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Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 27, 2020
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From              To             
Commission File Number: 001-32431

https://cdn.kscope.io/7cd3658315bf132de5d2fe791369c491-dlb-20200327_g1.jpg
DOLBY LABORATORIES, INC.
(Exact name of registrant as specified in its charter)
Delaware90-0199783
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
1275 Market StreetSan FranciscoCalifornia94103-1410
(Address of principal executive offices)(Zip Code)

(415) 558-0200
Registrant’s telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A common stock, $0.001 par valueDLBThe New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer
Accelerated Filer  
Non-accelerated Filer  
Smaller Reporting Company  
Emerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes     No 
On April 24, 2020, the registrant had 64,434,421 shares of Class A common stock, par value $0.001 per share, and 36,224,220 shares of Class B common stock, par value $0.001 per share, outstanding.


Table of Contents

DOLBY LABORATORIES, INC.
FORM 10-Q
For the Fiscal Quarter Ended March 27, 2020
TABLE OF CONTENTS
 
Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 6.

2

Table of Contents

GLOSSARY OF TERMS
The following table summarizes certain terms and abbreviations that may be used within the text of this report:
AbbreviationTerm
AACAdvanced Audio Coding
AFSAvailable-For-Sale (Securities)
AOCIAccumulated Other Comprehensive Income
APICAdditional-Paid In-Capital
ASCAccounting Standards Codification
ASPAverage Selling Price
ASUAccounting Standards Update
ATSCAdvanced Television Systems Committee
AVCAdvanced Video Coding
AVRAudio/Video Receiver
CEConsumer Electronics
CESConsumer Electronics Show
CODMChief Operating Decision Maker
COGSCost Of Goods Sold
COSOCommittee Of Sponsoring Organizations (Of The Treadway Commission)
DDDolby Digital®
DD+Dolby Digital Plus™
DMADigital Media Adapter
DTVDigital Television
DVBDigital Video Broadcasting
DVDDigital Versatile Disc
EPSEarnings Per Share
ESPEstimated Selling Price
ESPPEmployee Stock Purchase Plan
FASBFinancial Accounting Standards Board
FCPAForeign Corrupt Practices Act
G&AGeneral & Administrative
HDHigh Definition
HDRHigh-Dynamic Range
HDTVHigh Definition Television
HE-AACHigh Efficiency Advanced Audio Coding
HEVCHigh Efficiency Video Coding
HFRHigh Frame Rate
HTIBHome Theater In-A-Box
ICIntegrated Circuit
IBRIncremental Borrowing Rate
IPIntellectual Property
IPOInitial Public Offering
IPTVInternet Protocol Television
ITInformation Technology
LPLimited Partner/Partnership
MEMultiple Element
NOLNet Operating Loss
OCIOther Comprehensive Income
ODDOptical Disc Drive
OECDOrganization For Economic Co-Operation & Development
OEMOriginal Equipment Manufacturer
OTTOver-The-Top
PCPersonal Computer
PCSPost-Contract Support
PP&EProperty, Plant, & Equipment
PSOPerformance-Based Stock Option
PSUPerformance-Based Restricted Stock Unit
R&DResearch & Development
ROURight-Of-Use
RSURestricted Stock Unit
S&MSales & Marketing
SERPSupplemental Executive Retirement Plan
SoCSystem(s)-On-A-Chip
SSPStandalone Selling Price
STBSet-Top Box
TPEThird Party Evidence
TSRTotal Stockholder Return
UHDUltra High Definition
U.S. GAAPGenerally Accepted Accounting Principles In The United States

3

Table of Contents

PART I - FINANCIAL INFORMATION
ITEM 1. UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DOLBY LABORATORIES, INC.
INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
(unaudited)

