DLB - Earnings call transcript Q2 2018 | Dolby Laboratories, Inc.

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Dolby Laboratories Conference Call Fiscal Second Quarter Results.

During the presentation, all participants will be in a listen-only mode. [Operator Instructions].

As a reminder, this call is being recorded, Tuesday, April 24, 2018. to of conference Relations Corporate Laboratories. like Elena over for now Director Carr, Finance would turn call the to Dolby I and Investor go Please Elena. ahead,

Elena Carr

call. second afternoon. XXXX Good Dolby Laboratories to earnings Welcome conference quarter

CEO; Joining me today Financial Chew, Kevin Yeaman, Chief Vice and and President President Dolby Executive Officer. Lewis Laboratories' are and

not discussion to to reminder, that that A as to may statements forward-looking during uncertainties the today's forward-looking some in under Form future update differ section this As made and from well recent of will made a a statements statements. These release result call, most risks or Factors, does report information on can actual results as these risks no we include of intend issued discussion our statements materially the the events. are assumes new and subject found be XX-Q. any of captioned cause earnings today today. uncertainties Dolby as press in Risk and obligation

today's our website. Investor and between sheet available Investor the we data is financial of and section two the measures. A on reconciliation Relations During discuss press the non-GAAP Dolby will on in Laboratories' release, Relations our earnings GAAP call,

discussion As the a our financial a will results will business. content fiscal Kevin this and XXXX begin for of the recap call, with Lewis finish provide of with of Dolby's outlook, and

let's started, So, get go ahead and Lewis.

Lewis Chew

everyone. afternoon Thanks, Elena, good and Okay.

momentum second revenue. quarter we products licensing, and in in $XXX and the from from positive and $XXX to total Our was was see our continue of million revenue was million, which $XX million services,

our revenue outlook raising We for the are full-year.

operating comments quarter. But these results, licensing starting increasing in in second a markets. two on have I our our minutes. with about jump the will end and of Broadcast also QX expenses are few on XX% to commentary some range represented total me topics just of let back first, estimated We more

Products saw due sequentially X% holiday and did also payments. higher than second in electronic of total about in QX the by about and revenue Cinema to more The in to increase sequential that saw year-over-year. The getting to we're what year-over-year, about broadcast. market about recoveries year-over-year. licensing was devices, in blended was and driven set-top XX% And increased second Mobile along with QX Consumer some quarter increase increase Our by about year-over-year was The partially was was Dolby and lower X% from Consumer by in in and we're The some mainly sequential Cinema TVs PC penetration increased repeat up sequential XX% QX XX% about year-over-year. Other higher revenue and by devices million from second year's saw total offset XX% our about by increased in and licensing of quarter. increase as year-over-year boxes, higher revenue QX about our mainly and million was electronics the compared mix. revenue the being was lower driven sequentially XXX%. sequential we in and by X% lower Dolby penetration PC XX% Dolby down sequentially, year-over-year. due from lower a the year-over-year mobile boxes was higher last of in in increase sequential in from by and by due seasonally quarter. about timing offset fees revenues primarily helped ASPs $XX.X due to mainly decline growth by was Licensing higher set-top and of mainly some by services this represented seasonality volume and from helped revenue to by of seasonality. due about new QX in other models automotive. this higher revenue to the by via getting we large and decline gaming holiday in markets licensing gaming. represented year-over-year recoveries that reflected in represented sequentially in licensing didn't recovery with that's the XX% XX% quarter. million as and and higher flat primarily total nor licensing this The in some well slightly and trend $XX.X In increase driven and Cinema we but activity from up expected the TV along that's The and was $XX.X from products QX up approximately volumes and we down licensing into mobile so year-over-year revenue DMAs. from lower higher but XX% higher TVs sequentially to total represented was Voice. second was was

