly 500 testers effectively in 2023. Client B is one of the top 10 players in the industry as well, very tech centric, very strong take backbone, and it's interesting.

We had one studio working with them since the very, very beginning of their journey as well in 2017. We took the company over as an M&A joining us in 2020. And since then, we have now 6 studios. We've been developing the relationship more broadly, helping them across all areas that are mission-critical within their clients, strong backbone in live services, in particular, and even in some case, being able to really being an absolute partner, even taking ownership of entire side of the game themselves across our studios.

Client C is interesting, a bit different. -- newcomers to the industry, who decided a few years ago now to say, look, we should really have a look at gaming. It's in addition to the audience that we have, mostly coming from big audiences themselves into M&A. And they're effectively looking at what could be a partner that can help us navigate through that. We now have over 60 titles on which we help them one way or the other, close to them across the different divisions that we have. I find that fascinating to have been on that journey since the very beginning. We have invested in that relationship. You may remember that we talked about solution architects, solution producers.

We have embedded resources within their own operations to really streamline the communication as well to make it a very easy access to Keywords more broadly.

On that one, there's another behavior happening, which is also newcomers, but small entities, very strong developers, producers who may have left some of the big publishers in gaming. And on purpose, well funded, decide actually to keep the team capped at 50 to 100 people and coming to us to say, "Can you [ accompanise ] on the journey from get-go," typically starts on the co-development side and then expanding across the areas of services that we have on there, which I find very interesting as well because they are sort of defining if you take a longer-term lens, the type of model we'll see in the years to come.

So now turning to technology. I'll use this slide just to frame what is coming. On the left side, we're separating the way that we think about production, which is more akin to the Create business versus on the right side, what we do in terms of post production, which is largely Globalize and part of Engage. On the production side, we don't feel like we need to own the technology. Our mission there is to be to a 4,500 creative technologies to be ahead of the pack, to be 3 steps ahead even of our clients of the entire industry. So that we can be the best adviser of how to use those technology more broadly, GenAI included. So -- but we see our world as being mostly an aggregator of AI and how can we help as well as some of the tech tools, tech startups as well to ever go to market.

On the right-hand side, there we make no apology for it. We absolutely want to own the tech. If you take a longer-term vision with us, when I think about it as sort of an akin we become the ERP for the post-production services. The publishers themselves don't necessarily want to do this. We're having more and more discussions along those lines. But there, it's all about scale and how can we aggregate on behalf of the industry by owning the platform itself.

So if I start with the production side, this is something on which we'll do a bigger reveal. We're talking about it before the call, but at GDC next week, a project that we called Project Ava. This started in April last year, in the full boom of GenAI with a lot of hype, a lot of movements, moving very fast. And I asked a team of what if we could create a 2D, fairly flat 2D game, fairly simple, using only AI at the extreme, using almost no humans at all. And it's interesting. We're a big readout in November.

We just did a big one in February, again, reveal in GDC at the game developer conference next week, which is the biggest one in the year if you're interested to watch that through and it's interesting to see the team has been coming back to us from an R&D point of view, every single one asking for more and more resources. Guess what, we need more engineers to be able to understand the SDKs and APIs. We need more designers to understand of how do you make the connections between quite a few of those. We need more back-end engineers to understand how do we really make it scalable once we start implementing it.

We need more BD people that have been involved into those across our studios to understand be on pretty website of which ones have really something that's of substance behind. And we need more legal people who understand as well the IP rights where can we really play with it, obviously, always in partnership with our clients. We've been testing over 400 tools across the different areas of our business on that front. But what has been fascinating is that this is not a judgment about that AI work or not? AI is there for the taking. It's an incredible powerful tool in the hands of the right domain expert, but the goal of that has been to understand what works, what doesn't work, so that when we're undergoing with our clients, we can really help everybody navigate and raise the game to the top for everybody on that front.

This has also helped us generate some partnerships with AI. So it's not just about M&A. We feel like it's too early to pick some of the winners in some of those spaces, but it has educated us as well across 7 studios. As I said, I really like the fact as well that this has been a galvanizer to get 4,500 creative technologies to really get around that anything a platform where we can test a variety of those tools.

Those are some of the partnerships you may have seen us announcing very recently but on the Create side, we have announced a partnership in the space of middleware, physics with Havoc, Havoc is a company backed by Microsoft. We think there's really something very interesting there. We talked last time about non-playable characters in the games. We made a partnership with Charisma AI. We've been looking closely as well. Microsoft invested in inroads as well, a space where we think there are real inroads that we can make and we can create much better interactive experiences on the games themselves.

In the space of Engage, I was at DICE in Vegas few weeks ago, we did a partnership with Search ROI in terms of VIP, helping Helpshift really base in terms of our proposition. I think it's a fascinating one. And you may have seen some announcement that we made yesterday as being playing a key part of the Gaming Safety Coalition in the space of trust and safety. The spirit of those is -- we believe that there are a lot of technologies where we're really good at what they do, but how can we play our part by being more of the arms in terms of go to market, bringing them into the workflows themselves. In some cases, we even need access to the source code. So I think there's a very nice complementarity to be played between those partners and ourselves and especially with the access that we have with most of the top 25.

