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Dolby Laboratories (NYSE:DLB) reported its financial results for the first quarter of 2025, surpassing earnings expectations and witnessing a positive market reaction. The company achieved earnings per share (EPS) of $1.14, exceeding the forecast of $1.05. Revenue reached $357 million, surpassing the anticipated $337.94 million. Following the announcement, Dolby’s stock rose by 1.7% in aftermarket trading, reflecting investor confidence in the company’s performance and future prospects.
Key Takeaways
- Dolby’s Q1 2025 EPS of $1.14 surpassed forecasts by $0.09.
- Revenue increased by 13% year-over-year, reaching $357 million.
- The stock price increased by 1.7% in aftermarket trading.
- Mobile licensing revenue saw a significant 74% year-over-year increase.
- The company repurchased $15 million worth of its own stock.
Company Performance
Dolby Laboratories delivered a strong performance in Q1 2025, with a notable 13% increase in revenue compared to the same quarter last year. The company’s licensing revenue, a significant contributor to its financial success, rose by 12% year-over-year. Dolby’s expansion in mobile licensing, which increased by 74%, played a crucial role in driving revenue growth. The company also demonstrated its commitment to shareholders by repurchasing $15 million worth of stock.
Financial Highlights
- Revenue: $357 million, up 13% year-over-year
- EPS: $1.14, compared to the forecast of $1.05
- Licensing Revenue: $330 million, up 12% YoY
- Operating Cash Flow: $107 million
- Cash and Investments: $611 million
Earnings vs. Forecast
Dolby Laboratories exceeded market expectations with an EPS of $1.14, compared to the forecasted $1.05, marking an 8.6% surprise. The company’s revenue also surpassed predictions, coming in at $357 million against an expected $337.94 million. This performance reflects Dolby’s ongoing ability to capitalize on its licensing business and expand its market reach.
Market Reaction
Following the earnings announcement, Dolby’s stock price increased by 1.7% in aftermarket trading, closing at $82. This movement is in line with the company’s positive earnings surprise and robust revenue growth. The stock’s performance remains within its 52-week range, with a high of $85.3 and a low of $66.35, indicating stable investor sentiment.
Outlook & Guidance
Dolby provided a full-year revenue guidance ranging from $1.33 billion to $1.39 billion, with non-GAAP EPS expected between $3.99 and $4.14. The company anticipates licensing revenue to be between $1.22 billion and $1.28 billion. Dolby’s strategic focus on expanding its technologies across various sectors, including automotive and consumer electronics, is expected to support future growth.
Executive Commentary
"Our ecosystem is strong. Our momentum with creatives and distributors continues to build," stated Kevin Yaman, CEO of Dolby Laboratories. CFO Robert Park added, "Our financials remain strong and we are well positioned for long term growth." These statements highlight Dolby’s confidence in its market position and future prospects.
Q&A
During the earnings call, analysts inquired about the volatility in mobile licensing and timelines for integrating Dolby Vision in automotive sectors. The company also discussed growth opportunities in interactive digital experiences and highlighted its advancements in low-latency streaming capabilities.
Risks and Challenges
- Potential market saturation in consumer electronics could impact revenue.
- Macroeconomic pressures may affect consumer spending and licensing revenue.
- Supply chain disruptions could hinder product availability and innovation.
- Increased competition in the immersive audio and video technology sectors.
- Dependence on licensing revenue may pose risks if market dynamics shift.
Full transcript - Dolby Laboratories (DLB) Q1 2025:
Conference Operator: Ladies and gentlemen, thank you for standing by. Welcome to the Dolby Laboratories conference call discussing results. During the presentation, all participants will be in a listen only mode. Afterwards, you will be invited to participate in a question and answer session. To ask a question, press star 1 on your telephone keypad.
As a reminder, this call is being recorded Wednesday, Jan. 29, 2025. I would now like to turn the conference over to Mr. Peter Goldmacher, Vice President and Investor Relations. Peter, please go ahead.
Peter Goldmacher, Vice President and Investor Relations, Dolby Laboratories: Thank you, operator, and good afternoon. Welcome to Dolby Laboratories’ first quarter twenty twenty five earnings conference call. Joining me today are Kevin Yaman, Dolby Laboratories’ CEO and Robert Park, Dolby Laboratories’ CFO. As a reminder, today’s discussion will include forward looking statements, including our and full year outlook and our assumptions underlying that outlook. These statements are subject to risks and uncertainties that may cause actual results to differ materially from the statements made today, including, among other things, the impact of macroeconomic events, supply chain issues, inflation rates, changes in consumer spending and geopolitical instability on our business.
