technicolor - 2020 Universal Registration Document

2 OPERATING AND FINANCIAL REVIEW AND PROSPECTS RESULTS OF OPERATIONS FOR 2019 AND 2020

Analysis of operating expenses and profit (loss) from continuing 2.2.3 operations before tax and net financial expense COST OF SALES NET IMPAIRMENT LOSSES ON NON-CURRENT OPERATING ASSETS

Cost of sales amounted to €2,725 million in 2020 or 90.6% of revenues, compared to €3,375 million in 2019, or 88.8% of revenues. Cost of sales decreased by €651 million compared with 2019, reflecting the impact of lower sales driven by Covid-19 Pandemic impacts and cost structure improvement (Panorama plan savings). The principal components of the Group’s cost of sales were the costs of finished goods for resale (mainly in the Connected Home segment), raw materials (mostly in the Connected Home and DVD Services segments), labor costs in the Group’s operations (mostly in the Production Services and in DVD Services segments), as well as costs related to real estate and fixed assets depreciation (mainly in the Production Services and DVD Services segments). Gross margin from continuing operations amounted to €281 million in 2020, or 9.4% of revenues, compared to €425 million in 2019, or 11.2% of revenues. This lower gross margin mainly reflects the lower sales impact in Production Services segment. SELLING & ADMINISTRATIVE EXPENSES Selling and marketing expenses amounted to €92 million in 2020, or 3.1% of revenues, compared to €111 million in 2019, or 2.9% of revenues. General and administrative expenses amounted to €191 million in 2020, or 6.4% of revenues compared to €212 million in 2019, or 5.6% of revenues. This decrease reflects the cost structure optimization done all over the Group to mitigate Covid-19 lower revenue impact. 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 €94 million in 2020, or 3.1% of revenues, compared to €114 million in 2019, or 3.0% of revenues. For more information, please refer to note 3.3.1 to the Group’s consolidated financial statements. RESTRUCTURING COSTS In 2020, the Group continued its efforts to reduce costs through facilities optimization and headcount reductions, which generated restructuring costs. Restructuring costs for continuing operations amounted to €100 million in 2020, or 3.3% of revenues, including €27 million in Production Services on cost streamlining actions, €31 million in Connected Home, pursuant to the three-year transformation plan, €33 million in DVD Services, mainly resulting from optimization of replication and distribution sites, and €9 million for Corporate and Other (Group's Transversal Functions). In 2019, restructuring costs for continuing operations amounted to €31 million, or 0.8% of revenues.

In 2020, Technicolor recorded a net impairment charge of €75 million, compared to a net impairment charge of €61 million in 2019, mainly coming from a depreciation of DVD Services business goodwill in both years. For more information, please refer to notes 4.5 to the Group’s consolidated financial statements. OTHER INCOME (EXPENSE) Other income (expense) was a gain of €8 million in 2020, compared to a loss of €16 million in 2019. For further information, please refer to note 3.3.3 to the Group’s consolidated financial statements. Loss from continuing operations before tax and net financial expense amounted to €264 million in 2020, or (8.8)% of revenues, compared to a loss of €121 million, or (3.2)% of revenues in 2019 mostly explained by lower gross margin of €144 million, lower selling and administrative expenses by €39 million, lower R&D costs of €20 million and lower other expenses for €24 million partly offset by higher restructuring costs of €69 million and higher net impairment losses on non-current operating assets of €12 million. 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 an income of €77 million in 2020 compared to a loss of €84 million in 2019. NET INTEREST EXPENSE Net interest expense amounted to €78 million in 2020 compared to €69 million in 2019, reflecting mainly the interest rates on bridge loan in place from March to July and higher credit line drawings. For further information, please refer to note 8.5 to the Group’s consolidated financial statements. PROFIT (LOSS) FROM CONTINUING OPERATIONS BEFORE TAX AND NET FINANCIAL EXPENSE

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TECHNICOLOR UNIVERSAL REGISTRATION DOCUMENT 2020