Core Insights - The article provides a comprehensive analysis of Microsoft in comparison to its major competitors in the Software industry, focusing on financial metrics, market position, and growth potential [1] Company Overview - Microsoft develops and licenses both consumer and enterprise software, known for its Windows operating systems and Office productivity suite [2] - The company is divided into three segments: productivity and business processes, intelligence cloud, and more personal computing [2] Financial Metrics Comparison - Microsoft's Price to Earnings (P/E) ratio is 37.17, which is 0.32x lower than the industry average, indicating favorable growth potential [6] - The Price to Book (P/B) ratio of 10.97 is significantly below the industry average by 0.79x, suggesting undervaluation [6] - The Price to Sales (P/S) ratio is 13.44, which is 0.81x the industry average, indicating possible undervaluation based on sales performance [6] - The Return on Equity (ROE) stands at 8.19%, which is 1.26% above the industry average, reflecting efficient equity utilization [6] - EBITDA is reported at $44.43 billion, which is 56.96x above the industry average, showcasing strong profitability and cash flow generation [6] - Gross profit amounts to $52.43 billion, 34.72x above the industry average, indicating higher earnings from core operations [6] - Revenue growth for Microsoft is 18.1%, significantly lower than the industry average of 64.46%, suggesting potential concerns regarding sales performance [6] Debt-to-Equity Ratio Analysis - Microsoft's debt-to-equity (D/E) ratio is 0.18, indicating a lower reliance on debt financing compared to its peers, which is viewed positively by investors [11] - The analysis of Microsoft's D/E ratio in relation to its top 4 peers highlights a stronger financial position [9]

The Zacks Audio Video Production industry participants like Dolby Laboratories, Inc. (DLB) , Sonos, Inc. (SONO) and GoPro, Inc. (GPRO) are likely to benefit from investments in cutting-edge technology solutions that create better communication experiences. The players also stand to gain as they increase focus on direct-to-customer sales channels. Rapid technological advances, such as 4K, 8K and immersive audio formats, are boosting demand for new devices, which bodes well for participants like GoPro and Dol ...

Core Insights - The article provides a comprehensive evaluation of Microsoft in comparison to its major competitors in the Software industry, focusing on financial metrics, market standing, and growth prospects [1] Company Overview - Microsoft develops and licenses both consumer and enterprise software, known for its Windows operating systems and Office productivity suite [2] - The company is organized into three segments: productivity and business processes, intelligence cloud, and more personal computing [2] Financial Metrics Comparison - Microsoft has a Price to Earnings (P/E) ratio of 37.97, which is 0.29x less than the industry average, indicating potential for growth at a reasonable price [6] - The Price to Book (P/B) ratio is 11.21, below the industry average by 0.79x, suggesting the stock may be undervalued based on book value [6] - The Price to Sales (P/S) ratio is 13.72, which is 0.83x the industry average, indicating potential undervaluation based on sales performance [6] - The Return on Equity (ROE) stands at 8.19%, which is 1.26% above the industry average, highlighting efficient use of equity [6] - Microsoft’s EBITDA is $44.43 billion, which is 56.96x above the industry average, demonstrating stronger profitability [6] - The gross profit of $52.43 billion is 34.72x above that of its industry, indicating higher earnings from core operations [6] - Revenue growth for Microsoft is 18.1%, significantly below the industry average of 66.99%, suggesting challenges in increasing sales volume [6] Debt to Equity Ratio - Microsoft has a debt-to-equity (D/E) ratio of 0.18, indicating a favorable balance between debt and equity compared to its top peers [11] - The D/E ratio is a key metric for evaluating financial health and risk profile within the industry [9] Summary of Key Takeaways - Microsoft exhibits low P/E, P/B, and P/S ratios compared to peers, indicating potential undervaluation [9] - High ROE, EBITDA, and gross profit suggest strong profitability and operational efficiency [9] - The low revenue growth rate may raise concerns for future performance relative to industry peers [9]

Core Viewpoint - The stock market is expected to see a shift from large-cap dominance to a focus on high-growth midcap stocks in the latter part of 2025, with potential changes in interest rates and inflation impacting investor sentiment [2][27]. Group 1: Stock Recommendations - Five stocks are highlighted for September 2025, characterized by optimistic outlooks, positive cash flow, and manageable debt levels [3]. - The stocks are ranked by market capitalization, with detailed metrics provided for each [3]. Group 2: Monday.com Ltd. (MNDY) - Expected EPS growth for Monday.com is over 25%, with a price target upside above 35% [4]. - The stock price is currently $193, with an expected EPS of $0.62 for 2024 and a projected growth of 550.4% this year [5]. - The company has a positive free cash flow and a debt/free cash flow ratio under 2, indicating strong financial health [4]. Group 3: Wix.com Ltd. (WIX) - Wix.com has a strong buy rating from eight analysts, with an average price target of $214.84 and a consensus EPS target of $6.92 for 2025, up from $2.36 in 2024 [11]. - The company has seen free cash flow grow from $32 million in 2022 to $488 million in 2024, driven by increased demand for its services [11]. Group 4: Dolby Laboratories (DLB) - Dolby has a strong buy rating from two analysts, with an average price target of $102.25 and a consensus EPS target of $4 for fiscal 2025, up from $2.69 in fiscal 2024 [14]. - The company reported $68 million in operating cash flow in the last quarter and has $777 million in cash and investments on its balance sheet [15]. Group 5: Krystal Biotech (KRYS) - Krystal Biotech is rated a strong buy by seven analysts, with an average price target of $204.90 and a consensus EPS target of $5.06 for 2025, up from around $3 in 2024 [20]. - The company estimates a global market opportunity for its product Vyjuvek exceeding $1 billion, with plans for expansion into various markets [21]. Group 6: Harmony Biosciences Holdings (HRMY) - Harmony Biosciences has a strong buy rating from five analysts, with an average price target of $55.33 and a consensus EPS expectation of $3.21 for 2025, up from $2.51 in 2024 [24]. - The company's flagship product, Wakix, generated $714.7 million in sales for 2024, reflecting a 20% annual gain [25].

