Dolby Laboratories Reports Second Quarter Fiscal 2020 Financial Results

San Francisco, California, UNITED STATES

SAN FRANCISCO, May 04, 2020 (GLOBE NEWSWIRE) -- Dolby Laboratories, Inc. (NYSE:DLB) today announced the company's financial results for the second quarter of fiscal 2020. For the second quarter, Dolby reported total revenue of $351.8 million, compared to $338.3 million for the second quarter of fiscal 2019.

"We are well positioned to navigate these challenging times with the strength of our people, our value proposition, and our financial position,” said Kevin Yeaman, President and CEO, Dolby Laboratories. "Consumers want and need immersive entertainment and communications now more than ever, and Dolby is well positioned to bring these experiences across our entire portfolio of businesses.”

Second quarter GAAP net income was $88.5 million, or $0.86 per diluted share, compared to GAAP net income of $73.4 million, or $0.70 per diluted share for the second quarter of fiscal 2019. On a non-GAAP basis, second quarter net income was $106.6 million, or $1.04 per diluted share, compared to non-GAAP net income of $109.0 million, or $1.04 per diluted share for the second quarter of fiscal 2019. Second quarter cash flows from operations was $65.7 million, compared to $48.9 million for the second 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. 


Dolby continues to monitor the evolving situation of the COVID-19 pandemic on all aspects of our company. Our priorities continue to be the safety and well-being of our employees and supporting our communities. Since the initial outbreak of COVID-19, our revenues have been and we expect will continue to be impacted across various markets within licensing and products and services. The implications of COVID-19 on our future results of operations remain uncertain as the situation continues to develop globally.

We expect continued significant uncertainty in global financial markets. Dolby’s financial results for the second quarter of fiscal 2020 rely on estimates of royalty-based revenue that take into consideration the macroeconomic effect of global events, including the COVID-19 pandemic, which may impact supply chain activities and demand for shipments. For more information, see the section captioned “Critical Accounting Policies and Estimates” in our Quarterly Report on Form 10-Q for the second quarter of fiscal 2020, filed on the date hereof.


Today, Dolby announced a cash dividend of $0.22 per share of Class A and Class B common stock, payable on May 27, 2020, to stockholders of record as of the close of business on May 18, 2020.

Financial Outlook - Third Quarter Fiscal 2020

The circumstances relating to the COVID-19 pandemic continue to evolve and are difficult to predict. As a result, we are providing third quarter fiscal 2020 estimates that incorporate certain assumptions about the potential impact of COVID-19, based upon a consideration of external and internal data and information. We are unable to provide an estimate for our fourth quarter fiscal 2020 because of a lack of visibility. Therefore, our full year financial outlook as previously stated in our first quarter fiscal 2020 earnings release and related conference call is withdrawn.

Our actual results could differ materially from the estimates we are providing due to the challenging economic environment and highly uncertain effects of COVID-19. For more information, see "Forward-Looking Statements" in this press release for a description of certain risks that we face, and the section captioned “Risk Factors” in our Quarterly Report on Form 10-Q for the second quarter of fiscal 2020, filed on the date hereof.

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

  • Total Revenue is estimated to range from $225 million to $250 million with the following assumptions incorporated:
    • A vast majority of global cinema sites are currently closed and most are unlikely to reopen before the end of June
    • Unit volume shipments, aggregated across various end markets and devices, could be lower by 15% to 25% relative to what we had previously been modeling
  • Gross margin percentages are anticipated to range from 86% to 87% on a GAAP basis and from 87% to 88% on a non-GAAP basis
  • Operating expenses are anticipated to range from $191 million to $201 million on a GAAP basis and from $170 million to $180 million on a non-GAAP basis
  • Effective tax rate is anticipated to range from 19% to 21% on both a GAAP basis and non-GAAP basis
  • Diluted earnings per share is anticipated to range from $0.01 to $0.18 on a GAAP basis and from $0.18 to $0.35 on a non-GAAP basis

Conference Call Information

Members of Dolby management will lead a conference call open to all interested parties to discuss second quarter fiscal 2020 financial results for Dolby Laboratories at 2:00 p.m. PT (5:00 p.m. ET) on Monday, May 4, 2020. Access to the teleconference will be available over the Internet from or by dialing 1-866-548-4713. International callers can access the conference call at 1-323-794-2093.

