Dolby Laboratories (DLB) 1 Feb 242024 Q1 Earnings call transcript

Ladies and gentlemen, thank you for standing by. Welcome to the Dolby Laboratories conference call discussing fiscal first quarter results. [Operator Instructions].

As a reminder, this call is being recorded, Thursday, February 1, 2024.

I would now like to turn the conference over to Mr. of President Vice Goldmacher, Investor Relations. Peter go please ahead. Peter,

First Good Conference Earnings to Laboratories afternoon. Dolby Quarter Call. XXXX Welcome

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

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

issued as of our and the discussion can XX-Q. press in section be today these well Risk section Factors report found recent we earnings under forward-looking captioned as additional A the of in statements risks Form on uncertainties the most that and release

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

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

the With Kevin. call that, to I'd like turn to over

for Thank better were than the everyone Peter, about you, and Revenue expected thanks and earnings we joining for where today. us to quarter we came in expected.

Robert guidance will Our guidance the detailed and quarter full share few unchanged, the minutes. in for is year second for a

I'd like topics. to Today, X cover

environment. brief on macro to like some First, comments make I'd the

up portion closing Atmos in some with third, momentum talk of we I'd And the and thoughts. seeing my business call wrap Vision. Dolby to the like Second, I'll and Dolby about our brief are

macro, foundational Spending the much on our the is consumer on largest first offerings. factor impacting changed. electronics has So not

mid-single-digit in anything seeing cause 'XX licensing would FY declines revenue. foundational aren't guidance our to that us change for We

time, distributors across and have Dolby growth remain we for device continue year Atmos comfortable Dolby Dolby Atmos As Vision, to return imaging full manufacturers, XX% and we to CAGR foundational with grow single-digit a and X- creators, Dolby Dolby engagement of low it relates Vision. growth expect Dolby XX%. high strong Over we between single-digit our and continue and Atmos Vision at to and to and X-year patents in to for to guidance to

So let of the Dolby double-digit to Vision, time. in growth Today, on which will of Atmos the components me to important to turn an biggest the business. the over company and and the Dolby focus growth are part our returning path I opportunity midterm

Vision, and Dolby at look the of primarily opportunity We is and Atmos lens market content. device, intersection the of distribution with Dolby which through ecosystems, the

focus primary automotive Our new Atmos Dolby in is with for wins Music.

shows, TV content. via including is it is And mobile, sports for it user-generated videos and TV, For movies.

community we why us with their for put we and momentum focus value long-term we to the gives real partners which so in devices. ecosystem remain OEM In on share enabling serve, you opportunity the opportunity each great an I this our about understand and technology over of realized to OEM and our our on decades the grow years our technology as of more adopt is content, The partnerships. help and optimistic perspective our of business. excited more confident you about creative ongoing partnership

content creators Atmos create described Dolby high-quality and in you Dolby Dolby. and If virtuous of to quarter, We recall, we distributors last cycle with Vision. the work

buy a devices, and that they experience. when more audio Dolby-enabled consumers engaging visual and So immersive enjoy

that experience, support devices more Dolby the content content. want The want distributors create virtuous more is cycle Dolby as to creators the more deliver in Dolby the for and to

work. see of continue the best Dolby of to leverage for continue Vision. we On very cycle, adoption to Dolby the Artists and their creator strong Dolby side and distributor Atmos

over Dolby of in for the are this of Dolby Year New We the the and Every of momentum nominated of for in XXXX XX% Emmys And breadth the midst is used XXX across in Dolby shows the of and XXX album, artists season Emmy Us. lens. available Oscars. the Artist Succession were record, clear Technologies The billboard XXXX top through Song adoption Grammy's are Atmos. and Winners Dolby the year-end nominee and Including Atmos. last award and

Vision of to We service million continue the distribution availability earlier Which XXX for Atmos an announced partners, its including active through shortly for Indian Dolby platform after increase in adding the Dolby Dolby OTT users. support content on monthly support ZX, XXXX.

artists visual Atmos experience the and and have streaming as Dolby These deliver Vision their Dolby the highlights in to possible. the communities in quest reinforce momentum audio best

focused are many as possible. devices on these making We as on experiences available

