February 21, 2018

Technicolor: Full Year 2017 Results

Technicolor announces today its results for the full year 2017.

Technicolor: Full Year 2017 Results

Paris (France), 21 February 2018 – Technicolor (Euronext Paris: TCH; OTCQX: TCLRY) announces today its results for the full year 2017.

Frederic Rose, Chief Executive Officer of Technicolor, stated:
"2017 was particularly challenging for Technicolor which, nonetheless, showcased the underlying resilience of its operating businesses. The second half of the year showed significant improvement, versus the first half. The pending sale of our Patent Licensing business will be a watershed moment, simplifying our operational model and clearly increasing visibility on our performance, removing conflicts and complexity for all stakeholders. Post-sale, we can focus our capital resources on our key operating businesses – Entertainment Services and Connected Home – alongside our measures to reduce our corporate cost structure, to ensure Technicolor achieves profitable growth and higher levels of free cash flow."


Full Year 2017 Key Indicators from continuing operations


Second Half

Full Year

In € million



At constant



At constant

Revenues from continuing operations







Adjusted EBITDA from continuing operations







As a % of revenues







Free Cash Flow from continuing operations








Technicolor announced, on December 18, 2017, its decision to sell its Patent Licensing business and that it was in advanced negotiations with a third party. As a result, the Group reported the financial information of its Patent Licensing business, previously included in the Technology segment, under discontinued operations. 2016 results were represented for comparative purposes. R&I and Trademark Licensing activities are now reported under Corporate & Other segment for both years.


Full Year 2017 Key Highlights

  • Revenues from continuing activities amounted to €4,231 million, down 6.8% year-on-year at constant rate, with an Adjusted EBITDA of €291 million compared to €359 million in 2016. This is wholly attributable to the Connected Home segment as memory price increases negatively impacted its Adjusted EBITDA by €80 million (of which €50 million in the second half);
  • Excluding the memory cost impact, Connected Home would have generated an Adjusted EBITDA equivalent to 2016, as the segment recorded significant margin improvement in the second half;
  • Entertainment Services recorded an Adjusted EBITDA broadly flat year-on-year at €230 million, with a material improvement in the second half, in particular in Production Services through an efficient resource allocation;
  • Group net income amounted to a loss of €173 million, resulting from low operating profits and a non-cash depreciation of €113 million of the net deferred tax assets as a result of the announcement of the planned Patent Licensing disposal;
  • Free cash flow for reconciliation generation before cash impacts of the Cathode Ray Tube cartel case settlement was €102 million, out of which €63 million was generated by the continuing activities;
  • Financial structure at end December 2017 is solid, with a net debt of €784 million, down €132 million compared to June 2017. The Group also had a strong level of liquidity (above €700 million, including €390 million of committed undrawn credit lines);
  • 2017 financial performance was also affected by advanced negotiations for the sale of the Patent Licensing business, which is now reported under discontinued operations;
  • Simplification of the Group's structure is on track thanks to the anticipated strategic transaction related to the Patent Licensing business with corporate costs reduction initiatives launched in the second half of 2017.


Strategy Update
As a result of the strategic transaction for its Patent Licensing activities, Technicolor will focus on developing its two operating business segments as follows:

  • Entertainment Services:
    • Technicolor will continue to develop Production Services as it pursues growth opportunities driven by the continued increase in original content and the emergence of immersive content. Available Group capital will continue to be allocated in priority to opportunities in this business, organically or by acquisition, including the development of market leading tools;
    • DVD Services will maximize cash generation while continuing to develop further opportunities for its world class operating platform.
  • Connected Home: going forward, Connected Home will focus on new opportunities in home networking and streaming solutions, including through alliances and partnerships. It will also concentrate its efforts to durably improve its profitability. In this context, the Group has decided to exit from a number of customers and countries which are a drag on the division's profitability.

The Group will continue to rely on its world class Research and Innovation Group to develop new tools, such as mixed reality production and new in-home services.
Technicolor's operational and financial profile will also be strengthened by corporate cost reductions and by applying all cash proceeds related to the Patent Licensing business to pay down debt. This will also include the cash settlement received from Samsung in the first quarter of 2018.


