Dolby Laboratories (DLB) 7 Aug 242024 Q3 Earnings call transcript

Ladies and gentlemen, thank you for standing by. Welcome to the Dolby Laboratories Conference Call discussing fiscal third quarter results. [Operator Instructions] As a reminder, this call is being recorded, Wednesday, August 7, 2024. I would now like to turn the conference over to Mr. Peter Goldmacher, Vice President of Investor Relations. Peter, please go ahead.

good and operator, you, afternoon, everyone. Thank Dolby to Laboratories' Third Call. Conference Earnings XXXX Quarter Welcome

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

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

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

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

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

the everyone were on the range. Thank the you of midpoint above just us above you, range Revenue on we the and quarter thanks provided came in joining call for end of Peter, earnings to the the and high call today. that last the earnings

X% is the throughout to we we've the now expect year. which lower For been to at what revenue down year, the approximately expecting be full end of X%,

the to making guidance EPS year. not any our non-GAAP are We changes for

and in revenue Atmos than services, the to soft second the year. our boxes box attach we to is coming Dolby remains exhibitors in performing units Our lower are consoles sluggish been Dolby content as expectations products we we sales device slightly continues as expected of as and growth and are for office in year. In foundational cinema products in rates. CapEx. half continue And drive are set-top all of aggregate device and Vision gaming lower-than-expected the out have strong expected than seeing push global lower audio coming ahead

Dynamics stream and the engagement of stable manufacturers remain and from ecosystem all broader creators, ongoing across device launches a driving of families. steady product distributors are device

Atmos our are strong normal our continue have We be growth end and as confident we with to opportunity Dolby well return Vision, positioned position to markets in which technologies, audio a and our more with Dolby foundational cycles.

Moving on for highlights the the to quarter.

We the biggest launched X momentum driving been significant movies in to one Since Dolby TV live partners, ecosystem movies companies, initial story. And into momentum studios, has Dolby production providers on and one that are Dolby and of the just across Vision we taking OEM. global partners TV with device add launch, sports. in XX that worked service XXXX October and to content, Dolby made happy a basis available from for continue a content studio product enjoy Vision areas TVs is growth we and considering which autos, this that as shows that Dolby movies spring, over share to Dolby milestone in of Starting and to XX,XXX TV in I'm of Vision, Vision Atmos mobile, Vision, opportunity. content in Dolby and with our have

throughout we've partners of and available U.S. course, May, QX cited we Vision. Dolby Cricket music seasons of Atmos a full there. music the making Tencent And global Dolby in mentioning stickier, Dolby drive hear. stopping Cup, and offerings the is their aren't we European on attractive more XX% the alone, in this Music recently making something Audible by Vision, are Olympics momentum variety post and Harry announced library scheduled World that soccer, seen on premiere they Xfinity to and Potter Championship available NBA call, we the will In their all of NHL Atmos which Wimbledon, them with were Atmos cast and that In content year. year-over-year of help which earnings builds in books in X Dolby Comcast Atmos all love growth productions to audio expand to continue to their And late Dolby Dolby XXXX. the

XXXX Dolby of that automotive. will for quarter, across car its standard feature this Moving partners Dolby Atmos, have this first the on will support momentum second RX the Cadillac announced announced Hyundai vehicle, the OPTIQ to generation And And flagship to also our the Atmos. and brand quarter announced GM with Genesis Atmos Rivian that GM. will in models now starting Korea. OEM Atmos XX X continues its luxury build. Dolby make Dolby We that

to contributing order OEMs are compete and and uptick share market lineups the seeing into aggressively deeper TVs, to other look continue attach to bring slight Dolby rates. of incremental more TCL, In adopters gain Vision momentum covered. strong in both a we to drivers are get like that additional Atmos just wins Atmos sports Dolby to as in growth we their certain which TV and Vision Dolby are continue in in we the Hisense and Dolby content markets. Also