Core Insights - Dolby Laboratories reported Q3 FY2025 earnings with GAAP revenue of $315.5 million, exceeding analyst expectations of $305.2 million and up from $288.8 million in Q3 FY2024, indicating a year-over-year growth of 9.3% [1][2] - Non-GAAP earnings per share reached $0.78, surpassing estimates of $0.71, reflecting a 9.9% increase from the previous year [1][2] - The company experienced higher GAAP operating income of $47.6 million, a 29.3% increase year-over-year, and net income of $46.1 million, up 20.1% from Q3 FY2024 [1][2] Financial Performance - Licensing revenue grew 8.5% year-over-year to $289.9 million, with broadcast licensing accounting for 38% and mobile licensing for 19% of total licensing revenue [5][6] - Gross margin was reported at 86.0%, slightly down from 87.6% in Q3 FY2024, while operating expenses rose 3.5% to $223.9 million [2][8] - The company maintained a strong net income growth of 19.8% year-over-year, alongside a share buyback of approximately $40 million and a quarterly dividend of $0.33 per share [8][12] Strategic Focus - Dolby Laboratories is recognized for its innovations in audio and visual technologies, such as Dolby Atmos and Dolby Vision, which are widely integrated across various devices and platforms [3][9] - The company relies heavily on licensing, which constituted 93% of total revenue in FY2024, and focuses on expanding its patent portfolio and relationships with manufacturers and content providers [4][10] - Recent partnerships in the automotive sector with companies like Audi and Tata, as well as new product launches in consumer electronics, highlight Dolby's expanding market presence [7][10] Future Outlook - Management projects Q4 FY2025 GAAP revenue between $288 million and $318 million, with full-year FY2025 revenue forecasted at $1.33 billion to $1.36 billion [11] - Operating expenses for FY2025 are expected to reach up to $920 million, with non-GAAP earnings per share projected in the range of $3.88 to $4.03 [11] - The company maintains a cautious outlook due to macroeconomic uncertainties, including trade restrictions and supply chain disruptions, which may impact near-term visibility [12]

Core Insights - Dolby Laboratories, Inc. (DLB) reported strong third-quarter fiscal 2025 results with non-GAAP earnings per share (EPS) of 78 cents, exceeding the Zacks Consensus Estimate by 8.3% and up from 71 cents in the prior-year quarter [1][8] - Total revenues reached $315.6 million, an increase from $288.8 million year-over-year, also surpassing the Zacks Consensus Estimate by 3.9% [1][8] - The growth was primarily driven by higher revenues in the Licensing segment and the Products and Services segment [1][8] Financial Performance - Licensing revenues were $289.9 million, reflecting an 8.5% year-over-year increase, reaching the upper end of the company's guidance due to earlier-than-expected activity [4][8] - Products and Services revenues increased by 18% year-over-year to $25.6 million [4] - Gross profit for the quarter was $271.5 million, compared to $253.2 million in the year-ago quarter, while total operating expenses rose to $223.9 million from $216.4 million [6] Cash Flow and Liquidity - For the fiscal year to date ending June 27, 2025, Dolby generated $349.4 million in net cash from operating activities [9] - As of June 27, 2025, the company had $698.6 million in cash and cash equivalents against total liabilities of $581.8 million [9] - During the quarter, Dolby repurchased approximately 526,000 shares for around $40 million and declared a cash dividend of 33 cents per share [10] Future Outlook - For the fourth quarter of fiscal 2025, Dolby estimates revenues between $288 million and $318 million, with GAAP EPS of 28-43 cents and non-GAAP EPS between 61 cents and 76 cents [11] - The company expects full fiscal 2025 revenues in the range of $1.33 billion to $1.36 billion, with licensing revenues projected between $1.23 billion and $1.26 billion [12][13] Market Engagement - Dolby continues to see robust engagement from creators, distributors, and device manufacturers, with Dolby Atmos and Dolby Vision expanding across various content types and devices [2] - Major sporting events have been broadcast in Dolby, and partnerships with companies like Audi and Motorola have enhanced Dolby's presence in the automotive and mobile sectors [14][15]

Core Insights - Dolby Laboratories reported revenue of $315.55 million for the quarter ended June 2025, marking a year-over-year increase of 9.3% and exceeding the Zacks Consensus Estimate of $303.67 million by 3.91% [1] - The company achieved an EPS of $0.78, up from $0.71 a year ago, resulting in an EPS surprise of 8.33% compared to the consensus estimate of $0.72 [1] Revenue Breakdown - Licensing revenue was $289.91 million, surpassing the estimated $281.01 million, reflecting an 8.6% year-over-year increase [4] - Products and services revenue reached $25.64 million, exceeding the average estimate of $22.66 million, with an 18% year-over-year change [4] - PC market licensing revenue was $33.59 million, compared to the estimated $28.41 million, showing a 21.7% increase year-over-year [4] - Other market licensing revenue was $60.66 million, slightly below the $65.55 million estimate, but still representing a 15.3% year-over-year increase [4] - Consumer Electronics (CE) market licensing revenue was $28.07 million, below the estimated $30.03 million, indicating a year-over-year decline of 1% [4] - Broadcast market licensing revenue was $111.29 million, exceeding the estimated $100.27 million, with a year-over-year increase of 16.6% [4] - Mobile market licensing revenue was $56.3 million, below the estimated $60.99 million, reflecting a year-over-year decline of 10.8% [4] Gross Margin Analysis - Gross margin for licensing was reported at $268.19 million, above the average estimate of $263.61 million [4] - Gross margin for products and services was $3.35 million, significantly higher than the average estimate of $1.11 million [4] Stock Performance - Over the past month, shares of Dolby Laboratories have returned -0.4%, while the Zacks S&P 500 composite has increased by 2.7% [3] - The stock currently holds a Zacks Rank 3 (Hold), suggesting it may perform in line with the broader market in the near term [3]

Core Viewpoint - Dolby Laboratories reported quarterly earnings of $0.78 per share, exceeding the Zacks Consensus Estimate of $0.72 per share, and showing an increase from $0.71 per share a year ago [1][2] Financial Performance - The earnings surprise for the quarter was +8.33%, and the company has surpassed consensus EPS estimates in all four of the last quarters [2] - Revenues for the quarter ended June 2025 were $315.55 million, surpassing the Zacks Consensus Estimate by 3.91%, compared to $288.82 million in the same quarter last year [3] Market Performance - Dolby Laboratories shares have declined approximately 3% since the beginning of the year, while the S&P 500 has gained 8.2% [4] - The current Zacks Rank for Dolby Laboratories is 3 (Hold), indicating expected performance in line with the market in the near future [7] Future Outlook - The consensus EPS estimate for the upcoming quarter is $0.77 on revenues of $308.32 million, and for the current fiscal year, it is $3.98 on revenues of $1.34 billion [8] - The Audio Video Production industry, to which Dolby belongs, is currently ranked in the bottom 30% of over 250 Zacks industries, which may impact stock performance [9]

Financial Data and Key Metrics Changes - Q3 revenue was $316 million, up 9% year over year, with licensing revenue at $290 million, also up 9% year over year [15] - Product and services revenue was $26 million, up 18% year over year [15] - Non-GAAP earnings per diluted share were $0.78, above the high end of guidance due to higher revenue and lower operating expenses [17] - Cash and investments at the end of the quarter totaled $777 million, with $68 million generated in operating cash flow [17] Business Line Data and Key Metrics Changes - Broadcast licensing revenue grew 17% year over year, while mobile licensing revenue declined 11% year over year, and PC licensing revenue grew 22% year over year [16] - Full year expectations indicate flat growth for broadcast, mid-teens growth for other end markets, and low teens decline for consumer electronics [16] Market Data and Key Metrics Changes - Strong momentum in the automotive sector with partnerships with major OEMs like Audi, Tata, and Mahindra [10][11] - Increased adoption of Dolby Vision in mobile devices, with Motorola and Xiaomi launching new products featuring Dolby technologies [10][11] Company Strategy and Development Direction - The company continues to focus on expanding Dolby Atmos and Dolby Vision across various content types and device categories [12] - There is a strong emphasis on engaging with content creators and distributors to enhance the ecosystem [12] Management Comments on Operating Environment and Future Outlook - The macro environment remains uncertain, but the company maintains its guidance for the full year, expecting revenues between $1.33 billion and $1.36 billion [14] - Management is optimistic about long-term growth prospects, citing strong engagement and a solid financial position [15] Other Important Information - The company repurchased $40 million worth of common stock and declared a $0.33 dividend, up 10% from the previous year [17] - The company expects Q4 revenue to be between $288 million and $318 million, with licensing revenue ranging from $263 million to $293 million [19] Q&A Session Summary Question: Impact of ATSC 3.0 transition on Dolby Atmos and Vision adoption - Management does not anticipate any impact from the transition, as Dolby's codecs are supported within the standards [22] Question: Shipment volume expectations in Q4 guidance - Management noted slight headwinds for the year, with softness in shipments particularly in set-top boxes and consumer electronics [24] Question: Trade agreement certainty and its impact on Dolby adoption - Management acknowledged some improvement in trade agreements but noted that uncertainty still exists, though engagement for Dolby technologies remains strong [28] Question: Opportunity for Dolby Vision in automotive outside of China - Management sees significant opportunities for expanding in-car entertainment experiences beyond China [32] Question: Achieving double-digit growth in the current environment - Management believes it is achievable, citing strong growth in Dolby Atmos and Vision categories [36]