Now turning on to the post production side. You may remember that we that reel that we showcased at the interims last time. I wanted to showcase a little bit the progress we have made, including on the right-hand side. We've been scaling Mighty, build and test very strongly. Jon's team has been pushing that incredibly hard. First and foremost, within our studio, 25 studios doing co-development. So how do we use that into our own processes to showcase how you can almost test in real-time as you're developing, which I think is a game changer.

We then upgraded as well infrastructure that was when we acquired Mighty was only in Unity. Now it's live in Unreal, live on proprietary engines as well and now starting to have actually some very meaningful names on the publishing side, having given us a few titles to really go and implement that into their own workflow as part of that. So more on this and much bigger pipeline as well that could be coming. Still early days, but very excited.

You may remember, we have talked a lot about Kantan in the past, partnership with Microsoft. We have extended that now. One of the modules, it is called Language AI and Language AI, I think, could be a game changer that we've completely embedded into our operations into Helpshift. So now in terms of player support, player engagements. Now typically, in normal times, you need agents in 35 languages to be able to help the players as they are playing their games. Thanks to Language AI. We've bypassed a lot of those processes now where agents can really focus on being the agents themselves. So completely changed the economics as well and the ability for us to operate faster and tapping into a broader network of qualified agents.

And finally, some that we barely talk about, but XLOC, we have decided to invest in this. This is a game asset management platform, and we've embedded that into the processes at Mighty. So without going into too much details, what I wanted to convey is, we now have about 250 FTEs on the product development side that I completely assigned to this, building the platform in terms of cost production. And again, I think it's a bit akin to a potential, if you take, again, a 5-plus year vision, how can it be more ERP, more sticky with the right agents and the right humans as well on the back end in terms of service providing.

And there is one in particular on which I wanted to spend a bit more time, which is Helpshift, probably one of my favorite because it's very close to the players. We do honestly talk a lot about it or when we talked about the acquisition of Helpshift. It was more as an automation tool of how are we more efficient in our operations. The aim at the time, if you remember, was having 30% automation of the player engagement tickets we take on. We're now reaching levels of 60% plus.

You can see some case studies here with some of the biggest mobile players in the industry. But what is more interesting to me is it's much more than just the automation cost set up. Now we're starting to really have discussions about how can we help in your workflow to improve the customer satisfaction score, the CSAT scores. How can we have a role to play on the lift in live services in terms of sales? So how can we really tap the VIP players, how can we play trust and safety, how can we have community management. So we can help in those environments where you need to stay very close to the players to really base your game on the top line as well.

We have about 20 clients now in that space, quite a few enterprise clients as well in there, but I think it's one in which you're definitely going to see us keep investing. So -- and we're talking about over 6 million automated conversion, tens of millions now of savings on behalf of our clients, which hopefully definitely helps them and it clearly helps making sure that we all benefit from that together. So I hope this gives you a quick snapshot on both on the production side, post production side. And hopefully, you can imagine from there a little bit the journey we're going to keep taking on.

Now as a last step before outlook, I'll turn to M&A. We have had a solid organic growth for the year, but we have also had a record year in terms of M&A in 2023, but I'm not sure that we always get the credit for it. So I just wanted to spend a little bit of time on our track record, but maybe more importantly, to give you a sense as well of the type of pipeline and position that we have when we think about M&A.

So going back in time, clearly, it's a core part of our strategy. Going back in time, Rob was alluding to it, but we've done 65 deals over the last 10 years. We've done about 13, I think, over the last 2.5 years. And we have a fairly clear plan, I'll come back on that right away with 4 quadrants that we are encoring on. We have a very strong recipe in the way we do that. We are getting really strong in terms of integration of the M&A while making sure that they keep the right entrepreneurship spirit, but all the back end, all the backbone, all the Infosec piece, cybersecurity also being completely integrated many of our processes in terms of shared services and the leadership of Nicolas Liorzou.

We have a clear recipe as well in terms of cultural fit in terms of quality level of those start-ups on which we want those businesses on which we won't deviate and also in terms of type of target in terms of EBITDA multiple. What we're also observing is we are more and more considered as being a preferred buyer into the industry. And it comes from different lens. It comes from the -- having done it many times, having a machine that works really well in that space. But interestingly, also some big publishers coming to us and asking when they have had a partner for some time, feeling more comfortable in potentially that partner could be integrated within Keywords because it's a go to stability for the long term. And frankly, some of them being a bit nervous that this partner might end up actually with a competitor potentially being acquired.

So we are being seen in Switzerland where it's definitely helpful for everybody around the table on that front. So in terms of acquisition for 2023, specifically, we have talked about the 4 at the bottom, Playboss, Hardsuit Labs, DMM and 47 at the interims. The new addition to the families, the Multiplayer Group, it says it in the name, it's all about multiplayer, highly complex back-end engineering pieces, [ Data Sense Entity ] as well, interestingly behind, very, very strong engineering about 350 people spread across Nottingham in the U.K., Spain and Montreal and really seen as one of the market in terms of by many of our clients, including some of the biggest names there. So -- and we felt an immediate fit with them right away, went to Nottingham fairly recently. The integration is really progressing well.

