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Consumer Cyclicals
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Market Cap £7.50bn
Enterprise Value £6.67bn
Revenue £910.9m
Position in Universe 914th / 6850

Dolby Laboratories Reports First Quarter Fiscal 2021 Financial Results

Thu 28th January, 2021 9:15pm
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SAN FRANCISCO, Jan. 28, 2021 (GLOBE NEWSWIRE) -- Dolby Laboratories, Inc.
(NYSE:DLB) today announced the company's financial results for the first
quarter of fiscal 2021. For the first quarter, Dolby reported total revenue of
$389.9 million, compared to $291.9 million for the first quarter of fiscal
2020.

"We had a good start to the fiscal year with solid financial results and
ongoing progress across our growth initiatives," said Kevin Yeaman, President
and CEO, Dolby Laboratories. "Dolby Vision and Dolby Atmos continue to grow
across more devices and services, including new focus areas like music and
gaming, and we are in the early days of enabling a broader range of
applications and services as we increase our engagement with developers
through Dolby.io."

First quarter GAAP net income was $135.2 million, or $1.30 per diluted share,
compared to GAAP net income of $48.8 million, or $0.47 per diluted share, for
the first quarter of fiscal 2020. On a non-GAAP basis, first quarter net
income was $153.3 million, or $1.48 per diluted share, compared to $65.5
million, or $0.64 per diluted share for the first quarter of fiscal 2020.
First quarter cash flows from operations was $82.2 million, compared to $31.2
million for the first quarter of fiscal 2020. First quarter GAAP results
included a pre-tax gain of $13.9 million related to the sale of property
previously classified as held for sale. A complete listing of Dolby's non-GAAP
measures are described and reconciled to the corresponding GAAP measures at
the end of this release.

COVID-19

Dolby continues to monitor the COVID-19 pandemic and its impact on our
company. The safety and well-being of our employees and supporting our
communities continue to be priorities. Since the initial outbreak of COVID-19,
our revenue continues to be impacted across various markets within licensing
and products and services. The implications of COVID-19 on our future results
of operations remain uncertain.

We expect continued uncertainty in global financial markets. Dolby’s
financial results for the first quarter of fiscal 2021 rely on estimates of
royalty-based revenue that take into consideration the macroeconomic effect of
global events, including COVID-19, which may impact supply chain activities
and consumer demand for electronic products.

Dividend

Today, Dolby announced a cash dividend of $0.22 per share of Class A and Class
B common stock, payable on February 19, 2021, to stockholders of record as of
the close of business on February 9, 2021.

Financial Outlook

The volume of shipments, aggregated across various end markets and devices,
continues to be impacted and difficult to predict because of economic
uncertainty due to COVID-19. The global cinema market has been adversely
impacted by COVID-19, and we anticipate that cinema sites and the production
of content could continue to be negatively affected through fiscal 2021 or
longer.

Our actual results could differ materially from the estimates we are providing
due in part to the challenging economic environment and highly uncertain
effects of COVID-19. The estimates we are providing for future periods reflect
certain assumptions about the potential impact of COVID-19, based upon a
consideration of external and internal data and information. For more
information, see "Forward-Looking Statements" in this press release for a
description of certain risks that we face, and the section captioned “Risk
Factors” in our Quarterly Report on Form 10-Q for the first quarter of
fiscal 2021, filed on or around the date hereof.

Second Quarter Fiscal 2021

Dolby is providing the following estimates for its second quarter of fiscal
2021:
* Total revenue is estimated to range from $280 million to $310 million
* Gross margin percentages are anticipated to range from 88% to 89% on a GAAP
basis and from 89% to 90% on a non-GAAP basis
* Operating expenses are anticipated to range from $200 million to $210
million on a GAAP basis and from $175 million to $185 million on a non-GAAP
basis
* Effective tax rate is anticipated to range from 20% to 21% on both a GAAP
and non-GAAP basis
* Diluted earnings per share is anticipated to range from $0.36 to $0.51 on a
GAAP basis and from $0.57 to $0.72 on a non-GAAP basis
Conference Call Information

Members of Dolby management will lead a conference call open to all interested
parties to discuss first quarter fiscal 2021 financial results for Dolby
Laboratories at 2:00 p.m. PT (5:00 p.m. ET) on Thursday, January 28, 2021.
Access to the teleconference will be available over the Internet from
http://investor.dolby.com/event-calendar or by dialing 1-866-548-4713.
International callers can access the conference call at 1-323-794-2093.

