DLB - Earnings call transcript Q4 2019 | 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 Fourth Quarter and Fiscal 2019 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, Thursday, November 14th, 2019.

to Investor conference Relations like Dea, to now of Director for would turn over the Jason I Dolby Laboratories. ahead. go Please Jason.

Jason Dea

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

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

some These A risks from can issued earnings that a under Factors, uncertainties actual these may Form press release statements. include our the results reminder, discussion the Risk to XX-Q. subject to will the of discussion are As materially statements cause today. made found risks in of today's on in and be captioned recent as differ that today, forward-looking statements as report most and we well uncertainties section

obligation to or Dolby made result and forward-looking statements as intend this information of new does any not during update call a events. assumes future no

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

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

introduction that, now turn the I with behind So, will us. call to Lewis.

Lewis Chew

Jason Okay. everyone. good Thank and you, afternoon

XXX, revenue to we standard revenue. accounting us new the year's at of adopted that As full the used and a retrospective this previous beginning ASC year we method reminder, recast required the and

that figures as is XXX, our quarter. FY shows is quarterly So, the we revenue the last and earnings table that under published release within same table a adjusted XXXX

those my under numbers to in recasted prior I year commentary revenue So, number any XXX. refer are

in the the of was million both million let's services at QX fiscal products QX the year's we total million, was with fourth to XXXX, In QX. revenue the guidance quarter. of line revenue and that revenue million, compared $XXX $XXX $XXX $XX in last Licensing those results. go the $XXX quarter beginning million quarter were through while was gave of and in for the So,

end Broadcast total licensing fourth by was were on they were XX% of Here's up year-over-year in higher represented however, markets. about that and QX. a about commentary revenues recoveries Broadcast recoveries Broadcast than driven XX% my about by basis, quarter. sequential as were revenues and were in lower the down XX%

the QX the is devices organic of in Mobile to be in obviously make of fourth XX% XXX difficult that space caused is last business we recast mobile year's QX in not reflective the a total represented approximately and which a about space. the quarter of licensing because, comparisons licensing, X% year-over-year quarter to have meaningful mobile

they and under that devices this space. a than But by that down into are more were and mobile Dolby I that's was was can say timing mobile contracts. contributor widely to On key our sequential due about a to now year a ago X% adopted technologies of mainly revenue growth in basis,

was down sound licensing several across Consumer higher X% a to the recoveries on CE by total lower about device XX%, of increased fourth about CE categories consumer and about and adoption electronics basis, of due in XX% the year-over-year by licensing represented DMAs. including driven quarter. mostly sequential bars

to but ASPs, down quarter. about in mainly basis, On lower X% of mix was revenue on a PC fourth the was total due by about roughly licensing flat. sequential basis, a X%, represented PC year-over-year of PC

gaming. Cinema sequential higher by about was revenues in to On from They in licensing partially fourth the compared up represented licensing from XX% quarter. basis, year-over-year offset driven that down gaming. was about of total by and QX were to a lower about X% X% Dolby due Other markets higher recoveries other revenues by

$XX of was Growth compared newer driven and in revenue higher to $XX.X area this offerings $XX.X sales year's last services was million QX. by in our and products million million in QX in in QX Products Cinema group. the

review in and we fourth XX.X% on anticipate percentage QX basis Gross in XX.X% on was me I in lower margin QX higher recur Total non-GAAP than had guided margin a as the licensing margins going of operating had a GAAP a gross expenses. quarter to Let now don't basis. some and and bit we sales forward. in was cost that

was was basis compared inventory that we gross and Products downs product XX.X% gross had discontinue. to to some quarter QX. projected write what was a margin or we fourth margin on also QX due services in XX.X% little to that the decided below and GAAP in a items

back Looking QX, bounce forward into should typical the more up margins product levels. anticipate gross to we do

gross is what I said a same the margins. gross basis and in non-GAAP XX.X% margin services the product here was Products compared on to and in quarter fourth comments XX.X% QX GAAP apply about

expenses were restructuring of expenses of to decided related that facilities lease to of in on $XXX.X were operating expenses which and quarter $X which which million million, in quarter third Operating $XX million million, vast to included the total the these includes basis in of a the and $XXX.X San expenses exit. restructuring compares Francisco we GAAP fourth majority

non-GAAP revenue million the was a in in basis the or in $XX.X GAAP fourth of XX.X% year. a or $XX.X revenue expenses $XXX.X quarter. on Operating were in the income of to QX third quarter X.X% of compared last million $XXX.X basis million compared Operating to quarter fourth on million

ripples a QX is and I'd number, to and non-GAAP XXX, year's GAAP both income through And this under revenue that results. it lower operating under last other to applied was recast in and words, like lower XXX what than to been note that has

$XX.X $XX.X fourth of million in last on a non-GAAP of of compared so, or XX.X% was QX the basis And quarter in income revenue year. or operating to XX% revenue million