But all in all, you can see a big, big focus on game dev. Again, with the right quality standard, but also expanding our footprint and scaling up operations in marketing, technology, plus the partnerships, I alluded to earlier and some of the adjacent markets. This also helps us ship that wheel that I was referring to earlier and making sure that we can keep shaping the different dimensions and the focus of the business, obviously, more and more to Create as a whole, which is very value-added services.

And finally, on M&A, maybe a very concrete example to show how we are looking at strategy into action. This is an example in Australia, where we looked at -- we had a white space there when we looked at it 3 years ago, we wanted to have to build from there also built for Asia. And Jon and team, new studio called Tantalus that we were very impressed by about 35, 40 -- 37 people at the time on the engineering side game dev and led by an incredible leader called [indiscernible] and so we started looking at it together. Tom joined us as part of the team fairly quickly afterwards, he used a muscle of Keywords in our balance sheet to make an acquisition of Wicked Workshop, which had a fairly average pipeline, but they are completely repaying the pipeline using as well the [indiscernible] strengths, but also access to the top 25 that we have and it's -- I went to see them in similar -- it's an incredible pipeline that they have beyond with some of the biggest names there.

What I love is they also empowered some entrepreneurs within Tantalus. So there were a lot of people who were not necessarily ready to go and launch their own business, but wanted to do within the canvas of maybe a more robust business overall. And I want to see those 2 entrepreneurs who launched Tantalus North, Tantalus South, it's a cozy brand everywhere as well with about 40 engineers and developers around each of those as well. And then with the tech focus that we have put Tom and team also acquired Mighty, of which we have done at 10x in terms of investment in terms of the headcount that we have beyond Mighty and [ engineers beyond ].

So all in all, you can see from three years ago, from fairly early stage, 10 years of existence with Mighty, we are now 3 years later with a business of about 300 engineers, developers, talent basically in there with 8x what we had in terms of AAA project at a time. That's the type of approach that we have. And that's why many talked about us as being a financial arbitrage. I don't think it's a financial arbitrage. It's really an operational leverage, operational arbitrage of when businesses come to us. Hopefully, that reemphasizes as well the point of being a good buyer when entrepreneurs joined us and how we can enable them. And Tom and team are looking more broadly across Asia, Southeast Asia, across Japan, what we can do to keep expanding from that point.

So I went a little bit long on M&A, but I hope that gives you a bit of an insight of the power of the machine that we have behind and maybe how we operate as a core part of our strategy. So all in all, in terms of outlook, we are continuing to drive forward to building on the momentum that we have of gaining share. I think it's fair to say that we have a very resilient business. We have a diversified business. We have agility in the system as well to be able to take that on.

We have a strong plan, a strong ambition from a platform point of view as well. You know the 5 pillars of the strategy. We're executing against those. We are investing massively and staying very close to our top clients at the highest level. We're investing to make sure that we have the right cost control, the right discipline that Rob was talking about and equally importantly, managing the short term, but at the same time, how do we make sure that we invest in the long term to really go after the very big market that is in there. So hopefully, uniquely positioned to take this on.

And as we open to Q&A, I wanted to finish on this slide, just to remind ourselves of what we do at the end of the day and building some of the -- helping contribute to some of the most amazing titles. We had the game awards in December 2023, very proud to say that 70% of the award winners have a piece of Keywords inside. So out of the 18 winners that came out, 13 have been partly powered by Keywords where we had our road to play in the industry. And maybe a small interesting fact is some of you may have watched the Oscar or the results of the Oscar, but the [indiscernible] have 6x the audience of the Oscar maybe a little known fact, but it gives you a sense of the power of our industry as well. So we are really proud to be a core part of that backbone and to be mission-critical more and more into that ecosystem.

So on that note, we'll move to Q&A with Rob.

[Nick Dempsey, analyst]

It's Nick Dempsey from Barclays. I've got 3, please. So first of all, we heard yesterday from the Quebec government that they're looking to reduce the tax breaks for video games groups gradually over the next few years. I can see you benefit pretty well from that in terms of total tax breaks across the group. Can you give any indication of how much of that relates to Quebec? And given that it seems to be unfolding over time and with some complexity, can you talk about ultimately whether you could expect a profit headwind from that?

Second question, just on Player Support, we had focus there as Klarna announced intangible benefits from AI. Can you talk about why your player support line isn't at risk over the next few years from that and perhaps how your world differs from that of Klarna.

Then the third question environment is tough, as you've pointed out, are you seeing M&A targets that you've been wanting to look out for a long time now starting to come to market with multiples that make sense to you as a result.

[Bertrand J. F. Bodson, executive]

You want to take the first one?

[Robert Kingston, executive]

Yes. Perfect. Great. Thanks for the questions, Nick. Yes. So in terms of the tax credits, yes, we do benefit from them. We take them from a number of jurisdictions around the world. In terms of Quebec, obviously, that news came in overnight. So sort of first blush is -- well, first thing to say is that there's no change really until the end of 2027. So the agreement is in place till then for us with the Quebec government. Obviously, if it does pass, our first blush is that we don't expect a significant impact from it ultimately. We operate at fairly fluid production environment in terms of moving into different locations around the world to provide the most cost-effective solution for our clients. So ultimately, beyond '27, we don't think there's going to be any significant impact.

