7 JUNE 2018 technicolor.com COUNTRIES SITES REVENUES 2017 2017 - - PowerPoint PPT Presentation

technicolor.com 7 JUNE 2018

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COUNTRIES SITES REVENUES

25% 16% 7% 52%

Europe, Middle-East & Africa 23% Latin America 16% Asia-Pacific 8% North America 53%

2016 2017

16% 26% 1% 57%

Production Services 18% DVD Services 24% Corporate & Other 1% Connected Home 57%

2017 2016

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► Hollywood and Independent

Studios, Advertising companies & Brands, streaming companies, game publishers

► Major Network Service providers

and Pay-TV operators

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 Disposal of the Patent Licensing business announced early March  Completion of the transaction expected in July 2018  Developing Production Services  Optimizing cash generation in DVD Services  Improving profitability in Connected Home  Cost actions being implemented across businesses, and intensified for

the Connected Home segment

 Corporate cost savings program just launched: €10m of savings

targeted by 2020

 Deleveraging: proceed and cash flows from Patent Licensing applied to

pay down debt, continuous optimization of the balance sheet

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►

Market leadership driven by premium positioning:

• #1 in VFX for Film & TV
• #1 in VFX for Advertising
• #2 in Postproduction

►

Market drivers Immediate: increasing demand for high-end original content across segments Near term: development and personalization

• f

streaming platforms driving more demand Long term: development of immersive content and experiences driving increased demand and new customers

►

Sales breakdown:

• 1/3 in VFX for Film & TV with MPC Film and MrX brands
• 1/3 in VFX for Advertising with MPC and The Mill brands
• 15% to 20 % in Postproduction with Technicolor brand
• 10% to 15% in Animation & Games with Mikros and

Technicolor brands

►

Competitive advantage

• Strong barriers to entry
• Scale and customer diversification
• Computing power and software expertise
• Significant IP library (algorithms)
• Global footprint with front end studios in key end markets

and a state-of-art facilities in India

2017 revenue Revenue growth Market trends

►

€766 million

►

+3% YoY at constant rate

►

2018: mid-single digit

►

VFX & Animation markets: +1% to +10% per year

►

Postproduction: roughly stable

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►

Market leadership :

• #1 in North America, Europe and Australia
• Completion of full market coverage with Sony
• utsourcing agreement starting in Q2 2018
• Japan market is the only addressable market which us

not served

►

Market drivers

• The US Box office is the main driver for new releases

and Blu-ray volumes

• Natural decline in Standard definition discs
• The highly efficient operational platform could be

leveraged by diversification opportunities

►

Sales breakdown

• Revenue driven by volumes and mix
• Technicolor replicated 1.3 bn discs (o/w 22.5% of Blu-ray

discs) in 2017 while its addressable market amounted to c. 2.7bn discs

• Serving all major Hollywood studios, serving Microsoft

and all major Games publishers

►

Competitive advantage

• Deeply integrated customer relationships
• Highly scalable optimized low cost operational platform

and very efficient cost base with variable costs above 70%

• f total costs
• Focus on cash generation with restructuring and

maintenance capex below €15m per year

2017 revenue Revenue growth Market trends

►

€1,024 million

►

(12.9)% YoY at constant rate

►

2018: flat

►

Declining market remaining resilient

►

Down 5% to 15% per year (not linear)

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PRODUCTION SERVICES DVD SERVICES

EXPAND market coverage both in terms of CUSTOMER PENETRATION and INTERNATIONAL FOOTPRINT

+

INCREASE the scale of the Animation business

+

CONTINUED DEVELOPMENT of high-concept content, platforms and technology for VIRTUAL and AUGMENTED REALITY and other immersive media APPLICATIONS

+

M&A OPPORTUNITIES will be considered

+

Reinforce MARKET LEADERSHIP position  Ongoing onboarding of Sony DADC as the

• utsourcing agreement for replication and

distribution in North America and Australia started ramping up in Q2  Incremental market share opportunities, however marginal

+

Leverage BEST-IN-CLASS OPERATIONAL PLATFORM thanks to ongoing restructuring

+

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►

Market leadership

• #2 worldwide in CPE, behind Arris, in a market which

remains fragmented

• Increased market share in North America reflecting

higher penetration of cable operators both in video and broadband

• Leadership in Broadband technologies, illustrated by

position in Docsis 3.1 deployment

►

Market drivers

• Technological upgrade cycle starting in broadband

CPE (Docsis 3.1, LTE, …)

• Gradual decline expected in video CPE due to the

recent refresh cycle and the development of OTT solutions

• NSPs and Pay-TV operators seeking ways to limit

churn and maximize ARPU

►

Sales breakdown

• 62% of Video CPE / 38% Broadband CPE in 2017 as a result of

record deliveries of video set-top boxes to Charter

• Going forward, Broadband is expected to represent at least 50%
• f Connected Home revenues
• 57% in North America, 43% international (EMEA, LATAM, APAC)