GAAP compared quarter to a first and margin a basis on in Let's quarter GAAP the GAAP on on second a margins gross in a basis operating on non-GAAP was in the non-GAAP. the XX.X% $XXX.X to quarter were rate million for revenue. a XX.X% QX. income expenses a the for was million effective or compared XX.X% $XXX.X QX both of and quarter. GAAP was million basis basis a in quarter and GAAP and basis $XXX.X a to XX.X% compared the the second million non-GAAP Net the $X.XX share XX.X% quarter a or income or in $X.XX Operating million in margin in million to income was basis diluted on second were and $XX.X XX.X% non-GAAP move and a a a expenses operating $XXX.X in GAAP last second million the Net to was $XXX.X the diluted on or GAAP per Operating QX to and QX. on non-GAAP on the compared first million quarter on on basis was QX of $X.XX share $X.X non-GAAP in in was Other second basis on revenue second XX.X% compared income for the $XX.X in And quarter in of per quarter on XX.X% basis was Product basis. income expenses. year's quarter on the a $XX.X XX.X% basis. our Total last year. XX.X% in to million second $X.XX product in tax was compared non-GAAP gross share diluted per gross a basis quarter margin

operations with ended about $X.X the million We investments. common of cash quarter quarter from us. billion in and ended in $XXX second with in bought the shares back During quarter we about stock QX XX,XXX about generated authorization the to we million our $XX repurchase still stock and of cash and available about

payable today dividend XXXX, on will share per May XXXX. be on a cash shareholders We $X.XX to of record which of announced also XX, May X,

So for outlook for now let full-year the the me provide QX. and

million. full-year year range and $X.XX anticipate from million. services And that FYXX will are for $X.XXX will range the we to million now million, revenue that $X.XX we For total within licensing $XXX while to million estimate total, from products revenue around the a the estimated be to $X.XXX

to category, higher other to consumer year gaming, on modestly products a growth XX% be flat and this from minus recoveries. cinema be over product to benefiting adoption GAAP in and is or a down, annual that and licensing and imaging for the somewhat in with Dolby are basis the higher will non-GAAP that likely the impact lower Voice, the audio minus up to PC finally, partially will revenues or volume driven Here basis. Dolby while up lower from large by will is anticipate to be be are offset We Gross recovery margin consumer year imaging and projected got recoveries. as to be due from also on this incorporated will of year electronics significantly modestly Voice. will from revenue in other broadcast by be up expected into some plus XX% be factors last higher Dolby offset QX. grow be Mobile along plus up for the And licensing consumer outlook. should by projected Cinema, of is And a positive modestly. we revenues about around from

comments it is Let mentioned expenses opening our in the at me to operating relates that and increasing turn exchange unfavorable so are operations our and like of primary non-U.S. negatively been have the expenses my here range of for to we the impact this us Currency and year. rates that's OpEx. to I the expenses year looks those foreign reason. will for dollar persisting the value as local it

to income expenses estimated the million $XXX operating on $XXX and rate the $XXX to on recorded that tax would $XXX we effective plus year basis to QX GAAP XX% XX%. a we're As to to actual is full-year in projecting minus. range on for range full-year such, million the rate now Adding basis non-GAAP of or GAAP a from tax million for the and about million of and a expected Other the $XX two to $XX million from XX% basis. year remaining from range is from income yield tax to quarters to QX a million

QX. Now ahead of let me us cover the quarter

to margin XX%. QX around within range will factors $X.XX million the that, million that around Operating to from to a range is non-GAAP for from $XXX on a from quarter $XXX products basis. total and QX $X.XX million and estimate and services is that $XX $X from just share XX%. estimated we the $XXX $X.XX range I is projected XX% diluted Based estimated Other from that QX to $XXX million licensing a will $XXX a and million to million. income to non-GAAP expenses basis. For to million is and from tax $XXX and XX% rate be combination of around GAAP to we earnings range QX million gross GAAP FYXX, $XXX GAAP be per projected million on to of from anticipate projected the basis on be to in on covered, the basis the on estimated $X.XX effective will around be $XXX a range estimate non-GAAP are basis are margin million, while we to gross revenue on

So now to turn to over it Kevin. Kevin? I'd like

Kevin Yeaman

Thank as continued a progress to entertainment audio you, leadership everyone. and visual made our audio around new our experiences bring We more world. in lot consumers of and expand this great the Lewis, good afternoon we quarter to

revenue seeing both our as in as initiatives. fact, In audio new growth well we're our business

significantly for Galaxy SX expands Atmos the on in availability February. the start in This both World Dolby More a It Atmos. its way me delivered be in first Huawei Dolby the Dolby of Atmos was these mobile mobile. with And by at big Let Samsung will late phones quarter wins with of with Atmos. mobile announced support Mobile for devices. recently, Dolby Atmos Dolby announced Congress ACX.

