Exhibit 99.1
Dolby Laboratories Reports Record Revenue for Second Quarter of Fiscal 2005;
Company Issues Full-Year Guidance
SAN FRANCISCO--(BUSINESS WIRE)--May 5, 2005--In its first earnings
report as a public company, Dolby Laboratories (NYSE:DLB) today
announced the Company's financial results for the second quarter of
fiscal 2005 ended April 1, 2005. For the second quarter, Dolby
reported total revenue of $85.1 million, the highest quarterly revenue
in its 40-year history, compared to $78.7 million for the second
quarter of fiscal 2004. Second-quarter net income was $10.3 million,
or $0.10 per diluted share compared to $12.4 million, or $0.14 per
diluted share for the second quarter of fiscal 2004. Per-share
calculations are based on 105.5 million diluted shares in the second
quarter of fiscal 2005 compared with 91.0 million diluted shares in
the comparable year-ago quarter as a result of the Company's IPO in
February 2005.
"We are very pleased with this quarter's results. Revenue was at a
record quarterly level, driven by continued growth in licensees' sales
of DVD-related products," said Bill Jasper, Dolby Laboratories'
President and Chief Executive Officer. "During the second quarter we
continued to make significant investments in our infrastructure to
support anticipated growth and to meet the needs of being a public
company. We also remain focused on the future through research and
development as we strive to bring new high-quality entertainment
technologies to the market."
On a pro forma basis, second-quarter net income was $14.9 million,
or $0.14 per diluted share, compared to $18.5 million, or $0.20 per
diluted share last year. Pro forma results exclude the effect of
royalties payable to the Company's founder for the use of intellectual
property rights under licensing agreements, which discontinued as of
February 2005. These amounts were $7.7 million and $10.0 million in
the second quarter of fiscal 2005 and 2004, respectively.
The second-quarter 2005 results included the Company's continued
investment in its infrastructure, research and development, and
stock-based compensation expense. Stock-based compensation expense was
$5.3 million, compared to $2.1 million for the second quarter of
fiscal 2004.
Operating highlights during the quarter include:
-- Raised $247 million in initial public offering on the New York
Stock Exchange effective on February 16, 2005.
-- Company founder and Chairman Ray Dolby contributed
intellectual property rights to the Company, eliminating
future royalty obligations.
-- Debuted Dolby(R) Digital Cinema system at ShoWest in Las
Vegas.
-- All films nominated for 2004 Oscars(R) in the Sound Editing
and Sound Mixing categories incorporated Dolby Digital or
Dolby Digital Surround EX(TM) technology.
Business Outlook
For fiscal 2005, revenue is expected to be in the range of $335
million to $350 million, compared to $289 million in fiscal 2004. Net
income for fiscal 2005 is expected to be between $49 million and $55
million, compared to $39.8 million in fiscal 2004. Pro forma net
income for fiscal 2005 is expected to be between $60 million and $67
million, compared to pro forma net income of $63.3 million in fiscal
2004. Earnings per diluted share for the full fiscal year 2005 are
expected to be in the range of $0.45 to $0.51 and, on a pro forma
basis, $0.55 to $0.62. This compares to $0.43 per diluted share and
$0.68 per diluted share, pro forma, in fiscal 2004. Stock-based
compensation expense for the full year is expected to be between $14
million and $15 million. EPS is estimated on a diluted share count of
108 million shares.
As noted in its prospectus, the Company's operating results may
fluctuate due to a number of factors outside of the Company's control.
Because the Company does not manufacture or sell the products that
drive the licensing business, there is limited ability to control the
timing of revenue on a quarterly basis. As a result, the business is
managed over the long-term, focusing on year-over-year growth.
Therefore, the Company's policy is to provide guidance for the full
year.
Pro Forma Information
Throughout the Company's history, Ray Dolby retained ownership of
the intellectual property he created related to the Company's business
and licensed those rights to the Company in exchange for royalty
payments. In connection with the Company's IPO, Ray Dolby contributed
to the Company all of these intellectual property rights. The pro
forma financial information included in this release gives effect to
the asset contribution as though such transactions had been completed
prior to the beginning of fiscal 2004. The Company provides this
information because it believes the pro forma presentation more
accurately reflects the Company's financial position going forward. A
reconciliation of the Company's actual results to its pro forma
results is included in this release.
