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Cover - shares	6 Months Ended
Cover - shares	Mar. 27, 2020	Apr. 24, 2020
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Mar. 27, 2020
Document Transition Report	false
Entity File Number	001-32431
Entity Registrant Name	DOLBY LABORATORIES, INC.
Entity Central Index Key	0001308547
Current Fiscal Year End Date	--09-25
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q2
Amendment Flag	false
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	90-0199783
Entity Address, Address Line One	1275 Market Street
Entity Address, City or Town	San Francisco
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	94103-1410
City Area Code	415
Local Phone Number	558-0200
Title of 12(b) Security	Class A common stock, $0.001 par value
Trading Symbol	DLB
Security Exchange Name	NYSE
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Class A Common Stock [Member]
Entity Common Stock, Shares Outstanding		64,434,421
Class B Common Stock [Member]
Entity Common Stock, Shares Outstanding		36,224,220

Interim Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Mar. 27, 2020	Sep. 27, 2019
Current assets:
Cash and cash equivalents	$ 724,931	$ 797,210
Restricted cash	9,513	8,383
Short-term investments	174,859	119,146
Accounts receivable, net of allowance for doubtful accounts of $11,262 and $9,775	247,043	189,115
Contract assets	223,739	195,651
Inventories, net	28,331	32,331
Prepaid expenses and other current assets	51,156	39,704
Total current assets	1,459,572	1,381,540
Long-term investments	127,294	179,587
Property, plant, and equipment, net	551,027	537,432
Operating lease right-of-use assets	79,439	0
Intangible assets, net	167,917	180,891
Goodwill	332,979	334,829
Other non-current assets	97,353	93,395
Deferred taxes	129,252	114,075
Total assets	2,944,833	2,821,749
Current liabilities:
Accounts payable	9,041	15,212
Accrued liabilities	245,869	268,144
Income taxes payable	15,186	3,506
Contract liabilities	19,745	19,991
Operating lease liabilities	17,413	0
Total current liabilities	307,254	306,853
Non-current contract liabilities	25,074	24,404
Non-current operating lease liabilities	64,423	0
Other non-current liabilities	178,805	177,462
Total liabilities	575,556	508,719
Stockholders’ equity:
Retained earnings	2,395,575	2,327,877
Accumulated other comprehensive (loss)	(31,615)	(20,625)
Total stockholders’ equity – Dolby Laboratories, Inc.	2,364,059	2,307,351
Controlling interest	5,218	5,679
Total stockholders’ equity	2,369,277	2,313,030
Total liabilities and stockholders’ equity	2,944,833	2,821,749
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, 2019
Stockholders’ equity:
Common stock	58	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, 2019
Stockholders’ equity:
Common stock	$ 41	$ 41

Interim Condensed Consolidated Balance Sheets (Parenthetical) $ in Thousands	Mar. 27, 2020 USD ($) vote $ / shares shares	Sep. 27, 2019 USD ($) vote $ / shares shares
Allowance for doubtful accounts \| $	$ (11,262)	$ (9,775)
Class A Common Stock [Member]
Common stock, par value (usd per share) \| $ / shares	$ 0.001	$ 0.001
Common stock voting right per share (votes per share) \| vote	1	1
Common stock, shares authorized (shares)	500,000,000	500,000,000
Common stock, shares issued (shares)	64,422,131	63,911,270
Common stock, shares outstanding (shares)	64,422,131	63,911,270
Class B Common Stock [Member]
Common stock, par value (usd per share) \| $ / shares	$ 0.001	$ 0.001
Common stock voting right per share (votes per share) \| vote	10	10
Common stock, shares authorized (shares)	500,000,000	500,000,000
Common stock, shares issued (shares)	36,224,820	36,229,820
Common stock, shares outstanding (shares)	36,224,820	36,229,820

Interim Condensed Consolidated Statements Of Operations - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Mar. 27, 2020	Mar. 29, 2019	Mar. 27, 2020	Mar. 29, 2019
Revenue:
Revenue	$ 351,815	$ 338,258	$ 643,692	$ 640,634
Total revenue	351,815	338,258	643,692	640,634
Cost of revenue:
Total cost of revenue	36,830	36,575	74,145	75,204
Gross margin	314,985	301,683	569,547	565,430
Operating expenses:
Research and development	60,086	58,625	117,736	117,272
Sales and marketing	88,485	92,694	183,603	178,296
General and administrative	60,800	47,416	113,329	98,229
Restructuring charges/(credits)	(331)	18	344	32
Total operating expenses	209,040	198,753	415,012	393,829
Operating income	105,945	102,930	154,535	171,601
Other income/expense:
Interest income	4,721	7,494	9,653	12,679
Interest expense	(25)	(32)	(97)	(77)
Other income/(expense), net	138	(390)	1,142	53
Total other income	4,834	7,072	10,698	12,655
Income before income taxes	110,779	110,002	165,233	184,256
Provision for income taxes	(22,105)	(36,427)	(27,968)	(12,323)
Net income including controlling interest	88,674	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 (in usd per share)	$ 0.88	$ 0.72	$ 1.36	$ 1.68
Diluted (in usd per share)	$ 0.86	$ 0.70	$ 1.33	$ 1.63
Weighted-average shares outstanding:
Basic (in shares)	100,854	102,141	100,595	102,409
Diluted (in shares)	102,773	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
Common stock, dividends declared (in dollars per share)	$ 0.22	$ 0.19	$ 0.44	$ 0.38
Common Stock, Dividends, Per Share, Cash Paid	$ 0.22	$ 0.19	$ 0.44	$ 0.38
Licensing
Revenue:
Revenue	$ 328,865	$ 310,308	$ 586,548	$ 570,587
Cost of revenue:
Cost of revenue	13,243	16,074	25,585	27,471
Products and services
Revenue:
Revenue	22,950	27,950	57,144	70,047
Cost of revenue:
Cost of revenue	$ 23,587	$ 20,501	$ 48,560	$ 47,733

