SAN FRANCISCO, Nov. 14, 2019 (GLOBE NEWSWIRE) -- Dolby Laboratories, Inc. (NYSE:DLB) today announced the Company's financial results for the fourth quarter and fiscal year that ended September 27, 2019. For the fourth quarter, Dolby reported total revenue of $298.8 million, compared to $240.6 million for the fourth quarter of fiscal 2018. For fiscal 2019, Dolby reported total revenue of $1.24 billion, compared to $1.05 billion for fiscal 2018.
“We achieved solid financial performance in 2019 and continued to build momentum for the combined Dolby Vision and Dolby Atmos experience, highlighted by new offerings from Apple and Disney,” said Kevin Yeaman, President and CEO, Dolby Laboratories. “We also introduced Dolby Atmos music, a completely new way for artists to create and fans to experience music, which is now available on Amazon Echo Studio and Amazon Music HD.”
Fourth quarter GAAP net income was $43.9 million, or $0.43 per diluted share, compared to GAAP net income of $26.7 million, or $0.25 per diluted share, for the fourth quarter of fiscal 2018. On a non-GAAP basis, fourth quarter net income was $67.6 million, or $0.66 per diluted share, compared to non-GAAP net income of $23.5 million, or $0.22 per diluted share, for the fourth quarter of fiscal 2018. Fourth quarter cash flows from operations was $130.5 million, compared to $111.7 million for the fourth quarter of fiscal 2018. A complete listing of Dolby's non-GAAP measures are described and reconciled to the corresponding GAAP measures at the end of this release.
Fiscal 2019 GAAP net income was $255.2 million, or $2.44 per diluted share, compared to $41.7 million, or $0.39 per diluted share for fiscal 2018. On a non-GAAP basis, fiscal 2019 net income was $334.6 million, or $3.20 per diluted share, compared to $215.8 million, or $2.02 per diluted share, for fiscal 2018. Fiscal 2019 cash flows from operations was $327.7 million, compared to $352.2 million for fiscal 2018.
As previously indicated, Dolby adopted Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (ASC 606) in the first quarter of fiscal 2019, and today’s announced results and the financial outlook are presented in accordance with that new revenue standard. Dolby adopted ASC 606 using the full retrospective transition method, therefore all prior periods are also presented in accordance with the new revenue standard. Included at the end of this press release are financial results for fiscal 2017, fiscal 2018, and the four quarters of fiscal 2018, as adjusted in accordance with ASC 606.
Dividend
Today, Dolby announced a cash dividend of $0.22 per share of Class A and Class B common stock, payable on December 4, 2019, to stockholders of record as of the close of business on November 26, 2019.
Financial Outlook
First Quarter Fiscal 2020
Dolby is providing the following estimates for its first quarter of fiscal 2020:
- Total revenue will range from $275 million to $295 million
- Gross margin percentages will be approximately 88% on a GAAP basis and approximately 89% on a non-GAAP basis
- Operating expenses will range from $214 million to $220 million on a GAAP basis and from $192 million to $198 million on a non-GAAP basis
- Effective tax rate will range from 18% to 21% on both a GAAP basis and non-GAAP basis
- Diluted earnings per share will range from $0.27 to $0.33 on a GAAP basis and from $0.45 to $0.51 on a non-GAAP basis
Fiscal Year 2020
Dolby is providing the following estimates for its fiscal year 2020:
- Total revenue will range from $1.30 billion to $1.35 billion
- Gross margin percentages will range from 87% to 88% on a GAAP basis and from 88% to 89% on a non-GAAP basis
- Operating expenses will range from $829 million to $849 million on a GAAP basis and from $740 million to $760 million on a non-GAAP basis
- Effective tax rate will range from 18% to 21% on both a GAAP basis and non-GAAP basis
- Diluted earnings per share will range from $2.64 to $2.74 on a GAAP basis and from $3.40 to $3.50 on a non-GAAP basis
Conference Call Information
Members of Dolby management will lead a conference call open to all interested parties to discuss fourth quarter and fiscal 2019 financial results for Dolby Laboratories at 2:00 p.m. PT (5:00 p.m. ET) on Thursday, November 14, 2019. Access to the teleconference will be available over the Internet from http://investor.dolby.com/event-calendar or by dialing 1-888-394-8218. International callers can access the conference call at 1-323-701-0225.
