Dolby Laboratories(DLB) - 2024 Q2 - Quarterly Results

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 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] - Dolby Atmos and Dolby Vision content is expanding across movies, TV, sports, and music, driving more consumer device adoption worldwide[2] Second Quarter Fiscal 2024 Financial Highlights 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] Recent Business Highlights 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] - The Indian Premier League broadcasted cricket in Dolby Atmos and Dolby Vision for the first time[6] - 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] Dividend Announcement 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] - Payable on May 22, 2024, to stockholders of record as of May 14, 2024[4] 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 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 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 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 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][14] - 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][10][12][13] 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) 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) This section presents Dolby's GAAP interim condensed consolidated financial statements, including statements of operations, balance sheets, and cash flows Statements of Operations 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 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 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 This section provides background on Dolby Laboratories, outlines forward-looking statement disclaimers, and includes conference call and contact details About Dolby Laboratories 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] - Transforms the science of sight and sound into spectacular experiences for billions of people worldwide[16] - Key technologies include Dolby Atmos, Dolby Vision, Dolby Cinema, and Dolby.io, used in entertainment and communications[16] Forward-Looking Statements 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] - Key risk factors include economic conditions, supply chain constraints, international conflicts, consumer demand for products with Dolby technologies, and competitive risks[15] - Actual results may differ materially from expectations, and Dolby disclaims any obligation to update these statements[15] Conference Call Information 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] - 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 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] - Media Contact: Rachel Lowery, media@dolby.com[27]