2018 Assumptions by Segment

Entertainment Services:

  • Production Services revenues – mid-single digit revenue growth driven by:
    • Very strong order backlog in Film and TV VFX;
    • Advertising VFX expected to improve in 2018 compared to 2017;
    • Post-production anticipated to continue to benefit from the significant increase in streaming original content;
    • Revenue growth mildly impacted by slightly fewer projects in Animation & Games.
  • DVD Services – revenues and volumes expected to be around 2017 levels notwithstanding continued overall market decline, reflecting:
    • Improvement of the US Box Office at end 2017 which is expected to positively impact new release activity in the first half of 2018;
    • Outsourcing agreement from Sony DADC to Technicolor in North America and Australia to start in the second quarter of 2018.
  • Overall, Entertainment Services Adjusted EBITDA expected to remain flat year-on-year due the DVD Services business, of which short-term profitability will be impacted by raw material (polycarbonate) increases which cannot be passed on fully to all customers in 2018 under existing contracts.


Connected Home:

  • Revenues:
    • Customer portfolio review conducted in the last quarter of 2017 expected to lead to a revenue decrease of around €250 million, corresponding to a decline of around 10% year-on-year.
  • Adjusted EBITDA:
    • Assumptions for NAND Flash and DRAM memory price is that they remain at a high level throughout 2018, with NAND Flash prices decline starting in the second half of 2018, while a decreasing trend for DRAM is expected beginning in early 2019;
    • Current mitigation actions including cost savings expected to show results at the end of 2018;
    • Adjusted EBITDA therefore expected to be flat year-on-year and to show similar trends to 2017 with a weak first half and solid margin increase in the second half.

Based on these assumptions, Technicolor expects an Adjusted EBITDA from the continuing operations broadly stable at constant rate compared to 2017.


Mid-term Outlook
In 2017, the Group initiated a strategic refocus on its core operating businesses with the advanced negotiations regarding the sale of the Patent Licensing activity. This strategy led to a major change in the Group's business model and a significant evolution in its cash generation profile in a more challenging environment. The objectives of the Drive 2020 strategic plan have therefore evolved.
After reaching a low point in 2018, below 2017 levels, Technicolor expects free cash flow from continuing operations to reach a run rate of at least €130 million by 2020, resulting from an Adjusted EBITDA which is expected to be above €350 million, relying on the following drivers:

  • Continued 5% to 10% organic revenue growth in Production Services based on market leading capabilities and overall industry growth;
  • Resiliency of DVD Services activity with volume decrease being partially offset by cost efficiencies and continued solid cash generation. Raw material (polycarbonate) costs increase will be contractually fully passed on to all customers;
  • Single digit revenue growth for Connected Home once the customer portfolio review has been completed (expected to be completed in 2019) with profitability improvement that will progress the division towards its 10% Adjusted EBITDA margin objective;
  • Corporate savings amounting to a run-rate of around €10 million by 2020 compared to 2017.

These mid-term objectives are at constant exchange rates compared to 2017.

The Board of Directors of Technicolor will not propose a dividend to the 2018 Annual General Meeting of Shareholders in light of 2017 financial performance.

Management update
Technicolor announces the departure of Esther Gaide, the Group's Chief Financial Officer, who will leave the Group on 20 March 2018 to pursue a new professional opportunity. Her successor will be announced shortly.


An analyst audio webcast hosted by Frederic Rose, CEO, and Esther Gaide, CFO, will be held Wednesday, 21 February 2018 at 6:30pm CET.
Link to the Audio Webcast
(The presentation slides will be made available on our website prior to the webcast)
The replay will be available at the latest by 9:30pm (CET) on February 21st, 2018


Financial calendar

Q1 2018 business update

25 April 2018

H1 2018 results

25 July 2018



Warning: Forward Looking Statements
This press release contains certain statements that constitute "forward-looking statements", including but not limited to statements that are predictions of or indicate future events, trends, plans or objectives, based on certain assumptions or which do not directly relate to historical or current facts. Such forward-looking statements are based on management's current expectations and beliefs and are subject to a number of risks and uncertainties that could cause actual results to differ materially from the future results expressed, forecasted or implied by such forward-looking statements. For a more complete list and description of such risks and uncertainties, refer to Technicolor's filings with the French Autorité des marchés financiers.



About Technicolor
Technicolor, a worldwide technology leader in the media and entertainment sector, is at the forefront of digital innovation. Our world class research and innovation laboratories enable us to lead the market in delivering advanced video services to content creators and distributors. Our commitment: supporting the delivery of exciting new experiences for consumers in theaters, homes and on-the-go.
www.technicolor.com – Follow us: @Technicolorlinkedin.com/company/technicolor
Technicolor shares are on the NYSE Euronext Paris exchange (TCH) and traded in the USA on the OTCQX marketplace (OTCQX: TCLRY).

Investor Relations
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Christophe Le Mignan : +33 1 41 86 58 83


FCF for reconciliation includes the free cash flow from the discontinued operations.

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