PART I – FINANCIAL INFORMATION This section presents Dolby Laboratories, Inc.'s unaudited interim condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations [ITEM 1. UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS](index=4&type=section&id=ITEM%201.%20UNAUDITED%20INTERIM%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) This section presents Dolby Laboratories, Inc.'s unaudited interim condensed consolidated financial statements, including balance sheets, statements of operations, comprehensive income, stockholders' equity, and cash flows, along with detailed notes. The financial statements are prepared in accordance with U.S. GAAP and SEC regulations, providing a snapshot of the company's financial health and performance for the fiscal quarter and year-to-date periods ended June 27, 2025, compared to the prior year [Unaudited Interim Condensed Consolidated Balance Sheets](index=4&type=section&id=Unaudited%20Interim%20Condensed%20Consolidated%20Balance%20Sheets) This section provides a snapshot of the company's financial position, detailing assets, liabilities, and stockholders' equity at specific fiscal year-end and quarter-end dates Unaudited Interim Condensed Consolidated Balance Sheets (in thousands) | ASSETS (in thousands) | June 27, 2025 | September 27, 2024 | | :-------------------- | :------------ | :----------------- | | Cash and cash equivalents | $698,566 | $482,047 | | Total current assets | $1,338,119 | $1,194,417 | | Total assets | $3,196,001 | $3,109,928 | | LIABILITIES AND STOCKHOLDERS' EQUITY (in thousands) | June 27, 2025 | September 27, 2024 | | Total current liabilities | $388,785 | $417,836 | | Total liabilities | $581,750 | $623,035 | | Total stockholders' equity | $2,614,251 | $2,486,893 | - Total assets increased by **$86.1 million** from September 27, 2024, to June 27, 2025, primarily driven by an increase in cash and cash equivalents[10](index=10&type=chunk) - Total liabilities decreased by **$41.3 million**, while total stockholders' equity increased by **$127.4 million** over the same period[10](index=10&type=chunk) [Unaudited Interim Condensed Consolidated Statements of Operations](index=5&type=section&id=Unaudited%20Interim%20Condensed%20Consolidated%20Statements%20of%20Operations) This section presents the company's financial performance over specific fiscal periods, detailing revenue, gross profit, operating income, and net income, including diluted earnings per share Unaudited Interim Condensed Consolidated Statements of Operations (in thousands, except per share amounts) | (in thousands, except per share amounts) | Fiscal Quarter Ended June 27, 2025 | Fiscal Quarter Ended June 28, 2024 | Fiscal Year-To-Date Ended June 27, 2025 | Fiscal Year-To-Date Ended June 28, 2024 | | :--------------------------------------- | :--------------------------------- | :--------------------------------- | :-------------------------------------- | :-------------------------------------- | | Revenue: | | | | | | Licensing | $289,905 | $267,082 | $966,390 | $899,089 | | Products and services | $25,641 | $21,736 | $75,716 | $69,826 | | Total revenue | $315,546 | $288,818 | $1,042,106 | $968,915 | | Gross profit | $271,544 | $253,155 | $921,493 | $862,415 | | Operating income | $47,639 | $36,783 | $235,282 | $211,972 | | Net income attributable to Dolby Laboratories, Inc. | $46,071 | $38,444 | $205,686 | $203,255 | | Diluted EPS | $0.48 | $0.40 | $2.11 | $2.09 | | Cash dividend declared per common share | $0.33 | $0.30 | $0.99 | $0.90 | - Total revenue for the fiscal quarter ended June 27, 2025, increased by **9.2% to $315.5 million** from **$288.8 million** in the prior year quarter, primarily driven by an **8.5% increase in licensing revenue**[12](index=12&type=chunk) - Operating income for the quarter increased by **29.5% to $47.6 million**, and net income attributable to Dolby Laboratories, Inc. rose by **19.9% to $46.1 million**[12](index=12&type=chunk) - Diluted EPS for the quarter increased to **$0.48** from **$0.40**, and the cash dividend declared per common share increased to **$0.33** from **$0.30**[12](index=12&type=chunk) [Unaudited Interim Condensed Consolidated Statements of Comprehensive Income](index=6&type=section&id=Unaudited%20Interim%20Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) This section outlines the company's total comprehensive income, including net income and other comprehensive income components like foreign currency translation adjustments, for specific fiscal periods Unaudited Interim Condensed Consolidated Statements of Comprehensive Income (in thousands) | (in thousands) | Fiscal Quarter Ended June 27, 2025 | Fiscal Quarter Ended June 28, 2024 | Fiscal Year-To-Date Ended June 27, 2025 | Fiscal Year-To-Date Ended June 28, 2024 | | :------------- | :--------------------------------- | :--------------------------------- | :-------------------------------------- | :-------------------------------------- | | Net income including noncontrolling interest | $46,542 | $39,655 | $206,838 | $205,450 | | Total other comprehensive income/(loss), net of tax | $14,619 | $(1,058) | $5,747 | $6,937 | | Total comprehensive income attributable to Dolby Laboratories, Inc. | $60,525 | $37,340 | $211,349 | $210,067 | - Total comprehensive income attributable to Dolby Laboratories, Inc. significantly increased to **$60.5 million** for the fiscal quarter ended June 27, 2025, from **$37.3 million** in the prior year, primarily due to positive currency translation adjustments[14](index=14&type=chunk) - For the fiscal year-to-date period, comprehensive income attributable to Dolby Laboratories, Inc. increased slightly to **$211.3 million** from **$210.1 million**[14](index=14&type=chunk) [Unaudited Interim Condensed Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Unaudited%20Interim%20Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) This section details changes in the company's stockholders' equity over specific fiscal periods, reflecting net income, stock-based compensation, share repurchases, and dividends Unaudited Interim Condensed Consolidated Statements of Stockholders' Equity (in thousands) | (in thousands) | Balance as of March 28, 2025 | Net income | Other comprehensive income, net of tax | Stock-based compensation expense | Repurchase of common stock | Cash dividends declared and paid on common stock | Common stock issued under employee stock plans | Balance as of June 27, 2025 | | :------------- | :--------------------------- | :--------- | :------------------------------------- | :------------------------------- | :------------------------- | :----------------------------------------------- | :--------------------------------------------- | :-------------------------- | | Total Stockholders' Equity - Dolby Inc. | $2,573,669 | $46,071 | $14,454 | $30,728 | $(39,991) | $(31,633) | $12,557 | $2,604,733 | - Total stockholders' equity for Dolby Laboratories, Inc. increased from **$2,573.7 million** as of March 28, 2025, to **$2,604.7 million** as of June 27, 2025[17](index=17&type=chunk) - Key increases were driven by net income (**$46.1 million**) and other comprehensive income (**$14.5 million**), partially offset by common stock repurchases (**$40.0 million**) and cash dividends (**$31.6 million**)[17](index=17&type=chunk) [Unaudited Interim Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Unaudited%20Interim%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section presents the company's cash inflows and outflows from operating, investing, and financing activities for specific fiscal year-to-date periods Unaudited Interim Condensed Consolidated Statements of Cash Flows (in thousands) | (in thousands) | Fiscal Year-To-Date Ended June 27, 2025 | Fiscal Year-To-Date Ended June 28, 2024 | | :------------- | :-------------------------------------- | :-------------------------------------- | | Net cash provided by operating activities | $349,367 | $211,082 | | Net cash provided by/(used in) investing activities | $11,326 | $(24,984) | | Net cash used in financing activities | $(183,183) | $(227,696) | | Net increase/(decrease) in cash, cash equivalents, and restricted cash | $178,812 | $(39,342) | | Cash, cash equivalents, and restricted cash at end of period | $756,564 | $778,624 | - Net cash provided by operating activities increased significantly to **$349.4 million** for the fiscal year-to-date period ended June 27, 2025, up from **$211.1 million** in the prior year[21](index=21&type=chunk) - Investing activities shifted from a net cash outflow of **$25.0 million** in the prior year to a net inflow of **$11.3 million**, primarily due to lower purchases of marketable securities and higher proceeds from asset sales[21](index=21&type=chunk) - Net cash used in financing activities decreased to **$183.2 million** from **$227.7 million**, mainly due to lower common stock repurchases[21](index=21&type=chunk) [Notes to Unaudited Interim Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Unaudited%20Interim%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the unaudited interim condensed consolidated financial statements, covering accounting policies, revenue recognition, and other financial captions [1. Basis of Presentation](index=10&type=section&id=1.