A replay of the call will be available from 5:00 p.m. PT on Thursday, January
28, 2021, until 8:59 p.m. PT on Thursday, February 4, 2021, by dialing
1-844-512-2921 (international callers can access the replay by dialing
1-412-317-6671) and entering the confirmation code 1022195. An archived
version of the teleconference will also be available on the Dolby website,
http://investor.dolby.com.

Non-GAAP Financial Information

To supplement Dolby's financial statements presented on a GAAP basis, Dolby
provides certain non-GAAP financial measures to provide investors with an
additional tool to evaluate Dolby's operating results in a manner that focuses
on what Dolby's management believes to be its ongoing business operations.
Specifically, we exclude the following as adjustments from one or more of our
non-GAAP financial measures:

Stock-based compensation expense: Stock-based compensation, unlike cash-based
compensation, utilizes subjective 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
restructuring plans and primarily relate to costs associated with exit or
disposal activities, 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.

Other operating income adjustments: We are excluding a one-time gain on the
sale of property, which was previously classified as held for sale, finalized
during the first quarter of fiscal 2021. The property was 51% owned by our
controlling interest, therefore 51% of the gain recognized has been attributed
to our controlling interest.

Using the aforementioned adjustments, Dolby provides various non-GAAP
financial measures including, but not limited to: non-GAAP net income,
non-GAAP diluted earnings per share, non-GAAP gross margin, non-GAAP operating
expenses, non-GAAP operating margin, and non-GAAP effective tax rate. Dolby's
management believes it is useful for itself and investors to review both GAAP
and non-GAAP measures to assess the performance of Dolby's business. Dolby's
management does not itself, nor does it suggest that investors should,
consider non-GAAP financial measures in isolation from, or as a substitute
for, financial information prepared in accordance with GAAP. Whenever Dolby
uses non-GAAP financial measures, it provides a reconciliation of the non-GAAP
financial measures to the most closely applicable GAAP financial measures.
Investors are encouraged to review the related GAAP financial measures and the
reconciliation of these non-GAAP financial measures to their most directly
comparable GAAP financial measures as detailed above. Investors are also
encouraged to review Dolby's GAAP financial statements as reported in its US
Securities and Exchange Commission (SEC) filings. A reconciliation between
GAAP and non-GAAP financial measures is provided at the end of this press
release and on the Dolby investor relations website,
http://investor.dolby.com.

Forward-Looking Statements

Certain statements in this press release, including, but not limited to,
statements relating to Dolby's expected financial results for the second
quarter of fiscal 2021, our ability to advance our long-term objectives, and
future dividend payments are "forward-looking statements" that are subject to
risks and uncertainties. These forward-looking statements are based on
management's current expectations, and as a result of certain risks and
uncertainties, actual results may differ materially from those provided. The
following important factors, without limitation, could cause actual results to
differ materially from those in the forward-looking statements: the potential
impacts of COVID-19 on Dolby’s business operations, financial results, and
financial position (including the impact to Dolby partners and disruption of
the supply chain and delays in shipments of consumer products; consumer demand
for products that incorporate Dolby technologies; delays in the development
and release of new products or services that contain Dolby technologies;
delays in royalty reporting or delinquent payment by partners or licensees;
the impact to the overall cinema market, including closures or limitations of
cinema capacity and resulting adverse impact to Dolby’s revenue recognized
on box-office sales and demand for cinema products and services; temporary
Dolby office closures and other actions to protect Dolby’s workforce; and
macroeconomic conditions that affect discretionary spending and access to
products that contain Dolby technologies); risks associated with trends in the
markets in which Dolby operates, including the Broadcast, Mobile, Consumer
Electronics, PC, Cinema, and Other Markets; the loss of, or reduction in sales
by, a key customer or licensee; pricing pressures; risks that the continued
shift in content distribution from optical disc-based and other traditional
media to online and streaming media content could result in fewer devices with
Dolby technologies or less revenue from such devices; risks relating to
conducting business internationally, including trade restrictions and changes
in diplomatic or trade relationships; risks relating to the expiration of
patents; the timing of Dolby's receipt of royalty reports and payments from
its licensees, including recoveries; changes in tax regulations; timing of
revenue recognition under licensing agreements and other contractual
arrangements; Dolby's ability to develop, maintain, and strengthen
relationships with industry participants; Dolby's ability to develop and
deliver innovative technologies in response to new and growing markets;
competitive risks; risks associated with conducting business in China and
other countries that have historically limited recognition and enforcement of
intellectual property and contractual rights; risks associated with the
health of the motion picture industry generally; Dolby's ability to increase
its revenue streams and to expand its business generally, and to continue to
expand its business beyond audio technologies to other technologies; risks
associated with acquiring and successfully integrating businesses or
technologies; and other risks detailed in Dolby's SEC filings and reports,
including the risks identified under the section captioned "Risk Factors" in
our most recent quarterly report on Form 10-Q. Dolby disclaims any obligation
to update information contained in these forward-looking statements whether as
a result of new information, future events, or otherwise.

