Slide 1: 19 February 2016
19 FEBRUARY 2016 technicolor.com
Slide 2: Technicolor – A Successful Transformation in 2015
Technicolor – A Successful Transformation in 2015 “ Successful transformation of the Company around three leading Operating businesses and a core Licensing business thereby significantly increasing the Drive 2020 financial objectives. ” CREATIVES RESEARCHERS & ENGINEERS OPERATIONALS REVENUES* 2 *201
Slide 3: Three Leading Operating businesses and a core Licensing business
Three Leading Operating businesses and a core Licensing business WORLDWIDE WORLDWIDE WORLDWIDE INDUSTRY-LEADING IP IN VFX AND POST IN DVD SERVICES IN CPE AND LICENSING CAPABILITIES Production Services DVD Services Connected Home Licensing FY 2015 Revenues FY 2015 Revenues FY 2015 Revenues FY 2015 re
Slide 4: Strategic Innovation Focus
Strategic Innovation Focus MEDIA FORMATS IMMERSIVE MEDIA DIGITAL LIFE EXPERIENCES Compression & Color Augmented & Immersive IoT & Virtualization Video coding standards Immersive content creation Learn from sensor &/or network data HDR & WCG technologies and rendering, AR, VFX to infer user behavior
Slide 5: FY 2015 – Solid Financial Results
FY 2015 – Solid Financial Results Revenues (€m) Adj. EBITDA (€m) Change as reported & Margin (%) Change 2015 vs. 2014 16.5% 15.5% Change 2015 vs. 2014 at constant rate 15.6% at constant rate +2.4% +3.1% +9.6% 3,450 3,332 3,652 550 565 537 2013 2014 2015 2013 2014 2015 Adj. EBIT (€m) Net Income (€m)
Slide 6: FY 2015 - Strong Cash Generation
FY 2015 - Strong Cash Generation Group FCF (€m) Cash conversion rate Change as reported 398 410 374 +11.0% 256 62% 230 58% +50.3% 153 41% 2013 2014 2015 2013 2014 2015 Operating Cash Flow FCF/OCF Net Debt/ Nominal Net Debt (€m) 1.74x Adj. EBITDA 1.46x 1.17x 985 784 645 2013 2014 2015 6
Slide 7: Operating Businesses
OPERATING _ BUSINESSES
Slide 8: FY 2015 – Connected Home excl. Cisco Connected Devices
FY 2015 – Connected Home excl. Cisco Connected Devices Revenues (€m) Adj. EBITDA (€m) Key Highlights Change at constant rate & Margin 5.6% 5.4% Top-line growth ► Back to organic growth in Q4 (5.7)% 77 74 ► FY 2015 revenues down 1.2% at 1,382 1,365 current rate YoY reflecting lower product shipments,
Slide 9: A Transforming Acquisition for Connected Home
A Transforming Acquisition for Connected Home Connected Home Connected Home pre acquisition €3Bn of revenues in 2015 A complete and balanced portfolio €1.5Bn Other CPE Geographically balanced, 5% strong in Broadband and APAC 9% satellite STB BB EMEA 35% 20% NAM 51% LATAM STB 20% Cisco Connected 60%
Slide 10: Reinforced Worldwide Leadership
Reinforced Worldwide Leadership TCH moves from #6 to #2 TCH consolidates #1 position 44,3% 34,4% LATAM 29,1% NAM 16,5% 10,2% 9,8% 10,6% 5,3% 5,5% 3,9% 3,7% 2,5% 3,3% 2,8% TCH moves from #5 to #1 TCH moves from #8 to #5 15,1% APAC 13,6% 13,0% 21,3% 12,0% EMEA 14,1% 4,4% 3,9% 3,8% 5,1% 4,7% 4,1% 4,1%
Slide 11: Synergies > €130m
Integration of Cisco Connected Devices Closed 4 months Synergies > €130m after announcement +30% vs. initial objective REDUCTION REDUCTION EFFICIENCY ► On schedule ► Immediate ► On schedule impact in 2016 11
Slide 12: Post Acquisition Status
Post Acquisition Status ► > 1,837* employees, o/w 714 joining Technicolor through the acquisition ► Strengthened Management team ► Targeting to end the Transition Service Agreements with Cisco before year end ► Ongoing implementation of the partnership with Cisco with focus on video, broadband, IoT
Slide 13: Technology Focus on Growing Markets
Technology Focus on Growing Markets Connected Home Innovation Focus on bandwidth ► In-home connectivity and data ► Fixed BB boosted by new aggregation tools technology ► OTT devices ‒ DOCSIS 3.1 ► Virtual CPE (vCPE) ‒ Fiber ► Virtual Reality in the home ‒ G.fast ‒ Fixed LTE 13
Slide 14: FY 2015 – Entertainment Services excl. exited activities
