Dolby Laboratories Reports First Quarter Fiscal 2020 Financial Results

San Francisco, California, UNITED STATES

SAN FRANCISCO, Jan. 29, 2020 (GLOBE NEWSWIRE) -- Dolby Laboratories, Inc. (NYSE:DLB) today announced the Company's financial results for the first quarter of fiscal 2020. For the first quarter, Dolby reported total revenue of $291.9 million, compared to $302.4 million for the first quarter of fiscal 2019.

“We’re off to a strong start to 2020 as Dolby Vision and Dolby Atmos are being adopted across more content and more devices,” said Kevin Yeaman, President and CEO, Dolby Laboratories. “Innovations like Dolby Atmos for music are sparking a wave of interest from artists and fans, creating more reasons for our partners to adopt our technology and for consumers to seek Dolby experiences.”

First quarter GAAP net income was $48.8 million, or $0.47 per diluted share, compared to GAAP net income of $98.2 million, or $0.93 per diluted share for the first quarter of fiscal 2019. On a non-GAAP basis, first quarter net income was $65.5 million, or $0.64 per diluted share, compared to non-GAAP net income of $78.7 million, or $0.74 per diluted share for the first quarter of fiscal 2019. First quarter cash flows from operations was $31.2 million, compared to $57.0 million for the first quarter of fiscal 2019. A complete listing of Dolby's non-GAAP measures are described and reconciled to the corresponding GAAP measures at the end of this release.


Today, Dolby announced a cash dividend of $0.22 per share of Class A and Class B common stock, payable on February 20, 2020, to stockholders of record as of the close of business on February 10, 2020.

Financial Outlook

Second Quarter Fiscal 2020

Dolby is providing the following estimates for its second quarter of fiscal 2020:

  • Total revenue will range from $370 million to $390 million

  • Gross margin percentages will be approximately 89% on a GAAP basis and approximately 90% on a non-GAAP basis

  • Operating expenses will range from $213 million to $219 million on a GAAP basis and from $191 million to $197 million on a non-GAAP basis

  • Effective tax rate will range from 18% to 20% on both a GAAP basis and non-GAAP basis

  • Diluted earnings per share will range from $0.97 to $1.03 on a GAAP basis and from $1.15 to $1.21 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 17% to 19% on a GAAP basis and from 18% to 20% on a 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 first quarter fiscal 2020 financial results for Dolby Laboratories at 2:00 p.m. PT (5:00 p.m. ET) on Wednesday, January 29, 2020. Access to the teleconference will be available over the Internet from or by dialing 1-800-263-0877. International callers can access the conference call at 1-646-828-8143.

A replay of the call will be available from 5:00 p.m. PT on Wednesday, January 29, 2020, until 8:59 p.m. PT on Wednesday, February 5, 2020, by dialing 1-844-512-2921 (international callers can access the replay by dialing 1-412-317-6671) and entering the confirmation code 8210782. An archived version of the teleconference will also be available on the Dolby website,

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 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,

Forward-Looking Statements

Certain statements in this press release, including, but not limited to, statements relating to Dolby's expected financial results for the second 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 that the continued shift in content distribution from optical disc-based and other traditional media to online and streaming media content could result in fewer devices with Dolby technologies or less revenue from such devices; 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 annual report on Form 10-K. 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, and Dolby Voice - revolutionize entertainment and communications at the cinema, on the go, in the home, and at work.