Interim Condensed Consolidated Statements of Comprehensive Income Statement - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Mar. 27, 2020	Mar. 29, 2019	Mar. 27, 2020	Mar. 29, 2019
Statement of Comprehensive Income [Abstract]
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)	0	(3,724)	0
Other Comprehensive Income (Loss), Net of Tax	(13,926)	4,113	(11,184)	1,155
Comprehensive income	74,748	77,688	126,081	173,088
Less: comprehensive (income) attributable to controlling interest	193	(292)	178	(280)
Comprehensive income attributable to Dolby Laboratories, Inc.	$ 74,941	$ 77,396	$ 126,259	$ 172,808

Interim Condensed Consolidated Statements of Comprehensive Income (Parenthetical) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Mar. 27, 2020	Mar. 29, 2019	Mar. 27, 2020	Mar. 29, 2019
Statement of Comprehensive Income [Abstract]
Currency translation adjustment, tax	$ (40)	$ 0	$ 0	$ 0
Unrealized gain (loss) on investments, tax	54	84	(207)	124
Unrealized gains on cash flow hedges, tax	$ 37	$ 0	$ 0	$ 0

Interim Condensed Consolidated Statements Of Stockholders' Equity - USD ($) $ in Thousands	Total	Common Stock	Additional Paid-In Capital	Retained Earnings	Accumulated Other Comprehensive Income/(Loss)	Total Dolby Laboratories, Inc.	Controlling Interest	Class A Common Stock [Member] Common Stock	Class A Common Stock [Member] Additional Paid-In Capital
Beginning balance (in shares) at Sep. 28, 2018		102,000
Beginning balance at Sep. 28, 2018	$ 2,370,503		$ 66,127	$ 2,313,539	$ (15,832)	$ 2,363,936	$ 6,567
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	171,933			171,659		171,659	274
Other comprehensive loss, net of tax	1,155				1,149	1,149	6
Distributions to controlling interest	(1,014)						1,014
Stock-based compensation expense	40,717		40,717			40,717
Shares repurchased (in shares)		(3,000)
Repurchase of common stock	(197,880)		(113,321)	(84,556)		(197,880)
Cash dividends declared and paid on common stock	(39,035)			(39,035)		(39,035)
Common stock issued under employee stock plans (in shares)								1,000
Common stock issued under employee stock plans	27,158		27,157			27,158
Tax withholdings on vesting of restricted stock (in shares)								0
Tax withholdings on vesting of restricted stock	(20,680)					(20,680)			$ (20,680)
Ending balance (in shares) at Mar. 29, 2019		100,000
Ending balance at Mar. 29, 2019	2,352,857		0	2,361,607	(14,683)	2,347,024	5,833
Beginning balance (in shares) at Dec. 28, 2018		101,000
Beginning balance at Dec. 28, 2018	2,348,954		0	2,361,843	(18,639)	2,343,305	5,649
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	73,575			73,440		73,440	135
Other comprehensive loss, net of tax	4,113				3,956	3,956	157
Distributions to controlling interest	(108)						108
Stock-based compensation expense	19,235		19,235			19,235
Shares repurchased (in shares)		(3,000)
Repurchase of common stock	(85,335)		(31,118)	(54,214)		(85,335)
Cash dividends declared and paid on common stock	(19,462)			(19,462)		(19,462)
Common stock issued under employee stock plans (in shares)								1,000
Common stock issued under employee stock plans	12,886		12,885			12,886
Tax withholdings on vesting of restricted stock (in shares)								1,000
Tax withholdings on vesting of restricted stock	(1,001)					(1,001)	0		(1,002)
Ending balance (in shares) at Mar. 29, 2019		100,000
Ending balance at Mar. 29, 2019	2,352,857		0	2,361,607	(14,683)	2,347,024	5,833
Beginning balance (in shares) at Sep. 27, 2019		99,000
Beginning balance at Sep. 27, 2019	2,313,030		0	2,327,877	(20,625)	2,307,351	5,679
Ending balance (in shares) at Dec. 27, 2019		99,000
Ending balance at Dec. 27, 2019	2,338,701		0	2,351,251	(18,060)	2,333,290	5,411
Beginning balance (in shares) at Sep. 27, 2019		99,000
Beginning balance at Sep. 27, 2019	2,313,030		0	2,327,877	(20,625)	2,307,351	5,679
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	137,265			137,249		137,249	16
Other comprehensive loss, net of tax	(11,184)				(10,990)	(10,990)	(194)
Distributions to controlling interest	(283)						(283)
Stock-based compensation expense	$ 43,565		43,565			43,565
Shares repurchased (in shares)	(1,447,523)	(1,000)
Repurchase of common stock	$ (101,672)		(76,456)	(25,215)		(101,672)
Cash dividends declared and paid on common stock	(44,336)			(44,336)		(44,336)
Common stock issued under employee stock plans	53,986	$ 1	53,985			53,986
Tax withholdings on vesting of restricted stock	(21,094)					(21,094)			(21,094)
Ending balance (in shares) at Mar. 27, 2020		99,000
Ending balance at Mar. 27, 2020	2,369,277		0	2,395,575	(31,615)	2,364,059	5,218
Beginning balance (in shares) at Dec. 27, 2019		99,000
Beginning balance at Dec. 27, 2019	2,338,701		0	2,351,251	(18,060)	2,333,290	5,411
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	88,674			88,496		88,496	178
Other comprehensive loss, net of tax	(13,926)				(13,555)	(13,555)	(371)
Distributions to controlling interest	0						0
Stock-based compensation expense	20,951		20,951			20,951
Shares repurchased (in shares)		(1,000)
Repurchase of common stock	(71,669)		(49,751)	(21,917)		(71,669)
Cash dividends declared and paid on common stock	(22,255)			(22,255)		(22,255)
Common stock issued under employee stock plans	29,613	$ 1	29,612			29,613
Tax withholdings on vesting of restricted stock	(812)				0	(812)	0		$ (812)
Ending balance (in shares) at Mar. 27, 2020		99,000
Ending balance at Mar. 27, 2020	$ 2,369,277		$ 0	$ 2,395,575	$ (31,615)	$ 2,364,059	$ 5,218

