Dolby Laboratories (DLB) FY Conference June 04, 2025 09:00 AM ET Speaker0 All right. Good morning. Why don't we go ahead and get started. I'm Ralph Schackart, Internet Analyst here at William Blair. Thanks again for attending our Annual Growth Stock Conference. Today, we're really excited to have Kevin back from Dolby to give you an overview on the business. Just a quick overview of the company because I think it'll help level set. I've covered the company since the IPO which is a long time ago. And through ...

Group 1 - Dolby Laboratories, Inc. will host a fireside chat at the William Blair 45th Annual Growth Stock Conference on June 4, 2025, at 8:00 AM CT [1] - The event will be led by Kevin Yeaman, President and CEO of Dolby Laboratories [1] - A live webcast and replay of the event will be available on Dolby's investor relations website [1] Group 2 - Dolby Laboratories is headquartered in San Francisco and has a global presence [2] - The company focuses on transforming the science of sight and sound into experiences for billions of people worldwide [2] - Dolby partners with various stakeholders, including artists and developers, to enhance entertainment and communications through technologies like Dolby Atmos and Dolby Vision [2]

Financial Performance - Dolby Laboratories reported non-GAAP EPS of $1.34 for Q2 fiscal 2025, exceeding the Zacks Consensus Estimate by 3.9% and up from $1.27 in the prior-year quarter [1] - Total revenues reached $369.6 million, a slight increase from $364.5 million year-over-year, but fell short of the Zacks Consensus Estimate by 2.4% [1] - Licensing segment revenues were $346 million, up 2.3% year-over-year, while Products and Services revenues decreased by 10.4% to $23.6 million [4][5] Segment Performance - Broadcast Licensing contributed 27% to total licensing revenues, while Mobile Licensing, Consumer Electronics, PC Licensing, and Licensing from Other Markets accounted for 29%, 11%, 17%, and 16% respectively [5] - The company anticipates mid-single-digit declines in Consumer Electronics, with strong growth expected in mobile and other markets, while Broadcast and PC are projected to remain flat [6] Cash Flow and Liquidity - For the fiscal year to date ending March 28, 2025, Dolby generated $281.7 million in net cash from operating activities [10] - As of March 28, 2025, the company had $626.6 million in cash and cash equivalents and total liabilities of $646 million [10] Dividend and Share Repurchase - Dolby declared a cash dividend of 33 cents per share, payable on May 21, 2025 [3] - The company repurchased 429,000 shares for approximately $35 million during the quarter, with $352 million remaining under its stock repurchase authorization [11] Future Outlook - For Q3 fiscal 2025, Dolby estimates revenues between $290 million and $320 million, with GAAP EPS expected to be between 26-41 cents and non-GAAP EPS between 62-77 cents [12] - The company revised its fiscal 2025 revenue guidance to a range of $1.31-$1.38 billion, down from the previous $1.33-$1.39 billion [13] Recent Developments - Dolby continues to expand its technologies, with major sporting events available in Dolby Atmos and Dolby Vision, and new partnerships in various markets including China and the automotive sector [14][15][16] - The partnership with AMC Entertainment will add 40 new Dolby Cinema screens at select U.S. locations by 2027 [17]

Core Insights - Dolby Laboratories reported revenue of $369.56 million for the quarter ended March 2025, marking a year-over-year increase of 1.4% and an EPS of $1.34 compared to $1.27 a year ago [1] - The revenue fell short of the Zacks Consensus Estimate of $378.68 million, resulting in a surprise of -2.41%, while the EPS exceeded the consensus estimate of $1.29 by 3.88% [1] Revenue Breakdown - Revenue from Products and Services was $23.56 million, which is below the average estimate of $28.20 million, reflecting a year-over-year decline of 10.4% [4] - Licensing revenue was reported at $346.01 million, slightly below the estimated $350.48 million, but showed a year-over-year increase of 2.3% [4] Gross Margin Analysis - Gross Margin for Licensing was $326.32 million, compared to the average estimate of $331.80 million [4] - Gross Margin for Products and Services was $7.40 million, exceeding the average estimate of $6.77 million [4] Stock Performance - Shares of Dolby Laboratories have decreased by 5.4% over the past month, while the Zacks S&P 500 composite has seen a decline of 0.7% [3] - The stock currently holds a Zacks Rank 4 (Sell), indicating potential underperformance relative to the broader market in the near term [3]

