Technicolor delivers “robust” Q3
November 5, 2021
Technicolor delivered a positive third quarter 2021, and a significant improvement in profitability, despite supply constraint challenges affecting both Connecting Home and Technicolor Creative Studios.
For the first nine months of the year, the Media and entertainment technologist reported:
- Revenues of €2,050 million, a 4.4 per cent decrease at constant exchange rate, negatively impacted by key component shortages, which prevented the business from fully servicing its growing demand and despite a strong recovery in Visual Effects and Animation;
- Adjusted EBITDA of €176 million, up 71.3 per cent at constant rate, reflecting operational and financial improvements, mainly in Technicolor Creative Studios;
- Adjusted EBITA of €46 million, representing a robust €111 million year-on-year improvement at current exchange rate;
- Free cash flow (before financial results and tax) from continuing operations of €(206) million, representing a €72 million year-on-year improvement at current exchange rate.
All Technicolor activities are benefiting from sustained market demand
- Technicolor Creative Studios has an almost full committed revenue pipeline for Film & Episodic Visual Effects and Animation & Games for the remainder of 2021. The division continued to be awarded multiple new projects and, as a result, around 75 per cent of its 2022 pipeline is also committed. Adjusted EBITDA and Adjusted EBITA are also benefiting from the positive impact of operating efficiencies.
- Connected Home revenues were down 13.1 per cent year-on-year at constant exchange rate as a result of unprecedented logistics challenges and key component shortages, which have slowed delivery capacity. At the same time, there has been very strong worldwide market demand, with customers committing on volumes until the end of 2022 and agreeing on pass through contracts to secure component supply. This situation is expected to continue well into 2022.
- DVD Services revenues are driven by continued higher than expected back catalog sales and ongoing growth in non-disc related supply chain activity. Profitability improvement has benefited from the acceleration of cost saving actions, and higher activity in freight and logistics despite continued labor and material cost pressures.
The Group is on track to achieve the c. €115 million cost savings planned for calendar year 2021, with €75 million cost savings realized in the first 9 months. The target of delivering a cumulative €325 million in savings by the end of 2022 is confirmed.
Richard Moat, Chief Executive Officer of Technicolor, stated: “Technicolor benefited from strong and growing demand across all activities during the third quarter of 2021. Results are robust, and demonstrate significant profitability improvement, reflecting our disciplined operational focus.
“Demand for creative VFX artistry and technology continues to improve across media and entertainment, boosted by the increasing desire for original content. Live action production is ramping up as expected, with almost all of our 2021 Visual Effects and Animation pipeline committed, and more than 75 per cent of our 2022 pipeline. Revenue and profitability in DVD Services was ahead of expectations, driven by higher-than-anticipated strength in back catalog, and ongoing growth in supply chain activity. In Connected Home, despite very strong demand in North America and in Eurasia, revenue has been impacted by component shortages, leading to sales being pushed into 2022. However, our customers are now committing on volumes and have agreed on pass through contracts to secure components supply. Based on business activity for the first nine months and the continued successful optimization of its businesses, the Group is confirming its outlook for 2021 and 2022,” he added.