BENGALURU: Global technology player in the media and entertainment sector Technicolor reported a 8.3 per cent growth on current currency basis in group revenue for the quarter ended 31 March, 2015 (Q1-2015, current quarter) to € 805 million as compared to the € 744 million for the corresponding year ago quarter. However, on a constant currency basis, revenue actually fell 3.2 per cent.
Company speak
Technicolor CEO Fredric Rose said, “Our strong first-quarter performance means we are well on our way to deliver on our 2015 objectives of EBITDA and FCF. With the launch of the UHD Alliance and our broad program of initiatives in High Dynamic Range technologies and services, the HEVC Advance patent pool and the announced acquisitions of OuiDo Productions and Mikros Image, Technicolor’s implementation of its Drive 2020 strategic plan is on track and we are laying foundation for success in our key areas of profitable growth. Even at this early stage, 2015 is shaping up to be a very good year for Technicolor.”
Segments
Three segments contribute to Technology’s revenues. (1) Technology, which includes four activities-Research and Innovation, licensing, M-GO and Virdata. (2) Entertainment Services, which develops and offers content-related technologies and services for the Media & Entertainment industry, notably the motion picture, broadcast and commercial advertising industries and (3) Connected Home, which offers a wide range of solutions to Pay-TV operators and network service providers for the delivery of digital entertainment, data, voice, and smart home services. Through the design and supply of products such as set-top boxes, gateways and managed wireless tablets, Technicolor offers connected life solutions.
Technology
This segment reported revenue of € 123 million in Q1-2015, representing a current currency basis growth of 9 per cent over the € 113 million reported for Q1-2014. On a constant currency basis revenue fell 2.2 per cent for this segment.
Licensing contributes a major chunk to this segment’s revenue – € 118 million in Q1-2015, increasing by 7 per cent y-o-y at current currency. Technicolor says that revenues generated by the MPEG LA pool were significantly higher, driven by favourable €/US$ exchange rate movements. It says that there was a solid performance across direct programs, but lower as compared to Q1-2014, which included a lump sum payment related to LG smartphone licensing agreement. It informs of significant business development in Technology Licensing, which include partnering with Chinese mobile device manufacturer TCL to embed Technicolor’s Color Enhance technology on the new Alcatel Onetouch premium smartphone and launching an end-to end HDR offering for legacy and new content for movies, TV shows and commercials.
Entertainment Services
This is currently Technology’s largest segment in terms of revenue. Entertainment Services reported a 9.2 per cent growth in revenue to € 358 million in Q1-2015 from the € 328 million reported for Q1-2014 on current currency ( a fall of 4.1 percent on constant currency basis).
The company says that Productions services reported significant revenue increase y-o-y, driven by double digit growth in VFX and Animation activities. It reports the seamless integration of Mr. X and informs of a Digital Cinema joint-venture with Deluxe with the binding agreement expected to be completed in Q2 2015. Technicolor says that it plans to focus on distribution services solely on digital servicing platform and exit from low margin services.
DVD services revenues were driven by lower volumes versus Q1-2014 that had benefited from a very positive impact of ‘Frozen’. Further, it says that the seasonally weak release of major games in Q1-2015 also contributed to the lowering of revenues from this stream.
Connected Home
This segment reported 8.9 per cent revenue growth to € 317 million in Q1-2015 as compared to the € 291 million in the corresponding quarter of last year on current currency basis. On constant currency, revenue fell 0.8 per cent. The company reports continued gross margin improvement by this segment driven by solid operating execution, supply-chain efficiency and improved product mix. It informs that the segment’s EBITDA margin also increased versus Q1-2014, notwithstanding stronger R&D expenses.
Technology informs of large shipments of 4K set top boxes in India for the ICC Cricket World Cup 2015, advance in next-generation video technologies and creative design dealing with complex integration challenges and real-time test platform for new MPEG-H interactive and immersive TV Audio.
2015 Guidance
Technicolor has reaffirmed in its press release its objectives for 2015 – Adjusted EBITDA between € 560 million and € 590 million; Free Cash Flow of at least € 230 million; Leverage ratio (Net Debt/Adj. EBITDA) of around 0.75x at end December 2015.