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Dolby Laboratories Reports Second Quarter Fiscal 2018 Financial Results
“We had another solid quarter with growth in several areas,” said
Second quarter GAAP net income was
Dividend
Today,
Financial Outlook
Q3 Fiscal 2018
- Total revenue will range from
$310 million to $320 million - Gross margin percentages will be between 88.5 percent and 89.5 percent on a GAAP basis and between 89.5 percent and 90.5 percent on a non-GAAP basis
- Operating expenses will be between
$190 million and $194 million on a GAAP basis and between$172 million and $176 million on a non-GAAP basis - Diluted earnings per share will be between
$0.64 and $0.70 on a GAAP basis and between$0.78 and $0.84 on a non-GAAP basis - Effective tax rate will be between 20 percent and 23 percent on both a GAAP and non-GAAP basis
Fiscal Year 2018
- Total revenue will range from
$1.165 billion to $1.185 billion - Gross margin percentages will be between 87.5 percent and 88.5 percent on a GAAP basis and between 88.5 percent and 89.5 percent on a non-GAAP basis
- Operating expenses will range from
$744 million to $749 million on a GAAP basis and from$670 million to $675 million on a non-GAAP basis - The ongoing tax rate for the remainder of fiscal 2018 will be between 20 percent to 23 percent on both a GAAP and non-GAAP basis
Conference Call Information
Members of
A replay of the call will be available from
Non-GAAP Financial Information
To supplement
Stock-based compensation expense: Stock-based compensation, unlike cash-based compensation, utilizes subjective and complex 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 a formal restructuring plan and primarily relate to 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 U.S. Tax Cuts and Jobs Act (Tax Reform): The enactment of Tax Reform requires estimates based on
Using the aforementioned adjustments,
Forward-Looking Statements
Certain statements in this press release, including, but not limited to, statements relating to
About
DOLBY LABORATORIES, INC. | |||||||||||||
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||||
(in thousands, except per share amounts; unaudited) | |||||||||||||
Fiscal Quarter Ended | Fiscal Year-To-Date Ended | ||||||||||||
March 30, 2018 |
March 31, 2017 |
March 30, 2018 |
March 31, 2017 |
||||||||||
Revenue: | |||||||||||||
Licensing | $ | 273,143 | $ | 241,617 | $ | 531,159 | $ | 474,316 | |||||
Products | 22,665 | 20,713 | 47,598 | 48,924 | |||||||||
Services | 5,547 | 5,144 | 10,395 | 10,501 | |||||||||
Total revenue | 301,355 | 267,474 | 589,152 | 533,741 | |||||||||
Cost of revenue: | |||||||||||||
Cost of licensing | 10,610 | 8,796 | 19,869 | 16,917 | |||||||||
Cost of products | 15,603 | 13,988 | 32,638 | 31,708 | |||||||||
Cost of services | 4,746 | 4,193 | 9,328 | 8,319 | |||||||||
Total cost of revenue | 30,959 | 26,977 | 61,835 | 56,944 | |||||||||
Gross margin | 270,396 | 240,497 | 527,317 | 476,797 | |||||||||
Operating expenses: | |||||||||||||
Research and development | 59,493 | 58,341 | 115,937 | 115,859 | |||||||||
Sales and marketing | 74,019 | 75,620 | 144,168 | 146,795 | |||||||||
General and administrative | 50,747 | 43,253 | 99,032 | 84,793 | |||||||||
Restructuring charges/(credits) | (167 | ) | — | (364 | ) | — | |||||||
Total operating expenses | 184,092 | 177,214 | 358,773 | 347,447 | |||||||||
Operating income | 86,304 | 63,283 | 168,544 | 129,350 | |||||||||
Other income/expense: | |||||||||||||
Interest income | 3,892 | 2,186 | 7,673 | 4,000 | |||||||||
Interest expense | (29 | ) | (37 | ) | (64 | ) | (63 | ) | |||||
Other income/(expense), net | (684 | ) | 762 | (1,836 | ) | 563 | |||||||
Total other income | 3,179 | 2,911 | 5,773 | 4,500 | |||||||||
Income before income taxes | 89,483 | 66,194 | 174,317 | 133,850 | |||||||||