I during little because in The effective on was quarter. XX.X% than guided The QX GAAP discrete rate rate and a higher XX.X% charges basis. a on was tax basis income tax of non-GAAP GAAP a the

million was a the $XX.X little diluted compared restructuring was in year's per per rate $XX.X guidance and share GAAP EPS GAAP diluted a last or the quarter mentioned in a or higher fourth below to million charge our share QX. due second ago. just on to I tax $X.XX $X.XX income Net basis

Net million income share diluted of QX basis line what EPS or $X.XX non-GAAP on fourth $XX.X was in diluted the we quarter year compared per non-GAAP or and a with per had $XX.X to share was in in million $X.XX projected. last

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

from today a X, payout also our to to raising announced shareholders we of per on new November $X.XX be XXXX of We that a by XX, payable per payout dividend share will $X.XX record XXXX. December cash previous on are of per which quarterly $X.XX share, share

results full in FY QX, XXXX since Total And let million FY was it’s to $XXX revenue million of compared $X,XXX $X,XXX Within while revenue me came for XXX. for give we revenue was $X,XXX and had as consistent XXXX summary products that what year the in under with in million. FY quick year. services at the number, a the guided, XXXX licensing recasted million

diluted of the a revenue. about $XXX operating was non-GAAP the million was $X.XX year million income a revenue $X.XX million $XXX on of per diluted full income million. the or $XXX GAAP and flow basis $XXX million Net XX% operations non-GAAP on GAAP about was or per on $XXX for or per on around Operating for a net income year or share basis from XX% was was for cash share full or year and year share, for a the basis income basis and

starting with outlook full year. go for fiscal Let over first me XXXX, now the

to licensing million. that million, we For $X,XXX $XXX $XXX range Within will to anticipate in range million million from FY estimated total made $X,XXX while and XXXX to total, from have range $X,XXX are total, we million. that products from million revenue $X,XXX services to that

first, adoption considerations Atmos would benefit Vision of In into anticipate this we projecting and incorporated TVs lower are for Dolby that Dolby we are year the largely Broadcast recoveries, offset and the have boxes, that outlook. full should but Here more from set-top year. some revenues Broadcast in we which

our grow mobile, company branded noticeably and from our to due licensing newer And above some we patent grow technologies of in expect in innovative programs. sound mix, revenues to primarily technologies from the DMAs, our but licensing, we average, expect ASPs and Consumer smart that we bars, speakers. to projected pressure PCs. with PC offset contributions continued from adoption expect by from of will In be some is downward electronics

But screens the recoveries as also other of similar Dolby life are currently in we number projecting we in XXXX in we the FY automotive consoles. did of gaming now, XXXX. plan new and lower FY gaming category, from expect as because other revenues In right lower growth cycle Cinema, to we the a in add licensing, of

And grow. for in products services, we while expected relatively to full are and finally, flat to the Cinema be Voice projecting Dolby products is year

XX%. basis. to the we million from for Operating to projected GAAP basis a million to on are non-GAAP, range non-GAAP XX% projected year for range percentage XX% $XXX on margin from GAAP and $XXX expenses XX% to to on is Gross $XXX to $XXX a range basis million million from from to expect and margin a gross

non-GAAP. million year XX% Other income effective The for GAAP tax range for million income to for GAAP non-GAAP basis. expected $XX year on a is the estimated $XX to both is both range XX% from and from and to to the rate

factors to earnings a That's and on full $X.XX on $X.XX Based above, range GAAP from year. the $X.XX share full we basis. diluted non-GAAP year a the to will $X.XX the on from estimate per basis

on quarter me fiscal to XXXX. first of Let the move

revenue will products quarter, to services from that, range to will is that $XXX we million, $XX million from from million. that and first estimate $XX Within range million while For we the million. total to licensing projected $XXX $XXX anticipate $XXX to range million

margin XX% $XXX estimated range to million QX estimated to $XXX a gross plus a or a million is from basis basis. estimated be from percentage GAAP is to to in on around non-GAAP minus. margin be and on minus gross $XXX XX% and Operating on million million QX or around non-GAAP plus $XXX the GAAP are to basis expenses

our marketing QX increase year. by the are that back activities in that see being and the half the QX we the drive And this increase year the in than over spending first more certain of where is now, timing of half concentrated of programs, the driven

sense look full-year a guidance at to that the to can you So, get of that. relative

on effective Other income to for $X our million GAAP from $X the QX for range and basis. XX% a rate to XX% to quarter tax is range projected and from both is projected to million non-GAAP

basis GAAP covered, factors to the range a will that just on a of and diluted basis. from $X.XX $X.XX QX we I from $X.XX combination non-GAAP $X.XX on based to share per estimate earnings So, on

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

Kevin Yeaman

Thank you, Lewis and good afternoon everyone.

financial in solid cap Dolby. performance another of XXXX off year Our results financial for

grown last Dolby Vision, Atmos This about per grown even earnings by three has we Dolby annually higher made X% primarily driven average our with the Over and at revenue on have progress rate. share an Cinema. the years, has Dolby and is

like how broaden we are how positions I'd on head growth to our future. as even drive grow that I'll of the progress we and working continue in it to reach Today, highlight into reflect XXXX. the technologies to to higher to also

and are Dolby to of the hundreds Cinema online. services, ago, and broad consumers Dolby Dolby experiences content, globally TVs were of years Dolby accessible across Atmos Three of just Dolby locations. coming range coming Vision first cinema Atmos millions first bars Today, devices, and a Sound were Vision to sites and market, the