A replay of the call will be available from 5:00 p.m. PT on Thursday, November 14, 2019, until 8:59 p.m. PT on Thursday, November 21, 2019, by dialing 1-844-512-2921 (international callers can access the replay by dialing 1-412-317-6671) and entering the confirmation code 1707606. An archived version of the teleconference will also be available on the Dolby website, www.dolby.com.
Non-GAAP Financial Information
To supplement Dolby's financial statements presented on a GAAP basis, Dolby provides certain non-GAAP financial measures to provide investors with an additional tool to evaluate Dolby's operating results in a manner that focuses on what Dolby's management believes to be its ongoing business operations. Specifically, we exclude the following as adjustments from one or more of our non-GAAP financial measures:
Stock-based compensation expense: Stock-based compensation, unlike cash-based compensation, utilizes subjective and complex assumptions in the methodologies used to value the various stock-based award types that we grant. These assumptions may differ from those used by other companies. To facilitate more meaningful comparisons between our underlying operating results and those of other companies, we exclude stock-based compensation expense.
Amortization of acquisition-related intangibles: We amortize intangible assets acquired in connection with acquisitions. These intangible assets consist of patents and technology, customer relationships, and other intangibles. We record amortization charges relating to these intangible assets in our GAAP financial statements, and we view these charges as items arising from pre-acquisition activities that are determined by the timing and valuation of our acquisitions. As these amortization charges do not directly correlate to our operations during any particular period, and often remain unchanged between reporting periods, we exclude these charges to facilitate an evaluation of our current operating results and comparisons to our past operating performance.
Restructuring charges: Restructuring charges are costs associated with restructuring plans and primarily relate to costs associated with exit or disposal activities, employee severance benefits, and asset impairments. We exclude restructuring costs, including any adjustments to charges recorded in prior periods, as we believe that these costs are not representative of our normal operating activities and therefore, excluding these amounts enables a more effective comparison to our past operating performance.
Income tax adjustments: We believe that excluding the income tax effect of the aforementioned non-GAAP adjustments provides a more accurate view of our underlying operating results to management and investors.
Impact from Tax Reform: The enactment of the U.S. Tax Cuts and Jobs Act (Tax Reform), and any related amendments or revisions, requires certain discrete and infrequent charges that are not representative of current operating results and therefore, excluding these amounts enables a more effective comparison to our past operating performance.
Using the aforementioned adjustments, Dolby provides various non-GAAP financial measures including, but not limited to: non-GAAP net income, non-GAAP diluted earnings per share, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating margin, and non-GAAP effective tax rate. Dolby's management believes it is useful for itself and investors to review both GAAP and non-GAAP measures to assess the performance of Dolby's business. Dolby's management does not itself, nor does it suggest that investors should, consider non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Whenever Dolby uses non-GAAP financial measures, it provides a reconciliation of the non-GAAP financial measures to the most closely applicable GAAP financial measures. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures as detailed above. Investors are also encouraged to review Dolby's GAAP financial statements as reported in its US Securities and Exchange Commission (SEC) filings. A reconciliation between GAAP and non-GAAP financial measures is provided at the end of this press release and on the Dolby investor relations website, http://investor.dolby.com.
Forward-Looking Statements
Certain statements in this press release, including, but not limited to, statements relating to Dolby's expected financial results for the first quarter of fiscal 2020 and fiscal 2020, our ability to advance our long-term objectives and future dividend payments are "forward-looking statements" that are subject to risks and uncertainties. These forward-looking statements are based on management's current expectations, and as a result of certain risks and uncertainties, actual results may differ materially from those projected. The following important factors, without limitation, could cause actual results to differ materially from those in the forward-looking statements: risks associated with trends in the markets in which Dolby operates, including the Broadcast, Mobile, Consumer Electronics, PC, Cinema, and Other Markets; the loss of, or reduction in sales by, a key customer or licensee; pricing pressures; risks associated with the rate at which OEMs include optical disc playback in Windows® devices and the rate of consumer adoption of Windows operating systems; risks that the continued shift from disc-based media to online media content could result in fewer devices with Dolby technologies; risks associated with the effects of macroeconomic conditions, including trends in consumer spending; risks relating to conducting business internationally, including trade restrictions and changes in diplomatic or trade relationships; risks relating to the expiration of patents; the timing of Dolby's receipt of royalty reports and payments from its licensees, including recoveries; the impact of Tax Reform; timing of revenue recognition under licensing agreements and other contractual arrangements; Dolby's ability to develop, maintain, and strengthen relationships with industry participants; Dolby's ability to develop and deliver innovative technologies in response to new and growing markets; competitive risks; risks associated with conducting business in China and other countries that have historically limited recognition and enforcement of intellectual property and contractual rights; risks associated with the health of the motion picture industry generally; Dolby's ability to increase its revenue streams and to expand its business generally, and to expand its business beyond audio technologies to other technologies; risks associated with acquiring and successfully integrating businesses or technologies; and other risks detailed in Dolby's SEC filings and reports, including the risks identified under the section captioned "Risk Factors" in its most recent quarterly report on Form 10-Q. Dolby disclaims any obligation to update information contained in these forward-looking statements whether as a result of new information, future events, or otherwise.