March 27,
2020
September 27,
2019
ASSETS
Current assets:
Cash and cash equivalents$724,931  $797,210  
Restricted cash9,513  8,383  
Short-term investments174,859  119,146  
Accounts receivable, net of allowance for doubtful accounts of $11,262 and $9,775247,043  189,115  
Contract assets223,739  195,651  
Inventories, net28,331  32,331  
Prepaid expenses and other current assets51,156  39,704  
Total current assets1,459,572  1,381,540  
Long-term investments127,294  179,587  
Property, plant, and equipment, net551,027  537,432  
Operating lease right-of-use assets79,439    
Intangible assets, net167,917  180,891  
Goodwill332,979  334,829  
Deferred taxes129,252  114,075  
Other non-current assets97,353  93,395  
Total assets$2,944,833  $2,821,749  
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$9,041  $15,212  
Accrued liabilities245,869  268,144  
Income taxes payable15,186  3,506  
Contract liabilities 19,745  19,991  
Operating lease liabilities17,413    
Total current liabilities307,254  306,853  
Non-current contract liabilities25,074  24,404  
Non-current operating lease liabilities64,423    
Other non-current liabilities178,805  177,462  
Total liabilities575,556  508,719  
Stockholders’ equity:
Class A, $0.001 par value, one vote per share, 500,000,000 shares authorized: 64,422,131 shares issued and outstanding at March 27, 2020 and 63,911,270 at September 27, 201958  58  
Class B, $0.001 par value, ten votes per share, 500,000,000 shares authorized: 36,224,820 shares issued and outstanding at March 27, 2020 and 36,229,820 at September 27, 201941  41  
Retained earnings2,395,575  2,327,877  
Accumulated other comprehensive (loss)(31,615) (20,625) 
Total stockholders’ equity – Dolby Laboratories, Inc.2,364,059  2,307,351  
Controlling interest5,218  5,679  
Total stockholders’ equity2,369,277  2,313,030  
Total liabilities and stockholders’ equity$2,944,833  $2,821,749  
See accompanying notes to unaudited interim condensed consolidated financial statements
4

Table of Contents

DOLBY LABORATORIES, INC.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
 
Fiscal Quarter EndedFiscal Year-To-Date Ended
March 27,
2020
March 29,
2019
March 27,
2020
March 29,
2019
Revenue:
Licensing$328,865  $310,308  $586,548  $570,587  
Products and services22,950  27,950  57,144  70,047  
Total revenue351,815  338,258  643,692  640,634  
Cost of revenue:
Cost of licensing13,243  16,074  25,585  27,471  
Cost of products and services23,587  20,501  48,560  47,733  
Total cost of revenue36,830  36,575  74,145  75,204  
Gross margin314,985  301,683  569,547  565,430  
Operating expenses:
Research and development60,086  58,625  117,736  117,272  
Sales and marketing88,485  92,694  183,603  178,296  
General and administrative60,800  47,416  113,329  98,229  
Restructuring charges/(credits)(331) 18  344  32  
Total operating expenses209,040  198,753  415,012  393,829  
Operating income105,945  102,930  154,535  171,601  
Other income/expense:
Interest income4,721  7,494  9,653  12,679  
Interest expense(25) (32) (97) (77) 
Other income/(expense), net138  (390) 1,142  53  
Total other income4,834  7,072  10,698  12,655  
Income before income taxes110,779  110,002  165,233  184,256  
Provision for income taxes(22,105) (36,427) (27,968) (12,323) 
Net income including controlling interest88,674  73,575  137,265  171,933  
Less: net income attributable to controlling interest(178) (135) (16) (274) 
Net income attributable to Dolby Laboratories, Inc.$88,496  $73,440  $137,249  $171,659  
Net income per share:
Basic$0.88  $0.72  $1.36  $1.68  
Diluted$0.86  $0.70  $1.33  $1.63  
Weighted-average shares outstanding:
Basic100,854  102,141  100,595  102,409  
Diluted102,773  104,587  103,133  105,529  
Related party rent expense:
Included in operating expenses$78  $768  $148  $1,648  
Included in net income attributable to controlling interest$327  $176  $221  $352  
Cash dividend declared per common share$0.22  $0.19  $0.44  $0.38  
Cash dividend paid per common share$0.22  $0.19  $0.44  $0.38  
See accompanying notes to unaudited interim condensed consolidated financial statements
5

Table of Contents

DOLBY LABORATORIES, INC.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(unaudited)
 Fiscal Quarter EndedFiscal Year-To-Date Ended
 March 27,
2020
March 29,
2019
March 27,
2020
March 29,
2019
Net income including controlling interest$88,674  $73,575  $137,265  $171,933  
Other comprehensive income:
Currency translation adjustments, net of tax expense/(benefit) of ($40), $0, $0, and $0(10,191) 2,015  (6,571) (1,713) 
Unrealized gains/(losses) on investments, net of tax expense/(benefit)
of $54, $84, ($207), and $124
273  2,098  (889) 2,868  
Unrealized gains on cash flow hedges, net of tax of $37, $0, $0, and $0(4,008)   (3,724)   
Total other comprehensive income/(loss), net of tax(13,926) 4,113  (11,184) 1,155  
Total comprehensive income74,748  77,688  126,081  173,088  
Less: comprehensive (income)/loss attributable to controlling interest193  (292) 178  (280) 
Comprehensive income attributable to Dolby Laboratories, Inc.$74,941  $77,396  $126,259  $172,808  
See accompanying notes to unaudited interim condensed consolidated financial statements
6

