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technicolor's (thnrf) ceo frederic rose on q4 2017 results - earnings call transcript - transparent polycarbonate sheet price

by:Cailong     2019-08-20
technicolor\'s (thnrf) ceo frederic rose on q4 2017 results - earnings call transcript  -  transparent polycarbonate sheet price
Technicolor SA (OTCPK:THNRF)
Etexecuesfrederic rose at 12: 30 p. m. on February 21, 2018-2017 earnings call in the fourth quarter
CEOEsther Gaide-
CFOAnalystsEmmanuel Matot-
David thurdan, Oddo.
Kepler CheuvreuxEric Beaudet-
Ladies and gentlemen, welcome to the conference call at Technicolor, chaired by CEO Frederick Rose;
And chief financial officer Esther Gaide.
At this point, all participants are only in listening mode.
We will have a question later-and-answer session. [
Operation instructions]
To remind everyone, the meeting is being recorded.
We would like to inform you that this event can also be broadcast live on Technicolor's website by syncing slides.
During this conference call, the following statements may be made:
Forward-looking statements based on management's current expectations and beliefs, which are affected by some risks and uncertainties, these risks and uncertainties may result in significant such forward predictions or hints of actual results and expressed future results-
Look at the report.
For a more complete list and description of such risks and uncertainties, please refer to the document submitted by Technicolor to [France]Indiscernible].
I want to transfer the phone to Frederick Rose now.
Sir, please proceed.
Thank you very much.
Thank you all.
I'm here with esther.
We will take you through the PowerPoint presentation you provided first.
I see slide.
We will give you some comments and then obviously we will go to Q &.
So if we start directly with the third slide, if I can summarize the key information.
As we all know, 2017 of our financial performance is affected by a key factor, that is, the increased cost of memory for the interconnected home experience throughout the year.
Obviously, from the reporting point of view, the planned sales of the patent licensing business have stopped and we will go back to that.
As you can see in the figures, although the business environment for the whole year is very difficult, our second half performance is obviously better than the first half, during this period, all of our operations have made significant profit gains.
Specifically, entertainment services from 8.
5% to 16 in the first half.
7% in the second half, even home from 4. 6% to 6. 8%.
I will discuss these issues later.
Our financial structure has also been solid this year, with net debt falling by 0. 132 billion euros from June 30, 2017. Since strong free cash flow of more than $0. 17 billion was achieved in the second half of the year, giving them more than € 0. 7 billion in liquidity in December, I think this provides us with solid operational and financial flexibility.
Our strategic decision-making clearly also marks the 2017 re-focus of the group on its core operating business, which leads to entry--
This allowed us to negotiate with the sale of our patent licensing business.
The move is to streamline the operating model, clarify the group structure and increase our visibility into the performance of the market and shareholders.
From now on, we will be able to focus our capital resources entirely on our important operating business of entertainment services and connected homes.
In addition to our measures to reduce the company's cost structure, this initiative will ensure that Technicolor achieves profitable growth in the coming years.
As we announced in December, the patent licensing business will decline fifth and is now an asset. for-
Sales, therefore, the numbers of 2016 and 2017 are restated to show the account holding a patent license --for-
Stop sales under operation.
So, from now on, I'm going to talk about the financial performance of ongoing operations.
As you can see in this chart on page 5, the adjusted EBITDA decline in 2017 is entirely attributable to the impact of the increased cost of memory, namely, EUR 80 million, of these, € 50 million was experienced in the second half of this year, which clearly affected the profitability of connected families.
We did succeed in some ways. -
By implementing a cost savings plan to mitigate some of the other adverse factors we face, especially in connected homes and our DVD services business, we also launched a business savings plan at the end of the year, applying our cost structure to the new group structure, we will be back a bit late.
Obviously, it's understatement to say that 2017 is a very challenging year because our visual FX advertising campaign is recovering slowly, the worst summer box office in the USS.
The CPE market in Europe and Latin America has been weak overall over the past 15 years.