About Dolby Laboratories
Dolby Laboratories (NYSE:DLB) is based in San Francisco with offices in over 20 countries around the globe. Dolby transforms the science of sight and sound into spectacular experiences. Through innovative research and engineering, we create breakthrough experiences for billions of people worldwide through a collaborative ecosystem spanning artists, businesses, and consumers. The experiences people have - with Dolby Cinema, Dolby Vision, Dolby Atmos, Dolby Audio, Dolby Dimension, and Dolby Voice - revolutionize entertainment and communications at the cinema, on the go, in the home, and at work.
Dolby, Dolby Atmos, Dolby Audio, Dolby Cinema, Dolby Dimension, Dolby Vision, Dolby Voice, and the double-D symbol are among the registered and unregistered trademarks of Dolby Laboratories, Inc. in the United States and/or other countries. Other trademarks remain the property of their respective owners. DLB-F
DOLBY LABORATORIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts; unaudited)
| Fiscal Quarter Ended | Fiscal Year-To-Date Ended | ||||||||||||
| September 27, 2019 | September 28, 2018 (as adjusted) | September 27, 2019 | September 28, 2018 (as adjusted) | ||||||||||
| Revenue: | |||||||||||||
| Licensing | $ | 264,796 | $ | 214,699 | $ | 1,107,280 | $ | 940,777 | |||||
| Products and services | 34,031 | 25,872 | 134,340 | 113,823 | |||||||||
| Total revenue | 298,827 | 240,571 | 1,241,620 | 1,054,600 | |||||||||
| Cost of revenue: | |||||||||||||
| Cost of licensing | 16,770 | 10,603 | 57,531 | 42,583 | |||||||||
| Cost of products and services | 29,190 | 20,656 | 103,323 | 84,979 | |||||||||
| Total cost of revenue | 45,960 | 31,259 | 160,854 | 127,562 | |||||||||
| Gross margin | 252,867 | 209,312 | 1,080,766 | 927,038 | |||||||||
| Operating expenses: | |||||||||||||
| Research and development | 60,191 | 60,500 | 237,871 | 236,794 | |||||||||
| Sales and marketing | 82,149 | 85,760 | 343,835 | 309,762 | |||||||||
| General and administrative | 53,013 | 50,498 | 205,425 | 197,423 | |||||||||
| Restructuring charges/(credits) | 6,294 | — | 36,558 | (446 | ) | ||||||||
| Total operating expenses | 201,647 | 196,758 | 823,689 | 743,533 | |||||||||
| Operating income | 51,220 | 12,554 | 257,077 | 183,505 | |||||||||
| Other income/expense: | |||||||||||||
| Interest income | 5,689 | 5,810 | 24,919 | 18,970 | |||||||||
| Interest expense | (64 | ) | (47 | ) | (170 | ) | (198 | ) | |||||
| Other income/(expense), net | (594 | ) | (464 | ) | 481 | (5,903 | ) | ||||||
| Total other income | 5,031 | 5,299 | 25,230 | 12,869 | |||||||||
| Income before income taxes | 56,251 | 17,853 | 282,307 | 196,374 | |||||||||
| Provision for income taxes | (12,316 | ) | 9,001 | (26,802 | ) | (154,069 | ) | ||||||
| Net income including controlling interest | 43,935 | 26,854 | 255,505 | 42,305 | |||||||||
| Less: net (income) attributable to controlling interest | (17 | ) | (138 | ) | (354 | ) | (559 | ) | |||||
| Net income attributable to Dolby Laboratories, Inc. | $ | 43,918 | $ | 26,716 | $ | 255,151 | $ | 41,746 | |||||
| Net income per share: | |||||||||||||
| Basic | $ | 0.44 | $ | 0.26 | $ | 2.51 | $ | 0.40 | |||||
| Diluted | $ | 0.43 | $ | 0.25 | $ | 2.44 | $ | 0.39 | |||||
| Weighted-average shares outstanding: | |||||||||||||