A replay of the call will be available from 5:00 p.m. PT on Monday, May 4, 2020, until 8:59 p.m. PT on Monday, May 11, 2020, by dialing 1-844-512-2921 (international callers can access the replay by dialing 1-412-317-6671) and entering the confirmation code 4615918. 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 third quarter of 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: the potential impacts of the COVID-19 pandemic on Dolby’s business operations, financial results, and financial position (including the impact to Dolby partners and disruption of the supply chain of consumer products; consumer demand for products that incorporate Dolby technologies; delays in the release of new products or services that contain Dolby technologies; delays in royalty reporting or delinquent payment by partners or licensees; the impact to the overall cinema market, including duration of cinema closures and resulting adverse impact to Dolby’s revenue recognized on box-office sales and demand for cinema products and services; temporary Dolby office closures and other actions to protect Dolby’s workforce; and macroeconomic conditions that affect discretionary spending and access to products that contain Dolby technologies); 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 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; changes in tax regulations; 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 our 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, 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 Fiscal Year-To-Date Ended
 March 27,
March 29,
 March 27,
March 29,
Licensing$328,865   $310,308    $586,548   $570,587   
Products and services22,950   27,950    57,144   70,047   
Total revenue351,815   338,258    643,692   640,634   
Cost of revenue:     
Cost of licensing13,243   16,074    25,585   27,471   
Cost of products and services23,587   20,501    48,560   47,733   
Total cost of revenue36,830   36,575    74,145   75,204   
Gross margin314,985   301,683    569,547   565,430   
Operating expenses:     
Research and development60,086   58,625    117,736   117,272   
Sales and marketing88,485   92,694    183,603   178,296   
General and administrative60,800   47,416    113,329   98,229   
Restructuring charges/(credits)(331) 18    344   32   
Total operating expenses209,040   198,753    415,012   393,829   
Operating income105,945   102,930    154,535   171,601   
Other income/expense:     
Interest income4,721   7,494    9,653   12,679   
Interest expense(25) (32)  (97) (77) 
Other income/(expense), net138   (390)  1,142   53   
Total other income4,834   7,072    10,698   12,655   
Income before income taxes110,779   110,002    165,233   184,256   
Provision for income taxes(22,105) (36,427)  (27,968) (12,323) 
Net income including controlling interest88,674   73,575    137,265   171,933   
Less: net income attributable to controlling interest(178) (135)  (16) (274) 
Net income attributable to Dolby Laboratories, Inc.$88,496   $73,440    $137,249   $171,659   
Net income per share:     
Basic$0.88   $0.72    $1.36   $1.68   
Diluted$0.86   $0.70    $1.33   $1.63   
Weighted-average shares outstanding:     
Basic100,854   102,141    100,595   102,409   
Diluted102,773   104,587    103,133   105,529   

(in thousands; unaudited)

 March 27,
September 27,
Current assets:  
Cash and cash equivalents$724,931   $797,210   
Restricted cash9,513   8,383   
Short-term investments174,859   119,146   
Accounts receivable, net247,043   189,115   
Contract assets223,739   195,651   
Inventories, net28,331   32,331   
Prepaid expenses and other current assets51,156   39,704   
Total current assets1,459,572   1,381,540   
Long-term investments127,294   179,587   
Property, plant, and equipment, net551,027   537,432   
Operating lease right-of-use assets79,439   —   
Goodwill and intangible assets, net500,896   515,720   
Deferred taxes129,252   114,075   
Other non-current assets97,353   93,395   
Total assets$2,944,833   $2,821,749   
Current liabilities:  
Accounts payable$9,041   $15,212   
Accrued liabilities245,869   268,144   
Income taxes payable15,186   3,506   
Contract liabilities19,745   19,991   
Operating lease liabilities17,413   —   
Total current liabilities307,254   306,853   
Non-current contract liabilities25,074   24,404   
Non-current operating lease liabilities64,423   —   
Other non-current liabilities178,805   177,462   
Total liabilities575,556   508,719   
Stockholders’ equity:  
Class A common stock58   58   
Class B common stock41   41   
Retained earnings2,395,575   2,327,877   
Accumulated other comprehensive (loss)(31,615) (20,625) 
Total stockholders’ equity – Dolby Laboratories, Inc.2,364,059   2,307,351   
Controlling interest5,218   5,679   
Total stockholders’ equity2,369,277   2,313,030   
Total liabilities and stockholders’ equity$2,944,833   $2,821,749   

(in thousands; unaudited)