[Bertrand J. F. Bodson, executive]

In terms of player support, I hope that the picture you saw as well and hope it gives you a bit of a picture of what we're doing there. It's incredibly -- first of all, Player Support is about 10% of our business, so 10%. So it gives you a bit of a sense of proportion. Two, we are really going on the offense on that front. And I think the Helpshift has been really a game changer move for us. Quite frankly, I'm very excited about this because the example you're talking about is more about cost savings that you can have.

Clearly, we are hitting a 60% automation. On the back of that, you can see the type of savings that we're offering as well to our clients. But more importantly, this is really a push as well to the top line to see that improvement to managing the live services as well as the operations of the community. We have added VIP services. You might have seen the partnership yesterday as well was also about trust and safety abroad. So it's a totally different ball game altogether.

So I think we're going to benefit from both the cost savings that we can pass on to our clients and share with us, and at the same time, also being much more indispensable to them in terms of managing the games more broadly in the entire solution and the entire proposition. So it's really an end-to-end proposition. So I think really apple to pears quite frankly. In terms of M&A targets, you're right, the environment is probably healthier for us and it has been for a long time. That's probably why you saw us the EUR 225 million of consideration last year.

In a tougher environment, you get actually more single players, service providers who would have, let's say, 150, 200 developers where you -- depending on 1 or 2 projects or AAA, you're a bit more at risk all of a sudden if there's a cancellation or there is a postponement, you might be at risk on that front. We can take that risk across the much broader operations that we have. It means that there are quite a few incredibly attractive targets, assets that we've been knowing for the last 3 years that Jon and I have been knowing for a long time that would not necessarily have considered at the time that now coming to us saying, look, it's time to do a joint of basically together within the type of valuation guidance that we're talking about.

So very healthy, probably the best pipeline that we have seen for a long time. But at the same time, this doesn't mean that we're going to get our guards down in terms of rigor, again, cultural fit is nonnegotiable, the type of quality as well that we have behind making sure that it's not an over excess of bench as well associated to those so that they're really at the right place and associated at the right place behind. So I would say, very healthy and at the same time, making sure that we keep the right due diligence but very relevant topic.

[Sebastian Patulea, analyst]

Sebastian Patulea from Jefferies. I've got 3 questions, please. Firstly, video game developers are canceling IPs closing studios and firing people. First, do you notice developers focusing only on their internal operations for now? Or is this also affecting the outsourcing market? And what's your ability to adapt to a late notice project cancellation, please?

Secondly, 2023 was a year with a strong pipeline of games coming to the market. Now in 2024, that pipeline looks pretty empty. Sony has announced no first-party titles for 2024. Xbox have implied it. 2025 looks interesting with quite a few big titles and even the GTA 6. My question is, please, are you expecting further revenue acceleration in 2025? Or are you working today on that 2025 pipeline?

And lastly, regarding AI and the impact on the pricing on your project-based work. When you negotiate a new contract today, do you notice any impact on either price per hour or the number of people required to deliver that project, please? And how do you see this model change in the future, if at all?

[Bertrand J. F. Bodson, executive]

I'll start. Maybe, Rob, on the last one. Thank you, Seb. I think on the video -- on the internal only, absolutely not. So we see -- you're right, there's a lot of restructuring happening. But if anything, this actually creates more triggers about think about it, they're going to be tighter, but there will be a race to the top in terms of content, content needs to be there into the Game Pass or the -- you're talking about Sony and others, they've been announcing quite a few life services that we want to create on the back of it. They need actually more help to be able to do that.

So we are at the table discussing those. Where you get more headwinds short term is as they are thinking that out as there have been some job losses, it's like you want to manage the time line a little bit before you take us on board as part of that. So that's why I flagged a few headwinds short term, but really bullish on the midterm on the back of it.

Even more broadly, the example I took on fixed cost to variable cost, you see many of the publishers like trimming down a little bit their own cost base, going back to the core that they really master. Frankly, many are using that -- it's more than just job losses because they have too many IPs there we're focusing on the core ones -- is also using that to reshare their business model entirely. So to say what is really core to us, a little bit like the example I was taking on newcomers. What is really core to us and where can we start working with the Keywords to surround ourselves testing, with localizations, with postproduction, with technology, more and more co-development as well. So this is really something we've been trying to trigger for many years is how can we accelerate fixed cost to variable cost. That's why we exist in the first place.

And to your second questions about the pipeline on the years, you're right, Seb. We don't tend to work just on the pipeline that is coming in 2024. Typically for AAA, those titles that take 3, 4, 5 years to come to market. So you would expect us to be involved actually much earlier. However, it's true that there are places where we have to play tetris a little bit more when our clients decide to be a range or to be focused to double down on some of but we're fairly good at that. That's something that we have, I think, a significant competitive advantage to be able to do. It might mean that we need one more month to readjust the resources to be able to tie it up actually to the key projects, but that's part of the service we provide, that's part of the differentiation that we can really provide there.