Provision for income taxes | (18,718 | ) | (15,467 | ) | (185,030 | ) | (29,549 | ) | |||||
Net income/(loss) including controlling interest | 70,765 | 50,727 | (10,713 | ) | 104,301 | ||||||||
Less: net (income) attributable to controlling interest | (134 | ) | (137 | ) | (278 | ) | (337 | ) | |||||
Net income/(loss) attributable to Dolby Laboratories, Inc. | $ | 70,631 | $ | 50,590 | $ | (10,991 | ) | $ | 103,964 | ||||
Net income/(loss) per share: | |||||||||||||
Basic | $ | 0.68 | $ | 0.50 | $ | (0.11 | ) | $ | 1.02 | ||||
Diluted | $ | 0.66 | $ | 0.49 | $ | (0.11 | ) | $ | 1.00 | ||||
Weighted-average shares outstanding: | |||||||||||||
Basic | 103,771 | 101,787 | 103,162 | 101,635 | |||||||||
Diluted | 107,001 | 103,883 | 103,162 | 103,867 |
DOLBY LABORATORIES, INC. | ||||||
INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||
(in thousands; unaudited) | ||||||
March 30, 2018 |
September 29, 2017 |
|||||
ASSETS | ||||||
Current assets: | ||||||
Cash and cash equivalents | $ | 705,519 | $ | 627,017 | ||
Restricted cash | 8,082 | 7,351 | ||||
Short-term investments | 240,497 | 247,757 | ||||
Accounts receivable, net | 141,257 | 73,750 | ||||
Inventories | 24,066 | 25,051 | ||||
Prepaid expenses and other current assets | 35,244 | 30,508 | ||||
Total current assets | 1,154,665 | 1,011,434 | ||||
Long-term investments | 262,062 | 314,364 | ||||
Property, plant and equipment, net | 500,981 | 485,275 | ||||
Intangible assets, net | 191,340 | 189,648 | ||||
Goodwill | 316,558 | 311,087 | ||||
Deferred taxes | 141,580 | 190,915 | ||||
Other non-current assets | 39,453 | 30,831 | ||||
Total assets | $ | 2,606,639 | $ | 2,533,554 | ||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||
Current liabilities: | ||||||
Accounts payable | $ | 18,200 | $ | 14,373 | ||
Accrued liabilities | 167,793 | 207,034 | ||||
Income taxes payable | 4,614 | 1,216 | ||||
Deferred revenue | 22,542 | 23,150 | ||||
Total current liabilities | 213,149 | 245,773 | ||||
Long-term deferred revenue | 37,430 | 36,425 | ||||
Other non-current liabilities | 202,082 | 107,514 | ||||
Total liabilities | 452,661 | 389,712 | ||||
Stockholders’ equity: | ||||||
Class A common stock | 59 | 58 | ||||
Class B common stock | 43 | 43 | ||||
Additional paid-in capital | 113,827 | 61,331 | ||||
Retained earnings | 2,039,116 | 2,083,063 | ||||
Accumulated other comprehensive (loss) | (5,616 | ) | (7,753 | ) | ||
Total stockholders’ equity – Dolby Laboratories, Inc. | 2,147,429 | 2,136,742 | ||||
Controlling interest | 6,549 | 7,100 | ||||
Total stockholders’ equity | 2,153,978 | 2,143,842 | ||||
Total liabilities and stockholders’ equity | $ | 2,606,639 | $ | 2,533,554 |
DOLBY LABORATORIES, INC. | ||||||
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||
(in thousands; unaudited) | ||||||
Fiscal Year-To-Date Ended | ||||||
March 30, 2018 |
March 31, 2017 |
|||||
Operating activities: | ||||||
Net income/(loss) including controlling interest | $ | (10,713 | ) | $ | 104,301 | |
Adjustments to reconcile net income/(loss) to net cash provided by operating activities: | ||||||
Depreciation and amortization | 40,684 | 44,061 | ||||
Stock-based compensation | 36,375 | 33,198 | ||||
Amortization of premium on investments | 1,472 | 1,376 | ||||
Provision for doubtful accounts | 1,607 | 1,010 | ||||
Deferred income taxes | 48,332 | (8,856 | ) | |||
Other non-cash items affecting net income | 977 | 160 | ||||
Changes in operating assets and liabilities: | ||||||
Accounts receivable | (69,018 | ) | (13,538 | ) | ||
Inventories | (352 | ) | (3,253 | ) | ||
Prepaid expenses and other assets | (12,732 | ) | (11,280 | ) | ||
Accounts payable and other liabilities | (38,124 | ) | 495 | |||
Income taxes, net | 99,861 | 11,089 | ||||
Deferred revenue | 324 | 85 | ||||
Other non-current liabilities | (652 | ) | 480 | |||
