Technicolor: First Quarter 2022 Results

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PRESS RELEASE

Technicolor: First Quarter 202 2 Outcomes

Paris (France), Could 5 th , 2022 – Technicolor (Euronext Paris: TCH; OTCQX: TCLRY) is in the present day saying its outcomes for the primary quarter 2022. The Board of Administrators of Technicolor SA, assembly on Could fifth, 2022, permitted the Group’s first quarter 2022 accounts and steering.

• Good set of outcomes with robust efficiency throughout all divisions resulting in improved f inancial efficiency of the Group in comparison with the primary quarter 2021 , regardless of present provide constraints with :
  • R evenues of €756 million, roughly flat at fixed alternate charges and up 6.6% at present alternate charges;
  • Adjusted EBITDA of €55 million , up €1 6 million (+€11 million at fixed alternate charge), with margin bettering by 169 foundation factors to 7.2% of revenues;
  • Free Money Stream earlier than Monetary and Tax of €( 126) million , up €74 million (+€81 million at fixed alternate charge);
• Technicolor confirms its 2022 steering 1 ;
• The 65% p artial s pin – off of T echnicolor C reative S tudios is on monitor to be accomplished within the third quarter of 2022 .

Richard Moat, Chief Govt Officer of Technicolor, s help :

“Technicolor’s divisions continued to carry out according to our expectations, regardless of going through ongoing headwinds in key parts provide, logistics and expertise recruitment. With a strong demand throughout most of our companies, I’m happy to substantiate this yr’s steering.

Following the restructuring executed inside our divisions, the corporate has gained vital working leverage, which is highlighted by the fixed progress in our margins and money move era.

Whereas our groups have been doing an ideal job dealing with our day-to-day operations, now we have additionally made vital progress within the partial spin-off of TCS together with the total refinancing of our present debt. We’re properly on monitor to have two new unbiased corporations within the third quarter of 2022.

This operation is a singular alternative to make sure each TCS and Technicolor Ex-TCS have the sufficient capital construction to assist their improvement, long-term ambitions and natural progress. With the spin-off and the debt refinancing, we intend to create two unbiased market leaders of their respective sectors, with strong foundations for long run progress.”

I- Q1 2022 key hig hlights and 2022 Outlook

First quarter 2022 registered set of outcomes, regardless of a buying and selling atmosphere nonetheless marked by two conflicting tendencies: robust demand for TCS and Related House merchandise, however persistent achievement difficulties.

First quarter 2022 Adjusted EBITDA of €55 million improved by €11 million (+28.6%) at fixed alternate charge, primarily because of increased revenues and improved efficiency at TCS and improved EBITDA at Related House. Margin improved by 169 foundation factors to 7.2% of revenues, ensuing from the numerous value financial savings and working efficiencies achieved throughout all divisions. This resulted in a +€16 million adjusted EBITA enchancment at fixed charge in comparison with the primary quarter 2021.

Free Money Stream from persevering with operations earlier than monetary and taxes amounted to €(126) million in comparison with €(200) million within the first quarter 2021, primarily thanks to higher working efficiency and decrease change in working capital necessities at Related House, together with decrease restructuring bills.

Outlook

The Group confirms its 2022 steering:

• Demand for Technicolor Artistic Studios’ highest high quality VFX artistry and cutting-edge know-how is predicted to proceed to develop considerably all through 2022. The division has been awarded a number of new initiatives, leading to roughly 80% of the income pipeline for MPC and Mikros Animation being already dedicated for 2022. For instance, the variety of characteristic animation initiatives in manufacturing has grown from two in 2019 to 6 options in 2022. The problem in delivering all pipeline initiatives stays the primary problem for 2022, as a consequence of the scarcity of expertise out there. Important funding in artist recruitment, retention and coaching (together with TCS Academy applications) continues;
• Worldwide demand for Related House broadband tools is predicted to stay robust in 2022, as clients search to enhance their connectivity. Nonetheless, ongoing part shortages and pricing challenges will proceed to affect our skill to serve finish buyer demand all through 2022. Nonetheless, effectivity measures, gradual enhancements in supply and steady discussions with each suppliers and clients ought to proceed to assist offset these headwinds. Whereas we don’t have any belongings or direct clients or suppliers in Russia and Ukraine, the continued battle has generated further uncertainty when it comes to provide. This has led to a rise in transit instances to some European clients, as we transition from rail to sea transportation for merchandise that used to maneuver by Russia. The Group is extending its present motion plans, and is sustaining steady discussions with each suppliers and clients to compensate for these potential components;
• In DVD Providers, increased year-on-year new launch volumes are anticipated as theatrical attendance continues to normalize, however this will likely be barely offset by decrease catalog volumes. This ought to be additional mitigated by persevering with value efficiencies. As a part of the Group’s plan to speed up the diversification of the enterprise, the division is constant to work on considerably increasing non-disc actions.