So drives codec of this further next-generation efficiency which delivers and higher adoption features. more our

have Beyond offering Skyworth with now its supporting bar bars quarter, from with mobile, Last announced recent a TVs. sound that below and first Dolby Atmos The would we also We price XX televisions is Dolby and Atmos starting joining launches sound TCL Vizio in points LG of Sony Dolby LG Atmos. Atmos be three and growing. Dolby $XXX. announced have number partners

and and with services. year, in OTT more recently of release sports BT have both available delivered global with Atmos Throughout and Atmos. major Dolby announced Changhong in More Hisense, Konka, XXX and African titles quarter Atmos. portions content live been Sky the Olympics DIRECTV Dolby Comcast is Dolby the and announced for support Sports Winter TVs delivering over Atmos to Dolby This all

TVs Vision turn to E-Series mid announced price Vision of a me Dolby are available low result the its as and this high models Dolby Vizio let and into at now Now month beyond points expansion as end Earlier $XXX. Vision. Dolby as the with

an the great XX nearly expanding reach to have partners Dolby Dolby Dolby more Vision. through progress some TV Vision more of made people number of with with increasing We devices. Vision in We mainstream models

in market XX, iPhone year. And the and in launched now TV included start X, Vision of Apple There of And continues was world. available Dolby and the RocketOn than Netflix. with and of the iPad industry the Chinese recently launched to partners in these from through coming the and to We're Dolby Sony, XXX seeing on as hours around and Dolby are time increase Bluray now Vision Atmos services Vision Germany, Pro, adoption of are experiences Europe, Vision one in have largest first the at in PC been Dolby LG. Dolby XXX moving Vision in movies iPhone Dolby At and region nearly China, UK, Italy. ITE. more In same Vision on its are Tencent such know, and Vision More over you Dolby Dolby the Panasonic, widespread Dolby Spain, there mainstream. the Vision with content As service from are XK the iTunes available amount Lenovo. titles players to France, from X,XXX

So let's Dolby turn to Cinema.

partners, China XXX Dolby quarter in with Jinyi content The Dolby be past two Cinema of announced this locations announced in great has Cinema pipeline world. with first In Dolby for to of over overall XXX Theaters ago. Cinema where Cinema to Cinema. another open Multiplex its have a cinema will content Player Chinese It total, locations Also partners. list the we Jinyi, partners adds announced released. over Shochiku in was one roll our rapidly Dolby grow titles presence continues as Shochiku number growing have with the about or out out quarter, seven committed now and Dolby a Japan. Dolby grown plans Cinema the Dolby Ready the Dolby chains new The year and Vision year growing compared XXX Panther we largest XX Black in quarter to around screens. This or market rolling This to One. and over XX Atmos the we now of for such titles join open

with make the Star available titles XX Atmos Dolby to Dolby partners movies Dolby world. movie the two upcoming two growing including and titles last be Cinema see We our support to adding Avengers Wars of in at titles Vision experience working forward franchise. week announced to continue all a more studios Disney and in best major and We the to to around slate going shown from look broadly

Dolby Let's Voice. turn to

conference product Dolby announced quarter as Together, solution. phone. we is This a Voice companion this to device the a Room camera the Dolby Voice

to In of Voice addition reaction the is meeting. benefits an innovations that positive. the Dolby the video Room This more Room Dolby resembles an set experience. the The all up easy closely been initial audio in-person to from Dolby of very experience, Voice new and creates to Voice market combination has experience introduces the

of will partners first and are a the broader go-to-market customers huddle Our think in product BlueJeans address HighFive growing we and space. set this

momentum Dolby Dolby grow becoming mainstream our we for newest Voice to expanded experiences devices. Dolby We up, Dolby business. and continue partners wrap we to So and new continue a to see Atmos Vision audio great this quarter our Dolby offering. Cinema and in are increasingly had our available

creates updating to of Dolby increased All you I turn that enjoy quarter over broadens for the it that with I'll next number revenue to of experiences. growth will opportunities this and Q&A. people look forward and

