Earnings call transcript Q3 2023

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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 a question-and-answer session. [Operator Instructions] As a reminder this call is being recorded Thursday, August 3, 2023.

to Dolby conference Laboratories. like Liz over now from Krukowski would turn call the to I Please ahead, go Liz.

Liz Krukowski

Good afternoon conference earnings third quarter and welcome to call. Dolby Laboratories' XXXX

Laboratories' the Joining and Yeaman, are me Dolby today Robert CFO. Park, Kevin CEO;

As that our of outlook including and spending, our among including forward-looking risks issues, other actual on QX from current statements that statements impact inflation, These to today's are consumer a macroeconomic materially assumptions risks specific business. fiscal results underlying may and discussion uncertainties reminder supply our the include statements in our made and issues, chain to will today, and and outlook. uncertainties other ongoing XXXX subject things differ instability business, to cause changes and geopolitical

quarterly of can well these XX-Q. assumes the the or additional statements Risk section of in update in we discussion as intend form forward-looking found and release as uncertainties events. Dolby under Factors future issued earnings and information today A our Statements as result no a risks the does Forward-looking be press made call, that any the captured and during section to not new of recent most obligation

on we discuss Investor our call Center measures is the Relations financial earnings in website. reconciliation measures. available section our press A the GAAP today's During will Analyst Interactive in and non-GAAP of between non-GAAP financial release and

get behind let's seeing us, started. introduction the that Kevin, are with What business? So in you

Kevin Yeaman

quarter. focused every towards growth experiences line outlook people more the about by came to driving year in our we're sustainable more is QX of in on last what shared bringing where types with content. for is and double-digit Dolby we and expected, more day we Well, What

we work our markets. continue With a our strengthen base across position of audio have to end to each our technologies, and diversified we foundational

diversified in. this revenues having is be to base very strong long-term position of the Over a

we're movies to patents, user-generated three design that and including to continue Dolby and music wins And relates TV Atmos, Dolby focused As drive be on long-term and Vision imaging focus it our of content. automotive growth. the areas

a that's never been seeing and opportunities there's Now a what for if content greater back time we're creates for demand entertainment Dolby. I take where just step

Liz Krukowski

areas can progress movies and mentioned, you focus you the On just about with talk TV?

Kevin Yeaman

Yes.

So continuing content movies mobile We across PCs devices on we're and your partner room to a that TV demand being boundaries are that with top devices that the who most care the starts focused driving all people about push about. creators beyond on of with driving passionate the with they're and part living and creating. adoption the experience

lot cinema. a Moviegoers summer's this Dolby been both Cinema. Barbie this Oppenheimer the quarter in There's blockbusters and around in enjoy can excitement of

area progress. we sports sports. an make movies and a So that includes is and we have to And continue presence TV strong across where

and they they Sports what together. of likely demand is the devices events these People experience these want or today course XX are love And a attached XX match. their watch of driver years experiences you same have their to big emotionally best for particularly that ago. game or bring in TVs. team did you are the communities however to Many sports

Man are games in the French were City available and sports Atmos. Dolby Dolby the and win fans Dolby quarter enjoy Atmos, the Dolby on in including Open finals championship UEFA in to the home Vision This able took Germany Wimbledon Sky Atmos where

top-tier Dolby Max launched On the and with service Atmos side Dolby Max Vision. service their Ultimate

Dolby including in can consumers and now Bros. enjoy services across HBO, content Warner Discovery more So

As of a we've streaming about part talked are market. partners and significant regional local OEMs the

the new US, earlier in regional And Atmos this and all increasing this included India. their will all on TCL, that and that their quarter focus are TV to announced Dolby in into announced continue models Atmos models be they of Dolby of we so expanding year Dolby presence. Dolby in Vision who And our Vision XK

of line Vision partner Atmos our local Dolby Vietnam. a in launched added TVs pay and India with Acer first Dolby TV and TVs we in

we expanding further on global what with this continue with providers. make good our these progress We're to and to drive regional So continues lineups into area. focused growth the in partners that's

Liz Krukowski

Can you seeing what talk you're about with music?