►

“Competitive advantage”

• Success of Technicolor’s commercial strategy with North

American cable operators, resulting in market share gains

• Market leadership in next generation broadband technologies
• Integration expertise and supply chain excellence
• 1st supplier of OTT boxes to NSPs and Pay-TV operators

2017 revenue Revenue growth Market trends

►

€2,419 million

►

(6,8)% YoY at constant rate

►

2018: -10% vs. 2017

►

+1% to 2% per year excl. China, mostly driven by Broadband

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IMPLEMENTATION of a 3 year transformation plan to further enhance customer relationships:

► Focus on major NORTH AMERICAN CABLE

CUSTOMERS to leverage recent commercial success and further gain market share

► Concentration on the other 50 most INNOVATIVE

and VALUE-ORIENTED worldwide customers, which value performance and bring better CONTRIBUTION

► De-focus NON-CONTRIBUTIVE and NON-

SCALABLE customers, representing 10% DECREASE or c. € 250 MILLION of revenue for 2018

+

IMPLEMENTATION OF OPTIMIZATION MEASURES to adapt the business to this environment:

► Ongoing CONVERSATIONS/NEGOTIATIONS

with CUSTOMERS to transfer component price increases from Q3 2018 and beyond

► Strengthening RATIONALIZATION,

MUTUALIZATION, and COST-CUTTING initiatives

► Accelerating organization and geographical

footprint STREAMLINING

► Foster SOLUTIONS AND PROCESS

INNOVATION TO MAINTAIN leading position in growing segments CHALLENGING MARKET CONDITIONS driven by components issue:  Memory prices continued to increase in H1, faster than anticipated in Q2  Some additional commodities incl. MLCC (capacitors) experiencing major supply constraints that could potentially affect revenues if shortages persist

+

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► General: negative forex impact driven by

dollar weakness vs. euro

► Entertainment Services:

►

Production Services: single digit revenue growth YoY

• Double digit revenue growth in Film & TV Visual

Effects and single digit revenue growth in Advertising VFX

• Solid level of Postproduction activity in the US

and in the UK and lower revenues in Animation & Games

►

DVD Services: lower revenues YoY, in line with Group’s expectations

• Blu-rayTM volumes up 15% & Standard Definition

volumes down 17%

• No impact of the outsourcing agreement with Sony

which started in Q2 (ramp up will be completed before Q4 2018)

► Connected Home:

►

Top line

• Lower revenues in North America cable

reflecting product cycle: ramp up of DOCSIS 3.1 gateways in Q1 2018 vs. record deliveries of WorldBox to Charter in Q1 2017

• Significant revenues growth in EMEA,

Asia-Pacific and Latin America

►

Margin and supply pressures remain still intense:

• Memory prices increases in H1 2018
• MLCC disruption generating additional cost

increases and challenging revenue target

►

Price discussions with customer and reinforced management actions

• Customers will pay for component cost

increases in order to ensure supply starting in Q3

• Accelerating implementation of efficiencies

programs

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359 291 2016 2017 4 628 4 231 2016 2017

7.8% 6.9% (6.8)%

(106) (219) 2016 2017 132 53 2016 2017

2.9% 1.2%

REVENUE (IN € MILLION) CHANGE AT CONSTANT CURRENCY (%) ADJUSTED EBITDA (IN € MILLION) MARGIN (%) ADJUSTED EBIT (IN € MILLION) MARGIN (%) NET RESULT (IN € MILLION)

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► As part of the Group’s simplification process, costs

which support business activities reallocated to business divisions

► Effective as of January 1st, 2018

P&L impact of this reallocation in 2017 (in m€)

Entertainment Services Connected Home Corporate & Other

FY 17 Adj. EBITDA as reported

230 137 (76)

Cost reallocation*

(15) (9) 24

FY 17 Adj. EBITDA post reallocation

216 128 (53)

• Adj. EBITDA

split (in m€)

H1 2017 H2 2017

Entertainment Services

72 159

Connected Home

57 80

Corporate & Other

(46) (30)

CORPORATE COSTS REVIEW A HIGHLY SEASONAL PERFORMANCE

► Adj. EBITDA mostly generated in H1 due to

the seasonality of the business

► DVD Services is the most impacted by

seasonality with a very strong Q4

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FREE CASH FLOW FROM CONTINUING OPERATIONS (IN € MILLION)

291 63 (146) (40) +72 (62) (9) (43)

2017

• Adj. EBITDA

Net capex Net restruc. Δ WC & OAL Financial Tax Pensions and

• thers

FCF Continuing (in € million)

H1 2016 H2 2016 FY 2016 H1 2017 H2 2017 FY 2017 FCF continuing (23) 111 88 (109) 172 63 Discontinued operations* FCF 121 39 160 (39) (39) FCF for reconciliation (Group FCF) 98 150 248 (148) 172 24