models priced, to Transient from in into India partners, sell Middle of Africa, affordably OEM higher-end new steady East, aggressively our Asia. Malaysia, Dolby-enabled the continues to a in most company in consumers the mobile, added Southeast as mobile low-cost of addition and Lastly, phones rollout to the phone

complements, GE in our a compelling video patent and offerings, represents pending high-margin revenue. to particularly briefly of Licensing, on durable, financial Dolby's technologies reoccurring profile of Moving M&A. streaming of a conferencing. important imaging also I'd to picture expands in like which while which applications transaction resolution, provide is strengthens and discuss best-in-class acquisition This better higher video like significant codec adds compression and quality portfolio video that and overall enabling particularly

These patent monetized facilitating its primarily pools, this the adoption enable that through promote and licensing structures programs, new well video standardized acquisition current patents continues licensing are us our patent collaborative position strengthening licensing of which long-term to by technologies. addition efficiency growth to In opportunities. next-generation industry are for

the transaction the be year fiscal margins expect to on non-GAAP in to accretive to of We and by a EPS end and operating XXXX. the it expect basis fiscal close

on M&A, Dolby enhanced our recently Also we Technologies the IO with THEO million. offering $XX for of acquisition

we've real-time in to talked As companies are experiences. are who about, and demand from and looking we seeing sports create entertainment personalized

the technologies. impact addresses continue perspective an a have will of and operate we THEO in on. gives to summary, build complementary This more these us foundation and FY stronger deals 'XX. In and both momentum dynamic base Neither customer customer product to uncertain similar acquisition from a with on a material and a same and environment box grow on market we with device year, foundational. grow and revenues automotive, Atmos weighing TV, mobile. lower adoption, cinema Dolby unit sports TV our and in to movie, Vision music continue particularly and particularly time, office in content to Dolby across shipments this ecosystems At

remain earnings the than faster be opportunities in of opportunity our committed portfolio excited are revenue to We while healthy and us growth. earnings the in and innovation, about front to a acquisition. strengthening very we revenue growing to of I imaging and a financially with continue investing deliver attractive offerings

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

thanks this us to today. everyone and on call joining Kevin, Thanks,

review the the detail, in I'd Before we like some quarter to highlights. hit

above the midpoint the earnings QX of the high in the above range were on QX laid profitability out for of we came call, and end the range. revenues First,

the environment remains and uncertain Second, dynamic.

down range lower and solid. Our are down unchanged. our our about we to all the said year of year feel but million year-over-year. shared And and skewing guidance midpoint of revenue financials what describing the Products year, you revenue the is earnings and million, and remains we was X% as good is full the growth call. quarter, revenue above flat we've $XXX EPS non-GAAP value ago $XXX the our for towards as end QX been down have third, was was with prospects I on X% our $XX services compared proposition long-term XX% of strong year-over-year. Licensing roughly revenue last million, before, guidance

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

timing between As minimum volume volatility a quarters. reminder, drive commitments recoveries, can and true-ups of

but was down consumer slightly year-over-year, revenue down which year-over-year full Similarly, electronics in this mobile, to full the volume example, be year. XX% slightly be the For for XX% for minimum down quarter, year. revenue benefited commitments was from still will expect quarter, up the we but

box Broadcast revenue. expect and to revenue for set-top by full deals of terms year, driven We be the in down tough lower and size of year-over-year timing comps

benefiting flip and side, volumes. increased and fees of by PC solid slightly to growth Dolby and auto. volume imaging unit patent markets, from in Atmos the expect minimum we driven continue other admin adoption commitments higher is On

above $XX basis, in to on earned expenses nonoperating $X.XX revenue, Moving of and to due bottom the guidance, end operating share million cash non-GAAP We primarily our per stronger and income a high diluted we generated flow. lower higher line. operating the

