Dolby Investor Relations

Financial Releases



Dolby Laboratories Reports Fourth Quarter and Fiscal 2016 Financial Results

Oct 26, 2016

SAN FRANCISCO--(BUSINESS WIRE)-- Dolby Laboratories, Inc. (NYSE:DLB) today announced financial results for the fourth quarter (Q4) and fiscal year that ended September 30, 2016. For Q4, Dolby reported total revenue of $233.0 million, compared to $232.7 million for Q4 of fiscal 2015. For fiscal 2016, Dolby reported total revenue of $1.03 billion, compared to $970.6 million for fiscal 2015.

Fourth quarter GAAP net income was $23.9 million, or $0.23 per diluted share, compared to $46.6 million, or $0.45 per diluted share, for the fourth quarter of fiscal 2015. On a non-GAAP basis, fourth quarter net income was $38.6 million, or $0.37 per diluted share, compared to $44.4 million, or $0.43 per diluted share, for the fourth quarter of fiscal 2015.

Fiscal 2016 GAAP net income was $185.9 million, or $1.81 per diluted share, compared to $181.4 million, or $1.75 per diluted share, for fiscal 2015. On a non-GAAP basis, fiscal 2016 net income was $249.0 million, or $2.43 per diluted share, compared to $229.3 million, or $2.21 per diluted share, for fiscal 2015. Fourth quarter and fiscal 2015 GAAP results included a pre-tax gain of approximately $26 million related to the sale of real estate. Dolby's non-GAAP measures are described and reconciled to the corresponding GAAP measures at the end of this release.

"Q4 wrapped up an important year for Dolby," said Kevin Yeaman, President and CEO, Dolby Laboratories. "Dolby Audio was included in iOS, Dolby Cinema deployments accelerated, and Dolby Vision TVs shipped globally."

Dividend

Today, Dolby announced an increase in our quarterly cash dividend to $0.14 per share of Class A and Class B common stock, payable on November 16, 2016, to stockholders of record as of the close of business on November 7, 2016. Last quarter, the cash dividend was $0.12 per share.

Financial Outlook

Q1 2017

Dolby estimates that total revenue for the first quarter (Q1) of fiscal 2017 will range from $250 million to $260 million. Gross margin percentages are projected to range between approximately 88 percent and 89 percent on a GAAP basis, and between 89 percent and 90 percent on a non-GAAP basis.

Dolby anticipates that operating expenses will be between $173 million and $177 million on a GAAP basis, and between $154 million and $158 million on a non-GAAP basis.

Dolby estimates that diluted earnings per share will be between $0.34 and $0.40 on a GAAP basis, and between $0.49 and $0.55 on a non-GAAP basis.

Dolby estimates that its fiscal Q1 2017 effective tax rate will be approximately 25 percent on both a GAAP and non-GAAP basis.

Fiscal 2017

Dolby anticipates that total revenue will range from $1.06 billion to $1.09 billion.

Dolby anticipates that operating expenses will range from $700 million to $710 million on a GAAP basis, and from $625 million to $635 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 Q4 and fiscal 2016 financial results for Dolby Laboratories at 2:00 p.m. PT (5:00 p.m. ET) on Wednesday, October 26, 2016. Access to the teleconference will be available over the Internet from http://investor.dolby.com/events.cfm or by dialing 1-888-551-9018. International callers can access the conference call at 1-719-325-2216.

A replay of the call will be available from 5:00 p.m. PT on Wednesday, October 26, 2016, until 9:00 p.m. PT on Wednesday, November 2, 2016, by dialing 1-844-512-2921 (international callers can access the replay by dialing 1-412-317-6671) and entering the confirmation code 7817627. An archived version of the teleconference will also be available on the Dolby 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. In the fourth quarter of fiscal 2015, our non-GAAP results exclude a one-time gain on the sale of real estate. 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 the investor relations data sheet at http://investor.dolby.com/downloads.cfm.

Forward-Looking Statements

Certain statements in this press release, including, but not limited to, statements relating to Dolby's expected financial results for Q1 2017 and fiscal 2017, our ability to advance our long-term objectives, 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, cinema, gaming, mobile, communications, and automotive 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® 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; 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 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) creates audio, video, and voice technologies that transform entertainment and communications in mobile devices, at the cinema, at home, and at work. For more than 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 Audio, Dolby Cinema, and Dolby Vision are trademarks of Dolby Laboratories. All other trademarks remain the property of their respective owners. DLB-F

           