%20Basis%20of%20Presentation) This note describes the basis for preparing the interim financial statements, including compliance with U.S. GAAP and SEC rules, and the company's single reportable segment - The unaudited interim condensed consolidated financial statements are prepared in accordance with U.S. GAAP and SEC rules, allowing for condensed disclosures[22](index=22&type=chunk) - The company operates as a single reportable segment, with the CEO evaluating financial information and resources on a consolidated basis[25](index=25&type=chunk) - Significant estimates include sales-based royalties, ESPs for revenue arrangements, allowance for credit losses, and carrying values of assets[27](index=27&type=chunk)[28](index=28&type=chunk) [2. Summary of Significant Accounting Policies](index=11&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines the key accounting policies, including credit risk management and recently issued accounting standards under evaluation for their potential impact - The company manages credit risk by diversifying cash, cash equivalents, and investments with high-credit-standing financial institutions and through derivative contracts[30](index=30&type=chunk) - Recently issued accounting standards include ASU 2023-07 (Segment Reporting), ASU 2023-09 (Income Taxes), and ASU 2024-03/2025-01 (Income Statement Expense Disaggregation), all currently under evaluation for impact[32](index=32&type=chunk)[33](index=33&type=chunk)[34](index=34&type=chunk) [3. Revenue Recognition](index=11&type=section&id=3.%20Revenue%20Recognition) This note details the company's revenue recognition policies, primarily from licensing technologies and selling products and services, with a breakdown by revenue type and market segment - Revenue is primarily generated from licensing technologies, trademarks, and patents for sound and imaging solutions, and selling products and services[35](index=35&type=chunk) - Licensing revenue accounts for **92% of total revenue in Q3 2025** and **93% year-to-date**, with Broadcast and Mobile being the largest market segments[60](index=60&type=chunk) Revenue Composition (in thousands) | Revenue Type | Fiscal Quarter Ended June 27, 2025 | Fiscal Quarter Ended June 28, 2024 | Fiscal Year-To-Date Ended June 27, 2025 | Fiscal Year-To-Date Ended June 28, 2024 | | :------------- | :--------------------------------- | :--------------------------------- | :-------------------------------------- | :-------------------------------------- | | Licensing | $289,905 (92%) | $267,082 (92%) | $966,390 (93%) | $899,089 (93%) | | Products and services | $25,641 (8%) | $21,736 (8%) | $75,716 (7%) | $69,826 (7%) | | Total revenue | $315,546 (100%) | $288,818 (100%) | $1,042,106 (100%) | $968,915 (100%) | Licensing Revenue by Market (in thousands) | Market | Fiscal Quarter Ended June 27, 2025 | Fiscal Quarter Ended June 28, 2024 | Fiscal Year-To-Date Ended June 27, 2025 | Fiscal Year-To-Date Ended June 28, 2024 | | :------- | :--------------------------------- | :--------------------------------- | :-------------------------------------- | :-------------------------------------- | | Broadcast | $111,286 (38%) | $95,430 (36%) | $321,297 (33%) | $313,326 (35%) | | Mobile | $56,295 (19%) | $63,096 (24%) | $217,942 (23%) | $187,073 (21%) | | CE | $28,071 (10%) | $28,352 (11%) | $115,668 (12%) | $123,793 (14%) | | PC | $33,589 (12%) | $27,606 (10%) | $123,247 (13%) | $107,223 (12%) | | Other | $60,664 (21%) | $52,598 (19%) | $188,236 (19%) | $167,674 (18%) | | Total | $289,905 (100%) | $267,082 (100%) | $966,390 (100%) | $899,089 (100%) | - The majority of revenue (**72% in Q3 2025**) is generated from international locations, based on the location of licensees' headquarters, product shipment destinations, or service performance locations[60](index=60&type=chunk) [4. Composition of Certain Financial Statement Captions](index=16&type=section&id=4.%20Composition%20of%20Certain%20Financial%20Statement%20Captions) This note provides a detailed breakdown of specific balance sheet accounts, including accounts receivable, contract assets, inventories, and accrued liabilities Accounts Receivable and Contract Assets (in thousands) | Category | June 27, 2025 | September 27, 2024 | | :------- | :------------ | :----------------- | | Trade accounts receivable | $149,979 | $170,574 | | Accounts receivable from patent administration program licensees | $154,742 | $150,252 | | Contract assets | $204,486 | $197,584 | | Total accounts receivable and contract assets, net | $501,995 | $512,943 | Inventories (in thousands) | Category | June 27, 2025 | September 27, 2024 | | :------- | :------------ | :----------------- | | Raw materials | $6,500 | $3,079 | | Work in process | $4,145 | $4,791 | | Finished goods | $21,770 | $25,858 | | Total inventories | $32,415 | $33,728 | - Total accounts receivable and contract assets, net, decreased by **$10.9 million** from September 27, 2024, to June 27, 2025[65](index=65&type=chunk) - Inventories, net, decreased slightly from **$33.7 million** to **$32.4 million**, with a notable increase in raw materials but a decrease in finished goods[67](index=67&type=chunk) - Accrued liabilities decreased by **$30.1 million**, primarily due to lower amounts payable to patent administration program partners and accrued compensation and benefits[70](index=70&type=chunk) [5. Investments and Fair Value Measurements](index=18&type=section&id=5.%20Investments%20and%20Fair%20Value%20Measurements) This note details the company's cash, cash equivalents, and investments, including fair value measurements and the use of currency derivatives for hedging Cash, Cash Equivalents, and Investments (in thousands) | Category | June 27, 2025 | September 27, 2024 | | :------- | :------------ | :----------------- | | Cash and cash equivalents | $698,566 | $482,047 | | Short-term investments | $763 | — | | Long-term investments | $78,017 | $89,267 | | Total cash, cash equivalents, and investments | $777,346 | $571,314 | - Total cash, cash equivalents, and investments increased by **$206.0 million** from September 27, 2024, to June 27, 2025[73](index=73&type=chunk)[74](index=74&type=chunk) - The company holds an equity method investment in Access Advance LLC, valued at **$64.9 million** as of June 27, 2025[75](index=75&type=chunk) - Currency derivatives are used to hedge currency risk, classified as other current assets and accrued liabilities, with a total notional amount of **$218.5 million** as of June 27, 2025[72](index=72&type=chunk)[73](index=73&type=chunk)[306](index=306&type=chunk) [6. Property, Plant, and Equipment](index=20&type=section&id=6.%20Property,%20Plant,%20and%20Equipment) This note presents the gross and net values of property, plant, and equipment, along with accumulated depreciation Property, Plant, and Equipment, Net (in thousands) | Category | June 27, 2025 | September 27, 2024 | | :------- | :------------ | :----------------- | | Property, plant, and equipment, gross | $1,076,094 | $1,097,885 | | Less: accumulated depreciation | $(597,613) | $(618,776) | | Property, plant, and equipment, net | $478,481 | $479,109 | - Net property, plant, and equipment remained relatively stable, decreasing slightly from **$479.1 million** to **$478.5 million**[83](index=83&type=chunk) [7. Leases](index=21&type=section&id=7.%20Leases) This note outlines the company's lease arrangements, both as a lessee for operating leases and as a lessor for its Dolby Cinema product solution - As a lessee, total undiscounted operating lease payments are **$45.3 million** as of June 27, 2025, with total lease liabilities of **$39.1 million**[84](index=84&type=chunk) - As a lessor, Dolby leases its Dolby Cinema product solution, generating variable operating lease income of **$11.3 million in Q3 2025** (up from **$9.1 million in Q3 2024**) and fixed operating lease income of **$1.0 million** (up from **$0.9 million**)[86](index=86&type=chunk) [8. Goodwill and Intangible Assets](index=22&type=section&id=8.