FY 2015 – Entertainment Services excl. exited activities* Revenues (€m) Adj. EBITDA (€m) Change at constant rate & Margin Key Highlights 11.6% 568 13.6% Production Services Production 372 +38.1% ► Revenues up 52.5% at current rate Services 190 driven by double-digit organic growth 183 (0.7)% 1,071 a
Slide 15: Production Services Poised to Thrive over the coming years
Production Services Poised to Thrive over the coming years Growing customer base Post-integration focus ► Best practice & technology sharing/optimization ► Global talent retention acquisition ► Rendering and storage in the cloud ► Enterprise agreements for software and hardware Unquestionable leader
Slide 16: Recognized Visual Effects Expertise in all market segments
Recognized Visual Effects Expertise in all market segments British Academy Golden Globes Canadian Screen Cinema Audio Academy Awards of Film Awards Worked on 26 Awards Society Award Worked on 23 Worked on 29 nominated Worked on 24 Oscar films nominated projects nominated films projects 1 nomination
Slide 17: DVD Services focused on Cash Generation
DVD Services focused on Cash Generation SERVED MARKET SIZE: 3.3Bn discs TECHNICOLOR REPLICATION VOLUMES: 1.3Bn discs Market leading ► 5 of 6 Major Hollywood Studios support to enhance ► Microsoft & All Major Games Publishers customer base ► 2 of 3 Major Music Labels ► North America, Europe & Austral
Slide 18: A Leader in a Mature and Resilient Market
A Leader in a Mature and Resilient Market Physical to Digital Shift Ultra HD Blu-ray ► Physical media demand remains stronger than expectations ► DVD & Blu-ray remains majority of consumer spending ► Production started in Q1 2016 ► “Long-Tail”- Physical share will shrink, but on gradual basis ► Grow
Slide 19: Licensing Businesses
LICENSING _ BUSINESSES
Slide 20: FY 2015 – Technology excl. M-GO
FY 2015 – Technology excl. M-GO Revenues (€m) Adj. EBITDA (€m) & Margin (%) Key Highlights 78.7% 79.4% MPEG LA 213 288 MPEG LA ► Licensing revenues up 3.3% at 213 288 constant rate ► Higher revenues from the MPEG Licensing 266 Licensing 202 164 LA pool which represented 59% of and R&I 101 total sale
Slide 21: IP and Licensing Expertise
IP and Licensing Expertise Patent Patent Trademark Technology portfolio Licensing Licensing Licensing management 21
Slide 22: Patent Portfolio Management and Licensing
Patent Portfolio Management and Licensing Digital Television Mobile Connected Home All leading TV 2 of the Top 10 N°2 WW CPE brands licensed players licensed provider 22
Slide 23: Patent Portfolio Management and Licensing
Patent Portfolio Management and Licensing DISPLAY VIDEO CODING 7% Structure, Backlight, 18% Compression, Transport, Mechanics Image Processing COMMUNICATIONS 21% Broadcast, Mobile, Wireless, Personal Area Network APPLIES TO MOBILE OTHER COMPONENTS 8% Power, Mechanics, USER EXPERIENCE Connections, An
Slide 24: Technicolor Patent Portfolio coverage for Smartphones
Technicolor Patent Portfolio coverage for Smartphones MARKET SIZE: 1.5Bn units/year globally Video Codecs MPEG-2 Systems, MPEG-4 Visual, H.264, HEVC Display LCD & AMOLED Structure, Backlight, Copy protection Mechanics User interface LTE, 3G, 2G Search recommendations, Audio player interface… WiFi OS
Slide 25: Technicolor Patent Portfolio coverage for TV
Technicolor Patent Portfolio coverage for TV MARKET SIZE: Video codecs H.264, HEVC 230m units/year globally Image processing, incl. HDR User interface Display LCD & AMOLED Voice recognition, Remote Structure, Backlight, Mechanics control DVB standards Electronic Program Guide DVB-T/T2, DVB-S/S2, DVB
Slide 26: Trademark and Technology Licensing
Trademark and Technology Licensing A solid portfolio of brands that Solid foundations to leverage leverage Technicolor’s heritage Technicolor’s expertise ► Product offering for immersive video and experiences: image enhancement, color processing ► HDR progress: strong SOC vendors penetration, CE ven
Slide 27: Technicolor – Feel the Wonder
technicolor iil FEEL THE WONDER
Slide 28: FY 2015 – Strong free cash flow generation of €256m