Nevertheless, we have received free cash flow from the ongoing operation of EUR 63 million, due to our refinancing and optimized management of working capital and capital expenditure requirements.
If I made a special zoom in on the sixth slide in the second half of the show, I think a lot of you are looking forward to and waiting to see what we will do in the second half.
Our second half was obviously much better than the first half.
This not only reflects the seasonal nature of our business, but also reflects our actions ---
Due to our performance in the first half of the year, we have taken concrete actions in the second half of this year.
Especially in connected families, if you look at the table, our profit will reach 10 in the second half of this year.
3% external memory cost impact.
This reflects a better combination of flagship product launch and cost savings initiatives.
In terms of production services, we have successfully optimized resource allocation and operational efficiency, with higher profit margins compared to last year.
In terms of DVD services, as we continue to focus on operating cost savings, we maintain the percentage of revenue. We also --
I will also go back to some of the measures we took in the fourth quarter to reduce costs.
If I assume by business on page 7, production services are not executed in terms of discipline as we originally expected.
Compared with last year, we only grew by 3% at the same rate.
However, we have created higher profitability. -
Profitability has improved over last year and is actually higher than we expected.
This is where we focus on high-
Focus on projects that we believe can maximize profitability, as well as significantly improved cross-business resource allocation processes.
In the fourth quarter, we also paid off through the measures we took in the advertising organization, which created additional flexibility in the cost structure and corrected the following
Business scale.
As a result, the business not only resumed growth at the end of September, but also significantly improved profitability.
In terms of animation and games, we performed very strongly last year, after
Production Services, our performance has improved significantly.
In many ways, especially after
Production, we benefit from what we call a very significant growth in streaming services, non-
Traditional broadcast operators.
The only thing we don't see is some visual delay in December ---
The reason for the movie visual effects project is more related to the script and the customer, which has slipped to 2018.
We could have filled this revenue gap, but at that time, we would have filled this revenue gap at a profit level that is inconsistent with our standards, we prefer to focus on our profits and cash flow.
In the eighth slide of the DVD service, the quantity and combination fundamentally reflect the worst situation in the USS.
Summer box office for the past 15 years.
Game Content activities also didn't help with this, which is much lower as well.
So, you can see the blue light.
Sales of Ray and DVD fell 11% year on year. over-
However, this year was somewhat mitigated by the solid catalogue.
So while the new version is not good, we see very good performance in terms of catalog for studio customers, especially in the first nine months of this year.
A kind of forward
Looking ahead, given the strength of the box office in the fourth quarter, we clearly expect the first half to benefit from it.
The last Star Wars movie, Coco, will be released in the coming months.
The same is true in terms of games, some titles-
AAA games are pushed to 2018 and obviously something else has happened in this market and our timeline has changed as game publishers can now extend the life of their main games with digital additions
This is a trend that we need to pay close attention.
In terms of cost structure optimization, we continue what we have been doing over the years and keep--
Make sure we continue to be profitable as potential revenue.
Most importantly, in the future, we have reached an outsourcing agreement with Sony ---
The company has agreed to outsource Technicolor, including its replication and packaging activities in North America and Australia, which will be operating at 2018 in the second quarter and will allow us to continue to take advantage of our best technologyin-
Class operating platform.
If we go to the connected family on slide 9 now.
Obviously, we have talked a lot this year. -
Last year, there were several key points about connected homes.
Our share in North America has grown significantly and we have been very successful, especially with Canadian operators, and we have now successfully rebuilt our relationship.
We also saw the successful deployment of new products, especially the first shipment of a large number of DOCSIS 3. 1.
We are very pleased that we will continue to gain a fair share of CP on the way forward-
Growth in capital expenditure.
As you can see throughout the year, North America now accounts for 57% of our total sales, especially obviously driven by North American cables.
Telecom customers are generally--
I mean, the troubled kid. -
Kids with problems, not doing well in AmericaS.
It is clear that floods in Florida and Texas in the south of the United States did not help this.