As cash will benefits will priorities. restructuring a and a with over of of net cash our $X to to flow quarter-to-quarter million fluctuate for timing flow expenses align deals, correlate included due operating GAAP time, as severance resources strategic charge income. but to operating reminder, non-GAAP approximately we related continue

stock, existing ago dividend, repurchased and of by up declared XX% received to million, the ended quarter $X plan board authorization repurchase and Moving share total of with We million year from our to authorization $XX increase we our our investments bringing We common about repurchase just We remaining $X.XX authorization. the a billion. and $XXX under cash on $XX dividend approval have recently on. million. $XXX a million

in soft box services both office and an It product remain which guidance. licensing to At same Dolby better uncertain of the revenue. implications is Device expected. revenue market. to be negative the engagement to continues Atmos performing and from remains a and our and and Turning strong shipments and sluggish, dynamic Dolby than partners for has content Vision and time, Dolby bit created steady we see and distributed continue technology, from imaging our growth patents

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

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

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

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

revenue seeing This all billion flat we've full revenue lower billion, $X.XX as the and between revenue from roughly describing QX shipments year we $X.XX lower cinema. of end lower-than-expected year, implies what are at unit as been and guidance

$X.XX. within range year we've we to and expect of $X.XX all been still earnings discussing However, the non-GAAP be

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

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

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

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

on macro, the kick it just off. Kevin, to just

relation to quarter. you Was at you balance in the quarter Just But maybe tweak slight on curious this what observed have follow-up. end, then what of the within the add you given observed lower to it anything I macro? sort And last of sort could a guidance?

Yes, seeing all goes, been of much as Yes, that far course. Ralph. would I say the we're as seeing the we've macro same Thanks, year.

a did been in it's cautiously have our optimistic environment some stabilizing, that specific we it's that as and devices distribution Vision. What things that think mentioned but we, are softness been for several tough is Atmos last customers them we the was years, Ralph, consoles. more a fair I on OEM for continue set-top to this gaming looking think, really -- we content quarter, growth. see for boxes And see and for strong to over engagement I opportunities Dolby Dolby it's little say, I

So boxes. set-top it's really the

pretty Our boxes the kind level customers through They last We're inventory up and seeing year. big to we're our worked year. partners begin to expecting set-top -- it not stay tick industry analysts a the and that. of seeing flattish. through And were

the year. we quarter. set-top negative And the and in which QX in a weakness time, continued there's that takes through continuing always million, the puts in we a with of biggest and At part, was the so see $X gaming also consoles had true-up box same

our it show So things come we is you relative which to didn't why guidance in up few for see early QX. had in QX, a

on the that, continued of So through then say pretty be would office the -- end to QX. top soft of I and box

cinema product So we continue of to pushing see out purchases. the

a say it wouldn't I things X what So I as contributed change. those macro slight but the were specific would characterize adjustment, big to

Great. more. one That's And helpful. Okay. just really

products it's video that patents know Curious if future leverage GE. new acquired the in that or patents a on from could products? into Just part existing compression. you these for you they've potentially either applied I

well. So perhaps could overall IO help Dolby curious, efforts this your as

license accelerate or pools, always much we imaging business, we're patent can a This to this opportunity are attractive all, of through And collaborative this for expand structures. the patent a is really licensing video opportunities which very -- on of that unique existing really business where first is our terms -- this bring technology And looking our in so focused our a -- us, -- codec in the very on in patent pretty portfolio for is is this portfolio -- the ability space. particularly initiatives.

imaging of it streams, presencing and to and year. revenue operating patents. to first it or It's nonoperating -- we very durable So non-GAAP our attractive expect set in be expands the income and accretive both sorry, EPS in a

We of does Technologies, relates also did to the it IO also as a we by -- which enhance this the -- name we did start-up acquire IO, Dolby quarter, offering. THEO which

more companies are digital sports efforts THEO fiscal They that around a and similar on interactivity. has real-time, As looking of We customer our experiences. know, and the refocused features player this and really you beginning year. offer focused very base. coming functions interactive a serve video increase we're entertainment that to much that into very