%20Goodwill%20and%20Intangible%20Assets) This note details the composition and changes in goodwill and intangible assets, including acquired patents, technology, and customer relationships Goodwill (in thousands) | Category | Amount | | :------- | :----- | | Balance as of September 27, 2024 | $533,208 | | Translation adjustments | $939 | | Measurement period adjustments | $(5,324) | | Balance as of June 27, 2025 | $528,823 | Intangible Assets, Net (in thousands) | Category | June 27, 2025 Net | September 27, 2024 Net | | :------- | :---------------- | :--------------------- | | Acquired patents and technology | $270,797 | $286,379 | | Customer relationships | $137,112 | $147,826 | | Other intangible assets | $241 | $309 | | Total | $408,150 | $434,514 | - Goodwill decreased slightly to **$528.8 million** as of June 27, 2025, primarily due to measurement period adjustments[88](index=88&type=chunk) - Total intangible assets, net, decreased to **$408.2 million** from **$434.5 million**, with amortization expense of **$34.0 million** for the fiscal year-to-date period ended June 27, 2025[89](index=89&type=chunk)[90](index=90&type=chunk) [9. Stockholders' Equity and Stock-Based Compensation](index=23&type=section&id=9.%20Stockholders'%20Equity%20and%20Stock-Based%20Compensation) This note provides information on the company's capital structure, stock-based compensation expense, share repurchase activities, and cash dividends - As of June 27, 2025, Dolby had **61.1 million Class A shares** and **34.7 million Class B shares** outstanding, with Class B holders having ten votes per share[92](index=92&type=chunk) Stock-Based Compensation Expense (in thousands) | Award Type | Fiscal Quarter Ended June 27, 2025 | Fiscal Quarter Ended June 28, 2024 | Fiscal Year-To-Date Ended June 27, 2025 | Fiscal Year-To-Date Ended June 28, 2024 | | :--------- | :--------------------------------- | :--------------------------------- | :-------------------------------------- | :-------------------------------------- | | Stock options | $1,690 | $1,540 | $5,108 | $5,170 | | Restricted stock units | $28,201 | $26,436 | $89,028 | $81,783 | | Employee stock purchase plan | $837 | $1,361 | $3,326 | $3,193 | | Total stock-based compensation | $30,728 | $29,337 | $97,462 | $90,146 | - Total stock-based compensation expense increased to **$30.7 million in Q3 2025** from **$29.3 million in Q3 2024**, and to **$97.5 million year-to-date** from **$90.1 million**, primarily driven by restricted stock units[110](index=110&type=chunk) - The company repurchased **526,033 shares** for **$39.991 million** in Q3 2025, with a remaining authorization of **$311.6 million**[116](index=116&type=chunk) - A quarterly cash dividend of **$0.33 per share** was declared and paid in Q3 2025, totaling **$31.6 million**[118](index=118&type=chunk) [10. Accumulated Other Comprehensive Loss](index=29&type=section&id=10.%20Accumulated%20Other%20Comprehensive%20Loss) This note details the changes in accumulated other comprehensive loss, primarily driven by foreign currency translation adjustments Changes in Accumulated Other Comprehensive Loss (in thousands) | Category | Fiscal Quarter Ended June 27, 2025 | Fiscal Quarter Ended June 28, 2024 | Fiscal Year-To-Date Ended June 27, 2025 | Fiscal Year-To-Date Ended June 28, 2024 | | :------- | :--------------------------------- | :--------------------------------- | :-------------------------------------- | :-------------------------------------- | | Beginning Balance | $(27,978) | $(29,068) | $(19,187) | $(36,984) | | Net current-period other comprehensive income/(loss) | $14,454 | $(1,104) | $5,663 | $6,812 | | Ending Balance | $(13,524) | $(30,172) | $(13,524) | $(30,172) | - Accumulated other comprehensive loss improved significantly, moving from **$(28.0) million** to **$(13.5) million** in Q3 2025, primarily due to **$12.8 million** in foreign currency translation gains[121](index=121&type=chunk)[122](index=122&type=chunk) [11. Earnings Per Share](index=30&type=section&id=11.%20Earnings%20Per%20Share) This note presents the calculation of basic and diluted earnings per share, along with the weighted-average shares outstanding EPS Attributable to Dolby Laboratories, Inc. | (in thousands, except per share amounts) | Fiscal Quarter Ended June 27, 2025 | Fiscal Quarter Ended June 28, 2024 | Fiscal Year-To-Date Ended June 27, 2025 | Fiscal Year-To-Date Ended June 28, 2024 | | :--------------------------------------- | :--------------------------------- | :--------------------------------- | :-------------------------------------- | :-------------------------------------- | | Net income attributable to Dolby Laboratories, Inc. | $46,071 | $38,444 | $205,686 | $203,255 | | Weighted-average shares outstanding—basic | 95,897 | 95,686 | 95,947 | 95,593 | | Weighted-average shares outstanding—diluted | 96,900 | 96,959 | 97,537 | 97,412 | | Basic EPS | $0.48 | $0.40 | $2.14 | $2.13 | | Diluted EPS | $0.48 | $0.40 | $2.11 | $2.09 | - Diluted EPS increased to **$0.48 in Q3 2025** from **$0.40 in Q3 2024**, and to **$2.11 year-to-date** from **$2.09**[128](index=128&type=chunk) - The calculation of diluted EPS excludes antidilutive awards, which included **1,516 thousand stock options** and **41 thousand restricted stock units** in Q3 2025[127](index=127&type=chunk)[128](index=128&type=chunk) [12. Income Taxes](index=31&type=section&id=12.%20Income%20Taxes) This note provides details on the provision for income taxes, effective tax rates, and unrecognized tax benefits, highlighting factors influencing tax expense Income Tax Provision and Effective Tax Rate | (in thousands) | Fiscal Quarter Ended June 27, 2025 | Fiscal Quarter Ended June 28, 2024 | Fiscal Year-To-Date Ended June 27, 2025 | Fiscal Year-To-Date Ended June 28, 2024 | | :------------- | :--------------------------------- | :--------------------------------- | :-------------------------------------- | :-------------------------------------- | | Provision for income taxes | $(8,974) | $(10,509) | $(54,979) | $(47,295) | | Effective tax rate | 16.2% | 20.9% | 21.0% | 18.7% | - The effective tax rate decreased to **16.2% in Q3 2025** from **20.9% in Q3 2024**, primarily due to higher tax benefits from U.S. federal R&D tax credits[133](index=133&type=chunk) - For the fiscal year-to-date, the effective tax rate increased to **21.0%** from **18.7%**, mainly due to a mix of earnings favoring higher tax jurisdictions and lower benefits from stock-based awards, partially offset by R&D tax credits[134](index=134&type=chunk) - The total gross unrecognized tax benefits increased to **$90.8 million** as of June 27, 2025, from **$81.6 million** as of September 27, 2024, mainly due to current year reserves for transfer pricing and interest accruals[131](index=131&type=chunk) [13. Restructuring](index=32&type=section&id=13.%20Restructuring) This note describes the company's restructuring actions, including associated charges and expected pre-tax operating income savings - In November 2024 (fiscal 2025), the company initiated restructuring actions to align R&D and S&M resources with strategic priorities, incurring **$9.2 million** in severance and related benefits year-to-date[137](index=137&type=chunk) - These fiscal 2025 restructuring activities are expected to result in estimated gross pre-tax operating income savings of approximately **$20 million** in fiscal 2025[137](index=137&type=chunk) - Restructuring accruals decreased to **$1.720 million** as of June 27, 2025, from **$2.765 million** as of September 27, 2024[141](index=141&type=chunk) [14. Legal Matters](index=34&type=section&id=14.%20Legal%20Matters) This note discusses the company's involvement in legal proceedings, including intellectual property claims, and management's assessment of their potential financial impact - The company is involved in various legal proceedings, including IP infringement claims, but does not expect resolutions to have a material adverse impact on operating results or financial condition[143](index=143&type=chunk)[144](index=144&type=chunk) [15. Commitments and Contingencies](index=34&type=section&id=15.%20Commitments%20and%20Contingencies) This note outlines the company's contractual obligations and commitments, including naming rights, purchase obligations, and indemnification clauses Contractual Obligations and Commitments (in thousands) | Category | Remainder of Fiscal 2025 | Fiscal 2026 | Fiscal 2027 | Fiscal 2028 | Fiscal 2029 | Thereafter | Total | | :------- | :----------------------- | :---------- | :---------- | :---------- | :---------- | :--------- | :---- | | Naming rights | — | $13,472 | $8,534 | $8,642 | $8,751 | $26,923 | $66,322 | | Purchase obligations | $7,670 | $32,841 | $31,087 | $19,585 | $19,208 | $19,208 | $129,599 | | Donation commitments | — | $183 | $153 | $153 | $153 | $586 | $1,228 | | Total | $7,670 | $46,496 | $39,774 | $28,380 | $28,112 | $46,717 | $197,149 | - Total contractual obligations and commitments amount to **$197.1 million** as of June 27, 2025, including naming rights, purchase obligations, and donation commitments[145](index=145&type=chunk) - The company provides indemnification to counterparties for licensed IP and to officers, directors, and employees, but the maximum potential exposure is not reasonably estimable[148](index=148&type=chunk)[149](index=149&type=chunk) [16. Business Combinations](index=35&type=section&id=16.