About EMEA, the performance is very weak throughout the year.
As we pointed out at the beginning of the year, we know that our product cycle is balanced because we have several high-margin products that are about to expire.
But we did not expect demand to be so weak. This trend --
This weak trend did not really change until the end of the year, with the successful launch of some products in December, however, we were not able to get the expected number from them near the end of the year. LatAm --
As expected, Latan.
The only good news in Latin America is that Brazil has resumed growth, but it is clear that Mexico has not yet resumed growth.
We still have a lot to do. it really depends on macroeconomic conditions. Finally, APAC. APAC grew year-over-
In some respects, this year, thanks to the addition of two operations;
South Korea's LG business has improved our OTT streaming service capabilities;
And we enter Japan.
India is also doing well.
At the same time, we made a decision ---
We decided to withdraw from the Chinese market and some customers in India during the middle of the year because they have no profit for the business.
About the elephant in the room, this is the topic of memory cost, I would love to tell you that this is behind us, but this is not the case.
We spent 80 last year--
According to EBITDA, its price is 80 million euros, of which 50 million euros is the price in the second half of the year.
We expect that the cost this year will be comparable to the price of some memory last year, especially the price of DRAM;
The shortage continues to increase.
Because of all this, we introduced a cost-
Some of the cuts in the second half of last year have been implemented.
For example, we have closed our factory in the United States of America, and concentrated all our activities in North America and Atlanta, thus simplifying our geographical footprint.
We have narrowed our footprint in Asia Pacific and Belgium, and we have also launched a range of initiatives to further reduce our SG &.
Although the cost of memory has increased a lot, the recovery of our profit in the second half of the year is actually the result of two major drivers. A significant --
First, we have significantly improved the mixing and balancing product cycle in our North American cable customers.
The second is the first impact of the cost plan we implemented in the second half of the year.
If we exclude the impact of memory costs and management can't do anything about it in terms of operations, our profitability as a percentage of revenue will actually increase by 150 points over last year.
2017 is very difficult for each of us. -
In connected families.
But I believe that the team has made great achievements under the impetus of Luis Martinez, and we launched a strategic review in the second half of the year, and decided to restructure our business approach by implementing new organizations and methods for our customers, focusing on profit and profitability and the generation of cash flow.
I will discuss this again later.
If we go to the company slide 10.
I mentioned that we have launched a corporate savings plan that has been launched in the fourth quarter.
It will take several quarters to roll out, especially some real estate savings that will not be recorded by 2019.
But given the sales of our patent licensing business, our goal is to adjust our company's cost structure by streamlining the operating model.
At the same time, we are also here to simplify the readability or visibility of the business to financial performance by allocating all the costs that occur, however, this is actually generated to support the specific department itself, this allows us to clearly separate and tell you what the real corporate structure of Technicolor is--
Our functions should be embedded in the department.
So you'll find it in the slide summary statement for 2016 and 2017, which will help you provide a look and feel view of them in our 2018 report.
I pass slide 11 to Esther? Esther GaideYes.
Thank you, Frederick.
From Slide 11, I will not comment on all the different items, just a quick review of depreciation and amortization above last year.
This is mainly due to the high level of growth we achieved in connected households last year and the higher cost of capital development we have during this period, which increased G & A in 2017.
In addition, a quick review of the cost of restructuring.
This is the level of last year, but mainly due to some actions we have taken at the relevant family level after the closure of Indianapolis and China, as well as some restructuring [Indiscernible]
Adjust to the level of activity.
From EBIT to net income, if we turn to 12.
You will find that we have-
In fact, the result of what we have been doing for the past few years is financial results.
The full impact of our advance of $0. 11 billion and € 0. 119 billion in 2016, in addition, we also reimbursed the expenses in 2017 and made different repricing in the past few years, this could reduce financial costs by around € 58 million.
About income tax, we--
The current tax is actually reduced due to reduced activity.
But we have to write.
Deferred tax assets.
We have been increasing over the past few years. Why?
