Dolby Laboratories, Inc. (NYSE:DLB) Q2 2024 Earnings Conference Call May 2, 2024 5:00 PM ET Company Participants Peter Goldmacher - Vice President, Investor Relations Kevin Yeaman - Chief Executive Officer Robert Park - Chief Financial Officer Conference Call Participants Steven Frankel - Rosenblatt Ralph Schackart - William Blair Jim Goss - Barrington Research Operator Ladies and gentlemen, thank you for standing by and welcome to the Dolby Laboratories Conference Call discussing Fiscal Second Quarter Resu ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended March 29, 2024 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period From To Commission File Number: 001-32431 DOLBY LABORATORIES, INC. (Exact name of registrant as specified in its charter) Delaware 90-0199783 (State or othe ...

[Q2 2024 Performance Overview](index=1&type=section&id=Q2_2024_Performance_Overview) This section provides an overview of Dolby Laboratories' financial and business performance for the second quarter of fiscal 2024 [Executive Summary & CEO Commentary](index=1&type=section&id=Executive_Summary_CEO_Commentary) Dolby Laboratories' Q2 FY2024 financial results met expectations, with CEO Kevin Yeaman highlighting the expanding content ecosystem for Dolby Atmos and Dolby Vision - Second quarter fiscal 2024 results were in line with expectations[2](index=2&type=chunk) - Dolby Atmos and Dolby Vision content is expanding across movies, TV, sports, and music, driving more consumer device adoption worldwide[2](index=2&type=chunk) [Second Quarter Fiscal 2024 Financial Highlights](index=1&type=section&id=Second%20Quarter%20Fiscal%202024%20Financial%20Highlights) Dolby reported Q2 FY2024 total revenue of $364.5 million, with GAAP net income increasing to $97.8 million and non-GAAP net income to $123.2 million Q2 FY2024 Financial Performance (GAAP & Non-GAAP) | Metric | Q2 FY2024 | Q2 FY2023 | | :----------------------- | :-------- | :-------- | | Total Revenue | $364.5M | $375.9M | | GAAP Net Income | $97.8M | $95.7M | | GAAP Diluted EPS | $1.01 | $0.98 | | Non-GAAP Net Income | $123.2M | $122.6M | | Non-GAAP Diluted EPS | $1.27 | $1.26 | - Dolby repurchased **294 thousand shares** of its common stock, with approximately **$107 million** of stock repurchase authorization remaining[6](index=6&type=chunk) [Recent Business Highlights](index=1&type=section&id=Recent%20Business%20Highlights) Dolby Vision and Dolby Atmos expanded their presence across live sports, cricket broadcasts, and new mobile and electric vehicle integrations - Max announced the launch of Dolby Vision for live sports, in addition to Dolby Atmos[6](index=6&type=chunk) - The Indian Premier League broadcasted cricket in Dolby Atmos and Dolby Vision for the first time[6](index=6&type=chunk) - Several mobile device makers (Transsion, Xiaomi, Oppo, Honor, Lava Mobiles) launched new smartphones supporting Dolby Atmos and/or Dolby Vision. Xiaomi's first electric vehicle (SU7) and Hyundai's Genesis model will also support Dolby Atmos[6](index=6&type=chunk) [Dividend Announcement](index=1&type=section&id=Dividend) Dolby declared a cash dividend of $0.30 per share for Class A and Class B common stock, payable on May 22, 2024 - Cash dividend of **$0.30 per share** of Class A and Class B common stock declared[4](index=4&type=chunk) - Payable on May 22, 2024, to stockholders of record as of May 14, 2024[4](index=4&type=chunk) [Financial Outlook](index=1&type=section&id=Financial_Outlook) This section provides Dolby's financial estimates for the third quarter and full fiscal year 2024, including revenue, margins, and EPS projections [Third Quarter Fiscal 2024 Estimates](index=2&type=section&id=Third_Quarter_Fiscal_2024_Estimates) Dolby projects Q3 FY2024 total revenue between $270 million and $300 million, with gross margins around 87% and diluted EPS of $0.21 to $0.36 (GAAP) Q3 FY2024 Financial Estimates | Metric | Range (Low) | Range (High) | | :-------------------------------- | :------------ | :------------- | | Total Revenue | $270M | $300M | | Licensing Revenue | $245M | $275M | | Gross Margins | ~87% | ~87% | | GAAP Operating Expenses | $215M | $225M | | Non-GAAP Operating Expenses | $180M | $190M | | GAAP Effective Tax Rate | ~24% | ~24% | | Non-GAAP Effective Tax Rate | ~21% | ~21% | | GAAP Diluted EPS | $0.21 | $0.36 | | Non-GAAP Diluted EPS | $0.51 | $0.66 | [Full Year Fiscal 2024 Estimates](index=2&type=section&id=Full_Year_Fiscal_2024_Estimates) For full year FY2024, Dolby anticipates total revenue of approximately $1.30 billion, gross margins of 89%, and GAAP diluted EPS of $2.30 to $2.45 Full Year FY2024 Financial Estimates | Metric | Estimate (Low) | Estimate (High) | | :-------------------------------- | :------------- | :-------------- | | Total Revenue | ~$1.30B | ~$1.30B | | Gross Margins | ~89% | ~89% | | GAAP Operating Expenses | $885M | $895M | | Non-GAAP Operating Expenses | $740M | $750M | | GAAP Operating Margins | ~20% | ~20% | | Non-GAAP Operating Margins | ~32% | ~32% | | GAAP Diluted EPS | $2.30 | $2.45 | | Non-GAAP Diluted EPS | $3.60 | $3.75 | [Non-GAAP Financial Measures](index=2&type=section&id=Non-GAAP_Financial_Measures) This section explains the rationale for using non-GAAP financial measures and provides detailed reconciliations to GAAP for historical and outlook periods [Rationale for Non-GAAP Adjustments](index=2&type=section&id=Non-GAAP%20Financial%20Information) Non-GAAP measures offer a clearer view of ongoing operations by excluding items like stock-based compensation and acquisition-related amortization, which are not indicative of core performance - Non-GAAP financial measures are used to evaluate ongoing business operations, performance, and to enable comparability between periods and among peer companies[9](index=9&type=chunk)[14](index=14&type=chunk) - Adjustments include stock-based compensation (due to subjective valuation), amortization of acquisition-related intangibles (arising from pre-acquisition activities), restructuring charges (not representative of normal operations), and income tax adjustments (not directly correlated to operating performance)[9](index=9&type=chunk)[10](index=10&type=chunk)[12](index=12&type=chunk)[13](index=13&type=chunk) [GAAP to Non-GAAP Reconciliations (Historical)](index=8&type=section&id=GAAP_to_Non-GAAP_Reconciliations_Historical) Detailed reconciliations show Q2 FY2024 non-GAAP net income of $123.19 million and diluted EPS of $1.27, adjusted for stock-based compensation and other items Q2 FY2024 GAAP to Non-GAAP Net Income Reconciliation (in thousands) | Adjustment | Q2 FY2024 | Q2 FY2023 | | :--------------------------------------- | :-------- | :-------- | | GAAP Net Income | $97,830 | $95,696 | | Stock-based compensation | 28,915 | 29,827 | | Amortization of acquisition-related intangibles | 3,031 | 2,372 | | Restructuring charges/(credits) | (2,495) | 33 | | Income tax adjustments | (4,091) | (5,367) | | **Non-GAAP Net Income** | **$123,190** | **$122,561** | Q2 FY2024 GAAP to Non-GAAP Diluted EPS Reconciliation | Adjustment | Q2 FY2024 | Q2 FY2023 | | :--------------------------------------- | :-------- | :-------- | | GAAP Diluted EPS | $1.01 | $0.98 | | Stock-based compensation | 0.30 | 0.31 | | Amortization of acquisition-related intangibles | 0.03 | 0.02 | | Restructuring charges | (0.03) | — | | Income tax adjustments | (0.04) | (0.05) | | **Non-GAAP Diluted EPS** | **$1.27** | **$1.26** | [GAAP to Non-GAAP Reconciliations (Outlook)](index=8&type=section&id=GAAP_to_Non-GAAP_Reconciliations_Outlook) Outlook reconciliations project Q3 FY2024 non-GAAP operating expenses at $180-$190 million and full year non-GAAP operating margin at 32% Q3 FY2024 GAAP to Non-GAAP Operating Expenses Reconciliation (in millions) | Adjustment | Q3 2024 (Low-High) | | :--------------------------------------- | :----------------- | | GAAP operating expenses | $215 - $225 | | Stock-based compensation | (32) | | Amortization of acquisition-related intangibles | (3) | | Restructuring charges | — | | **Non-GAAP operating expenses** | **$180 - $190** | Fiscal 2024 GAAP to Non-GAAP Operating Margin Reconciliation | Adjustment | Fiscal 2024 | | :--------------------------------------- | :---------- | | GAAP operating margin | 20% +/- | | Stock-based compensation | 10% | | Amortization of acquisition-related intangibles | 1% | | Restructuring charges | 1% | | **Non-GAAP operating margin** | **32% +/-** | Q3 FY2024 GAAP to Non-GAAP Diluted EPS Reconciliation | Adjustment | Q3 2024 (Low) | Q3 2024 (High) | | :--------------------------------------- | :------------ | :------------- | | GAAP diluted earnings per share | $0.21 | $0.36 | | Stock-based compensation | 0.33 | 0.33 | | Amortization of acquisition-related intangibles | 0.03 | 0.03 | | Restructuring charges | — | — | | Income tax adjustments | (0.06) | (0.06) | | **Non-GAAP diluted earnings per share** | **$0.51** | **$0.66** | [Interim Condensed Consolidated Financial Statements (GAAP)](index=5&type=section&id=Interim_Condensed_Consolidated_Financial_Statements_GAAP) This section presents Dolby's GAAP interim condensed consolidated financial statements, including statements of operations, balance sheets, and cash flows [Statements of Operations](index=5&type=section&id=INTERIM%20CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS) Q2 FY2024 total revenue decreased to $364.5 million, while net income attributable to Dolby Laboratories, Inc. increased to $97.8 million ($1.01 diluted EPS) Q2 FY2024 Interim Condensed Consolidated Statements of Operations (in thousands) | Metric | Q2 FY2024 | Q2 FY2023 | YTD FY2024 | YTD FY2023 | | :--------------------------------------- | :-------- | :-------- | :--------- | :--------- | | Total Revenue | $364,523 | $375,891 | $680,097 | $710,812 | | Licensing Revenue | $338,240 | $351,608 | $632,007 | $659,619 | | Products and services Revenue | $26,283 | $24,283 | $48,090 | $51,193 | | Gross Profit | $325,746 | $334,842 | $609,260 | $635,313 | | Operating Income | $108,968 | $109,224 | $175,189 | $203,312 | | Net Income Attributable to Dolby Labs, Inc. | $97,830 | $95,696 | $164,811 | $175,071 | | Diluted EPS | $1.01 | $0.98 | $1.69 | $1.80 | [Balance Sheets](index=6&type=section&id=INTERIM%20CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) As of March 29, 2024, total assets increased to $3,044.7 million, with total stockholders' equity rising to $2,437.7 million Interim Condensed Consolidated Balance Sheets (in thousands) | Metric | March 29, 2024 | September 29, 2023 | | :--------------------------------------- | :------------- | :----------------- | | Total Assets | $3,044,728 | $2,979,766 | | Cash and cash equivalents | $709,535 | $745,364 | | Restricted cash | $114,821 | $72,602 | | Accounts receivable, net | $282,131 | $262,245 | | Total Liabilities | $607,041 | $607,582 | | Total Stockholders' Equity | $2,437,687 | $2,372,184 | [Statements of Cash Flows](index=7&type=section&id=INTERIM%20CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) Year-to-date net cash from operating activities increased to $189.8 million, while investing and financing activities resulted in net outflows Interim Condensed Consolidated Statements of Cash Flows (in thousands, YTD) | Metric | YTD March 29, 2024 | YTD March 31, 2023 | | :--------------------------------------- | :----------------- | :----------------- | | Net cash provided by operating activities | $189,818 | $160,937 | | Net cash provided by (used in) investing activities | $(17,240) | $51,886 | | Net cash used in financing activities | $(169,301) | $(157,189) | | Net increase/(decrease) in cash, cash equivalents, and restricted cash | $6,390 | $65,049 | | Cash, cash equivalents, and restricted cash at end of period | $824,356 | $693,420 | [Additional Information](index=2&type=section&id=Additional_Information) This section provides background on Dolby Laboratories, outlines forward-looking statement disclaimers, and includes conference call and contact details [About Dolby Laboratories](index=4&type=section&id=About%20Dolby%20Laboratories) Dolby Laboratories, a global leader in audio and visual experiences, partners with creators to innovate entertainment and communications through technologies like Dolby Atmos and Dolby Vision - Dolby Laboratories (NYSE: DLB) is based in San Francisco, California, with offices globally[16](index=16&type=chunk) - Transforms the science of sight and sound into spectacular experiences for billions of people worldwide[16](index=16&type=chunk) - Key technologies include Dolby Atmos, Dolby Vision, Dolby Cinema, and Dolby.io, used in entertainment and communications[16](index=16&type=chunk) [Forward-Looking Statements](index=4&type=section&id=Forward-Looking%20Statements) Forward-looking statements regarding future financial results are subject to significant risks, including economic conditions, supply chain, and competitive pressures, with actual results potentially differing materially - Statements regarding expected financial results and long-term objectives are forward-looking and involve substantial risks and uncertainties[15](index=15&type=chunk) - Key risk factors include economic conditions, supply chain constraints, international conflicts, consumer demand for products with Dolby technologies, and competitive risks[15](index=15&type=chunk) - Actual results may differ materially from expectations, and Dolby disclaims any obligation to update these statements[15](index=15&type=chunk) [Conference Call Information](index=2&type=section&id=Conference%20Call%20Information) Dolby management held a conference call on May 2, 2024, to discuss Q2 FY2024 results, with a replay available until May 7, 2024 - Conference call to discuss Q2 FY2024 financial results was held on Thursday, May 2, 2024, at 2:00 p.m. PT (5:00 p.m. ET)[7](index=7&type=chunk) - A replay of the call was available until May 7, 2024, via teleconference and on the Dolby investor relations website (http://investor.dolby.com)[8](index=8&type=chunk) [Investor and Media Contacts](index=9&type=section&id=Investor_and_Media_Contacts) Contact details are provided for investor relations and media inquiries to facilitate communication with stakeholders - Investor Contact: Peter Goldmacher, 415-254-7415, peter.goldmacher@dolby.com[27](index=27&type=chunk) - Media Contact: Rachel Lowery, media@dolby.com[27](index=27&type=chunk)