| Basic | 100,481 | 103,349 | 101,629 | 103,377 | |||||||||
| Diluted | 102,945 | 106,794 | 104,572 | 106,978 | |||||||||
DOLBY LABORATORIES, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands; unaudited)
| September 27, 2019 | September 28, 2018 (as adjusted) | |||||
| ASSETS | ||||||
| Current assets: | ||||||
| Cash and cash equivalents | $ | 797,210 | $ | 918,063 | ||
| Restricted cash | 8,383 | 7,187 | ||||
| Short-term investments | 119,146 | 178,138 | ||||
| Accounts receivable, net | 189,115 | 166,133 | ||||
| Contract assets | 195,651 | 165,959 | ||||
| Inventories, net | 32,331 | 26,206 | ||||
| Prepaid expenses and other current assets | 39,704 | 34,890 | ||||
| Total current assets | 1,381,540 | 1,496,576 | ||||
| Long-term investments | 179,587 | 187,782 | ||||
| Property, plant, and equipment, net | 537,432 | 514,182 | ||||
| Goodwill and intangible assets, net | 515,720 | 512,001 | ||||
| Deferred taxes | 114,075 | 74,766 | ||||
| Other non-current assets | 93,395 | 80,080 | ||||
| Total assets | $ | 2,821,749 | $ | 2,865,387 | ||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||
| Current liabilities: | ||||||
| Accounts payable | $ | 15,212 | $ | 21,922 | ||
| Accrued liabilities | 268,144 | 243,128 | ||||
| Income taxes payable | 3,506 | 2,680 | ||||
| Contract liabilities | 19,991 | 17,468 | ||||
| Total current liabilities | 306,853 | 285,198 | ||||
| Non-current contract liabilities | 24,404 | 25,887 | ||||
| Other non-current liabilities | 177,462 | 183,799 | ||||
| Total liabilities | 508,719 | 494,884 | ||||
| Stockholders’ equity: | ||||||
| Class A common stock | 58 | 61 | ||||
| Class B common stock | 41 | 41 | ||||
| Additional paid-in capital | — | 66,127 | ||||
| Retained earnings | 2,327,877 | 2,313,539 | ||||
| Accumulated other comprehensive (loss) | (20,625 | ) | (15,832 | ) | ||
| Total stockholders’ equity – Dolby Laboratories, Inc. | 2,307,351 | 2,363,936 | ||||
| Controlling interest | 5,679 | 6,567 | ||||
| Total stockholders’ equity | 2,313,030 | 2,370,503 | ||||
| Total liabilities and stockholders’ equity | $ | 2,821,749 | $ | 2,865,387 | ||
DOLBY LABORATORIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands; unaudited)
| Fiscal Year-To-Date Ended | ||||||
| September 27, 2019 | September 28, 2018 (as adjusted) | |||||
| Operating activities: | ||||||
| Net income including controlling interest | $ | 255,505 | $ | 42,305 | ||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||
| Depreciation and amortization | 85,123 | 81,283 | ||||
| Stock-based compensation | 76,580 | 71,249 | ||||
| Amortization of premium on investments | 358 | 2,473 | ||||
| Provision for doubtful accounts | 4,523 | 2,413 | ||||
| Deferred income taxes | (40,191 | ) | 61,059 | |||
| Restructuring charge for exit of leased facility | 33,251 | — | ||||
| Other non-cash items affecting net income | 6,952 | 7,570 | ||||
| Changes in operating assets and liabilities: | ||||||
| Accounts receivable, net | (27,492 | ) | 100,129 | |||
| Contract assets | (29,708 | ) | (2,502 | ) | ||
| Inventories | (16,098 | ) | (6,602 | ) | ||
| Prepaid expenses and other assets | (6,200 | ) | (52,485 | ) | ||
| Accounts payable and accrued liabilities | 169 | (29,019 | ) | |||
