Technicolor opens a new chapter of value creation

TECHNICOLOR CLOSES 2021 WITH A STRONG PERFORMANCE,
READY TO ENTER A NEW CHAPTER OF VALUE CREATION

  • 2021, a year of significant achievement
  • Strong 2022 outlook
  • New phase to enhance the full potential of the Technicolor business and create value for all stakeholders


Dear Shareholders,

2021 was a year of significant achievement in financial and operational terms. Despite the unpredictable business environment, we have yet again proved our ability to react quickly and efficiently, producing strong financial and operating results, and positioning Technicolor on a growth trajectory for the years to come. The efforts of our dedicated and talented teams have enabled us to continue delivering the best products and services to our clients, allowing us to achieve our 2021 guidance. Today, we have solid foundations for long-term growth and believe that now is the right moment to begin a new chapter as we position all of our business divisions for future success.

A SUCCESSFUL TRANSFORMATION IMPROVING EFFICIENCIES AND RESULTS

Over the past two years, we have been successfully executing a transformational strategy to improve the Group’s operational and financial performance. As a result, Technicolor has a portfolio of three leading and profitable businesses, operated by a renewed and experienced management team:

• Technicolor Creative Studios (TCS) provides visual effects services using the highest quality artistry and cutting-edge technology within the entire industry. Under Christian Roberton’s leadership, we have reorganized and integrated our studios under dedicated service lines to serve our clients more efficiently: MPC for Film & Episodic, The Mill for Advertising, Mikros for Animation and Technicolor for Games.
• Connected Home, under Luis Martinez-Amago’s leadership, has implemented several initiatives aiming at improving efficiencies and reducing costs. As a result of these initiatives, we are well-positioned to address strong customer demand despite also navigating an environment impacted by supply chain constraints and the semiconductor crisis.
• DVD Services, led by David Holliday, has repositioned the disc business to focus strongly on profitability and is in parallel expanding into new future-growth businesses by leveraging existing assets, know-how and customer relationships.

A NEW CHAPTER FOR TECHNICOLOR

Today, we are writing a new page of Technicolor’s history, aiming at creating value for all Technicolor stakeholders.
• We intend to spin-off (65%) of TCS. This should help reduce the conglomerate discount affecting TCH shares, and reduce the complexity of the group, allowing both new entities to focus on their growth story without competing for resources.
• We have the opportunity, thanks to the support of our key shareholders, and the issuance of fully backstopped Mandatory Convertible Notes, to significantly decrease the financial debt, and complete a full refinancing of both entities, leading to a significant reduction of the current interest burden.

With the partial spin-off of TCS, we intend to create two independent market leaders in their respective sectors:
• TCS will apply for a listing on the Euronext Paris stock exchange, and will be a global leader in VFX, offering an attractive “pure play” equity story in a market with burgeoning growth.
• Technicolor ex-TCS will be the leader1 in Connected Home devices as it leverages its position in existing and new markets, and in DVD Services as global leader in Disc, with specialty manufacturing and supply chain services driving future growth.

As Technicolor shareholders, you will receive TCS shares, while remaining shareholders of Technicolor Ex-TCS. So, you will have exposure to two growth stories.

Existing lenders will be refunded early, and the financial profile of each company will be significantly de-risked. The refinancing package will include the issuance of €300 million Mandatory Convertible Notes to be converted into Technicolor shares after the vote of Technicolor’s shareholders at the General Meeting approving the spin-off of TCS.

The refinancing and the spin-off are expected to be completed by Q3 2022, subject to (i) the shareholders’ approval of the issuance of the MCN, (ii) the shareholders’ approval of the terms of the spin-off, (iii) the completion of the refinancing discussions with creditors on terms satisfactory to Technicolor Ex-TCS and TCS and (iv) customary conditions, consultations and regulatory approvals.

We are confident that the proposed spin-off and refinancing will allow both companies to thrive as independent businesses, and compete in a more agile manner within their respective sectors. Both entities will have a capital structure that supports their viability, long-term ambitions and organic growth to the benefit of their employees, shareholders, customers and suppliers. Ultimately, this will enable each of them to unlock enhanced value for all Technicolor stakeholders.