Conference Call Information
Today, beginning at 2:00 p.m. PDT, Bill Jasper, President and CEO,
and Marty Jaffe, Executive Vice President Business and Finance, will
lead a conference call open to all interested parties to discuss the
quarterly results and answer analysts' and portfolio managers'
questions.
Access to the teleconference is available over the Internet from
http://investor.dolby.com/medialist.cfm or by dialing 800-810-0924
(international callers can access the call by dialing 913-981-4900).
A replay of the call will be available until May 13 by dialing
888-203-1112 (international callers can access the replay by dialing
719-457-0820) and entering confirmation code number 8477436. An
archived version of the teleconference will also be available on
www.dolby.com.
About Dolby Laboratories
Dolby Laboratories (NYSE: DLB) develops and delivers products and
technologies that make the entertainment experience more realistic and
immersive. For nearly four decades, Dolby has been at the forefront of
defining high-quality audio and surround sound in cinema, broadcast,
home audio systems, cars, DVDs, headphones, games, televisions, and
personal computers. Based in San Francisco with European headquarters
in England, the company has entertainment industry liaison offices in
New York and Los Angeles, and licensing liaison offices in London,
Shanghai, Beijing, Hong Kong, and Tokyo. For more information about
Dolby Laboratories or Dolby technologies, please visit www.dolby.com.
Certain statements in this press release, including statements
relating to Dolby's expectations regarding revenue and earnings per
share for the fiscal year ending September 30, 2005, its expectations
regarding future growth and its expectations regarding bringing
entertainment technologies to the market in the future are
"forward-looking statements" that are subject to risks and
uncertainties. These forward-looking statements are based on
management's current expectations, and as a result of certain risks
and uncertainties actual results may differ materially from those
projected. These risks and uncertainties include, without limitation,
the following: risks associated with Dolby's ability to maintain and
strengthen the Dolby brand; the growth in sales by consumer
electronics products manufacturers of products that incorporate
Dolby's technologies; the timing of Dolby's receipt of royalty reports
and/or payments from its licensees; Dolby's ability to develop and
deliver innovative technologies in response to changes in the
entertainment industry; risks associated with Dolby's ability to have
its products and technologies adopted as industry standards; Dolby's
ability to enforce its intellectual property rights; Dolby's ability
to develop, maintain and strengthen relationships with industry
participants; Dolby's ability to have semiconductor manufacturers
incorporate Dolby's technologies into their ICs; the growth of markets
for surround sound technologies; competition risks; pricing pressures;
risks associated with conducting business in China and other countries
that have historically limited recognition and enforcement of
intellectual property and contractual rights; risks associated with
operating Dolby's business internationally; risks associated with
licensing certain of Dolby's technologies in patent pools; Dolby's
ability to develop proprietary technology in markets in which open
standards are adopted; risks associated with the health of the motion
picture industry generally; the growth of the market for digital
cinema; Dolby's ability to expand our business into non-sound
technologies; and other risks detailed in Dolby's Securities and
Exchange Commission filings and reports, including, its registration
statement on Form S-1, as amended, filed in connection with its
initial public offering. Dolby disclaims any obligation to update
information contained in these forward-looking statements whether as a
result of new information, future events or otherwise.
Dolby and the double-D symbol are registered trademarks of Dolby
Laboratories. Surround EX is a trademark of Dolby Laboratories.
