Dolby Investor Relations

Dolby Laboratories Reports First Quarter Fiscal 2015 Financial Results

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Jan 21, 2015

Dolby Laboratories Reports First Quarter Fiscal 2015 Financial Results

SAN FRANCISCO--(BUSINESS WIRE)-- Dolby Laboratories, Inc. (NYSE:DLB) today announced the Company's financial results for the first quarter of fiscal year 2015. For the first quarter, Dolby reported total revenue of $234.2 million, compared to $231.3 million for the first quarter of fiscal year 2014.

First quarter GAAP net income was $41.4 million, or $0.40 per diluted share, compared to $44.5 million, or $0.43 per diluted share, for the first quarter of fiscal 2014. On a non-GAAP basis, first quarter net income was $58.5 million, or $0.56 per diluted share, compared to $60.6 million, or $0.59 per diluted share, for the first quarter of fiscal 2014. Dolby's non-GAAP measures are described and reconciled to the corresponding GAAP measures at the end of this release.

"We had a solid start to the year driven by the strength of our broadcast business," said Kevin Yeaman, President and CEO, Dolby Laboratories. "We continue to make progress on our new initiatives, highlighted by the launch this quarter of Dolby Cinema, a branded premium cinema offering that combines spectacular imaging and audio with inspired design."

Acquisition of Doremi Labs Completed During the Quarter

As previously announced on November 3, 2014, Dolby completed the acquisition of Doremi Labs, a privately held company, during the first quarter.

Dividend

Dolby today announced a cash dividend of $0.10 per share of Class A and Class B common stock, payable on February 10, 2015, to stockholders of record as of the close of business on February 2, 2015.

Financial Outlook

Q2 2015

Dolby estimates that total revenue will range from $260 million to $270 million. Gross margin percentages are projected to range between approximately 90 percent and 91 percent on a GAAP basis and between 91 percent and 92 percent on a non-GAAP basis.

Dolby anticipates that operating expenses will be between $171 million and $175 million on a GAAP basis and between $152 million and $156 million on a non-GAAP basis.

Dolby estimates diluted earnings per share to be between $0.45 and $0.51 on a GAAP basis and between $0.60 and $0.66 on a non-GAAP basis.

Dolby estimates that its fiscal Q2 2015 effective tax rate will be between approximately 25 percent and 26 percent on both a GAAP and non-GAAP basis.

Fiscal Year 2015

Dolby anticipates that total revenue will range from $970 million to $1 billion.

Dolby anticipates that operating expenses will be between $664 million and $674 million on a GAAP basis and between $585 million and $595 million on a non-GAAP basis.

Conference Call Information

Members of Dolby management will lead a conference call open to all interested parties to discuss the financial results and outlook for Dolby Laboratories at 2:00 p.m. PT (5:00 p.m. ET) on Wednesday, January 21, 2015. Access to the teleconference will be available over the Internet from http://investor.dolby.com/events.cfm or by dialing 1-877-723-9502. International callers can access the conference call at 1-719-325-4798.

A replay of the call will be available from 5:00 p.m. PT on Wednesday, January 21, 2015, until 9:00 p.m. PT on Wednesday, January 28, 2015, by dialing 1-877-870-5176 (international callers can access the replay by dialing 1-858-384-5517) and entering the confirmation code 1739077. An archived version of the teleconference will also be available on the Dolby Laboratories website, http://investor.dolby.com/events.cfm.

Non-GAAP Financial Information

To supplement Dolby's financial statements presented on a GAAP basis, Dolby provides certain non-GAAP financial measures. These measures are adjusted to exclude amounts related to stock-based compensation, expense associated with dividend equivalents paid on restricted stock units, the amortization of intangibles from business combinations, restructuring charges, and the related tax impact of these items. Dolby presents non-GAAP financial measures in reporting its financial results 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. Dolby's management believes it is useful for itself and investors to review both GAAP and non-GAAP measures in order to assess the performance of Dolby's business for planning and forecasting in subsequent periods. 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 Dolby's investor relations website at http://investor.dolby.com/events.cfm.