We are excited to be entering this new chapter with you. Your loyalty and support have been and remain key assets for our group. Together with our team, we are fully committed to making this new phase a success, one of which we can be proud.

Thank you for your trust.


1 Source: September 2021 – Dell Oro

2021 key numbers


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TECHNICOLOR


Technicolor confirms its 2022 guidance2

  • Revenues are expected to grow,
  • Adjusted EBITDA of €375 million,
  • Adjusted EBITA of €175 million,
  • FCF, before financial results and tax of €230 million.
2 2022 guidance numbers for continuing operations have been restated to reflect changes in accounting methods (IFRIC interpretation adjustments on Saas).


Proposed spin-off creating independent market leaders in their respective sectors

TECHNICOLOR


Create two independent companies, each with a more focused strategy and freedom to pursue their own agenda

Ensure both entities have a capital structure that can support their viability, long-term ambitions and organic growth

Unlock value to Technicolor shareholders by creating an independent TCS, a unique pure play story in the exponentially growing VFX industry

Opportunity to further deleverage while refinancing existing debt: reimbursing existing lenders, reducing cost of debt, and deleveraging
TECHNICOLOR

MAXIMIZE VALUE TO ALL TECHNICOLOR’S STAKEHOLDERS: SHAREHOLDERS, CUSTOMERS, SUPPLIERS, LENDERS, EMPLOYEES




TCS: WORLD'S LEADING INDEPENDENT PROVIDER OF CREATIVE VISUAL ARTS SERVICES



Award-winning teams of artists and technologists partnering with the creative community across Feature Film, Episodic, Animation, Brand Experience & Advertising, and Gaming to bring the universal art of visual storytelling to audiences everywhere.

TECHNICOLOR



TECHNICOLOR Ex-TCS IS ideally positioned
to leverage its leadership in existing and new markets

TECHNICOLOR


Intention to fully refinance the Group’s debt

UNLOCK the possibility of refinancing existing expensive debt at attractive conditions

CREATE OPTIONALITY to refinance the balance sheet of both entities

REDUCE COST of debt
TECHNICOLOR

Issuance of €300m Mandatory Convertible Notes which would be converted into Technicolor shares


Launch of negotiations on new debt structure, consistent with the proposed separation, with a view to putting in place two distinct and optimized financing packages for TCS and Technicolor Ex-TCS respectively

Item Description
Issuer Technicolor S.A.
Issue amount €300M
Conversion Price €2.60 per share, representing 3 months VWAP at signature of the commitment letter minus 5% discount.
Maturity Date Earlier of 6 months after the latest maturity date of the new secured debt instrument, and the 7th anniversary of issuance.
Coupon 4.5% cash coupon p.a.
Conversion Automatic mandatory conversion into shares of the Issuer at the Conversion Price within the 18 months of issuance upon (i) an EGM approving the Issuer distributing/listing of at least 65% of TCS share capital and board decision to proceed with the distribution, (ii) an admission by Euronext of the listing of TCS shares.

Right to convert into Technicolor shares at any time at the discretion of the holders.


Indicative Timetable

TECHNICOLOR


www.technicolor.com/investor-center

Contact us :
shareholder@technicolor.com

TECHNICOLOR


Warning: Forward Looking Statements - Communication of a promotional nature

This document 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, and more specifically the Universal Registration Document filed with the AMF on April 7, 2021, and available on the Company’s and the AMF websites. Investors' attention is drawn to the risk factors described in this document.

This document contains non-GAAP alternative performance indicators. A definition and a reconciliation of these indicators (Adjusted EBITDA, Adjusted EBIT and Free Cash-Flow) with the income statement and the cash-flow statement is available in appendix 3 and 4 of the press release published by the company on February 24, 2022 and available on the company's website, in the Regulated Information section: https://www.technicolor.com/investor-center/regulated-information

A prospectus relating to the admission of the Technicolor shares resulting from the conversion of the MCNs and a prospectus relating to the admission of the TCS shares on the regulated market Euronext Paris will be drawn up and published on the Company's website once approved by the AMF..