Operator

Thank you. [Operator Instructions].

our take Piper go will Mike from from We first ahead. Olson question Jaffray. Please

Mike Olson

if questions I Hey I two could. had good afternoon.

can Atmos pricing like other there for on technologies implementations say important First Dolby you anything and continued one obviously compare how is being electronics? stuff non-mobile about to Vision or in is like an TVs, PCs, with mobile your success consumer driver, mobile

Lewis Chew

now, want you of to us right Well the one start off Mike. tough

Mike Olson

that. about Sorry

Lewis Chew

of general make factors it's of general really comment the broad to typical volume a and about I hard in say that, comments the In "rest well make pricing known a that there our pricing. connection versus industry but size the we in between would mobile and don't it's customer is about business".

Mike Olson

Okay, no problem.

or you between that contributor you and Vision doubling assuming $XX million and Secondly say so initiative revenue so which in the what largest versus Thanks. new last a revenue it's think looking would year not Cinema still XXXX if new will imply can voice. be around I are within of year-over-year initiative for $XXX million

Kevin Yeaman

Yes.

revenue are We you're from this year at $XXX million. new to that looking and around initiatives put it double right would

about programs. of are remember seeing I Vision the Dolby but licensing these which We including today patent of you we're talked on number a Cinema, and call contribution three good getting the both consumer contribution all of all and from them. imaging imaging Voice, our from wins includes initiatives Dolby

Lewis Chew

was question, Mike. that easier Thanks. Yes,

Michael Olson

yes. Thank right, you. All

Operator

Please Steven our take with from next And question ahead. we Frankel will Dougherty. go

Steven Frankel

Good afternoon.

Should let the anticipate follow-up still difficult the question Or that that June Mike's pays So large again question. once own your something with in my we flows that customer way a does is year arrangement changed quarter? me difficult mobile that possibly through year? the in

Lewis Chew

But me let timing and had year that I Well go of the Steven, said was highlighted issues we way that that. that's I similar with payments that of play that indicate payments. changed years se, in the not forward, affected year by the in going back even topic payments that something I've our which last last last to year every see bump had has of QX per view a all year, been we new did and of and future so timing we here not timing off circumstance almost years I on would

Steven Frankel

Okay. then characterized a think if be quarter, for year as might wonder hazard June mobile where of I you on I the would the you've license that? of in percentage you for kind thought it years past And I revenue guess or

Lewis Chew

Yes, the probably something to it was high on this throughout mobile published evenly year-over-year and the but this growth year. weighted number We year. see substantial certainly side up not because we a XX little a we in haven't expect it's the that's see revenues bit year, percent for quarter

Kevin Yeaman

fundamentals coming adopted on that year the see the into mean Vision Dolby can I Apple. you And underlying getting

throughout on Samsung the value at made with mobile the audio Huawei, our same video provide Now and technologies really I'm demonstrating pleased opportunity there this that and the and quarter with is we've Atmos in Dolby ACX progress still time ecosystem. the

Lewis Chew

Correct.

Kevin Yeaman

big be us big of highlights the of it's the will and year. of the but big definitely continue for a focus one of quarter one highlights that to So

Lewis Chew

Yes.

Steven Frankel

some do have points on the market ramp in materially proof business? that And you leads you you to huddle-room that believe that Voice, Great. can

Kevin Yeaman

yes Lewis drivers of is, the our Dolby the partners in huddle-room growth there of Well, one products said, space in this One BlueJeans. Voice are things. couple quarter big business and and was HighFive go-to-market as are this that's

HighFive. a had year the those BlueJeans of of into quarters. couple we So of and good entered coming solid year with with last middle We kind markets

So the a pipeline from for results year. on the of based we're lot from of the getting customers, it and revenue the half reactions first the is

Lewis Chew

And the partners.