Kevin Yeaman

The songs regional again, Atmos Dolby than and continues XX% And this content. content. Snoop of to the starts we grow. Beach genres top more. Yes. in global with artists create further music once globally Well, and continue all to Dogg Atmos many artists Dolby XXX quarter, in across it And we're expanding from library added just More the Billboard Boys into of

the quarter that of T-Series they and streaming including India biggest announced the three XXX We Dolby Airtel's support Music, subscribers, five free now available a service are streaming thousands songs India have Saregama, million of in Yash labels Atmos, Raj Music. Wynk are Dolby This from and to top available Films. local music Atmos in services there artists going to by

local experience creates for Atmos consumers speakers, it bars, partners, it enjoy music the which phones, sound us opportunity across the more Dolby to that is a because devices. of That particularly includes Music and consumers Dolby in for range Expanding value Atmos Music into anywhere and creates automotive, music. smart much more wider catalogs gain important, hardware adoption brings our

Liz Krukowski

Can where Dolby categories growth Dolby you're talk you experience mentioned the bringing Music with device Atmos Music. car? Atmos several about just more to You the driving

Kevin Yeaman

to for we music of be early across experience first Atmos the Atmos it artists when partners to whether add environment car love Music, going is and the continue started perfect have the experience one in Because more more consumers. demonstrating are the questions their Music. was in Dolby is Dolby the which or to models this From music our labels Dolby of days we the always increasing And it's to Atmos got, car? markets, people able Yes. availability we

with Nearly Atmos. half multiple have now Dolby of our partners models car

over the models car Dolby Chinese and add available globally. models in to domestic And in started market, which a have Mercedes dozen cars Lotus, with they launched and continue Atmos NIO quarter more now This has ship and Europe.

nine from still went early over first car So two having it's to our announcement we days. and in years manufacturers just

up Our are still manufacturers. current ramping continue more and with auto we to partners engage

Liz Krukowski

Today seeing about the for with user-generated types growing you are different demand What content. content? of you talked

Kevin Yeaman

user-generated most to content, way. and share storytelling the that Dolby more and enabling with of increasing types Well, their inspires their bringing the of lifelike the and are people them the unleash by it's and more and we're realistic power those the in experience and able Vision, capture people videos content. to to amount And creativity

Android stories create include WeChat, part that perspective, momentum and media their capture have with first and have globally. platforms And a wins OPPO is in QQ. We on great social people China iOS where Xiaomi, device a our Bilibili device From can and Vision we with Vivo. of share Dolby

social adopt This stories and our million Dolby their more has phones. Vision. platform share iOS devices can quarter Xiaomi in with India's they subscribers to their Dolby Moj, largest It than now short latest media became their Vision or video platform, XXX and create

short We added now also Vision Dolby a quarter. video Atmos. a this Dolby Singapore and supports Viddsee film partner that platform in is

latest of films partner in Dolby phone. So storytellers share can our And and create became Vision first Motorola, Dolby. their their start now playback shipping to community announce and global

to is partners. creates our to and create into bring more that's giving our of content creators partners to in and to their user-generated expand device what expand on ecosystem about further, demand for continuing lineups course Growing all new Dolby access to further the services

Liz Krukowski

As working you look beyond on? content and movies is the user-generated music team TV and what else

Kevin Yeaman

things. we the just about of areas we're on working also always talked of really course, new excited number Well, but we're about a

about haven't gaming. We talked

may earlier You this week have PlayStation announcement Dolby that Sony about in made Atmos. five seen an

personalized have in promise increasing the to seeing it we're that audience lot As experiences, immersive experiences of Dolby.io, relates engagement. interest of a online

ability to between latency with high-quality streamed to of audio excited and our opens participants particular, potential about. developers possibility are a in conversations video new and have experiences In up our ability natural really provide the that along customers ultra-low sounding

what there storytellers the stories innovation our and content Stepping the we to boundaries a of can on amount always and see looking what's to what people push that's thing be means us. continues Dolby the tremendous at reinventing it experience hardware most of of hard to exciting for is they course, And work same with back, partners, We're and are important of And to boundaries those a always have push who are are to the both looking opportunities to tell. creates creation that bringing storytelling possible. life. experiences what's the

Liz Krukowski

about talk to a comes to want wrap-up you the on do Kevin, numbers? before quick Robert do

Kevin Yeaman

what There's consumers. of passion. receive There a content. across to to the a better the each to opportunities tell types enjoy of experience Well, and difference and us ways There in board It's all make of full significant of content all that to to out ways content. the amount There's is in and are are content. that's the us which for delivered. those in ways our creates that of this enabling available to and Dolby experiences more as those And experiences. are more they the creator and more bring Yes. stories been increase emotion artists

for growth opportunities we're experiences. quality doing So in of continue been I'm the the that We've going to those ahead. the decades raising to on bar focus and on confident

