19th February 2020 technicolor.com
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1 9 t h F e b r u a r y 2 0 2 0
technicolor.com
TODAY’S AGENDA
Agenda Presenter Time
Welcome Breakfast 8:30am
Introduction & Key Highlights Richard 9:00am
Deep-dive by Segment Tim, Christian, Luis and Quentin 9:30am
2020-2022 Strategic Plan Richard 11:00am
Q&A and Lunch Break 11:30pm
2019 Results and Financial Guidance Laurent 1:00pm
Capital Markets Transaction Laurent 1:30pm
Concluding Remarks and Q&A 2:00pm
2
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TODAY’S SPEAKERS
Richard Moat Laurent Carozzi Tim Sarnoff
Chief Chief President
Executive Financial Production
Officer Officer Services
(joined in 2019) (joined in 2018) (joined in 2009)
Christian Roberton Quentin Lilly Luis Martinez-Amago
Head President of President of
of VFX DVD Connected
(joined in 2003) Services Home
(joined in 1994) (joined in 2015)
3
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technicolor.com
INTRODUCTION
Richard Moat Background
► Joined in November 2019
► Previous experience
o CEO Eir Limited (2014-2018)
o CFO Eir Limited (2012-2014)
o Deputy CEO and CFO EE Limited
o 17 years with Orange
► Education
o St Katharine’s College, Cambridge
o London Business School
Chief Executive Officer
5
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NEW BOARD IN PLACE TO EXECUTE
Anne Bouverot Richard Moat Thierry Sommelet Xavier Cauchois
Chairperson of Technicolor’s Chief Executive Officer Representing Bpifrance Former Head of PwC Europe
Board of Directors Participations and France in the Technology,
Telecom and Media sector
Senior Advisor for Managing Director Mid &
Former CEO at Eircom President of Remuneration
TowerBrook Capital Partners Large Cap. Bpifrance
Committee
Dominique D’Hinnin Yann Debois Cécile Frot-Coutaz Ana Garcia Fau
Chairman of Eutelsat Head EMEA at YouTube Former CFO of TPI-Paginas
Employee Director Amarillas (Group Telefonica),
Communication SA
Corporate Sourcing CEO of Yell for the Spanish
Former CFO Lagardere and Latin-American business
Christine Laurens Melinda J. Mount Brian Sullivan Maarten Wildschut
Chief Financial Officer Formerly President of Former President and Co-Head of RWC European
and Partner at A.T. Jawbone and Corporate Chief Operating Officer Focus Fund
Kearney Vice President and CFO for of Fox Network Group
the Online Services and CEO Sky Deutschland
division at Microsoft
Appointed as Board Observer. Board of Directors intends
Director newly appointed by the Board on November 2019 Nominations & Governance committee Audit committee
to propose her election at the next shareholder meeting
Director newly appointed by the Shareholders’ meeting
Independent Board members: 67% of Board Strategy committee Remunerations committee
held in June 2019
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EXCITING OPPORTUNITIES AS A GLOBAL LEADER
PRODUCTION DVD CONNECTED
SERVICES SERVICES HOME
Worldwide leadership Worldwide in DVD, In Broadband and
in VFX for Films Blu-ray, UHD, and CD Android TV
Market share in
70% Top box office films 65% Global market share 19%
Broadband
Visual effects shots
Market leading supply Market share in
150k for film & episodic per 65%
chain services Android TV
year
GROWTH CASH GENERATION LEADERSHIP
NEW CEO IS STRONGLY CONVINCED BY THESE OPPORTUNITIES AND
WILL PERSONALLY INVEST IN THE UPCOMING RIGHTS ISSUE
Source: Company information; Management estimates 7
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WHAT WE WILL DO
► Exploit burgeoning demand for VFX content: secure volume agreement with key players
► Optimise headcount allocation to individual projects
PRODUCTION
► Advertising: improve margins/continue agency disintermediation
SERVICES
► Post Production: change model
► Maximise use of Indian resources
► Renegotiate remaining studio contracts on improved terms
DVD SERVICES ► Explore potential of adjacent businesses
CONNECTED
HOME ► Maximising “cash cow” potential of the business
► Continue to pivot from Video to Broadband
CONNECTED
► Exploit growth in Android TV
HOME
► Focus growth on scale customers using platform model
► Streamline the business model in each function
TRANSVERSAL
► Reduce organisational complexity
FUNCTIONS
► Centralise functions where appropriate
FINANCIAL ► Combined impact of new capital structure and strict focus on profitable growth and
PERFORMANCE financial discipline will provide a sustainable future for Technicolor
8
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COMPREHENSIVE STRENGTHENING OF CAPITAL STRUCTURE
THREE STEP TRANSACTION REINFORCING LIQUIDITY POSITION…
c. €300m rights issue
c.€300m
► Restore cash buffer to cope with
natural seasonality of business c.€726m
€111m
€426m
€250m(1)
Extension of RCF and Wells
Fargo maturities(1) €65m
Cash position as of RCF Wells Fargo Facility Available Liquidity Capital Increase Proforma Available
► 18 month extension to June 2023 31/12/2019 Position Liquidity Position
in line with strategic plan timeline
► Full flexibility to implement new … AND IMPROVING LEVERAGE
initiatives
c.4.0x
2019 EBITDA
New $110m bridge facility < 3.0x
2019 EBITDA
€300m
€1,233m
€933m
Nebt Debt as of 31/12/2019 Capital Increase Proforma Net Debt
Source: Company information
Note: Including IFRS 16 impacts 9
C3 - Restricted Natixis 1. €250m available until December 31st 2020, €225m until December 21st 2021 and €202.5m until June 30th 2023
A UNIQUE VALUE PROPOSITION
GLOBAL LEADER IN EACH NEW MANAGEMENT WITH CAPITAL STRUCTURE
BUSINESS UNIT TURNAROUND EXPERIENCE STRENGTHENING
► #1 with significant market share ► New CEO with clear mandate ► Position the company to execute
on growth plan
► Award-winning, market-leading ► Granular Strategic Plan to drive
products and services profitable growth ► Restore cash buffer to manage
natural working capital movements
► Unmatched creative talent, ► New board focused on
technology and scale accountability ► Match debt horizon with time
horizon of Strategic Plan
10
C3 - Restricted Natixistechnicolor.com
technicolor.com
A WORLDWIDE LEADER IN THE CREATION OF
EXTRAORDINARY ENTERTAINMENT EXPERIENCES
FILM & EPISODIC ADVERTISING ANIMATION & GAMES POST PRODUCTION
Market ► # 1 position ► # 1 position ► # 2 position in Animation ► # 2 position