Core Viewpoint - Dolby Laboratories reported quarterly earnings of $1.34 per share, exceeding the Zacks Consensus Estimate of $1.29 per share, and showing an increase from $1.27 per share a year ago [1][2] Financial Performance - The earnings surprise for the quarter was 3.88%, with the company having surpassed consensus EPS estimates in all four of the last quarters [2] - Revenues for the quarter ended March 2025 were $369.56 million, which missed the Zacks Consensus Estimate by 2.41%, but showed an increase from $364.52 million year-over-year [3] Market Performance - Dolby Laboratories shares have declined approximately 1.7% since the beginning of the year, while the S&P 500 has decreased by 5.3% [4] Future Outlook - The current consensus EPS estimate for the upcoming quarter is $0.82 on revenues of $305.84 million, and for the current fiscal year, it is $4.03 on revenues of $1.35 billion [8] - The estimate revisions trend for Dolby Laboratories is currently unfavorable, resulting in a Zacks Rank 4 (Sell), indicating expected underperformance in the near future [7] Industry Context - The Audio Video Production industry, to which Dolby Laboratories belongs, is currently in the top 21% of over 250 Zacks industries, suggesting a favorable industry outlook [9]

Financial Data and Key Metrics Changes - Q2 revenue was $370 million, in line with the midpoint of guidance and up 1% year over year [16] - Licensing revenue was $346 million, up 2% year over year, while products and services revenue was $24 million, down 10% year over year [16] - Non-GAAP earnings per diluted share for Q2 was $1.34, up 5% year over year, at the high end of guidance [18] - The company generated $175 million in operating cash flow and finished the quarter with $701 million in cash and investments [18] Business Line Data and Key Metrics Changes - Broadcast revenue declined by 11% year over year, while PC revenue increased by 17% year over year [17] - The company expects strong growth in mobile and other markets, with broadcast and PC remaining flat and consumer electronics down mid-single digits for the full year [17] Market Data and Key Metrics Changes - The automotive sector is increasingly important, with high demand for in-car entertainment experiences [7] - New partnerships in the automotive sector include Porsche, Cadillac, and Volvo, among others, adopting Dolby Atmos and Dolby Vision [7][8] - In mobile, Dolby is expanding its presence in the Android ecosystem and has added new partners in China, including Xiaohongshu and Kuaishou [10] Company Strategy and Development Direction - The company is focused on long-term growth drivers, maintaining strong engagement with content creators, distributors, and OEM partners [6][14] - Dolby aims to expand its technologies into more devices and content, particularly in the automotive and mobile sectors [11][12] Management's Comments on Operating Environment and Future Outlook - Management noted significant uncertainty in the macroeconomic environment, leading to a revision of the revenue range for the year to $1.31 billion to $1.38 billion [5] - The company is prepared to operate across a wide range of scenarios and remains focused on controllable factors that drive long-term growth [14][24] Other Important Information - The company declared a dividend of $0.33, up 10% from the previous year [18] - The outlook for Q3 revenue is between $290 million and $320 million, with licensing revenue expected to range from $265 million to $295 million [23] Q&A Session Summary Question: OEM partners' capacity in lower tariff regions - Management indicated that the ability to increase capacity varies by end market, with Mexico being a significant manufacturing location exempt from tariffs [26][28] Question: Clarification on U.S. sales impact - Approximately 25% of licensing revenue from consumer device shipments is from products sold in the U.S. [30][32] Question: Momentum for Dolby Vision and Atmos - Management confirmed strong engagement with partners and ongoing investments in the automotive sector, with new models being announced [34] Question: Adjustments to OpEx in a deteriorating environment - The company is focused on long-term value and is not making immediate changes to operating plans but will adjust if necessary [38] Question: Tipping point for Atmos Music in cars - Management believes that continued engagement with manufacturers and expansion into mainstream models will be key to reaching a tipping point [40] Question: Tariff exposure on products and services - The impact of tariffs on the products business is considered small, as most products are shipped to non-U.S. markets [48]

