Dolby Laboratories(US:DLB)2022-05-04 16:00Revenue Generation and Licensing - Dolby Laboratories generates the majority of its revenue from licensing audio technologies, with approximately 500 active licensing arrangements as of April 1, 2022[178]. - The company holds around 16,400 issued patents related to its technologies, which significantly contribute to its licensing revenue[178]. - The revenue composition for the fiscal year ending April 1, 2022, shows that 33% comes from broadcast, 21% from mobile, 17% from consumer electronics, 18% from PCs, and 11% from other sources[179]. - Dolby's key technologies include Dolby Atmos, Dolby Vision, and various audio codecs, which enhance media playback experiences across multiple platforms[179]. - The company has implemented a two-tier licensing model, where semiconductor manufacturers first license technologies before they are sold to OEMs[180]. - Dolby Cinema partnerships allow the company to earn revenue through a share of box office receipts, recognized as licensing revenue[187]. - Dolby's licensing revenue is primarily driven by the adoption of audio and imaging technologies, with foundational audio technologies expected to reflect market trends in device shipments[201]. Market Challenges and COVID-19 Impact - The COVID-19 pandemic has negatively impacted consumer purchasing activity and supply chains, affecting demand for products incorporating Dolby's technologies[195]. - The company continues to monitor the evolving situation of COVID-19 and its impact on business operations and revenue[196]. - The company faces challenges in the broadcast market due to geopolitical issues and the impact of COVID-19 on consumer demand and manufacturing capabilities[211]. - COVID-19 continues to impact the cinema market, with uncertainty regarding full capacity operations and box office receipts fluctuating[199]. - The ongoing impact of COVID-19 has negatively affected demand for cinema products and services, with supply chain constraints also posing challenges[234]. Product and Service Offerings - The company offers various services to support theatrical and television production, including equipment training and maintenance[192]. - The developer platform, Dolby.io, enables access to audio and video APIs, expanding the addressable market for the company's technologies[191]. - Dolby Cinema sites are operating at approximately 85% capacity, subject to local regulations, with over 400 theatrical titles in Dolby Vision and Dolby Atmos announced or released, up from over 375 at the end of fiscal 2021[227]. - As of the end of the second quarter of fiscal 2022, there are over 6,500 Dolby Atmos screens installed or committed, with over 2,200 Dolby Atmos theatrical titles announced or released[231]. - Major streaming partners like Netflix, Disney+, and Amazon continue to enable more content in Dolby formats, enhancing the adoption of Dolby Vision and Dolby Atmos across devices[205]. - Dolby has expanded its presence in the mobile market, with new devices from Lenovo, Xiaomi, and OPPO supporting Dolby Atmos and Dolby Vision[214]. - The company continues to focus on expanding its leadership in audio and imaging solutions for premium entertainment content, including music and gaming[200]. Financial Performance - Licensing revenue for the fiscal quarter ended April 1, 2022, was $313,833, a 3% increase from $303,585 for the same quarter in 2021[242]. - Total revenue for the fiscal year-to-date ended April 1, 2022, was $646,117, down 5% from $676,590 for the same period in 2021[242]. - Products revenue increased by 29% to $20,538 for the fiscal quarter ended April 1, 2022, compared to $15,973 for the same quarter in 2021[246]. - Gross margin for licensing was 95% for both the fiscal quarter ended April 1, 2022, and the same quarter in 2021[242]. - The company reported a gross margin percentage of 8% for products and services revenue for the fiscal quarter ended April 1, 2022, compared to a negative 2% for the same quarter in 2021[246]. - Net income attributable to controlling interest for the quarter ended April 1, 2022, was $201 million, compared to a loss of $128 million in the same quarter of the previous year, representing a 257% change[268]. Expenses and Investments - Research and Development expenses primarily consist of employee compensation, stock-based compensation, and consulting costs[249]. - Sales and marketing expenses for Q1 2022 were $84,230, an increase of $6,184 or 8% compared to $78,046 in Q1 2021, representing 25% of total revenue[251]. - General and administrative expenses for Q1 2022 were $98,693, an increase of $39,295 or 66% compared to $59,398 in Q1 2021, representing 30% of total revenue[255]. - Restructuring charges for Q1 2022 were $5,162, an increase of $4,421 or 597% compared to $741 in Q1 2021, representing 2% of total revenue[260]. - Year-to-date research and development expenses increased to $136,245, up $6,665 or 5% from $129,580 in the previous year[250]. - Year-to-date sales and marketing expenses increased to $181,400, up $27,909 or 18% from $153,491 in the previous year[251]. - Year-to-date general and administrative expenses increased to $161,137, up $47,285 or 42% from $113,852 in the previous year[255]. - Year-to-date restructuring charges decreased to $5,067, down $5,697 or 53% from $10,764 in the previous year[260]. Cash Flow and Investments - Cash and cash equivalents as of April 1, 2022, totaled $900.4 million, down from $1.2 billion as of September 24, 2021[273]. - Net cash provided by operating activities decreased by $71 million to $94.7 million for the year-to-date period ended April 1, 2022, compared to $165.6 million for the same period last year[280]. - Net cash used in investing activities increased significantly to $(247.1) million for the year-to-date period ended April 1, 2022, compared to $(15.8) million for the same period last year[281]. - The company had short and long-term investments totaling $265.8 million as of April 1, 2022, primarily in corporate bonds and government securities[272]. - The weighted-average credit quality of the investment portfolio was AA+ with a weighted-average maturity of approximately ten months as of April 1, 2022[290]. - A 10% increase in the value of the U.S. dollar would decrease the fair value of financial instruments by $2.9 million, while a 10% decrease would increase the fair value by the same amount[299]. - The total notional amounts of outstanding foreign currency contracts were $87.8 million as of April 1, 2022, compared to $51.0 million as of September 24, 2021[298]. Internal Controls and Legal Matters - The company maintains disclosure controls and procedures to ensure timely and accurate reporting of required information[302]. - There were no changes in internal control over financial reporting during the fiscal quarter ending April 1, 2022, that materially affected the internal control[304]. - The company is involved in various legal proceedings, but resolution of these matters is not expected to materially impact operating results or financial condition[307].