Dolby, Dolby Cinema, Dolby Vision, Dolby Atmos, Dolby Audio, 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

(in thousands, except per share amounts; unaudited)

 Fiscal Quarter Ended
 December 27,
December 28,
Licensing$257,683 $260,279 
Products and services34,194 42,097 
Total revenue291,877 302,376 
Cost of revenue:  
Cost of licensing12,342 11,397 
Cost of products and services24,973 27,232 
Total cost of revenue37,315 38,629 
Gross margin254,562 263,747 
Operating expenses:  
Research and development57,650 58,647 
Sales and marketing95,118 85,602 
General and administrative52,529 50,813 
Restructuring charges675 14 
Total operating expenses205,972 195,076 
Operating income48,590 68,671 
Other income/expense:  
Interest income4,932 5,185 
Interest expense(72)(45)
Other income, net1,004 443 
Total other income5,864 5,583 
Income before income taxes54,454 74,254 
(Provision for)/benefit from income taxes(5,863)24,104 
Net income including controlling interest48,591 98,358 
Less: net loss/(income) attributable to controlling interest162 (139)
Net income attributable to Dolby Laboratories, Inc.$48,753 $98,219 
Net income per share:  
Basic$0.49 $0.96 
Diluted$0.47 $0.93 
Weighted-average shares outstanding:  
Basic100,336 102,677 
Diluted103,078 106,130 

(in thousands; unaudited)

 December 27,
September 27,
Current assets:  
Cash and cash equivalents$741,429 $797,210 
Restricted cash11,726 8,383 
Short-term investments170,234 119,146 
Accounts receivable, net191,001 189,115 
Contract assets204,963 195,651 
Inventories, net29,104 32,331 
Prepaid expenses and other current assets52,551 39,704 
Total current assets1,401,008 1,381,540 
Long-term investments141,720 179,587 
Property, plant, and equipment, net549,495 537,432 
Operating lease right-of-use assets71,071  
Goodwill and intangible assets, net511,424 515,720 
Deferred taxes123,284 114,075 
Other non-current assets95,282 93,395 
Total assets$2,893,284 $2,821,749 
Current liabilities:  
Accounts payable$13,700 $15,212 
Accrued liabilities242,052 268,144 
Income taxes payable2,318 3,506 
Contract liabilities19,785 19,991 
Operating lease liabilities15,604  
Total current liabilities293,459 306,853 
Non-current contract liabilities23,917 24,404 
Non-current operating lease liabilities57,985  
Other non-current liabilities179,222 177,462 
Total liabilities554,583 508,719 
Stockholders’ equity:  
Class A common stock58 58 
Class B common stock41 41 
Additional paid-in capital  
Retained earnings2,351,251 2,327,877 
Accumulated other comprehensive (loss)(18,060)(20,625)
Total stockholders’ equity – Dolby Laboratories, Inc.2,333,290 2,307,351 
Controlling interest5,411 5,679 
Total stockholders’ equity2,338,701 2,313,030 
Total liabilities and stockholders’ equity$2,893,284 $2,821,749 

(in thousands; unaudited)

 Fiscal Quarter Ended
 December 27,
December 28,
Operating activities:  
Net income including controlling interest$48,591 $98,358 
Adjustments to reconcile net income to net cash provided by operating activities:  
Depreciation and amortization20,239 20,029 
Stock-based compensation22,614 21,482 
Amortization of premium on investments160 309 
Provision for doubtful accounts575 1,605 
Deferred income taxes(9,174)(32,571)
Restructuring charge for exit of leased facility486  
Other non-cash items affecting net income(10)3,393 
Changes in operating assets and liabilities:  
Accounts receivable, net(2,331)17,736 
Contract assets(9,310)(33,519)
Inventories767 (2,709)
Operating lease right-of-use assets(8,644) 
Prepaid expenses and other assets(13,245)(13,157)
Accounts payable and accrued liabilities(30,785)(26,332)
Income taxes, net945 1,546 
Contract liabilities(724)(678)
Operating lease liabilities8,664  
Other non-current liabilities2,341 1,460 
Net cash provided by operating activities31,159 56,952 
Investing activities:  
Purchases of investment securities(129,325)(63,329)
Proceeds from sales of investment securities97,717 32,582 
Proceeds from maturities of investment securities17,876 19,785 
Purchases of property, plant, and equipment(23,385)(18,539)
Purchase of intangible assets(290)(12,065)
Net cash used in investing activities(37,407)(41,566)
Financing activities:  
Proceeds from issuance of common stock24,373 14,272 
Repurchase of common stock(30,003)(112,545)
Payment of cash dividend(22,081)(19,573)
Distribution to controlling interest(283)(906)
Shares repurchased for tax withholdings on vesting of restricted stock(20,282)(19,679)
Net cash used in financing activities(48,276)(138,431)
Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash2,086 (2,419)
Net decrease in cash, cash equivalents, and restricted cash(52,438)(125,464)
Cash, cash equivalents, and restricted cash at beginning of period805,593 925,250 
Cash, cash equivalents, and restricted cash at end of period$753,155 $799,786 