One year Apple's Vision highlights Dolby combined the Dolby the is adoption this momentum of and at Atmos the experience. of

and content Dolby first in month Catalina, XX Dolby products MacBook in Apple and Dolby iPad titles Atmos. Vision those for original With all the time. and iOS Apple plus macOS release and launched both with also Vision the now TV iPhone, Atmos support of Dolby this is

in to supporting Disney The world week, their Dolby Atmos films along launched including Wars the and which of original content, of Dolby plus services it. the of across most Vision streaming the and experience their now first available in Also Dolby. expand content available Mandalorian including with library are Disney continues is the Star Dolby combined this of The expanding availability format. seven is

soon Dolby In Now the Dolby India Atmos became Dolby combined and delivering the with OTT in Vision in be and first launch recently upcoming India, their will service experience. originals to Atmos, Eros

quarter. streaming Atmos and the enjoy this excited particularly Dolby but I'm early from Atmos It music. both Group Echo enabled content fans Warner is way resonating the of of to launch artists Music with library speaker days, Universal as a Music. experience Studio the new about Music is Dolby and The a is Amazon with growing still smart Music first Amazon HD completely

with of a engagement few Music the from a opens more and similar the Dolby on what in Music seeing is Dolby to Dolby experience. artists Atmos passion level that Atmos that have are I'll minutes. opportunities create We up us directors seen we've and for Cinema

range in in Dolby in We've of also broadcast month, Dolby the the in in football their college festivals time of Rio, continued as broadcasting DIRECTV to events, allows Atmos and games live expand one began music ESPN Dolby Brazil. the largest was Rock Comcast. Also world in with content Atmos prime

the For expansion. global XXXX in Cinema, theme been Dolby has

have in the a will Including markets. during have presence with And of and The And Kino we about Dolby XX first Cinema Germany, Dolby a box partnership the month, Dolby Russia. the open Cinema Japan, open overall, the global Kuwait opened top XXX UK, Dolby to seven sites globally. Cinemas Russia, we in OKKO now Cinema year. announced in last first office

With of and Dolby devices, content. their a Dolby entertainment Vision growing content and Atmos enjoy setting help new and amount standard people a are

growth sustained progress ability revenue in and earnings XXXX Our to confidence us our as in fiscal gives guidance. reflected our drive

double-digit increase ahead also of our achieve growth growth. to to and opportunities our rate We see goal

Allow take some to these opportunities. of me a few let me minutes to highlight

stage Dolby adoption cycle Dolby We early Vision are in and the in Atmos. still an for

XK For last Dolby year Vision example, each great we doubling have progress years. the with volume made on three over TVs,

about opportunity Vision TVs. total as in TV the and high grow We as XK adoption the now Dolby Atmos both is estimate ahead XK shipments of see on of continues of end We Vision Dolby XXXX. beyond expands market Dolby and present that as XX% a to percentage TV

at in we the inflection we this. for resulted are categories hit have growth company, cycles, PC. higher know And that and earlier technology in adoption stages In beyond and of the like TVs, previous even adoption we points for do revenue formula mobile

Dolby on Dolby to Signs as adoption of deeper make forward devices. watch easier increasing Increase the it adopt, new amount wins, available among around to and consumers our experience compelling ultimately, for include penetration partners to and world. the go more in new valuable we partner content categories and device the of throughout for continue for partners passion lineups

the Bringing types to to content an accelerating growth. of experience is Dolby additional important path

experiences sports, even available invest gaming, making more to in content. continue of will We Dolby and in user-generated

example Dolby products. Dolby smart for experiences. our of of launch The speakers and Dolby Music value healthy Atmos proposition Music ecosystem new audio home by is create enabling A an increasing will opportunities in further other adoption

position not to enjoy In our comes automotive, mobile, a largely market, it Music based bring primarily from rear on value built partners, strong broader and also devices. attractiveness revenue, these entertainment. in value experience the high of the to population of seat can increases Dolby we brings also to today episodic new have Dolby a only theatrical growth the our more the of content. Music, presence at and end where

also for opportunities additional can innovations continued growth. Our create

technology Dolby create areas where additional in we speakers. example, engaging our opportunities are can smart and Voice like in value PC For

technologies, entertainment With with and broad unique and accelerate many We a to Dolby the enables exciting have momentum us new with new breadth our we bring we value of our continue have position audio opportunities and ecosystem. add partners our to as continue premium experiences our existing codecs partners enjoy Dolby throughout adoption Vision of growth. to Atmos, devices, established it the enabled more and to

music. activities areas, experience. tell of of of decades studios, We These famous and through their the look TV, the ways by directors powered world's stories realm the and to artists, experience premium entertainment. to our we Beyond are movies, now innovation to enable these Dolby and extend many for continue beyond most