| Income taxes, net | (2,186 | ) | 39,738 | |||
| Contract liabilities | 1,084 | (59 | ) | |||
| Other non-current liabilities | (13,996 | ) | 34,650 | |||
| Net cash provided by operating activities | 327,674 | 352,202 | ||||
| Investing activities: | ||||||
| Purchases of investment securities | (265,361 | ) | (174,195 | ) | ||
| Proceeds from sales of investment securities | 200,636 | 123,058 | ||||
| Proceeds from maturities of investment securities | 136,951 | 237,432 | ||||
| Purchases of property, plant, and equipment | (96,281 | ) | (72,814 | ) | ||
| Payments for business acquisitions, net of cash acquired | (14,919 | ) | (22,852 | ) | ||
| Purchase of intangible assets | (17,255 | ) | (12,543 | ) | ||
| Net cash (used in)/provided by investing activities | (56,229 | ) | 78,086 | |||
| Financing activities: | ||||||
| Proceeds from issuance of common stock | 57,346 | 106,162 | ||||
| Repurchase of common stock | (340,585 | ) | (150,470 | ) | ||
| Payment of cash dividend | (77,496 | ) | (66,155 | ) | ||
| Distribution to controlling interest | (1,015 | ) | (1,022 | ) | ||
| Shares repurchased for tax withholdings on vesting of restricted stock | (22,788 | ) | (22,144 | ) | ||
| Payment of deferred consideration for prior business combination | (743 | ) | — | |||
| Net cash used in financing activities | (385,281 | ) | (133,629 | ) | ||
| Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash | (5,821 | ) | (5,777 | ) | ||
| Net increase/(decrease) in cash, cash equivalents, and restricted cash | (119,657 | ) | 290,882 | |||
| Cash, cash equivalents, and restricted cash at beginning of period | 925,250 | 634,368 | ||||
| Cash, cash equivalents, and restricted cash at end of period | $ | 805,593 | $ | 925,250 | ||
| GAAP to Non-GAAP Reconciliations | |||||||||||||
| (in millions, except per share data; unaudited) | |||||||||||||
| The following tables present Dolby's GAAP financial measures reconciled to the non-GAAP financial measures included in this release for the fourth quarter of fiscal 2019 and 2018 and fiscal 2019 and 2018: | |||||||||||||
| Net income: | Fiscal Quarter Ended | Fiscal Year Ended | |||||||||||
| September 27, 2019 | September 28, 2018 (as adjusted) | September 27, 2019 | September 28, 2018 (as adjusted) | ||||||||||
| GAAP net income | $ | 43.9 | $ | 26.7 | $ | 255.2 | $ | 41.7 | |||||
| Stock-based compensation (1) | 17.0 | 17.8 | 76.6 | 71.2 | |||||||||
| Amortization of acquisition-related intangibles (2) | 3.1 | 1.9 | 9.9 | 7.7 | |||||||||
| Restructuring charges/(credits), net | 6.3 | — | 36.5 | (0.4 | ) | ||||||||
| Impact of Tax Reform | — | (33.1 | ) | (18.2 | ) | 104.5 | |||||||
| Income tax adjustments | (2.7 | ) | 10.2 | (25.4 | ) | (8.9 | ) | ||||||
| Non-GAAP net income | $ | 67.6 | $ | 23.5 | $ | 334.6 | $ | 215.8 | |||||
| (1) Stock-based compensation included in above line items: | |||||||||||||
| Cost of products and services | 0.4 | 0.4 | 1.7 | 1.6 | |||||||||
| Research and development | 5.3 | 5.0 | 23.2 | 19.5 | |||||||||
| Sales and marketing | 5.8 | 6.8 | 28.1 | 25.0 | |||||||||
| General and administrative | 5.5 | 5.6 | 23.6 | 25.1 | |||||||||
| (2) Amortization of acquisition-related intangibles included in above line items: | |||||||||||||
| Cost of licensing | 0.6 | 0.6 | 2.4 | 2.5 | |||||||||