Net cash provided by operating activities | 98,041 | 159,328 | ||||
Investing activities: | ||||||
Purchases of investment securities | (129,456 | ) | (98,789 | ) | ||
Proceeds from sales of investment securities | 64,698 | 23,071 | ||||
Proceeds from maturities of investment securities | 118,874 | 66,171 | ||||
Purchases of PP&E | (39,734 | ) | (51,230 | ) | ||
Payments for business acquisitions, net of cash acquired | (6,563 | ) | — | |||
Purchase of intangible assets | (11,893 | ) | (5,250 | ) | ||
Change in restricted cash | (731 | ) | (2,107 | ) | ||
Net cash used in investing activities | (4,805 | ) | (68,134 | ) | ||
Financing activities: | ||||||
Proceeds from issuance of common stock | 71,061 | 24,210 | ||||
Repurchase of common stock | (34,993 | ) | (50,000 | ) | ||
Payment of cash dividend | (32,956 | ) | (28,494 | ) | ||
Distribution to controlling interest | (1,022 | ) | (2,094 | ) | ||
Shares repurchased for tax withholdings on vesting of restricted stock | (19,946 | ) | (15,799 | ) | ||
Net cash used in financing activities | (17,856 | ) | (72,177 | ) | ||
Effect of foreign exchange rate changes on cash and cash equivalents | 3,122 | (2,621 | ) | |||
Net increase in cash and cash equivalents | 78,502 | 16,396 | ||||
Cash and cash equivalents at beginning of period | 627,017 | 516,112 | ||||
Cash and cash equivalents at end of period | $ | 705,519 | $ | 532,508 |
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 2018 and 2017: | ||||||
Net income: | Fiscal Quarter Ended | |||||
March 30, 2018 |
March 31, 2017 |
|||||
GAAP net income | $ | 70.6 | $ | 50.6 | ||
Stock-based compensation | 17.7 | 15.9 | ||||
Amortization of acquisition-related intangibles | 1.9 | 3.8 | ||||
Restructuring credits, net | (0.2 | ) | — | |||
Income tax adjustments | (6.5 | ) | (5.2 | ) | ||
Non-GAAP net income | $ | 83.5 | $ | 65.1 | ||
Diluted earnings per share: | Fiscal Quarter Ended | |||||
March 30, 2018 |
March 31, 2017 |
|||||
GAAP diluted earnings per share | $ | 0.66 | $ | 0.49 | ||
Stock-based compensation | 0.16 | 0.16 | ||||
Amortization of acquisition-related intangibles | 0.02 | 0.03 | ||||
Restructuring charges, net | — | — | ||||
Income tax adjustments | (0.06 | ) | (0.05 | ) | ||
Non-GAAP diluted earnings per share | $ | 0.78 | $ | 0.63 | ||
Shares used in computing diluted earnings per share | 107 | 104 | ||||
The following tables present a reconciliation between GAAP and non-GAAP versions of the estimated financial amounts for the third quarter of fiscal 2018 and fiscal year 2018 included in this release: | ||||||
Gross margin: | Q3 2018 | Fiscal 2018 | ||||
GAAP gross margin (low - high end of range) | 88.5%-89.5% | 87.5%-88.5% | ||||
Stock-based compensation | 0.2% | 0.2% | ||||
Amortization of acquisition-related intangibles | 0.8% | 0.8% | ||||
Non-GAAP gross margin (low - high end of range) | 89.5%-90.5% |
88.5%-89.5% |
||||
Operating expenses: | Q3 2018 | Fiscal 2018 | ||||
GAAP operating expenses (low - high end of range) | $190 - $194 | $744 - $749 | ||||
Stock-based compensation | (17.0 | ) | (71.0 | ) | ||
Amortization of acquisition-related intangibles | (1.0 | ) | (3.0 | ) | ||
Non-GAAP operating expenses (low - high end of range) | $172 - $176 | $670 - $675 | ||||
Diluted earnings per share: | Q3 2018 | |||||
Low | High | |||||
GAAP diluted earnings per share | $ | 0.64 | $ | 0.70 | ||
Stock-based compensation | 0.16 | 0.16 | ||||
Amortization of acquisition-related intangibles | 0.02 | 0.02 | ||||
Income tax adjustments | (0.04 | ) | (0.04 | ) | ||
Non-GAAP diluted earnings per share | $ | 0.78 | $ | 0.84 | ||
Shares used in computing diluted earnings per share | 107 | 107 |
Investor Contact:
415-645-5583
investor@dolby.com
Media Contact:
404-316-0201
tony.carter@dolby.com
Source: Dolby Laboratories