DLB - Earnings call 4 2023 | 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 results. [Operator Instructions] As a reminder, this call is being recorded, Thursday, November 16, 2023. I would now like to turn the conference over to Mr. Peter Goldmacher, Vice President of Investor Relations. ahead. go please Peter,

Peter Goldmacher

to Fourth Welcome Call. XXXX Dolby afternoon. Quarter Laboratories Earnings Good

me Dolby CFO. Dolby Yeaman, are CEO; Joining Kevin Park, Labs today and Robert Labs

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

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

we call the non-GAAP is available discuss call, the to With measures earnings release press that, our During certain our of Analyst Kevin. the financial I'd A on Center section and financial reconciliation GAAP turn Investor on non-GAAP in over today's website. will to Interactive between and Relations like measures.

Kevin Yeaman

everyone Peter, and Today, you, to topics. joining like cover I'd Thank X thanks for to today. us

First, I'm going to make some brief comments on the macro.

third, turning for our And to model and you understand, fourth outlook year call help opportunity. to why fiscal our and make will I business comments share so premise the our 'XX, revisit bullish remain our Second, before Robert. over quarter a priorities about on underlying fundamental we the few I'll

spoke of time top demand of know noticeably, hasn't August. The I you. we since environment the macro mind for changed is many last in the

many their current reflect customers and time, continue and economic we At our to continue to priorities have consumers, and Our to partners the the their experiences rebalance the customers to strong audio same engagement. of and still to bring video best partners want realities.

taking to Dolby And partnerships on you is to time in line some layer impact more takes time. a from top of perspective that are when it amount from go new The wins design and and about the we agreement on opportunities, a progress, longer. device are the outlook our more minutes. our I'll taking in market, things talk the long-term an making are few Dolby-enabled a reaching growth just

roughly from revisiting I But model, revenues audio continue I'd to like which audio penetration, Foundational technologies comes Technologies, broad across over end our markets, position to before our These ongoing why do our our our strengthen you and diverse growth innovation. revenue generate We Today, of we includes remain spend our long-term and all through branded of help Audio licensing minutes of our set patent codecs a to confident in few XX% a devices X/X that, we our understand have and opportunities. licensing. from business licensing.

patents. the these is Audio from the from is comes revenue Dolby licensees Dolby earlier Foundational Technologies. Imaging revenue licensing than Dolby and Vision device term. with driven primarily licensing adoption long by from The of Atmos our technologies primarily Atmos, are spending over largely cycle our and and Vision Dolby Our remainder correlated our in consumer shipments and

addition more growth driven of increased So current adoption by and partners licensees. is for from our opportunity the new

shipping. the Dolby Atmos since spend of business. opportunity then getting devices and and more are on I'd Top about our to like next about line few discussing minutes dynamic Dolby ecosystem and Vision more many Atmos that is for growth the most Vision, for that how Dolby is the part shipping devices our Dolby growth are

to to the and a device musician pillars: people influencer, technology social content royalties, use on hardware Creators movie manufacturers. X that like content. built Dolby-enabled manufacturers and a or that they The Distributors media Dolby consumers when Music director, Dolby pay us include are make Dolby sell are that ecosystem Netflix, like companies distributors consumer Comcast. are technology. is Apple creators, a a the deliver Device devices companies or that make

Sony or LG would their Dolby enjoyed examples of of that Sonos they its consumers a the from all a Apple substantively TV ultimately the and distribute revenue and part include Creators devices. are sound speaker licensing device Mercedes. ecosystem critical manufacturers. and generates iPhone, create or Some is a by because distributors bar on content,

of great first in grow, to availability this The continues amount Dolby a and step is in cycle. content, the and virtuous created

