technicolor - 2018 Registration document

2 OPERATING AND FINANCIAL REVIEW AND PROSPECTS RESULTS OF OPERATIONS FOR 2017 AND 2018

OTHER INCOME (EXPENSE) Other income (expense) was a loss of €24 million in 2018, compared to a loss of €11 million in 2017. For further information, please refer to note 3.3.3 to the Group’s consolidated financial statements. PROFIT (LOSS) FROM CONTINUING OPERATIONS BEFORE TAX AND NET FINANCIAL EXPENSE Loss from continuing operations before tax and net financial expense amounted to €119 million in 2018, or (3.0)% of revenues, compared to a profit of €40 million, or 0.9% of revenues in 2017 mostly explained by a lower gross margin of €135 million, higher net impairment losses on non-current operating assets by €72 million and higher restructuring costs by €19 million mitigated by lower selling, administrative and R&D expenses. For further information, please refer to the Group’s consolidated financial statements (please refer to note 6.1.1) Net financial expense 2.2.4 The Group’s net financial result from continuing operations was a loss of €51 million in 2018 compared to a loss of €96 million in 2017. NET INTEREST EXPENSE Net interest expense amounted to €40 million in 2018 compared to €43 million in 2017, reflecting mainly the positive impact of lower average interest rates. For further information, please refer to note 8.5 to the Group’s consolidated financial statements. OTHER FINANCIAL INCOME (EXPENSE) Other financial charges amounted to €(11) million in 2018 compared to €(53) million in 2017. First half 2017 included a €(27) million adjustment further to the early payment of former Term Debt. Income tax 2.2.5 The Group total income tax expense from continuing operations, including both current and deferred taxes, amounted to €54 million in 2018 compared to €112 million in 2017. The current income tax charge was mainly attributable to current taxes due in France, India, Canada, UK, Australia and Poland. Net deferred tax expense was €55 million in 2018 compared to €100 million in 2017. In 2018, this is mainly due to the depreciation of deferred tax assets in the United States as there is no probability anymore to use the tax losses carried forward in the next five years. Net deferred tax assets in the United States was fully depreciated as of December 31, 2018.

Gross margin from continuing operations amounted to €467 million in 2018, or 11.7% of revenues, compared to €602 million in 2017, or 14.2% of revenues. This lower gross margin ratio mainly reflects the negative impact from net components upcosts in the Connected Home segment and DVD Services lower sales. SELLING & ADMINISTRATIVE EXPENSES Selling and marketing expenses amounted to €111 million in 2018, or 2.8% of revenues, compared to €145 million in 2017, or 3.4% of revenues, mainly reflecting the positive impact of cost optimization measures. General and administrative expenses amounted to €181 million in 2018, or 4.5% of revenues compared to €205 million in 2017, or 4.8% of revenues. For more information, please refer to note 3.3.2 to the Group’s consolidated financial statements. NET RESEARCH AND DEVELOPMENT EXPENSES Net research and development (“R&D”) expenses amounted to €127 million in 2018, or 3.2% of revenues, compared to €149 million in 2017, or 3.5% of revenues. For more information, please refer to note 3.3.1 to the Group’s consolidated financial statements. RESTRUCTURING COSTS In 2018, the Group continued its efforts to reduce costs through facility closures and headcount reductions, which generated restructuring costs. Restructuring costs for continuing operations amounted to €62 million in 2018, or 1.6% of revenues resulting principally from costs streamlining actions in the Connected Home segment as well as sites closures in the U.S. for Post Production and DVD Services. In 2017, restructuring costs for continuing operations amounted to €43 million, or 1.0% of revenues, principally resulting from facility closures in the Connected Home segment as well as cost streamlining actions in the DVD Services business.

NET IMPAIRMENT LOSSES ON NON-CURRENT OPERATING ASSETS

In 2018, Technicolor recorded a net impairment charge of €81 million, mainly coming from a depreciation of DVD Services business goodwill, compared to a net impairment charge of €9 million in 2017 primarily related to intangible asset write-offs in the Connected Home segment. For more information, please refer to notes 4.4 to the Group’s consolidated financial statements.

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TECHNICOLOR REGISTRATION DOCUMENT 2018