Liz Krukowski

Thanks, quarter. Kevin. for the Robert, the can through us you walk financials

Robert Park

Of a the to like things. details, course, I'd we highlight into get of before couple

we provided with last $XXX of revenue line quarter. total First, million guidance was in the

outlook for billion is quarter. also we Second, X% the X% on $X.XXX we're from year-over-year $X.XXX shared growth based line revenue expected to year This to seeing today, range billion. of results what in what last to in

broadcast of category, year-over-year, Products Dolby revenue $XX by category, was sales. in up higher more million, up Growth markets up let's turn in patent revenue Licensing services year-over-year. offset as in driven Dolby and mobile, and and that foundational Vision lower Atmos, $XXX XX% context primarily the audio CE With primarily million was details product QX. PC. cinema our X% $XXX imaging X% and other for PC revenue QX than year-over-year. from to million, was revenue

about Now revenue by talk market. end let's licensing

based our on licensing unit shipments. As is a reminder, business

revenue recoveries prior all is revenue difference transactions upfront. transactions the portion of or from units have These all the were which only and a volume call timing. minimum is that shipments a shipped and also recognized in given for commitments to periods, We period unit reflect related we are

volume from X% volume revenue and flat about shipments higher commitments minimum QX licensing represented offsetting unit XXXX, with up technologies and year-over-year and or revenue patents. total minimum higher from roughly imaging foundational lower were of commitments. $X recoveries Revenue from Broadcast XX% million in

total million on by revenue minimum technologies. licensing driven from Mobile represented XXXX, volume foundational of XX% basis, $XX down impacting a in commitments, primarily year-over-year lower about QX or XX%

primarily $X higher revenue impacting by foundational patents, about driven volume year-over-year shipments, partially QX licensing represented and by of basis, in million XX% from XXXX, PC or imaging technologies. up total lower on minimum a offset X% unit commitments

about of Consumer represented and XX% impacting QX a foundational true-up licensing patents, represented a Atmos total electronics sound year-over-year a patent primarily Other technologies. million QX primarily markets basis, up down in lower about licensing in or million to pool in Dolby related admin imaging unit increased XX% gaming $XX or on shipments driven fees by $X year-over-year adoption XXXX, higher bars of total by XX% driven of XX% of DMAs, XXXX, on basis, higher and auto. in

increase last to of higher turn to and labor was quarter fiscal expenses to quarter higher the operating the non-GAAP of expenses a revenue. services margin million quarter of and in products program primarily $XXX Total year of let's were driven mix revenue was compared in the year, versus by and quarter in higher of patent timing third XX% spend travel. $XXX Non-GAAP XX% third Now gross The the XXXX. in third million margins. third due

the to charge in resources During our of optimize most as we of about restructuring related impactful and $XX the along the a to million exit a quarter, opportunities severance lease align quarter footprint. charges continue we related benefits our geo of and recorded with non-GAAP facility to comprised

discrete XX% compared tax Non-GAAP XX.X% operating year. last XX.X% last to more year income in compared income revenue of rate of included of The XX% was or QX which in in million year. items revenue non-GAAP $XX this was of to QX

$X.XX compared share $XX diluted in share Net $XX QX income or million basis on diluted million non-GAAP per or last a of was year. $X.XX to per

with cash in in During to million ended $XXX third million in $XXX quarter We year's about QX. the operations investments. fiscal generated and cash the third million $XXX compared quarter, we generated last from

million bought we forward. of our authorization and shares quarter about third of the the XXX,XXX stock available with During XXX common ended repurchase back stock quarter going

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

Liz Krukowski

turn let's 'XX that With to Robert. you guidance. Thank FY

Robert Park

uncertain and challenging operate in to continue We environment. a

the low from lower technologies said broadcast CE, with digits revenue year-over-year full to PC, expect unit shipments mobile and fiscal consistent For year XXXX, single we decline audio in reflecting that continue we've our will previously. what foundational

our XX% broadcast target by other patents XX% are Atmos, We imaging to on and Dolby to of Vision hit track and growth growth Dolby markets. driven in in

in We expect the offset this foundational will audio that declines are more expecting. than we

full anticipate from driven in to our $X.XXX impacting technologies. to revenue revenue by to assumptions PC range million outpacing Dolby growth and licensing range Atmos, from expected revenue patents $X.XXX range from and Dolby we broadcast billion these year Products markets With $XXX and with from billion is decline to other imaging this, $X.XXX foundational and $XXX primarily Vision is CE services the million. in billion. $X.XX Within to to billion revenue XXXX expected

expected roughly to from estimated Non-GAAP to to are million. gross margin $XXX range expenses XX%. Non-GAAP million operating $XXX is be