Interim Condensed Consolidated Statements Of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Mar. 27, 2020	Mar. 29, 2019
Operating activities:
Net income including controlling interest	$ 137,265	$ 171,933
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	40,212	40,799
Stock-based compensation	43,565	40,717
Amortization of premium on investments	334	338
Provision for doubtful accounts	2,955	1,963
Deferred income taxes	(15,141)	(38,548)
Restructuring charge for exit of leased facility	602	0
Other non-cash items affecting net income	3,753	1,355
Changes in operating assets and liabilities:
Accounts receivable	(60,870)	(14,221)
Inventories	(5,376)	(7,983)
Operating lease right-of-use assets	(20,102)	0
Contract assets	(28,086)	(78,949)
Prepaid expenses and other assets	(16,068)	(15,273)
Accounts payable and other liabilities	(22,033)	(14,190)
Income taxes, net	13,238	18,414
Contract liabilities	452	1,061
Operating lease liabilities	20,099	0
Other non-current liabilities	2,100	(1,572)
Net cash provided by operating activities	96,899	105,844
Investing activities:
Purchase of investments	(167,292)	(152,499)
Proceeds from sales of investment securities	109,907	83,478
Proceeds from maturities of investment securities	54,599	78,714
Purchases of property, plant and equipment	(41,782)	(56,082)
Purchases of intangible assets	(2,640)	(17,065)
Net cash provided by/(used in) investing activities	(47,208)	(63,454)
Financing activities:
Proceeds from issuance of common stock	53,986	27,158
Repurchase of common stock	(101,672)	(197,880)
Payment of cash dividend	(44,336)	(39,035)
Distribution to controlling interest	(283)	(1,014)
Shares repurchased for tax withholdings on vesting of restricted stock	(21,094)	(20,680)
Payment related to prior purchases of intangible assets	(91)	0
Payment of deferred consideration for prior business combination	(3,000)	0
Net cash used in financing activities	(116,490)	(231,451)
Effect of foreign exchange rate changes on cash and cash equivalents	(4,350)	(1,323)
Net decrease in cash, cash equivalents, and restricted cash	(71,149)	(190,384)
Cash, cash equivalents, and restricted cash at beginning of period	805,593	925,250
Cash, cash equivalents, and restricted cash at end of period	734,444	734,866
Supplemental disclosure:
Cash paid for income taxes, net of refunds received	35,096	27,612
Non-cash investing activities:
Property, plant, and equipment purchased and unpaid at period-end	(4,914)	(5,500)
Purchase consideration payable for intangibles	$ 260	$ 0

Basis Of Presentation	6 Months Ended
Basis Of Presentation	Mar. 27, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Basis Of Presentation	Unaudited Interim Condensed Consolidated Financial Statements We have prepared the accompanying unaudited interim condensed consolidated financial statements in accordance with U.S. GAAP, and with SEC rules and regulations, which allow for certain information and footnote disclosures that are normally included in annual financial statements prepared in accordance with U.S. GAAP to be condensed or omitted. In our opinion, these unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements for the fiscal year ended September 27, 2019 and include all adjustments necessary for fair presentation. The accompanying unaudited interim condensed consolidated financial statements should be read in conjunction with our consolidated financial statements for the fiscal year ended September 27, 2019, which are included in our Annual Report on Form 10-K filed with the SEC. The results for the fiscal quarter ended March 27, 2020 are not necessarily indicative of the results to be expected for any subsequent quarterly or annual financial period, including the fiscal year ending September 25, 2020. Principles of Consolidation The unaudited interim condensed consolidated financial statements include the accounts of Dolby Laboratories, Inc. and our wholly owned subsidiaries. In addition, we have consolidated the financial results of jointly owned affiliated companies in which our principal stockholder has a controlling interest. We report these controlling interests as a separate line in our consolidated statements of operations as net income attributable to controlling interest and in our consolidated balance sheets as a controlling interest. We eliminate all intercompany accounts and transactions upon consolidation. Operating Segments Since we operate as a single reporting segment, all required financial segment information is included in our unaudited interim condensed consolidated financial statements. This reflects the fact that our CODM, our Chief Executive Officer, evaluates our financial information and resources, and assesses the performance of these resources on a consolidated basis. Use of Estimates The preparation of our financial statements in accordance with U.S. GAAP requires management to make certain estimates and assumptions that affect the amounts reported and disclosed in our unaudited interim condensed consolidated financial statements and accompanying notes. Significant items subject to such estimates and assumptions include estimated shipments by our licensees for which we are owed a sales–based royalty. These estimates involve the use of historical data and judgment for several key attributes including industry estimates of expected shipments, the percentage of markets using our technologies, and average sale prices. Our estimates of royalty-based revenue also take into consideration the macroeconomic effect of global events, such as the COVID-19 pandemic or other natural disasters which may impact supply chain activities as well as demand for shipments. Additional significant items subject to such estimates and assumptions include estimated selling prices for performance obligations within revenue arrangements; valuation allowances for accounts receivable; carrying values of inventories and certain property, plant, and equipment, goodwill and intangible assets; fair values of investments; accrued liabilities including liabilities for unrecognized tax benefits, deferred income tax assets and liabilities, and stock-based compensation. Actual results could differ from our estimates. Fiscal Year Our fiscal year is a 52 or 53 week period ending on the last Friday in September. The fiscal periods presented herein include the 13 week periods ended March 27, 2020 and March 29, 2019. Our fiscal year ending September 25, 2020 (fiscal 2020) and our fiscal year ended September 27, 2019 (fiscal 2019) both consist of 52 weeks.