Because this deferred tax based on net operating losses in France is based on a business case where patent licensing is the main activity.
So for our decision to sell a patent license, we do not have any business cases to support Deferred tax assets in our books.
The discontinued business is shifting, mainly due to a decrease in patent licensing reported on this line between 2016 and 2017.
If we go to page-
Decline in cash flow 13-
Key cash flow indicators.
We see that the cash flow conversion of the patent license is affected by the following facts-
Samsung's lawsuit settlement was paid in 2018, not in 2017.
On top of that, you bridge between EBITDA in 2017 and the free cash flow actually generated.
You see, we have the same usual suspicion about the financial impact of the capital expenditure restructuring and the pension.
We also have working caps and OAL movements.
We have done a lot of work and completed all the departments about account cashing by the end of the year.
In addition, we still have the last possibility in connection with the purchase of the home, what can be realized by the be supplier.
As a result, we ended with a free cash flow of 63 million euros at the end of 2017. Page 14 --
Slide 14, you have a balance sheet structure.
Just to summarize the Northern investment bank loans that we have achieved in H1 over the past few years and the past few months with the reduction of old loans and interest rates.
Maturity has been extended to December 23.
On page 15, you have a summary of the strong liquidity we have.
I will go.
Frederick RoseThank, you, Esther.
So if we go to slide 17 I will cover 2017 and 2018 which will affect the patent licensing business.
I just want to summarize that we have made very significant progress since December 2018 and have a high degree of confidence in the details that we will announce the deal soon. On page --
If we follow our strategic price and assumptions, we will go to slide 20.
Looking into the future, after the sale of the patent licensing business, of course, as I mentioned earlier, we will focus on developing the operating business while continuing to reduce the company's cost structure.
So if we were on the entertainment service, especially on slide 21 for each business group, we would--
We will continue to expand the scope of our services because our view is that-
Demand for original content, including immersive content, will continue to grow and will therefore support future market growth.
Obviously, some segments are more than others, but in the long run
The long-term trend is clear and growth exists.
So we will move on. -
We hope to develop this business in the medium term. single-
The number of organic forward development.
While we will continue to expand our capabilities and expectations--
Expansion in other international areas, as we announced in Australia.
We are related, we will pursue
There are opportunities to expand our market reach.
In terms of DVD services, as evidenced by the outsourcing agreement with Sony, our last-person strategy is clearly effective.
While this will lead to a stable sales volume in 2018, it certainly will not stop the overall long-term growth.
Market decline in term structure.
We will therefore continue to adopt our cost structure to optimize our distribution organization.
If we go into slide 22 on connected homes, this is the most fundamental change in strategy since we last talked about our strategic focus, and of course, this is the result of what happened in 2017. So, we will --
So obviously, the memory cost problem shows that we have some-
We have some dependencies and we need to look at things differently.
At this point, we obviously need-
We want to see the price from their previous memory.
Level in December 2016.
But instead of waiting, we took immediate action, which I mentioned before.
In addition, cost-
The cuts I talked about earlier, we also adjusted our organization based on our client profile.
So we have actually fundamentally changed our business strategy.
For example, we are now considering very carefully whether to participate in the inquiry because we have implemented the profit standard, which is much higher than in the past.
So we also decided to withdraw from some areas.
China, for example--
Mainland China and some customers, because these are not-
Because these customers do not contribute to our EBITDA.
In India, for example, we decided to focus only on Tata Sky and Bharti.
Obviously, this will not be implemented overnight as we need to add existing contracts, but we expect to generate in 2018on-
Annual revenue loss of about 0. 25 billion euros.
Even so, we expect our profitability to increase in sales.
Now, connected families are organized around two key business units;
One, which we call North American cable;
An enterprise dedicated to the rest of the world.
Why is this organization?
In short, North American cable customers are looking for performance at good prices.
While other operators often look for good pricing with acceptable performance, which means we need different structures, we need different cost structures and we need to provide different products.