We allocation on envelope and regular disciplined be spend with our and basis. to continue our a resource review

operating basis anticipate expect on of per XX% a the We $X.XX year. to for share diluted non-GAAP be roughly earnings margins to non-GAAP $X.XX. We

Liz Krukowski

Thanks Any questions? for open before closing Robert. thoughts it up we

Robert Park

Of course.

make flows remain in fundamentals the believe continue Dolby's model sheet to growth cash opportunities of progress and operating strong. are our balance and We long-term durable confident

Liz Krukowski

right. are With that operator. ready All we questions for

Operator

question first Schackart Our Instructions] ahead. from [Operator Blair. you. go William from Thank comes Ralph Please

Ralph Schackart

fiscal the where Thanks last if of go for you're maybe step year well? macro say to question. just And your on relative you let's provide would versus initial for today that back of you the sort back taking maybe as you you kind quarter? characterize how the macro could afternoon. outlook just Good now sitting take when of this provided you sort when Kevin perhaps the if outlook a to

Kevin Yeaman

when and out. we've which Yes. what PC Well, we markets end that's seen of unit mobile entered really play the the that number year shipments we lower we would think across I expected our are and see

were the -- it's So, a for I guess to the at to transpired. on expecting chances increasingly beginning soft I of as some economists would giving the I say we're of and things landing US. have look the are we now And we where year encouraging pundits in macro see

still PC, partners talking our particularly time At dynamic those like would I And through working they're It's we're of same of we're they're a issues. still the say areas and when to some of cautious. been or a in understandably period company. mobile time course, global

are. environment feel real depending the the So differs where you of economic on

Ralph Schackart

And trend like great. looking a at then and products Okay. margin, services gross just there. it there's looks little in break

what's driving curious Just that?

Robert Park

Hey Ralph, here. this Robert is

service lower gross In in quarter. the the product higher quarter is terms third excess and in obsolete reserves of margin margin gross the to attributable

slightly They be levels. in pre-pandemic But quite volumes in get not depressed. back say than if the year were that what you closer the the to like to they we'd of are at what it pre-pandemic are current should levels. We're the period mid-teens. full terms That's look But to. lower I'd the back to the

Ralph Schackart

thanks Rob, Okay, thanks Kevin.

Kevin Yeaman

Thank you.

Operator

from from Please Frankel Rosenblatt question comes go Our ahead. Securities. next Steven

Steven Frankel

think was the to negotiations customers? decision-making push annual return you time some going of you wanting with patterns Are go of the some expected. and if of in do dynamics one you What's them kind got and take than the quarter signed back of or these deals to the to pulled seeing earlier like environment Last to I now do normal? think larger are their

Kevin Yeaman

Steve. one That's a to tough generalize

that circumstances It the we some I had deals based. think latter is facts the had of even in took observed longer. And year year we earlier part quarter the that some this really and half we first in came last of in year. then deals last

But is and what's our we the all is in we of that What's with course what -- line in prioritizing what's for which the guidance are year when they their into quarter of the considered the spoke. last dynamic. what partner about expected coming

front and to Mobile And we're the So, Vision seeking we've on and on OPPO, to for think level areas. the stepping including I with we're capture key Xiaomi. add this that around back add what Vivo, able partners are focused year focus really our Dolby signals been a is demand

continued auto partners. add highlight to of partners and again TV, was India a regional some continued make progress the quarter. particularly with in We've we've to this

think is there always it don't be. would climate and and is can I generalize demand we the that can vary it timing on except about I expected So, the deal what

Steven Frankel

Okay.

so you quarter? the And acquired big there Was was in and a goodwill the that that or step-up managing something else intangibles related quarter. to for there pools, is in IP

Robert Park

portfolio. in patent strengthen to our step-up is goodwill quarter, yeah intangibles last acquisition Hey, and diversify was related to which talked imaging Steve, and the we about LA MPEG the

Steven Frankel

And the out? sure. any quarter recoveries in Thanks. material you I in were would And wanted that to make there what true-ups then just were quarter? the call

