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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 June 26, 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/c6475ce161abd21533471afeaed566cb-dlb-20200626_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 July 24, 2020, the registrant had 64,372,221 shares of Class A common stock, par value $0.001 per share, and 36,222,720 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 June 26, 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)

June 26,
2020
September 27,
2019
ASSETS
Current assets:
Cash and cash equivalents$855,103  $797,210  
Restricted cash8,290  8,383  
Short-term investments189,383  119,146  
Accounts receivable, net of allowance for doubtful accounts of $14,292 and $9,775247,486  189,115  
Contract assets128,319  195,651  
Inventories, net29,330  32,331  
Prepaid expenses and other current assets45,524  39,704  
Total current assets1,503,435  1,381,540  
Long-term investments74,768  179,587  
Property, plant, and equipment, net546,650  537,432  
Operating lease right-of-use assets78,374    
Intangible assets, net160,069  180,891  
Goodwill335,694  334,829  
Deferred taxes104,015  114,075  
Other non-current assets100,901  93,395  
Total assets$2,903,906  $2,821,749  
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$10,047  $15,212  
Accrued liabilities210,241  268,144  
Income taxes payable3,071  3,506  
Contract liabilities 18,025  19,991  
Operating lease liabilities16,318    
Total current liabilities257,702  306,853  
Non-current contract liabilities24,128  24,404  
Non-current operating lease liabilities65,189    
Other non-current liabilities119,990  177,462  
Total liabilities467,009  508,719  
Stockholders’ equity:
Class A, $0.001 par value, one vote per share, 500,000,000 shares authorized: 64,338,677 shares issued and outstanding at June 26, 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: 36,222,720 shares issued and outstanding at June 26, 2020 and 36,229,820 at September 27, 201941  41  
Retained earnings2,448,389  2,327,877  
Accumulated other comprehensive (loss)(17,121) (20,625) 
Total stockholders’ equity – Dolby Laboratories, Inc.2,431,367  2,307,351  
Controlling interest5,530  5,679  
Total stockholders’ equity2,436,897  2,313,030  
Total liabilities and stockholders’ equity$2,903,906  $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
June 26,
2020
June 28,
2019
June 26,
2020
June 28,
2019
Revenue:
Licensing$235,125  $271,897  $821,673  $842,484  
Products and services11,784  30,262  68,928  100,309  
Total revenue246,909  302,159  890,601  942,793  
Cost of revenue:
Cost of licensing12,572  13,290  38,157  40,761  
Cost of products and services17,316  26,400  65,876  74,133  
Total cost of revenue29,888  39,690  104,033  114,894  
Gross margin217,021  262,469  786,568  827,899  
Operating expenses:
Research and development59,583  60,408  177,319  177,680  
Sales and marketing70,934  83,390  254,537  261,686  
General and administrative50,843  54,183  164,172  152,412  
Restructuring charges1,522  30,232  1,866  30,264  
Total operating expenses182,882  228,213  597,894  622,042  
Operating income34,139  34,256  188,674  205,857  
Other income/expense:
Interest income2,578  6,551  12,231  19,230  
Interest expense(34) (29) (131) (106) 
Other income, net3,307  1,022  4,449  1,075  
Total other income5,851  7,544  16,549  20,199  
Income before income taxes39,990  41,800  205,223  226,056  
(Provision for)/benefit from income taxes27,388  (2,163) (580) (14,486) 
Net income including controlling interest67,378  39,637  204,643  211,570  
Less: net income attributable to controlling interest(93) (63) (109) (337) 
Net income attributable to Dolby Laboratories, Inc.$67,285  $39,574  $204,534  $211,233  
Net income per share:
Basic$0.67  $0.39  $2.03  $2.07  
Diluted$0.66  $0.38  $1.99  $2.01  
Weighted-average shares outstanding:
Basic100,593  101,218  100,594  102,012  
Diluted102,075  103,717  102,912  105,025  
Related party rent expense:
Included in operating expenses$(36) $13,107  $112  $14,755  
Included in net income attributable to controlling interest$116  $111  $337  $463  
Cash dividend declared per common share$0.22  $0.19  $0.66  $0.57  
Cash dividend paid per common share$0.22  $0.19  $0.66  $0.57  
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
 June 26,
2020
June 28,
2019
June 26,
2020
June 28,
2019
Net income including controlling interest$67,378  $39,637  $204,643  $211,570  
Other comprehensive income:
Currency translation adjustments, net of tax expense/(benefit) of $0, $0, $0, and $08,471  (2,005) 1,900  (3,718) 
Unrealized gains/(losses) on investments, net of tax expense/(benefit)
of ($556), ($30), ($763), and $94
478  1,918  (411) 4,786  
Unrealized gains on cash flow hedges, net of tax of ($110), $0, ($110), and $05,764  134  2,040  134  
Total other comprehensive income, net of tax14,713  47  3,529  1,202  
Total comprehensive income82,091  39,684  208,172  212,772  
Less: comprehensive (income)/loss attributable to controlling interest(312) 77  (134) (203) 
Comprehensive income attributable to Dolby Laboratories, Inc.$81,779  $39,761  $208,038  $212,569  
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 March 27, 2020$99  $  $2,395,575  $(31,615) $2,364,059  $5,218  $2,369,277  
Net income—  —  67,285  —  67,285  93  67,378  
Other comprehensive loss, net of tax—  —  —  14,494  14,494  219  14,713  
Stock-based compensation expense—  21,285  —  —  21,285  —  21,285  
Repurchase of common stock(1) (34,712) 7,632  —  (27,081) —  (27,081) 
Cash dividends declared and paid on common stock—  —  (22,103) —  (22,103) —  (22,103) 
Common stock issued under employee stock plans1  14,302  —  —  14,303  —  14,303  
Tax withholdings on vesting of restricted stock—  (875) —    (875)   (875) 
Balance at June 26, 2020$99  $  $2,448,389  $(17,121) $2,431,367  $5,530  $2,436,897  