positions
► Industry-leading artists, cutting-edge ► From ideation to creative execution ► High-quality, end-to-end computer- ► Partnership with clients from camera
technology, tools and workflow ► Campaigns from traditional TV ads to generated imagery (CGI) animation capture on-set to VFX, colour and
► Capabilities include pre-visualization / branded experiences services from concept art to final sound post production
virtual production, asset building, deliverables for theatrical, streaming ► Innovative workflow and flexibility
Description ► Immersive Experiences
texturing, animation, rigging, and TV clients
► VFX, animation, design, experiential ► Dailies, digital intermediates, video
rotoscoping, lighting, match move and ► Leading provider of VFX services to post, sound post, localization,
and interactive, color and finishing
compositing video game producers marketing services
Brands
Select projects
13
C3 - Restricted NatixisA LONG STORY OF GROWTH AND EXPANSION
2019
2020
• The Mill opens in Berlin
• 8,300+ headcount • MPC Episodic launched to
capture high-end Episodic
2015 market in the UK
• Technicolor acquires The Mill • MPC Film wins Oscar for 1917
• MPC Advertising opens in
Paris and Shanghai
2014 • 3,900+ headcount
• Technicolor acquires Mr. X
• 3,000+ headcount
2012
• MPC Film pre-vis team launches in
Los Angeles 2018
2008
• MPC Advertising opens in
• MPC Advertising opens in LA Bangalore • Mill Film launches in Montreal
and Adelaide
• 760+ headcount by the end of 2009 • MPC Creative launches
• 7,700+ headcount
• 1,250+ headcount
2017
• MPC Film wins Oscar for THE
2013 JUNGLE BOOK
• MPC Film opens in Montreal and • 5,000+ headcount
2010 wins Oscar for LIFE OF PI
• MPC Film opens in Bangalore • MPC Advertising opens in
2004 Amsterdam
• MPC Advertising opens in NYC
• 1,780+ headcount
• Technicolor acquires MPC • 880+ headcount
• Film & Advertising VFX
services in single London
facility
• 400+ headcount
*Headcount reflect FTE (full time equivalent)
14
C3 - Restricted Natixis2018 – 2019 AWARDS
A CELEBRATION OF ARTISTRY
15
C3 - Restricted Natixis2020 AWARDS
A CELEBRATION OF ARTISTRY
2020 Academy Award for
Visual Effects
2020 BAFTA Award for
Special Visual Effects
16
C3 - Restricted NatixisVIDEO: 1917
17
C3 - Restricted NatixisWHY CLIENTS ARE ATTRACTED TO PRODUCTION SERVICES
► Innovative, award-winning talent
► Global footprint
Talent ► Wide breadth of services
► Efficient use of all leading location-based ► Cutting-edge proprietary technologies
production incentives ► Efficient integration of leading third-party
► Highly talented artist pool in low-cost India Workflow Technology tools
► Effective workflow allows business to ► Robust investment in software
scale and address various types of development that differentiates our
projects services
18
C3 - Restricted NatixisPRODUCTION SERVICES IMPERATIVES
Position ourselves to scale Streaming/Episodic VFX and
✓ Animation businesses ✓ Extend upstream in advertising value chain
Further diversify revenue mix to balance major studio
✓ clients and emerging streaming platforms ✓ Sell locally, act globally
Film and Episodic Advertising Animation and Games Post-Production
► Scale Streaming and Episodic ► Expand number of direct-to- ► Capture long-term growth in ► Continue to innovate and
VFX businesses to capture brand relationships Feature Animation segment by implement cloud-based
highest growth segment of the broadening customer base workflows to improve utilization
► Grow business in experiential
market and efficiencies
marketing using creative ► Expand offering and capacity in
► Service high-end local content technology expertise (e.g., Games to enlarge addressable ► Scale business in higher margin
productions immersive experiences, virtual market and move up the value just-in-time, digital make-up and
avatars) chain into higher margin related VFX services delivered
► Continue investment in
services as part of the Post-Production
technology to improve efficiency ► Increase utilization of India
workflow
and optimize workflow, driving talent base to expand margins
top and bottom-line growth
19
C3 - Restricted NatixisGROWING PORTION OF BUDGETS BEING SPENT ON VFX
Films are spending more on VFX Spend on film & TV (VFX), advertising (VFX & post production) and
(% budget spend on VFX) animation (production) CAGR
(US/UK, $ in bn) 18-23
6.9 8%
Medium budget film(1)
10–15% 1.1 6%
8–12%
5–8%
4.8 1.8 1%
2014 2018 2023
0.8
High budget film(2) 1.6
30–35% Similar trends
25–30%
in Tentpole TV 4.0 12%
20–25% with Game of
Thrones and
Lord of the 2.3
Rings spending
20% of budget
on VFX
2014 2018 2023 2018 2023
Film & Episodic Advertising Animation
Sources: Third Party Consultant
Notes: (1) Budget of $30-100m;. (2) Budget of >$100m
20
C3 - Restricted NatixisBRAND SEGMENT ALLOWS US TO CAPTURE FULL FILM AND
EPISODIC VFX MARKET POTENTIAL
STREAMING LOCAL CONTENT:
FILM & EPISODIC EXAMPLES THEATRICAL
/ TV THEATRICAL / STREAMING / TV
• Theatrical studio
tentpole films
• Tier A High- to Mid-end
Streaming / TV
EPISODIC
• Local French / EU • High-end Episodic
content market in the UK
• Mid-sized VFX budgets
• Tier A Mid- to Low-end
Streaming / TV
• Smaller-sized VFX
budgets
21
C3 - Restricted NatixisADVERTISING: ELEVATING AUDIENCE ENGAGEMENT ON
HIGH-PROFILE CAMPAIGNS
MARKET TRENDS
Digital video is the fastest growing digital ad medium by spend
CAGR
(Global digital ad spending per medium, $ in bn)(1) ► Increase proximity with brands
18 – 21
352
10% ► Deepen relationship with agencies
263 Opportunities
► Fully utilize India workforce to meet needs of customers
Other 9%
Other ► Explore expansion in outdoor advertising
Video Video 18%
2018 2021
► Generational shift in content consumption norms is disrupting ► Global capabilities
content creation and distribution value chains ► Ability to address most complex and time sensitive projects through
Strengths
► DTC business models are dramatically restructuring the retail global talent pool
landscape, driving brands to invest in emerging technologies and ► Broad portfolio of leading brands
experiential marketing
BLUE-CHIP CUSTOMER BASE
Note: (1) Zenith data, “Advertising Expenditure in US$ million at current price”.