Wall Street analysts expect Dolby Laboratories (DLB) to post quarterly earnings of $1.17 per share in its upcoming report, which indicates a year-over-year decline of 7.1%. Revenues are expected to be $361.98 million, down 3.7% from the year-ago quarter.Over the past 30 days, the consensus EPS estimate for the quarter has remained unchanged. This demonstrates the covering analysts' collective reassessment of their initial projections during this period.Prior to a company's earnings announcement, it is cruci ...

Wall Street expects a year-over-year decline in earnings on lower revenues when Dolby Laboratories (DLB) reports results for the quarter ended March 2024. While this widely-known consensus outlook is important in gauging the company's earnings picture, a powerful factor that could impact its near-term stock price is how the actual results compare to these estimates.The earnings report, which is expected to be released on May 2, 2024, might help the stock move higher if these key numbers are better than expe ...

Experience "Eternity" and Anyma's latest album Genesys II today in Dolby Atmos SAN FRANCISCO, April 10, 2024 /PRNewswire/ -- Dolby Laboratories, Inc. (NYSE: DLB), a leader in immersive entertainment experiences, is teaming up with Anyma, the solo project of Matteo Milleri of Tale Of Us, to celebrate the transformative experience of Dolby Atmos Music. Set to the song "Eternity" from his debut album Genesys, Anyma stars in the commercial, which spotlights the heightened emotional bond fans can share with thei ...

SAN FRANCISCO, Feb. 28, 2024 /PRNewswire/ -- Dolby Laboratories, Inc. (NYSE: DLB), a leader in immersive entertainment experiences, is launching the next chapter of the "Love More in Dolby" global brand campaign with a new commercial celebrating the transformative theatrical experience of watching movies in Dolby Vision and Dolby Atmos at Dolby Cinema. Dolby launches latest installment of the "Love More" global brand campaign showcasing the immersive power of Dolby Cinema. Watching movies at Dolb ...

The Zacks Audio Video Production industry participants are concentrating on the premium segment of the branded products market for business growth. Panasonic Holdings Corporation (PCRFY) , Dolby Laboratories (DLB) and Sonos (SONO) and are likely to benefit from investments in cutting-edge technology solutions that create better communication experiences. Easing supply chain issues is likely to aid the performance of these companies. However, in the near term, muted consumer demand amid a weak macroeconomic ...

Dolby Laboratories (DLB) reported $315.57 million in revenue for the quarter ended December 2023, representing a year-over-year decline of 5.8%. EPS of $1.01 for the same period compares to $1.11 a year ago.The reported revenue represents a surprise of +1.48% over the Zacks Consensus Estimate of $310.98 million. With the consensus EPS estimate being $0.89, the EPS surprise was +13.48%.While investors scrutinize revenue and earnings changes year-over-year and how they compare with Wall Street expectations to ...

Dolby Laboratories, Inc (DLB) reported first-quarter fiscal 2024 results, with non-GAAP earnings per share (EPS) of $1.01 compared with $1.11 reported in the prior-year quarter. The bottom line surpassed the Zacks Consensus Estimate of 89 cents.Total revenues were $315.6 million, lower than $334.9 million in the year-ago quarter. However, the top line surpassed the Zacks Consensus Estimate by 1.5%.The company announced a dividend of 30 cents per share, payable on Feb 22, 2024, to shareholders of record as o ...