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—  —  204,534  —  204,534  109  204,643  
Other comprehensive loss, net of tax—  —  —  3,504  3,504  25  3,529  
Distributions to controlling interest—  —  —  —  —  (283) (283) 
Stock-based compensation expense—  64,850  —  —  64,850  —  64,850  
Repurchase of common stock(2) (111,168) (17,583) —  (128,753) —  (128,753) 
Cash dividends declared and paid on common stock—  —  (66,439) —  (66,439) —  (66,439) 
Common stock issued under employee stock plans2  68,287  —  —  68,289  —  68,289  
Tax withholdings on vesting of restricted stock—  (21,969) —  —  (21,969) —  (21,969) 
Balance at June 26, 2020$99  $  $2,448,389  $(17,121) $2,431,367  $5,530  $2,436,897  



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 March 29, 2019$100  $  $2,361,607  $(14,683) $2,347,024  $5,833  $2,352,857  
Net income—  —  39,574  —  39,574  63  39,637  
Other comprehensive income, net of tax—  —  —  187  187  (140) 47  
Distributions to controlling interest—  —  —  —  —  (1) (1) 
Stock-based compensation expense—  18,863  —  —  18,863  —  18,863  
Repurchase of common stock(1) (35,651) (52,980) —  (88,632) —  (88,632) 
Cash dividends declared and paid on common stock—  —  (19,283) —  (19,283) —  (19,283) 
Common stock issued under employee stock plans  17,869  —  —  17,869  —  17,869  
Tax withholdings on vesting of restricted stock  (1,081) —  —  (1,081)   (1,081) 
Balance at June 28, 2019$99  $  $2,328,918  $(14,496) $2,314,521  $5,755  $2,320,276  


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—  —  211,233  —  211,233  337  211,570  
Other comprehensive income, net of tax—  —  —  1,336  1,336  (134) 1,202  
Distributions to controlling interest—  —  —  —  —  (1,015) (1,015) 
Stock-based compensation expense—  59,580  —  —  59,580  —  59,580  
Repurchase of common stock(4) (148,972) (137,536) —  (286,512) —  (286,512) 
Cash dividends declared and paid on common stock—  —  (58,318) —  (58,318) —  (58,318) 
Common stock issued under employee stock plans1