The Group delivered €171 million of value financial savings in 2020, and €116 million in 2021. These outcomes, mixed with steady enhancements in effectivity, are maintaining Technicolor on monitor to ship a cumulative €325 million in run charge value financial savings by the tip of 2022.

In consequence, the Group Technicolor confirms its 2022 steering:

• Revenues from persevering with operations are anticipated to develop;
• Adjusted EBITDA from persevering with operations of €375 million or €361 million excluding Trademark Licensing;
• Adjusted EBITA from persevering with operations of €175 million or €161 million excluding Trademark Licensing;
• FCF from persevering with operations, earlier than monetary outcomes and tax of €230 million or €217 million excluding Trademark Licensing.

2022 steering assumes €/$ alternate charge of 1.15. As offered on February twenty fourth, 2022, 2022 steering numbers mirror modifications in accounting strategies (IFRIC changes on Saas), and don’t embrace the TCS spin-off.

II- Replace on Technicolor’s i ntention to listing 65% of Technicolor Artistic Studios and on the early (two years prematurely of maturity ) refinanc ing of Technicolor’s present debt
The Group is making good progress on the implementation of the Technicolor Artistic Studios (TCS) spin-off plan and of the refinancing of its debt:

• An Extraordinary Basic Assembly for the approval of the Necessary Convertible Notes (MCN) will likely be held on Could sixth at 12pm CEST;
• The Capital Market Days for TCS and Technicolor Ex-TCS will happen in London on June 14th, 2022;
• The Firm’s Annual and Extraordinary Shareholders Assembly to approve the 2021 accounts and the spin-off will happen on June thirtieth, 2022.

As well as, Technicolor is engaged on its debt refinancing:

• Topic to ongoing discussions, Technicolor ex-TCS debt would come with €300 – €375 million of personal debt and an Asset-Based mostly Lending (ABL) Facility;
• Technicolor Artistic Studios financing bundle would come with a €575 – €650 million Time period Mortgage and a €40 million Revolving Credit score Facility.

The Group has additionally appointed the management groups for the 2 new entities.

Technicolor Ex-TCS:

• Richard Moat, present CEO of Technicolor, will likely be appointed Chairman of Technicolor Ex-TCS;
• Luis Martinez-Amago, present President of Related House, will likely be appointed CEO of Technicolor Ex-TCS;
• Lars Ihlen, present CFO of Related House, will likely be appointed CFO of Technicolor Ex-TCS;
• DVD Providers Enterprise Division will proceed to be headed by David Holliday;
• Related House Enterprise Division will stay beneath the authority of Luis Martinez-Amago with François Allain being appointed as Deputy President in command of the operational administration of Related House, along with his present COO position.

Technicolor Artistic Studios (TCS) :

• Anne Bouverot, present Chairperson of Technicolor, will likely be appointed Chairperson of TCS;
• Christian Roberton, present President of TCS, will likely be appointed CEO of TCS;
• Laurent Carozzi, present CFO of Technicolor, will likely be appointed CFO of TCS and can oversee Finance, M&A and Technique;
• The 4 Enterprise Divisions will proceed to be headed by the present model leaders – Thomas Williams for MPC, Andrea Miloro for Mikros Animation, Joshua Mandel for The Mill and Jeaneane Falkler for Technicolor Video games, and Manufacturing Operations will stay beneath Nathan Wappet.