DOLBY LABORATORIES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

 
Fiscal Quarter Ended Fiscal Year Ended
September 30,     September 25, September 30,     September 25,
2016     2015 2016     2015
Revenue: (unaudited) (unaudited) (unaudited)
Licensing $ 203,541 $ 203,325 $ 917,032 $ 868,111
Products 25,033 25,060 90,543 83,904
Services 4,423       4,363  

18,163

      18,623  
Total revenue 232,997       232,748   1,025,738       970,638  
 
Cost of revenue:
Cost of licensing 8,482 2,264 28,333 10,879
Cost of products 17,739 19,642 64,853 70,490
Cost of services 4,001       3,471   15,796       13,447  
Total cost of revenue 30,222       25,377   108,982       94,816  
               
Gross margin 202,775       207,371   916,756       875,822  
 
Operating expenses:
Research and development 59,214 50,621 219,607 201,324
Sales and marketing 74,764 74,434 295,267 279,174
General and administrative 39,724 46,220 168,854 182,176
Restructuring charges/(credits) (12 )     (41 ) 1,233       (80 )
Total operating expenses 173,690       171,234   684,961       662,594  
               
Operating income 29,085       36,137   231,795       213,228  
 
Other income/expense:
Interest income 1,673 1,100 5,684 4,544
Interest expense (37 ) (68 ) (125 ) (183 )
Other income/(expense), net 92       27,034   (1,450 )     28,193  
Total other income 1,728       28,066   4,109       32,554  
               
Income before income taxes 30,813 64,203 235,904 245,782
Provision for income taxes (6,734 )     (17,288 ) (49,502 )     (62,542 )
Net income including controlling interest 24,079 46,915 186,402 183,240
Less: net (income) attributable to controlling interest (146 )     (362 ) (542 )     (1,850 )
Net income attributable to Dolby Laboratories, Inc. $ 23,933       $ 46,553   $ 185,860       $ 181,390  
 
Net Income Per Share:
Basic $ 0.24 $ 0.46 $ 1.85 $ 1.77
Diluted $ 0.23 $ 0.45 $ 1.81 $ 1.75
Weighted-Average Shares Outstanding:
Basic 101,145 101,935 100,717 102,354
Diluted 103,766 103,059 102,424 103,862
 

         

DOLBY LABORATORIES, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands)

 
September 30, September 25,
2016     2015
ASSETS (unaudited)
Current assets:
Cash and cash equivalents $ 516,112 $ 531,926
Restricted cash 3,645 2,936
Short-term investments 121,629 138,901
Accounts receivable, net 75,688 101,563
Inventories 16,354 13,872
Prepaid expenses and other current assets 26,302       32,031  
Total current assets 759,730 821,229
Long-term investments 393,904 321,015
Property, plant and equipment, net 443,656 403,091
Intangible assets, net 215,342 127,507
Goodwill 309,616 307,708
Deferred taxes 166,790 143,279
Other non-current assets 21,068       9,464  
Total assets $ 2,310,106       $ 2,133,293  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 17,544 $ 20,710
Accrued liabilities 169,055 169,307
Income taxes payable 2,304 754
Deferred revenue 24,180       18,910  
Total current liabilities 213,083 209,681
Long-term deferred revenue 35,366 30,581
Other non-current liabilities 82,922       77,024  
Total liabilities 331,371 317,286
 
Stockholders' equity:
Class A common stock 57 51
Class B common stock 44 51
Additional paid-in capital 42,032 17,571
Retained earnings 1,938,320 1,800,857
Accumulated other comprehensive (loss) (10,197 )     (11,462 )
Total stockholders' equity - Dolby Laboratories, Inc. 1,970,256 1,807,068
Controlling interest 8,479       8,939  
Total stockholders' equity 1,978,735       1,816,007  
Total liabilities and stockholders' equity $ 2,310,106       $ 2,133,293  
 

     
DOLBY LABORATORIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 
Fiscal Year Ended
September 30,     September 25,
2016     2015

Operating activities:

(unaudited)
Net income including controlling interest $ 186,402 $ 183,240
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 85,152 69,133
Stock-based compensation 66,985 67,069
Amortization of premium on investments 3,824 9,162
Excess tax benefit from exercise of stock options (3,225 ) (2,544 )
Provision for doubtful accounts 1,017 33
Deferred income taxes (22,798 ) (14,484 )
Gain on sale of ownership interest in subsidiary (pre-tax) (26,221 )
Other non-cash items affecting net income 1,779 5,125
Changes in operating assets and liabilities:
Accounts receivable 24,886 (7,008 )
Inventories (2,949 ) 5,835
Prepaid expenses and other assets (15,217 ) (3,595 )
Accounts payable and other liabilities

2,834

 