A discussion of these and additional risks and uncertainties can be found in the earnings press release that we issued today under the section captioned Forward Looking Statements as well as in the Risk Factors section of our most recently quarterly report on Form 10 Q. Dolby assumes no obligation and does not intend to update any forward looking statements made during this call as a result of new information or future events. During today’s call, we will discuss non GAAP financial measures. A reconciliation between GAAP and non GAAP financial measures is available in our earnings press release and in the Interactive Analyst Center on the Investor Relations section of our website. With that, I’d like to turn the call over to Kevin.
Kevin Yaman, CEO, Dolby Laboratories: Thanks, Peter, and thanks to everyone for joining us today for the earnings call. Both licensing revenue and total revenue came in towards the high end of the range of the guidance that we provided on our last earnings call and non GAAP earnings for the quarter came in above the high end of the range. It’s a strong start to the year, which gives us confidence that we are on track to achieve the annual financial guidance we gave on the earnings call. We continue to expect foundational revenues to be roughly flat for the full year. And we have robust engagement from our broad ecosystem of content creators, distributors and OEM partners.
Dolby Atmos, Dolby Vision and Imaging patents are well positioned to grow roughly 15% for the full year. And we continue to expect to grow non GAAP earnings faster than revenue. I’ll cover a few of the highlights for the quarter, and then I’ll turn the call over to Robert to review the financials. Our creative community continues to show strong support for Dolby Atmos and Dolby Vision. All 8 of the twenty twenty five Grammy nominees for Best New Artist are available in Dolby Atmos, and 7 out of 8 Grammy nominees for Record of the Year and Album of the Year are available in Dolby Atmos.
For calendar year 2024, over 80% of the domestic box office and almost 70% of the global box office came from Hollywood and local titles released in Dolby Atmos and Dolby Vision. In addition to music and movies, the momentum continues to build across music, TV, live sports and user generated content. We wrapped up CES a few weeks ago and the Dolby experience was on display across the show floor, including in cars, TVs, PCs and soundbars. Starting with auto, we have announced partnerships with over 20 OEMs and those 20 plus OEM brands have over 60 models in market with Dolby Atmos. Many of our partners, after starting with their high end models, are expanding Dolby Atmos deeper into their lineups.
1 of our earliest partners, Mercedes, had over 15 models in market by the We are also excited that Lee Auto has the first car in market with both Dolby Atmos and Dolby Vision. In car entertainment is an investment priority for automotive and consumers are spending more time enjoying entertainment in their cars, whether they are waiting to pick someone up or getting a charge. With Dolby Atmos and Dolby Vision, the car has transformed into a high end entertainment experience, and we are excited about the growth opportunity ahead. The broader ecosystem around in car entertainment also continues to coalesce around the Dolby experience. At CES, Samsung (KS:005930) Display announced that it will include Dolby Vision in automotive displays, and Texas Instruments (NASDAQ:TXN) announced that it is now supporting Dolby Atmos in its new family of chips for automakers, all making it easier for OEMs to adopt and implement.
Also, Pioneer demonstrated Dolby Atmos as an aftermarket solution in a 4 channel sound system. We continue to make progress with further adoption on TVs. In Nov. 0, announced that the Fire TV Omni Mini LED will support Dolby Atmos and Dolby Vision. And there were a lot of new Dolby Atmos and Dolby Vision enabled TV launches at CES from partners including Hisense, TCL, Panasonic (OTC:PCRFY), Sharp (OTC:SHCAY), and RCA.
In PCs, OEMs including Asus, Dell (NYSE:DELL), Lenovo and Samsung all announced new computers, laptops or peripherals that support Dolby Atmos and or Dolby Vision. Also this quarter, Amazon (NASDAQ:AMZN) launched its first soundbar supporting Dolby Atmos. Harman Kardon introduced the Enchanted soundbar lineup with Dolby Atmos and Samsung announced new soundbars with Dolby Atmos to complement their TVs. Looking forward, with a solid behind us, we remain optimistic for the rest of 05/00 and beyond. We like what we are seeing and hearing from our partners.