22
C3 - Restricted NatixisANIMATION & GAMES: CREATING ASSETS AND PROVIDING
ANIMATION SERVICES IN FILM, EPISODIC AND GAMES
STRENGTHS CUSTOMERS SELECT ACHIEVEMENTS
► Unique setup combining higher
Feature value, creative front-end
WFH(1)
services with high quality
animation
► Leading production services
facilities
Episodic
WFH(1) ► Recognized for security and
stability
► High-end, creative solutions
augmented with in-engine
Games services
► Possibility to scale and activate
large talent pool
Note: (1) Work For Hire (WFH)
23
C3 - Restricted NatixisPOST PRODUCTION: EMPOWERING STORYTELLING
POST-PRODUCTION SERVICES CUSTOMER OVERVIEW
► On-location services
► Color finishing
► Episodic sound finishing
► Cloud-based content management
► Marketing services
► Restoration and remastering
► Subtitling and international versioning
24
C3 - Restricted NatixisVFX PIPELINE & LOCATION-BASED WORKFLOW
1. PRODUCER PUBLISH 2. DEPARTMENT PUBLISH
► Once a project is secured, it is officially handed over ► Once a Producer publishes the request, the
from Business Development to a Producer1 Department Managers validates the requests
► Following an assessment of workforce required to from all the Producers and assign work
deliver the project, the Producer makes a request for accordingly in DASH
the project needs through DASH2
► Requests made in DASH are always based on a by
department, by site estimate of need to complete WEEKLY
PROJECT
ESTIMATE TO
COMPLETE
4. PROJECT P&L CYLE 3. WORKFORCE MANAGEMENT
► Concurrently, based on the workforce booked in ► WFP3 oversees all Producer and Department
the ‘Producer Publish’, DASH calculates the cost Publishers to ensure an effective and efficient
of the efforts required to complete the project and use of workforce within the physical sites with
generates a Project P&L the help of tools and analytics provided in
► At the end of each week artist time sheets are DASH
actualized to the project and task they worked on ► In case more artists are required than
which overwrites the schedule in DASH for available, positions can be added to the hiring
actuals thereby trueing up the cost on a weekly list in DASH once approved by WFP, Finance
basis and HR
Note: DASH is integrated with the payroll system to feed in the latest salary details and has a module to input the latest sales per project
1 Producer = Project Manager / Lead; 2 DASH = Inhouse Workforce / Project / Finance Management Application; 3 WFP = Workforce Planning
25
C3 - Restricted NatixisATTRACTIVE GLOBAL PRESENCE
CLOSE PROXIMITY TO CUSTOMERS AND ACCESS TO LARGE PRODUCTION TAX INCENTIVES
TOTAL HC:
+10,400
40%
+500 HC
PARIS
AMSTERDAM
30% 40% +10 HC
+450 HC +1,430 HC BRUSSELS & LIÈGE
TORONTO
MONTREAL
LONDON +25 HC
+1,125 HC BERLIN
+10 HC
CHICAGO 20%
LOS ANGELES +65 HC NEW YORK
+1,000 HC +400 HC +1,000 HC SHANGHAI
20 - 25% 30% MUMBAI +45 HC
BANGALORE
+4,000 HC
Headcount for Production Services (Q4 2019)
Approximate effective tax incentives to the client on
XX% VFX and/or Animation services for Film and/or Episodic
work
ADELAIDE
+335 HC
40% 26
C3 - Restricted NatixisA UNIQUE COMPETITIVE ADVANTAGE: INDIAN PLATFORM
A DECADE IN THE MAKING
► Established in 2007 with offices in Bangalore and Mumbai
Headcount in India
1 ► Currently the largest VFX workforce located in India
~5,000
► Develop and train our artists to take on more and more complex productions taste
~300 ► Technicolor India offers:
2007 2019 ✓ High speed, secure connectivity with other Production Services facilities
2
✓ Ability to scale economically
✓ Access to highly talented and passionate artists
► Allows Technicolor to:
3 ✓ Improve competitiveness of bid
✓ Free up capacity in key, high-incentive cities to take on additional projects
27
C3 - Restricted NatixisCONTINUED STRENGTHENING OF OUR TALENT BASE
LEARNING AND DEVELOPMENT TheFocus.com RECRUITMENT
► Technicolor Academy, launched in 2018, encompasses both new hire ► The Focus is a centralized recruitment team and platform for Production
training and current employee development in order to supplement general Services
recruiting efforts required to sustain our growing artist population worldwide
► Since launching in 2018, The Focus has been responsible for recruiting over
► Technicolor Academy has trained over 360 graduates worldwide, with over 3,000 employees
320 new employees hired
► Currently servicing recruitment needs for:
► Currently available in London, Adelaide, Bangalore and Montreal
o And will be rolled out to the other Production Services businesses over
time
28
C3 - Restricted NatixisVIRTUAL PRODUCTION
Virtual Production is changing how movies are made – integrating creative further
into the VFX pipeline, shortening schedules, freeing up budget and giving
filmmakers more control in bringing their visions to the screen
The Virtual Production Platform:
Technicolor Genesis
Technicolor Genesis provides tools that give directors,
production designers, lighting designers, directors of
photography, VFX and post-production supervisors –
among others – the ability to simultaneously integrate
and manipulate live action and computer-generated
assets
29
C3 - Restricted NatixisA UNIQUE GROWTH TRACK RECORD
Production services historical revenues
€ in m
2004-19 organic
TheFocus.com RECRUITMENT revenue growth
CAGR of 19%
893
785
750 757
554
364
276 279
243
211
43
2004 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Source: Company information
Note: Includes acquisitions
30
C3 - Restricted NatixisWHY ARE WE EXCITED ABOUT PRODUCTION SERVICES
1 Combination of explosive growth in demand and new use cases
2 Only company which has the capabilities, scale and customer trust to meet this demand
3 Larger number of smaller projects in episodic will provide greater resilience and visibility of growth
4 Continue to successfully leverage Indian presence to drive profitability and top-line
5 Growing operating leverage and significant cash generation ahead
31
C3 - Restricted Natixistechnicolor.com
LARGEST WORLDWIDE PROVIDER OF SUPPLY CHAIN SOLUTIONS TO
LEADING CONTENT CREATORS
✓ ✓ ✓
Highly scalable and
Global presence with
flexible operations with Full service, multi-channel
industry leading market
low cost manufacturing supply chain capabilities
share(1)
platform
✓ ✓
Best-in-class technical Long-term, deeply
strength and content integrated customer
security capabilities relationships
Source: Future source
Notes: 1. Addressable market share defined as: North America, Europe and Australia. Excluding Sony 33
C3 - Restricted NatixisSTRATEGIC EVOLUTION OF SERVICE OFFERINGS
MEDIA ► Duplication / Replication
MANUFACTURING ► Optical Disc
~60% of
revenue
► Assembly / Packaging
PACKAGING
► Case / Materials
► Value-added warehousing & distribution
DISTRIBUTION ► Returns / Reverse logistics
► POS display
c. 40% of DVD ► Non-asset freight management ~40% of
Services revenue TRANSPORTATION revenue
base now derived ► Parcel / TL / LTL / Ocean…
from non-
manufacturing
activities ► Forecasting support
BACK OFFICE ► Data entry
► MRP
DVD SERVICES IS A FULL-SERVICE SUPPLY CHAIN SOLUTIONS
PROVIDER WITH GROWING PRESENCE IN NON-PACKAGED MEDIA
34
Source: Company information
C3 - Restricted NatixisDIVERSIFIED CUSTOMER BASE
Client type Selected examples Additional information
► Typically multi-year contacts (2 to 4 years)
STUDIOS ► Exclusive relationships common
85% of volumes ► Ongoing consolidation (ex Disney / Fox and Warner /
Universal JV)
INDEPENDENTS ► Indies increasingly consolidating with major studios
6% of volumes for distribution (with volume flowing to DVD services
via studio contracts)
MUSIC / AUDIO ► Increasing CD volume share with exit / consolidation
5% of volumes of other replicators
► 85% worldwide share in Microsoft Xbox disc
GAMES / replication
SOFTWARE
4% of volumes ► Exclusive consultant to Microsoft for worldwide
Xbox testing and technical services
35
C3 - Restricted NatixisDEPTH OF RELATIONSHIP & BREADTH OF SERVICES: DISNEY
✓ ✓
DVD & Blu-Ray DVD & Blu-Ray
Capacity to manufacturing manufacturing
✓
support DVD & Blu-Ray
manufacturing
clients on a ✓ ✓
Distribution & Distribution &
global level freight management freight management
Planning Replication Packaging Distribution Returns
Offering full ► Pre-release planning ► Receipt, validation,
► New releases &
range of ► Materials
catalog production ► Order coordination ► 10-15k distribution
rework and credit
issuance
procurement orders per day
services from ► Global & facility ► DVD & Blu-Ray ► 50 to 200+ SKUs per ► 300k units
► 25-30k retail / ship