Summary Of Significant Accounting Policies	6 Months Ended
Summary Of Significant Accounting Policies	Mar. 27, 2020
Accounting Policies [Abstract]
Summary of Significant Accounting Policies	2. Summary of Significant Accounting Policies Recently Issued Accounting Standards Adopted Standards At the beginning of fiscal 2020, we adopted the following standards: Leases. In the first quarter of fiscal 2020, we adopted ASU 2016-02, Leases (ASC 842) along with all subsequent applicable ASU clarifications and improvements, which requires lessees to recognize leases on balance sheet and disclose key information about leasing arrangements. We adopted ASC 842 using the modified retrospective transition method and used the effective date as the date of initial application. Consequently, financial information is not updated and the disclosures required under ASC 842 are not provided for dates and periods prior to implementation. ASC 842 provides a number of optional practical expedients in transition. We elected the “package of practical expedients,” which permits us not to reassess under ASC 842 our prior conclusions about lease identification, lease classification and initial direct costs. In addition, we account for lease and non-lease components as a single lease component. Operating leases are included in operating lease right-of-use assets, operating lease liabilities, and in current and non-current operating lease liabilities on our interim condensed consolidated balance sheets. As a lessee, the adoption of ASC 842 resulted in the recording of Operating lease right-of-use ("ROU") assets and Operating lease liabilities of $62.1 million and $64.6 million, respectively, as of September 28, 2019. The difference between the operating lease assets and liabilities was recorded as an adjustment to Other non-current liabilities, primarily related to deferred rent and other lease incentives. As a lessor, the adoption of ASC 842 did not have a material impact. The adoption of ASC 842 did not impact Retained Earnings. Income Taxes: Comprehensive Income. In the first quarter of fiscal 2020, we adopted ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects From Accumulated Other Comprehensive Income, which allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Act. We elected to not reclassify the stranded tax effects to retained earnings as they were not material to Dolby's consolidated financial statements. Standards Not Yet Effective Collaborative Arrangements. In November 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606, which clarifies that certain transactions between participants in a collaborative arrangement should be accounted for under ASC 606 when the counterparty is a customer. In addition, ASU 2018-18 precludes an entity from presenting consideration from a transaction in a collaborative arrangement as revenue from contracts with customers if the counterparty is not a customer for that transaction. This standard will be effective for Dolby beginning September 26, 2020, and we do not currently plan to early adopt. We do not believe that this standard will have a material impact on our consolidated financial statements. Financial Instruments. In June 2016, the FASB issued ASU 2016-13, Financial Instruments (Topic 326): Measurement of Credit Losses on Financial Instruments, which modifies the measurement of expected credit losses of certain financial instruments, including trade receivables, contract assets, and lease receivables. This standard will be effective for Dolby beginning September 26, 2020, and we do not currently plan to early adopt. We do not believe that this standard will have a material impact on our consolidated financial statements. Income Taxes. In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes by removing certain exceptions for recognizing deferred taxes for investments, performing intraperiod allocation, and calculating income taxes in interim periods. In addition, the modifications simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. This standard will be effective for Dolby beginning September 26, 2020, and we do not currently plan to early adopt. We are currently evaluating the impact of the standard on our consolidated financial statements.

Revenue Recognition Revenue Recognition

6 Months Ended

Mar. 27, 2020

Revenue from Contract with Customer [Abstract]

Revenue Recognition

We enter into revenue arrangements with our customers to license technologies, trademarks and patents for sound, imaging and voice solutions, and to sell products and services. We recognize revenue when we satisfy a performance obligation by transferring control over the use of a license, product, or service to a customer.

A. Identification of the Contract or Contracts with Customers

We generally determine that a contract with a customer exists upon the execution of an agreement and after consideration of collectability, which could include an evaluation of the customer's payment history, the existence of a standby letter-of-credit between the customer’s financial institution and our financial institution, public financial information, and other factors. At contract inception, we also evaluate whether two or more non-standard agreements with a customer should be combined and accounted for as a single contract.

