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Technicolor Reports Q1 2014 Results, Blu-ray Delights

Technicolor SA announced financial and production results for its first quarter 2014.

According to the statement, Technicolor’s revenues were €744 million (US $1.03 billion) in the quarter, down 4.1% compared to Q1 2013.

On the optical disc replication front, Technicolor reported that “DVD services revenues recorded a slight decrease in the first quarter of 2014, reflecting a decline in combined Standard Definition DVD and Blu-ray volumes of 5.5% compared with a very strong first quarter of 2013 (which had year-over-year total volume growth of 8,6% versus the first quarter of 2012). Blu-ray format demonstrated continued solid growth, with a 20.5% increase in total volumes, despite the difficult comparison to the prior-year quarter. Standard Definition DVD volumes declined by 10.7% in the quarter, due to lower-than-expected catalog promotional activity in the North American market, driven primarily by non-recurring retailer specific actions. Outside of North America, Standard Definition DVD volumes were down only 2.8% in the quarter. Ongoing use of multi-disc DVD/Blu-ray ‘combo-pack’ configurations continued in the period at levels similar to 2013. Game volumes also continued to deliver year-over-year growth, despite a lighter than normal release schedule, following a heavy release activity in the fourth quarter of 2013 in support of the new gaming console launches.”

Additionally, “major titles produced in the first quarter of 2014 included Frozen (Disney), The Hobbit: The Desolation of Smaug (Warner), Ride Along (Universal) and The Wolf of Wall Street (Paramount).”

Disc Replication Services (by format)

Millions of units Q1 2013 Q1 2014 Change (%)
DVD 267.9 239.2 -10.7%
Blu-ray Disc (BD) 54.1 65.2 20.5%
Total 322.0 304.4 -5.5%

Disc Replication Services (by segment)

Millions of units Q1 2013 Q1 2014 Change (%)
Studio/Video 302.7 280.5 -7.3%
Games 12.0 12.3 2.6%
Software & Kiosk 7.3 11.5 58.6%
Total 322.0 304.4 -5.5%

Currency conversion as of April 25, 2014.

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Unedited press release follows:

Solid Q1 2014 Achievements

Technicolor today announces its revenues for the first quarter of 2014.

Solid Q1 2014 Achievements

• Revenue growth of 3.8% year-over-year at constant currency[1]

• Solid performance across the Group’s businesses

• Continued optimization of the financial structure

25 April 2014 – Technicolor (Euronext Paris: TCH; OTCQX: TCLRY) today announces its revenues for the first quarter of 2014.

“Technicolor delivered another strong quarter of performance,” said Frederic Rose, Technicolor Chief Executive Officer. “We made good progress in the first quarter in laying the foundation for delivering continued strong performance beyond 2015 with the signature of a major smartphone licensing agreement, record orders in Connected Home and Production Services and continued focus on internal IP generation across all activities. This performance has been recognized by the rating agencies and enables us to continue improving our balance sheet structure.”

Key points

• Continuing solid execution, with year-over-year revenue growth at constant rate of 1.4% and of 3.8% excluding legacy activities.

• Technology: another quarter of revenues above €100 million, supported by double-digit year-on-year growth in direct licensing programs, with a sustained level of new contract and renewals, offset by softness in MPEG LA revenues.

• Entertainment Services: good performance in Production Services, with double-digit year-over-year revenue growth in VFX, offset by unfavorable comparison to last year’s record slate in DVD Services.

• Connected Home: eighth straight quarter of double-digit year-over-year revenue growth, driven by strong volume increase in developed markets and
significantly improved overall product mix.

• Rating upgrades by S&P and Moody’s reflecting their view that the Group’s performance has improved over the last two years and should continue to strengthen in the coming years.

• Launch of a repricing that will lead to a significant reduction in the Group’s annual interest expenses.

• Sustained pace of innovation across the Group, building on its leadership in advanced video and audio technologies to participate in defining new models for content creation, management and distribution.

2014 guidance confirmed

• Adjusted EBITDA between €550 million and €575 million;

• Group free cash flow between €180 million and €200 million, notwithstanding higher cash restructuring charges compared with 2013;

• Positive net income;

• Net debt to Adjusted EBITDA ratio below 1.2x at end-December 2014.