The is attracts partners. Dolby to As more want content more excited Which as momentum we creators the virtuous that create Dolby expect create about engagement distributors to because the we our experience, creators remain manufacturers. devices high-quality and Dolby, We distributors and business more for the to strong long-term our Dolby more more and deliver our the from content. and from content growth. creators distribution that that device in cycle want in content support see device drive

just and create content, and are types from of them more there days, large ongoing Dolby. streaming independent carrying of episodes, thousands all with movie XX ways more and providers, an The offer of of a studios, and several flow TV content content. movies that enjoy range of content, TV These sourced major in who to global more top Dolby-enabled

indies X as summer, and Billboard's tracks Atmos countries. over record States Dolby grossing Vision, the well one of and hundreds XX% for X music top XXX ARRIS or have years of Over XXX more created Taylor were XXXX, The XX the as top Tour. biggest and services Dolby the Dolby Atmos The in in this to Barbie in global United tracks falls movies delivering last available movies Swift, Oppenheimer, major in XX of including Dolby artists All are the X of labels Atmos. this

can Vision Cricket Major for delivered a League, Bundesliga, to high-quality drive long-term and support World becoming create growing across Super partnerships wide Men's so anyone Atmos content the And Bowl are very and in highlight believe of the standard Premier a with and continue Technologies. U.S. League to device have this We the up that sports, de all And Cup share videos. us that content Dolby in Capture Open, to Soccer, Baseball, These growth. manufacturers drive variety sets well content. facto we stories Dolby Vision Dolby Dolby

and highlights. content. to room Atmos transition areas are of TV by mobile automotive devices, driven of Dolby devices top and focus and living like TVs our user-generated music by I'd movie, Our sports context, driven content, QX by to With some that driven

We this signed stages These automotive models fifth car first had great in BYD, BYD Atmos. the cases, multiple win out various rolling OEM in already car Dolby their manufacturers out are win follow-on of who wins date. our with has rolling quarter. tenth up our and We year first manufacturer, this and launched is its some Mercedes, Chinese to models. some OEM like

this Sky in Bringing came Dolby Test to Dolby tennis Indian Dolby the was fore Atmos delivered in automotive, the to in week in is Open continues TV Dolby-enabled football the Vision World broadcast the Vision. Atmos. momentum And India, all Cricket world build. International and Dolby U.S. and Open in content Dolby available the French one college as Atmos. broadcasting to to Council over Atmos tournament Disney in of music ESPN's Championships showed And Dolby U.K. the game STAR, Dolby Atmos. high-quality most represents Sports technology Comcast leveraged the devices. and events opportunities our growth summer, to compelling Dolby of

a TVs its represents MAX in experience. TV baseball time, Dolby fall, strong enthusiasts now are This new the Dolby. for to games more for for adoption over on enjoy long streamed more this sports And movie us enjoyed playoff drive to enthusiasts We've adoption a and and time. able opportunity

We These both and wins in movie our very as partnerships as names, are our Yamaha driven music. a headphones, by fast-growing also strength active variety for in LG. quarter household had TV presence speakers of with and Jabra, TCL, and including content, including well a

the manufacturer smartphone phone are user-generated of Honor, adopted platforms X mobile mobile, in leading growing the top of social An And strong and Technology. a presence, Dolby playback. in our indication media Four Vision content. and China, OEMs Dolby leveraging enabling Chinese

products surface TV Dolby in longtime and We Microsoft's Amazon's iPhone continued Vision, of Fire quarter shipping the and Apple from Atmos XK. Dolby including new XX, latest version with also momentum the and new had partners, the

for products TVs over its down market. with Indonesia, Polytron, and TV momentum Atmos, the OEM highlights all largest Zubronic inches. quarter other indicating include And in now of Dolby Some in shipping XX OEM, Indian PC introducing technology the Dolby

to innovation. Turning

an quarter, this product. Flex anywhere immersive place TCL This the get Atmos to Atmos Dolby Connect. room to first enables introduced we Dolby A solution partner consumers experience. with our new announce is wireless automatically in and a paired that TV, speakers,