B. Identification of Performance Obligations in a Contract

We generate revenues principally from the following sources, which represent performance obligations in our contracts with customers:

•Licensing. We license our technologies, including patents, to a range of customers who incorporate them into their products for enhanced audio, imaging and voice functionality across broadcast, mobile, CE, PC, gaming, and other markets.

•Product Sales. We design and provide audio and imaging products for the cinema, television, broadcast, communications, and entertainment industries.

•Services. We provide various services to support theatrical and television production for cinema exhibition, broadcast, and home entertainment, including equipment training, mixing room alignment, equalization, as well as audio, color and light image calibration.

•PCS. We provide PCS for products sold and for equipment leased, and we support the implementation of our licensing technologies in our licensees’ products.

•Equipment Leases. We collaborate with established cinema exhibitors to offer Dolby Cinema, a branded premium cinema offering for movie audiences by leasing equipment and licensing our intellectual property. We also lease hardware that facilitates the Dolby conferencing experience, including the Dolby Conference Phone, and the Dolby Voice Room solution.

•Licensing Administration Fees. We generate service fees for managing patent pools on behalf of third party patent owners through our wholly-owned subsidiary, Via Licensing Corporation.

Some of our revenue arrangements include multiple performance obligations, such as hardware, software, support and maintenance, and extended warranty services. We evaluate whether promised products and services are distinct performance obligations.

The majority of our arrangements with multiple performance obligations pertain to our digital cinema server and processor sales that include the following distinct performance obligations to which we allocate portions of the transaction price based on their stand-alone selling price:

•Digital cinema server hardware and embedded software, which is highly dependent on and highly interrelated with the hardware. Accordingly, the hardware and embedded software represent a single performance obligation.

•The right to support and maintenance, which is included with the purchase of the digital cinema server hardware, is a distinct performance obligation.

•The right to receive commissioning services is a distinct performance obligation within the sale of the Dolby Atmos Cinema Processor. These services consist of the review of venue designs specifying proposed speaker placement as well as calibration services performed for installed speakers to ensure optimal playback.

C. Determination of Transaction Price for Performance Obligations in a Contract

After identifying the distinct performance obligations, we determine the transaction price in accordance with the terms of the underlying executed contract which may include variable consideration such as discounts, rebates, refunds, rights of returns, and incentives. We assess and update, if necessary, the amount of variable consideration to

which we are entitled for each reporting period. At the end of each reporting period, we estimate and accrue a liability for returns and adjustments as a reduction to revenue based on several factors, including past returns history.

With the exception of our sales-based royalties, we evaluate whether a significant financing component exists when we recognize revenue in advance of customer payments that occur over time. For example, some of our licensing arrangements include payment terms greater than one year from when we transfer control of our IP to a licensee and the receipt of the final payment for that IP. If a significant financing component exists, we classify a portion of the transaction price as interest income, instead of recognizing all the transaction price as revenue. We do not adjust the transaction price for the effects of financing if, at contract inception, the period between the transfer of control to a customer and final payment is expected to be one year or less.

D. Allocation of Transaction Price to Distinct Performance Obligations in a Contract

For our sales-based royalties where the license is the predominant item to which the royalties relate, we present all revenues as licensing.

For revenue arrangements that include multiple performance obligations, we determine the stand-alone selling price for each distinct performance obligation based on the actual selling prices made to customers. If the performance obligation is not sold separately, we estimate the stand-alone selling price. We do so by considering market conditions such as competitor pricing strategies, customer specific information and industry technology lifecycles, internal conditions such as cost and pricing practices, or applying the residual approach method when the selling price of the good, most commonly a license, is highly variable or uncertain.

Once the transaction price - including any variable consideration - has been determined, we allocate the transaction price to the performance obligations identified in the contract, and recognize revenue as or when control is transferred for each distinct performance obligation.

E. Revenue Recognition as Control is Transferred to a Customer

We generate our licensing revenue by licensing our technologies and patents to various types of licensees, such as chip manufacturers ("implementation licensees"), consumer product manufacturers, software vendors, and communications service providers. Our revenue recognition policies for each of these arrangements are summarized below.

Initial fees from implementation licensees. Implementation licensees incorporate our technologies into their chipsets that, once approved by Dolby, are available for purchase by OEMs for use in end-user products. Implementation licensees only pay us a nominal initial fee on contract execution as consideration for the ongoing services that we provide to assist in their implementation process. Revenues from these initial fees are recognized ratably over the contractual term as a component of licensing revenue.

Sales-based licensing fees. In our royalty bearing licensing agreements with OEMs, control is transferred upon the later of contract execution or the contract’s effective date. We apply the royalty exception, which requires that we recognize sales-based royalties when the sales occur based on our estimates. These estimates involve the use of historical data and judgment for several key attributes including industry estimates of expected shipments, the percentage of markets using our technologies, and average sale prices. Generally, our estimates represent the current period’s shipments to which we expect our licensees to submit royalty statements in the following quarter. Upon receipt of royalty statements from the licensees with the actual reporting of sales-based royalties that we estimated previously, we record a favorable or unfavorable adjustment based on the difference, if any, between estimated and actual sales. In the second quarter of fiscal 2020, we recorded a favorable adjustment of approximately $7 million, which was primarily related to October through December shipments and largely based on actual royalty statements received from licensees.

Fixed and guaranteed licensing fees. In certain cases, our arrangements require the licensee to pay fixed, non-refundable fees independent of the actual number of units they may distribute in the future. In these cases, control is transferred and fees are recognized upon the later of contract execution or the effective date. Additionally and separate from initial fees from implementation licensees, our sales- and usage-based licensing agreements include a nominal fee, which is also recognized at a point in time in which control of the IP has been transferred. Revenues from these arrangements are included as a component of licensing revenue.

