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Dolby Laboratories Reports Second Quarter Fiscal 2014 Financial Results
Second quarter GAAP net income was
"We're pleased to report our second quarter results with revenues higher
than forecast," said
Financial Outlook
Q3 2014
The Company estimates that its fiscal Q3 2014 effective tax rate will be between approximately 27% and 28% on both a GAAP and non-GAAP basis.
FISCAL YEAR 2014
The Company's Conference Call Information
Members of
A replay of the call will be available from
Non-GAAP Financial Information
To supplement Dolby's financial statements presented on a GAAP basis,
Forward-Looking Statements
Certain statements in this press release, including, but not limited to,
statements relating to Dolby's expected financial results for Q3 2014
and fiscal 2014 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
About
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INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||
(in thousands, except per share amounts) |
||||||||||||||||
(unaudited) |
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Fiscal Quarter Ended | Fiscal Year-To-Date Ended | |||||||||||||||
2014 |
2013 |
2014 |
2013 |
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Revenue: | ||||||||||||||||
Licensing | $ | 258,616 | $ | 226,455 | $ | 464,276 | $ | 431,331 | ||||||||
Products | 14,563 | 17,726 | 32,667 | 43,224 | ||||||||||||
Services | 5,413 | 5,165 | 12,926 | 11,393 | ||||||||||||
Total revenue | 278,592 | 249,346 | 509,869 | 485,948 | ||||||||||||
Cost of revenue: | ||||||||||||||||
Cost of licensing | 3,742 | 6,409 | 7,743 | 9,489 | ||||||||||||
Cost of products | 10,293 | 13,206 | 24,081 | 31,695 | ||||||||||||
Cost of services | 3,470 | 3,668 | 7,063 | 7,704 | ||||||||||||
Total cost of revenue | 17,505 | 23,283 | 38,887 | 48,888 | ||||||||||||
Gross margin | 261,087 | 226,063 | 470,982 | 437,060 | ||||||||||||
Operating expenses: | ||||||||||||||||
Research and development | 44,798 | 41,948 | 89,261 | 84,384 | ||||||||||||
Sales and marketing | 64,828 | 58,130 | 125,207 | 116,551 | ||||||||||||
General and administrative | 46,457 | 41,803 | 88,365 | 84,911 | ||||||||||||
Restructuring charges | 86 | — | 3,301 | — | ||||||||||||
Total operating expenses | 156,169 | 141,881 | 306,134 | 285,846 | ||||||||||||
Operating income | 104,918 | 84,182 | 164,848 | 151,214 | ||||||||||||
Other income/expense: | ||||||||||||||||
Interest income | 920 | 904 | 1,574 | 2,243 | ||||||||||||
Interest expense | (93 | ) | (402 | ) | (205 | ) | (427 | ) | ||||||||
Other income/(expense), net | (2,823 | ) | 188 | (2,594 | ) | 901 | ||||||||||
Total other income/expense | (1,996 | ) | 690 | (1,225 | ) | 2,717 | ||||||||||
Income before income taxes | 102,922 | 84,872 | 163,623 | 153,931 | ||||||||||||
Provision for income taxes | (26,373 | ) | (22,633 | ) | (41,828 | ) | (40,215 | ) | ||||||||
Net income including controlling interest | 76,549 | 62,239 | 121,795 | 113,716 | ||||||||||||
Less: net (income) attributable to controlling interest | (681 | ) | (328 | ) | (1,412 | ) | (456 | ) | ||||||||
Net income attributable to |
$ | 75,868 | $ | 61,911 | $ | 120,383 | $ | 113,260 | ||||||||
Net Income Per Share: | ||||||||||||||||
Basic | $ | 0.74 | $ | 0.61 | $ | 1.18 | $ | 1.11 | ||||||||
Diluted | $ | 0.73 | $ | 0.60 | $ | 1.16 | $ | 1.10 | ||||||||
Weighted-Average Shares Outstanding: | ||||||||||||||||
Basic | 102,291 | 101,638 | 102,021 | 102,000 | ||||||||||||
Diluted | 103,934 | 102,680 | 103,460 | 102,980 |
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INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||
(in thousands, except share and per share amounts) |
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2014 |
2013 |
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ASSETS | (unaudited) | ||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 568,899 | $ | 454,397 | |||
Restricted cash | 3,344 | 3,175 | |||||
Short-term investments | 169,082 | 140,267 | |||||
Accounts receivable, net | 109,143 | 97,460 | |||||
