DLB - Earnings call transcript Q3 2018 | Dolby Laboratories, Inc.

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Operator

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

During the presentation, all participants will be in a listen-only mode. Afterwards, you will be invited to participate in the question-and-answer session. [Operator Instructions] As a reminder, this call is being recorded, Wednesday, July 25, 2018. turn Corporate call for Finance to Carr, to Dolby like of Director and now the over conference Elena Laboratories. I’d Investor Relations ahead, go Elena. Please

Elena Carr

Thank third Dolby call. you. Welcome earnings XXXX conference Laboratories Good afternoon. quarter to

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

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

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

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

turn over Lewis. to call us, the with that initial I’ll behind So

Lewis Chew

the was we $XXX And $XX in which at Thanks, Elena, guidance with of million quarter services. products and good the revenue beginning million, from of provided these both and third afternoon, everyone. million that were quarter. the the licensing, was was Total line $XXX of from and in

this down Mobile about licensing lower to lower up up and and volume volume year-over-year the about of decrease volume on XX% as up volume, of seasonally reflected were the category in PC and the to XX% mainly represented was few compared a declining year-over-year activity basis, total Dolby The about both but about $XX.X $XX.X markets and adoption by from higher timing $XX.X services this X%. Voice were year-over-year. driven a On XX% and in third Dolby to licensing by into Broadcast and by by year's areas and licensing sequentially, also end partially in XX% cases, Product in the in in in than In QX XX% million quarter. third to over last both through payments, The sequential offset was drop ASP in about Mobile about by represented in million Cinema, offset we last of Revenues X% sequentially partially decline automotive. total licensing the on mix. was represented licensing DMAs. in third by boxes. the slightly sequentially mobile XX%, was of from up increase attributable year-over-year year-over-year of due lower PC a decrease go sequentially third but licensing devices represented TVs, and was me in million boxes, licensing Voice, other a and up was basis, set-top QX. by Cinema driven revenue of was total in of more market. details sequential gaming, the more growth market revenue seasonal revenues other in Dolby QX revenue approximately the both in recoveries our a quarter. down about in third sequential increased by electronics XX% the of year. total X% growth by about Gaming higher on products Consumer and from decline quarter. primarily by of In grew mainly by the year-over-year offset our driven cases quarter. about set-top higher let and from CE in quarter. PC XX%. by So well as higher devices. X% XX% total about partially from was year-over-year technologies represented attributable XX% by Licensing about increase was by

quarter non-GAAP in on was non-GAAP on margin million gross expenses. to the quarter $XXX.X second QX, a to GAAP the XX.X% compared So the QX. third in quarter. $XXX.X in operating GAAP expenses a in Total in million on to on let’s quarter were gross compared move second and QX margin basis on the in expenses was basis quarter Operating a product basis $XXX.X third basis $XXX.X gross was non-GAAP XX.X% million were XX.X% a margin and in third XX.X% million the a compared compared on XX.X% to in GAAP the to margins a on third XX.X% operating basis. in Product and basis and quarter

rate So million Other million related was tax operating XX.X% non-GAAP, $XXX.X effective basis revenue on of non-GAAP XX.X% in the million income in on quarter XX.X% third for an The income the quarter both the GAAP $XX.X this a a of income a and XX.X% non-GAAP basis was and a GAAP was of basis. million approximately equity non-cash and and write-down for revenue. to on or GAAP quarter includes was a the or $X investment. $X.X on basis

a year's non-GAAP share QX, that share quarter income GAAP per last on a compared in to income, was and compares share million net diluted share million in QX of on So third basis $XX last per and $XX.X diluted year. per basis that to $X.XX or $X.XX or the quarter for net $X.XX was $X.XX net diluted per third in the income diluted

common shares stock operations the we $XXX authorization of We in billion about about from with our the over ended had investments. the generated third of $X.X at in June. stock million quarter, quarter back end and cash repurchase over million QX During cash and in of $XX bought and XXX,XXX

So stock, million currently common means million combining is up authorized of with about we available stock today $XXX repurchase that the to of going authorization repurchase of an that that our announcement Board additional forward. $XXX have