to cases. use several we are range now opportunities, across enabling I'd speaking market on And introduction, higher ability of efforts with video Since we've demand Dolby.io. touch where high-quality stream experiences technologies to around experiences. real-time released audio of feedback its broader hundreds of like the to in enough our interactive have area entertainment, a consolidate milliseconds. and the aim and audio video biggest An of the innovation, quality like for sports We more in seeing

to result a and growth net is a The over and time. streamlined organization drive path clear margin

projects we've find meaningful to sharpened to aren't processes compelling. the where benefit. that In scale or addition, And focus, our efficiencies back benefits deliver activities, organization to as eliminate prioritize across and the

moving FY 'XX. So on to

revenue for flat. be Our for 'XX, guidance roughly to is FY

partnerships pipeline the current remains economic some at As given the our call, I are new of conditions, the design and wins said our of longer. start taking of strong, persistence but

medium a of our to Atmos, over of slight and targeted the XX% expect a expect we CAGR to foundational. continue imaging in while to decline achieve XX% XX% this Dolby We year. do Vision expect to multiyear in not Dolby patents, we term, And growth XX%

to you faster outlook are these a Robert the In sharpening detail this we growth light conditions, than in will more few drive margin moments. sales year. take growth priorities in our through of

priorities We FY for have X 'XX.

discussed the priority drive virtuous continuing the to our is of X first drive by growth work cycle pillars we within The to earlier. to ecosystem long-term

more is we revenue, to priority around third headwinds. people bring to priority to than world. continuous faster earnings experiences more navigate growing the the And second innovation, economic while is continue The Dolby

to of experiences proud to work enormously at people market. that I'm all Dolby great the bring

partners content will people Dolby deliver the creation of Dolby-enabled experiences engage channels our to bring world. that to to that more device the with vibrant in market, keep customers and We the to the continue innovate around and distributors with content drive

that for demand more and immersive. entertainment content stronger the for to a been never content and There's more be market in

of growth that, it. before gives questions. open All over call I'd turn in the execute to me discuss to to Robert opportunity the this for to like long-term ability and financials, our our our line on With confidence we

Robert Park

Thanks, Kevin.

numbers, the I'd into like X to dig share I thoughts. Before

line First, the came the and results expected top in, and both bottom for from perspective. year full as QX line

to long-term our top best value streamlining despite last about third, which our by the strong are was to prospects, deliver our X% sales. the and XX% services Cinema with the shared million proposition we our year-over-year, the on will financials $XX guidance line support up call. . QX was as feel X%, Products driven business Licensing and economy, revenue quarter million, midpoint revenue down $XXX compared remains earnings above year just you Second, revenue up we of of And expansion. priorities, the margin $XXX and solid. million, we're good ago was product year-over-year. lower

For the year grew X% business we $X.X the to billion. full XXXX,

up TVs X/X Our down Atmos, mobile, boxes, licensing includes We just PC revenue. Revenue category, X% and and over Dolby represented licensing was and other. Dolby year-over-year electronics, from out revenue revenue Foundational and Broadcast, our XX% consumer imaging Technologies into year-over-year. X was our which markets: set-top break approximately patents of Vision

but for category year with imaging like X% Broadcast, offsetting Detailed Dolby but on shipments. in the down to revenue more lower by our noteworthy end to and point the website, out details. foundational Atmos, Vision X% our year-over-year than Dolby quarter, some was I'd due market, full was up declines IR in performance is patents, largest

imaging but XX% the in XX% for year, quarter, up up patent the down XX% year, was quarter primarily Auto. lower X% growth remained year-over-year by fees electronics full year-over-year was other our sluggish, and full and to the was admin primarily Consumer and in PC in driven Atmos in due Dolby sales device shipments. for grew the category

to line. flow, we remaining $XX on per tax the due QX, in $XX bottom repurchase primarily million plan In $X.XX lower $XXX operating non-GAAP end of and generated million a stock to our basis, above million share cash We our have the Moving diluted on repurchased authorization. earned rate. high a of guidance,

ago year investments declared from cash dividend, year XX% and under $X.XX of a We $X a the with just dividend, up billion. our ended and