 Fiscal Quarter Ended
 March 27,
March 29,
Operating activities:  
Net income including controlling interest$137,265   $171,933   
Adjustments to reconcile net income to net cash provided by operating activities:  
Depreciation and amortization40,212   40,799   
Stock-based compensation43,565   40,717   
Amortization of premium on investments334   338   
Provision for doubtful accounts2,955   1,963   
Deferred income taxes(15,141) (38,548) 
Restructuring charge for exit of leased facility602   —   
Other non-cash items affecting net income3,753   1,355   
Changes in operating assets and liabilities:  
Accounts receivable, net(60,870) (14,221) 
Contract assets(28,086) (78,949) 
Inventories(5,376) (7,983) 
Operating lease right-of-use assets(20,102) —   
Prepaid expenses and other assets(16,068) (15,273) 
Accounts payable and accrued liabilities(22,033) (14,190) 
Income taxes, net13,238   18,414   
Contract liabilities452   1,061   
Operating lease liabilities20,099   —   
Other non-current liabilities2,100   (1,572) 
Net cash provided by operating activities96,899   105,844   
Investing activities:  
Purchases of investment securities(167,292) (152,499) 
Proceeds from sales of investment securities109,907   83,478   
Proceeds from maturities of investment securities54,599   78,714   
Purchases of property, plant, and equipment(41,782) (56,082) 
Purchase of intangible assets(2,640) (17,065) 
Net cash used in investing activities(47,208) (63,454) 
Financing activities:  
Proceeds from issuance of common stock53,986   27,158   
Repurchase of common stock(101,672) (197,880) 
Payment of cash dividend(44,336) (39,035) 
Distribution to controlling interest(283) (1,014) 
Shares repurchased for tax withholdings on vesting of restricted stock(21,094) (20,680) 
Payment related to prior purchases of intangible assets(91) —   
Payment of deferred consideration for prior business combination(3,000) —   
Net cash used in financing activities(116,490) (231,451) 
Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash(4,350) (1,323) 
Net decrease in cash, cash equivalents, and restricted cash(71,149) (190,384) 
Cash, cash equivalents, and restricted cash at beginning of period805,593   925,250   
Cash, cash equivalents, and restricted cash at end of period$734,444   $734,866   

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 second quarter of fiscal 2020 and 2019:
Net income:Fiscal Quarter Ended
 March 27,
March 29,
GAAP net income$88.5   $73.4  
Stock-based compensation (1)21.0   19.2  
Amortization of acquisition-related intangibles (2)2.4   2.4  
Restructuring credits(0.3) —  
Impact of Tax Reform—   18.9  
Income tax adjustments(5.0) (4.9)
Non-GAAP net income$106.6   $109.0  
(1) Stock-based compensation included in above line items:       
      Cost of products and services 0.5   0.4 
      Research and development 6.2   5.8 
      Sales and marketing 7.7   7.2 
      General and administrative 6.6   5.8 
(2) Amortization of acquisition-related intangibles included in above line items:  
  Cost of licensing1.1  0.6 
  Cost of products and services0.8  0.7 
  Research and development0.1  0.1 
  Sales and marketing0.7  1.0 
  General and administrative(0.3) —  
Diluted earnings per share:Fiscal Quarter Ended
 March 27,
March 29,
GAAP diluted earnings per share$0.86   $0.70  
Stock-based compensation0.21   0.18  
Amortization of acquisition-related intangibles0.02   0.02  
Impact of Tax Reform—   0.18  
Income tax adjustments(0.05) (0.04)
Non-GAAP diluted earnings per share$1.04   $1.04  
Shares used in computing diluted earnings per share103   105  
The following tables present a reconciliation between GAAP and non-GAAP versions of the estimated financial amounts for the third quarter of fiscal 2020 included in this release:
Gross margin: Q3 2020
GAAP gross margin (low - high end of range) 86% - 87%
Stock-based compensation  0.2%
Amortization of acquisition-related intangibles 0.8%
Non-GAAP gross margin (low - high end of range) 87% - 88%
Operating expenses: Q3 2020
GAAP operating expenses (low - high end of range) $191 - $201
Stock-based compensation (20)
Amortization of acquisition-related intangibles (1)
Non-GAAP operating expenses (low - high end of range) $170 - $180
Diluted earnings per share:Q3 2020
GAAP diluted earnings per share$0.01   $0.18  
Stock-based compensation0.20   0.20  
Amortization of acquisition-related intangibles0.02   0.02  
Income tax adjustments(0.05) (0.05)
Non-GAAP diluted earnings per share$0.18   $0.35  
Shares used in computing diluted earnings per share103   103  

Investor Contact:
Jason Dea
Dolby Laboratories, Inc.

Media Contact:
Karen Hartquist
Dolby Laboratories, Inc.