Table of Contents

DOLBY LABORATORIES, INC.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands)
(unaudited)
Fiscal Quarter-To-Date
 Dolby Laboratories, Inc.  
 Common
Stock
Additional
Paid-In
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income/(Loss)
Total Dolby
Laboratories,
Inc.
Controlling
Interest
Total
Balance at December 27, 2019$99  $  $2,351,251  $(18,060) $2,333,290  $5,411  $2,338,701  
Net income—  —  88,496  —  88,496  178  88,674  
Other comprehensive loss, net of tax—  —  —  (13,555) (13,555) (371) (13,926) 
Distributions to controlling interest—  —  —  —  —      
Stock-based compensation expense—  20,951  —  —  20,951  —  20,951  
Repurchase of common stock(1) (49,751) (21,917) —  (71,669) —  (71,669) 
Cash dividends declared and paid on common stock—  —  (22,255) —  (22,255) —  (22,255) 
Common stock issued under employee stock plans1  29,612  —  —  29,613  —  29,613  
Tax withholdings on vesting of restricted stock—  (812) —    (812)   (812) 
Balance at March 27, 2020$99  $  $2,395,575  $(31,615) $2,364,059  $5,218  $2,369,277  


Fiscal Year-To-Date
 Dolby Laboratories, Inc.  
 Common
Stock
Additional
Paid-In
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income/(Loss)
Total Dolby
Laboratories,
Inc.
Controlling
Interest
Total
Balance at September 27, 2019$99  $  $2,327,877  $(20,625) $2,307,351  $5,679  $2,313,030  
Net income—  —  137,249  —  137,249  16  137,265  
Other comprehensive loss, net of tax—  —  —  (10,990) (10,990) (194) (11,184) 
Distributions to controlling interest—  —  —  —  —  (283) (283) 
Stock-based compensation expense—  43,565  —  —  43,565  —  43,565  
Repurchase of common stock(1) (76,456) (25,215) —  (101,672) —  (101,672) 
Cash dividends declared and paid on common stock—  —  (44,336) —  (44,336) —  (44,336) 
Common stock issued under employee stock plans1  53,985  —  —  53,986  —  53,986  
Tax withholdings on vesting of restricted stock—  (21,094) —  —  (21,094) —  (21,094) 
Balance at March 27, 2020$99  $  $2,395,575  $(31,615) $2,364,059  $5,218  $2,369,277  



Fiscal Quarter-To-Date
 Dolby Laboratories, Inc.  
 Common
Stock
Additional
Paid-In
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income/(Loss)
Total Dolby
Laboratories,
Inc.
Controlling
Interest
Total
Balance at December 28, 2018$101  $  $2,361,843  $(18,639) $2,343,305  $5,649  $2,348,954  
Net income—  —  73,440  —  73,440  135  73,575  
Other comprehensive income, net of tax—  —  —  3,956  3,956  157  4,113  
Distributions to controlling interest—  —  —  —  —  (108) (108) 
Stock-based compensation expense—  19,235  —  —  19,235  —  19,235  
Repurchase of common stock(3) (31,118) (54,214) —  (85,335) —  (85,335) 
Cash dividends declared and paid on common stock—  —  (19,462) —  (19,462) —  (19,462) 
Common stock issued under employee stock plans1  12,885  —  —  12,886  —  12,886  
Tax withholdings on vesting of restricted stock1  (1,002) —  —  (1,001)   (1,001) 
Balance at March 29, 2019$100  $  $2,361,607  $(14,683) $2,347,024  $5,833  $2,352,857  


Fiscal Year-To-Date
 Dolby Laboratories, Inc.  
 Common
Stock
Additional
Paid-In
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income/(Loss)
Total Dolby
Laboratories,
Inc.
Controlling
Interest
Total
Balance at September 28, 2018 (as adjusted)$102  66,127  2,313,539  (15,832) 2,363,936  6,567  2,370,503  
Net income—  —  171,659  —  171,659  274  171,933  
Other comprehensive income, net of tax—  —  —  1,149  1,149  6  1,155  
Distributions to controlling interest—  —  —  —  —  (1,014) (1,014) 
Stock-based compensation expense—  40,717  —  —  40,717  —  40,717  
Repurchase of common stock(3) (113,321) (84,556) —  (197,880) —  (197,880) 
Cash dividends declared and paid on common stock—  —  (39,035) —  (39,035) —  (39,035)