| Cost of products and services | 1.2 | 0.5 | 3.1 | 2.2 | |||||||||
| Research and development | 0.1 | 0.1 | 0.2 | 0.3 | |||||||||
| Sales and marketing | 1.3 | 0.7 | 4.2 | 2.7 | |||||||||
| General and administrative | -0.1 | 0.0 | 0.0 | 0.0 | |||||||||
| Diluted earnings per share: | Fiscal Quarter Ended | Fiscal Year Ended | |||||||||||
| September 27, 2019 | September 28, 2018 (as adjusted) | September 27, 2019 | September 28, 2018 (as adjusted) | ||||||||||
| GAAP diluted earnings per share | $ | 0.43 | $ | 0.25 | $ | 2.44 | $ | 0.39 | |||||
| Stock-based compensation | 0.17 | 0.16 | 0.73 | 0.67 | |||||||||
| Amortization of acquisition-related intangibles | 0.03 | 0.02 | 0.09 | 0.07 | |||||||||
| Restructuring charges/(credits), net | 0.06 | — | 0.35 | — | |||||||||
| Impact of Tax Reform | — | (0.31 | ) | (0.17 | ) | 0.98 | |||||||
| Income tax adjustments | (0.03 | ) | 0.10 | (0.24 | ) | (0.09 | ) | ||||||
| Non-GAAP diluted earnings per share | $ | 0.66 | $ | 0.22 | $ | 3.20 | $ | 2.02 | |||||
| Shares used in computing diluted earnings per share | 103 | 107 | 105 | 107 | |||||||||
| The following tables present a reconciliation between GAAP and non-GAAP versions of the estimated financial amounts for the first quarter of fiscal 2020 and fiscal year 2020 included in this release: | |||||||||||||
| Gross margin: | Q1 2020 | Fiscal 2020 | |||||||||||
| GAAP gross margin (low - high end of range) | 88 | % | 87% - 88% | ||||||||||
| Stock-based compensation | 0.2 | % | 0.2 | % | |||||||||
| Amortization of acquisition-related intangibles | 0.8 | % | 0.8 | % | |||||||||
| Non-GAAP gross margin (low - high end of range) | 89 | % | 88% - 89% | ||||||||||
| Operating expenses: | Q1 2020 | Fiscal 2020 | |||||||||||
| GAAP operating expenses (low - high end of range) | $214 - $220 | $829 - $849 | |||||||||||
| Stock-based compensation | (21 | ) | (84 | ) | |||||||||
| Amortization of acquisition-related intangibles | (1 | ) | (5 | ) | |||||||||
| Non-GAAP operating expenses (low - high end of range) | $192 - $198 | $740 - $760 | |||||||||||
| Diluted earnings per share: | Q1 2020 | Fiscal 2020 | |||||||||||
| Low | High | Low | High | ||||||||||
| GAAP diluted earnings per share | $ | 0.27 | $ | 0.33 | $ | 2.64 | $ | 2.74 | |||||
| Stock-based compensation | 0.21 | 0.21 | 0.84 | 0.84 | |||||||||
| Amortization of acquisition-related intangibles | 0.02 | 0.02 | 0.09 | 0.09 | |||||||||
| Income tax adjustments | (0.05 | ) | (0.05 | ) | (0.17 | ) | (0.17 | ) | |||||
| Non-GAAP diluted earnings per share | $ | 0.45 | $ | 0.51 | $ | 3.40 | $ | 3.50 | |||||
| Shares used in computing diluted earnings per share | 104 | 104 | 103 | 103 | |||||||||
Revenue Standard Adoption
The following tables contain restated summarized financial information resulting from the adoption of ASC 606. In the first quarter of fiscal 2019 we adopted Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (ASC 606), the new revenue recognition standard. ASC 606 replaces existing revenue recognition rules with a comprehensive revenue measurement and recognition standard. The Company adopted the new revenue standard utilizing the full retrospective method. Under this method, the new revenue standard is applied retrospectively to each prior period reported.