S05/16289. DLB-F
DOLBY LABORATORIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Fiscal Quarter Fiscal Year-To-Date
Ended Ended
------------------- -------------------
March 26, April 1, March 26, April 1,
2004 2005 2004 2005
------------------- -------------------
(unaudited)
(in thousands, except per share
amounts)
Revenue:
Licensing $58,948 $64,717 $106,747 $126,908
Product sales 14,386 14,807 27,778 31,294
Production services 5,357 5,577 9,589 11,162
------------------- -------------------
Total revenue 78,691 85,101 144,114 169,364
Cost of revenue:
Cost of licensing 15,105 14,062 27,886 30,211
Cost of product sales(1) 7,717 7,472 14,613 16,284
Cost of production services(1) 1,931 2,181 3,518 4,196
------------------- -------------------
Total cost of revenue 24,753 23,715 46,017 50,691
Gross margin 53,938 61,386 98,097 118,673
Operating expenses:
Selling, general and
administrative(1) 26,301 35,610 46,393 68,467
Research and development(1) 5,700 7,740 10,634 16,029
Settlements - - - (2,000)
In-process research and
development 1,540 - 1,540 -
------------------- -------------------
Total operating
expenses 33,541 43,350 58,567 82,496
------------------- -------------------
Operating income 20,397 18,036 39,530 36,177
Other income, net 156 751 380 1,038
------------------- -------------------
Income before provision for
income taxes and controlling
interest 20,553 18,787 39,910 37,215
Provision for income taxes 8,124 8,000 14,949 15,743
------------------- -------------------
Income before controlling
interest 12,429 10,787 24,961 21,472
Controlling interest in net
income (70) (457) (356) (765)
------------------- -------------------
Net income $12,359 $10,330 $24,605 $20,707
=================== ===================
Basic net income per share $0.14 $0.11 $0.29 $0.23
Diluted net income per share $0.14 $0.10 $0.27 $0.20
Shares used in the calculation
of basic net income per share 85,432 94,806 85,221 90,649
Shares used in the calculation
of diluted net income per
share 90,986 105,544 90,770 101,573
(1) Stock-based compensation was
classified as follows:
Cost of product sales $- $56 $- $110
Cost of production services - 30 - 56
Selling, general and
administrative 2,130 4,603 2,134 6,790
Research and development - 570 - 1,251
------------------- -------------------
Total stock-based
compensation $2,130 $5,259 $2,134 $8,207
=================== ===================
DOLBY LABORATORIES, INC.
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
Pro Forma
----------------------------------------
Fiscal Quarter Fiscal Year-To-Date
Ended Ended
-------------------- -------------------
March 26, April 1, March 26, April 1,
2004 2005 2004 2005
----------------------------------------
(unaudited)
(in thousands, except per share amounts)
Revenue:
Licensing $58,948 $64,717 $106,747 $126,908
Product sales 14,386 14,807 27,778 31,294
Production services 5,357 5,577 9,589 11,162
-------------------- -------------------
Total revenue 78,691 85,101 144,114 169,364
Cost of revenue:
Cost of licensing 5,917 6,789 10,585 12,787
Cost of product sales (1) 6,946 7,088 13,085 14,998
Cost of production
services (1) 1,931 2,181 3,518 4,196
-------------------- -------------------
Total cost of revenue 14,794 16,058 27,188 31,981
Gross margin 63,897 69,043 116,926 137,383
Operating expenses:
Selling, general and
administrative (1) 26,301 35,610 46,393 68,467
Research and development(1) 5,700 7,740 10,634 16,029
Settlements - - - (2,000)
In-process research and
development 1,540 - 1,540 -
-------------------- -------------------
Total operating
expenses 33,541 43,350 58,567 82,496
-------------------- -------------------
Operating income 30,356 25,693 58,359 54,887
Other income, net 156 751 380 1,038
-------------------- -------------------
Income before provision for
income taxes and controlling
interest 30,512 26,444 58,739 55,925
Provision for income taxes 11,992 11,070 22,235 23,330
-------------------- -------------------
Income before controlling
interest 18,520 15,374 36,504 32,595
Controlling interest in net
income (70) (457) (356) (765)
-------------------- -------------------
Net income $18,450 $14,917 $36,148 $31,830
==================== ===================
Basic net income per share $0.22 $0.16 $0.42 $0.35
Diluted net income per share $0.20 $0.14 $0.40 $0.31
Shares used in the calculation
of basic net income per share 85,432 94,806 85,221 90,649
Shares used in the calculation
of diluted net income per
share 90,986 105,544 90,770 101,573
(1) Stock-based compensation
was classified as follows:
Cost of product sales $- $56 $- $110
Cost of production
services - 30 - 56
Selling, general and
administrative 2,130 4,603 2,134 6,790
Research and development - 570 - 1,251
-------------------- -------------------
Total stock-based
compensation $2,130 $5,259 $2,134 $8,207
==================== ===================
DOLBY LABORATORIES, INC.