Forward-Looking Statements

Certain statements in this press release, including, but not limited to, statements relating to Dolby's expected financial results for Q2 2015 and fiscal 2015 and future quarterly 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 personal computer, DVD, and Blu-ray Disc™, broadcast, consumer electronics, gaming, mobile, and automobile 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® 8 devices and the rate of consumer adoption of Windows operating systems; risks that a 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 the expiration of patents; the timing of Dolby's receipt of royalty reports and payments from its licensees, including back payments; timing of revenue recognition under licensing agreements and other contractual arrangements; Dolby's accuracy of calculation of royalties due to its licensors; 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; the development and growth of the market for digital cinema and digital 3D and Dolby's ability to successfully penetrate this market; Dolby's ability to expand its business generally, and to expand its business beyond sound technologies to other technologies related to digital entertainment delivery; risks associated with acquiring and successfully integrating businesses or technologies; and other risks detailed in Dolby'sSEC 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) creates audio, video, and voice technologies that transform entertainment and communications in mobile devices, at the cinema, at home, and at work. For nearly 50 years, sight and sound experiences have become more vibrant, clear, and powerful in Dolby. For more information, please visit www.dolby.com.

Dolby and the double-D symbol are registered trademarks of Dolby Laboratories. Dolby Cinema is a trademark of Dolby Laboratories. Blu-ray Disc is a trademark of Blu-ray Disc Association. Windows is a registered trademark of Microsoft Corporation. S15/28599 DLB-F

 
DOLBY LABORATORIES, INC.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

 
  Fiscal Quarter Ended
December 26,   December 27,
2014   2013
Revenue: (unaudited) (unaudited)
Licensing $ 216,598 $ 205,660
Products 13,263 18,104
Services   4,377       7,513  
Total revenue   234,238       231,277  
 
Cost of revenue:
Cost of licensing 3,481 4,001
Cost of products 12,584 13,788
Cost of services   3,345       3,593  
Total cost of revenue   19,410       21,382  
         
Gross margin   214,828       209,895  
 
Operating expenses:
Research and development 48,594 44,463
Sales and marketing 68,018 60,379
General and administrative 44,716 41,908
Restructuring charges/(credits)   (39 )     3,215  
Total operating expenses   161,289       149,965  
         
Operating income   53,539       59,930  
 
Other income/expense:
Interest income 900 654
Interest expense (15 ) (112 )
Other income/(expense), net   (108 )     229  
Total other income/expense   777       771  
         
Income before income taxes 54,316 60,701
Provision for income taxes   (12,379 )     (15,455 )
Net income including controlling interest 41,937 45,246
Less: net (income) attributable to controlling interest   (580 )     (731 )
Net income attributable to Dolby Laboratories, Inc. $ 41,357     $ 44,515  
 
Net Income Per Share:
Basic $ 0.40 $ 0.44
Diluted $ 0.40 $ 0.43
Weighted-Average Shares Outstanding:
Basic 102,303 101,750
Diluted 104,275 103,192
 

DOLBY LABORATORIES, INC.
INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)

   
December 26, September 26,
2014   2014
ASSETS (unaudited)
Current assets:
Cash and cash equivalents $ 409,115 $ 568,472
Restricted cash 2,040 2,142
Short-term investments 211,443 231,208
Accounts receivable, net 117,240 86,168
Inventories 28,291 8,536
Deferred taxes 86,937 86,445
Prepaid expenses and other current assets   37,092       22,880
Total current assets 892,158 1,005,851
Long-term investments 318,448 296,335
Property, plant and equipment, net 330,249 289,755
Intangible assets, net 108,220 63,700
Goodwill 315,791 277,574
Deferred taxes 48,212 41,746
Other non-current assets   9,341       9,051
Total assets $ 2,022,419     $ 1,984,012
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 9,973 $ 15,898
Accrued liabilities 159,360 158,376
Income taxes payable 1,754 2,600
Deferred revenue   21,236       12,496
Total current liabilities 192,323 189,370
Long-term deferred revenue 23,203 19,279
Other non-current liabilities   55,793       43,715
Total liabilities 271,319 252,364
 
Stockholders' equity:
Class A common stock 52 51
Class B common stock 51 52
Additional paid-in capital 45,479 46,415
Retained earnings 1,691,614 1,660,485
Accumulated other comprehensive income   (2,188 )     3,014
Total stockholders' equity - Dolby Laboratories, Inc. 1,735,008 1,710,017
Controlling interest   16,092       21,631
Total stockholders' equity   1,751,100       1,731,648
Total liabilities and stockholders' equity $ 2,022,419     $ 1,984,012
 