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

So of now let me of provide outlook the the the with the and along the start fourth year with and for full-year I’ll quarter full-year. course that,

that that, $X,XXX,XXX,XXX]. estimate from are we FYXXXX will full-year and to from range anticipate we tightening revenue full-year the midpoint the revenue that with $XXX we million. last [$X,XXX,XXX,XXX midpoint. range and For licensing be quarter gave will services of to We range guidance one that will that same but quarter, around the maintaining Within $X,XXX,XXX,XXX] [$X,XXX,XXX,XXX approximately to go products

factors basis up. recoveries revenue licensing consumer while embedded around GAAP in expected growth anticipate imaging higher broadcast Dolby a in imaging and from to booked Gaming, that was expected income from expected QX. outlook. million revenues to the full-year the to that that are be of QX Here on lower to for significantly a for as positive to set-top for offset to plus to adoption that some $XXX recoveries should to projected a higher or got basis year offset about PC that a is the And a will the million year boxes. for the around basis. to revenues and full-year is gross be Dolby this with increase. the along plus be around category related $XXX impact down be basis, projected by estimated large is GAAP non-GAAP volume million $XXX Full-year a We plus other expenses $XXX million from recovery Other range in is to partially of is to are million down, minus. full-year non-GAAP be on minus, be from flat to is XX% we And and the be from Voice, electronics the large is the or a also U.S. lower to will that million course. will on Cinema, $XX margin of operating be tax audio by non-GAAP and and be lower up consumer would course tax XX% year $XX due consumer expected rate from reform. $XX Mobile tax are basis. on includes expected in million plus minus and basis, from a up, to Full-year over last product or XX% tax licensing on licensing $XX minus to And million XX% GAAP accrual On rate full-year of benefiting year. we or a be range

million XX% quarter from on Based products anticipated of to a we $XXX the $X.XX earnings services QX to the will QX we a on is from $X.XX $X.XX from $XXX combination anticipate will Our covered, and will to and projected estimate million minus GAAP that basis GAAP be to around basis $X.XX about estimate $X are $XXX be to to to that, basis. million, gross point on from factors revenue is higher. a and around and to XX%. range is range from effective rate plus projected from $X.XX range follows: gross per the $XXX fourth Other be $XX margin on expenses should we GAAP basis. just million within that million the or to Operating licensing QX million. while and a share estimated and that million, margin basis from diluted range $XXX income quarter be for XX% million I around to non-GAAP estimated $X.XX in non-GAAP total to a a on revenue on from range million to non-GAAP as $XXX the tax million are is estimates

Kevin? turn Kevin. me over it let to Now

Kevin Yeaman

Thank everyone. you, Lewis, and good afternoon

and by the We’re I combined and want Atmos Dolby experience. the Vision momentum many fronts making for progress Dolby to start highlighting on

in TV This quarter, Apple Dolby iTunes. Atmos XK Apple announced be will and supported on that

Apple by has becomes Xbox both Of the DMA Microsoft Vision this to titles. the is and month, Apple that support already on XXX first course, XK iTunes One. already Vision. Atmos supporting now Dolby Vision Earlier over Vision and Dolby Dolby will Dolby supported Dolby be The it TV announced

the combined our by Atmos. both iQIYI Dolby mobile and end Dolby the the becomes many Dolby TCL, of LG, very combined with support experience console Hisense beyond Vision in this VUDU, NTT in both the and Dolby on in Netflix, Dolby I’m traction. Vision And And Vision, Dolby these Atmos Dolby Dolby and began was now OTT name gaming and OEMs, first phone with to streaming this, to excited At are Rakuten, momentum experience Tencent, Sharp providers quarter, is Plala Japan. first Atmos the Dolby Vision to this few. June, launched Along there Atmos streaming including six So phones. combined the and TVs to about the and experience. including with and Atmos Dolby gain continues from a progress

be a the first variety For TV and will Fire systems. in title example, TV Dolby a Atmos and of streaming theater sound and including other Dolby Cube to Jack Amazon Video. Prime Prime home TV, Original Atmos bars, Fire addition Ryan, Tom devices, in be in Clancy's to compatible will

World name also We in China in live The in to more and Dolby more Brazil, Cup broadcasters Russia, few. Atmos seeing by adoption was are carried and a broadcast.

continue new formats well. sport other our live progress in make trials We as and to

you Open X, Open, French as earlier live and Dolby XX, were the quarter, been Apple Also the with Vision This XK supporting to have iOS Pro, Apple's TV iPhone with this devices, prices. Atmos and smartphones, is Dolby trials since Atmos Vision Dolby trials sound year. iPad and in know AVRs, French Huawei done a a range partnered with on devices, phones. we broad now bars range and Samsung TVs, of wide PCs, AC-X of at streaming to Dolby including available tablets, live iPhone

launched this truly speaker quarter, Dolby a Lenovo Dolby great the two system. Lenovo partnered the and deliver PCs with design This solution, of experience. Atmos Atmos its to on subsystem With we new with speaker layout

streaming as in began China Dolby a Dolby me in OTT Dolby services Vision. little Alibaba's now result, on more the three Let Vision, Vision. recently support touch top a and YouTube

We continue in being adopted mainstream to TV Vision models. the see Dolby

are now a We as have nearly price TVs at XX partners point as Dolby Vision and $XXX. available low TV

as, The are such and Blu-ray shipping PCs now to and from Dolby coming Vision more partners, Lenovo LG. first are from market Panasonic, players Sony, with