Therefore, we will continue to focus on developing our North American cable business with these customers, we will continue to invest in technology solutions, and we will continue to benefit from the investment in the past two years.
The rest--
For other operators, our selective approach will lead us into what we call the top 50 customers.
We will focus on about 50 accounts worldwide outside of North American cable, and we believe we can make a profit and benefit our bottom portfolioline.
Obviously, my particular concern is
DOCSIS 3, end the new solution.
1, 5g, etc. , pay special attention to the streaming media solution based on Android TV. We have --
We are consolidating R & D efforts in the rest of the world, reducing the number of centers we have and ensuring that we benefit from the new technology platform approach available to these customers.
This organization is--
Effective from January 1, the organization will feel its impact during 2018 when it is deployed.
Due to the withdrawal of some countries and customers, sales fell in 2018 and we expect to return to single
Revenue growth began in 2019.
At this point, our view is that in the next few years, the video side of the market will fall structurally, and we see that the growth of broadband has benefited especially from the technology upgrade cycle, started at the end of last year, especially in fiber optic and DOCSIS 3. 1.
If we enter slide 23 on the production service, as I mentioned earlier, we expect the single
Digital revenue growth for our reasons--
Some details we provide here.
On DVD, we expect our revenue and sales to be flat this year. over-
This year, special thanks to the outsourcing agreement with Sony and the improvement of the United StatesS. box office.
As a result, we expect the overall level of entertainment services for EBITDA in 2018. on-
Years, mainly due to short-
The impact of Pc price increases, which cannot be passed on--
According to the existing contract, the service will be fully provided to our customers in 2018.
But we expect this issue to be resolved on its own due to renegotiation of contracts over the next few years.
I already talked about our expectations--
What are our expectations, I don't think I need to go back to this and have a specific comment on our assumptions about memory.
We try to detail our key assumptions about flash and memory in communication ---
Price of DRAM memory.
We want them to be at a high level throughout the year, and we just want--
We only see Flash prices beginning to fall in the second half of 2018, while the price drop in DRAM is expected to start in early 2019.
These are assumptions based on the best knowledge we have today.
So we expect 2017-
Compared with 2018, the 2017 figures in EBITDA are basically stable.
Finally, if I go to page 25, sell our patent license-
After the end of our patent license sales, of course, it will change the business model, and of course, it will change our financial situation.
Obviously we have-
We obviously have to update our Drive 2020 target with two factors in mind; one is --
We are selling our patent licensing business, which is an integral part of this goal;
Second, we can't put our heads into the sand.
The memory impact has already happened and this is true and it has to affect our Drive 2020 target.
Therefore, based on the above situation, our current expectation is that starting from 2020, we will achieve a free cash flow rate of at least 0. 13 billion euros per year, based on the assumption that the adjusted EBITDA is at least 0. 35 billion euros.
We have detailed the drivers behind this, and obviously this is all about constant monetary targets.
Finally, I would like to talk about what is not in the PowerPoint presentation.
In our press release, we communicate that Esther Gaide, who has been working at Technicolor for the past seven years, will leave the company and seek another opportunity ---
Business opportunities--
It's a career opportunity for her.
I would like to say formally to you all, thank you esther for all that has been done in the last seven years.
Thank you for organizing our finance today's Technicolor.
Thank you for everything you do.
Her successor will soon announce that esther will be working until the last day.
Esther gaideextly.
Frederick Rosso, I think we can continue to ask questions. Question-and-
Operation instructions]
We have the first question from Emmanuel Matot from ODDO.
Russell Manuel? Hello.
Please proceed.
Please answer a few questions.
First of all, Frederick, compared to the negative 80 million euros in 2018, what impact do you expect the memory price of connected households to have in 2017?
If I understand well, the level you mentioned on the phone is quite the same, meaning [Indiscernible]
When you feel that you can compensate for the sales impact through various measures, 80 million euros, right?
Fred Rick in Ross cable-
I know you will ask 10 questions in a row, but if you don't mind Emmanuel, maybe I can answer each one at a time.