November. During that resources quarter, the order fourth in priorities, in a strategic with realign we to our completed restructuring we adopted plan

million, $XX aligned $XX priorities. quarter, that charge of to $X non-GAAP actions fourth recorded the record we impacted restructuring approximately employees. of approximately an $XX In benefits no developed loss in severance QX, about non-GAAP million of severance of with charge longer And software million, associated benefits comprised for impairment related In internally and primarily a million for an and November. expect is with related we taken our additional for for

can delaying don't payback. things greatest we that or internally are will activities are have the control, For that compelling focusing the and offer near-term impact projects on eliminating we

Speaking specifically, invest about in shape of believe and entertainment. R&D to continue the we technologies, we future that will content

to Turning guidance.

still As of in and in outset our no the the Kevin guidance macroeconomic call, discussed market, environment. assumes the material uncertainty at there is this change

our design of remain content partners, some distributed get we in created mentioned Dolby and wins to longer and and from his shipments are to device market. strong technology, Kevin As comments, while engagement to in steady taking soft see continue growth

revenue $XXX margin range of $XXX Gross million. million that, XX% revenue between 'XX, largely to on QX be from a non-GAAP to year-over-year, commitments year we For between minimum with licensing and and down recoveries. and is expect XX% last associated estimated $XXX due million. $XXX million QX basis. to volume and revenue, timing to Within true-ups is should be

between non-GAAP to expect $XXX and We be operating million. $XXX expenses million

Our around basis. non-GAAP be QX rate XX% a effective projected for on to tax is

the and estimate of we combination between So I based on be EPS just should that factors covered, non-GAAP $X.XX. $X.XX

the for 'XX. full fiscal to year year guidance Turning

Offset foundational services licensing high of single-digit roughly expecting and licensing flat is revenue. in revenue. Atmos, assumption in are decline and Embedded Vision products guidance, mid-single-digit patent We by revenue Dolby imaging audio in growth Dolby flat this an and a revenue.

We the years, be the licensing last of more than with slight X weighting timing half year. expect to revenue evenly towards distributed of a first the the

revenue and market, from solid declines engine markets recoveries. mobile. consumer by patents at Looking and PC from other slightly growth offset see should by higher This licensing increase in benefit we broadcast, in higher our be and end units, electronics will

While in Atmos we terms year. volume and are commitments recoveries foundational the to primarily growth year, declines size and and including of markets, the Dolby and in deals, this see last revenue engineering Dolby of in comps true-ups in Vision overall due these timing minimum tough patents

We continue and expect multiyear medium in Vision XX% a patents to of Dolby to the Atmos, XX% term. imaging CAGR Dolby over

for year range, in operating X the be million should a XX%. Non-GAAP basis. should improvement percentage to roughly in year $XXX margin operating gross Non-GAAP expenses to result X about million will margins full be point full which the $XXX in on a

of the expecting On EPS $X.XX and are bottom line, $X.XX. non-GAAP we between

creation up, grow still partners content things wrap engaged. To very distribution of the Dolby-enabled are and And nicely. our continues to

conditions Our we financials growth, are improve. positioned well and when economic for are solid,

the an Please please open community demos early those XX, for remarks. Lastly, can to in Vegas for you line Peter investment we're concludes X invitation. This of January for coming Operator, some host you CES, prepared for going for the on to January our up a.m. with Q&A? at follow

Operator

Rosenblat take We'll our afternoon, first question at from Steven Frankel this Securities. Instructions] [Operator

Steven Frankel

adoption going some a let's this are notion both cycle? pipeline growth in lower get customers? that longer slug where bit and penetration little have that you're the of taking you Vision. a in that you the to deals we say had larger your are explore function Is And and that is and out Kevin, leveled much Atmos another in of So

Kevin Yeaman

Yes. Thanks, Steve.