Inventories | 9,569 | 10,093 | |||||
Deferred taxes | 82,980 | 84,238 | |||||
Prepaid expenses and other current assets | 24,377 | 28,949 | |||||
Total current assets | 967,394 | 818,579 | |||||
Long-term investments | 304,376 | 306,338 | |||||
Property, plant and equipment, net | 242,970 | 242,917 | |||||
Intangible assets, net | 46,772 | 41,315 | |||||
Goodwill | 279,871 | 279,724 | |||||
Deferred taxes | 44,877 | 37,434 | |||||
Other non-current assets | 10,295 | 11,638 | |||||
Total assets | $ | 1,896,555 | $ | 1,737,945 | |||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 10,312 | $ | 10,695 | |||
Accrued liabilities | 144,382 | 137,795 | |||||
Income taxes payable | 9,148 | 3,394 | |||||
Deferred revenue | 12,640 | 20,931 | |||||
Total current liabilities | 176,482 | 172,815 | |||||
Long-term deferred revenue | 20,178 | 19,663 | |||||
Other non-current liabilities | 46,713 | 45,441 | |||||
Total liabilities | 243,373 | 237,919 | |||||
Stockholders' equity: | |||||||
Class A common stock | 50 | 47 | |||||
Class B common stock | 53 | 55 | |||||
Additional paid-in capital | 49,074 | 18,812 | |||||
Retained earnings | 1,574,765 | 1,454,382 | |||||
Accumulated other comprehensive income | 8,694 | 7,814 | |||||
Total stockholders' equity - |
1,632,636 | 1,481,110 | |||||
Controlling interest | 20,546 | 18,916 | |||||
Total stockholders' equity | 1,653,182 | 1,500,026 | |||||
Total liabilities and stockholders' equity | $ | 1,896,555 | $ | 1,737,945 |
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INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||||||||
(in thousands) |
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(unaudited) |
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Fiscal Quarter Ended | Fiscal Year-To-Date Ended | |||||||||||||||
2014 |
2013 |
2014 |
2013 |
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Operating activities: | ||||||||||||||||
Net income including controlling interest | $ | 76,549 | $ | 62,239 | $ | 121,795 | $ | 113,716 | ||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||||
Depreciation and amortization | 12,705 | 13,291 | 25,114 | 26,420 | ||||||||||||
Stock-based compensation | 17,753 | 14,945 | 32,807 | 32,649 | ||||||||||||
Amortization of premium on investments | 2,328 | 2,159 | 4,594 | 5,953 | ||||||||||||
Excess tax benefit from exercise of stock options | (552 | ) | (180 | ) | (1,562 | ) | (649 | ) | ||||||||
Provision for doubtful accounts | 133 | 449 | 507 | 270 | ||||||||||||
Deferred income taxes | (4,980 | ) | (7,950 | ) | (6,302 | ) | (10,577 | ) | ||||||||
Other non-cash items affecting net income | 2,838 | (181 | ) | 2,943 | (872 | ) | ||||||||||
Changes in operating assets and liabilities: | ||||||||||||||||
Accounts receivable | (33,334 | ) | (39,884 | ) | (12,186 | ) | (47,948 | ) | ||||||||
Inventories | (585 | ) | 5,419 | 1,640 | (754 | ) | ||||||||||
Prepaid expenses and other assets | 492 | (4,787 | ) | (1,139 | ) | 4,129 | ||||||||||
Accounts payable and other liabilities | 22,033 | 17,756 | 5,337 | (2,142 | ) | |||||||||||
Income taxes, net | 8,591 | (5,090 | ) | 13,386 | 4,422 | |||||||||||
Deferred revenue | (1,879 | ) | (1,846 | ) | (7,776 | ) | (1,989 | ) | ||||||||
Other non-current liabilities | 46 | 416 | 262 | 1,428 | ||||||||||||
Net cash provided by operating activities | 102,138 | 56,756 | 179,420 | 124,056 | ||||||||||||
Investing activities: | ||||||||||||||||
Purchase of investments | (76,113 | ) | (118,862 | ) | (178,830 | ) | (325,997 | ) | ||||||||
Proceeds from sales of investment securities | 35,998 | 78,037 | 63,424 | 467,105 | ||||||||||||
Proceeds from maturities of investment securities | 34,663 | 13,625 | 81,402 | 64,950 | ||||||||||||
Purchases of property, plant and equipment | (8,905 | ) | (5,447 | ) | (17,872 | ) | (12,164 | ) | ||||||||
Purchases of intangible assets | (12,400 | ) | (2 | ) | (12,400 | ) | (4,050 | ) | ||||||||
Proceeds from sale of property, plant and equipment and assets held for sale | — | 357 | 42 | 376 | ||||||||||||
Change in restricted cash | 5 | (937 | ) | (169 | ) | (1,228 | ) | |||||||||