Kevin Yeaman

is kind a space and rooms huddle-room have cycle the much it. call the quality for I value sales the we've more video The audio/video like and really have the not the now on both mean accepted it what of partners this pivoted bar are complex all a that of incredible that that we an an where or it's raised excited that's overly that about -- really equipment it's toward proposition. think to this it be It can should I audio we're experience buy may conference the into. and in equipment business it's room coming natural and for

at so, and natural it's voice integrated it's effective I course to -- to rooms, they like experience table, will are adding for mean that just that competitive innovation we're brought as the but customers by the you're highly whiteboard have that static, path And are that look perpendicular of it as Dolby forced felt bringing by natural for right now the to can wall, audio/video have it on really whiteboard typical choose a and straighten at don't any has -- side were it's we're it pick a the makes they make who experience it I think experience together, video amazing between shadowy don't like people out looking cameras this a and experience. much on we moving that typically so the the of we choice these that parts and where easily environment where to optimistic it kind up on to we pointed feature straight make well.

see of proposition we're the getting because value of from partners So developing. feedback I'm the we the pipeline because and excited because

Steven Frankel

with And are huddle-room offering your features offering is because their of these premium positioning mainstream partners or for premium you them a with technology. this

Kevin Yeaman

marketed I who partner the think It varies case premium as positioned solution other think premium by predominant one for case it the hardware. I is those in offering a huddle-room choose customers it's but in is to as offering offering the purchase the and

case, but in other the in the of for is So is that. hardware case, one the a the optional, the integral huddle-room solution part each and is equipment Dolby with solution purchase

Operator

will we from our And take Ralph Schackart William with Blair. next question

Ralph Schackart

afternoon. Good

then maybe First raised give for you on outlook sort main if the what perspective was great time that business the on just of also the the also the driver that OpEx there us would as the on OpEx and there outlook Thanks. drivers a sort that's top-line increased was Kevin revenue or predominantly that second the the just could of sense of that currency are in on increased within driving movement again well? increased outlook be spend year, or unfavorable some on you increased

Kevin Yeaman

Sure.

one So I'll on let take first some give me Lewis more and OpEx. let the color

bottom end As the one guidance the is really increased reflects end that really revenue we're notice far shaping like through the range year way on seeing is think substantially and up strength about halfway the things really, fact is basis. and top What the I of the this that the broad I that we're year. the as we of slightly you'll a

the we growth the the initiatives, mobile we're Atmos mobile adoption beyond year range getting we the So year success in the those of contribution that track we've audio each we Dolby into and about are that devices. of And we really of again from that revenue on both track this revenue double the continuing in on to the things through And from we're Vision new in initiatives we're first fact we're earlier new couple as up new so getting then that what halfway business, half. and have highlight the half Dolby like second see one bottom and that end had to a have initiatives, to if double at seen from of talked them. is fact we reflects the we bringing and and fact for and the

Lewis Chew

comment Yes, pocket I Kevin in little a better we than electronics thing consumer a like my about there's and made being even slightly mentioned you thought.

Kevin Yeaman

Yes.

Lewis Chew

really feels now. very it it's solid So right

short OpEx, the on Ralph is yes. Okay answer the

a this For follow-on the driven through us raising the quarter the back the we predominantly quarter and of question the only at history natural end in it’s last now range if most why in look things of full-year normalize sort by years being and were FX one on really I quarter year.

So we these don't typically a the cry have to or it create full-year because this global the is driver whine quarters about FX amount in the conditions I seeing, prepared in and essentially the we we're comments increase. in, my and of but is "persisted" the so for where we're persistent now that use what economy two decided seeing baked word environment

Operator

We'll our take J.P. Chung question with from [Operator Morgan. next Instructions]. Paul

Paul Chung

Hi, good afternoon, thanks for taking my questions.

footing, Cinema, new R&D Vision, couple expand So kind you Voice going now on now capital towards you putting the me, finding a of on are their from spend incremental to work? assume bulk with so is products, R&D can and of first where