planning to production ► Global capacity major title release
to locations
processed per day
planning guarantees ► 3.9m units per week
returns ► 2.0m+ units per day ► Freight management
total US processing
► Dedicated account ► 2.0m+ units per day
team capacity
TECHNICOLOR IS A CRUCIAL PARTNER TO MAJOR STUDIOS PROVIDING
A FULL RANGE OF SUPPLY CHAIN SERVICES. ANNUAL REVENUE
GENERALLY SURPASSES €100M PER MAJOR STUDIO
Source: Company information 36
C3 - Restricted NatixisVOLUMES HAVE DECLINED BUT LESS THAN ANTICIPATED
EVOLUTION OF DVD SERVICES VOLUMES SINCE 2009
DVD SERVICES VOLUMES (millions of units)
VOLUMES DECLINING BUT WITH A LONG TAIL
► Since 2015, Technicolor’s volumes have declined at a
~5% CAGR
1.54 1.55
1.47 1.48
1.32 1.31 1.35 DVD REPRESENTS MAJORITY OF OVERALL PRODUCTION
1.26
1.20
1.09 ► Remains preferred format for catalog issues and is
1.06
regularly pushed by retailers
► Technicolor’s volumes have decreased at a ~7.5%
CAGR since 2015 but format remains more resilient
than expected, particularly in North America
BLU-RAY ACCOUNTS FOR ~30% OF VOLUMES
► Materially better pricing and margins
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 ► Format largely targeted at new releases
DVD Blu-Ray CD
► Technicolor’s volumes have increased at a ~19%
CAGR since 2009
DEMONSTRATED ABILITY TO GAIN MARKET SHARE AND EXTEND
ADDRESSABLE PERIMETER VIA ORGANIC AND EXTERNAL INITIATIVES
Source: Company information 37
C3 - Restricted NatixisPHYSICAL MEDIA REMAINS A LARGE MARKET WITH LONG TAIL
ALMOST $5BN SPENT / YR ON PHYSICAL MEDIA IN SPITE OF THE GROWING IMPACT OF STREAMING
US HOME ENTERTAINMENT TRANSACTIONAL SPENDING (IN $BN)
► Subscription streaming has been active and growing for 10
13.0 years. This is not a new dynamic facing the physical media market
12.0
10.9
29% 10.4
34% 9.3
38%
44%
49% IMPACT ON DVD / BLU-RAY HAS BEEN LIMITED DUE TO:
71%
66%
62% ► Content: Focus on TV & deep catalogue (and more recently on
56% internally produced content)
51%
► Windowing: Studios have maintained DVD window in advance
of SVoD window to maximise monetisation of their content
2015 2016 2017 2018 2019
Physical (ST and Rental) Digital (EST and VOD)
Source: Digital Entertainment Group 38
C3 - Restricted NatixisINTEGRAL PART OF THE ENTERTAINMENT ECOSYSTEM
ANNUAL US BOX OFFICE EST. SPLIT OF SELECTED STUDIOS REVENUES
$11.9bn
$11.4bn $11.3bn 30%
$11.1bn $11.1bn
70%
Box Office Physical Home Entertainment
2015 2016 2017 2018 2019
Physical media represented ~30% of studio
Box office is key leading indicator for disc volume
theatrical revenues in 2019
New records set in 2015, 2016 and 2018 with another Considerable source of profitability which studios
strong year in 2019 have no intention of abandoning
Remains very important category for big box retail
Consumer interest in theatrical remains very strong (Walmart, Target…) as major driver of store traffic
MAJOR STUDIOS REMAIN FULLY COMMITTED TO PHYSICAL FORMAT AS
THEY STILL CONTRIBUTE SIGNIFICANTLY TO REVENUE AND PROFIT
Source: Box Office Mojo, Management estimates 39
C3 - Restricted NatixisSTRATEGIC INFLECTION POINT REACHED
LEGACY DYNAMICS EVOLVING LANDSCAPE CURRENT STRATEGIC
A A POSITIONING
► Intense competition for studio ► Maturing market with strong ► Technicolor has positioned itself
supply contracts volume pressure as the “last man standing”
► Downward trajectory of disc ► Studio and supplier consolidation ► Significant market share gains,
pricing in pursuit of efficiency gains currently at 65%
► Loss making contracts ► Long-tail market opportunity ► Strong focus on maintaining low
cost operating platform
40
C3 - Restricted NatixisSHIFT TO VOLUME AND ACTIVITY BASED PRICING MITIGATES
VOLUME DECLINE AND DRIVES MARGINS
DVD SERVICES VOLUMES
KEY TAKEAWAYS
PER CONTRACT STATUS
Strengthened leadership position bolsters
commercial leverage with customers
36%
39%
Implementation of volume & activity based
pricing mechanisms
Volumes
Automatic contractual
25%
unit price increase
Complexity
Renegotiated / Extended Near final renegotiation
Contracts representing 60% of volumes
Pending renegotiation
successfully renegotiated by mid-2020
Source: Company information 41
C3 - Restricted NatixisSUCCESSFUL REDUCTION OF COSTS PROTECTS THE BUSINESS
CONSTANT FOCUS ON COST… … DELIVERING STRONG REDUCTIONS
VARIABLE COSTS REPRESENT 65-70% OF TOTAL COST BASE Worldwide Total Disc Volume (mm) DVD services Revenue (€m)
► Raw materials, direct labour, temporary labour, disc royalties
FIXED COSTS HAVE REDUCED AT A FASTER RATE THAN
THE OVERALL BUSINESS DECLINE 1,037
1,308 1,059 867
► Facility footprint consolidation and real estate elimination
► Permanent headcount reductions 2015 2019 2015 2019
IMPROVED PURCHASING FOR ALL MATERIALS DVD services Fixed Facility
Worldwide Permanent Headcount
Space (sqft m)
► Aggressive ongoing negotiation with suppliers to reduce price /
improve terms
► Demonstrated track record of realized y-o-y unit price reductions
across broad array of inputs
REDUCED COSTS VIA ENHANCED PROCESSES 5,874 12.5
4,303 9.2
► Selected investments in automation to reduce labor requirements
► Continuous Improvement (e.g. increase machine yields / up-time / 2015 2019 2015 2019
cycle time)
€26M OF COST SAVINGS DELIVERED IN 2019 WITH SIMILAR AMOUNT
EXPECTED FOR 2020
Source: Company information 42
C3 - Restricted NatixisGOING FORWARD: MAXIMISING THE LONG TAIL
KEY LEVERS FOR FUTURE GROWTH AND MARGIN IMPROVEMENT
Volumes / ► Continued market share gains whenever possible / sensible. Currently pursuing opportunities in European market
Market Share ► Increase mix of higher margin Blu-Ray / UHD in total volume base
Customers / ► Continue to aggressively complete key customer price renegotiations / increases
39% 36%
Pricing ► Improve distribution economics and implementation of volumetric downside protection mechanisms
► Continue downsizing platform at a faster pace than volume / revenue decline 25%
Cost
► Reduce CAPEX and contract related cash outflows
Optimisation
► Capitalise on ongoing consolidation of studio operations for efficiency gains
Diversification ► Explore further expansion of supply chain services outside of packaged media
PRICING STRATEGY TO MITIGATE DECLINES AND DRIVE MARGIN EXPANSION
AND CASH FLOW
Source: Company information 43
C3 - Restricted NatixisWHY WE ARE EXCITED ABOUT DVD SERVICES
Demand from clients remains robust and will continue in the future, while the number of
1 providers is declining
Technicolor’s capabilities, global reach and operating excellence make it the preferred
2 supplier in the market
Successful commercial renegotiations (past and ongoing) with positive pricing impact
3 meaningfully offset volume declines
Low capex profile with further initiatives being implemented to improve competitiveness and
4 cost structure
5 Sizable EBITDA business with the potential to grow going forward
44
C3 - Restricted Natixistechnicolor.com
CPE: A SIZABLE MARKET WITH STRATEGIC VALUE FOR SERVICE
PROVIDERS
The service providers
need a DEVICE to deliver
the service to their
customers/consumers
MOBILE IN THE HOME (CPE)
➔ Mobile Device
Broadband to the home ➔ Broadband Gateway
Gateway
TV Service ➔ Set-Top-Box
Control of other connected devices ➔ IoT Device
Set-Top box
Note: CPE: Customer Premises Equipment; IoT: Internet of Things 46
C3 - Restricted NatixisTECHNICOLOR MEETS ALL THE REQUIREMENTS OF SERVICE
PROVIDERS
LATEST TECHNOLOGY HIGHEST QUALITY LOWEST COST GUARANTEE OF SUPPLY
DEVICES
► Incorporate latest ► Maximize customer ► Large volume of devices ► High volume
technology to experience and loyalty needed, represents
differentiate vs meaningful capex ► Need to manage
competitors ► Minimize annual failure category fluctuations
rate(1)
► User experience ► Design to cost
functionality key to win / competence and
retain customers procurement scale in the
component industry
TECHNICOLOR HAS PROVEN FIRST-TO-MARKET POSITIONS ON DISRUPTIVE TECHNOLOGIES
AND IS ABLE TO ENSURE QUICK TIME TO MARKET FOR ITS CUSTOMERS
Note: (1) Technicolor customer premises equipment is 1-2% vs over 10% for direct-to-consumer consumer electronics (up to 20% for laptops – source: SquareTrade) 47
C3 - Restricted NatixisSTRUCTURAL MARKET SHIFT
VIDEO BROADBAND
► Broadband experience in the home is
► US: OTT offers and cord-cutters are impacting
becoming a key priority since there are more
From Service the high ARPU Video business of SP
connected devices, and Wi-Fi is becoming the
Providers ► Rest of the world: Service Providers as video broadband delivery media
point of view integrators with very price competitive offers.