TCL, from on where and across LG returned room Vision Atmos announcements partners, lineup we We the in particularly the TVs including CES, from be in and continue Hisense. were floor, to show Dolby display like full And sound our and Dolby in living just featured bars. devices

Flex a and they Hisense with TVs. that place Atmos room our strong Connect, begin supporting on an TV had Dolby room immersive to paired Atmos in also Dolby solution anywhere get announced speakers FlexConnect would living consumers Dolby a We engagement that with their automatically enables wireless new experienc. Atmos

of monitor manufacturers focus in In our was A for support show Vision. the Aliwanware Asus, auto. us leading and two announced gaming, world's of the for presence Dolby growing big gaming

a an reactions X X-channel, immersive Dolby delivers positive sound speaker car car fully a demo midsized which Atmos-enabled affordable from standard enjoyed experience system. We Atmos with Dolby our in

their Dolby CarPlay. announced Apple in auto Atmos multiple recently by Broadening opportunity cars. addition, Atmos enabling In OEMs our to consumers Dolby market to offer in for support ways experience

as side, up the of and at XX On the fourth quarter. announced OEMs the from auto we've XX the the agreements quarter, with end first end of OEM of

this $XX,XXX quarter Zeekr, automaker Dolby retail quickly about that the of is for is year. cars are Chinese less which our most Europe. and half expected EV later premium China and They of manufacturers, Chinese our to partnerships be new this which an some Interestingly, over-the-air popular that they support road OEM XXX, with than of in partners of on are via doing becoming Zeekr are the One brand the the will update announced Atmos, Geely. going to EV

We're will Vision. Vision Apple's with will Atmos Apple believe Dolby computing Vision to and We Dolby the Pro, with horizons sight shipping which and also spatial Dolby excited expand tomorrow include what sound. possible continue Dolby begin the environment Atmos that is of and

for progress To Atmos, sum we our CAGR XX% on Dolby multiple multiyear Dolby Dolby and XX% Imaging to progress us a in fronts. for Vision, patents. up to confidence on gives Dolby Atmos expectation continue and of Vision make This

We've engaging experiences real-time about enabling where and in focused entertainment. more and Dolby you are Vision. on beyond Atmos Dolby sports our IO, personalized Dolby and talked to Looking opportunity we with

closed our our are latency product. We X-figure seeing it's we And streaming strong ultra-low demand days, deals. early first real-time for while just

I'd up closing year is unchanged. some my the wrap was comments like It a solid thoughts. for to outlook quarter, our with and

momentum foundational and we have Dolby Dolby remain offerings forward, and Looking strong, Vision. our with Atmos

IO, continue profile have healthy invest strong innovation We with and cash attractive margin including generation. to and in growth, we new of a Dolby areas

All confidence of revenue us our and gives forward. this in earnings opportunity grow going to

with Robert. that, it I'll And over to turn

Kevin. Thanks,

to detailed get Before financials, I'd to thoughts. the like share X we

spend. and to laid profitability for due of primarily QX the earnings within timing than came in higher we range the out call, Revenue First, QX was guidance, in

services long-term I've compared Second, value strong last of third, than good financials the million, to guidance we year driven about orders on earnings revenue just said environment the you of the down year the we remains down expected above was our was revenue as later . QX uncertain, are quarter remains and proposition $XXX sales million year-over-year, in feel prospects ago due lower down call. our came Products while for full before, shared lower the now and solid. guidance and was timing remains the with X% year-over-year. by midpoint our as $XXX million, revenue of cinema our XX% expected unchanged. and in And year. product to $XX Licensing X%

licensing Detailed point details. IR market on our some like noteworthy out end but by website, to performance I'd is

reminder, dynamic we between And can timing expected. quarter volume minimum drive mobile saw this as of true-ups and recoveries, As that in commitments volatility quarters. we a

about revenue factors, we slightly due was only In to year-over-year QX, expect still XX% be mobile down for down year. full mobile to but these the

last for year from outlook market call. the full end is unchanged Our quarter's

in continue PC units, other slightly imaging recoveries. markets and slight higher patents This CE solid growth declines in and broadcast, higher should revenue increase mobile. to and by offset benefit from in expect We be will