to around colleagues, Today live visual with the a in skill, our experiences and collaborating almost all we new us media see audio world stories we where our to to learning lives, enhances aspect friends. of improve of with these quality sharing media how a every from or perform opportunities

to you Dolby we areas. keep new will as opportunities more streams. create in reinforce both compelling as revenue experiences I posted well ways see enable to our progress existing continue in as these And We propositions that

highlighted So, increasing the in locations an Dolby Cinema XXXX experiences Vision wrap-up, devices around the Atmos was amount and by momentum across enabling of content, to Dolby world. services, and

to into the sustain are earnings XXXX, ahead within able revenue the adoption growth. we gives technologies As we'll head we that road the advance be on confidence cinema of focused to Dolby ecosystem. and entertainment and This consumer us

are you. we growth accelerate I we addition, innovations. the believe to forward as we look of In well-positioned reach our updating to broaden

will I to that with turn it over Q&A. And

Operator

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

Ralph Schackart

questions Good the of understand you Dolby longer afternoon. sense that term when of just a year? Dolby as that potentially growth, what's and you of you timeline of Kevin, exit commentary accelerating Would just the accelerating couple the us I together. that can fiscal talk give about you growth. something But that? Vision on on some Atmos this a could occur come have be

And then any have guess how maybe get you I and there accounting a to rate a is how just but XXXX to trying there previous switched here or a follow-up. know treatment a is follow-up and year, if I this XXXX true given is, sense growth XXX the Thanks. is I fiscal comparable to of switch

Kevin Yeaman

Sure.

might So, comparison true some have Lewis on here. the I'll our take the I first one, give -- first color

lot the of you allowed and to and us single-digit has we for rate see built Vision gotten So, are growth a high Ralph, that we Atmos, we -- get of have opportunities Dolby to thank mid -- with momentum we yes, acknowledging so Dolby and this proud up to really ahead. what that's

difficult us but and It we proposition answer where past, that think further. to the of amount I exiting that to to available out what today why include I I guess we predict short script in increase inflection we devices. believe growth hit do are for them, that increases of those I the asked your we been we It's question to after accelerate more to continue that in are want for the know And it to has know these the I see year. you and -- whether the the opportunities opportunity content laid is to the difficult where could is could. it some the -- on areas would points. And could be believe that people takes go us rate what

just Those the you heads can enjoy experience. to You look at on all to that Night, to plus, Apple want Dolby as progress we the we've made down Football possibly fast College inflection there are where these recently, just drive more plus, and are now reasons TV get are Saturday Atmos going the can. we Dolby Vision, are Disney as are toward that things us point working of

And that's can to excited Music recently. said, context with Dolby devices I I'm quarter, opportunity play we and and new in as had Dolby for the we very open up us Atmos of about beginnings haven't something the which this that for Vision think

do want talk to you Lewis, XXX? about the XXX,

Lewis Chew

year to under Yes, didn't and XXX. so any the question, we XXXX the -- Yes, truly effort. the was on operated is we the think time year just clarify topic really I that fiscal take we that XXX, nice at to spent it haven't completed first just in much on was your reported Ralph, company touch

point. We it and could XXXX a comparison recasted XXXX be so that

XXXX not XXX, under opposed sort new the as rules. believe comparison, we're a think fiscal giving operating both under of as company but that it fiscal XXXX to XXX versus is of accounted guidance for means that applying the So, only I backwards fair

Ralph Schackart

call comparison. just just kind Okay. of, different let QX, I a can't prior to on different think topline guide, it's to up readjust lower The specifically? line go But me relative the know year But I back in ask a was the In you than it be get time, question. expected I timing could know anything in factor to out at QX and your sometimes least you'd Street. quarters. a tough

Kevin Yeaman

QX the pattern of published out the on point us. by XXXX the different ours look there, things QX did let's at of pattern. not on than to that sort XXXX was are actually those the Yes, our say consensus pattern isn't first XXXX to and lost year I'd on XXXX We thing quarter out versus is that

corky anything I Lewis there know a to where driving make will numbers number to -- think a our of that our the assumptions don't probably QX QX, in was lot responsible number maybe we set that is spike anything show you run nothing hard as had of consensus the shape expected in in some way weren't for. to there's FY a about particularly of XXXX bigger probably that's the but broad differently. speak particular other than I revenue business of we speak that think

in Also sort those in any some FY in our of year larger was which have business are space, came of that under those the there have hybrid last year more XXXX didn't not of extra deals Dolby as the from revenue we QX, the part and progressed. did XXX we actually Cinema lumpy because,

that creates the in hitch little so of bit also of a comparisons. And terms a

that, So, isolate if the causing noise. you also some of that's for

to at guidance of was $X,XXX midpoint than But million look not range of that our and lot we lines million million. now $X,XXX think of The whole other in far year up. sort of think a or that $X,XXX be is $X,XXX year and that and with Street whole the year, I QX the off where totality a for the right that I that's a when million differences will landing And from of rest

of a that customer year, terms activities of seasonality, signaling think a even from way little pattern and activities QX just the in are we quarter in surge for revenue, the last to of an is not our And new our see work. uncommon bit us I our

Ralph Schackart

And give will know sometimes then products. Thank Can over the I I'll that about other a sense in questions. for growth new And XXXX? you to from turn you talk time-to-time you. Great. us of it

Kevin Yeaman

Sure.