Robert Park

yeah, $X are a Steve, Hey, million. quarter about positive really for true-ups the non-factor this

terms So in of note quarter's volume. our last nothing to true-ups really from

by it million. Of vary overall was course they end device but about $X

Steven Frankel

a the then there's the pace And Okay. buyback year. last decrease versus noticeable of in

So what about going forward? your capital that strategy allocation does say

Robert Park

said Yeah. doing what with least accelerated you're the year And going that Last a of was is is our the level what policy buyback. plan. from dilution. Steve that's of respect seeing we're a now offset or to year compensation. But right we've policy to with buyback our at offsetting really for stock-based this executing is little we're heightened dilution on

Steven Frankel

you're you Okay. be or deemphasizing details give us what investing? versus projects particular And of you then people off on where can might the you restructuring, pulling any areas were on areas

Kevin Yeaman

Steve, efficiency broad range that project areas I of areas. and initiative. any attribute range to there for a was we it wouldn't one or of of were Most a across areas it across identified

Some of it related. was facilities

any as areas it about. nothing we've relates talking the is so And that change certainly to in focus been nothing business -- of directly a

Steven Frankel

I’ll queue. back in you. Thank great. the jump Okay,

Operator

Goss Please go from comes [ph]. ahead. Our from Jim Dolby next question

Jim Goss

of any this particular late, maybe I'm couple in moments didn't music. that about if a developments hear wondering again -- application? a I so but don't were I I'm of I lot further missed there comments

Kevin Yeaman

We which talked add we of local now major labels. the artists catalog to did large and new songs the WYNK, side. services have about India service with add in a and the Yeah. fact music momentum great we a artist three music India that We on continue of top in three

And that front, progress. experience So demand the device side the lot all that and on what then services that on for the ways music. of creates in a side more models, now launched strong and in continue had content on engagement we launched the and NIO have bringing launched Europe. That's initially we board. noted people for who China auto Mercedes pipeline and have manufacturers Lotus to strong more

Jim Goss

are you seeing in applications or And any impact, any the terms significant other these of as any way? licensing of revenues having Okay. in

Kevin Yeaman

cetera adoption of falls category, or Vision on has by some the Music. lower highlights, some look of increased – unit then foundational if offset Well, to volumes which an sound be for at for categories in of best one us, of markets. being et being Robert increases Atmos we a areas at And course look yes, been on And really that speakers, annual driven driver by a of would and by the always -- CE music Dolby Other basis. cars. has that's Yes. as offset and in it's it, side that Atmos our consistently is being other extent in of automotive bar year, that this on that's to this partially result but

Jim Goss

between split roughly XX%, equally Okay. gaming gaming and and Is that automotive? then other

Kevin Yeaman

to Cinema to category fees, We our the it's licensing that is out, administrator Dolby gaming, it it's also -- for patent automotive, point categories you -- pools. haven't out contribute it's our yet, as broken that but

category then, make categories. that's are own. And individually a So we its when rise the they of enough it to when would those large

Jim Goss

of could obviously, look Vision, always things that right on Atmos placement the which you and considering, can that right that's for probably big and thing. now. company be might the their very It now? increased are developing You're the products? say, even next driving a be top sound, focused rates level quality any should done be not I'm can penetration wondering obvious that is come there extra on models seems future are higher some in and Are terms not that royalty more We or engineers, always create just with things that along. category the something nuance that your in of might command that surface the if

Kevin Yeaman

here on they're of it's a the combination Tech next Summit, focused ago doing they're they're is future you couple and state technology, to -- in a always state of what week believe, current going the just at experience talks, doing of and They're yes, what they're hopefully, of what types that our the kind We of make of looking weeks technology, ideas. and top year-round, tech I thing. is what doing will, possible? of a that hackathon, had if And

across types of excited yes, owners engage into AR things that and the going we go ecosystem about. that for equation lot where are, us of that's what we are the that things Obviously, but manufacturers there's of of experiences. what boundaries take And are implications about. VR are have thinking in of thinking always about, distributors hardware And solve we're that of that whether where looking it's they lot pushing a the AI problems a whether it's to you're things and and to set the way content and creators, next the the pave respect,

Jim Goss

thank much. Okay. you, Well, very

Operator

to the I closing will now for over call remarks. turn Kevin

Kevin Yeaman

Okay. look Great. we for you Well, thank today forward joining updating again us to and everybody, soon. you

Operator

all gentlemen, joining. that call. for today's Ladies concludes Thank you and

disconnect. now may You

Dolby Laboratories (DLB) 3 Aug 232023 Q3 Earnings call transcript