%20Business%20Combinations) This note details recent business combinations, specifically the acquisition of GE Licensing, and its impact on the company's assets and goodwill - No business combinations were entered into during the third quarter or fiscal year-to-date period ended June 27, 2025[150](index=150&type=chunk) - In fiscal 2024, Dolby acquired GE Licensing for a total consideration of **$434.2 million**, net of cash acquired, to strengthen its IP portfolio, particularly in HEVC video[151](index=151&type=chunk) GE Licensing Acquisition Date Fair Values (in thousands) | Recognized Identifiable Assets Acquired and Liabilities Assumed | Purchase Price Allocation | | :------------------------------------------------------------ | :------------------------ | | Cash and cash equivalents | $2,232 | | Accounts receivable | $20,171 | | Assets held for sale, current | $24,494 | | Long-term investments | $76,000 | | Intangible assets | $274,197 | | Goodwill | $75,387 | | Purchase Consideration | $434,211 | - Goodwill of **$75.4 million** was recognized from the GE Licensing acquisition, representing expected benefits and synergies from integration[152](index=152&type=chunk)[154](index=154&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=37&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides management's perspective on Dolby Laboratories, Inc.'s financial condition and results of operations for the fiscal quarter and year-to-date periods ended June 27, 2025. It covers the company's business overview, strategic initiatives, revenue generation models, performance across various end markets, the impact of macroeconomic conditions, and a detailed analysis of financial results, including revenue, gross margin, operating expenses, and cash flows [OVERVIEW](index=37&type=section&id=OVERVIEW) This section provides a brief introduction to Dolby Laboratories, Inc., highlighting its core business of innovating audio and video technologies and its primary revenue generation models - Dolby Laboratories, Inc. was founded in 1965 and focuses on inventing and innovating technologies to advance audio and video capture, transmission, and playback, enhancing entertainment experiences[159](index=159&type=chunk) - The company derives the majority of its revenue from licensing audio and video technology to electronics manufacturers and offers premium audio and video technologies to cinema exhibitors[160](index=160&type=chunk) [STRATEGY](index=38&type=section&id=STRATEGY) This section outlines the company's strategic pillars, focusing on advancing technology, delivering superior creative experiences, building ecosystems, and expanding market reach - Advancing the Science of Sight and Sound: Collaborating with creators and innovating in emerging categories like user-generated content, sports, and podcasts - Delivering Superior Creative Experiences: Promoting solutions as creative tools for filmmakers, artists, and content creators - Building Ecosystems: Working with creators, distributors, and device makers to sustain demand and promote standardized technologies - Expanding the Reach: Applying expertise to new content, media, devices, and audiences [PRODUCTS AND REVENUE GENERATION](index=38&type=section&id=PRODUCTS%20AND%20REVENUE%20GENERATION) This section describes how Dolby generates revenue through licensing branded technologies and patents, as well as selling products and services, primarily for the cinema industry - Over **90% of revenue** comes from licensing branded technology and patents to approximately **1,000 electronic device manufacturers**[168](index=168&type=chunk) Revenue Composition (in thousands) | Revenue | Fiscal Quarter Ended June 27, 2025 | Fiscal Quarter Ended June 28, 2024 | Fiscal Year-To-Date Ended June 27, 2025 | Fiscal Year-To-Date Ended June 28, 2024 | | :------ | :--------------------------------- | :--------------------------------- | :-------------------------------------- | :-------------------------------------- | | Licensing | $289,905 (92%) | $267,082 (92%) | $966,390 (93%) | $899,089 (93%) | | Products and services | $25,641 (8%) | $21,736 (8%) | $75,716 (7%) | $69,826 (7%) | | Total revenue | $315,546 (100%) | $288,818 (100%) | $1,042,106 (100%) | $968,915 (100%) | [LICENSING](index=38&type=section&id=LICENSING) This section details the company's primary revenue source, encompassing branded technology licensing, patent licensing, recoveries from under-reported usage, and Dolby Cinema revenue - Licensing revenue is primarily generated from Branded Technologies (Dolby Atmos, Dolby Vision, and Audio Codecs like DD+, Dolby AC-4) and Patents (Audio and Imaging Patents, including AAC, AVC, HEVC)[167](index=167&type=chunk)[172](index=172&type=chunk)[175](index=175&type=chunk)[187](index=187&type=chunk) - Branded technology licensing involves a two-stage model: licensing to semiconductor manufacturers and then to OEMs, typically through per-unit royalty arrangements[176](index=176&type=chunk)[177](index=177&type=chunk) - Patent licensing revenue largely comes from participation in patent pools (e.g., Access Advance, Via LA) for standard essential patents, with a minority from bilateral agreements[189](index=189&type=chunk)[193](index=193&type=chunk)[196](index=196&type=chunk) - Recoveries, from unlicensed or under-reported usage in prior periods, are a recurring but unpredictable element of licensing revenue[197](index=197&type=chunk) - Dolby Cinema generates licensing revenue through a share of box office receipts from premium large format (PLF) cinemas that feature Dolby Vision, Dolby Atmos, and proprietary theater design[198](index=198&type=chunk) [Branded Technology Licensing](index=38&type=section&id=Branded%20Technology%20Licensing) This section describes Dolby's branded technologies like Dolby Atmos and Dolby Vision, their market adoption, and the value- and volume-based pricing model for royalties - Dolby branded technologies, including Dolby Atmos and Dolby Vision, offer immersive audio and video experiences, enjoying widespread adoption and often mandated as standards[169](index=169&type=chunk)[172](index=172&type=chunk) - The ecosystem for Dolby Atmos and Dolby Vision is growing, with increasing content availability in music, TV shows, movies, user-generated content, audio books, and live sports[174](index=174&type=chunk) - Pricing is based on value and volume, with advanced features like Dolby Atmos and Dolby Vision commanding higher royalties, and higher volumes generally leading to lower per-unit prices[179](index=179&type=chunk)[180](index=180&type=chunk)[181](index=181&type=chunk) [Patent Licensing](index=41&type=section&id=Patent%20Licensing) This section explains revenue generation from patents essential to standardized audio and video technologies, including participation in patent pools and bilateral agreements - Patent licensing revenue is primarily derived from Dolby-owned patents essential to standardized audio (AAC, HE-AAC) and video (AVC, HEVC) technologies, which are fundamental to media capture, storage, transmission, and playback[182](index=182&type=chunk)[187](index=187&type=chunk) - The company actively participates in the development of next-generation standardized audio and video technologies, including exploring the use of AI[185](index=185&type=chunk) - Dolby participates as a licensor in patent pools administered by entities like Access Advance, Sisvel, Via LA (majority stockholder), and Vectis, which offer simplified access to fundamental technology for licensees[193](index=193&type=chunk) [Recoveries](index=43&type=section&id=Recoveries) This section defines recoveries as licensing revenue from previously unlicensed or under-reported use of Dolby technologies, noting their recurring but unpredictable nature - Recoveries represent licensing revenue from unlicensed or under-reported distribution of products incorporating Dolby technologies in prior periods, arising from licensee audits or back-royalties from new license agreements[197](index=197&type=chunk) - These recoveries are a recurring element of the business but are subject to fluctuation and unpredictability[197](index=197&type=chunk) [Dolby Cinema](index=43&type=section&id=Dolby%20Cinema) This section describes the Dolby Cinema premium experience, generating revenue through a share of box office receipts from cinemas featuring Dolby Vision and Dolby Atmos - Dolby Cinema offers a branded premium cinema experience with Dolby Vision, Dolby Atmos, and proprietary theater design, generating revenue through a share of box office receipts[198](index=198&type=chunk) - The company typically provides the necessary technology to exhibitors at minimal or no upfront cost[198](index=198&type=chunk) [PRODUCTS AND SERVICES](index=43&type=section&id=PRODUCTS%20AND%20SERVICES) This section covers revenue from the sale of audio and imaging hardware/software for cinema, along with related services and the SaaS product Dolby OptiView - Products and services revenue is primarily derived from the sale of audio and imaging hardware and software solutions for the cinema industry, including digital cinema servers and audio processors[199](index=199&type=chunk)[200](index=200&type=chunk)[202](index=202&type=chunk) - Services include equipment training, maintenance, mixing room alignment, equalization, image calibration, and post-contract support (PCS)[201](index=201&type=chunk) - Dolby OptiView, a SaaS product, contributes to services revenue by powering immersive, interactive, and social experiences for live events via a consumption-based model[203](index=203&type=chunk)[205](index=205&type=chunk) [Cinema Imaging Products & Audio Products](index=43&type=section&id=Cinema%20Imaging%20Products%20%26%20Audio%20Products) This section details Dolby's hardware and software solutions for cinema, including digital cinema servers and audio processors, and the widespread adoption of Dolby Atmos screens - Dolby designs and manufactures audio and