• Continued active participation in standardization bodies to promote Technicolor’s technologies in the market. The Group has notably developed an integrated test bed (video, audio, transport, physical layer transmission) enabling the true evaluation of a viable end-to-end ATSC 3.0 solution aiming to provide enhanced video, immersive audio on both fixed and mobile devices through improved network efficiency and robustness.

• Significant focus around next generation immersive technologies to improve end-user visual quality experience, including the development of a High Dynamic Range (“HDR”) broadcast distribution solution with backward compatibility, as well as a technology for creation and rendering of high quality content for HDR displays derived from existing content that will enable consumers to enjoy exceptional image realism in the very near future.

• Launch of Creative District, an online professional network for filmmakers and other creative professionals to connect, collaborate, display and develop their projects. The platform will offer a new networking experience to establish and maintain valuable professional relationships online.

• Creation of a new function in the Technology segment to drive the use of advanced technologies from R&I into Content Solutions and bring Technicolor’s solutions to the market garnering the support of the motion picture and broadcast industries to drive adoption of select technologies into consumer’s lives.

• Key milestone achieved by M-GO, with 1 million subscribers reached during the first quarter.

• Strong pipeline of Connected Home invention disclosures in communication/interoperability and local networks and successful commercial roll-out in that field, with strong demand in the first quarter of key customers for its Wi-Fi Doctor application developed on top of Qeo and materiel shipments of Wi-Fi 802 11ac gateways starting in the second quarter.

• All businesses continued to increase their number of invention disclosures, leading to another double digit increase in priority applications in the first quarter further strengthening the Group’s IP portfolio.

• This strong pace of innovation allowed Technicolor to gain market share in the Connected Home segment, further raise the Group’s innovative profile in the motion pictures and broadcast industries, demonstrate its commitment to the creative space and further reinforce its IP portfolio thereby supporting existing and future licensing programs. In the meantime, Technicolor remains focused on generating productivity gains and operating efficiencies.

Update on financial structure

• In the first quarter of 2014, Technicolor continued to further simplify its financial structure and increase its financial flexibility. The Group successfully refinanced €181 million of senior secured debt maturing in 2016 and 2017 through an exchange into new debt maturing in 2020 on terms identical to the term loans borrowed in July 2013. In addition to this exchange, the Group will reimburse in cash the rest of its senior secured debt maturing in 2016 and 2017 (€85 million) by the end of May.

• Moody’s and S&P have recently upgraded their ratings on Technicolor’s senior secured debt reflecting their view that the Company’s performance has improved over the last two years and should continue to strengthen in the coming years. Moody’s has raised Technicolor’s long-term credit rating to B2 from B3 and S&P to B+ from B previously, with a stable outlook.

• Technicolor has launched a repricing to reduce the interest margin on its $884 million and €321 million of senior secured Term Loan B originally incurred in 2013. The expected pricing is Libor / Euribor + 450bps, subject to a 1% Libor / Euribor floor, which would result in significant annual interest savings for the Company. The transaction should close by the end of April.

• Nominal gross debt at the end of March 2014 amounted to €1,070 million, a decrease of €21 million compared to the end of December 2013, mainly resulting from €24 million of debt repayments. The level of cash was significantly higher compared to the end of December 2013, driven by sustained free cash flow generation.

An analyst conference call hosted by Frederic Rose, CEO, and Stéphane Rougeot, CFO, will be held on Friday, April 25, 2014 at 3:00pm CEST.

Financial Calendar

AGM 2014    22 May 2014
H1 2014 Results    25 July 2014
Q3 2014 Revenues    22 October 2014

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. We also benefit from an extensive intellectual property portfolio focused on imaging and sound technologies, based on a thriving licensing business. Our commitment: supporting the delivery of exciting new experiences for consumers in theaters, homes and on-the-go.

Technicolor shares are on the NYSE Euronext Paris exchange (TCH) and traded in the USA on the OTCQX marketplace (OTCQX: TCLRY).