Our ecosystem is strong. Our momentum with creatives and distributors continues to build, and that energy continues to propel our opportunities with our OEM partners. And so with that, I’ll turn it over to Robert, who will take you through the financials in a bit more
Robert Park, CFO, Dolby Laboratories: detail. Thanks, Kevin, and thanks for everyone joining us on the call today. Before we review the quarter in some detail, I’d like to hit the highlights. Revenue for was near the high end of the range we laid out in the earnings call, primarily driven by a favorable true up, and earnings came in above the high end of the range. We’re off to a good start for At the same time, it’s early in the year, so we’re keeping our full year guidance unchanged.
We’re making progress on the business front and our partners remain engaged. Our value proposition remains strong, our financials are solid and we are confident in our long term growth prospects. Revenue was $3.57,000,000 dollars up 13% compared to the year ago quarter. Licensing revenue of $3.30,000,000 dollars was up 12% year over year. This includes a $17,000,000 favorable true up for shipments reported that were above our original estimate.
The true up was across all end markets, but was most notable in broadcast and auto. Products and services revenue was $27,000,000 up 22% year over year. Detailed licensing performance by Enmark is on our IR website. And as a reminder, timing of recoveries, minimum volume commitments and true ups can drive volatility between quarters. A notable movement this quarter was in mobile, which was up 74% year over year.
The 2 main reasons for this increase are revenue from GE licensing and the timing of minimum volume commitments. Moving to the bottom line. In we earned $1,.14 per diluted share on a non GAAP basis, above the high end of our guidance, primarily due to a stronger revenue and we generated $107,000,000 in operating cash flow. We repurchased $15,000,000 worth of common stock and have about $3.87,000,000 dollars remaining on our repurchase plan authorization. We declared a $0,.33 dividend, up 10% from our dividend a year ago and ended the quarter with cash and investments of approximately $6.11,000,000 dollars GAAP operating expenses in the quarter included a restructuring charge of approximately $5,000,000 dollars as we continue to align our resources with our business priorities.
Turning to guidance. Our full year revenue is typically weighted more towards the first half of the year. Last year, the weighting was 53%, forty seven % first half to second half, and we expect a similar weighting this year. For we expect revenue between $3.55,000,000 dollars and $3.85,000,000 dollars Within that, licensing revenue is estimated to range from $3.30,000,000 dollars to $3.60,000,000 dollars dollars Gross margin should be approximately 91% on a non GAAP basis. We expect non GAAP operating expenses to be between $190,000,000 and $200,000,000 Our effective tax rate for is projected to be around 18.5% on a non GAAP basis.
So as a result, we estimate the non GAAP EPS should be between $1,.19 and $1,.34 per diluted share. Moving on to the full year. We are maintaining our full year guidance for revenue and earnings. To repeat and reiterate what we said last quarter, for the full year, we expect non GAAP earnings to be between $3,.99 and $4,.14 on revenue between $1,330,000,000,.00 and $1,390,000,000,.00 We expect license revenue to be between $1,220,000,000,.00 and $1,280,000,000,.00 and non GAAP operating expenses to be between $7.65,000,000 dollars and $7.75,000,000 dollars dollars We expect revenue from foundational audio technology to be roughly flat and revenue from Dolby Atmos, Dolby Vision and Imaging patents to grow roughly 15%. From an end market perspective, there’s no change to what we communicated last quarter.
We expect growth in mobile and other markets, broadcast and PC are expected to be flattish and consumer electronics is expected to be down mid single digits for the year. To wrap things up, the creation and distribution of Dolby enabled content continues to grow nicely and our partners are still very engaged. Our financials remain strong and we are well positioned for long term growth. With that, I’d like to turn it back to the operator to open the line for your questions. Operator?
Conference Operator: Thank you. We’ll go first to Stephen Franco, Rosenblatt Securities.
Stephen Franco, Analyst, Rosenblatt Securities: Good afternoon. I appreciate the opportunity to ask some questions. And the comment on the relative flatness of foundational for the year, was that also true in or are you seeing any different trends in the beginning of the year?
Robert Park, CFO, Dolby Laboratories: Hey, Steve, it’s Robert here. We focus on the full year being, our view is still to be flattish, but nothing in indicated anything other than that.
Stephen Franco, Analyst, Rosenblatt Securities: Okay. And then in the outsized growth in mobile in was that simply a pull in of something that maybe you thought would land later in the year or that’s just the timing of the ebbs and flows of these deals or is there anything kind of a level differ about penetration rates or deal sizes that we can read into this number as well?