Recoveries. Through our contract compliance efforts, we identify under-reported or misreported licensee royalties related to non-current periods. We may record a favorable or unfavorable revenue adjustment in connection

with the findings from these compliance efforts generally upon resolution with the licensee through agreement of the findings, or upon receipt of the licensee’s correction statement. Revenues from these arrangements are included as a component of licensing revenue.

We also undertake activities aimed at identifying potential unauthorized uses of our technologies by third parties with whom we don't have a licensing agreement for such use, which when successful result in the recognition of revenue. These back royalties stem from third parties who agree to remit payments to us based on past use of our technology. In these scenarios, a legally binding contract did not exist at time of use of our technology, and therefore, we recognize revenue recoveries upon execution of the agreement as that is the point in time to which a contract exists and control is transferred. These revenues are classified as licensing revenue.

In general, we classify legal costs associated with activities aimed at identifying potential unauthorized uses of our technologies, auditing existing licensees, and on occasion, pursuing litigation as S&M in our consolidated statements of operations.

We recognize licensing revenue gross of withholding taxes, which our licensees remit directly to their local tax authorities, and for which we receive a partial foreign tax credit in our income tax provision.

In addition to our licensing arrangements, we also enter into arrangements to deliver products and services.

Product Sales. Revenue from the sale of products is recognized when the customer obtains control of the promised good or service, which is generally upon shipment.

Services. We provide various services, such as engineering services related to movie soundtrack print mastering, equipment training and maintenance, mixing room alignment, equalization, and image calibration, which we bill on a fixed fee and time and materials basis. Most of these services are of a short duration and are recognized as control of the performance obligations are transferred which is when the related services are performed.

Collaborative Arrangements. We collaborate with established cinema exhibitors to offer Dolby Cinema, a branded premium cinema offering for movie audiences. Under such collaborations, Dolby and the exhibitor are both active participants, and share the risks and rewards associated with the business. Accordingly, these collaborations are governed by revenue sharing arrangements under which Dolby receives revenue based on monthly box office reports from exhibitors in exchange for the use of our imaging and sound technologies, our proprietary designs and trademark as well as for the use of our equipment at the exhibitor’s venue. The use of our product solution meets the definition of a lease, and for the related portion of Dolby's share of revenue, we apply ASC 842, Leases, and recognize revenue based on monthly box office reports from exhibitors. Our revenue share is recognized as licensing revenue in our consolidated statements of operations.

In addition, we also enter into hybrid agreements where a portion involves guaranteed payments, which in some cases result in classifying the payments as a sales-type lease. In such arrangements, we consider control to transfer at the point in time to which we have installed and tested the equipment, at which point we record such guaranteed payments as product revenue.

Via Administration Fee. We generate service fees for managing patent pools on behalf of third party patent owners through our wholly-owned subsidiary, Via Licensing Corporation. As an agent to licensors in the patent pool, Via receives a share of the sales-based royalty that the patent pool licensors earn from licensees. As such, we apply the sales-based royalty exception as the service provided is directly related to the patent pool licensors’ provision of IP, which results in recognition based on estimates of the licensee’s quarter shipments that use the pool’s patents. In addition to sales-based royalties, Via also has contracts where the fees are fixed. The revenue share Via receives from licensors on fixed fee contracts is recognized over the term in which we are providing services associated with the fixed fee contract. We recognize our administrative fees net of the consideration paid to the patent licensors in the pool as licensing revenue.

Deferred revenue, which is a component of contract liabilities, represents amounts that are ultimately expected to be recognized as revenue, but for which we have yet to satisfy the performance obligation. On March 27, 2020, we had $42.9 million of remaining performance obligations, 29% of which we expect to recognize as revenue in fiscal 2020, 26% in fiscal 2021, and the balance of 45% in fiscal years beyond 2021.

F. Disaggregation of revenue

The following table presents a summary of the composition of our revenue for all periods presented:


	Fiscal Quarter Ended															Fiscal Year-To-Date Ended
Revenue	March 27, 2020						March 29, 2019						March 27, 2020					March 29, 2019
Licensing	$	328,865	93	%	$	310,308	92	%	$	586,548	91	%		$	570,587	89	%
Products and services	22,950		7	%	27,950		8	%	57,144		9	%		70,047		11	%
Total revenue	$	351,815	100	%	$	338,258	100	%	$	643,692	100	%		$	640,634	100	%

The following table presents the composition of our licensing revenue for all periods presented:


	Fiscal Quarter Ended															Fiscal Year-To-Date Ended
Market	March 27, 2020						March 29, 2019						March 27, 2020					March 29, 2019
Broadcast	$	128,677	39	%	$	122,424	39	%	$	230,810	39	%		$	222,562	39	%
Mobile	75,697		23	%	66,759		22	%	110,178		19	%		100,932		18	%
CE	49,199		15	%	44,776		14	%	98,044		17	%		88,526		16	%
PC	45,791		14	%	41,193		13	%	77,634		13	%		64,350		11	%
Other	29,501		9	%	35,156		12	%	69,882		12	%		94,217		16	%
Total licensing revenue	$	328,865	100	%	$	310,308	100	%	$	586,548	100	%		$	570,587	100	%

We license our technologies in approximately 60 countries, and our licensees distribute products that incorporate our technologies throughout the world. As shown in the table below, we generate the majority of our revenue from outside the United States. Geographic data for our licensing revenue is based on the location of our licensees’ headquarters, products revenue is based on the destination to which we ship our products, and services revenue is based on the location where services are performed.