About Dolby Laboratories

Dolby Laboratories (NYSE: DLB) is based in San Francisco, California with
offices around the globe. From movies and TV shows, to apps, music, sports and
gaming, Dolby transforms the science of sight and sound into spectacular
experiences for billions of people worldwide. We partner with artists,
storytellers, developers, and businesses to revolutionize entertainment and
communications with Dolby Atmos, Dolby Vision, Dolby Cinema, and Dolby.io.

Dolby, Dolby Atmos, Dolby Vision, Dolby Cinema, Dolby.io, and the double-D
symbol are among the registered and unregistered trademarks of Dolby
Laboratories, Inc. in the United States and/or other countries. Other
trademarks remain the property of their respective owners. DLB-F



DOLBY LABORATORIES, INC.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts; unaudited)

                                                               Fiscal Quarter Ended                                   
                                                               December 25, 2020             December 27, 2019        
 Revenue:                                                                                                             
 Licensing                                                     $      373,005                $       257,683          
 Products and services                                         16,869                        34,194                   
 Total revenue                                                 389,874                       291,877                  
                                                                                                                      
 Cost of revenue:                                                                                                     
 Cost of licensing                                             12,946                        12,342                   
 Cost of products and services                                 22,358                        24,973                   
 Total cost of revenue                                         35,304                        37,315                   
                                                                                                                      
 Gross margin                                                  354,570                       254,562                  
                                                                                                                      
 Operating expenses:                                                                                                  
 Research and development                                      63,772                        57,650                   
 Sales and marketing                                           75,445                        95,118                   
 General and administrative                                    54,454                        52,529                   
 Gain on sale of assets                                        (13,871         )             —                        
 Restructuring charges                                         10,023                        675                      
 Total operating expenses                                      189,823                       205,972                  
                                                                                                                      
 Operating income                                              164,747                       48,590                   
                                                                                                                      
 Other income/expense:                                                                                                
 Interest income                                               974                           4,932                    
 Interest expense                                              (85             )             (72              )       
 Other income, net                                             1,326                         1,004                    
 Total other income                                            2,215                         5,864                    
                                                                                                                      
 Income before income taxes                                    166,962                       54,454                   
 Provision for income taxes                                    (24,272         )             (5,863           )       
 Net income including controlling interest                     142,690                       48,591                   
 Less: net (income)/loss attributable to controlling interest  (7,492          )             162                      
 Net income attributable to Dolby Laboratories, Inc.           $      135,198                $       48,753           
                                                                                                                      
 Net income per share:                                                                                                
 Basic                                                         $      1.34                   $       0.49             
 Diluted                                                       $      1.30                   $       0.47             
 Weighted-average shares outstanding:                                                                                 
 Basic                                                         100,716                       100,336                  
 Diluted                                                       103,876                       103,078                  

 

DOLBY LABORATORIES, INC.
INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands; unaudited)

                                                            December 25, 2020               September 25, 2020           
 ASSETS                                                                                                                  
 Current assets:                                                                                                         
 Cash and cash equivalents                                  $      1,110,024                $        1,071,876           
 Restricted cash                                            9,401                           8,103                        
 Short-term investments                                     52,261                          46,948                       
 Accounts receivable, net                                   293,948                         180,340                      
 Contract assets, net                                       187,539                         161,357                      
 Inventories, net                                           20,108                          25,550                       
 Prepaid expenses and other current assets                  51,390                          53,022                       
 Total current assets                                       1,724,671                       1,547,196                    
 Long-term investments                                      49,337                          52,149                       
 Property, plant, and equipment, net                        543,550                         541,963                      
 Operating lease right-of-use assets                        75,460                          76,515                       
 Goodwill and intangible assets, net                        483,401                         489,376                      
 Deferred taxes                                             133,610                         118,881                      
 Other non-current assets                                   86,825                          91,245                       
 Total assets                                               $      3,096,854                $        2,917,325           
                                                                                                                         