Dolby the million could into $XXX We imaging that XXXX. that we having that Voice, $XXX Dolby we in initiatives, year those, of we felt remember between at of came in and million. Cinema one-off grow our is benefit our done around XX% few So, saying couple but least right above items, excluding that just consumer we came again about you had

and I Cinema anymore that forward, the about of so think come begin conclusion our and aren't Going each really the Dolby new going and laid those Vision further we've in as of out Dolby we're today. to context opportunities that to markets talking then I growth

Ralph Schackart

Okay. Thanks, Thanks. Kevin. Lewis.

Operator

next Steven And Frankel be with will Dougherty.

Steven Frankel

Hi.

Just to follow-up on Ralph's question, let me just understand the guidance.

So, down at not headwinds QX to reflection the the hit is should you expect more year number? we that seasonality fact about midpoint, how in the year revenues of that about earlier work a to some through seeing X% and full think the and that you're

Lewis Chew

Yes.

Steven Frankel

And big on kind was those were much hybrid last of how year? that zone Okay. and So, deals? in how that let's

Lewis Chew

Sure.

my that Let of try $XX to to of in was we $X probably in a QX, by neighborhood projected head, these that surround Last actually hybrid top me at million that. off million year some driven indicated of time revenue and that exceeded quarter the of deals. that our we in lot

out Kevin a approach, You whatever, at or some hybrid there for remainder didn't the can for is year. a much we and financial the and or these currency business, QX our applicable reasons that more may of business in in core time, instances the had be I where volumes that but really we revenue-sharing remember clarified have deals that really the reasons

and not a So, year scale projecting that year last scale again sense this that to we're QX. of the the in of gives happen you

Steven Frankel

Okay.

with drive to So, new we to belief to high business layer on your are that try going some that a initiatives this with single-digit to mid is stick the to growth harder. potential

Kevin Yeaman

technology when in-house, look Steve, major wins -- we of then our do the our we continued growth. it's it and have us us But each form confidence what's of for a in within annual on say on quarterly current our and mean, It's easier basis, Yes, an giving position I at that's basis. basis. guidance to important to quarterly that I would it's areas a we

when the we to is of we down getting hit point. point we an hit we devices -- very And that to kept I and we've that, to where beyond months that the out that, who beyond experiences, we we through an to desire higher have expanding there for seasoned likes some me if we that and can we and truth we've in keep look of in We've that point for future. -- a many have it as said, inflection And can of head know opportunities inflection opportunities after been -- here in front we these executive see who our when just us. creating we than ones about are that continue more content Dolby rates six hit cycles, have we and we in be we pipeline excited the got has we keep of growth keep innovation these even

Steven Frankel

for was number Thank year penetration sorry? you that TV Vision a -- ago year's at the the Dolby out What this calling holiday.

Kevin Yeaman

during TVs TV total shipments data about XK to market. the cited TV the and XK number year. XK today is according was I that the So, shipments of were data, TV according of XK our TVs -- And are to XX% XX% our

seeing for I on, we're don't -- know but certain -- harder been our percent but we're TVs. I about for been saying in handle a now that every the if have of we're has comfortable the XX% doubling can a you, I denominator at call, we to year. us The size Steve, number XK that that mention get shipments we've did

it didn't not down up for on bar turns If remember, statistic, gone set and once one. a repeatable uniform premium you premium, a a TVs I'd path of myself percentage XK because the out, I it's of

of we XXXX. and TVs XK XX% year shipments since every doubling launched in on we're been it unit we've So,

Steven Frankel

products Dolby and Okay. quick Cinema Wider Cinema on update. business. And one questions, just a one on Two the

In of Cinema, backlog the Dolby where today? terms is

Kevin Yeaman

the on to same we the good call, like last said the So, in and XXX installed about said we screen feel in pace at year. we we're XXX as increase have about count backlog and a Lewis position did we we're

to you markets -- some further. we the few good Russia I entered like the would and part? new place sorry But our And was those a the second all each signed quite are of look I'm that Japan, at beginnings say XXXX, us. over we wins in have for we what new represent could feel wins grow and if markets U.K., recently Germany, we of

Lewis Chew

Steve. Hey

Kevin Yeaman

Yes, go ahead.