Kevin Yaman, CEO, Dolby Laboratories: 2 things, Steve. One is just as you know within mobile, we talked about the fact that there’s more higher prevalence of minimum volume commitments. So timing can vary from quarter to quarter on mobile. The other thing is the integration of GE licensing. While that affected all markets, mobile was the had the largest impact.
Patrick Schull, Analyst, Barrington Research: Okay. And
Stephen Franco, Analyst, Rosenblatt Securities: then on your CES review, the Samsung OLED screens for cars seems pretty exciting. What do you think the timetable is for that to be beginning to show up in models? Is that something that happens pretty quickly? Or is this your typical OEM auto design cycle that these vehicles could be a couple of years out?
Kevin Yaman, CEO, Dolby Laboratories: Yes. So, well, first of all, we’re really excited about the opportunity with Dolby Vision in addition to the strong momentum we have with Dolby Atmos. I mean, clearly, in car entertainment is a big investment priority for automotive and we have put ourselves at the center of that. I as you know, we were demonstrating the first, car to have Dolby Vision in market. That’s Lee Auto, at CES who are demonstrating that.
So we think that the ecosystem is ready for it. I think the Samsung partnership in particular shows that they also see the opportunity. And so having them natively integrating Dolby Vision into their displays for automotive, I think both validates the opportunity and it makes it easier for implementation cycles. We’ve obviously, didn’t we’ve been working on this, Steve, so we would expect more progress throughout the year. And we’re excited to extend what we’ve done with Dolby Atmos in the car to include Dolby Vision and Dolby Atmos.
Stephen Franco, Analyst, Rosenblatt Securities: Okay. 1 last quick 1 for Robert. On the outsized true up in the quarter, was that 1 manufacturer in particular or was just in general in you undershot where actual volumes ended up?
Robert Park, CFO, Dolby Laboratories: There’s not 1 particular vendor excuse me, OEM or partner that stands out. It was really up across all markets, but particularly in TVs and auto.
Stephen Franco, Analyst, Rosenblatt Securities: Okay, great. Thank you. I’ll jump back in the queue.
Conference Operator: We’ll take the next question from Patrick Schull, Barrington Research.
Patrick Schull, Analyst, Barrington Research: Hi. Thank you. Just on the expected growth for Atmos Vision and the Image Path and Licensing, can you maybe talk about some of like the key variables that would take you to like the higher end of your target growth range for that versus what might be kind of a drag in 2025?
Kevin Yaman, CEO, Dolby Laboratories: Yes. I think the so the biggest factors there from an end market point of view are automotive, where we feel great about the momentum we have and it’s just a matter of the pace of adoption and especially the pace of rollout. So that’s the biggest variable there. So we’ll keep you up to speed on all of our wins each quarter as far as that is going. TV in the living room, we have last year our adoption rate grew to about 30% of 4 ks TVs with Dolby Atmos and Dolby Vision, the increase from 25%.
The couple of years years before that was the work that we’ve been saying that we’re doing paying off and that’s working with TV manufacturers to extend the Dolby experience deeper into their lineups where we have particular traction with the likes of Hisense, TCL. They’re also doing well market share wise. And then mobile, where 1 of our highest focus areas is getting more Dolby Vision and Dolby Vision capture in mobile. And on the content side, bringing up to speed the ecosystem for user captured content, being able to share and edit that content. So those are the 3 areas.
And so what’s going to drive it, what would produce upside is if there obviously if more of those things are shipping and obviously the pace of wins and getting them into the market and how popular those models are.
Patrick Schull, Analyst, Barrington Research: Okay. Thank you. Just then on Dolby Cinema, I guess, could you provide any sort of update on the screen base for that?
Kevin Yaman, CEO, Dolby Laboratories: Yes. We did add screens this quarter. It wasn’t a significant increase, but it’s getting going again. Certainly, after the last four years where it’s been a tough environment for exhibitors to invest, we’ve seen a significant pickup in the outlook for being able to add screens going forward. We did see year over year improvement in both Dolby Cinema and Cinema products.
And so, we’re working with our partners there. And as I think as we said before, over these last four years, the percentage of the box office that accrues to the premium screens, the premium large format screens like Dolby Cinema, has increased significantly. And so as exhibitors are beginning to look forward, they have greater confidence in the twenty five and twenty six box office and they look to invest. Where they want to invest is in premium screens.
Patrick Schull, Analyst, Barrington Research: All right. Thank you.
Conference Operator: Up next, we’ll hear from Ralph Schackert, William Blair.
