Technicolor’s Entertainment Services segment led by Production Services and new releases in DVD Services reported a 28.1 percent (€93 million) YoY revenue growth which was mainly responsible for the overall 4 percent (€34 million) revenue growth (including exited activities) reported by the company for the third quarter of 2015 (Q3-2015, current quarter).
Technicolor’s group revenues including exited activities increased to €877 million in the current quarter as compared to €843 million in Q3-2014. Excluding exited activities, the group’s revenue for Q3-2015 increased 7.5 percent to €876 million as compared to€815 million in the corresponding year ago quarter.
Technicolor Chief Executive Officer Frederic Rose said, “We are well on our way to achieve our 2015 objectives based on our solid third quarter revenue performance. In addition, while focusing on execution across our businesses, we announced major strategic milestones, with The Mill and Cisco Connected Devices, which will strongly accelerate the delivery of our Drive 2020 objectives.”
The company has four segments-Technology, Entertainment Services, Connected Home, and ‘Other’.
Technology segment revenues grew 4.6 percent YoY in Q3-2015 to €121 million as compared to €116 million. Within Technology, Licensing revenues stood at €117 million in the quarter, up €5 million YoY at current currency. This increase reflected higher revenues from the MPEG LA pool, due to favourable €/US$ exchange rate fluctuations, as well as a good performance of the Group’s direct licensing programs that benefited from the contribution of new contracts signed in prior quarters says the company.
Entertainment Services segment, which replaced Connected Home as Technicolor’s largest segment in terms of revenue contribution, reported revenue of €423 million in the current quarter as compared to €330 million in Q3-2014. This performance resulted from a sustained level of activity in Visual Effects and Animation activities in Production Services, as well as increased volumes related to a strong slate of Studio new releases in DVD Services says the company.
Production Services recorded double-digit increase in revenues in Q3-2015 compared to Q3-2014 claims Technicolor. Revenues excluding exited activities were up by over 40 percent year-on-year at constant currency. This performance was driven by double-digit organic growth in revenues, reflecting another record quarter in Visual Effects (‘VFX’) activities under the MPC brand, and by the additions of Mr. X, OuiDo Productions, Mikros Images, and The Mill (acquired on 15 September 2015). This increased level of activity was supported by feature films, advertising and animation activities, while Postproduction revenues were broadly stable in the quarter, and slightly lower in North America due to fewer theatrical and TV productions.
DVD Services revenues increased in Q3-2015, driven by growth in combined Standard Definition DVD (‘SD-DVD’) and Blu-ray disc volumes of more than 2% percent compared Q3-2014. Standard Definition DVD volumes were flat year-on-year, supported by a strong slate of studio new releases in the third quarter of 2015, as well as by the impact of selected new customer additions.
Blu-rayTM disc volumes were up 11 percent, due to the same factors as SD-DVD, and the positive impact of ongoing growth in Blu-rayTM Xbox One games volumes. Total Games volumes were affected by further decline in SD-DVD games volumes for prior generation Xbox. DVD Services experienced strong improvement in year-on-year and sequential quarterly volume performance in the quarter, which reconfirms ongoing consumer demand for packaged media when compelling content is available.
Connected Homes YoY revenue reduced 10 percent to €332 million in the current quarter as compared to €369 million in Q3-2014. ‘Other’ segment reported no revenue for Q3-2015 and Q3-2014. The company reported €1 million revenues for Q3-2015 from exited activities as compared to €28 million from the year ago quarter.
This performance reflected lower total product volumes of 7.7 million units ( decline of 14.2 percent) in the quarter, with a weak level of activity in North America, partially offset by an improvement in overall product mix across most regions, with the exception of Brazil.
Technicolor says that the soft revenue trend experienced by the Connected Home segment in Q2-2015 persisted during Q3-2015, almost entirely due to North America, where customer orders continued to be affected by pending industry consolidation, and in Brazil, due to softening macroeconomic conditions. Connected Home recorded however double-digit revenue growth in Europe, Middle-East and Africa and in Asia-Pacific, driven notably by the ramp-up of new higher-end devices during the period.
Regional Highlights
In North America, revenues decreased significantly in Q3-2015 compared to Q3-2014. Product deliveries in the period were affected by ongoing cautious customer approach towards orders and inventory management related to pending industry consolidation, particularly in the Satellite segment, as well as by the phasing-out in Q1-2015 of a Cable device that was shipped in large volumes in Q3-2014. Overall product mix improved however strongly year-on-year, driven mainly by an increased contribution of higher-end Cable devices in the sales mix.
In Latin America, revenues declined in the current quarter compared to Q3-2014, reflecting a drop in product shipments, after four consecutive quarters of year-on-year growth. Product deliveries in the period were primarily affected by tougher macroeconomic conditions in Brazil, as reflected by the devaluation of the Brazilian real against the US$, which led to high inventory levels.
In Europe, Middle East and Africa, revenues were up double-digit in 3- 2015 compared to Q3-2014, driven by stronger product shipments and significantly improved overall product mix. Connected Home benefited from the ramp-up of a new OTT set top box introduced at a key French customer, a device that the Group has started to ship across additional international markets. The segment’s performance was also supported by higher deliveries of OTT and broadband devices to Telecom customers, as well as by increased volumes of Cable gateways, driven by Western Europe.
In Asia-Pacific, revenues rose significantly Q3-2015 compared to Q3-2014, as a result of a strong double-digit increase in product shipments and a material improvement in overall product mix. Volume growth in the period reflected a rebound in set top box shipments to Indian customers as the digitization program has resumed, as well as higher deliveries of Cable and Telecom broadband devices, notably in China.