CONSOLIDATED BALANCE SHEETS
Sept. 24, April 1,
2004 2005
----------- -----------
(unaudited)
(in thousands)
ASSETS
Current assets:
Cash and cash equivalents $78,711 $350,650
Accounts receivable, net 18,257 18,824
Accounts receivable from related parties 1,927 225
Inventories 7,163 8,195
Income tax receivable 4,246 145
Deferred income taxes 30,813 34,593
Prepaid expenses and other current assets 3,640 3,038
----------- -----------
Total current assets 144,757 415,670
Property, plant and equipment, net 72,333 78,028
Intangible assets, net 6,778 18,109
Goodwill 22,030 23,200
Long-term deferred income taxes 6,669 6,812
Other assets 9,299 8,122
----------- -----------
Total assets $261,866 $549,941
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $56,540 $62,392
Accounts payable and accrued royalties due
to related parties 291 7,688
Income taxes payable 3,793 2,348
Current portion of debt 1,290 1,347
Deferred revenue 2,562 2,544
----------- -----------
Total current liabilities 64,476 76,319
Long-term debt 13,580 13,131
Other non-current liabilities 23,283 23,723
----------- -----------
Total liabilities 101,339 113,173
Controlling interest 17,200 18,257
Stockholders' equity:
Class A common stock - 32
Class B common stock 87 71
Additional paid-in capital 48,731 300,963
Deferred stock-based compensation (33,728) (32,745)
Retained earnings 125,076 145,783
Accumulated other comprehensive income 3,161 4,407
----------- -----------
Total stockholders' equity 143,327 418,511
----------- -----------
Total liabilities and stockholders'
equity $261,866 $549,941
=========== ===========
DOLBY LABORATORIES, INC.
RECONCILIATION OF PRO FORMA STATEMENTS OF OPERATIONS
Fiscal Quarter Ended
April 1, 2005
-------------------------------
Actual Effect of Pro
Related Forma
Party
Royalty
Agreements
-------------------------------
(unaudited)
(in thousands, except per share
amounts)
Revenue:
Licensing $64,717 $- $64,717
Product sales 14,807 - 14,807
Production services 5,577 - 5,577
-------------------------------
Total revenue 85,101 - 85,101
Cost of revenue:
Cost of licensing 14,062 (7,273) 6,789
Cost of product sales 7,472 (384) 7,088
Cost of production services 2,181 - 2,181
-------------------------------
Total cost of revenue 23,715 (7,657) 16,058
Gross margin 61,386 7,657 69,043
Operating expenses:
Selling, general and administrative 35,610 - 35,610
Research and development 7,740 - 7,740
Settlements - - -
-------------------------------
Total operating expenses 43,350 - 43,350
-------------------------------
Operating income 18,036 7,657 25,693
Other income, net 751 - 751
-------------------------------
Income before provision for income
taxes and controlling interest 18,787 7,657 26,444
Provision for income taxes 8,000 3,070 11,070
-------------------------------
Income before controlling interest 10,787 4,587 15,374
Controlling interest in net income (457) - (457)
-------------------------------
Net income $10,330 $4,587 $14,917
===============================
Basic net income per share $0.11 $0.05 $0.16
Diluted net income per share $0.10 $0.04 $0.14
Shares used in the calculation of basic
net income per share 94,806 94,806
Shares used in the calculation of
diluted net income per share 105,544 105,544
Fiscal Year-To-Date Ended
April 1, 2005
------------------------------
Actual Effect of Pro
Related Forma
Party
Royalty
Agreements
--------- ---------- ---------
(unaudited)
(in thousands, except per share
amounts)
Revenue:
Licensing $126,908 $- $126,908
Product sales 31,294 - 31,294
Production services 11,162 - 11,162
------------------------------
Total revenue 169,364 - 169,364
Cost of revenue:
Cost of licensing 30,211 (17,424) 12,787
Cost of product sales 16,284 (1,286) 14,998
Cost of production services 4,196 - 4,196
------------------------------
Total cost of revenue 50,691 (18,710) 31,981
Gross margin 118,673 18,710 137,383
Operating expenses:
Selling, general and administrative 68,467 - 68,467
Research and development 16,029 - 16,029
Settlements (2,000) - (2,000)
------------------------------
Total operating expenses 82,496 - 82,496
------------------------------
Operating income 36,177 18,710 54,887
Other income, net 1,038 - 1,038
------------------------------
Income before provision for income
taxes and controlling interest 37,215 18,710 55,925
Provision for income taxes 15,743 7,587 23,330
------------------------------
Income before controlling interest 21,472 11,123 32,595
Controlling interest in net income (765) - (765)
------------------------------
Net income $20,707 $11,123 $31,830
==============================
Basic net income per share $0.23 $0.12 $0.35
Diluted net income per share $0.20 $0.11 $0.31
Shares used in the calculation of basic
net income per share 90,649 90,649
Shares used in the calculation of
diluted net income per share 101,573 101,573
DOLBY LABORATORIES, INC.