► From a pure connectivity service to a new
More difficult to disrupt
variety of other services: security, IoT, …
► Evolution to IP video delivery devices makes ► Network broadband technologies keep evolving
From the technology more competitive (5G, Docsis 3.1, Fiber,…) and the CPE
Technological gateways must be periodically renewed to
► Evolution to more off-the shelf solutions: deliver this bandwidth in the home
point of view Android TV, where we play a wider role than
in traditional middleware, with quicker time-to- ► Wi-Fi 6 will become the broadband in the home,
market with other supporting technologies (Zigbee)
Note: OTT: Over-The-Top; ARPU: Average Revenue Per User; SP: Service Providers 48
C3 - Restricted NatixisTECHNICOLOR HAS REPOSITIONED THE BUSINESS
TOWARDS THE MORE ATTRACTIVE BROADBAND MARKET
BROADBAND – MARKET VALUE BY
VIDEO – MARKET VALUE BY GEOGRAPHY
GEOGRAPHY
(2018-21, €bn) (2018-21, €bn)
Forecasts CAGR Forecasts CAGR
7.5
18-21 18-21
6.8
6.4
6.0 -6% 5.9 6.1 6.1 2%
30%
26% 5.5
23%
21%
-16% 40% 40% -2%
18% 18% 43%
19% 20% 42%
-2% 16% 17% 2%
17%
18%
40% 43% 45% 45%
-4% 33% 33% 7%
29% 30%
11% 13% 13% 13% -4% 2%
11% 11% 11% 11%
2018A 2019 2020 2021 2018A 2019 2020 2021
LATAM EMEA ASIA NORAM LATAM EMEA ASIA NORAM
Sources: Company estimates with inputs from Dell’Oro, IHSMarkit, ABI Research, TSR Research 49
C3 - Restricted NatixisBUSINESS TRANSFORMATION TO DRIVE IMPROVED PROFITABILITY
FROM TO
► Customers with Scale
Customers (Selectivity)
► All possible customers 250+ 50+
1 (Selecting Relevance ► Reactive: Any RFQs
► Proactive Go to Market:
and Scale) customers Account Planning customers
► Clear segment priorities
► Platform Based
Portfolio strategy ► Project Oriented based on ► Lead new Video: Android TV
2 (From Project to customer requests
► Lead Broadband: Docsis 3.1, Fiber, Wi-Fi 6
Platforms in
► Any segment/technology
technologies with scale) ► Final products adapted to type of customers
► Productivity: Doubling the productivity (50%
► Present in all markets (NAM, OPEX reduction in 4 years, 70% achieved)
Competitive LATAM, Europe, APAC) ► Supply Chain: Performance and Resilience
3 differentiation ► Present in all Segments (Video, ► Engineering: Best Product quality, Product
(From Good to Great ) Broadband and IoT) Cost and Time-to-market
► Proximity
Suppliers 1,300 ► Value oriented engagement c.300
► Multiple ODM partners
4 (Partnership
► Mostly Transactional
► Original Development Center
and Scale) suppliers /System-in-Chip partnerships suppliers
50
C3 - Restricted Natixis1
A GLOBAL FOOTPRINT WITH LEADING PRESENCE IN ALL KEY
MARKETS
Key customers -
Americas
• Comcast Market Share Market Share Revenues
• Charter
• AT&T
• Cox USD IN APAC
• Roger 18%(1) 11.3%(1) 0.9 bn
• Telus
(W/O
• Mediacom
CHINA)
• Frontier
• CenturyLink
• Televisa Revenues
Key customers - Eurasia
• SKY (Sky Mexico, Sky
Latam • Telecom Italia • Etisalat • TataSky
• Amercia Movil : Telmex, USD • Vodafone • Proximus • Bharti Airtel
Claro, NET, Embratel (WW(2)) • Telenor • Telstra
• AT&T : DirecTV Panam, 1.3 bn • LGI (WW(2)) • Telia • Foxtel
Sky Brazil • Canal +(WW(2)) • ComHem • LGU+
• Megacable • Bouygues • Euskaltel • JCOm
• Oi • Bein Sport
• Millicom: Tigo, CEM IN LATAM
• Telecom Argentina
Source: HIS & Dell’Oro 3Q19 51
C3 - Restricted Natixis
Notes: 1. Regional Market Share Broadband & Video Products; 2. Worldwide1 CUSTOMER SELECTIVITY DRIVING PROFITABILITY
COST OF CUSTOMER ORGANIZATION & AVERAGE SALES BY CUSTOMER
€m / Rebased to 100 (2017=100)
► Greater selectivity and discipline on client
and project selection
► Bespoke service for large customers
208
► Platform approach for smaller customers
139
100 100
71 ► Exit from certain unprofitable countries and
67
markets (China, South-East Asia)
2017 2018 2019
Go to market cost Avg. Sales by customer
Note: Go to market cost defined as the overall cost for the organization of a customer (technical support, etc.) 52
C3 - Restricted Natixis2
PRODUCT PORTFOLIO HAS BEEN REPOSITIONED TO FOCUS ON
ATTRACTIVE MARKETS
DECREASING WEIGHT OF VIDEO ACTIVITIES
In % of Connected Home revenues
2017 2019
Video (NAM)
6%
37%
Broadband
19% 19%
62% 41%
Video
GRADUAL REPOSITIONING ON GROWING ACTIVITIES ON WHICH
TECNICOLOR IS THE WORLDWIDE MARKET LEADER
53
C3 - Restricted Natixis2 WORLDWIDE LEADERSHIP IN ULTRA BROADBAND
Wi-Fi
EXTENDERS
Worldwide Leader
in
HOME GATEWAYS
19%
19%
2019 worldwide DOCSIS 3.1 LTE hybrid
market share
SW SERVICES Move to user-centric
Open Services Platform,
PLATFORM made possible through
the rise of Open
Standards and Eco- FIBER
program systems
FOR MORE THAN 20 YEARS, TECHNICOLOR HAS DEMONSTRATED A PROVEN
FIRST-TO-MARKET POSITION ON DISRUPTIVE BROADBAND TECHNOLOGIES
54
C3 - Restricted Natixis2 UNDISPUTABLE LEADER ON ANDROID TV
34+ SPs wins
Worldwide Leader
in
ANDROID TV
19%
65%
KEY APPS
2019 worldwide
market share
Certified Certified Certified Certified Certified Certified Available
Sept 2015 May 2016 Nov 2016 July 2017 June 2018 July 2019 Q4 2019
with Android L with Android L with Android M with Android N with Android O with Android with Android
P Q
OVER 6 YEARS’ EXPERIENCE INTEGRATING ANDROID TV INTO OUR
DEVICES AS GOOGLE’S PREMIER PARTNER
55
C3 - Restricted Natixis3 FURTHER OPPORTUNITY TO INCREASE OPEX PRODUCTIVITY
EVOLUTION OF FIXED COSTS
€m / Rebased to 100 (2017=100)
INCREASING PRODUCTIVITY
► Costs decreased by 30% between 2017 and
2019
c.-50%
WHILE
► Shortening time to market and improving
100 performance in all areas thanks to:
‒ Selectivity
69 ‒ Platform Approach
c.50 ‒ Partnerships
‒ Aggressive Automation
‒ Top Skills in the industry in critical Areas
2017 2019 Target
56
C3 - Restricted Natixis3 LEADING SUPPLY CHAIN: PERFORMANCE AND RESILIENCE
VALUE PROPOSITION
COMPONENTS PLANNING PRODUCTION LOGISTICS SUPPORT
► Quality Selection ► Industry ► Design & ► Optimized logistic ► Robust Quality
► Strategic partnership leading planning Manufacturing network to efficiently Management
for SoC processes & tools controlled end to end cope with geographical System
► Real time adapting ► Partnerships constraints ► Worldwide post-
► Direct management
& negotiation of to customers optimization in Asia ► Strategic Partnership sales service