tremendous I to and is So confidence say founded of the of and the focus across it continue in device. growth our our in in see Vision But content Dolby Dolby varies content and really by would type what areas. type of we Atmos growth each is,

and our we pipeline. have to content strong more to do across continue see available. engagement continue more And We

with done device get adoption been and X get could -- environments. you've we've timing a that's a adoption quarter that predict to many to the Steve, best environment, through or it a in rarely longer And even longer device in us through does particularly or in get many and from customer market. It straight take those the a to economic to a to X difficult cycles, of for win different where this true it's it And cycles, go of line, could a a take quarter device win. times, in

wins our to of And great the ability a amount engagement the with because get And so XX% have to in our of we CAGR to in midterm. in distribution to continue grow and confidence the we we content, see content coming XX% the that's at and partners. strength design to of that have market continue and

Steven Frankel

Again, trying to this just little dig a more.

device the new device customers to speak, line Vision, in saying, because new is spreading in current Atmos conscious? going even area seeing and maybe in jam, deeper now that So stop traffic are or cost they're your "I'm primarily for product Or so areas? you customers of to my

Kevin Yeaman

pressed a entirety automotive, i'd hard announced continue last for brush across our to this growth win tenth paint couple if So, our of you quarter. We partner the of the broad be to at But That's opportunities. BYD partners. over instance, we years. look

market. of are in Some devices those

Some of of And market. growing the but off coming come small devices are business, part it's to yet a base. a the relatively to

XK In to India announcements, mid-tier, XK, the of to based that as rate. units where TCL, Atmos and TVs year, to is that, Dolby while high have One on some year and the high Vision our looking to did of as a end to like We largely increases some American continue very of Dolby did well. lower shift moving work on the things of move to throughout we've the its attach moving year going to see this increase and see North a also all over penetration made overall high at space, you we TV know, TV the from there's last the which market. flat, on. end we We were couple is

But where value one have a continued represents you an new a I energy proposition us. still of and momentum, think see our a that, about proposition, really low opportunity is excited mid-tier. there which lot of content. think that's for the we I behind of the area we're That's sports And things important ahead value the the in

So focus within the some those our each of of areas. are dynamics

Steven Frankel

me Okay. that on appreciate you time one where this get a ramp IO streaming to sneak need Does faster? still this to one of market, the go? this Or what's revenue? on I and line kind to drive meaningful in last multiyear get details in. And you to business focusing let help to the is

Kevin Yeaman

Well, that think so helps revenue drive I us it growth faster.

greatest companies latency, more live at video think I things ability opportunity is over about on experiences stepping experience we've you years. content know, developer it your a the our when and And they Dolby TAM is things, for back. of and are drawn meaning goal that in you're audio like platform, looking what experiences. Dolby. that seeing ultimately seeing going that the it's stream personalized that tried the on ultra-low of difference the Dolby.io almost to with is, to a audiences bringing far to discernible last greatest looked and the broader real-time, what's And we've where build are our of demand. high-quality no increasing through to we're the number And done immersive, screen. as And for more between more digital there's range and few

larger that's shifting want toward enterprises, larger this at Steve, that scale. seeing, And do from we're a that demand also to

in a suited after. model, one to shift sales So that's we feel that the also go well

a but why, our importantly, focused out to come activities, more organization. with we've of more And able so kind consolidate that's been

Operator

next Ralph William Schackart now at go to Blair. We'll

Ralph Schackart

lengthened and being delayed because about talked partnerships or you the Kevin, wins, of maybe the macro. design

last. seen pronounced, get that you've perhaps little to more Is quarter on that. some bit a something more this that Just context want and

Just linearity or you partnerships could give extension fiscal the any designs sort more throughout of the last of the color these of year.