Lewis Chew

Dolby know supply going -- Cinema. I question what's people the to of been anyway, it but is comes have size all, asking the be out

I chunks think in talking XX% or we Cinema now X%, and you to still that right it's at my either about get below of that have sense our but past in to started overarching typically when look comment $XXX million some least Dolby they would like revenue be are and the growing. we give that revenue separately, that revenues usually

And as revenues stabilized now screens -- today. number of said, just ago, some is will the a but fairly at size looks similar, Kevin it has a for Dolby pace adding give the so of of year it center second we're as you per sense

sub that forward, go now more for out, right but As try break X%. look opportunities we to we will to it's still

Steven Frankel

we sales kind say as with economics If of, they that satisfied talk And Cinema. like what's improving are same-store you're something look it in about. the you would Dolby that's the still matures, and unit can

Kevin Yeaman

of market, market -- are where are Well, and of largest screens. of as XXX format per we in we those of U.S. by all Office And judged the performing between XXX the is have our collective highest Box our about most our data; screen. we -- course,

economics positive unit have we So, about all that. feel really good been and the

count. me it screen generalizations we think for draw lot for might broad markets; a of these grow early the any I to other as be

Steven Frankel

to back circle last quarter? quarter business demand, that in and I to brought Cinema think about products Okay. the the last was up, issues it And you just softer happened what's then traditional

Lewis Chew

I think it's stabilized.

This hit we're are Steve, give, quarter comments, and you And my sure can always we that year-on-year. guidance sales The products. we on make modeling guidance target our realistic cinema flat in that. see currently I try about prepared to we roughly we indicated

track going We backlog, do what's do we on. have

reset to X,XXX what is the the we we guidance in the QX, as think I to environment So, I current for hit took then and to adjusted QX cuts. try that opposed

Steven Frankel

really Dolby one. then Has Voice, been that successful? Any on now of Okay. last on that room update huddle that And the velocity in focused you've market.

Kevin Yeaman

year, year we also got didn't the focused the of partner, them Coming hotel model. introduced -- We about a just to with a BlueJeans, major of -- on, Voice end liked. grew we as we most much room-as-a-service remember, as this year year we grow added into would've the you Dolby actually were had through the partway room

much natural are a year was the That's model volume a the increased that with avail which more purchase still of able first complete is going a and -- was fourth -- model. themselves through to their option purchase an to that This quarter of experience the That we're CapEx subscription. saw Dolby customers with so the really from in the full cycle. we quarter is

that We added LogMeIn during have the they fourth also and quarter model.

course, that revenue over less of time. revenue would be Now, a recurring but stream upfront, nice

with way particular, in of room the the on hotel and purchasing this much natural experience we're So, in think model to a I focused offer this more is market. that ability still

Steven Frankel

you, Kevin. great. Okay, Thank

Operator

B. from with question next come will our Wold Riley. Eric And

Eric Wold

you're that Thank I guide you. guess up of is QX the in Couple I XXXX. questions. like cinema the continues it guess, first, fair. the drove just sounds following QX the on one environment in you competitive around saw market. into I guess in that anticipating one, the hit lower last

or the guidance both products offset growing? And your then two, product in cinema Cinema and by year, for Dolby is growing for services traditional

Lewis Chew

just to this grow be do FY for gave in revenue Cinema about anticipate refer is will just Dolby We is Hey, clear. product products Lewis, to Cinema; products. we specifically Dolby XXXX. a I guidance cinema the cinema initiatives flat Eric, the being The

Eric Wold

Not years? going front-weighted. prior is the something Okay. shifted on the on guess of what new one, going that I the And that I question called to toward QX to the versus beat spend is spent timing. back And as at then you out being it's before. more that in marketing spend that -- spending just you all timing haven't -- the guess

Kevin Yeaman

our in to combination and industry being and also toward shifting, a understanding engaging It's marketing prospective have results where you're that when is have a the that awareness of creating and you you that our partners how you Look tell make know leveraging experience, we the an is timing marketing yes. events of driven are, partners it, sure story experiences. know it partner is in Dolby great and these are having partnership consumers appreciating great and that

that's you've we of year, be this the And are are where and a the in you've year, the think got want going it. more to that's when that that's we got dollars of of moments those award seasons, the to concentrate we holiday front half because season, part the

the a yes, experiences dollars through with so try those into revenue, desire of make weigh things aware some are them. budget to the within going coming half that of Dolby the first -- year, to overall And that see people they and where and yes, sure more can we're the for that us you'll of is the as percentage get and message new same create

Eric Wold

cost And licensing continuing just the products in and the not write-down was of would much forward Perfect. then how kind going or that you're higher what and that due of the goods Lewis, QX recur to that was was incremental? of causing

Lewis Chew

that No, licensing of up additional just of recur a level of QX the IP margin. quarters that anywhere level. shows that was sales product discontinued cost The with or we the future a some of we gross cost in Yes. near some to products that to and relative bit piece little that we extra spiky in so don't anticipate our at write-down incurred in

Eric Wold

one final from a just then me. and Great

-- total in other, sense us total I can an assumed kind guess recoveries expectation and out a the broadcast year what's of called lower and for then that of maybe give You you you recoveries what recoveries XXXX? what's between and delta guidance what's in recoveries lower XXXX for the expect this caused in

Lewis Chew

Yes.