Aura MatotPlease.
You're right. it was 80 million euros last year.
So far, we expect the total cost this year to be around 90 million euros and 92 million euros.
Our total cost, we hope to be able to reduce some of them.
But I have given you the assumptions and most of the pricing of memory;
Of course, the price is rising by h1.
So, we look forward to a different combination from last year, most of which are in the first half and a small part in the second half.
With regard to connected households, why is capital spending for North American cable operators expected to slow in 2018?
I saw the cycle;
Will it be more positive there?
In 2018, we benefited a lot from the video growth of North American cable TV.
In 2018, we saw a reversal of the trend, and we saw a significant increase in broadband, particularly driven by DOCSIS 3.
1. we saw the real volume in 2018, one of the important-
Sharp slowdown during the yearover-
Year, considering deployment--
Given the maturity of video-side deployment.
Do you think there will be some cycles of video in the US? S.
After 2018, or do you have no visibility at all?
Frederick Ross I think our visibility is that we basically had a big update cycle last year ---
Or last year's upgrade cycle.
We expect the company's business to be quite strong, but the performance last year was incredible.
So looking forward to the future, we expect this to continue steadily for the next two or three years as we get instructions from our customers.
Now in terms of production services, why are you not optimistic about the plan for 2020?
You're just based on the middlesingle-digit growth; double-
According to you, is the digital level certainly not flexible?
I'm not saying that, Frederick Roseno.
The reality is that the market is growing very fast.
What we know is that we-
Our ability to capture and maintain 10% growth actually requires considerable investment in increasing capacity.
As I mentioned to you and many others, 10% a year, it's getting harder and harder because it's a bigger number.
As a result of 2017, what I want to be careful is that for 10% growth, I didn't motivate the team to grow by 10% because our focus has to be on improving profit margins --on-year.
What we are most concerned about is the increase in profit margins.
If we can grow fast, keep and protect our profits, we will do so.
But in the struggle between growth and profit, we pay more attention to sustained profit growth.
The last two questions, the simple one.
Why did you decide to pay the dividend first?
What are your expectations for free cash flow in 2018? Thank you.
Frederick Roswell, with respect to the dividend, I think if you look at our results, you should be well aware of why the board does not recommend the dividend this year.
Given our 2017 cash performance, the board does not see this as appropriate.
Obviously, this is something that needs to be re-examined next year.
In terms of guidance, what we have done is that we have actually listened to shareholders and investors in an attempt to provide clearer information on our objectives.
The key point is that many people tell us that people are more willing to understand what our drivers are.
So we provide a lot of information about the key drivers of what we are doing.
In terms of free cash flow, 2018 will be--
If you look at the press release, I think we did write something on this. In the mid-term --
We gave you a medium term outlook for free cash flow, which we talked about after reaching a low of below 2017 in 2018, and we expect free cash flow for ongoing operations to reach at least € 0. 13 billion, this is on the third page of the press release.
MatotThank you.
Frederick Rose is the main reason for the decline this yearover-
2017 is the last year of Cisco's acquisition cost improvement, especially in terms of working capital improvement, which of course will not happen again.
So, at this point in time, we expect most of these measures, free cash flow will not come out of our improvements, but from operating profit EBITDA.
Thank you very much.
Thank you, Emmanuel.
We also have a question from David Cerdan from Kepler Cheuvreux.
Sir, please proceed.
Good evening, David therdenny.
I have a few questions for you.
The first is about your decision to handle the technology business.
Can we get an update on this decision?
Is there anything new to tell us?
The second question is about the benefits of this disposition. So, is it on --
Would you like to deleverage the company with these proceeds, or finance the merger or buy back some stock?
The third question is about your goal of 2020.
You expect the adjusted EBITDA to increase by EUR 60 million and the free cash flow to increase by EUR 60 million or more.
So, can you explain the bridge between the adjusted EBITDA and the free cash flow?