[Unknown Executive]

In terms of AI, I mean, no, we don't see any impact in terms of our pricing and revenue growth today. I think as we've -- as you've heard us say before, we see it as an opportunity for us in terms of growth into the future. Obviously, what we can do is it means we can be more efficient in terms of the way we provide services to clients, particularly on the post production side. Bertrand explained a bit about that in the presentation. And so we're really focused on doing that. I think over time, as we embed more technology into our offering, it will allow us to evolve our pricing.

If we can make it more effective for clients then we expect them to invest more into the games. You've heard many of them say that on stage. So overall, we think it will drive overall volume growth into the market so people have been in that race to the top that Bertrand mentioned earlier.

[Bridie Barrett Schmidt, analyst]

Bridie from Stifel. A couple of questions. Just firstly, on Create, you've talked about the fact you've got a good pipeline building into the second half of the year. I wonder whether you can just sort of help us understand sort of the depth of the visibility on that compared to where you typically are at this point of the year.

And also, maybe just sort of add some context around perhaps the overly simplistic sort of views that the sort of Create services ultimately drives the rest of the -- the business in the later cycle services because this year, obviously, the market -- last year, the market was difficult, but Create continued to do very, very well. And the other service offerings were a little bit sort of weaker. Do you see that as a cyclical matter or something a bit more structural moving forward? So sorry, it's kind of 2 parts to that first question.

And then just one small one on live services. Can you give us a sense of how big that is within Create or the wider business?

[Bertrand J. F. Bodson, executive]

Yes. Actually, I'll take the opportunity to maybe go a little bit a -- division per division to give you a flavor of where we are and what we see, very openly. I think in Create, we have a forward visibility that is touching distance of what we saw last year, which is interesting. However, to Seb's point, there's more tetris to be played. So you have much more variability in cancellations moving part as part of it.

So again, that's part of the service we provide. But it's interesting that the demand is there for the taking. We're in all of these conversations, deals that are effectively in play, but you have more risk where you can lose all of a sudden project for a few months or you need a couple of months to be readjust the next one. I think there is Jon keeps reminding me, it's an industry that is actually very old compared to many others where it's an entry way historically, everybody is always done everything themselves. If you look at other entertainment industry, you tend to assemble more teams having the very core of your team in-house and then you work with partners around it. So we see more and more. So -- and if you look at the percentage that has been done by service providers is still fairly small. So hence, a lot to really go after in that space.

In terms of -- I wouldn't say that one is the only one that drives the other. I think Globalize is a really good business in its own right. You have 2 dynamics there. You've probably FQA, the testing side and localization. FQA, there's still -- we're still sub-50% being outsourced, make no sense. It shouldn't be publishers doing that themselves, at least for the bulk of it. We have the right onshore/offshore type of capabilities. We're investing more and more tech into that. And there I would expect you're going to see more and more of those fixed cost to variable cost pieces. So I'm very [ abide ] about that.

Localization is a slightly trickier one because there is a temptation in cost controls to say it should have trim down instead of 35 languages, do I do 25 languages because that's maybe more marginal benefits. That's where technology also comes into play, Kantan comes into play so that we can do actually more marginal languages, more efficiently than the publisher can do going forward. And on -- but there is more cyclicity, you're right into Globalize because if you remember, 1.5 years ago or 2 years ago, that business was booming, we could -- we needed do hard to even meet the demand that was in there because many AAA were coming prereleases to '22, 2023 but we have the flexibility to be able to do that up and down. And it's a very cash -- good cash generation business, which helps us fund the rest of the program, the M&A, et cetera.

And then Engage is one on which we have had more weakness last year, partly because of mobile as well, there has been less spend on Player Engagement in particular. Marketing is always the first one that tends to struggle more in terms of cyclicity of cycles of the economy. It's interesting. We are starting actually to see some really good green shoots into that space. Very encouraging to see what is happening there on that front.

All in all, it's not clearly, Create is the best entry door to the CXOs to the CEO because that's a more strategic piece. It gives us forward visibility on the pipeline of what is coming in terms of testing to your point. But it's more than that. It goes back to your second question on Live Services. It's the strength of having the full proposition means that you can start doing live services across different studios with a lease studio type of model. And that's really important because they are looking at how can we do a co-development, how can we create content all the time if you are Epic or Fortnite, you need new content all the time.

At the same time, you need engagement with those players. You need an event and a concert that happens in there, that's our Engage division. And at the same time, all that content needs to be tested. The more live services happens, the more you need the ability to test and probably automation to be able to take that on. So hopefully, that gives you a view that it all really comes quite nicely together as a platform, but not unhelpful as well to be diversified when you have a cycle so that we can take that on and probably the performance for 2023 reflects that.

[Bridie Barrett Schmidt, analyst]

And just the materiality of the LiveOps piece as well.

[Bertrand J. F. Bodson, executive]

Yes, it's an important part of our business. It's just to define LiveOps. We have a studio called Lively that is entirely dedicated to LiveOps mostly in mobile. We have multiple studios doing work with Fortnite, for example. It's LiveOps in its broad sense, we're doing different capacity as such with areas where we are helping take on a full LiveOps set of a game, while the publishers are moving on to the next stage of it. So I won't venture on putting a number on it because it's really depending on how you quantify it, but it's certainly a content production machine using all the strengths of the different sides of the business that we have.