Let’s turn Cinema. to Dolby

partners announced This quarter, we new several world. the around

presence our in new partners. expanding two We are Europe with

first UK We Germany. bringing for Also Dolby are will the Odeon to starting with in quarter, Cinema Dolby Kinopolis opening Cinemas the the time first Cinema be seven Group, announced with it this locations.

screens open or to quarter Dolby progress total, the XXX now partner screens be first in announced content for this Cinema we Dolby Cinema its Dolby and October, AMC over announced milestone The have National opening with Dolby open open in and brand. the in week, titles they locations committed with in XXX Earlier total, open. our XXX first Dolby pipeline the are In Cinema Cinema its with around we and about their over opening today we We happy as of Cinescape reached Kuwait Dolby world. continues have have Atmos also Cinema. this nine or since Cinema released. Cinema will the they Gaumont XXX France Vision grow Pathe we with Kuwait. Dolby In under Dolby Company first

the on end Room are did shipping The Dolby and to continue with we Incredibles offering support to Wasp quarter to make major And see all best X. to Dolby begin the moviegoing the partners we releases the the broadly Voice, forward at our look the experience around more and pipeline continue and studios We newest our initial and available encouraged Ant-Man working of recent We include; world. from activity. by Voice

So results with pleased to this wrap quarter. up, am our I

including both momentum world. are Vision, this and Atmos to consumers new and and combined momentum in Dolby for the We’ve quarter continued content partners around reach several devices Cinema We Dolby in experience. seeing our expanded added the Dolby

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

Operator

comes and Blair. you, Your ladies Ralph Schackart from gentlemen. Thank question [Operator with first Instructions] William

Ralph Schackart

afternoon. Good

on I thought OpEx. we question of is had think than for quarter. First OpEx better sort was modeled, you than the have

next if in any Just the is spent into push to curious quarter? OpEx under perhaps of original if quarter relative there and you plans,

Lewis Chew

that. That so can foreign I’d a bit – in probably of little some this what this we this quarter, Lewis. Also, is have for we’ve we modeled end any lower say say in the quarter, of Ralph had are given yes, at I’d that, we quarter of exchange.

may foreign But You fluctuations pretty in tract. much that beyond we we’re that, I that I are quarter, highlighted exchange. some think last on remember seeing

for we the quarter certainly that yes. think I have from programs can that out one we year the to next, shift modeled

Ralph Schackart

point, this to on question – or sustainable give and that about Okay. the you the us Great. And Kevin, back thoughts then march sort for new get at you this plan selling double-digit to revenue some streams? of give plan on update to serve usual growth double thoughts products what your just year think during continued an do you those

Kevin Yeaman

Yes.

in in combined great devices. and The so to Atmos continue those Dolby see. some to many Dolby talked experience to each sustainable of of with I Dolby well for and we Cinema from love both the returning together focused initiatives. really the growth. progress. many on and double-digit be initiatives about progress services really highlights are new is Europe We and of coming That see I Vision with the to so pleased really the bodes

So about that. I'm excited

see we of to the be initiatives on track double-digit a plain, yes, about that’s big to new double. to So back from get And part obviously revenue growth.

this also in see audio year have We good to continued business. the strength core

So big the equation as part of that’s well. the

innings. see core up. next we early these we not if are good there. are with guidance the So each business, things strength and that can about continue initiatives pretty feel how for to can, the combined new to ready we are year We believe shaping we grow fact obviously, in but give And which really we

Ralph Schackart

Kevin. Great. Thanks Okay.

Operator

Frankel Next we’ll here Dougherty. Steven with from

Steven Frankel

out got you things them, the these launched know, of might of high level, what lay you've lot about like product a four Kevin, or some timing could But three I Maybe to pipeline. and focused talk last initiatives a afternoon. them. you good we come years, of in a at new ton momentum the where the behind the on you don't what’s next? Hi,

Kevin Yeaman

strong to Well, strong quote yet. talk innovation we products of at to haven't we pipeline about announced do a released and don't very I have a Dolby. I like guess culture or a you, But

I or many think so opportunity, to will audio across by surface the it's contracts. speak, And give improve to entertainment the that from entertainment years, having more experiences mean was broader. audio-visual I many area, much what expanded licensing communications that to audio-visual that last over primarily and I us that, And believe, both – experiences. and both

going the So audio-visual. that before then, music. very consumers and work I interesting And experience we I about in think, of in some the have of course there talked ways on which early

confident to is to pipeline do experiences the improve, new certainly be to intend we're and strong. find we'll able that. So We

Steven Frankel

Okay. now sales in relative you've you that per install got business? and growth good you've reached business, of how sense screen or same-store you on base, model could averages give Cinema this the then the any AMC pretty performing how And when your them into milestone us a you are to