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 first quarter of fiscal 2020 and 2019:
Net income:Fiscal Quarter Ended
 December 27,
December 28,
GAAP net income$48.8 $98.2 
Stock-based compensation (1)22.6 21.5 
Amortization of acquisition-related intangibles (2)2.2 1.8 
Restructuring charges0.7  
Impact of Tax Reform (36.0)
Income tax adjustments(8.8)(6.8)
Non-GAAP net income$65.5 $78.7 
(1) Stock-based compensation included in above line items:  
Cost of products and services 0.5  0.5 
Research and development 7.0  6.3 
Sales and marketing 8.2  8.2 
General and administrative 6.9  6.5 
(2) Amortization of acquisition-related intangibles included in above line items:  
Cost of licensing0.6 0.6 
Cost of products and services0.4 0.6 
Research and development0.1 (0.2)
Sales and marketing0.8 0.8 
General and administrative0.3  
Diluted earnings per share:Fiscal Quarter Ended
 December 27,
December 28,
GAAP diluted earnings per share$0.47 $0.93 
Stock-based compensation0.22 0.20 
Amortization of acquisition-related intangibles0.02 0.02 
Restructuring charges0.01  
Impact of Tax Reform (0.34)
Income tax adjustments(0.08)(0.07)
Non-GAAP diluted earnings per share$0.64 $0.74 
Shares used in computing diluted earnings per share103 106 
The following tables present a reconciliation between GAAP and non-GAAP versions of the estimated financial amounts for the second quarter of fiscal 2020 and fiscal year 2020 included in this release:
Gross margin:Q2 2020Fiscal 2020
GAAP gross margin (low - high end of range)89% 87% - 88%
Stock-based compensation0.2%0.2%
Amortization of acquisition-related intangibles0.8%0.8%
Non-GAAP gross margin (low - high end of range)90% 88% - 89%
Operating expenses:Q2 2020Fiscal 2020
GAAP operating expenses (low - high end of range) $213 - $219  $829 - $849 
Stock-based compensation(21)(84)
Amortization of acquisition-related intangibles(1)(5)
Non-GAAP operating expenses (low - high end of range) $191 - $197  $740 - $760 
Effective tax rate: Fiscal 2020
GAAP effective tax rate (low - high end of range)  17% - 19%
Stock-based compensation (low - high end of range)  2% - 3%
Amortization of acquisition-related intangibles (low - high end of range)  (1%) - 0%
Non-GAAP effective tax rate (low - high end of range)  18% - 20%
Diluted earnings per share:Q2 2020
GAAP diluted earnings per share$0.97 $1.03 
Stock-based compensation0.21 0.21 
Amortization of acquisition-related intangibles0.02 0.02 
Income tax adjustments(0.05)(0.05)
Non-GAAP diluted earnings per share$1.15 $1.21 
Shares used in computing diluted earnings per share103 103 
 Fiscal 2020
GAAP diluted earnings per share$2.64 $2.74 
Stock-based compensation0.84 0.84 
Amortization of acquisition-related intangibles0.09 0.09 
Income tax adjustments(0.17)(0.17)
Non-GAAP diluted earnings per share$3.40 $3.50 
Shares used in computing diluted earnings per share103 103 

Investor Contact:
Jason Dea
Dolby Laboratories, Inc.

Media Contact:
Karen Hartquist
Dolby Laboratories, Inc.