Universal Registration Document 2021

RISKS, LITIGATION, AND CONTROLS RISK FACTORS

CLIENT CONCENTRATION AND DEPENDENCY

Risk identification

Risk monitoring and management

Client concentration requires suppliers to become global partners and to increase depth of relationship. Technicolor’s 2015 acquisition of the Cisco Connected Devices Division is a response to the industry consolidation with efforts to deliver more value through innovation and competitive pricing through economies of scale and greater market share. Technicolor strives to foster collaboration with its customers by increasing intimacy and proximity; key account teams oversee anticipation of customer needs to deliver better services and solutions. A strong customer offer review process is in place to properly manage large requests for quotation, identify risks and mitigating actions to stay ahead of competition. Sales force implementation has been reinforced with business development team engaged in bringing new contracts and strengthening existing ones worldwide. Consolidating account management by using new processes, monthly management reviews and diversification strategy is the proper response in ensuring our negotiation position.

Possible revenue concentration around a few clients may challenge our negotiation power during the competitive bidding process and face us to unfavorable prices and other conditions. Due to the current components supply market, we are forced to negotiate new commercial conditions with all our clients. It is likely shortages will impact supply demand and increase prices for Service Providers. In 2021, the division’s top 5 customers accounted for 48% of the Connected Home segment’s revenue and 26% of the Group’s consolidated revenue. This concentration of revenues around a few companies in the CPE (Customer Premises Equipment) industry has accelerated with the consolidation that has taken place in recent years such as Charter Communications (acquisition of Time Warner Cable), AT&T (acquisition of DIRECTV), and Comcast’s X1 syndication activities. This concentration has created opportunities for Connected Home to expand activities among these ever-larger customers while simultaneously increasing risk should entities switch to competitors. Connected Home’s forecasts (sales, production…) are highly dependent on its customers’ performances and commitments: a decrease in demand from large customers could significantly 1. impact cash flow and working capital and lead to excess components and finished goods inventories; higher than anticipated demand can be difficult to fulfil due to 2. long procurement lead times (average 8+ months) for components.

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TECHNICOLOR UNIVERSAL REGISTRATION DOCUMENT 2021