DOLBY LABORATORIES, INC.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 
Fiscal Quarter Ended
December 26,   December 27,
2014   2013
Operating activities: (unaudited) (unaudited)
Net income including controlling interest $ 41,937 $ 45,246
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 16,524 12,409
Stock-based compensation 17,842 15,054
Amortization of premium on investments 2,391 2,266
Excess tax benefit from exercise of stock options (1,944 ) (1,010 )
Provision for doubtful accounts (376 ) 374
Deferred income taxes (6,310 ) (1,322 )
Other non-cash items affecting net income 653 105
Changes in operating assets and liabilities:
Accounts receivable (22,442 ) 21,148
Inventories (2,997 ) 2,225
Prepaid expenses and other assets (4,473 ) (1,631 )
Accounts payable and other liabilities (46,801 ) (16,696 )
Income taxes, net 3,692 4,795
Deferred revenue 4,452 (5,897 )
Other non-current liabilities   1,297       216  
Net cash provided by operating activities   3,445       77,282  
 
Investing activities:
Purchase of investments (110,508 ) (102,717 )
Proceeds from sales of investment securities 63,454 27,426
Proceeds from maturities of investment securities 42,700 46,739
Purchases of property, plant and equipment (21,661 ) (8,967 )
Acquisitions, net of cash acquired (93,516 )
Purchase of intangible assets (6,416 )
Proceeds from sale of property, plant and equipment and assets held for sale 3 42
Change in restricted cash   102       (174 )
Net cash used in investing activities   (125,842 )     (37,651 )
 
Financing activities:
Proceeds from issuance of common stock 7,512 8,127
Repurchase of common stock (16,953 ) (11,660 )
Payment of cash dividend (10,228 )
Distribution to controlling interest (5,591 )
Excess tax benefit from the exercise of stock options 1,944 1,010
Shares repurchased for tax withholdings on vesting of restricted stock   (10,846 )     (6,727 )
Net cash used in financing activities   (34,162 )     (9,250 )
 
Effect of foreign exchange rate changes on cash and cash equivalents   (2,798 )     (138 )
Net increase/(decrease) in cash and cash equivalents (159,357 ) 30,243
Cash and cash equivalents at beginning of period   568,472       454,397  
Cash and cash equivalents at end of period $ 409,115     $ 484,640  
 

GAAP to Non-GAAP Reconciliations
(In millions, except per share data)
   
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 2015 and 2014:
 
Net income: Fiscal Quarter Ended
December 26, December 27,
2014   2013
GAAP net income $ 41.4 $ 44.5
Stock-based compensation 17.8 15.1
RSU dividend equivalent 0.7 0.8
Amortization of acquired intangibles 4.0 2.8
Restructuring charges, net 3.2
Income tax adjustments   (5.4 )     (5.8 )
Non-GAAP net income $ 58.5     $ 60.6  
 
Diluted earnings per share: Fiscal Quarter Ended
December 26, December 27,
2014   2013
GAAP diluted earnings per share $ 0.40 $ 0.43
Stock-based compensation 0.17 0.15
RSU dividend equivalent 0.01 0.01
Amortization of acquired intangibles 0.04 0.03
Restructuring charges, net 0.03
Income tax adjustments   (0.06 )     (0.06 )
Non-GAAP diluted earnings per share $ 0.56     $ 0.59  
 
Shares used in computing diluted earnings per share (in millions) 104 103
 
The following tables present a reconciliation between GAAP and non-GAAP versions of the estimated financial amounts for the second quarter of fiscal 2015 and fiscal year 2015 included in this release:
 
Gross margin: Q2 2015
GAAP gross margin (low - high end of range)

90% - 91

%

Stock-based compensation 0.1 %
Amortization of acquired intangibles   0.9 %
Non-GAAP gross margin (low - high end of range)  

91% - 92

%

 
Operating expenses: Q2 2015   Fiscal 2015
GAAP operating expenses (low - high end of range) $171 - $175 $664 - $674
Stock-based compensation (16 ) (69 )
RSU dividend equivalent (1 ) (3 )
Amortization of acquired intangibles   (2 )     (7 )
Non-GAAP operating expenses (low - high end of range) $152 - $156     $585 - $595  
 
Diluted earnings per share: Q2 2015
Low   High
GAAP diluted earnings per share $ 0.45 $ 0.51
Stock-based compensation 0.16 0.16
RSU dividend equivalent 0.01 0.01
Amortization of acquired intangibles 0.04 0.04
Income tax adjustments   (0.06 )     (0.06 )
Non-GAAP diluted earnings per share $ 0.60     $ 0.66  
 
Shares used in computing diluted earnings per share (in millions) 104 104

Dolby Laboratories
Investor Contact:
Elena Carr, 415-645-5583
investor@dolby.com
Media Contact:
Sean Durkin, 415-645-5176
news@dolby.com

Source: Dolby Laboratories, Inc.

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