*Discontinued operations include Cathode Ray tube settlements and Patent Licensing activities

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► Strict management of the Working Capital and the Capex ► Financial charges reduction

(IN € MILLION)

DECREASE IN FREE CASH FLOW PARTIALLY OFFSET BY:

Free cash flow in 2016 Free cash Flow in 2017 Adjusted EBITDA from continuing

• perations

Capex Restruct. Δ WC & OAL Financial Tax Pensions and

• thers

► New €90 million EIB 6-year

borrowing at a fixed rate of 2.54% drawn in January 2017

► Around €30 million of annual

interest cost savings following 2016-2017 refinancing and debt reduction

► Term loan repayments amounted

to €50 million 2017

► Average rate at December 31,

2017: 3.45% (end of 2017) vs. 4.34% (end of 2016)

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Healthy Balance Sheet structure

2 0 1 7

Nominal IFRS December 31, 2017 December 31, 2016 Issuer Type Curr Rate Formula Maturity Rate Rate Nominal IFRS Nominal IFRS

Tech Finance Term Loan USD

Libor w/ floor of 1% + 4.00%

Jul-20 5.00% 6.42%

• 290

279 Tech Finance Term Loan EUR

Euribor w/ floor of 1% + 4.00%

Jul-20 5.00% 6.98%

• 315

297 Technicolor SA Term Loan USD

Libor w/ floor of 0% + 2.75%

Dec-23 4.23% 4.35% 249 248

• Technicolor SA

Term Loan EUR

Euribor w/ floor of 0% + 3.00%

Dec-23 3.00% 3.11% 275 273

• Technicolor SA

Term Loan EUR

Euribor w/ floor of 0% + 3.50%

Dec-23 3.50% 3.63% 450 447 450 446 Technicolor SA EIB Loan EUR

Fixed rate

Jan-23 2.54% 2.54% 90 90

• Other debt

Mainly capital leases and accrued interest 3.25% 3.25% 39 39 28 28 Total Debt: €1103m €1097m €1083m €1050m Cash: 319 319 371 371 Net Debt: €784m €778m €712m €679m

• Avg. int. rate:

3.45% 3.56% 4.34% 5.33%

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Strong liquidity of €319m€ at 31 December 2017 All committed credit lines were undrawn at December 31,2017

Liquidity at December 31, 2017 Amount (m€) Cash on hand at December 31, 2017 year end

319

Committed credit facilities:

Technicolor SA Revolving Credit Facility (€250m matures December 2021) 250 Crédit Agricole credit line (€35m matures May 2019) 35 Wells Fargo credit line ($125m matures September 2021) 105

Liquidity €709m

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2017 – Revenues and Adj. EBITDA

2 0 1 7

REVENUES

• Adj. EBITDA

(in € million)

2016 2017 Δ % Current currency Δ % Constant currency 2016 2017 Δ % Current currency Δ % Constant currency Production Services 765 766 +0.0% +3.0% 238 230 (3.1)% (1.2)% DVD Services 1,201 1,024 (14.7)% (12.9)% Connected Home 2,637 2,419 (8.3)% (6.8)% 218 137 (37.1)% (36.0)% Corporate & Other 25 22 (10.3)% (9.8)% (97) (76) +21.4% +20.7% Disco 257 131 (49.0)% (48.9)% 204 80 (60.7)% (60.7)%

For reconciliation 4,885 4,362

(10.7)% (9.0)%

563 371

(34.1)% (32.9)%

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Free cash flow – IFRS reconciliation

2 0 1 7

(in € million) December 31, 2016 Published December 31, 2016 Represented December 31, 2017 Adjusted EBITDA 565 359 291 Changes in working capital and other assets and liabilities 106 56 72 Pension cash usage of the period (note 8.1) (28) (28) (27) Restructuring provisions – cash usage of the period (note 9.1) (56) (47) (40) Interest paid (74) (74) (46) Interest received 3 3 2 Income tax paid (44) (5) (9) Other items (26) (24) (34) Net operating cash generated from continuing activities 446 240 209 Purchases of property, plant and equipment (PPE) (68) (68) (52) Proceeds from sale of PPE and intangible assets 1 1 1 Purchases of intangible assets including capitalization of development costs (85) (85) (95) Net operating cash used in discontinued activities (46) 160 (39) Free cash flow for reconciliation 248 248 24

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Cash Net nominal debt evolution (non IFRS)

2 0 1 7

371 319

+63 (39) +35 (25) (25) (39) (22) January 01 2017 December 31 2017 FCF disco.

Cash position

FCF continuing Net acquisition Dividend Other Forex

(in € million)

New cash from debt FCF continuing

1,083 1,103

(10) (593) +556 +90 +22 (45) Repayment

• f term loans

Net term loans Forex New EIB loan Other

Gross nominal debt

Net debt at nominal value 712 784 Normal term loan repayments