And complementary solution. of set And so hand, technologies. sales a we It versus cross-sell. a the ability it's -- buy the one more to us it a also build it's provide increase think it's because complete because momentum can very allows to on

getting as we we're have well. common. that very customer in We're one number feedbacks so fact, and In excited prospects of positive about

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

to in like ask Atmos I'd cars. First, about

Cadillac being of you feel that's with the a this you're And cars? Genesis. broadening how picking number pretty if OPTIQ, point. momentum But I You usage used, within In the Genesis, rare, models gave you other a seeing are different to including X wondering I'm the up usage think, that number points, in in Rivian -- applications. do of

the also, And we we Thanks, to them lineups. of on Hyundai with that continue would board Very deeper to have and now -- Korea. see we models had get have you partners into now Jim. Rivian. to offering model. X many continue excited expanding models is And have OEM XX Cadillac Yes. we seen first in and see into additional

to for models we is projections. Dolby their Atmos It's And or going function into in sorry, of on deeper area for Dolby Atmos so automotive, where doing -- -- the than lineups, Vision bring some coming doing a this of Dolby and expected year. we're unit new and an exceeding better continuing into those just

in is And the correct? for payment base, that this products Okay. you're more a area. of it's way royalty -- it's not monetizing but the an installation Is base

it's -- for an typical a It's model. We get car. amount each our

and the Okay. might I'm the you prouding just that's SKUs. getting pretty expectations also the been domestically comments And that. starting if royalties penetration via for but you're movie And you how 'XX number theater at similar an continues expanded or might obviously, of elaborate low a internationally move it's to recover either are to whether products. to business also and 'XX. real been consumer if you on high wonder And monetization point, both? installations increase other wondering I have or just is applications, and as that to go lower-priced TV But you any has on

Thanks, Yes. Jim.

nice the of release lingering So this as if know, the schedule. the June year you the the was came softer would that most by of scheduling strikes anything, But affected expecting probably a expected. course, the be and see through of because really we those and off office effects a box quarter, out. year at than And little will start. end into there's titles 'XX of that we to the optimistic And the quarter, are titles a it's time, ready that and the strong about of September great this to lot to are lot come a be . and 'XX same industry --

continued Cinema the seen to So at later people to seeing year, product existing to and pandemic, increased that's that and Atmos year experiences, incorporate with percentage premium into large-format be of And into including box to because this of answer relates the beginning as your into strong, is announced and question, Dolby is we time, we've box Vision office. the engagement Dolby next CinemaCon as percentage a it's period PLF. or even branded the Cinema also it as Dolby going significantly that sales we're to of exhibitor office throughout increased ability pushing the even Dolby the

the and So premium exhibitors increased box have potential at for with they look look see to that we as and they as as engagement -- and they their footprint 'XX. office experience in 'XX increase optimism

package. still full I -- the United the with your vision Within with AMC, exclusive an Atmos though, contract is believe, it's States,

are changing. spurring increasing number markets finding -- of think that that's well? where the of you those you the in and So world a in same other to terms you I other penetration shipments hoping and out device areas do don't around Are are as

Yes. I'm on sorry, did still you Dolby or did Cinema, believe... to are mean we shipments, said I mean Dolby device Dolby -- you Cinema you

Dolby Cinema, Dolby Yes, Cinema.

okay. Yes,

is XXX our partner yes, AMC over So U.S., they're in the well today, and screens.

it's us. great with So a partner

have also in in would in where Korea, recently announced Japan, partners that Megabox expand a We of with us. number Europe, they

a we globe the pretty around the demand footprint good globe. have across and So

we go next that sign -- to a said, we QX a is increase Cinema So we're the and and installations. number Dolby I it's Dolby Vision I Dolby off think can year, start, good positive of begin like optimistic it's that Atmos, to as into

your call. With will Thank no conference this have all We conclude you we time. for participation. that, further questions today's at

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