Dolby Laboratories(US:DLB)2020-05-05 03:39Financial Data and Key Metrics Changes - In Q2 2020, total revenue was $352 million, up from $338 million in Q2 2019, but about $30 million below the midpoint of guidance due to lower consumer activity related to the COVID-19 pandemic [12][29] - Operating income was $105.9 million on a GAAP basis, representing 30.1% of revenue, compared to $102.9 million or 30.4% of revenue in Q2 2019 [28] - Net income on a GAAP basis was $88.5 million or $0.86 per diluted share, compared to $73.4 million or $0.70 per diluted share in Q2 2019 [29] Business Line Data and Key Metrics Changes - Licensing revenue from the Broadcast segment, which includes TVs and set-top boxes, was up 5% year-over-year, representing 39% of total licensing [15] - Mobile devices licensing revenue increased by 13% year-over-year, accounting for 23% of total licensing [16] - Products and services revenue was $23 million in Q2, down from $34 million in Q1 and $28 million in Q2 2019, primarily due to the impact of the pandemic on the cinema industry [23] Market Data and Key Metrics Changes - Licensing revenue was negatively impacted by approximately $25 million due to the pandemic, heavily concentrated in China [13] - Other Markets licensing, which includes automotive and gaming, was down 16% year-over-year due to lower volume and recoveries [21] - The effective income tax rate in Q2 was 20% on both GAAP and non-GAAP basis [29] Company Strategy and Development Direction - The company remains focused on long-term growth despite the current economic challenges, emphasizing the importance of quality experiences in content consumption [52][68] - Dolby is recalibrating priorities and reviewing spending and capital investments to align with long-term goals [53] - The company is confident in the return of consumers to theaters and the continued adoption of Dolby technologies across various devices and services [54][58] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the uncertainty caused by the COVID-19 pandemic, affecting visibility into near-term growth [10][32] - The company expects Q3 licensing revenue to range from $220 million to $240 million, down 20% to 25% from previous expectations due to cinema closures and reduced consumer demand [36][41] - Management expressed optimism about the long-term opportunities for Dolby technologies as consumer spending returns [68] Other Important Information - The company ended Q2 with over $1 billion in cash and investments and no outstanding debt [52] - A cash dividend of $0.22 per diluted share was announced, payable on May 27, 2020 [31] - The company bought back about 1 million shares during Q2, with $260 million of stock repurchase authorization still available [31] Q&A Session Summary Question: Insight on reducing run rate of expenses - Management indicated that they are focused on maintaining strength for long-term opportunities while reviewing expenses on a business-by-business basis [71][72] Question: Guidance on current quarter expenses - Management noted that current guidance reflects lower spending primarily due to reduced travel and hiring, with no significant one-time expenses expected [74][76] Question: Anticipating customer production volumes - Management stated that they rely on a range of indicators, including customer feedback and economic reports, to gauge production volumes [78][80] Question: Consumer demand trends and supply chain - Management acknowledged that the decline in unit shipments is primarily driven by reduced consumer demand rather than supply chain issues [90] Question: Share buyback program and future investments - Management confirmed that the buyback program has not been suspended and they continue to invest in growth programs despite the current environment [95][96] Question: Cinema strategy and future investments - Management expressed confidence in the return of consumers to theaters and indicated that new Dolby Cinema builds are significantly reduced for the near term [110][112] Question: Regional consumer demand trends - Management is monitoring trends in regions like Asia as retail outlets begin to open, but specific insights were not detailed [113]