FY 2015 – Strong free cash flow generation of €256m In €m (106) (48) 29 (72) (89) 565 (23) 410 410 255 256 2015 Adj. EBITDA Net capex Net Restruc. 2015 OCF Δ WC & OAL Financial Tax, pensions and FCF (disc.) 2015 Group FCF others 28
Slide 29: FY 2015 – Revenues
FY 2015 – Revenues In €m 240 The Mill 44 (73) 98 16 6 (7) 3,652 (79) 75 3,332 Revenue 2014 Connected Home Cisco Connected Technology M-GO DVD Services Production Exited activities* Forex Impact Revenue 2015 pre-acquisition Devices excluding M-GO Services excl. exited activities 29 * Exited activitie
Slide 30: FY 2015 – Adjusted EBITDA
FY 2015 – Adjusted EBITDA In €m (4) 8 4 (3) (8) 13 2 2 565 550 2014 Adj. Connected Home Cisco Connected Technology M-GO Entertainment Exited activities Corporate & Other Forex 2015 Adj. EBITDA pre-acquisition Devices excluding M-GO Services Impact EBITDA excl. exited activities 30
Slide 31: FY 2015 – Foreign exchange exposure
FY 2015 – Foreign exchange exposure GROUP REVENUE 2015 BY CURRENCY GROUP COST BASE 2015 BY CURRENCY USD 25% EUR 28% BRL 51% 5% GBP 54% CAD 6% 5% AUD 5% 5% 3% Other 6% 4% 2% 1% ► Technicolor’s highest exposures are to the USD, GBP, CAD and the BRL ► The cost base largely matched the revenue base, but
Slide 32: FY 2015 – Forex impact on revenues and Adj. EBITDA
FY 2015 – Forex impact on revenues and Adj. EBITDA 2015 FOREIGN EXCHANGE GROUP REVENUE IMPACT (€m) 2015 FOREIGN EXCHANGE GROUP Adj. EBITDA IMPACT (€m) 242.4 5 2 1 BRL USD Other CAD INR GBP (1) (3) 20.7 (35.5) (0.1) 2.0 4.9 6.1 (7) BRL AUD INR Other CAD GBP USD ► Average USD/EUR exchange rate increas
Slide 33: FY 2015 – From Adj. EBITDA to EBIT
FY 2015 – From Adj. EBITDA to EBIT (in € million) FY 2014 FY 2015 Change Adjusted EBITDA 550 565 +15 D&A (183) (190) (7) Adjusted EBIT 368 374 +6 Non-current 7 (45) (52) Restructuring costs (25) (39) (14) Net impairment losses (48) (27) +21 EBIT 302 264 (38) ► EBIT down €38 million YoY, reflecting a
Slide 34: FY 2015 – Positive net income
FY 2015 – Positive net income (in € million) FY 2014 FY 2015 Change EBIT 302 264 (38) Financial result (117) (87) 30 Share of profit/(loss) from associates 0 (1) (1) Income tax (48) (55) (7) Profit/loss from 137 121 (16) continuing operations Discontinued Operations (9) (43) (34) Net result 128 78 (
Slide 35: FY 2015 – Net Debt evolution
FY 2015 – Net Debt evolution In € million New Term Net Loan acquisition 01 Jan. 2015 31 Dec. 2015 Capital 374 Increase (688) Term Loan 227 debt Group FCF repayment Dividend Fees Forex Others 256 (55) (5) (17) (25) 2 (12) Other debt Cash 385 328 Position Gross 973 New Term Nominal Debt Loan 1,370 374
Slide 36: Debt structure
Debt structure (in millions) Issuer Nominal Debt IFRS Debt Term Loan B - $ Tech Finance $942 $894 ► Interest rate post April 2015 Term Loan B - € Tech Finance €490 €456 repricing Total Senior Debt €1,351 €1,274 ‒ 1% Floor Libor/Euribor + 400 Other Debt €19 €19 basis point Gross Debt €1,370 €1,293 Ca
Slide 37: Tax losses carryforward and deferred tax assets
Tax losses carryforward and deferred tax assets 2015 - in €m NOL's DTA on NOL's Comment France 1, 714 204 Can be carried forward without time limit U.S. 1,287 0 Can be carried forward 20 years 37
Slide 38: Technicolor – Feel the Wonder
technicolor iil FEEL THE WONDER
Slide 39: 2016 objectives
2016 objectives Adj. EBITDA Free Cash Flow: > €240m €600m to €630m Adj. EBITDA breakdown Net Debt to Adj. EBITDA Operating Businesses: > €475m < 1.4x Technology: > €200m Based on contribution of licensing agreements already signed and incl. €60m generated by MPEG LA Corporate: c. €(80)m 39
Slide 40: 2018 mid-term objectives
2018 mid-term objectives ► Free Cash Flow > €300m ► Adj. EBITDA > €660m ‒ Strong improvement of operating businesses: > €130m of synergies in Connected Home > €800m of revenues in Production Services c. €1bn of revenues in DVD Services > 50% of adj. EBITDA contributed by Production Services in the E
Slide 41: 2020 Ambition
2020 Ambition Free Cash Flow Adj. EBITDA 41
Slide 42: Technicolor
technicolor iil FEEL THE WONDER