Each the refinancing and the spin-off are anticipated to be accomplished in Q3 2022, topic to (i) the shareholders’ approval of the issuance of the MCN on Could sixth, 2022, (ii) the shareholders’ approval of the phrases of the spin-off, (iii) the completion of the refinancing discussions with collectors on phrases passable to Technicolor Ex-TCS and TCS and (iv) customary circumstances, consultations and regulatory approvals.

III- Section Assessment – First Quarte r 2022 Outcomes Highlights
Technicolor Artistic Studios

Technicolor Artistic Studios reven ues amounted to €198 million within the first quarter 2022, up 41.6% at present alternate charge and up 33.4% at fixed charge in comparison with Q1 2021. Excluding the Put up-Manufacturing enterprise divested in April 2021, income progress was 66.1% at present alternate charge and 56.5% at fixed charge in comparison with Q1 2021. This enchancment resulted from the numerous demand for unique content material and rising promoting spend, which collectively drove double-digit income progress for every enterprise line in contrast with the primary quarter 2021, which nonetheless suffered from pandemic-related impacts on manufacturing. Extra particularly within the first quarter 2022:

• At MPC, revenues have been up considerably pushed by the continued ramp-up in manufacturing of main theatrical initiatives, in addition to rising contributions from all the foremost streaming platforms;
• At The Mill, promoting revenues grew throughout all key markets, notably within the U.S.;
• At Mikros Animation revenues have been up primarily because of increased volumes in characteristic animation initiatives;
• At Technicolor Video games, revenues have been increased because of better manufacturing capability.

Adjusted EBITDA amounted to €26 million (13.0% margin), up €10 million in comparison with Q1 2021 at fixed charge, and Adjusted EBITA was €11 million, up €12 million in comparison with Q1 2021 at fixed charge. Important margin enchancment in comparison with Q1 2021 resulted from the optimistic impacts of the income improve mixed with a number of operational transformation applications. Q1 2022 margin was partly lowered by increased prices originating from the market scarcity of expertise, which resulted in increased labor prices to finish main initiatives. Whereas TCS workers elevated from roughly 10,700 on the finish of December 2021 to roughly 11,800 on the finish of March 2022, the Group is actively engaged on accelerating its recruiting and coaching plan. The problem to ship on all initiatives stays the primary problem for 2022.

Related House

Related House revenues totaled €408 million within the first quarter 2022, down 4.6% at present alternate charge and down 11.3% at fixed alternate charges in contrast the identical interval in 2021. Gross sales volumes2 continued to be impacted by the worldwide semiconductor disaster mixed with provide chain disruptions, limiting the division’s skill to totally fulfill the robust demand from its clients. Particularly, the underlying demand for the primary quarter 2022 was increased than precise gross sales.
The division continues to give attention to selective investments in key clients, platform-based merchandise and partnerships, and on optimizing mounted prices.

Adjusted EBITDA was €31 million within the first quarter 2022 (up 8.0% at fixed alternate charge), or 7.7% of income, in comparison with 6.3% of revenues within the first quarter 2021. Margin enchancment is ensuing from working efficiencies and price financial savings offset by decrease volumes and their further margin affect. Q1 2022 Adjusted EBITA was €14 million, representing a 27.2% improve in comparison with the primary quarter 2021 at fixed charge, representing 3.4% of revenues within the first quarter.

The division continues its collaboration with purchasers and suppliers to maximise deliveries, and to mitigate potential profitability and dealing capital impacts. A good portion of value will increase is presently handed by to clients.

DVD Providers

DVD Providers revenues totaled €150 million within the first quarter 2022, up 8.2% or 2.2% at fixed alternate charge in contrast with first quarter 2021. Regardless of decrease disc volumes year-on-year3 (-16.5%), income elevated pushed by the efficiency of recent progress companies (notably transportation administration and vinyl).

Within the first quarter 2022, adjusted EBITDA amounted to €5 million (vs. €4 million within the first quarter 2021), or 3.1% of revenues. EBITDA margin is flat in contrast with the primary quarter 2021, as the numerous footprint optimization, headcount reductions and better exercise in non-disc actions have been offset by the impacts of decrease disc volumes, and better labor prices in North America and Mexico. DVD Providers continued to adapt distribution and manufacturing operations, and associated buyer contract agreements, in response to continued quantity reductions.