Patrick Schull, Analyst, Barrington Research: Can you compare contrast as you look out into 2025 now versus maybe a year ago as you’re looking out into 2024? Maybe speak to some of the product momentum you see now versus maybe saw then and obviously the macro environment for foundational is better. But just maybe if you could start there and then I’ll follow-up for either you or Robert. Thanks.
Kevin Yaman, CEO, Dolby Laboratories: Yes. Thanks, Ralph. Well, so first of all, we came into the year a quarter ago saying that our customers and partners were increasingly optimistic that the environment stabilized, which is what gave us which is why we guided to roughly flat for foundational and that they continue to be highly engaged on Dolby Atmos, Dolby Vision. And we continue to be excited about that. I think also as it relates to automotive, we’re we more than doubled the number of OEM partners over the course of FY 2024.
Each of those most of those partners are looking to expand deeper into their lineups. We’ve now added we have Dolby Vision with Lee Auto. We have obviously a pipeline that we’re looking to grow there. So I think we’re just 1 of our higher growth areas is coming off a larger base and we continue to have strong momentum, in TV and the living rooms, getting that ball rolling again where we were, at 25% of 4 ks TVs for about two years, having risen that to 30% and continuing to have a lot of initiatives in the pipeline to keep that growing. And as I also said earlier, we’re optimistic about the further potential for Dolby Vision, Dolby Vision capture in the mobile ecosystem.
Patrick Schull, Analyst, Barrington Research: Great. And then just maybe a follow-up. And I get a lot of investor questions just to kind of get a sense of how you could frame the opportunity. I know you did it a while ago and then the model sort of pivoted since then. So maybe if you could take a step back and sort of frame the opportunity for us.
And then just to maybe kind of bolt on to that, as we think about IO, it’s I guess the benefits in the in app environment are pretty clear. But maybe if you could speak to the opportunity beyond apps, is there an enterprise play here or sort of give us a sense of how that product could evolve over time? Thank you.
Kevin Yaman, CEO, Dolby Laboratories: Yes, of course. So, yes, you talked about the pivot which was coming into FY 2024 when we went from kind of a self self-service developer model to recognizing a very strong demand signal for companies in and around sports that are looking to offer more real to continue to evolve and improve their real time interactive digital experiences, which are such an important part of how their audiences are engaging these days. In particular, our ability to stream high quality audiovideo content in ultra low latency. So we can do it in seconds, we can do it in subseconds, whereas the average today could be seven seconds, but you could have fifteen, you could have twenty five. And that makes it hard to have an experience where, you know, you’re watching the game, I’m watching the game, you’re in Chicago, I’m in San Francisco, I see the touchdown fifteen seconds before you.
Right? So, and on top of that, we’ve built other functionality. And, of course, with Theo, we’ve brought on a great list of customers that are in our target areas, and we have a more complete solution. So, I would say, Ralph, that, it continues to be those digital experiences we think are that we see as a significant investment priority for these organizations. And so, that continues to be the first thing we’re going to talk about.
But yes, it does extend into experiences that might not be Digital One customer that we added earlier this year, which has now gotten up to speed and is using the solution is Paddy Power (LON:FLTRF), which Paddy Power is a sports betting shop in Ireland. It’s the first of the Flutter it was the original Flutter company, which Flutter now has over 15 entities. And Paddy Power is using us for their in shop experience. And so when you go into the shop and you’re watching the horse race, for them, low latency has always been important. And but, you know, they were doing it early.
So they were using sort of a startup and some of their own stuff. And the reliability was a real problem. It would cut out, even if it was going, you might not be able to discern the number of the horse. And so they went forward with us. We’re now live in 600 bedding shops.
Each of those shops has 2 dozen can have up to 2 dozen or more streams going on at different events at any given time. And the reliability has just gone up dramatically. And so they’ve had a dramatic reduction in service calls because they’re now getting the high quality audio video stream in the latency. And of course, we’re excited about the fact that they’re part of a larger group and that we look forward to that creating more opportunities to go forward.
Patrick Schull, Analyst, Barrington Research: Great. Thanks, Tim.
Conference Operator: Everyone, at this time, there are no further questions. Does management have any closing remarks?
Kevin Yaman, CEO, Dolby Laboratories: No. Thank you for joining us. And, we look forward to keeping you up to speed on our progress. Thank you.
Conference Operator: Thank you. And once again, ladies and gentlemen, that does conclude this conference. Thank you all for your participation. You may now disconnect.
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