imaging hardware/software for cinema, including digital cinema servers (e.g., IMS3000) and audio processors (e.g., CP950)[199](index=199&type=chunk)[200](index=200&type=chunk)[237](index=237&type=chunk) - As of Q3 2025, over **8,400 Dolby Atmos screens** are installed or committed, and over **4,100 Dolby Atmos theatrical titles** have been announced or released[238](index=238&type=chunk) [Dolby OptiView](index=43&type=section&id=Dolby%20OptiView) This section introduces Dolby OptiView as a SaaS product for real-time digital experiences, utilizing a consumption-based revenue model for high-quality, ultra-low latency streaming - Dolby OptiView is a Software as a Service (SaaS) product licensed directly to enterprises, utilizing a consumption-based revenue model[205](index=205&type=chunk) - It aims to bring Dolby's audio and video technologies to real-time digital experiences, enabling high-quality, ultra-low latency streaming for increased audience engagement in live events, especially sports[203](index=203&type=chunk)[241](index=241&type=chunk) [END MARKETS](index=44&type=section&id=END%20MARKETS) This section analyzes the composition of licensing revenue across various end markets, including Broadcast, Mobile, CE, PC, and Other, highlighting shifts in market share Licensing End Market Composition | Market | June 27, 2025 | June 28, 2024 | Main Components of Each Category | | :-------- | :------------ | :------------ | :------------------------------- | | Broadcast | 38% | 36% | Televisions and STBs | | Mobile | 19% | 24% | Smartphones and Tablets | | CE | 10% | 11% | DMAs, Blu-ray Disc devices, AVRs, Soundbars, and DVDs | | PC | 12% | 10% | Windows and macOS operating systems and devices | | Other | 21% | 19% | Dolby Cinema, Gaming consoles, Automotive, and Patent pool administrative fees | | Total | 100% | 100% | | - Broadcast and Mobile remain the largest licensing end markets, with Broadcast revenue increasing to **38% in Q3 2025** from **36% in Q3 2024**, while Mobile decreased to **19%** from **24%**[206](index=206&type=chunk) - Growth in 'Other' markets (including automotive, gaming consoles, and Dolby Cinema) increased to **21% in Q3 2025** from **19% in Q3 2024**[206](index=206&type=chunk) [MACROECONOMIC CONDITIONS](index=45&type=section&id=MACROECONOMIC%20CONDITIONS) This section discusses how macroeconomic factors like inflation, interest rates, foreign exchange, and geopolitical conflicts can negatively impact revenue, technology adoption, and pricing - Revenue can be negatively impacted by macroeconomic conditions such as inflation, heightened interest rates, foreign exchange rates, rising costs, tariffs, international conflicts, and reduced consumer spending[207](index=207&type=chunk) - Uncertainty or adverse economic climate may delay or decrease technology adoption, lead manufacturers to discontinue Dolby technologies, or seek price reductions[208](index=208&type=chunk) - Challenges in licensing include global supply constraints, device lifecycles, difficulties enforcing IP rights in certain countries, and geopolitical factors[209](index=209&type=chunk) [CRITICAL ACCOUNTING POLICIES AND ESTIMATES](index=50&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES%20AND%20ESTIMATES) This section confirms that there have been no material changes to the company's critical accounting policies and estimates since the prior fiscal year - There have been no material changes to the critical accounting policies from those included in the fiscal 2024 Annual Report on Form 10-K[244](index=244&type=chunk) [RESULTS OF OPERATIONS](index=50&type=section&id=RESULTS%20OF%20OPERATIONS) This section provides a detailed analysis of the company's financial performance, examining revenue, gross margin, operating expenses, other income, and income taxes for the reported periods [Revenue and Gross Margin](index=50&type=section&id=Revenue%20and%20Gross%20Margin) This section analyzes the company's revenue and gross margin performance, broken down by licensing and products and services segments, highlighting key drivers of change Licensing Revenue and Gross Margin (in thousands) | Licensing | Fiscal Quarter Ended June 27, 2025 | Fiscal Quarter Ended June 28, 2024 | Change ($) | Change (%) | Fiscal Year-To-Date Ended June 27, 2025 | Fiscal Year-To-Date Ended June 28, 2024 | Change ($) | Change (%) | | :-------- | :--------------------------------- | :--------------------------------- | :--------- | :--------- | :-------------------------------------- | :-------------------------------------- | :--------- | :--------- | | Revenue | $289,905 | $267,082 | $22,823 | 9% | $966,390 | $899,089 | $67,301 | 7% | | Cost of licensing | $21,713 | $17,386 | $4,327 | 25% | $62,508 | $48,440 | $14,068 | 29% | | Gross margin | $268,192 | $249,696 | $18,496 | 7% | $903,882 | $850,649 | $53,233 | 6% | | Gross margin percentage | 93% | 93% | | | 94% | 95% | | | Products and Services Revenue and Gross Margin (in thousands) | Products and Services | Fiscal Quarter Ended June 27, 2025 | Fiscal Quarter Ended June 28, 2024 | Change ($) | Change (%) | Fiscal Year-To-Date Ended June 27, 2025 | Fiscal Year-To-Date Ended June 28, 2024 | Change ($) | Change (%) | | :-------------------- | :--------------------------------- | :--------------------------------- | :--------- | :--------- | :-------------------------------------- | :-------------------------------------- | :--------- | :--------- | | Revenue | $25,641 | $21,736 | $3,905 | 18% | $75,716 | $69,826 | $5,890 | 8% |\ | Cost of products and services | $22,289 | $18,277 | $4,012 | 22% | $58,105 | $58,060 | $45 | —% | | Gross margin | $3,352 | $3,459 | $(107) | (3)% | $17,611 | $11,766 | $5,845 | 50% | | Gross margin percentage | 13% | 16% | | | 23% | 17% | | | [Licensing](index=50&type=section&id=Licensing) This section details the changes in licensing revenue and gross margin, attributing fluctuations to recoveries, minimum volume commitments, and market segment performance - Q3 2025 licensing revenue increased by **$22.8 million (9%) YoY**, driven by higher recoveries and timing of minimum volume commitments in PC and Broadcast, and higher automotive and Dolby Cinema revenue in 'Other' markets[248](index=248&type=chunk)[249](index=249&type=chunk) - Mobile licensing revenue decreased in Q3 2025 due to timing of minimum volume commitments in imaging patent programs[249](index=249&type=chunk) - Year-to-date licensing revenue increased by **$67.3 million (7%) YoY**, with Mobile and PC showing higher revenue from imaging patent programs and minimum volume commitments[248](index=248&type=chunk)[250](index=250&type=chunk) [Products and Services](index=51&type=section&id=Products%20and%20Services) This section analyzes the revenue and gross margin trends for products and services, noting the impact of Dolby OptiView and Dolby Cinema-related purchases - Q3 2025 products and services revenue increased by **$3.9 million (18%) YoY**, primarily due to higher services revenue driven by Dolby OptiView[253](index=253&type=chunk)[254](index=254&type=chunk) - Q3 2025 gross margin for products and services decreased by **3% YoY**, driven by higher Dolby Cinema-related purchases, partially offset by higher services revenue[253](index=253&type=chunk)[254](index=254&type=chunk) - Year-to-date gross margin for products and services increased by **50% YoY**, mainly due to higher services revenue from Dolby OptiView and lower inventory reserve provision[253](index=253&type=chunk)[255](index=255&type=chunk) [Operating Expenses](index=52&type=section&id=Operating%20Expenses) This section provides an analysis of changes in research and development, sales and marketing, general and administrative, and restructuring charges Operating Expenses (in thousands) | Operating Expenses | Fiscal Quarter Ended June 27, 2025 | Fiscal Quarter Ended June 28, 2024 | Change ($) | Change (%) | Fiscal Year-To-Date Ended June 27, 2025 | Fiscal Year-To-Date Ended June 28, 2024 | Change ($) | Change (%) | | :----------------- | :--------------------------------- | :--------------------------------- | :--------- | :--------- | :-------------------------------------- | :-------------------------------------- | :--------- | :--------- | | Research and development | $65,982 | $65,501 | $481 | 1% | $194,327 | $195,027 | $(700) | —% | | Sales and marketing | $86,163 | $77,518 | $8,645 | 11% | $270,191 | $246,559 | $23,632 | 10% | | General and administrative | $72,307 | $69,275 | $3,032 | 4% | $212,814 | $201,183 | $11,631 | 6% | | Restructuring charges | $(547) | $4,078 | $(4,625) | (113)% | $8,879 | $7,674 | $1,205 | 16% | [Research and Development](index=52&type=section&id=Research%20and%20Development) This section reviews the trends in research and development expenses, noting their relative stability across the reported fiscal periods - R&D expenses remained relatively stable, with a slight increase of **1% in Q3 2025 YoY** and a marginal decrease year-to-date[257](index=257&type=chunk)[258](index=258&type=chunk)[259](index=259&type=chunk) [Sales and Marketing](index=52&type=section&id=Sales%20and%20Marketing) This section analyzes the increase in sales and marketing expenses, primarily driven by higher legal costs, payroll, and tradeshow expenditures - S&M expenses increased by **$8.6 million (11%) in Q3 2025 YoY**, primarily due to higher legal costs for litigation-related activities and increased payroll salaries and tradeshow