Company & Different

On February twenty fourth, 2022 the Group introduced that it had obtained a binding provide for the sale of its Trademark Licensing operations, for a money quantity of roughly €100 million, and shutting is predicted to happen by the tip of the second quarter 2022. In consequence, the Group has accounted for Trademark Licensing operations as discontinued operations as from January 1, 2021.

Company & Different revenues amounted to €1 million, in contrast with €4 million within the first quarter 2021. Adjusted EBITDA amounted to €(7) million, and Adjusted EBITA was €(8) million.

IV- Outcomes evaluation
P&L evaluation

1 Together with IT capability use for rendering in Technicolor Artistic Studios of €(2)m in Q1 2022 and €0m in Q1 2021
2 Threat, litigation and guarantee reserves

First quarter 2022 revenues have been up 6.6% (roughly flat at fixed alternate charges). Excluding change in perimeter (i.e. excluding Put up-Manufacturing), first quarter 2022 revenues would have been up 9.8% and a pair of.7% at fixed alternate charges. Technicolor Artistic Studios recorded a robust enchancment in revenues, whereas Related House continued to be impacted by industry-wide key part shortages and provide chain disruption, which prevented the enterprise from assembly robust buyer demand in full.

First quarter 202 2 Adjusted EBITDA improved by €16 million (+39.1%) to €55 million, or +28.6% at fixed alternate charge. EBITDA progress was primarily pushed by increased revenues and improved efficiency at TCS and improved EBITDA at Related House. Margin was 7.2%, up 169 foundation factors, ensuing from the numerous value financial savings and working efficiencies achieved throughout all divisions.

First quarter 2022 Adjusted EBITA of €14 million represented an €18 million enchancment at present charge (+€16 million at fixed charge) in comparison with the primary quarter 2021. This resulted primarily from the EBITDA enchancment.

EBIT from continui ng operations was a €(1) million loss in comparison with a €(29) million loss within the first quarter 2021. This resulted from higher operational efficiency, together with decrease non-recurring gadgets, primarily associated to decrease restructuring prices.

The monetary end result totaled €(34) million, in comparison with €(32) million within the first quarter 2021.

Revenue tax as up at €(7) million, in comparison with €(1) million, primarily attributable to TCS improved efficiency.

Internet acquire from discontinued operations amounted to €2 million in comparison with €1 million within the first quarter 2021.

The Group web loss subsequently amounted to €(39) million in within the first quarter 2022, in comparison with €(61) million within the first quarter 2021.

FCF and debt evaluation

1 Together with IT capability use for rendering in Technicolor Artistic Studios

Free Money Stream from persevering with operations earlier than monetary and taxes improved to €(126) million in comparison with €(200) million within the first quarter 2021. This €74 million enchancment primarily displays optimistic impacts from:

• the improved working efficiency (adjusted EBITDA was up €16 million);
• l ower working capital necessities (+€65 million). The change in working capital was €(128) million in contrast with €(193) million within the first quarter 2021. This enchancment got here from optimistic variation year-on-year at Related House as first quarter 2021 working capital was notably impacted by detrimental affect of reductions in provider cost phrases;
• decrease non-recurring money outflows (+€7 million), notably decrease money re struct ur ing (+€12 million), principally on the Related House and DVD Providers divisions.

These optimistic impacts have been partly offset by:

• capex improve (€12 million) from €23 million to €35 million, primarily at Technicolor Artistic Studios, largely because of cost phasing (notably increased money out for IT usage-based capex).

The money place on the finish of March 2022 was €38 million, in comparison with €196 million on the finish of December 2021. Money outflows over the interval are primarily defined by detrimental free money move from persevering with operations earlier than monetary and taxes of €126 million, and €29 million web money curiosity paid over the interval (in comparison with €27 million within the first quarter 2021). Free money move within the first quarter is all the time impacted by the seasonality of actions. Money out for working leases amounted to €10 million, in comparison with €15 million within the first quarter 2021. Complete liquidity quantities to €78 million, with €40m of the Wells Fargo line obtainable (€26m have been drawn on the finish of the quarter).