(7,384 )
Income taxes, net 17,265 21,767
Deferred revenue 10,288 8,981
Other non-current liabilities 596       268  
Net cash provided by operating activities

356,839

      309,377  
 
Investing activities:
Purchase of investments (426,118 ) (392,936 )
Proceeds from sales of investment securities 262,125 305,225
Proceeds from maturities of investment securities 103,987 146,152
Purchases of PP&E

(100,762

) (157,526 )
Payments for business acquisitions, net of cash acquired (93,516 )
Purchase of intangible assets (121,020 ) (37,416 )
Proceeds from sale of ownership interest in subsidiary (net) 27,216
Change in restricted cash (709 )     (794 )
Net cash used in investing activities

(282,497

)     (203,595 )
 
Financing activities:
Proceeds from issuance of common stock 71,111 28,627
Repurchase of common stock (100,854 ) (107,349 )
Payment of cash dividend (48,397 ) (41,018 )
Distribution to controlling interest (214 ) (5,615 )
Excess tax benefit from exercise of stock options 3,225 2,544
Shares repurchased for tax withholdings on vesting of restricted stock (13,632 )     (15,708 )
Net cash used in financing activities (88,761 )     (138,519 )
 
Effect of foreign exchange rate changes on cash and cash equivalents (1,395 )     (3,809 )

Net (decrease) in cash and cash equivalents

(15,814 ) (36,546 )
Cash and cash equivalents at beginning of period 531,926       568,472  
Cash and cash equivalents at end of period $ 516,112       $ 531,926  
 

 
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 fourth quarter of fiscal 2016 and 2015 and fiscal 2016 and 2015:
 
Net income: Fiscal Quarter Ended Fiscal Year Ended
September 30, September 25, September 30, September 25,
2016     2015 2016     2015
GAAP net income $ 23.9 $ 46.6 $ 185.9 $ 181.4
Stock-based compensation 15.5 16.3 67.0 67.1
RSU dividend equivalent 0.2 0.5 1.2 2.4
Amortization of acquired intangibles 3.7 4.0 15.4 17.0
Restructuring charges, net 1.2
Other non-operating income adjustments (26.2 ) (26.2 )
Income tax adjustments (4.7 )     3.2   (21.7 )     (12.4 )
Non-GAAP net income $ 38.6       $ 44.4   $ 249.0       $ 229.3  
 
Diluted earnings per share: Fiscal Quarter Ended Fiscal Year Ended
September 30, September 25, September 30, September 25,
2016     2015 2016     2015
GAAP diluted earnings per share $ 0.23 $ 0.45 $ 1.81 $ 1.75
Stock-based compensation 0.15 0.16 0.66 0.65
RSU dividend equivalent 0.01 0.02
Amortization of acquired intangibles 0.04 0.04 0.15 0.16
Restructuring charges, net 0.01
Other non-operating income adjustments (0.25 ) (0.25 )
Income tax adjustments (0.05 )     0.03   (0.21 )     (0.12 )
Non-GAAP diluted earnings per share $ 0.37       $ 0.43   $ 2.43       $ 2.21  
 

Shares used in computing diluted earnings per share

104 103 102 104
 
The following tables present a reconciliation between GAAP and non-GAAP versions of the estimated financial amounts for the first quarter of fiscal 2017 and fiscal 2017 included in this release:
 
Gross margin:

Q1 2017

GAAP gross margin (low - high end of range) 88% - 89%
Stock-based compensation 0.1 %
Amortization of acquired intangibles 0.9 %
Non-GAAP gross margin (low - high end of range) 89% - 90%
 
Operating expenses: Q1 2017     Fiscal 2017
GAAP operating expenses (low - high end of range) $173 - $177 $700 - $710
Stock-based compensation (17.5 ) (70.0 )
Amortization of acquired intangibles (1.5 )     (5.0 )
Non-GAAP operating expenses (low - high end of range) $154 - $158     $625 - $635
 
Diluted earnings per share: Q1 2017
Low     High
GAAP diluted earnings per share $ 0.34 $ 0.40
Stock-based compensation 0.17 0.17
Amortization of acquired intangibles 0.03 0.03
Income tax adjustments (0.05 )     (0.05 )
Non-GAAP diluted earnings per share $ 0.49       $ 0.55  
 

Shares used in computing diluted earnings per share

103 103

Investor Contact:
Dolby Laboratories
Elena Carr, 415-645-5583
investor@dolby.com
or
Media Contact:
Dolby Laboratories
Joy Nestor, 415-558-0164
joy.nestor@dolby.com

Source: Dolby Laboratories, Inc.

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