technicolor - 2020 Universal Registration Document

PRESENTATION OF THE GROUP ORGANIZATION AND BUSINESS OVERVIEW

DVD Services 1.2.3

GRI [102-2] [102-6] [103-1 Market presence] [103-2 Market presence] [103-3 Market presence]

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BUSINESS OVERVIEW Technicolor is the worldwide leader in replication, packaging and supply chain solutions for packaged media and related products serving global content producers across film, television, games and music. The Group provides turnkey integrated supply-chain solutions including mastering, replication, packaging, direct-to-retail and direct-to-consumer distribution of both new releases and catalog products, returns handling and freight management, as well as procurement and selected other inventory management and related services. DVD Services has established deeply integrated customer relationships and a highly scalable, optimized low-cost operational platform. Technicolor runs strategically positioned key manufacturing facilities in Guadalajara (Mexico) and Piaseczno (Poland), while associated supply chain services ( e.g. packaging and distribution) in the United States, Europe and Australia are supported by a multi-region/multi-site facility platform. In the U.S., the Group operates primarily from its Memphis (Tennessee) and Huntsville (Alabama) facilities, while continuing to grow its existing packaging and distribution platform in Mexicali (Mexico), located on the U.S. border. All Technicolor facilities and supply chain operations employ rigorous security processes to help ensure against piracy and other data loss of our customer’s valuable Intellectual Property. Technicolor believes it has the most efficient cost base in the packaged media industry, and the Group continuously seeks to implement further operational and productivity improvements, including the ability to adjust to the heavily seasonal nature of the packaged media industry via the use of temporary labor and other cost variabilization strategies. Technicolor is also actively diversifying its business outside of packaged media, offering supply chain solutions, including transportation management and direct-to-consumer fulfillment services, for clients across a variety of segments, including consumer electronics and peripherals, apparel, food and beverage, educational materials, and gift cards. Technicolor is also actively exploring diversification of manufacturing activity in the field of polymer-based microfluidic devices for use in diagnostics, life science and other applications. David Holliday, the newly appointed President of the DVD Services Business Division, has been tasked with further in-depth transformation of the business. The DVD Services team will continue the acceleration of the DVD Services transformation with further site closures, review of internal processes and cost management, and a very disciplined approach to contract negotiations.

INDUSTRY TRENDS AND MARKET POSITION While at an industry level, global shipments of packaged media products have declined in recent years and are expected to continue to decline, Technicolor believes it is well positioned to outperform overall market trends, driven by increased penetration of existing customers and the addition of new customers. The package media business remains a large and profitable revenue source for content creators, and Technicolor believes there will be continuing significant consumer demand for physical ownership of content. Given a highly variable cost structure, activity optimization and cost reductions, as well as ongoing revenue diversification efforts, Technicolor expects to maintain profitability in this maturing market environment. As a global market leader, Technicolor’s key customers include major Hollywood Studios such as Warner Bros., The Walt Disney Company, Paramount, Universal, Sony, Fox and Lionsgate, independent film studios, software and games publishers, and major music publishers. Most major customers are covered by multi-year contracts, which typically contain volume exclusivity and/or time commitments. Major client relationships typically consist of multiple contractual arrangements for specific types of services within specific geographical areas. Technicolor’s remaining key competitors in the DVD market include Sony and Arvato, both of which now have the majority of their activity concentrated in the European market. DVD Services continued to progress its previously announced structural division-wide initiatives to adapt distribution and replication operations, and related customer contract agreements in response to continued volume reductions. Multiple successful contract renegotiations were completed in 2019 and 2020, and similar efforts with other customers are ongoing. Following protracted negotiations, the Paramount replication/manufacturing contract will expire in mid-2021 and will not be renewed, while the associated distribution contract remains with Technicolor. The impact of this will be mitigated by the accelerated actions of DVD Services in respect to its business transformation plans.

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TECHNICOLOR UNIVERSAL REGISTRATION DOCUMENT 2020