The last question is about the deferred tax effect, can we know the amount of the deferred tax effect in the balance sheet after depreciation?
Frederick Rose, of course.
Can we start that?
As a result, deferred tax assets remain at 50 million euros, based solely on the United StatesS.
So we have a business case of 50 million euros.
Thank you, David thurdan.
Frederick Rosso, basically, in terms of patent licensing, David, we have made a lot of progress in the past ---
From December 2018
I'm confident. -
We are confident that we have made good progress and will announce something in the near future.
Of course, I can't comment more on this, but I can tell you that we haven't wasted time in the last two months and we are achieving that.
With respect to the proceeds, the proceeds we mentioned in the press release will be used for 100% de-leveraging and will be fully used to reduce our long-term gainsterm debt.
Regarding the 2020 target and free cash flow, the biggest difference between drive 2020 and what we are talking about today is obviously the loss of free cash flow caused by the patent licensing business, obviously, these two affect the memory cost of the most drivers.
I think so--
I think I answered your question.
David CerdanAnd just to be clear about the impact of memory, so in terms of cost, is that the impact of 80 million euros?
So if you deliver 63 million euros or 0. 16 billion euros in 2018, we should exceed 0. 14 billion euros if we only increase the zero memory impact.
Frederick Rose, I don't think you have. -
Maybe I think I need some clarification.
We are saying that we expect the impact of memory pricing to continue this year.
As prices continue to rise,-
Continue to rise in the quarter-after-
We are--
I have told you that the only way we can go back to historical interest rates is that we need to remember that prices stop rising and stay stable for a while, let's renegotiate and basically have new prices.
We have already told you that the time to do so is that in the new contract, it may be 18 months, and in the existing contract, a new price will be made every 6 to 12 months, which
As I mentioned earlier, our pricing market is not stable.
Prices are still rising and we expect it to continue to rise.
So the price we negotiated 12 months ago was lower than today's, so we expect it to continue.
So you have to be careful that you can't do that.
David thurdano.
You think it's because--
I just looked at some prices and it seems that from the beginning of the year, the price is stable compared to the end of 2017, right?
Frederick Ross I think the answer to this question is incorrect.
In general, in the options of the last about 5% years, we see an increase in everythingover-
Year, especially some specific categories related to Flash.
So, obviously, we 'd be happy to give you more details.
All of this is on the screen, but the description you made is actually--
It is actually incorrect. It is not flat.
I hope so, but not.
David thurdano. Yes.
DOCSIS has the same problem, you said DOCSIS was good in the fourth quarter of 2017.
Frederick Royes.
David thurdano. Thank you.
Frederick Rose is very grateful to David.
There is also a problem with OperatorWe, Eric Beaudet Natixis.
Hello everyone, Eric bodeyes.
Three of my questions.
The first is a patent.
You mentioned in the press release that Samsung settlement will be received in q1.
My question is, is it signed?
I mean, you have promised to sign for a while, but the signature has been delayed.
Can we assume it's signed?
So it will be included in the sales of the technical department?
Samsung settled on December and notified the market on December 2018 and received cash on January.
Eric BeaudetThank you.
My second question is the DVD.
Considering that you may be the worst blockbuster of 2017, it's hard for me to understand your 2018 guidance on stable rolls.
And then you got a contract from Sony.
So, at the end of the year, Blockbuster means we should have better films, like next year's, and new contracts.
So why is this supposed to be done with such a cautious review of DVD volumes?
Frederick Rosso, first of all, you are absolutely right for last year.
But from the fourth quarter data, we have started the first half.
But I want to remind you that in a yearon-
As we all know, the market is actually falling structurally. over-
According to the analysts you listen to, 8% to 10% are what we used to guide you.
On the other hand, we know that some blockbusters do have an impact on restoring growth.
Second, we also know-
As you said, Sony's outsourcing agreement should certainly help us.
But I would like to remind you that we only started listing in Sony in the second quarter of this year, and we are listing all year round.
So the reality is that when it's fully operational next year, the full benefits of onboarding will really be felt.