Financial Data and Key Metrics Changes - Q2 revenue was $370 million, in line with the midpoint of guidance and up 1% year over year [17] - Licensing revenue was $346 million, up 2% year over year, while products and services revenue was $24 million, down 10% year over year [17] - Non-GAAP earnings per diluted share were $1.34, up 5% year over year, at the high end of guidance [19] - The company generated $175 million in operating cash flow and finished the quarter with $701 million in cash and investments [19] Business Line Data and Key Metrics Changes - Broadcast revenue declined by 11% year over year, while PC revenue increased by 17% year over year [18] - The company expects strong growth in mobile and other markets, with broadcast and PC to be flat and consumer electronics down mid-single digits for the full year [18] Market Data and Key Metrics Changes - Automotive is increasingly important, with new partnerships announced, including Porsche and Cadillac integrating Dolby Atmos into their vehicles [8] - In mobile, Dolby is expanding its presence in the Android ecosystem and has added new partners in China, including Xiaohongshu and Kuaishou [10] Company Strategy and Development Direction - The company is focused on long-term growth through strong engagement with content creators, distributors, and OEM partners [7] - Dolby aims to expand its technologies into more devices and content, particularly in the automotive and mobile sectors [11][12] Management's Comments on Operating Environment and Future Outlook - Management noted significant uncertainty in the macroeconomic environment, leading to a revision of the revenue range for the year to $1.31 billion to $1.38 billion [6] - The company is prepared to operate across a wide range of scenarios and remains focused on controllable factors that drive long-term growth [14][26] Other Important Information - The company declared a dividend of $0.33, up 10% from the previous year [19] - True-ups for Q2 were approximately $1 million [44] Q&A Session Summary Question: OEM partners' capacity in lower tariff regions - Management indicated that the ability to increase capacity varies by end market, with Mexico being a significant manufacturing location exempt from tariffs [28] Question: Clarification on U.S. sales impact - Approximately 25% of licensing revenue from consumer device shipments is from products sold in the U.S. [32][33] Question: Economic environment's impact on OpEx - Management stated they are focused on long-term value and are not making quick changes to operating plans but will adjust if necessary [40][41] Question: Tipping point for Atmos Music in cars - Management believes momentum is strong and they are working towards getting Dolby Atmos into high-volume mainstream models [42][43] Question: Tariff exposure on products and services - The impact of tariffs on the products business is fairly small, as most products are shipped to non-U.S. markets [50]