Kevin Yeaman

as any technologies at always new time, new any the conclude and communications, there Laboratories as Dolby what's some longer-term recurring that new in the from do is things always of going product we range some at we've as I to those to into customer investment, invest the said audio/visual I over wouldn't opportunity in evolution we entertainment market we we the have Well those entertainment But business want a investment and Dolby improve we to all -- There's next and expanded the the next-generations have just on R&D product and like and there quarter. there's category. the And of labs, audio great like audio/visual at you just recurring in of continue always same this things I'd really offerings. each to of all of business first investment in the products because wide say of is and engineering those things. goes experiences very believe Voice businesses, brought any engineering support into so with

Paul Chung

how we All in think should medium to right. about term? then short pace spending the the of And be

Lewis Chew

we've the have gave I lot unusual shaped is which Sure. update but The from of we're new into just is us way of is this I coming the FX. would fairly a margin for because consistent focused on by just driver uptick with by today, the far speaking say those actually on a spending largest this wide year the years. driven to year broadly by pace aside our FX attitude

Paul Chung

course the Got capital expect any it. And strategy the then material last of update question we priorities, changes kind Thank over any should to on allocation is the of year? you.

Lewis Chew

Sure.

have I -- capital think multi-pronged we from do it’s allocation time record we a time. acquisitions do do we dividends, I’ve have been buybacks, that saying We on to strategy. pay

So to I think going forward we’re going continue to that. do

here in that items of like tend course minimum stock dilution those buyback that appeal listening offset of fluctuate we but to to comes the our parts think audience given least in three the various and the at of quarter on all any I can to comp. from at longer-term

Operator

ahead. Barrington Jim Please [Operator our go will take from with next Instructions]. And question we Research. Goss

Pat Sholl

is Hi, for Sholl Pat Jim. this on

to end on was quarter? as across installed getting signings just repeat set the bit question color the the one increased the of then of office just on you total you Cinema, guys of number right how terms relative indexes based are where the just a updates to you Dolby could related little the provide of Just wondering partners, on that I on screen and you could it footprint your number the box at product if like of now is in if

Kevin Yeaman

Yes.

ago. Dolby we Cinemas year that. to up let and have We XXX XX about said a that's So running that start me with compared

more you As continue pointed quarter. this out we add partners to

very very, think I both surveys are that's quality We averages and quantitatively with of the qualitatively our a consumer performance pleased very course are the three strong because we're the of of we really -- do function first the and screens of experience.

Operator

Next we'd Ralph William have Schackart Please go question ahead. a Blair. with from follow-up

Ralph Schackart

where quarter. plus the and more higher want asked talked year-over-year sort provide On you to growth your mobile this then, a XXX as of so quickly. in the you're of higher of color growth in in just two well double-digit two. get Thanks. rate. just little just I'm penetration terms between And Hi, maybe if quarter wanted sorry current can of Kevin you towards about those as timings me terms surprised bit percent on for the weighting rates more payment the nobody long-term still marching goal thinking

Lewis Chew

year that the Well, were this or models. driver timing for quarter CE probably volumes the pro the give is is new by not evenly increased of year. mobile the Ralph helped what but from that revenue do fact But sort throughout quarter new in I was also some payments sort models breakdown by of we rata the and to clearly want this of spread highlight can you in higher I

could is fiscal full So hard more by you this we say other land quarter down break year, helped to that had a but it both. it's that's than was for really that to me argue revenue to attributable that

Kevin Yeaman

contribution and to last pointed that's return growth. Yes, because our like sustainable of we've out earlier progress to of couple raised you each be business. and quarters revenue goal double-digit really getting Ralph continues a I strong the across to the our we're as guidance

we're get achieve in both growing we and revenue and double-digit that's we're said to to initiatives that initiatives our across as growth. getting as of audio need our goal well continue our the formula new business contribution I sustainable As the to new

Operator

call our Yeaman turn over Kevin conclude like session closing or any does to for today. that back to question-and-answer additional for conference the I'd comments. And

Kevin Yeaman

everybody us you for And you Great, to well updating again we look soon. forward joining today. thank

Operator

your We now call. and that for may And conference thank concludes all you today's participation disconnect. you

Dolby Laboratories (DLB) 24 Apr 182018 Q2 Earnings call transcript