As you try can level. to forecast down to not that we imagine, our break

So, total see company, did the directionally. whole In XXXX we fiscal maybe question for recoveries rise. in can answer I the

to like to look were those what be bit might because our partially XXXX, XXXX anticipate models FY will lower a construct it anticipates we that forecast use try higher. FY for we As we little and currently model our

land tried recognized how of you progress in will in I can do QX, I and that best as to we through give when markets guidance we so year, the see on what I the lands. that guys actually Beyond we updates gave to

give happened at total company. just you for thought in back some some see it's higher I forth, recoveries. We least whole years sense this so lower, FY But and in and of did higher, the it some years XXXX

Eric Wold

you Thank guys. Perfect.

Lewis Chew

Yes.

Operator

with question Chung next our comes JPMorgan. from And Paul

Paul Chung

taking for question. Thanks guys. Hey my

talk drag the just like your on like it's for you kind was higher. free kind working XX% some fiscal It and CapEx a had on and which of puts off, first you a So, about can cap year on takes of looks flow cash down looks bit XXXX.

what's if expand So, of days, successes your you cycle on how could with cash you on kind impacted? going

that follow-up. fiscal Thanks. And a expect a free of we net $XXX then as we hit look pro like XXXX, year amount? normalized hit kind million, And income looks north more should conversion income at you your forma of I've net Can for which cash flow. will your of of kind to

Lewis Chew

Sure.

it cash the don't of But from right look first I whoever our mean statement in press operations was cash thing at been have I for the $XX clarify think don't in down release. of it, down flow flow listening front The I rest is, if million. XX%, I'll have on call -- the may maybe the in is that I is

talked these for which known is flow year-to-year of the under by to to most under a XXX, than a profit you XXXX, see some as balance sheet your it revenue are that function producing course going and FY quarter in business, at now sooner because about the accounting of some and these remember, margin quarter-to-quarter our to but yes, on love, business cash this whether during related our recognize we things alluded always the high contained new to high the some part, or is are business, rules extent are So, I've for you be affected most we XXX, a required and fluctuations business a effectively question, were. you've part, as

you I And has those customer understand as XXXX bit more we not booking the now balance comparisons quarter will, into build pure FY we estimated started necessarily that that, can but first quarter, each revenues sheet. where But will we move if does was because a XXXX these that year my sooner. think transition affected mean our become a little FY

our So, I as normalize. that flows we think work will to through our cash way start

above QX just look we operations was cash For example, that million net if cash flow flow. I reported income. $XXX narrowly from at QX

but a a QX. a good what a example So, we number how it's boomerang bit little in positive lower of was got of

No, we were move we from and would free operations our like anything cash as in substantial think flow I change you even XXX. before cash to flows that. seeing FY into So, start mimic XXXX, have under forward expect to our terms no what or

Paul Chung

from like up it might more bit increase spending, Got little looks your guidance a on lift look are you. it your kind kind and X% like looks your of guess to pace at then flexibility gross margin I pro you be of for but your I your kind And higher to midpoint, OpEx of operating similar forma X%, modestly. but licensing a margins -- mix of some if gives growth revenue at the your

spending, kind your more pace Are you model you. see of in for really the of leverage that kind us in operating and revenues hit with mark? it of comfortable is double-digit more when to this order about Thank

Lewis Chew

let grow qualitative Sure. guidance the sort off At X.X%. revenue growing we're expecting are in than providing guidance, year come in I'll we I'll of with again the of neighborhood we're start-off the OpEx numbers of grow fifth of neighborhood for to where to once add, consecutive any midpoint finish our the in but revenue faster probably and with X%, and Kevin OpEx. the

I in continuing all business within forward. that non-GAAP and think operating would context, So, going is at least of committed maintain the margins hanging sustainable model very that Kevin, a have together and that I of we XX% as neighborhood

to year terms we operating leverage degree or be that said In Kevin the guidance by is opportunities for be happen to that. a as of growth we margin rate some revenue the going helped is more But best happens. our than growth, second what of at do ago, currently guess think for what affected are think revenue higher our the there will to for

growth is XX% growth. the talking EPS run. model is model trying than mid below growth, to that, I strong. That to we're higher of the kind and operating about revenue single-digits, or think very very, margins high business revenue of that So, OpEx We're growth, better

Paul Chung

Thank you.

Lewis Chew

You are welcome.

Operator

And moving Research. on Barrington to Goss with Jim

Jim Goss

Thanks. Couple of questions.

United venture model, States? type Dolby think it as revenue Cinema, across economic is model these joint in markets, sharing of the the with is model First all I

Kevin Yeaman

revenue pure those did smaller larger have revenue we that are payment majority sharing, time have last time. under upfront and vast about with The year a from we and share we'll expect a a talked ago, a to few fell as Lewis moment

the market driven to risks will the whether majority and financial by continue is we mostly characteristics the want in to in but It's are on of the and full the revenue move it's things or individual that there be if -- vast of to particular, model, depending the share model. where screens

Jim Goss

revenues think just-- might licensing of product were the so in you theaters might be usually dollars the area, some those some are I'm the I And product in that sell or

Lewis Chew

revenues-- The

Jim Goss

statement. income --your

Kevin Yeaman

we in product products include that will sell do will revenue-sharing, and So, in be where licensing services. revenues and