key components demand changes & ► Footprint with right mix of cost & organization
supply chain rationalization service level ► Data-Driven problem
► “Should cost events/crisis
methodology” ► Lean management ► End to end tracking solving approach
► Capability to manage & monitoring -
► Crisis management long lead times & automated
low
flexibility suppliers
► Strict control of
inventory levels
END TO END HIGHLY RESILIENT SERVICE
57
C3 - Restricted Natixis3 PROXIMITY TO OUR CUSTOMERS IS KEY
Belgium
France
Edegem
Rennes
China
Beijing
USA
Atlanta, Georgia
China
Mexico Suzhou
Reynosa
India China
Chennai Hong Kong / Shenzhen
CONNECTED HOME Supply Chain HQ
FOOTPRINT(1) Indonesia
Batam
(right in from of
Singapore)
Vietnam
R&D Hanoi
Brazil
3rd Party Manufacturing Manaus
Technicolor Manufacturing
Note: (1) Main offices
58
C3 - Restricted NatixisWHY WE ARE EXCITED ABOUT CONNECTED HOME
The CPE industry is a sizeable market with a strategic value for the service providers. Connected Home, are the
1 overall #2 of the industry with leading position in the growing segments: Broadband and Android TV
Following headwinds faced (memory prices crisis, decline of the video market in North America), Connected Home
2 launched an aggressive business transformation in order to protect margins
3 The objective of the Transformation Plan was:
‒ To remain a sizeable player in the industry (2b Euro) by specific sales and product actions
‒ Maximizing margins by an aggressive OPEX cost reduction of €162m (representing 50% reduction) of which €100m
already achieved
4 Key business and operating initiatives have been implemented:
‒ Customer selectivity
‒ Prioritization of investment in the growing segments: Broadband Gateways and Android TV
‒ Use of platform approach for engineering efficiency, TTM and simplification
‒ Reduction of number of suppliers and moving from transactional to strategic relationships to improve sourcing efficiency
5 In addition we launched a number of initiatives to expand competitive advantages in these areas:
‒ Time to market
‒ Functionality differentiation
‒ Product cost
‒ Perfect execution (engineering and supply chain)
6 Margins are now poised to increase significantly going forward thanks to all these actions
59
C3 - Restricted Natixistechnicolor.com
TRADEMARK LICENSING – RCA AND THOMSON PROVIDE STABLE
CASH FLOW GENERATION
A Global Footprint of Leading Brands Contractual Framework Overview
Europe South East Asia
► Average contract length of c.4 years
Long term
contracts ► Significant c. €90m backlog with c. 5 years
of revenue guaranteed
► Contracts signed with minimum volume
Predictable guarantees
volumes ► Yearly volumes can be anticipated with high
North America Latin America level of confidence as far as 12 months out
► Extremely lean organisation: 10 employees
High Cash ► Cash conversion rate in excess of 75% on
Conversion average over the past (10) years
► FY19 Sales: €23m & FY19 EBITDA: €17m
LONG-STANDING EXPERIENCE IN DEVELOPING INNOVATING BRANDS IN
THE CONSUMER ELECTRONICS SECTOR
61
C3 - Restricted Natixistechnicolor.com
SIGNIFICANT MEDIUM TO LONG TERM OPPORTUNITIES
KEY MID-TO-LONG TERM GROWTH
MID-TERM OPPORTUNITIES
OPPORTUNITIES
DVD PRODUCTION
SERVICES SERVICES
► Long tail of demand for home entertainment ► Capture future explosive growth in demand for
premium content: film, episodic and animation
► DVD services needs to be transformed to further
increase business model resiliency and cash flow
generation
CONNECTED CONNECTED
HOME HOME
► Business at an inflection point, set to benefit from ► Focus on broadband gateway and Android TV:
two years of repositioning, and margins are poised Significant white space in Europe to target largest
to increase significantly cable and broadband providers
WILL FUND FUTURE GROWTH WILL FUEL FUTURE GROWTH
63
C3 - Restricted NatixisCLEAR STRATEGY TO REALISE VALUE
CHALLENGES… … ADDRESSED THROUGH THE NEW STRATEGIC PLAN
1 Convoluted organisation ✓ Focus resources on identified profitable growth opportunities
Scope for efficiency gains ✓ Continued discipline around business selection
2 in each division
✓ Streamline operations
Transversal functions
3 not optimised
✓ Implement new cost saving plan to improve margins
4 Transparency ✓ Increase transparency and provide tangible financial targets
THANKS TO THE NEW STRATEGIC INITIATIVES, TECHNICOLOR WILL TURN
CHALLENGES INTO OPPORTUNITIES TO FUEL MID-TERM GROWTH
64
C3 - Restricted Natixis€150M OF TOTAL SAVINGS, €100M TO BE REALIZED IN 2020
BUILD-UP TO RUN-RATE COST SAVINGS
Saving initiatives in €m 7 150
Existing Corporate & Other 15%
2020 2021 2022 Run-rate
EXPECTED RESTRUCTURING COSTS OF C. €90M OVER THE NEXT THREE YEARS
C. 85% IMPACT OF 2020 SAVINGS INCLUDED IN EBITDA AND 100% IN EBITA
65
C3 - Restricted NatixisDETAILED ACTION PLAN
IMMEDIATE ACTION TO REDUCE INDIRECT
SECURE OPEX REDUCTION TARGET FOR 2020
COSTS AND IMPROVE WORKING CAPITAL
► Headcount freeze ► Execution plan in place for each detailed
element of the €100m 2020 opex reduction
► CEO purchase order approval process action (493 people have already left the
business)
► Significant reduction in travel and subsistence
spending across all business units ► Further P&L review with BUs with focus on
maximising profitability and cash generation in
► Spans and layers review: BearingPoint input 2020 and beyond
► Tighter control over working capital with new ► Commissioned benchmark study with focus on
controls introduced Transversal Functions to achieve further
significant savings across HR/IT/Finance/Legal
► Strategic real estate review underway to further
rationalise the global portfolio
► Consolidate procurement organization with
target to reduce 10% of indirect cost spending
66
C3 - Restricted Natixistechnicolor.com
2019 KEY FIGURES FROM CONTINUING OPERATIONS
REVENUES of €3.8bn reflecting double digit growth in ADJUSTED EBITDA of €246m reflecting strong performance in Production
Production Services, offset by decline in North American Services while ongoing transformation plans in Connected Home and
video segment in Connected Home and anticipated DVDs start to deliver results
replication volume decline in DVD services
ADJUSTED EBITA of €36m due to high rendering costs FCF1 at €(161)m affected by downgrades from the rating
