DLB - Dolby Laboratories Reports Third Quarter Fiscal 2022 Financial Results

SAN FRANCISCO, Aug. 09, 2022 (GLOBE NEWSWIRE) -- Dolby Laboratories, Inc. (NYSE:DLB) today announced the company's financial results for the third quarter of fiscal 2022. For the third quarter, Dolby reported total revenue of $289.6 million, compared to $286.8 million for the third quarter of fiscal 2021.

"While the macroeconomic environment remains uncertain, we are focused on executing on our growth initiatives and remain confident in our long-term opportunity," said Kevin Yeaman, President and CEO, Dolby Laboratories. "We continue to grow the adoption of Dolby Vision and Dolby Atmos across a broadening set of use cases, highlighted this quarter by important wins in mobile with Dolby Vision capture, and in music and automotive with Dolby Atmos."

Third quarter GAAP net income was $39.6 million, or $0.39 per diluted share, compared to GAAP net income of $54.6 million, or $0.52 per diluted share, for the third quarter of fiscal 2021. On a non-GAAP basis, third quarter net income was $68.7 million, or $0.68 per diluted share, compared to $74.8 million, or $0.71 per diluted share, for the third quarter of fiscal 2021. Third quarter cash flows from operations were $172.6 million, compared to $172.4 million for the third quarter of fiscal 2021. A complete listing of Dolby's non-GAAP measures are described and reconciled to the corresponding GAAP measures at the end of this release.

Recent Business Highlights

• Xiaomi announced their new 12S smartphone series - the first Android phone capable of recording video in Dolby Vision.
• Dolby Atmos Music is now available on Tencent Music’s QQ Music in China and Melon in South Korea.
• Li Auto announced their first vehicle supporting Dolby Atmos.
• The UEFA Champions League Final was broadcast live in Dolby Atmos and Dolby Vision on Canal+.

Impact of Recent Events

Dolby’s financial results for the third quarter of fiscal 2022 rely on estimates of royalty-based revenue that take into consideration the macroeconomic effect of certain events, including COVID-19, supply chain constraints, and consumer demand for electronic products. In addition, our actual results could differ materially from the estimates we are providing below due in part to the increased uncertainty resulting from these items as well as the geopolitical instability in Europe and continuing concerns around inflation. The uncertainty resulting from these factors has greatly reduced our visibility into our future outlook. To the extent possible, the estimates we are providing for future periods reflect certain assumptions about the potential impact of certain of these items, based upon a consideration of currently available external and internal data and information. These assumptions are subject to risks and uncertainties. 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 third quarter of fiscal 2022, filed on or around the date hereof.

Dividend

Today, Dolby announced a cash dividend of $0.25 per share of Class A and Class B common stock, payable on August 31, 2022, to stockholders of record as of the close of business on August 23, 2022.

Stock Repurchase Program

Today, Dolby also announced that its Board of Directors has approved increasing the size of its stock repurchase program by $350 million, bringing the amount available for future repurchases of its Class A Common Stock to approximately $581 million. Stock repurchases under this program may be made through open market transactions, negotiated purchases, or otherwise, at times and in amounts that the company considers appropriate.

Financial Outlook - Full Year of Fiscal 2022 and Fourth Quarter of Fiscal 2022

We have lowered our outlook to reflect the impact of the macroeconomic environment, primarily on our estimates for the mobile, broadcast, and PC markets.

Full Year Fiscal 2022

Dolby is providing the following estimates for its full year fiscal 2022:

• Total revenue is estimated to range from $1.27 billion to $1.30 billion.
• Gross margin percentages are anticipated to range from 88.5% to 89.5% on a GAAP basis and from 89% to 90% on a non-GAAP basis.
• Operating expenses are anticipated to range from $901 million to $911 million on a GAAP basis and from $740 million to $750 million on a non-GAAP basis.
• Operating margin percentages are anticipated to range from 17% to 19% on a GAAP basis and from 30% to 32% on a non-GAAP basis.
• Effective tax rate is anticipated to range from 16% to 17% on a GAAP basis and 17% to 18% on a non-GAAP basis.
• Diluted earnings per share is anticipated to range from $1.91 to $2.06 on a GAAP basis and from $3.22 to $3.37 on a non-GAAP basis.