As a consequence, n et monetary debt at nominal worth amounted to €1,297 million on the finish of March 2022, in contrast with €1,110 million on the finish of December 2021, primarily attributable to change in money and money equivalents. IFRS web debt amounted to €1,230 million as of March 31, 2022, in contrast with €1,039 million as of December 31, 2021.

An analyst audio webcast hosted by Richard Moat, CEO and Laurent Carozzi, CFO will likely be held in the present day, Could 5, 2022, at 6:30pm CET.

Indicative Timetable

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Warning: Ahead Wanting Statements

This press launch comprises sure statements that represent ‘forward-looking statements’, together with however not restricted to statements which are predictions of or point out future occasions, tendencies, plans or goals, based mostly on sure assumptions or which don’t instantly relate to historic or present info. Such forward-looking statements are based mostly on administration’s present expectations and beliefs and are topic to a lot of dangers and uncertainties that might trigger precise outcomes to vary materially from the longer term outcomes expressed, forecasted, or implied by such forward-looking statements. For a extra full listing and outline of such dangers and uncertainties, consult with Technicolor’s filings with the French Autorité des marchés financiers. 2021 Common Registration Doc (Doc d’enregistrement universel) has been filed with the French Autorité des marchés financiers (AMF) on April 5, 2022, beneath quantity D-22-0237 and an modification to the 2021 URD has been filed with the AMF on April 29, 2022, beneath quantity D-22-0237-A01.

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About Technicolor:

Technicolor shares are admitted to buying and selling on the regulated market of Euronext Paris (TCH) and are tradable within the type of American Depositary Receipts (ADR) in america on the OTCQX market (TCLRY).

APPENDIX
Appendix 1 –Enterprise highlights by division 9
Appendix 2 – Debt Construction 13
Appendix 3 – Reconciliation of adjusted working indicators 14
Appendix 4 – Free Money Stream Reconciliation and Summarized Monetary Construction 15
Appendix 5 – IFRS 16 16
Appendix 6 – Unaudited Monetary Statements 17

Appendix 1 – Enterprise highlights by division

Technicolor Artistic Studios

MPC

The Mill:

The Mill contributed to roughly 1,000 initiatives through the quarter, together with 34 Tremendous Bowl initiatives— 29 of which have been TV spots that aired through the sport; and was nominated for and received a number of prestigious {industry} awards, together with:

• Two VES Awards (Visible Results Society), together with Excellent Animated Character in a Industrial for Good Vitality’s ‘Einstein Is aware of Finest’ and Excellent Compositing & Lighting in a Industrial for Verizon’s ‘The Reset’
• Six British Arrows for Burberry’s ‘Festive’ (VFX Gold and Colourist Silver), Three’s ‘Actual 5G’ (VFX Silver), BBC’s ‘Tokyo 2020 Olympics’ (CGI Silver), Verizon’s ‘The Reset’ (VFX Bronze), and Amazon’s ‘An Unlikely Friendship’ (CGI Bronze)

Notable initiatives through the quarter embrace Samsung’s ‘Love at First Sight’, Samsung’s ‘Playtime Is Over’ and Pepsi’s Tremendous Bowl halftime trailer ‘The Name’.

Mikros Animation:

Mikros Animation introduced a brand new collaboration with Netflix on Charlie and the Chocolate Manufacturing facility, the upcoming animated occasion sequence based mostly on the Roald Dahl ebook – written, directed and government produced by Taika Waititi.

Technicolor Video games:

Through the first quarter 2022, Technicolor Video games continued to work with main gaming purchasers like Capcom, Digital Arts, Gameloft, Take-Two Interactive’s 2K Sports activities and Rockstar Video games, and Ubisoft. The crew contributed to main Q1 releases like 2K Sports activities’ WWE 2K22.