in Production Services
Full Year (pre-IFRS 16) Full Year (post-IFRS 16)
Change YoY Change YoY IFRS 16
In € million FY '18 FY '19 FY '19
at current rate at constant rate Impact
Revenues 3,988 3,800 (4.7)% (7.3)% 3,800
Adjusted EBITDA 266 246 (7.5)% (9.7)% 324 + 78
Adjusted EBITA 98 36 (63.6)% (63.5)% 42 +7
Operating Cash Flow² 61 39 (36.4)% (39.1)% 121 + 82
Free Cash Flow¹ before net interests (3) (117) n.a. n.a. (34) + 83
Free Cash Flow¹ (43) (161) n.a. n.a. (98) + 63
Notes:
1. Free cash flow defined as: Adj. EBITDA – (net capex + restructuring cash expenses + change in pension reserves + change in working capital and other assets & liabilities + cash impact of other non-current result + net financial interests + exchange
result + other financial results and income tax)
2. Operating cash flow defined as: Adj. EBITDA – net capex – restructuring cash expenses
68
C3 - Restricted NatixisPRODUCTION SERVICES
STRONG GROWTH DRIVEN BY FILM AND EPISODIC
REVENUE UP 10% AT A CONSTANT RATE, DRIVEN BY VFX
► Continued double digit growth driven by a record number of tent pole films including Lion King,
Maleficent 2 and Oscar-winning 1917
In € million FY '19 vs FY '18
FY '19 FY '18 ► Significant traction in animation and episodic after dedicated brand launches in H2 18
Current Constant
Production Services rate rate ► Animation & Games up high single digit
Revenues 893 785 +13.8% +10.4%
EBITDA MARGINS UP TO 14.8%, GIVEN HIGHER FOCUS ON VFX
Adjusted EBITDA 132 110 +20.3% +16.7% ► Favourable business mix, driven by higher contribution of high-margin activities (Film & Episodic
VFX)
Margin (%) 14.8% 14.0%
► Improving margins at Animation & Games
D&A* (108) (59)
► Declining margins in Advertising due to lower utilization rates of artists. New operational tools &
Adjusted EBITA 24 51 (53.1%) (56.2%) processes implemented in 2019 to restore profitability
► Post-Production margins decreasing due to delay in shift towards VFX activities
Margin (%) 2.7% 6.5%
EBITA DOWN MAINLY DUE TO ONE-OFF HIGHER RENDERING COSTS
► Higher rendering costs main factor impacting EBITA; processes now in place to permanently
address this issue
► Opening of Mill Film Adelaide and Montreal, Animation & Games new office in Paris and higher
production costs amortised on IP production
Notes:
All figures are presented excluding IFRS 16 in 2019 for comparability 69
(*) Depreciation & Amortization of assets and variation of operating reserves (risk, litigation and warranty)
C3 - Restricted NatixisDVD SERVICES
DECLINING VOLUMES BUT CONTRACT RENEGOTIATIONS UNDER WAY
SALES DOWN 10% ON DECREASING VOLUMES
► Replication volumes down 11% compared to 2018
In € million FY '19 vs FY '18
FY '19 FY '18 Standard definition DVD down 11% (vs. a decline of 17% in 2018), supported by better than
Current Constant
DVD Services rate rate anticipated catalogue activity in North America
Blu-rayTM down 13% given high 2018 comparable base which included Star Wars: The Force
Revenues 882 942 (6.3%) (9.7%)
Awakens and Red Dead Redemption 2. Ultra HD Blu-rayTM growth continued in 2019
Adjusted EBITDA 46 68 (31.6%) (34.0%) ► Successful large contract renegotiations with improved terms for Technicolor completed in 2019
provided a positive impact in the second half of the year
Margin (%) 5.3% 7.2%
D&A* (55) (54)
Adjusted EBITA (9) 14 n.m. n.m.
EBITDA AND EBITA DOWN ON VOLUME REDUCTION AND PRODUCT MIX
Margin (%) (1.0%) 1.5%
► EBITDA down 34% at constant rate as impact of reducing volumes and weaker product mix only
partially compensated by ongoing cost savings initiatives
► EBITA affected in similar fashion
Notes:
All figures are presented excluding IFRS 16 in 2019 for comparability 70
(*) Depreciation & Amortization of assets and variation of operating reserves (risk, litigation and warranty)
C3 - Restricted NatixisCONNECTED HOME
FOCUS ON PROTECTING PROFITABILITY
In € million FY '19 vs FY '18
FY '19 FY '18 SALES DOWN 13% ON LOWER VIDEO ACTIVITY
Current Constant
Connected Home rate rate ► Broadband down 2% YoY with 14% growth in North America driven by increase in market share in the
cable operator segment, offset by decrease in Eurasia due to end of product cycle, pending new
Revenues 1,983 2,218 (10.6%) (12.6%) product introduction
Broadband 1,152 1,140 +1.1% (2.0%) ► Video down 24% YoY entirely attributable to North America following Technicolor’s decision to
discontinue relationship with one key client
Video 830 1,078 (23.0%) (23.9%)
Adjusted EBITDA 69 87 (20.5%) (21.2%)
PROTECTING EBITDA AND EBITA MARGINS
Margin (%) 3.5% 3.9% ► EBITDA margin at 3.5%
D&A* (46) (54) Volume impact from Video decrease in North America, nonetheless partially offset by:
“Per unit margin” improvement due to better component price and high margin revenues
Adjusted EBITA 23 33 (30.2%) (28.8%) in 2018
Indirect cost savings
Margin (%) 1.2% 1.5%
2018 EBITDA positively affected by a one-off high margin revenue event, providing a high
comparable base
► EBITA further helped by lower D&A and a reversal of a provision
Notes:
All figures are presented excluding IFRS 16 in 2019 for comparability 71
(*) Depreciation & Amortization of assets and variation of operating reserves (risk, litigation and warranty)
C3 - Restricted NatixisCORPORATE AND OTHER
In € million FY '19 vs FY '18
FY '19 FY '18
Current Constant STABLE REVENUES OF TRADEMARK AND PATENT BUSINESSES
Corp. & Other rate rate
► Trademark revenues include royalties from Thomson and RCA brands. Royalty contracts are multi-
year with a minimum revenue to Technicolor guaranteed
Revenues 43 44 (3.6%) (3.6%)
► Patent and Licensing remaining contracts includes in 2018 and 2019 MPEGLA royalty revenues
Trademark
23 24 (6.5%) (6.5%) (patents kept by Technicolor)
Licensing
Patent Licensing 20 20 +0.2% +0.2%
Adjusted EBITDA (1) 1 n.m. n.m.
Margin (%) n.m. n.m.
ADJUSTED EBITDA INCLUDES CORPORATE COSTS
D&A* (1) (1) ► Trademark and Patent Licensing retained contracts generate high EBITDA margin (> 80%)
► EBITDA generated by Trademark and Patent Licensing is offset by Technicolor Group corporate
Adjusted EBITA (2) 0 n.m. n.m.
activity (function costs not allocated to the three Technicolor Divisions)
Margin (%) n.m. n.m.