We are not from zero to 100 in a day.
This is a gradual onboarding process that provides more visibility in 2019.
Finally, my last comment on the box office was that I was happy with what we saw at the end of the fourth quarter because we knew what the numbers were.
But let's talk about the summer box office 2018.
I don't know how it will behave if I tell you, and I think it will be true.
I don't think at this point in time I will certainly have any overly optimistic attitude towards what I don't know.
We know something.
I think we are telling you that we will be basically stable this year. on-
Year is a strong statement for a long-standing Enterpriseterm decline.
What we have done with the Sony agreement is that we have assured you that we will continue to work on this business and that we will continue to be able to generate significant cash flow.
Eric Boulder KayVery cleat. Thanks.
There are only two questions to end on set. top boxes.
The first one is that I see your guidance.
You mentioned that you expect the price of flash NAND to drop from H2 2018.
As commented last week, it expects the price of 10% to rise by 2018.
So does this mean that if we track the price of DRAM and they don't drop in H2, your guidance is:-
Your guidance is actually based on this decline, so there is a risk with your guidance if the H2 price is not down?
This is my first question.
The second is that you continue to target 10% of EBITDA profits on set-
Top box like you have in the last few years.
But since then, you have also mentioned that you want to withdraw from a lot of contracts that are losing money or making less profits.
So, I want to know--
What is the actual basis of the EBITDA target? e.
, If you take it out every time you have a bad contract, of course, it will artificially boost your guidance.
But implicitly, what is the expectation of 10% EBITDA compared to the past?
Fred Rick in Ross good
So, I don't want to take defensive measures on the first issue, but I think our credibility in memory pricing communication is very transparent to the market.
We don't come up with concepts like hedging things that can't be Hedge.
We have given you guidance and I know we have been questioned.
We have built it.
I can't comment on what others say.
I know what we built--
These are the assumptions that we are transparent, not just giving you a generic number.
So I think all you need is-
All you need to do is look at communication and tracking records from the transparency of this issue.
Second, regarding potential profitability, I would like to take you back to page 6 of the PowerPoint presentation where you--
If you look, we show you this. -
For example, if you look at the second half, we take 80--
Negative impact of 50 million euros, 6.
Profitability of 8%.
If we rule this out and do it at a uniform memory price, we will do it at 11. 1%.
So, show you that we can reach over £ 10%, provided we get the uniform memory price and get the runway for that.
There is absolutely no change in this goal.
The second comment is, we don't. -
Every time we sign a bad contract [Indiscernible]
Customer, I think what you're referring to is basically the analogy of Nortel.
We did not.
We believe that we have a group of long-term customers in the North American cable field.
Long-term profit, sound, and will be good for us.
We believe we have a team of about 50 people.
Plus customers around the world who are good for us, we are working with them for a long time
Regular investment.
What we want to say is that we are not going to pursue everything that is happening.
For example,--
The two big things we focus on are that we need productivity, and productivity needs volume.
We need to stop selling specific products to customers who only buy us 10 million euros-
Because in the specific development of the product ,--
Our $100 million product may take as much time as possible.
So our point is--
Regarding the specific development, we can optimize on the batch customers.
We will only pursue smaller sales on generic products that are not customized.
That's what we communicate.
We are not communicating an idea, we are driving the car.
Specifically, in China, we are withdrawing from the Chinese market, because as the only Western company active in the Chinese market, especially the broadband market, the conclusion is that for Westerners like us, this is an impossible market.
We're just talking verbally. I think we 've learned a lesson.
The better analogy is that India, we will not withdraw from India.
You have 10 operators in India.
We focus on two of them, which are the two largest, providing us with both quantity and long termterm strength.
That's what we do.
Eric Boulder Kay
Thank you very much.
Thank you very much.
We have no problem in the team.
Thank you very much.
Thank you very much and wish you all a good evening.
I'm sure we'll talk to a lot of you in the next few days and weeks. Thank you.
Thank you, operator.
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