Jim Goss

revenues So, of your Dolby are do services total and across technologies? your And Vision Cinema, looked do get terms think statement. into to affected income in they what those and by and of categories, if since Atmos you you various share

Lewis Chew

think Dolby revenue think break we say Atmos Vision and we don't I yeah. -- item. don't out I shouldn't as Dolby separate I don't a

I Dolby Kevin Vision anticipate you from which Jim, to comments a or revenue and Atmos. solely think separate just a Dolby the summation we his has just significant and don't prepared contributor of mentioned asked out but that growth our rate, what are breaking Vision Atmos in combined

I said, as our Cinema are of total and lot into company's if that and a revenue, Dolby a Dolby already Dolby devices, combined Atmos Dolby Dolby is I of effectively indicated, different than revenues So you growing. go, as can X% that experience less Cinema goes and today Vision but

Jim Goss

Okay.

quality. qualities it Another that while fully in by music system bring to take recreated I'm as your seems the come things in iTunes system part music, see get to momentum number are be the to seemed it to -- I'm to where various to cause the you And have a intend will music there through you advantage wondering, for there will you factors some able fully is the of good It your a audio Are but so is a factor be always there to encouraged technologies. appreciated category, the affected be table initiatives, trend. least dumbed not it into of limiting had a really of qualified it down technology the the being that because do embraced. had our limiting to. to to and this

Kevin Yeaman

cycle Thanks The looks a lot excited mean, artistic the community can with having of Cinema create. Yes. Jim. -- I experience that it any experience, the the adoption about and like Dolby starts Vision, Dolby Dolby Atmos, they Dolby

really Malone, good would about today feel The say the score on. Gaga and Lady you or there's Grande it we It's -- are Dolby goes the very on Music. fast. artists growing the excited I weekend, that early days Atmos about that music And from list can Post of Ariana

this think And music. we artists it's new experience as a of that hear way their -- they this a, from is to consistently

process step we the step, part that that's for that feel about So, been one and quite really of some and we've engaged good in time.

naturally available plug-ins and So, we've process. terms within in made tools their making of a headway lot workflow in their of the fit to

is the the capability. getting getting world. playback Unfortunately, and do having and installed it of device devices of we the thing Dolby course base in -- Atmos have Then second distribution

to and the with Echo Amazon streaming excited able Music, their Studio. are We that launch to we're really

that's both intend focused of that terms availability through expand it of know where the and can distribution far experience as which today. device. it Amazon the you to on We we're Amazon and said stream can can -- we which device So, as in -- they to has Music broadening footprint course, can

think really we're prepared like it remarks, but excited and the of in to, So, a the looks is we I one lot about a strong start the with the music said sell to cycles as ultimately have it that today, off it devices our we're we're are used into that us devices. value consumers who first it today opens for to reasons that ability the working are increases also and partners proposition devices that really and up

success have content. It instance, product and that primarily take a for it the appeal -- in in the and in mobile the will we that in on us we the home speaker the space that much proposition space, a cars you primarily at is If use that opportunities well. broader Music we've believe movie of based end, gives as space. smart and is case our can is be high and had have think in something could lot mobile TV

Jim Goss

and get last technologies lead-time now type and past have at the a way of Okay, years. it three you long technology great. in market three were are in Vision And the this Dolby thing, Atmos new terms that the at creating developed business years sort Are ago. there they over stage a any of

years So, talking we'll the in same about three be in way.

Kevin Yeaman

Early areas so about our in market. technology I doing that in of how about days, Where and you and the call our moment the innovation but for did which something some PC ago of room we're along space, we in, we're course, and that excited hotel to that's cycle. but a progress today, we're that coming potential of see Voice, talked opportunities pipeline of opportunities beginning some think other things also fundamental to our Dolby for see instance, in things feel about far mention the business I the I in sort great that life

on are experience the I and our experience in content. in mentioned ways innovation, increasing that our our looking as innovation end of innovation bring think of another the we also which of future at looking -- to ways we well I all decades the can we we're as current scale, our script, audio-visual

the which And it in them it made initiatives but way is we the we've can -- in space. early communication developers -- is stages, a but is the in one available of directly that is have, our market particular for access technologies

ability the companies a to or integrating service. their have are communication directly into inflow a have their that of of we number application So,

the think of notion, And the very days, interesting but the our for able technology us the in we increasingly experience to early an today. employed is media in and which form to being of now that's this videos way ways so the and all is documentation our make be to to

but that days, something early it's So, about. excited we're

Jim Goss

much. Okay. Thanks very

Kevin Yeaman

Thanks Jim.

Operator

question-and-answer And back the turn any to I'll you. does for conference session. Thank that remarks. conclude or closing over you now the additional

Kevin Yeaman

and thank joining Great, you for us today we we keeping move everybody you look well, XXXX. as forward to into Thank posted you.

Operator

participation. your today's We you you. day. That Thank Have conclude a thank does do conference. for wonderful

Dolby Laboratories (DLB) 14 Nov 192019 Q4 Earnings call transcript