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Technicolor: First Quarter 2020 Results
PRESS RELEASE
Technicolor: first quarter 2020 results
Paris (France), 7 May 2020 – Technicolor (Euronext Paris: TCH; OTCQX: TCLRY) announces today its results for the first quarter of 2020.
Richard Moat, Chief Executive Officer of Technicolor, stated:
“In common with many businesses, Technicolor is facing an unprecedented crisis, but the impact during the first quarter was limited, with resilience in both our Connected Home and Advertising activities. The response of our employees across the Group has been extraordinary, and we have been able to deploy work-from-home capabilities for 80% of them. We have maintained our operations wherever possible, guaranteeing safety for our employees whilst ensuring the continuity of our activities for our clients. In this difficult environment, we have continued our focus on the operational and financial transformation of the Group, including working on achieving €150 million of cost savings as announced during our Capital Markets Day. As promised, we are on track to achieve €100 million run-rate savings by the end of 2020. On top of the €150 million target, we have now identified an additional €75 million of cost reductions, reinforcing our commitment to do whatever it takes to create a sustainable future for the Group. We continue to have valuable assets and global leadership positions in each of our business units. We are working to ensure that Technicolor emerges stronger from the crisis, and ready to face the new future.”
Group revenues in the first quarter of 2020 were in line with expectations at €739 million, a 12.8% decrease year-on-year at current exchange rates. Activities such as Connected Home in the North American cable segment and Advertising within Production Services have demonstrated great resilience since the advent of the Covid-19 crisis.
Successful early implementation of plans to drive the operational and financial transformation of the company. The Group is on track to achieve c. €100 million of savings on a run rate basis by the end of 2020, with 70% of the targeted headcount reduction having been completed by first quarter 2020. In addition to the previously announced measures, management has identified incremental savings of €75 million to be implemented over the next three years.
The impact of Covid-19 started to materialize in the month of March, with some disruptions in our Connected Home supply chain which are now fully resolved. Negative impact of Covid-19 will be more meaningful in the second quarter in Production Services and DVD Services. Management has and will continue to implement all possible measures to ensure smooth business continuity while prioritizing the safety of employees, customers, suppliers and all other stakeholders.
Technicolor's management is working on updating the Company's strategic plan as communicated during our Capital Markets Day in February, in order to reflect changes in the macro and business environment. Given the continued uncertainty around the duration of lock-down measures globally and the profile of re-opening, Technicolor is not yet in a position to provide renewed financial guidance.
First quarter 2020 Key indicators from continuing operations
(*) Including IFRS 16
Q1 2020 Group update
Outlook
Update on the Rights Issue Process
Segment Review – First Quarter 2020 Results Highlights
(*) Including IFRS 16
Covid-19 situation update:
Adjusted EBITDA in the first quarter amounted to €11 million, or 6.2% of revenue, down 64.1% at constant rate year-on-year. The Adjusted EBITDA reduction was mainly driven by the decline in activity in Film & Episodic VFX. This negative evolution combined with lower cloud rendering costs impacted Adjusted EBITA compared to prior year.
(*) Including IFRS 16
· DVD Services revenues totaled €160 million in the first quarter 2020, down 16.5% at constant rate and 15.0% at current rate compared to 2019, driven predominately by lower volume. Total combined replication volumes reached 174 million discs, down 22% year-on-year.
Business Highlights:
DVD Services continued its previously announced structural division-wide initiatives to adapt distribution and replication operations, and renegotiate customer contract agreements in response to continued volume reductions.
Covid-19 situation update:
Adjusted EBITDA amounted to €1 million at current rate, or 0.6% of revenue, broadly in line with expectations given the anticipated volume reduction and normal seasonal weakness in the first half. Margin was bolstered by ongoing cost savings and a positive impact from contracts renegotiated in 2019. Lower D&A and renewal contracts have helped to deliver an Adj. EBITA of €(16) million.
Volume data for DVD Services
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(*) Including IFRS 16
· Connected Home revenues totaled €393 million in the first quarter 2020, down 13.9% year-on-year at constant rate and 12.8% at current rate. The division's revenues have been experiencing a demand slowdown in Latin America and in Eurasia not fully offset by strong demand from the North American cable division.
Business highlights:
North America: revenues were up compared to the first quarter 2019 driven by continued market share gains in Broadband, which increased by 16% versus prior year.
Europe, Middle East & Africa, Asia-Pacific and Latin America: while the group faced headwinds in video demand in Eurasia, revenues in Broadband were stable in the region. The division faced weakening demand in Latin America and in the Video segment across regions, explaining the lower overall revenue compared to prior year.
Connected Home is benefiting from significant progress of the three-year transformation plan. The division continues to focus on selective investments in key customers and specific parts of the portfolio that will lead to improved margins over the year:
(*) change at constant rate
Covid-19 situation update:
Connected Home remains cautiously optimistic about the business evolution for the rest of the year. The market recognizes the relevance of powerful broadband connections and high-quality Wi-Fi services in the home. Demand from key customers has increased while the lockdown in some markets, the currency crisis in Latin America and the remaining supply disruptions will continue to slightly impact revenues in the short term. Overall, the situation is expected to gradually improve in the coming months.
Adjusted EBITDA amounted to €16 million, or 4.1% of revenue, driven by the gross margin mix in the North American video market and OPEX improvements. Adjusted EBITA of €(1) million improved by €14 million compared to prior year at current rate.
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(*) Including IFRS 16
· Corporate & Other includes the Trademark Licensing business.
Corporate & Other recorded revenues of €9 million in the first quarter 2020, increasing compared to last year. Adjusted EBITDA amounted to €(1) million and Adjusted EBITA at €(2) million.
An analyst conference call hosted by Richard Moat, CEO and Laurent Carozzi, CFO will be held today, 7 May 2020 at 7:00pm CEST.
Financial calendar
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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.
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About Technicolor: www.technicolor.com
Technicolor shares are on the Euronext Paris exchange (TCH) and traded in the USA on the OTCQX marketplace (OTCQX: TCLRY).
Investor Relations
Christophe le Mignan: +33 1 88 24 32 83
Christophe.lemignan@technicolor.com
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