Revenue Performance - Total revenue for the fiscal quarter ended March 28, 2025, was $369,561 thousand, a slight increase from $364,523 thousand for the same period in 2024, representing a year-over-year growth of approximately 1%[162] - Licensing revenue accounted for 94% of total revenue in the fiscal quarter ended March 28, 2025, amounting to $346,006 thousand, compared to $338,240 thousand in the prior year[162] - In Q2 of fiscal 2025, 94% of Dolby's revenue was derived from licensing technology, brand, and patents, primarily to device manufacturers[202] - Licensing revenue for Q2 2025 reached $346,006 million, a 2% increase from $338,240 million in Q2 2024[243] Licensing and Patents - The company generated over 90% of its revenue from licensing agreements with approximately 1,000 electronic device manufacturers, enhancing their audio and visual capabilities[164] - As of March 28, 2025, the company held approximately 26,700 issued patents related to licensed technologies, which significantly contribute to licensing revenue[164] - Dolby's patent licensing revenue primarily comes from essential standardized audio and video technologies, which are embodied in billions of products sold annually[178] - The majority of Dolby's patent licensing revenue comes from patent pools, with a minority generated from bilateral licensing agreements[192] - Revenue from the patent licensing model is driven by royalty share within patent pools, licensee penetration, and device shipments[209] Technology and Market Trends - Dolby Atmos and Dolby Vision are key branded technologies driving revenue, enabling immersive audio and video experiences, with strong momentum in various content categories including user-generated content and live sports[170] - The company aims to expand the reach of its technologies to new content, media, devices, and audiences, enhancing overall market presence[160] - Dolby's technologies are broadly adopted in mobile ecosystems, with Dolby Atmos and Dolby Vision included in Apple devices and supported on all iPhones since the iPhone 12[219] - Over 8,300 Dolby Atmos screens are installed or committed globally, with more than 3,800 theatrical titles announced or released as of the end of Q2 fiscal 2025[233] - The breadth of mobile devices supporting Dolby technologies continues to increase, with OPPO launching multiple models that support Dolby Vision capture and playback[219] Financial Performance - Gross margin for licensing increased to $326,321 million, reflecting a 1% growth compared to $322,922 million in the previous year[243] - Mobile licensing revenue grew by 29% to $100,123 million, up from $88,690 million in Q2 2024[243] - Products and services revenue decreased by 10% to $23,555 million in Q2 2025, down from $26,283 million in Q2 2024[248] - Gross margin for products and services surged by 162% to $7,403 million, compared to $2,824 million in Q2 2024[248] Expenses and Restructuring - Research and development expenses slightly decreased by 1% to $61,707 million in Q2 2025, from $62,493 million in Q2 2024[252] - Sales and marketing expenses remained stable at $89,629 million for Q2 2025, a negligible change from $90,038 million in Q2 2024[256] - General and administrative expenses increased by 6% to $70,415 million in Q2 2025, compared to $66,742 million in Q2 2024[261] - Restructuring charges for Q2 2025 amounted to $4,210 million, a significant increase from $(2,495) million in Q2 2024[265] - The company anticipates gross pre-tax operating income savings of approximately $20 million in fiscal 2025 from restructuring actions[265] Cash Flow and Investments - Cash and cash equivalents as of March 28, 2025, were $626.6 million, up from $482.0 million as of September 27, 2024[280] - Net cash provided by operating activities increased by $91.9 million year-to-date, totaling $281.7 million for fiscal 2025[287] - The company acquired 100% of GE Intellectual Property Licensing and GE Technology Development, impacting cash and cash equivalents significantly[282] - The stock repurchase program has completed approximately $2.9 billion in repurchases since its initiation in fiscal 2010[285] - The company paid a quarterly dividend of $0.33 per share in Q2 2025, continuing its dividend program initiated in fiscal 2015[285] Market Challenges - Macroeconomic conditions, including inflation and trade barriers, pose risks to Dolby's revenue and may impact technology adoption[203][204] - Key challenges include the need for compelling reasons for consumers to demand Dolby technologies and the impact of changing trends in content distribution[218] - The automotive industry's cyclical nature and long development cycles may impact revenue growth from automotive-related technologies[228] Foreign Currency and Sensitivity Analysis - The total notional amounts of outstanding foreign currency contracts increased from $111.7 million to $138.6 million from September 27, 2024, to March 28, 2025[301] - A sensitivity analysis on foreign currency forward contracts was conducted as of March 28, 2025, focusing on a 10% shift in exchange rates relative to the U.S. dollar[302] - A 10% increase in the value of the U.S. dollar would decrease the fair value of financial instruments by $0.6 million[302] - Conversely, a 10% decrease in the value of the U.S. dollar would increase the fair value of these financial instruments by $0.6 million[302]