Notes:
All figures are presented excluding IFRS 16 in 2019 for comparability 72
(*) Depreciation & Amortization of assets and variation of operating reserves (risk, litigation and warranty)
C3 - Restricted NatixisADJUSTED EBITDA TO EBIT
FY '19 FY '18 FY '19 vs FY '18
AMORTIZATION UP BY 20%
► Higher rendering costs
Current Current Constant
In € million LY rate ► Increase in amortization of tangible assets linked to the
rate rate rate
development of Mill Film brand in Montreal, Adelaide and
Adjusted EBITDA 246 266 (7.5%) (9.7%) Bangalore
D&A (*) (210) (168)
PPA AMORTIZATION STABLE
Adjusted EBITA 36 98 (63.6%) (63.5%)
► PPA mainly relates to amortization of intangibles identified during
2015 acquisitions in each divisions
PPA amortization (54) (50)
Impairments & write-off (61) (81)
Restructuring (31) (62) LOWER IMPACT OF NON-RECURRING
► €59m goodwill impairment charges recognized on DVD Services
Other non current (17) (24) ► Restructuring costs decrease mainly relates to the CH
transformation plan initiated late 2017
EBIT continuing (127) (119)
► Other non-current is mainly related to negative non-cash liquidation
costs of certain Technicolor dormant entities
Notes:
All figures are presented excluding IFRS 16 in 2019 for comparability 73
(*) Depreciation & Amortization of assets and variation of operating reserves (risk, litigation and warranty)
C3 - Restricted NatixisFROM EBIT TO NET INCOME
€14M INCREASE OF FINANCIAL EXPENSES
FY '19 FY '18
► €9m increase in interests related to credit line drawings
and capital leases
► Less favourable foreign exchange impact mainly related
Current
In € million LY rate to BRL
rate
EBIT continuing (127) (119)
Net interest expense (49) (40) LOWER INCOME TAX IMPACT
► 2018 impact was related to depreciation of US tax losses
Others financial (15) (10)
previously recognized (-€55m)
Profit before tax (191) (170)
Tax (4) (54)
NEGATIVE IMPACT OF DISCONTINUED
Net result continuing (195) (224)
ACTIVITIES
Net result discontinued (21) 157 ► 2018 result of discontinued activities was positively
impacted by disposal result of the Patent Licensing
Net income (217) (67) business for €210m
► 2019 result of discontinued activities is mainly related to
the remaining impact of the Research & Innovation
activity disposed in May 2019 and the settlement of a
Cathode Ray Tubes case in Europe
Notes:
All figures are presented excluding IFRS 16 in 2019 for comparability 74
C3 - Restricted NatixisEBITA TO FREE CASH FLOW
CASH GENERATION IMPACTED BY WORKING CAPITAL DYNAMICS
Continuing Operations
Corporate
In € million PS DVD CH &
Other
Total FY '19 Total FY '18 NEGATIVE FCF OF €161M MOSTLY
AFFECTED BY LOWER EBITDA, HIGHER
Adjusted EBITA 24 (9) 23 (2) 36 98 RENDERING COSTS AND WORKING CAPITAL
D&A (*) 108 55 46 1 210 168 DYNAMICS:
Adjusted EBITDA 132 46 69 (1) 246 266 ► Adjusted EBITDA of €246m
Intangible net capex (24) (21) (53) (2) (99) (94)
► Higher rendering costs at PS included in D&A
Tangible net capex (38) (16) (15) (1) (70) (69)
► Capex €169m: mostly CH €68m (R&D capitalization and
Restructuring cash expense (9) (7) (21) (2) (38) (43)
New Products Introduction), PS €62m (capacity expansion
Operating cash flow 61 4 (20) (6) 39 61
and IP Production costs capitalization) and DVD €36m
Variation in WC / OAL (96) 3
Pensions & Non-recurring expenses (35) (51) ► Restructuring costs of €38m of which CH €21m, PS €9m
Sub-total (92) 14 and DVD €7m
Financial excl. net interest expenses (13) (3) ► WC/OAL variation €96m includes c.€100m negative impact
Tax paid (12) (14) from payment terms change following credit rating
FCF before net interests expenses (117) (3) downgrades
Net interest expenses (44) (40)
► Non-current & Pension €35m, mainly related to exited
FCF after net interest expenses (161) (43)
activities commitments
Notes:
All figures are presented excluding IFRS 16 in 2019 for comparability 75
(*) Depreciation & Amortization of assets and variation of operating reserves (risk, litigation and warranty)
C3 - Restricted NatixisNET DEBT EVOLUTION
FY '19 FY '18
In € million Pre-IFRS 16 Post-IFRS 16 Pre-IFRS 16
Opening cash position 291 291 319 CASH AT YEAR END €65M:
Opening gross debt (1,024) (1,328) (1,097) ► Cash position reduced from FY18 due to negative
Opening net debt (733) (1,037) (778) continuing FCF of €(161)m
► Others €(31)m: mainly cash out related to disposal €(25)m
Continuing Free Cash Flow (161) (98) (43) (Patent Licensing & Research & Innovation)
Discontinuing Free Cash Flow (13) (13) (4)
New capital leases (23) (23) (31)
New operating leases - (29) -
Other (31) (34) 123 INCREASE IN NET DEBT (IFRS) DRIVEN BY
LOWER CASH POSITION
Closing cash position 65 65 291 ► Gross debt broadly stable
Closing gross debt (1,026) (1,298) (1,024)
Closing net Debt (961) (1,233) (733)
Gross debt (excl. Operating lease) (1,026) (1,026) (1,024) GROSS DEBT FINANCIAL COVENANT AT
EBITDA Adj n.m. 324 266 3.16x; NET DEBT / ADJ. EBITDA (POST IFRS
Financial Covenant n.m. 3.16x 3.84x 16) RATIO AT 3.80x
► Net Debt / Adj. EBITDA ratio 2022 target: below 2.75x1
Net debt (961) (1,233) (733)
EBITDA Adj 246 324 266
Net debt / EBITDA Adj 3.90x 3.80x 2.75x
Notes: 76
1. Pro forma of the proposed c. €300m Rights Issue
C3 - Restricted NatixisLIQUIDITY AVAILABLE AT DECEMBER 31ST 2019 AND KEY TERMS
FOLLOWING CREDIT LINES EXTENSION
Available amount at
Liquidity at Dec. 31st 2019 LIQUIDITY AT DECEMBER 31ST 2019
Dec. 31st 2019 (in € m)
Cash on hand
65 ► WORKING CAPITAL AND OPERATING NEEDS
at December 31st 2019
MET BY CASH AND CREDIT LINES
Committed credit facilities:
► CASH AT HAND OF €65M
Technicolor SA Revolving Credit Facility (€250m) 250
► CREDIT LINES FULLY UNDRAWN
Wells Fargo credit line ($125m) 111
► TOTAL LIQUIDITY AVAILABLE OF €426M
LIQUIDITY €426m
CREDIT LINES MATURITY EXTENDED SUBJECT TO RIGHTS ISSUE COMPLETION
Amount and maturity extension Financial Covenants Covenant Testing Frequency
Committed credit facilities:
• €250m until December 31st 2020; Group IFRS Debt / Group EBITDA:
• €225m from January 1st 2021 until December • 4.00x for 2020; June 30th and December 31st
Technicolor SA Revolving Credit 21st 2021; • 3.75x for 2021;
Facility (€250m) • €202.5m from December 22nd 2021 until June • 3.50x for 2022 and thereafter
30th 2023
• Other covenants and reporting
requirements exists
Wells Fargo credit line ($125m) • $125m until March 31st 2023 June 30th and December 31st
77
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