 LIABILITIES AND STOCKHOLDERS’ EQUITY                                                                                    
 Current liabilities:                                                                                                    
 Accounts payable                                           $      13,631                   $        12,617              
 Accrued liabilities                                        250,253                         219,974                      
 Income taxes payable                                       15,516                          3,260                        
 Contract liabilities                                       21,202                          15,436                       
 Operating lease liabilities                                15,817                          15,822                       
 Total current liabilities                                  316,419                         267,109                      
 Non-current contract liabilities                           23,766                          24,342                       
 Non-current operating lease liabilities                    64,256                          65,315                       
 Other non-current liabilities                              121,196                         122,154                      
 Total liabilities                                          525,637                         478,920                      
                                                                                                                         
 Stockholders’ equity:                                                                                                   
 Class A common stock                                       59                              58                           
 Class B common stock                                       41                              41                           
 Retained earnings                                          2,565,670                       2,443,138                    
 Accumulated other comprehensive (loss)                     (608              )             (10,594             )        
 Total stockholders’ equity – Dolby Laboratories, Inc.      2,565,162                       2,432,643                    
 Controlling interest                                       6,055                           5,762                        
 Total stockholders’ equity                                 2,571,217                       2,438,405                    
 Total liabilities and stockholders’ equity                 $      3,096,854                $        2,917,325           

 

DOLBY LABORATORIES, INC.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands; unaudited)

                                                                                             Fiscal Quarter Ended                                                           
                                                                                             December 25,  2020                         December 27,  2019                  
 Operating activities:                                                                                                                                                      
 Net income including controlling interest                                                   $         142,690                          $           48,591                  
 Adjustments to reconcile net income to net cash provided by operating activities:                                                                                          
 Depreciation and amortization                                                               22,168                                     20,239                              
 Stock-based compensation                                                                    26,313                                     22,614                              
 Amortization of premium on investments                                                      329                                        160                                 
 Provision/(benefit) for credit losses                                                       (1,367                      )              575                                 
 Deferred income taxes                                                                       (15,439                     )              (9,174                        )     
 Gain on sale of assets                                                                      (13,871                     )              —                                   
 Restructuring charges                                                                       8,125                                      486                                 
 Other non-cash items affecting net income                                                   1,276                                      (10                           )     
 Changes in operating assets and liabilities:                                                                                                                               
 Accounts receivable, net                                                                    (111,902                    )              (2,331                        )     
 Contract assets                                                                             (26,384                     )              (9,310                        )     
 Inventories                                                                                 4,424                                      767                                 
 Operating lease right-of-use assets                                                         3,350                                      (8,644                        )     
 Prepaid expenses and other assets                                                           6,397                                      (13,245                       )     
 Accounts payable and accrued liabilities                                                    22,272                                     (30,785                       )     
 Income taxes, net                                                                           13,984                                     945                                 
 Contract liabilities                                                                        5,153                                      (724                          )     
 Operating lease liabilities                                                                 (3,481                      )              8,664                               
 Other non-current liabilities                                                               (1,877                      )              2,341                               
 Net cash provided by operating activities                                                   82,160                                     31,159                              
                                                                                                                                                                            
 Investing activities:                                                                                                                                                      
 Purchases of investment securities                                                          (13,726                     )              (129,325                      )     
 Proceeds from sales of investment securities                                                1,854                                      97,717                              
 Proceeds from maturities of investment securities                                           9,535                                      17,876                              
 Purchases of property, plant, and equipment                                                 (15,527                     )              (23,385                       )     
 Proceeds from sale of assets                                                                16,365                                     —                                   
 Purchase of intangible assets                                                               —                                          (290                          )     
 Net cash used in investing activities                                                       (1,499                      )              (37,407                       )     
                                                                                                                                                                            
 Financing activities:                                                                                                                                                      
 Proceeds from issuance of common stock                                                      51,323                                     24,373                              
 Repurchase of common stock                                                                  (39,985                     )              (30,003                       )     
 Payment of cash dividend                                                                    (22,231                     )              (22,081                       )     
 Distribution to controlling interest                                                        (7,362                      )              (283                          )     
 Shares repurchased for tax withholdings on vesting of restricted stock                      (28,085                     )              (20,282                       )     
 Net cash used in financing activities                                                       (46,340                     )              (48,276                       )     
                                                                                                                                                                            
 Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash      5,125                                      2,086                               
 Net increase/(decrease) in cash, cash equivalents, and restricted cash                      39,446                                     (52,438                       )     
 Cash, cash equivalents, and restricted cash at beginning of period                          1,079,979                                  805,593                             
 Cash, cash equivalents, and restricted cash at end of period                                $         1,119,425                        $           753,155                 



 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 first quarter of fiscal 2021 and 2020: 
                                                                                                                                                      
 Net income:                                                                        Fiscal Quarter Ended                                              
                                                                                    December 25,  2020                  December 27,  2019            
 GAAP net income                                                                    $           135.2                   $           48.8              
 Stock-based compensation ( (1))                                                    26.3                                22.6                          
 Amortization of acquisition-related intangibles ((2))                              2.5                                 2.2                           
 Restructuring charges                                                              10.0                                0.7                           
 Income tax adjustments                                                             (13.9                   )           (8.8                    )     
 Other operating income adjustments                                                 (6.8                    )           —                             
 Non-GAAP net income                                                                $           153.3                   $           65.5              
                                                                                                                                                      
 (1) Stock-based compensation included in above line items:                                                                                           
 Cost of products and services                                                      $           0.6                     $           0.5               
 Research and development                                                           7.9                                 7.0                           
 Sales and marketing                                                                9.8                                 8.2                           
 General and administrative                                                         8.0                                 6.9                           
                                                                                                                                                      
 (2) Amortization of acquisition-related intangibles included in above line items:                                                                    
 Cost of licensing                                                                  $           0.7                     $           0.6               
 Cost of products and services                                                      0.9                                 0.4                           
 Research and development                                                           0.1                                 0.1                           
 Sales and marketing                                                                0.8                                 0.8                           
 General and administrative                                                         —                                   0.3                           
                                                                                                                                                      
 Diluted earnings per share:                                                        Fiscal Quarter Ended                                              
                                                                                    December 25,  2020                  December 27,  2019            
 GAAP diluted earnings per share                                                    $           1.30                    $           0.47              
 Stock-based compensation                                                           0.25                                0.22                          
 Amortization of acquisition-related intangibles                                    0.02                                0.02                          
 Restructuring charges                                                              0.10                                0.01                          
 Income tax adjustments                                                             (0.13                   )           (0.08                   )     
 Other operating income adjustments                                                 (0.06                   )           —                             
 Non-GAAP diluted earnings per share                                                1.48                                0.64                          
                                                                                                                                                      
                                                                                                                                                      
 Shares used in computing diluted earnings per share                                104                                 103                           
                                                                                                                                                      
 The following tables present a reconciliation between GAAP and non-GAAP versions of the estimated financial amounts for the second quarter of fiscal 2021 included in this release: 
                                                                                                                                                      
 Gross margin:                                                                                                          Q2 2021                       
 GAAP gross margin (low - high end of range)                                                                            88% - 89                %     
 Stock-based compensation                                                                                               0.4                     %     
 Amortization of acquisition-related intangibles                                                                        0.6                     %     
 Non-GAAP gross margin (low - high end of range)                                                                        89% - 90                %     
                                                                                                                                                      
 Operating expenses:                                                                                                    Q2 2021                       
 GAAP operating expenses (low - high end of range)                                                                      $200 - $210                   
 Stock-based compensation                                                                                               (24                     )     
 Amortization of acquisition-related intangibles                                                                        (1                      )     
 Non-GAAP operating expenses (low - high end of range)                                                                  $175 - $185                   
                                                                                                                                                      
 Diluted earnings per share:                                                        Q2 2021                                                           
                                                                                    Low                                 High                          
 GAAP diluted earnings per share                                                    $           0.36                    $           0.51              
 Stock-based compensation                                                           0.24                                0.24                          
 Amortization of acquisition-related intangibles                                    0.03                                0.03                          
 Income tax adjustments                                                             (0.06                   )           (0.06                   )     
 Non-GAAP diluted earnings per share                                                $           0.57                    $           0.72              
                                                                                                                                                      
 Shares used in computing diluted earnings per share                                104                                 104                           

Investor Contact:
Jason Dea
Dolby Laboratories, Inc.
415-357-7002
investor@dolby.com 

Media Contact:
Karen Hartquist
Dolby Laboratories, Inc.
415-505-8357
karen.hartquist@dolby.com 

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