Financial Performance - Total revenue for Q2 2025 was $370 million, a 1.4% increase from $365 million in Q2 2024[6] - GAAP net income was $92 million or $0.94 per diluted share, down from $98 million or $1.01 per diluted share in Q2 2024; non-GAAP net income was $131 million or $1.34 per diluted share, up from $123 million or $1.27 per diluted share[6] - Total revenue for the fiscal quarter ended March 28, 2025, was $369,561 thousand, a slight increase from $364,523 thousand in the same quarter of 2024, representing a growth of 1%[20] - Licensing revenue reached $346,006 thousand for the quarter, up from $338,240 thousand year-over-year, with a notable contribution from the mobile market at 29%[26] - Net income attributable to Dolby Laboratories, Inc. for the fiscal quarter was $91,793 thousand, down from $97,830 thousand in the prior year, a decline of 6%[20] - Basic net income per share for the quarter was $0.95, compared to $1.02 in the same quarter of 2024, representing a decrease of 7%[20] Revenue Projections - Dolby expects Q3 2025 total revenue to range from $290 million to $320 million, with licensing revenue estimated between $265 million and $295 million[10] - For the full year of fiscal 2025, total revenue is projected to be between $1.31 billion and $1.38 billion, with licensing revenue estimated at $1.21 billion to $1.28 billion[10] Expenses and Margins - Gross margins are anticipated to be approximately 86% on a GAAP basis and 88% on a non-GAAP basis for Q3 2025[10] - GAAP operating expenses for Q3 2025 range from $225 million to $235 million, with non-GAAP operating expenses ranging from $190 million to $200 million[29] - Total GAAP operating expenses for fiscal 2025 are estimated to be between $905 million and $920 million, while non-GAAP operating expenses are estimated to be between $760 million and $775 million[29] Cash and Assets - Cash and cash equivalents increased to $626,551 thousand as of March 28, 2025, from $482,047 thousand at the end of September 2024, a growth of 30%[22] - Total assets rose to $3,229,036 thousand as of March 28, 2025, compared to $3,109,928 thousand in the previous period, marking an increase of 4%[22] Shareholder Returns - Dolby repurchased approximately 429,000 shares for about $35 million, with $352 million remaining in stock repurchase authorization[6] - The company announced a cash dividend of $0.33 per share, payable on May 21, 2025[5] Economic Outlook - The company acknowledges economic uncertainties affecting its financial outlook, including supply chain constraints and geopolitical instability[7] Product Development - New product launches include support for Dolby Atmos and Dolby Vision in various devices, including the Sky Glass Gen 2 TV and OPPO's Find X8 series[6] - Dolby's partnership with AMC Entertainment will expand to add 40 Dolby Cinema screens by 2027[6] Tax and Earnings Projections - The effective tax rate for Q3 2025 is 23.0% under GAAP and 20.5% under non-GAAP[29] - Full year fiscal 2025 GAAP diluted earnings per share is projected between $2.31 and $2.46, with non-GAAP diluted earnings per share projected between $3.88 and $4.03[29] - GAAP diluted earnings per share for Q3 2025 is projected between $0.26 and $0.41, while non-GAAP diluted earnings per share is projected between $0.62 and $0.77[29] - The effective tax rate for fiscal 2025 is projected to be 22.5% under GAAP and 20.0% under non-GAAP[29] Operating Income - Operating income for the fiscal quarter was $107,763 thousand, slightly down from $108,968 thousand in the same quarter last year, indicating a decrease of 1%[20] - Research and development expenses for the fiscal quarter were $61,707 thousand, slightly down from $62,493 thousand in the same quarter last year[20]

近日，在2025年上海车展上，杜比实验室（Dolby Laboratories）带来了由杜比视界HDR影像和杜比全景声沉浸式音频呈现的新一代座舱娱乐体 验。车展期间，多家汽车品牌也发布了支持杜比体验的新车型。截至目前，引入杜比体验的汽车品牌数量已超过25家。 推动座舱娱乐体验升级 随着汽车行业的不断发展，汽车早已不再仅仅是单纯的交通工具，而是逐渐演变成一个多元化的移动生活空间。消费者对高品质座舱娱乐体验的需求日 益增长，他们期望在车内也能享受到精彩的娱乐内容。杜比敏锐地捕捉到这一趋势，积极布局车载娱乐市场，与汽车制造商、流媒体内容平台等展开深度合 作，共同推动车载娱乐体验的升级。 发布会上，调研机构Counterpoint公布的一份调研结果显示，中国车主对杜比创新科技的认知度高达97%，每5位车主中就有4人认同杜比体验对娱乐内 容品质的显著提升。在未来6个月内有购车计划的消费者中，每10人就有9人对搭载杜比视界与杜比全景声的车型表现出购买兴趣，每5位受访者中就有2位将 是否具备杜比全景声和杜比视界作为购车的重要决策依据，并愿意为此接受溢价。这一系列数据显示了杜比技术在消费者心中的地位和吸引力。 继续拓展至更多 ...