Kevin Yeaman

Yes.

at I last in this the we a wouldn't think macro, operating now. in some say the time we talked. But that the been change time we've environment we obviously, said we've since I as significant -- for seen top,

So of effect those the there's kind of things. the cumulative

-- ago, speakers headphone do like -- continue that wins a BYD, quarter, bring do Ralph, just them land emphasize predict we some to of mobile smart And partners. But had this in remember, the saw you'll bit push we little like adding number year, a then we we a to about timing and out this want some get X.X this years of environment. to we're partners It's -- harder on great some last I seeing on Honor continue the deals, and year.

the momentum develop a through cycles on linear. and like we as and of of the said, adoption have high times, degree the that have a of distribution. we and we of when content can much always will in know, I level But with And are adoption have these We very not higher you number get amount devices. of confidence, we best

could that trajectory form always it's take of, form the get longer. It once launch around product. of -- be take launch the the moving -- harder because could not could we affecting in But the a predicting It design little and they're chipset environment easy, them. environment. a this the that how is external the customer taking what bit for is That win, that the win design waiting is to

Ralph Schackart

just operating and focusing forward sounds this initiatives thinking on kind kind Great. going of philosophy further around for your it I them OpEx. on, of or guess, philosophy revisit Maybe Robert, year some about in the were expenses quarter. there maybe And fiscal how cost you're your then raining like for and

Robert Park

Yes.

said, our expenses, more way at Kevin the can effective as is most top possible. efficient efficient always operating Which and we're line In priorities. revenue of be we in looking ways meeting more growing terms in

next for operating results efficient at as as and the that, going that's you ever the can year. continue you the this see, November, margins that. we're in it finishing you make You've And expansion as think looking actions doing I here QX percentage we're of be, between points to seen that don't X X looking how stop for done and we've year. and that at what in of and those is QX effective possible. and in sure And

Operator

Goss now to next Research. Barrington go We'll James at

James Goss

on right. All was I wondering first television.

enough you with that think could a mentioned the some opportunity greater domestic of rival you're domestic of to couple whatever Or be there's for the makers, domestically? that, to you terms markets, Vision provide you've television that manufacturers penetration doing do that If international in your think, in priority? extent runway, could Atmos and

Kevin Yeaman

Yes.

I great have think last we couple quarters. had of internationally, wins some over the

the and the with market. and very way we're it, high have experience is penetration, think TV think And momentum really across confident the given in devices, low the have a our we ability end larger I momentum to about live the and there's sports. to those of Dolby Jim, we to mid-tier the to that bring high the amount of movies we televisions with have given increasing in

wins also getting going In like us. the of label design the coming opportunity and we've is also those quite ones more of that a be front market, international to we've had still white in, about And part but the of won. There's is brands. big-box of in providers bit retailers

James Goss

international, won't factor, be probably Okay. dollar-wise? meaningful a significant But still to be

Kevin Yeaman

I say way have to is it the about high high we at that the penetration think No, would end.

falls so, largely geographically And about where that is consumption.

high Europe, other markets. and China in the have end many in in We high penetration in

you of Indonesia. quarters from have this wins us, last some So seen in couple India the quarter in

our on penetration mid-tier think I excited about, low- more really to opportunity, the that about is opportunity increasing in thinking, we're growth the we're of But certainly, first and terms there. So devices. foremost, there

our important in value that, going Sports, increased and is we're really where that's a presence excited proposition go and we've for to Sports And going forward. about really

James Goss

moment. to extent that some that you key new the noticed do royalty the time significant as becomes to sort for time wind with traction, that there's are not revenue now think significant? that that some has IO has that a a there right could mix we in be to the up emerging are before the generation Vision, gain IO initiatives tended ones initiatives over Atmos a And Okay. cycle and of extent to of the Dolby's at And taken rolling you some chance

Kevin Yeaman

great Yes, yes, to about we've continue focus continue we been to clear, it's a I question. mean I our But think, innovate. areas. top we see,

market. midterm, to are areas in Vision. Dolby and could the produce bring And technologies other continue We growth certainly there new in to Dolby that Atmos

Operator

gentlemen, Thank no you. And questions we afternoon. further this appears have it

for great we thank joining Dolby would We wish Call. evening. So to Results everyone a Conference Fourth like you the Laboratories Quarter all

You disconnect. may now

Dolby Laboratories (DLB) 16 Nov 232023 Q4 Earnings call transcript