Related House

Revenues breakdown by area and product

Key enterprise highlights

Related House division continues its ongoing dedication to leveraging open and revolutionary applied sciences for Community Service Suppliers (NSPs) to ship seamless connectivity and premium leisure experiences to customers:

• Availability of Cobra 5G, an indoor buyer premises tools (CPE) resolution that gives an final mounted wi-fi entry (FWA) modem and high-fidelity Wi-Fi router performance in a single enclosure. Cobra 5G leverages Related House application-oriented middleware, based mostly on OpenWRT and RDK-B requirements deployed in over 150 million properties. Thus, Cobra 5G permits operator to supply the identical providers to their FWA subscribers as they do for his or her fiber, copper, and cable clients;
• Related House division has partnered with Telstra, Australia’s main telecommunications and know-how firm, to deploy the brand new Good Modem 3. The revolutionary CPE is a hybrid modem that not solely supplies dependable broadband entry to Australia’s Nationwide Broadband Community (NBN), however provides 4G community back-up to make sure steady availability of high-speed connectivity. Past guaranteeing reliable broadband entry to the house, Telstra’s Good Modem 3 additionally ensures pervasive connectivity all through the house with the most recent Wi-Fi 6 know-how;
• Related House division has partnered with Bouygues Telecom to develop the Bbox 4K HDR, a futureproof and premium Android 4K UHD set-top field built-in with best-in-class Wi-Fi. This versatile open platform permits Bouygues Telecom clients to expertise dependable IPTV-over-Wi-Fi and thus get pleasure from a broad spectrum of high-quality TV and Android TV providers and functions — together with over-the-top (OTT) video content material and gaming — over excessive performing Wi-Fi.

On the Company Social Duty aspect:

• Technicolor has dedicated on local weather change with Science Based mostly Targets and is the one firm within the linked residence {industry} that has signed the 2050 Internet-Zero Customary;
• {Our relationships} with our clients transcend enterprise: as a part of the TIM Brasil’s Optimistic Girls undertaking — aimed on the employability of ladies — that TCH CH has joined final yr, now we have participated in a digital job honest for every week {of professional} and private improvement by programs, workshops and employment alternatives.

DVD Providers

Key business successes for non-disc actions:
Microf luidics:

• ISO 13485 (CA) with Solvent Bonding functionality;
• New lab/functionality in Poland past prototyping nearing completion finish of Q2. Microfluidic cartridge and medical gadget engineering accredited in Poland, having handed EU IVDD normal audit (February 2021).

Vinyl

• Contracts with World’s High 3 Music corporations: 1 has already been signed on the finish of Q1 and a pair of anticipated to be signed by finish of Q2 2022;
• 2 giant US independents in last contract negotiations.

Provide Chain/Fulfilment

• Main anchor consumer contract signed;
• Administration of 50K consolidated shipments/day for a few of the most outstanding names in media & shopper merchandise.

Appendix 2 – Debt St ructure

As a part of the monetary restructuring transaction accomplished in 2020, debt maturities have been prolonged and new financings executed, reinforcing the Group’s liquidity.

Appendix 3 – Reconciliation of adjusted working indicators

Along with revealed outcomes, and with the goal of offering a extra comparable view of the evolution of its working efficiency, Technicolor is presenting a set of adjusted indicators which exclude the next gadgets as per the assertion of operations of the Group’s consolidated monetary statements:

• Internet restructuring prices;
• Internet impairment costs;
• Different earnings and bills (different non-current gadgets).

Appendix 4 – Free Money Stream Reconciliation and Summarized Monetary Construction

Technicolor defines“Free Money Stream” as web money from working actions (persevering with and discontinued) plus proceeds from gross sales of property, plant, and tools (“PPE”) and intangible belongings, minus purchases of PPE and purchases of intangible belongings together with capitalization of improvement prices.

Appendix 5 – IFRS 16

• IFRS 16 impacts may be summarized as follows:

Appendix 6 – Unaudited Monetary Statements

6.1 – UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS

6.2 – UNAUDITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

6.3 – UNAUDITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

6.4 – UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS

1 As offered in February twenty fourth, 2022 press launch, steering numbers offered on this press launch displays modifications in accounting strategies (IFRIC changes on Saas) and don’t consider the spin-off of TCS.
2 Income break-down by area and merchandise is offered in Appendix 1“Enterprise highlights by division” of this press launch.

3 Quantity break-down by product is offered in Appendix 1“Enterprise highlights by division” of this press launch.

Attachment

• 2022-05-05-Q122-Press_release_US

Attachments 2022-05-05-Q122-Press_release_US…

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