[Unknown Analyst]

[indiscernible] at Librum. Just 3 questions from me. First on Engage, publishers are obviously focusing on extending gaming life cycles at the moment. Just a few comments on how monetization models are shifting over time and what opportunities that creates for Keywords. Then on Create, I think we mentioned that publishers are retreating towards core franchises taking fewer risks. Is this having an impact on project work coming in to Create in terms of the value add that you're able to deliver? Is it sort of more execution focus as opposed to value-add now? And what does that do in terms of pricing?

And then finally, on Create again, I mean, there's obviously been a lot of news around developer headcount shedding across the industry. What's that doing to the sort of price points for FTEs at the moment? And I mean, how are sort of hiring plans affected in more expensive connovations.

[Bertrand J. F. Bodson, executive]

I can start. Maybe we can complement each other. On Engage, you're right, everybody is looking at -- and live services not self-installed. You've seen some publishers as well. Look, it's really hard to do live services well because maybe to bring it to life, it's more than an Engage question. You need the ability to create content very quickly. You need analytics to be able to be the science of where the players are spending time and adjust almost real time on that. You need operations like Kantan where you can localize those almost in 30 hours as opposed to the long cycle times that you have.

You need to be able to test much more content as part of it. And you need, of course, to look at different monetization platform. We have a partner, for example, [ Waskas ], I was with him last night. They've asked us to also look at separate store, separate community play that you can have. So that when the players, there's a bit of fatigue on the game, they can go and spend time over there before they -- as a community play where they come back into the games. All those are incredibly value add. It's not just extracting more value per customer. It's really about how do you create holistic experiences as well that can work that plays to our strength.

I think it ties frankly to your second question, which is, no, we don't see, it's not because you focus on core that you're less value added on the country, it does a massive, massive franchise. Those are the biggest name. It's public domain. We've worked on Hogwarts Legacy, for example, Harry Potter and the team and those even translate across transmedia more and more into media and entertainment. That's why we're making moves there. So there's more complexity, there's more value added to be done. And the headcount, as I shared over there, I mean the best way I can put it is like we are acquisitive. If I could find another 500,000 super, super quality developer for the long time, again, with the right rigor, the right criterias, we're definitely going to keep cranking that will be the top priority in terms of M&A that we do on that front. And I think there will be opportunity. We're doing it wisely, progressively at the right time, matching our clients' needs.

[Unknown Executive]

Nothing more to add, really. I mean I was just thinking about creating the move towards AAA. And if you look across industries and let's say back to film and TV back at the start of the last century, they owned everything in-house, actually, over time, today, they actually rent most of it from outsourced external providers. And so if you think about that as a trend over time, even in an environment where film and TV are focusing on the franchises, the sequels, et cetera, I think that's an area that we can play really strongly in terms of that trend.

[Jasmine Rand, analyst]

Jasmine from Numis. I just wanted to kind of touch back on the kind of AI development you talked about. Clearly, there's been a lot of focus on kind of building out partnerships, the technology platform, et cetera. But I think you've kind of put out in the statement, obviously the options are pretty limited at the moment. Just wondering how, as we've kind of moved past sort of maybe some of the initial noise around kind of AI and game development, how have your conversations with publishers evolved? Where do you think kind of attitudes are at the moment? And do you have any kind of early learnings from maybe some early adoption of some of your AI or technology-enabled tools?

And then the second question I wanted to ask is just we've seen a little bit of news play around some of the console platforms that are out in the market. So kind of a little bit of rumors of maybe Microsoft deprioritizing their hardware and switch to being delayed. Does that have any impact on your business? Or is that kind of just all part of the [ cost ] noise.

[Bertrand J. F. Bodson, executive]

Yes. On AI, I would separate maybe from a client point of view. First of all, on the production side, there's still a lot of nervousness with varying degrees. You've seen some publishers who openly talked about the fact that they really want to go and embrace. You have some who are proactively asking us saying, don't touch it until we understand because of IP rights, because of ethical concerns about what really makes it. You have seen some big players as well, we have lawsuits, left, right and center. We're navigating that very responsibly entire chart around that always in absolute partnership with our clients. But what we are doing is that's why I like Ava is really to understand the landscape, what works, what doesn't work, no judgment, AI overall. It's more -- which ones could really be adding value, which ones have transparency in their models, which ones can you embed your own data as well to really improve if you're ourselves in partnership with publishers.

So we are really playing our part of saying, how can we stay 2, 3 steps ahead on the technology of it while making sure we do that very responsibly. But there's still a lot of nervousness from the publishers themselves. As you can figure out, I would expect that probably for next year, you still see a lot of nervousness. It's going to be early stage adoptions in a few segments where it's clear that it can really have an impact and where everybody feels much more comfortable.

On the post production side, it's all about efficiency. So especially in more cost control environment. It's how can you help us get more efficiency in the system. That's why we're investing very strongly into my team to Kantan into Helpshift. What I like is we're going to beyond efficiency. We also think about VIP management, community management, trust and safety because it's a more end-to-end propositions that we can really offer there. I think that's really the type of winning propositions we can bring there. There is a big, big appetite for that. So we are very busy at GDC next week. I've lost track of the number of demos that we have, the number of publisher engagement that we have around those type of technology at different degrees. In some, it's already embedded, where we have the first 2 engagements. We have seen Helpshift 20 clients, some enterprise clients, so it's how do we scale from there.