	Fiscal Quarter Ended															Fiscal Year-To-Date Ended
Revenue By Geographic Location	March 27, 2020						March 29, 2019						March 27, 2020					March 29, 2019
United States	$	186,586	53	%	$	158,000	47	%	$	294,213	46	%		$	277,799	43	%
International	165,229		47	%	180,258		53	%	349,479		54	%		362,835		57	%
Total revenue	$	351,815	100	%	$	338,258	100	%	$	643,692	100	%		$	640,634	100	%

G. Contract assets and liabilities

Our contract assets represent rights to consideration from licensees for the use of our IP that we have estimated in a given quarter in the absence of receiving actual royalty statements from licensees. These estimates reflect our best judgment at that time, and are developed using a number of inputs, including historical experience, anticipated performance, and third-party data. In the event that our estimates differ from actual amounts reported, we record an appropriate adjustment in the quarter in which the report is received which is typically the quarter following our estimate. Actual amounts reported are typically paid within sixty days. The main drivers for change in the contract assets account are variances in quarterly estimates, and to lesser degree, timing of receipt of actual royalty statements.

Our contract liabilities consist of advance payments and billings in excess of amounts earned and deferred interest where we have significant financing. The non-current portion of contract liabilities is separately disclosed in our consolidated balance sheets. We present the net contract asset or liability when we have both contract assets and contract liabilities for a single contract. In the second quarter of fiscal 2020, we recognized $6.3 million from prior period deferred revenue and deferred interest from arrangements which include a significant financing component.

The following table presents a summary of the balances to which contract assets and liabilities related to revenue are recorded for all periods presented:


	March 27, 2020		September 27, 2019		Change ($)		Change (%)
Accounts receivable, net	$	247,043	$	189,115	$	57,928	31	%
Contract assets	223,739		195,651		28,088		14	%

Contract liabilities - current	19,745		19,991		(246)		(1)	%
Contract liabilities - non-current	25,074		24,404		670		3	%

Composition Of Certain Financial Statement Captions

6 Months Ended

Mar. 27, 2020

Composition Of Certain Financial Statement Captions [Abstract]

Composition Of Certain Financial Statement Captions

4. Composition of Certain Financial Statement Captions

The following tables present detailed information from our consolidated balance sheets as of March 27, 2020 and September 27, 2019 (amounts displayed in thousands, except as otherwise noted).

Accounts Receivable


	March 27, 2020		September 27, 2019
Trade accounts receivable	$	165,421	$	151,996
Accounts receivable from patent administration program licensees	92,884		46,894
Accounts receivable, gross	258,305		198,890
Less: allowance for doubtful accounts	(11,262)		(9,775)
Total	$	247,043	$	189,115

Accounts receivable, gross includes unbilled accounts receivable balances of $115.0 million and $82.3 million as of March 27, 2020 and September 27, 2019, respectively, related to amounts that are contractually owed. The unbilled balance represents our unconditional right to consideration related to fixed fee contracts which we are entitled to as a result of satisfying, or partially satisfying, performance obligations, as well as Via's unconditional right to consideration related to their patent administration programs.

Inventories


	March 27, 2020		September 27, 2019
Raw materials	$	6,421	$	8,031
Work in process	5,265		4,872
Finished goods	16,645		19,428
Total	$	28,331	$	32,331

Inventories are stated at the lower of cost and net realizable value. Inventory with a consumption period expected to exceed twelve months is recorded within other non-current assets in our consolidated balance sheets. We have included $3.2 million and $3.0 million of raw materials inventory within other non-current assets in our consolidated balance sheets as of March 27, 2020 and September 27, 2019, respectively. Based on anticipated inventory consumption rates, and aside from existing write-downs due to excess inventory, we do not believe that material risk of obsolescence exists prior to ultimate sale.

Prepaid Expenses And Other Current Assets


	March 27, 2020		September 27, 2019
Prepaid expenses	$	27,803	$	17,997
Other current assets	23,353		20,924
Income tax receivable	—		783
Total	$	51,156	$	39,704

As of March 27, 2020 and September 27, 2019, other current assets include the carrying value of $2.2 million of land and building that are currently held for sale. Management has committed to a plan to sell the property and we have determined that no indicators of potential impairment exist based on current estimated selling prices in the market.

Accrued Liabilities


	March 27, 2020		September 27, 2019
Accrued royalties	$	2,947	$	2,957
Amounts payable to patent administration program partners	76,055		58,899
Accrued compensation and benefits	67,022		78,716
Accrued professional fees	16,600		19,216
Unpaid PP&E additions	9,820		15,332
Accrued customer refunds	15,751		24,299
Other accrued liabilities	57,674		68,725
Total	$	245,869	$	268,144

Other Non-Current Liabilities


	March 27, 2020		September 27, 2019
Supplemental retirement plan obligations	$	3,602	$	3,466
Non-current tax liabilities⁽¹⁾	137,214		136,323
Other liabilities	37,989		37,673
Total	$	178,805	$	177,462

(1) Refer to Note 12 “Income Taxes” for additional information related to tax liabilities.