Fourth Quarter of Fiscal 2022

Dolby is also providing the following estimates for its fourth quarter of fiscal 2022:

• Total revenue is estimated to range from $295 million to $325 million.
• Operating expenses are anticipated to range from $210 million to $220 million on a GAAP basis and from $180 million to $190 million on a non-GAAP basis.
• Effective tax rate is anticipated to range from 21% to 22% on a GAAP basis and 18% to 19% on a non-GAAP basis.
• Diluted earnings per share is anticipated to range from $0.40 to $0.55 on a GAAP basis and from $0.68 to $0.83 on a non-GAAP basis.

Conference Call Information

Members of Dolby management will lead a conference call open to all interested parties to discuss third quarter fiscal 2022 financial results for Dolby Laboratories at 1:30 p.m. PT (4:30 p.m. ET) on Tuesday, August 9, 2022. Access to the teleconference will be available at http://investor.dolby.com or by dialing 1-844-200-6205 (or dialing 1-929-526-1599 for international callers) and entering confirmation code 330163.

A replay of the call will be available from 4:30 p.m. PT (7:30 p.m. ET) on Tuesday, August 9, 2022, until 10:30 p.m. PT on Tuesday, August 16, 2022 (1:30 a.m. ET on Wednesday, August 17, 2022), by dialing 1-866-813-9403 (international callers can access the replay by dialing +44-204-525-0658) and entering the confirmation code 175460. An archived version of the teleconference will also be available on the Dolby website, http://investor.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 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.

Other operating income adjustments: In the second quarter of fiscal 2022, we recorded an expense of $34.4 million related to a one-time settlement and accrual in connection with indemnification requests under commercial agreements that we assumed in an acquisition in 2014 related to our Cinema products business. We expect this settlement and related accrual to fully resolve this matter. Also, in the first quarter of fiscal 2021, we recorded a one-time gain on the sale of property, which was previously classified as held for sale. The property was 51% owned by the controlling interest, therefore 51% of the gain recognized has been attributed to the controlling interest. We have excluded both of these items as they are unusual, non-recurring events that are not representative of our normal operating activities 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 fourth quarter of fiscal 2022 and full year fiscal 2022, our ability to advance our long-term objectives, our stock repurchase program, 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 provided. The following important factors, without limitation, could cause actual results to differ materially from those in the forward-looking statements: the potential impacts of COVID-19 on Dolby’s business operations, financial results, and financial position (including the impact to Dolby partners and disruption of the supply chain and delays in shipments of consumer products; consumer demand for products that incorporate Dolby technologies; delays in the development and 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 closures or limitations of cinema capacity 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 geopolitical issues, such as the conflict between Russia and Ukraine; risks associated with trends in the markets in which Dolby operates, including the Broadcast, Mobile, Consumer Electronics, PC, Cinema, Developer Platform Services, and Other Markets; the loss of, or reduction in sales by, a key customer, partner, 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 continue to expand its business beyond its current technology offerings? 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, California with offices around the globe. From movies and TV shows, to apps, music, sports and gaming, Dolby transforms the science of sight and sound into spectacular experiences for billions of people worldwide. We partner with artists, storytellers, developers, and businesses to revolutionize entertainment and communications with Dolby Atmos, Dolby Vision, Dolby Cinema, and Dolby.io.

Dolby, Dolby Atmos, Dolby Vision, Dolby Cinema, Dolby.io, 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.

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Investor Contact:
Maggie O’Donnell
Dolby Laboratories
914-267-7390
investor@dolby.com

Media Contact:
Karen Hartquist
Dolby Laboratories, Inc.
415-505-8357
karen.hartquist@dolby.com