DOLBY LABORATORIES, INC.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts; unaudited)
| As adjusted to reflect ASC 606 | ||||||||||||||||||
| Fiscal Quarter Ended | Fiscal Year Ended | |||||||||||||||||
| December 29, 2017 | March 30, 2018 | June 29, 2018 | September 28, 2018 | September 28, 2018 | September 29, 2017 | |||||||||||||
| Revenue: | ||||||||||||||||||
| Licensing | $ | 270,172 | $ | 272,135 | $ | 183,771 | $ | 214,699 | $ | 940,777 | $ | 965,864 | ||||||
| Products and services | 29,355 | 27,587 | 31,009 | 25,872 | 113,823 | 114,313 | ||||||||||||
| Total revenue | 299,527 | 299,722 | 214,780 | 240,571 | 1,054,600 | 1,080,177 | ||||||||||||
| Cost of revenue: | ||||||||||||||||||
| Cost of licensing | 9,259 | 10,610 | 12,111 | 10,603 | 42,583 | 39,329 | ||||||||||||
| Cost of products and services | 21,634 | 20,417 | 22,272 | 20,656 | 84,979 | 79,200 | ||||||||||||
| Total cost of revenue | 30,893 | 31,027 | 34,383 | 31,259 | 127,562 | 118,529 | ||||||||||||
| Gross margin | 268,634 | 268,695 | 180,397 | 209,312 | 927,038 | 961,648 | ||||||||||||
| Operating expenses: | ||||||||||||||||||
| Research and development | 56,444 | 59,493 | 60,357 | 60,500 | 236,794 | 233,312 | ||||||||||||
| Sales and marketing | 70,149 | 74,019 | 79,834 | 85,760 | 309,762 | 296,661 | ||||||||||||
| General and administrative | 48,285 | 50,747 | 47,893 | 50,498 | 197,423 | 171,686 | ||||||||||||
| Restructuring charges/(credits) | (197 | ) | (167 | ) | (82 | ) | — | (446 | ) | 12,856 | ||||||||
| Total operating expenses | 174,681 | 184,092 | 188,002 | 196,758 | 743,533 | 714,515 | ||||||||||||
| Operating income/(Loss) | 93,953 | 84,603 | (7,605 | ) | 12,554 | 183,505 | 247,133 | |||||||||||
| Other income/expense: | ||||||||||||||||||
| Interest income | 3,781 | 3,892 | 5,487 | 5,810 | 18,970 | 9,577 | ||||||||||||
| Interest expense | (35 | ) | (29 | ) | (87 | ) | (47 | ) | (198 | ) | (127 | ) | ||||||
| Other income/(expense), net | (1,152 | ) | (684 | ) | (3,603 | ) | (464 | ) | (5,903 | ) | (1,438 | ) | ||||||
| Total other income/expense | 2,594 | 3,179 | 1,797 | 5,299 | 12,869 | 8,012 | ||||||||||||
| Income (loss) before income taxes | 96,547 | 87,782 | (5,808 | ) | 17,853 | 196,374 | 255,145 | |||||||||||
| Provision for income taxes | (149,705 | ) | (22,432 | ) | 9,067 | 9,001 | (154,069 | ) | (48,039 | ) | ||||||||
| Net income (loss) including controlling interest | (53,158 | ) | 65,350 | 3,259 | 26,854 | 42,305 | 207,106 | |||||||||||
| Less: net (income) attributable to controlling interest | (144 | ) | (134 | ) | (143 | ) | (138 | ) | (559 | ) | (625 | ) | ||||||
| Net income/(loss) attributable to Dolby Laboratories, Inc. | $ | (53,302 | ) | $ | 65,216 | $ | 3,116 | $ | 26,716 | $ | 41,746 | $ | 206,481 | |||||
| Net/(loss) income per share: | ||||||||||||||||||
| Basic | (0.52 | ) | 0.63 | 0.03 | 0.26 | 0.40 | 2.03 | |||||||||||
| Diluted | (0.52 | ) | 0.61 | 0.03 | 0.25 | 0.39 | 2.00 | |||||||||||
| Weighted-average shares outstanding: | ||||||||||||||||||
| Basic | 102,552 | 103,771 | 103,836 | 103,349 | 103,377 | 101,784 | ||||||||||||
| Diluted | 102,552 | 107,001 | 106,950 | 106,794 | 106,978 | 103,286 | ||||||||||||
The following table presents the composition of our licensing revenue:
| As adjusted to reflect ASC 606 | ||||||||||||
| Fiscal Quarter Ended | Fiscal Year Ended | |||||||||||
| December 29, 2017 | March 30, 2018 | June 29, 2018 | September 28, 2018 | September 28, 2018 | September 29, 2017 | |||||||
| Market: | ||||||||||||
| Broadcast | 41 | % | 33 | % | 46 | % | 48 | % | 41 | % | 44 | % |
| Mobile | 22 | % | 25 | % | 11 | % | 1 | % | 16 | % | 15 | % |
| CE | 14 | % | 14 | % | 15 | % | 19 | % | 15 | % | 13 | % |
| PC | 8 | % | 16 | % | 9 | % | 12 | % | 11 | % | 13 | % |
| Other | 15 | % | 12 | % | 19 | % | 20 | % | 17 | % | 15 | % |
| Total revenue | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % |
Investor Contact:
Jason Dea
Dolby Laboratories, Inc.
415-357-7002
investor@dolby.com
Media Contact:
Karen Hartquist
Dolby Laboratories, Inc.
415-505-8357
karen.hartquist@dolby.com