Investments & Fair Value Measurements

6 Months Ended

Mar. 27, 2020

Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Abstract]

Investments & Fair Value Measurements

. Investments & Fair Value Measurements

We use cash holdings to purchase investment grade securities diversified among security types, industries, and issuers. All of our investment securities are measured at fair value, and are recorded within cash equivalents and both short-term and long-term investments in our consolidated balance sheets. With the exception of our mutual fund investments held in our SERP and classified as trading securities, all of our investments are classified as AFS securities. Derivative contracts are used to hedge currency risk, these are carried at fair value and classified as other assets and other liabilities.

Our investment securities primarily consist of government bonds, certificates of deposit, municipal debt securities, corporate bonds, U.S. agency securities, and commercial paper. In addition, our cash and cash equivalents also consist of highly-liquid money market funds. Consistent with our investment policy, none of our municipal debt investments are supported by letters of credit or standby purchase agreements. Our cash and investment portfolio consisted of the following (in thousands):


	March 27, 2020
	Cost		Unrealized									Estimated Fair Value
					Gains		Losses		Total			Level 1		Level 2		Level 3
Cash and cash equivalents:
Cash	$	704,418	$	—	$	—	$	704,418		$	704,418	$	—	$	—
Cash equivalents:


Corporate bonds	331		—		(1)		330			—		330		—
Money market funds	18,152		—		—		18,152			18,152		—		—
Municipal debt securities	2,029		2		—		2,031			—		2,031		—

Cash and cash equivalents	724,930		2		(1)		724,931			722,570		2,361		—

Short-term investments:
Certificate of deposit	5,005		1		—		5,006			—		5,006		—
U.S. agency securities	5,297		28		—		5,325			—		5,325		—

Government bonds	52,905		286		—		53,191			50,592		2,599		—
Commercial paper	16,027		29		—		16,056			—		16,056		—
Corporate bonds	82,770		117		(292)		82,595			—		82,595		—
Municipal debt securities	12,674		14		(2)		12,686			—		12,686		—
Short-term investments	174,678		475		(294)		174,859			50,592		124,267		—

Long-term investments:

Certificate of deposit	300		—		—		300			—		300		—
U.S. agency securities	8,206		283		—		8,489			—		8,489		—

Government bonds	25,866		776		—		26,642			22,522		4,120		—

Corporate bonds	73,411		397		(362)		73,446			—		73,446		—
Municipal debt securities	15,825		133		(84)		15,874			—		15,874		—
Other long-term investments (1)	2,543		—		—		2,543			—		—		—
Long-term investments	126,151		1,589		(446)		127,294			22,522		102,229		—

Total cash, cash equivalents, and investments	$	1,025,759	$	2,066	$	(741)	$	1,027,084		$	795,684	$	228,857	$	—

Investments held in supplemental retirement plan:
Assets	3,700		—		—		3,700			3,700		—		—
Included in prepaid expenses and other current assets & other non-current assets
Liabilities	3,700		—		—		3,700			3,700		—		—
Included in accrued liabilities & other non-current liabilities





Currency derivatives as hedge instruments:
Assets: Included in other current assets	—		49		—		49			—		49		—
Assets: included in other non-current assets	—		106		—		106			—		106		—
Liabilities: Included in other accrued expenses	—		—		(4,269)		(4,269)			—		(4,269)		—
Liabilities: Included in other non-current liabilities	—		—		(121)		(121)			—		(121)		—

(1)Other long-term investments as of March 27, 2020 include investments that are not carried at fair value including an equity method investment of $2.5 million.


	September 27, 2019
	Cost		Unrealized									Estimated Fair Value
					Gains		Losses		Total			Level 1		Level 2		Level 3
Cash and cash equivalents:
Cash	$	680,287	$	—	$	—	$	680,287		$	680,287	$	—	$	—
Cash equivalents:

Corporate bonds	1,000		—		—		1,000			—		1,000		—
Money market funds	115,270		—		—		115,270			115,270		—		—

Government bonds	653		—		—		653			653		—		—
Cash and cash equivalents	797,210		—		—		797,210			796,210		1,000		—

Short-term investments:
Certificate of deposit	1,265		1		—		1,266			—		1,266		—
U.S. agency securities	10,973		8		(9)		10,972			—		10,972		—
Government bonds	8,381		11		(1)		8,391			5,784		2,607		—
Commercial paper	6,347		9		—		6,356			—		6,356		—
Corporate bonds	76,802		172		(34)		76,940			—		76,940		—
Municipal debt securities	15,210		18		(7)		15,221			—		15,221		—
Short-term investments	118,978		219		(51)		119,146			5,784		113,362		—

Long-term investments:
Asset backed securities	400		2		—		402			—		402		—

U.S. agency securities	7,102		146		—		7,248			—		7,248		—
Government bonds	23,563		187		—		23,750			19,670		4,080		—

Corporate bonds	134,360		1,700		—		136,060			—		136,060		—
Municipal debt securities	10,315		87		(6)		10,396			—		10,396		—
Other long-term investments (1)	1,731		—		—		1,731			—		—		—
Long-term investments	177,471		2,122		(6)		179,587			19,670		158,186		—

Total cash, cash equivalents, and investments	$	1,093,659	$	2,341	$	(57)	$	1,095,943		$	821,664	$	272,548	$	—

Investments held in supplemental retirement plan:
Assets	3,564		—		—		3,564			3,564		—		—
Included in prepaid expenses and other current assets & other non-current assets
Liabilities	3,564		—		—		3,564			3,564		—		—
Included in accrued liabilities & other non-current liabilities