RECONCILIATION OF PRO FORMA STATEMENTS OF OPERATIONS
Fiscal Quarter Ended March 26, 2004
-----------------------------------
Actual Effect of Pro
Related Forma
Party
Royalty
Agreements
-----------------------------------
(unaudited)
(in thousands, except per share
amounts)
Revenue:
Licensing $ 58,948 $ - $ 58,948
Product sales 14,386 - 14,386
Production services 5,357 - 5,357
--------------------------------
Total revenue 78,691 - 78,691
Cost of revenue:
Cost of licensing 15,105 (9,188) 5,917
Cost of product sales 7,717 (771) 6,946
Cost of production services 1,931 - 1,931
--------------------------------
Total cost of revenue 24,753 (9,959) 14,794
Gross margin 53,938 9,959 63,897
Operating expenses:
Selling, general and
administrative 26,301 - 26,301
Research and development 5,700 - 5,700
Settlements - - -
In-process research
and development 1,540 - 1,540
--------------------------------
Total operating expenses 33,541 - 33,541
--------------------------------
Operating income 20,397 9,959 30,356
Other income, net 156 - 156
--------------------------------
Income before provision
for income taxes and
controlling interest 20,553 9,959 30,512
Provision for income taxes 8,124 3,868 11,992
--------------------------------
Income before controlling interest 12,429 6,091 18,520
Controlling interest in net income (70) - (70)
--------------------------------
Net income $ 12,359 $ 6,091 $ 18,450
================================
Basic net income per share $ 0.14 $ 0.08 $ 0.22
Diluted net income per share $ 0.14 $ 0.06 $ 0.20
Shares used in the calculation
of basic net income per share 85,432 85,432
Shares used in the calculation
of diluted net income per share 90,986 90,986
Fiscal Year-To-Date Ended
March 26, 2004
--------------------------------
Actual Effect of Pro
Related Forma
Party
Royalty
Agreements
--------------------------------
Revenue:
Licensing $106,747 $- $106,747
Product sales 27,778 - 27,778
Production services 9,589 - 9,589
--------------------------------
Total revenue 144,114 - 144,114
Cost of revenue:
Cost of licensing 27,886 (17,301) 10,585
Cost of product sales 14,613 (1,528) 13,085
Cost of production services 3,518 - 3,518
--------------------------------
Total cost of revenue 46,017 (18,829) 27,188
Gross margin 98,097 18,829 116,926
Operating expenses:
Selling, general
and administrative 46,393 - 46,393
Research and development 10,634 - 10,634
Settlements - - -
In-process research
and development 1,540 - 1,540
--------------------------------
Total operating expenses 58,567 - 58,567
--------------------------------
Operating income 39,530 18,829 58,359
Other income, net 380 - 380
------------------------------
Income before provision for income
taxes and controlling interest 39,910 18,829 58,739
Provision for income taxes 14,949 7,286 22,235
------------------------------
Income before controlling interest 24,961 11,543 36,504
Controlling interest in net income (356) - (356)
--------------------------------
Net income $24,605 $11,543 $36,148
==============================
Basic net income per share $0.29 $0.13 $0.42
Diluted net income per share $0.27 $0.13 $0.40
Shares used in the
calculation of basic
net income per share 85,221 85,221
Shares used in the calculation of
diluted net income per share 90,770 90,770
CONTACT: Dolby Laboratories
Paula Dunn, 415-645-4100
investor@dolby.com
or
Kalt Rosen & Co.
Pierre Hirsch, 415-397-2686
hirsch@krc-ir.com