spend[261](index=261&type=chunk)[262](index=262&type=chunk) - Year-to-date S&M expenses increased by **$23.6 million (10%) YoY**, driven by higher legal, professional, and contractor costs (including acquired business costs), increased compensation, and higher stock-based compensation[261](index=261&type=chunk)[263](index=263&type=chunk)[264](index=264&type=chunk) [General and Administrative](index=53&type=section&id=General%20and%20Administrative) This section details the increase in general and administrative expenses, mainly due to higher credit loss expense and incentive compensation - G&A expenses increased by **$3.0 million (4%) in Q3 2025 YoY**, mainly due to higher credit loss expense from aged receivables, partially offset by lower marketing program costs[266](index=266&type=chunk)[267](index=267&type=chunk) - Year-to-date G&A expenses increased by **$11.6 million (6%) YoY**, driven by higher credit loss expense, incentive compensation, salaries, and stock-based compensation[266](index=266&type=chunk)[268](index=268&type=chunk) [Restructuring Charges](index=53&type=section&id=Restructuring%20Charges) This section discusses the restructuring charges and credits, reflecting actions taken to align resources with strategic priorities and expected operating income savings - Restructuring charges showed a credit of **$(0.5) million** in Q3 2025, a significant change from a **$4.1 million charge in Q3 2024**[270](index=270&type=chunk) - Year-to-date restructuring charges increased to **$8.9 million** from **$7.7 million**, reflecting fiscal 2025 actions to align R&D and S&M resources, expected to yield **$20 million** in pre-tax operating income savings in fiscal 2025[270](index=270&type=chunk) [Other Income/Expense](index=54&type=section&id=Other%20Income%2FExpense) This section analyzes the decrease in total other income, primarily attributed to lower interest income from invested cash and short-term investments Other Income (in thousands) | Other income | Fiscal Quarter Ended June 27, 2025 | Fiscal Quarter Ended June 28, 2024 | Change ($) | Change (%) | Fiscal Year-To-Date Ended June 27, 2025 | Fiscal Year-To-Date Ended June 28, 2024 | Change ($) | Change (%) | | :----------- | :--------------------------------- | :--------------------------------- | :--------- | :--------- | :-------------------------------------- | :-------------------------------------- | :--------- | :--------- | | Total other income | $7,877 | $13,381 | $(5,504) | (41)% | $26,535 | $40,773 | $(14,238) | (35)% | - Total other income decreased by **$5.5 million (41%) in Q3 2025 YoY** and by **$14.2 million (35%) year-to-date**, primarily due to lower interest income from flat yields on lower invested cash and short-term investments[276](index=276&type=chunk)[277](index=277&type=chunk)[278](index=278&type=chunk) [Income Taxes](index=54&type=section&id=Income%20Taxes) This section examines the provision for income taxes and effective tax rates, highlighting the impact of R&D tax credits and foreign operations Income Tax Provision and Effective Tax Rate | Income Taxes | Fiscal Quarter Ended June 27, 2025 | Fiscal Quarter Ended June 28, 2024 | Fiscal Year-To-Date Ended June 27, 2025 | Fiscal Year-To-Date Ended June 28, 2024 | | :----------- | :--------------------------------- | :--------------------------------- | :-------------------------------------- | :-------------------------------------- | | Provision for income taxes | $(8,974) | $(10,509) | $(54,979) | $(47,295) | | Effective tax rate | 16.2% | 20.9% | 21.0% | 18.7% | - The effective tax rate decreased to **16.2% in Q3 2025** from **20.9% in Q3 2024**, mainly due to higher benefits from U.S. federal R&D tax credits, partially offset by lower benefits from foreign operations[282](index=282&type=chunk) - Year-to-date, the effective tax rate increased to **21.0%** from **18.7%**, primarily due to lower benefits from foreign operations and stock-based compensation, partially offset by higher R&D tax credits[283](index=283&type=chunk) [LIQUIDITY, CAPITAL RESOURCES, AND FINANCIAL CONDITION](index=56&type=section&id=LIQUIDITY,%20CAPITAL%20RESOURCES,%20AND%20FINANCIAL%20CONDITION) This section assesses the company's liquidity, capital resources, and financial condition, including cash flows, capital expenditures, shareholder returns, and contractual obligations - Principal sources of liquidity are cash, cash equivalents, investments, and cash flows from operations, supplemented by a revolving credit facility[284](index=284&type=chunk) Selected Financial Information (in thousands) | Category | June 27, 2025 | September 27, 2024 | | :------- | :------------ | :----------------- | | Cash and cash equivalents | $698,566 | $482,047 | | Short-term investments | $763 | — | | Long-term investments | $78,017 | $89,267 | | Accounts receivable, net | $297,614 | $315,465 | | Accounts payable and accrued liabilities | $334,656 | $364,909 | | Working capital | $949,334 | $776,581 | - Working capital increased to **$949.3 million** as of June 27, 2025, from **$776.6 million** as of September 27, 2024[285](index=285&type=chunk) [Capital Expenditures and Uses of Capital](index=56&type=section&id=Capital%20Expenditures%20and%20Uses%20of%20Capital) This section discusses the company's capital expenditures and how cash and cash equivalents are managed through operations and strategic investments - Capital expenditures include purchases of land, buildings, equipment, and investments in S&M and R&D[286](index=286&type=chunk) - Cash and cash equivalents increased in fiscal 2025 through normal operations, recovering from a decline in fiscal 2024 due to the GE Licensing acquisition[287](index=287&type=chunk) [Shareholder Return](index=56&type=section&id=Shareholder%20Return) This section highlights the company's commitment to returning cash to stockholders through its stock repurchase and quarterly dividend programs - The company has returned cash to stockholders through a stock repurchase program (approximately **$3.0 billion** completed since fiscal 2010) and a quarterly dividend program (**$0.33 per share** paid in Q3 2025)[289](index=289&type=chunk)[290](index=290&type=chunk) [Cash Flows Analysis](index=57&type=section&id=Cash%20Flows%20Analysis) This section provides a detailed analysis of net cash flows from operating, investing, and financing activities, explaining the key drivers of changes - Net cash provided by operating activities increased by **$138.3 million** year-to-date, driven by higher inflows from lower prepaid expenses, other current assets, and accounts receivable, offset by lower income taxes[292](index=292&type=chunk) - Net cash from investing activities was **$36.3 million higher** year-to-date, primarily due to lower outflows from marketable securities purchases and higher inflows from asset sales[293](index=293&type=chunk) - Net cash used in financing activities was **$44.5 million lower** year-to-date, mainly due to lower common stock repurchases, partially offset by higher dividend payments[294](index=294&type=chunk) [Contractual Obligations and Commitments](index=57&type=section&id=Contractual%20Obligations%20and%20Commitments) This section confirms no material changes in off-balance sheet financing or contractual obligations since the prior fiscal year-end - No material changes in off-balance sheet financing arrangements or contractual obligations outside the ordinary course of business since September 27, 2024[295](index=295&type=chunk) [Indemnification Clauses](index=58&type=section&id=Indemnification%20Clauses) This section notes the company's indemnification provisions for licensed intellectual property and for officers and directors, with unestimable maximum potential exposure - The company provides indemnification for licensed IP and to officers/directors, but the maximum potential exposure is not reasonably estimable[297](index=297&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=59&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) This section outlines Dolby Laboratories, Inc.'s exposure to market risks, specifically focusing on interest rate sensitivity and foreign currency exchange risk. It details the company's investment policies aimed at capital preservation and liquidity, and its strategies for hedging against currency volatility in international operations [Interest Rate Sensitivity](index=59&type=section&id=Interest%20Rate%20Sensitivity) This section discusses the company's exposure to interest rate fluctuations on its cash, cash equivalents, and investment portfolio, emphasizing its capital preservation policy - As of June 27, 2025, the company held **$698.6 million** in cash and cash equivalents and **$78.8 million** in short-term and long-term investments[299](index=299&type=chunk) - Investment policy prioritizes capital preservation and liquidity, investing in highly-rated securities (minimum A-) with limited credit exposure to any single issuer (except U.S. government)[299](index=299&type=chunk) - The fixed-income portfolio is subject to interest rate fluctuations, which could affect financial position and results of operations[299](index=299&type=chunk) [Foreign Currency Exchange Risk](index=59&type=section&id=Foreign%20Currency%20Exchange%20Risk) This section outlines the company's exposure to foreign currency exchange rate movements due to international operations and its use of forward currency contracts for hedging - The company operates