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

other income flow. we related $X to of share per bottom $X.XX lower the non-GAAP million We lower of timing taxes. our to a earned operating In expenses end Moving cash spend basis, the on program patent higher line. in to above guidance, primarily due QX, high operating generated and diluted

As quarter, we correlate over variety us. this flow cash to had net against time, but issues a a of working reminder, operating timing will income, non-GAAP

quarter Moving XX% and up dividend the on of repurchased from stock year our and authorization. $X.XX dividend, have repurchase $XXX ended $X remaining on. in plan our million common under $XXX declared the We We with million cash the million a a ago plan We line November. million. non-GAAP and investments with completed of in recorded just we charge and last restructuring quarter, quarter communicated in restructuring a $X

environment. still in to uncertainty our market, There guidance and no change in material is Turning the guidance. macroeconomic assumes the

and strong growth of distributed to engagement and soft done. our shipments partners, content While technology we remain continue get steady from just to things Dolby created and in see taking longer are device

to QX million. million XX% Within $XXX that, estimated non-GAAP is basis. be to million a we range expect margin licensing should million. $XXX revenue revenue $XXX be from For approximately and to 'XX, on Gross $XXX between

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

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

we non-GAAP $X.XX result, per share. $X.XX a and should as EPS So that be diluted estimate between

revenue product and fiscal of mid-single-digit Our by single-digit is Atmos, growth unchanged Dolby Embedded year guidance audio is in Dolby and an roughly this revenue. full services imaging in foundational assumption revenue guidance high in decline year for flat Vision patent and offset flat revenue. licensing at licensing 'XX a

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

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

to nicely. distribution wrap of To up, and things continues creation content Dolby-enabled grow the

engaged. very still are partners Our

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

that, your Operator? back the operator like it the With to to line open I'd turn to questions. for

Blair. Your of William Ralph question the comes line Schackart first Instructions] [Operator with from

Kevin, some maybe kind of macro. your of back on go to introductory comments

I think the as you if the out macro step a just last same call, into you taking you macro, today are of relative year sort as were last talked back out if being but and you they of guess, some you look give year maybe just looked versus where this an when I kind this out? Maybe compare looking about of XXXX versus of assessment year XXXX. into the

for Thanks Yes. Ralph. question, the

our course, for that. haven't the number shipments. we the would as to to macro said, our biggest anything that revenues, is outlook of So factor And relates foundational change us we of as cause it device seen

cycles that of As they deals had has number to product What a see or of a it devoting take just saw device their some companies sometimes referring or years they another a or that a adjustments to device relates what remind It an for a kind their attention could we uncertain that. we to of on it's get that focus win and could And to win. and a would I And might an to a was environment. partner from of have market deals delayed. ready lot another economic to, to environment, say been couple you kind of of launch which effect months the a we that overall changing two did couple two are making later. go, take overall it didn't for you're to of get month -- reasons, big product few decide that and month of to

growth guided Vision we patents. we dynamic we Dolby we the and that So were high see of the single-digit Dolby talked of high of imaging seeing we digits. Atmos and growth still in effect are last quarter that cumulative to was And when single still all growing, about

engagement strong really have to continue ecosystem. the across We

engagement midterm confident to the we're return And X-year to continue CAGR that getting XX%, can have growth be to see high we that we with we period. to single-digit the We and the that for XX% over the wins continue that year. X-

Great. circling comments bit kind And a little prepared back then had of maybe CES, in to just some the remarks. you

at last CES of an perhaps maybe least any momentum So perhaps year? just And this you're out year? versus year give conversations seeing coming of with assessment how initial this went like

Yes.