On the new consoles, probably not for me to overly comment on there, but you know the cycles that are coming in, those tend to be favorable to us because it requires more content. You have some that are probably at the mid-life, end of life of the console so much starting to plan the content and win some discussions where it's planning the content for the next 4, 5 years that are coming that could be helpful into that context. Those are the typical sales cycles in which we operate. Interesting to see as well, Microsoft announcements last week of going beyond the Xbox as well on for the titles and to span of course, on this what they do on Windows and on PC, but also what they can expand to other partners, this expensive user base, probably expense, the value is one of the content that can be created. So what that helps raise the boards if don't work together.

[Rahul Chopra, analyst]

Rahul from HSBC. I have 2 questions. Could you discuss in terms of stock utilization where we are given the given basically concern because with Helpshift content, AI and Mighty Games, just get a feel of what is the internal [ starts ] utilization and how it has changed? And maybe also your hiring plans in terms of how should we think about H1 versus H2, should we probably think about more H1 weighted or H2 weighted staff headcount growth for next year?

And in terms of -- second part of the question is in terms of organic growth expectations for 2024, could you give a sense of market growth versus basically internal self-help? And basically, what you're penciling in terms of the impact of strikes coming back in 2024 and '25, if further we're expecting.

[Bertrand J. F. Bodson, executive]

Remind me the first part of the question, was it about Helpshift?

[Rahul Chopra, analyst]

How the basically stock utilization has basically changed in the group because of those AI impact productivity from those Helpshift and how you thinking about that if any.

[Bertrand J. F. Bodson, executive]

So I can start with that, and maybe you take insurance.

[Robert Kingston, executive]

Yes, yes.

[Bertrand J. F. Bodson, executive]

I think on utilization, again, more and more demand on those, but just managing expectations, still early stage up to recently very few ways even talking about technology at all, was very manual. So there's a long way to go as well to face that, which, by the way, gives us time what to figure out the right business model with partners. I think Rob may share a little bit more insight of how we are thinking about this early stage, but you can sense, we want to be way ahead of the pack in to lead. I think we have the right win in those categories.

[Robert Kingston, executive]

Yes. In terms of organic growth, Rahul, mean I guess no change really from what we said in January in our trading update. We expect organic growth to progressively improve across the year. In terms of the Hollywood strikes, I think you said, we're expecting that to ramp up across the year. Obviously, Hollywood down tools for 6 months and the ramp-up is happening there, but it's taking time. So as expected, and you'll hear others say the same thing. So that's why, obviously, one of the reasons why we think that the growth will be H2 weighted. But ultimately, no change in terms of our overall average for the year. So it will be slightly lower than the average in the first half, slightly higher in the second half essentially.

[James Lockyer, analyst]

James Lockyer from Peel Hunt. A couple of questions for me, please. I think just on the Globalize part. I think part of the fears around AI is machine translation, localization becoming easier. You had Globalize for the last 10 years where we've had technology improving over that entire period. Can you give us some indication of how -- have you seen any of those positives or negatives over that period? Has utilization got better? Have you seen rates come down just to see over that period, what you've seen?

Secondly, then within the -- so last year, we had lots of big games being released. Obviously, we talked about the pipeline being a little bit slower, but the effect of having all that supply with less demand was big discounting on the games and hence, the ROIs were lower. But when gamers -- when publishers are looking to publish next games, does this mean that Engage becomes more important because you've got to try and help your clients find the right audiences for better ROIs from that side.

And then finally, just on the value of any GenAI model is the data that's put into it, not the model itself. I know [indiscernible] you don't obviously own the data of the games. I think within player support, there's a lot of data that you do own there. Any sort of value you could drive from that or monetize and help your clients over time will be useful.

[Bertrand J. F. Bodson, executive]

Yes. So I'll give a great question, James. Thanks for those. I think on -- I'll give a [indiscernible] on the first one on localizations. Yes, I would love to take credit for the fact that we've been 10 years at driving innovations in an incredible way. To be honest, a lot of it has been spreadsheet, basic workflow management with a lot of complexity on the linguist that we manage behind. If I'm really honest, we only really got into pushing tech 2.5, 3 years ago. That's why Kantan was pre- my time and kudos to the team for having taken that onboard, but we hadn't really used it as was we could have done. You know tech has been a big part of our agenda between Job, Rob, myself and the executive team since day one. I think we've talked enough about Kantan to showcase about 3,000-plus project with Microsoft now.

Now it's starting to really kick in, in terms of what it can do. It's still early stage. We still have a lot to go. We're only using a few of the modules we can use. We are mostly using streamlined pipeline so that between the publisher and ourself, we can actually do that together. More than the numbers what I like is also it's a more sticky propositions because now you're in the workflows together, you have joined visibility. It plays well to the question of live services as well because you can operate much, much faster.