Net cash provided by/(used in) investing activities | (26,752 | ) | (33,229 | ) | (64,403 | ) | 188,992 | |||||||||
Financing activities: | ||||||||||||||||
Proceeds from issuance of common stock | 9,337 | 2,700 | 17,464 | 7,202 | ||||||||||||
Repurchase of common stock | — | (11,477 | ) | (11,660 | ) | (65,433 | ) | |||||||||
Payment of cash dividend | — | — | — | (408,206 | ) | |||||||||||
Distribution to controlling interest | — | — | — | (5,039 | ) | |||||||||||
Excess tax benefit from the exercise of stock options | 552 | 180 | 1,562 | 649 | ||||||||||||
Shares repurchased for tax withholdings on vesting of restricted stock | (1,631 | ) | (1,496 | ) | (8,358 | ) | (5,132 | ) | ||||||||
Net cash provided by/(used) in financing activities | 8,258 | (10,093 | ) | (992 | ) | (475,959 | ) | |||||||||
Effect of foreign exchange rate changes on cash and cash equivalents | 615 | (1,119 | ) | 477 | (1,181 | ) | ||||||||||
Net increase/(decrease) in cash and cash equivalents | 84,259 | 12,315 | 114,502 | (164,092 | ) | |||||||||||
Cash and cash equivalents at beginning of period | 484,640 | 316,193 | 454,397 | 492,600 | ||||||||||||
Cash and cash equivalents at end of period | $ | 568,899 | $ | 328,508 | $ | 568,899 | $ | 328,508 |
GAAP to Non-GAAP Reconciliations | ||||||||
(In millions, except per share data) | ||||||||
The following tables present the Company's GAAP financial measures reconciled to the non-GAAP financial measures included in this release for the second quarter of fiscal 2014 and 2013: | ||||||||
Net income: | Fiscal Quarter Ended | |||||||
2014 |
2013 |
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GAAP net income | $ | 75.9 | $ | 61.9 | ||||
Stock-based compensation | 17.7 | 14.9 | ||||||
RSU dividend equivalent | 0.9 | 2.2 | ||||||
Amortization of acquired intangibles | 2.8 | 3.4 | ||||||
Restructuring charges, net | 0.1 | — | ||||||
Income tax adjustments | (5.7 | ) | (6.0 | ) | ||||
Non-GAAP net income | $ | 91.7 | $ | 76.4 | ||||
Diluted earnings per share: | Fiscal Quarter Ended | |||||||
2014 |
2013 |
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GAAP diluted earnings per share | $ | 0.73 | $ | 0.60 | ||||
Stock-based compensation | 0.17 | 0.15 | ||||||
RSU dividend equivalent | 0.01 | 0.02 | ||||||
Amortization of acquired intangibles | 0.03 | 0.03 | ||||||
Restructuring charges, net | — | — | ||||||
Income tax adjustments | (0.06 | ) | (0.06 | ) | ||||
Non-GAAP diluted earnings per share | $ | 0.88 | $ | 0.74 | ||||
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 third quarter of fiscal 2014 and fiscal year 2014 included in this release: | ||||||||
Gross margin: | Q3 2014 | |||||||
GAAP gross margin (low - high end of range) |
91% - 92 |
% |
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Stock-based compensation | 0.2 | % | ||||||
Amortization of acquired intangibles | 0.8 | % | ||||||
Non-GAAP gross margin (low - high end of range) |
92% - 93 |
% |
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Operating expenses: | Q3 2014 | Fiscal 2014 | ||||||
GAAP operating expenses (low - high end of range) |
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Stock-based compensation | (16 | ) | (66 | ) | ||||
RSU dividend equivalent | (1 | ) | (3 | ) | ||||
Amortization of acquired intangibles | (1 | ) | (4 | ) | ||||
Restructuring charges, net | — | (3 | ) | |||||
Non-GAAP operating expenses (low - high end of range) |
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Diluted earnings per share: | Q3 2014 | |||||||
Low | High | |||||||
GAAP diluted earnings per share | $ | 0.24 | $ | 0.29 | ||||
Stock-based compensation | 0.16 | 0.16 | ||||||
RSU dividend equivalent | 0.01 | 0.01 | ||||||
Amortization of acquired intangibles | 0.03 | 0.03 | ||||||
Income tax adjustments | (0.06 | ) | (0.06 | ) | ||||
Non-GAAP diluted earnings per share | $ | 0.38 | $ | 0.43 | ||||
Shares used in computing diluted earnings per share (in millions) | 103 | 103 |
Investor Contact:
investor@dolby.com
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