us floor. we across the a We you across lineup just that partners floor So of as devices. were show were number I living is walk was room -- announcements. the all living for everywhere in Dolby show think our room highlight one across featured featured the And

was a everywhere. around highlight space the Dolby that outside So real sort of

Within of get And everything of a share. I showing activity. with had Atmos number the a engagement, auto Dolby we manufacturer excited a space, at of an through. X lot course, car. do, we had We it's were we pipeline, engagement major affordable interest speakers, We automotive the Atmos of at X like lot cars, of we is point experience robust really a full people car would car, the experiencing really to which a we say a Dolby have really is about just strong Dolby actually the coming and show, lot represented to and channels lot of had most where for a demo a power Atmos Dolby that. nothing shows had had price the lot a in we in of every but in

are Ralph. highlights some us, for of So those the

might last been starting of picking lot that strategy. pretty prices. one I'll Are Atmos more where auto perhaps move consumer and one, a you your observing products turn would in over. of alter. into expensive the in their suggest of sort market newer to professional vehicles. has in way And a Dolby it Maybe that devices Great. see historically, less market high up make maybe mass you're anything and things And times, that, sort would

Just your -- on thoughts would love that.

early up quarter. our you to know, a Yes, everybody as have it's it's We're OEM XX is goal that experiences only days. last car. because, years. from -- And couple That's the a great Atmos in been of at XX question music Dolby way be it is We've the at wins.

in over extend already like models. partners year. to year. seen will Just them half And this are to more we this market be of expect of shipping market, already up they're many coming to the those -- release We've XX Mercedes to

going Geely China, that of mentioned is at that This Zeekr price in quarter, I under by model just point they be $XX,XXX. to a announced

the get believe experience, we're having which, to even the end do believe importance combined here. Dolby there the the to is opportunity I of So music that in the the with something have about engagements started as Atmos mainstream we out we car, high that we at the

that's So our focus.

in big And end an you're the because if XX, experience being demonstrate luxury the models, first those of be a speakers. to able you at XX of could affordable car part the talking models, even equation is highest many

strong forward to of be reception. cost mainstream step for our to a able really that, and people and big So to are the a they've it implementation have type hardware experience team that to at your got going That's models do a have.

comes Frankel Rosenblatt. Steven question from next Your with the of line

off me to a to sideline Robert him with couple we'll and get the you, Kevin. start go then Let questions of

mobile, on insight that? which more sharply down year-over-year a the And timing there give a the flow into Robert, than Maybe on us lot down the difference difference timing So behind was explain differences basis? market. cash of most some the obviously does

answer I'll those Steve, two separately. Yes.

it's expected about to year. mobile, step So for if it the full be where a if take back, about think you you we

imaging to trends. Vision it going there. offset be expect Dolby in due growth to Atmos We really and by be partially Dolby . market that's to And slightly, down and

quarter be from significantly do up that of due can swing recoveries, sequentially quarter. expect the and quarter-to-quarter. volume to said, to We timing, the for it next minimum Sound and you as commitments

on timing of you see will both So ends that. difference

due to flow As is Yes, a the in you setting it flow. to just stage goes terms cash quarter that. seasonality, see normally can of the and QX cash for weak

you net that. our take cash quarter. This to There this quarter-to-quarter, see flows issues and operating and cash closely it capital particular quarter us over very atypically a time, back look non-GAAP our income correlates that But flow soft. will you working to timing was if against time, at were continue will over fluctuate went balance but step

Okay. on color multiple use or more update for cases? us IO. Kevin, X-figure And customers clarify, what those tell us give deals? and thanks said And you you could about you any just then, the to Can

Yes.

So -- yes. Thanks, Steve.

latency, larger So They that personalized. ability to interactive larger with were real you to demand time. remember were scale. them digital that more and milliseconds in space average to that demand offer we're streaming really prospects that And are seconds are where sports offer quarter, cases how last That are our entertainment seeing delay our the are implement to we're around experiences the to of to use a they excited offer where on around experiences in and those that that otherwise customers you we experience, want or compared we to more -- wanting our and we're with the continues with X all innovate in And focusing excited were use starting increased in we that talked X means might of that want and looking the and hundreds about about and many about. on are customers particular, ultra-low and which is of the companies get. seeing the be cases

real content. We're have time where personal lot more seeing, and time. that to the with around like this of that, and real clear areas iGaming a course, are, their be propositions people take have to relationship of in betting, lot very experience, because seeing creative a sports and a ideas a in where value in entertainment engage broader expecting the of of and just having some beyond again, across there's And value interest sports for content we're

seeing. we're what that's So

did deals, couple we to point on forward. a that's yes, path, made of focus think, excited these kind Still we've days, the just developer of self-service I a about shift going really we're feel We like the and data And right progress. on that platform sign the and but prospects we're opportunities. that the X-figure from larger early good

do And closer then by or fact market up Do getting to Ralph's you're think more in platforms Atmos question that on that Or pulled this factors auto they in for convinced Europe. you companies value China, pick through you are today more to be have with to doesn't don't waiting be are back other home there's the think there are that encouraged for about demand? Okay. by to consumer mass holding this? -- that seeing in those consumer the doing them