Kevin Yeaman

Well, at our I the both very how all and absolute going, terms expecting. – about averages per in is of I pleased this strong that what into point came really screen we about in very say and it guess, can are that's terms we're

Steven Frankel

this or you around one market then Voice, quick with about this way where a the the to should as the – Okay. partners up? first it's momentum huddle a the it going And product room there rooms. any business you the think entered so scales about last in make momentum on Is that we as huddle you're like talked really BTE

Kevin Yeaman

to an those rooms area ability huddle generally, in it's we in. is fair the investing collaborative more we're both is because the in that investing have They're that opportunity huddle the in experiences huddle investing it's rooms. audio-video they're of people terms think I are what see in focused most growth on – room to say where simply that and

Some the support yet of to equipment. these that. rooms very Others don't equipment have have complicated

very the the at product focused think, so right And it's we're on the time we right reason because, is that that market. much that for

Steven Frankel

Thank great. you. Okay,

Operator

We [Operator do have Instructions] JPMorgan. with question from a Chung Paul

Paul Chung

for Thanks question. guys. taking Hey, my

year? how is I for you after broadcast, vision the reaccelerate just help flattish start this and will can more market meaningfully broadcast? of results next Can growth and us in big you audio kind just years of about vision? So in opportunity that boxes size on and both layer know probably emerging two opportunity TVs to set-top

Kevin Yeaman

our a some on take was in sure Yes, cycle with Dolby comps while what of that, success where the emerging with, we UHD, have products, there factor. to in would we TAM. do was clearly if continue were Atmos. but knew I think difficult of recoveries the rate grown Audio around we just historical Dolby year, attach some lot great seen the our broadcast, had And haven't increase – overall and Vision growth that perhaps it think big in not significantly. I with a we an the which coming Dolby volumes guidance we And upgrade area TV is having we spark one and into that to markets, opportunities to have not

On in the box side, timing the that on the pay-TV of plans set-top more I operators. would flows to come based that individual tends and ebbs and say

in It was we upgrade said And China and a that those So we little couple were China, earlier, pretty to adoption It's their we great of This just – and last IPTV have around with box and OTT of saw good of very pushed are a activity in further, engagement but feel we rollout. right for top the about just happened a providers operators year, timing a cycle so plans set-top bit harder for predict would to little looks always the has three and it they Atmos Dolby thought rollout. services. I the what little rollouts we have there a year significant Dolby like it's world their been their now. the as amount because of do have been with go-to-market bulk out actually both purchases much Vision. do

Paul Chung

little And step Atmos then really nice XXXX got momentum some revenues. Vision up Gotcha. adoption. here Mobile, in Nice we've and on with

longer kind moving about then obviously So how do lot to going term, should – see think this the next is is you year, be of forward? the this TAM larger and broadcast maybe a we or

Kevin Yeaman

for us. to Atmos Apple's think that goes. really very Samsung – that AC-X adopting and wins mobile far Dolby I for It's us of on been Well, adoption as some significant we've is Huawei it big a a Dolby gotten and a and I with be Vision, their continues as year this mean, phones. opportunity year important

lot we're making those as devices, are, like are value experience. and can opportunities market. deliver is which we to We on deliver to going which do of that that we we can now a deliver So us content throughout as think sure create better much that on with focused, think we up partners proposition, signing these is the we always to the mobile that a

Paul Chung

seems company overtake your Gotcha. And at that in eventually broadcast it this happening Do you like your long-term stage, point. segment that goal see some at model?

Lewis Chew

us. those they're markets but kids, it’s were having Paul, to Both of like too that seems markets quite and us, I'd like like of important very Hey both that it that. both say soon critically important only to so to grow, frankly. well, to not two those It's both And are so something doing Lewis.

Paul Chung

of structural accounts lastly, fiscal housekeeping in change on you. And quick What's year, cash have is there then jump just this one kind receivable. driving collections? I Thank the been a

Kevin Yeaman

quarter-over-quarter not only to QX I that $X million. at change Sure. from structurally. revenue up more our any fact, AR I look was say but $XX up if narrowly million, was there's would QX, like in And

that problem. So time, things, certainly not techniques could changed. point outstanding fundamentally our our have you sales nothing shifting collection some Over day will but I see to of and

Paul Chung

much. very Thank End Q&A you of

Operator

session. call remarks. will the additional Yeaman turn now will over question-and-answer Kevin to any today's for conclude That I closing

Kevin Yeaman

And look to you. joining for again talking everybody forward soon. thanks today. Well, you to we Great. us Thank

Operator

you Thank does conference call. today's That your conclude participation. for

You may now disconnect.

Dolby Laboratories (DLB) 25 Jul 182018 Q3 Earnings call transcript