So give us a bit more time as well, but we're at the beginning of that journey, but we're all into that one. More than localizations, you can sense there's an entire post production of how can we bring efficiency and technology into it. So there was a bit of catch-up to do, but we -- I'm pretty confident to say that we are taking a massive lead into the industry here, and we are using our size here with the right agility to do that.

On your question about the pipeline. Yes, I think you're right. It's -- this is one of the reasons why I'm excited about Engage. We always call Engage is still a bit subscale. We still have only a few of the modules as such, but under leadership of Tony Grigg, I think, it's scaling incredibly nicely, it's much more about solutions we can build. And the full focus is what you described. It's how can we really do community management, understand players much better, a lot of data about who are the VIPs. That's why we made a move on DMM because I think it's a sweet spot to be able to be in digital marketing, social media, influencer marketing, snackable contents. Think about technology wise, what is happening with Sora, I'm relishing that, because it means you can have more and more personalized content that all of a sudden influencer can start using. We're not there yet. It's early days of it, but this is quite promising and definitely Engage will be an important part of the proposition when you bid more on the pressure -- on the cost of the games themselves.

And thirdly, on data, absolutely, with full on sessions with that. We have a partnership that we haven't talked about very early stage, but we have way more data than we expected and certainly on the player support side through Helpshift but also through the SDK that is embedded there in terms of visibility, very concrete applications. We can see the type of complaints that players would have into the game, whether it's risk of toxicity in the games, we can anticipate those. We can do benchmarking across different [ genres ] so that we can go back to the publishers, we can start going much earlier saying, look, for that game that you're building right now, where you're going to put 100-plus-million basically into this. Here, the kind of key benchmarks to be aware of. We're starting to think about is the consulting piece to be added to that. I can think of many other use cases that I'm dreaming right now. We're working on those, have pushed a team last week on that front, but we're thinking exactly along the same lines.

[Unknown Executive]

I'm just conscious of everyone's time and getting to the end of the session. I've got a couple of questions from the webcast, Bertrand and Rob. So I think the first one is kind of around M&A. The balance of M&A and organic, kind of given the enormous number of layoffs in the industry, does it make sense to shift more towards organic expansion rather than acquiring entities?

And then the second part of that or combining two is really around M&A. And have we seen valuation shift? Are there bigger deals or smaller deals? Kind of what's the shape of the pipeline?

[Bertrand J. F. Bodson, executive]

I'll take 1, you'll take 2.

[Robert Kingston, executive]

Yes.

[Bertrand J. F. Bodson, executive]

On the -- thank you for the question. I think I understand the questions because you might expect that there are many, many more players basically in the market. It's actually -- it's interesting. It's a small point of data. We have a team that is called Talent Team, which we have isolated completely away from a typical HR processes. And the Talent Team is all about hunting, having a pipeline of talent that we can bring in more organically than through the M&A side. And it's interesting as much as everybody talks about a lot of layoffs and a lot of job losses, without a doubt, there are many of them much more than for a long time on that front. But one, the best senior guys are really being snatched [indiscernible] really being finished incredibly quickly. Often when you call 3, 4, 5 days after the announcement, and all this is highly publicized, the best one is already gone as part of it. So there is really a focus on super quality on that front.

And 2 I said earlier, we're not going to change anything to standard in terms of quality and not all jobs at the same as well. There are some which are perfect space in terms of back-end engineering, in terms of live services, in terms of specific operations, but we still have gaps. So we have massive demand from our clients where we want to keep pushing. So wisely, but M&A will remain a key part of our agenda. MPG is a perfect example of that. You'll see more of those, but within the right framework.

[Robert Kingston, executive]

Yes. And I think in terms of valuations, continued discipline within our overall sort of guidance range of 5 to 7x. I think if you look back to earlier in '23 or certainly in the boom times of end of 2022. They're running slightly hotter than that, but I think that's come back now. As Bertrand I think said earlier, some businesses that were sort of rejecting us in terms of things are now coming back because they're actually struggling a little bit more. I think it doesn't really change our overall focus, as Bertrand said, quality, the right fit for the business. And then those businesses where we think we can add value to them operationally over time as we've done with Tantalus in the example.

[Unknown Executive]

Thank you. I guess if there's any more last question from the room. Otherwise, I suggest we wrap it up. Now back to you, Bertrand.

[Bertrand J. F. Bodson, executive]

Yes. Thank you all for joining. Thank you for being on the journey with us. I see many friends who have been with us actually for 10 years plus. I think I hope this conveys the sense that we have a Brazilian business that we have a diversified business in those times as well that we have a strong plan. We're executing against it. You can see the emphasis that we're putting in particular on the 5 pillars, but if I had to pick 2, it would be the strategic partnerships and now we're building more and more with our clients at the right level, we're never losing the entrepreneurship, which makes our strengths. We are making sure that we have -- we're investing in technology massively. I think we have the right to win. We're trying to be smart about the way we take it in production versus post production.

We have the right talents as well to take that on at the end of the day, it's really in the hands of our talents, the right cost control as well to make sure that we have the right discipline in place and with an M&A machine that I think is -- has much, much more to give for the years to come.

So focus on the short term, but at the same time, really making sure that we keep building the platform for the long time because there's a lot to go after. So thank you very much for being with us, and enjoy the rest of the day.