And in that natural been lineups Dolby lineups. market OEMs . a think that It's going just selling with each higher-end think years. think we in are of the start years. to substantial Atmos about progress we've XX added X are to interested I OEMs. those it's expand continuing their partners for models. the expanding We've that's X for for are that We their and those

we in is see -- interest -- the our an for with for experience. hardware when models, mainstream lot affordable that amount across an to spectacular includes point look both. And price our why we really that and partners interest a appropriate audio a So to we hardware wanted of pipeline, of which is demonstrate experience

question with next Barrington line from comes . Jim the Research. Your of Goss

to little prevalent it Also, much on And that understand do How cars did a with some is how OTA some And you I'd that idea. technologies? how in enable possible? about so, talk it? had I the of correctly if economically? benefit usage is updates devices more new music like to you

Yes.

Jim, told the picked get up update. have their Atmos they're They over that update is announcement. and they'll their what customers by their Dolby you that So on, -- Zeekr

case the the that And still they So be requires you right charge still to hardware economic no different do able have model have requirements yes, is to per clearly, car. We're to device per and everything us. in -- for this we that.

different. that's So no

road that cars that it have that more are to on about is respect, the enable capabilities that exciting -- addressable that the means -- expands a market. provides it it cars the to -- in what's receive But base extent to for it way the there

electric cars? not to even it high-tech So -- type if primarily involves are and of vehicles or they other types, many the

a they're over-the-air an here of in win our case. Well, in the mean it's But the to be consumers is, increasingly think right, that have across car case, that's are our there have hardware going Increasingly, is the many another that $XX,XXX. significant it. updates introducing for vehicles possible many base that in you're is they I device I are Dolby via case has Dolby I can receive point news partners of categories. Atmos system big requirements. OEM cases, it the our electric And aspects -- this under some becoming over that into entertainment and price It to that or vehicle. Vision we update. mean If and their other and to the bring

Okay. one. other Maybe one

shift You've Atmos increased out point roll do of in it and in very technologies they the penetration growth At through look thing and the How as -- that do at been your at Vision technologies? to does in devices. various your additional you for shift mind than foundational you sort rather cycles? rolling good SKUs what pursuing

was the about of investment to community, environment. the imaging spirit understand the the and Atmos, to patents compared Vision and you macro Look, to help think Yes. foundational how

which spending range happens foundational to terms quarter macro for such happens enjoy with audio our our how foundational offerings, a in patents revenues. that Those against shipped big both what and of be a more specifically, branded significant codecs. the our devices in a are And penetration audio going broad on many so are factor of during consumer or devices is what such

Dolby about of TVs, Atmos Dolby room, Vision we penetration to today then and Dolby And have Vision, pursue. significant And we lot highest a opportunity our pretty the and in we Atmos pretty Dolby living we as have lot good Dolby and to for just Dolby Dolby been our mobile, Vision, on early where automotive, Atmos in in even still we've continue to still wins Whereas devices talking extend and a based penetration days. talked presence of our it's early Capture. Vision about, a have of

we board, And more shipping. getting the how in it midterm. more about the grow on the Vision, across being for Atmos believe but XX% to so are think to the [indiscernible] devices purchased we've devices significantly really -- of macroeconomic, is , obviously, that many we the can can We to that And over we said midterm. CAGR that get a XX% and

of still so grow. to And plenty room

not thinking going about So shift yet to when it's I'm to foundational

There are no further . questions at to turn Peter this the time. I call will closing remarks. for

thanks dialing in on Great. quarter. Everyone, talk you thank our we'll and next call . Okay. Operator, to for you. today,

Thank you. thank joining. today's you We This concludes conference for call.

disconnect You may lines. now your