Dolby Laboratories Reports First Quarter 2025 Financial Results

Dolby Laboratories, Inc. (NYSE:DLB) today announced the company's financial results for the first quarter of fiscal 2025.

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“We are off to a strong start for FY25,” said Kevin Yeaman, President and CEO, Dolby Laboratories. “In Q1, Dolby Atmos and Dolby Vision momentum continued across device categories. At CES, many of our device partners announced a wide range of Dolby enabled products, and customers experienced the first Dolby Vision enabled car with Li Auto.”

First Quarter Fiscal 2025 Financial Highlights

— Total revenue was $357 million, compared to $316 million for the first quarter of fiscal 2024.

— GAAP net income was $68 million or $0.70 per diluted share, compared to GAAP net income of $67 million or $0.69 per diluted share for the first quarter of fiscal 2024. On a non-GAAP basis, first quarter net income was $111 million or $1.14 per diluted share, compared to $99 million or $1.01 per diluted share for the first quarter of fiscal 2024.

— Dolby repurchased approximately 186,000 shares of its common stock for approximately $15 million, and ended the quarter with approximately $387 million of stock repurchase authorization available going forward.

A complete listing of Dolby's non-GAAP measures are described and reconciled to the corresponding GAAP measures at the end of this release.

Recent Business Highlights

— At CES, our partners announced a wide range of new products incorporating Dolby technologies, including:

— Soundbar announcements from Harmon Kardon, Samsung, and Amazon all support Dolby technology.

— TV launches from partners including Hisense, TCL, Panasonic, Sharp, and RCA support Dolby Atmos and Dolby Vision.

— In Auto, Samsung Display is working with Dolby to pre tune its cutting edge OLED displays for autos to deliver Dolby Vision to more cars, Texas Instruments announced that it would support Dolby Atmos in its new family of chips for automakers, and Pioneer showcased how Dolby Atmos could be used in an aftermarket solution using a 4-channel speaker system.

— In PCs, ASUS, Dell, Lenovo, and Samsung announced a variety of new PCs, laptops, and monitors that support Dolby Vision and/or Dolby Atmos.

— Social Media app Xiaohongshu, which goes by the name RedNote in the U.S., now supports Dolby Vision.

— Amazon announced that the Fire TV Omni Mini-LED will support Dolby Atmos and Dolby Vision.

— All eight of the 2025 Grammy nominees for best new artist are available in Dolby Atmos, and seven out of eight Grammy nominees for Record of the Year and Album of the Year are available in Dolby Atmos.

— In 2024, over 80% of domestic box office and almost 70% of global box office came from Hollywood and local titles released in Dolby Atmos and Dolby Vision.

Dividend

Today, Dolby announced a cash dividend of $0.33 per share of Class A and Class B common stock, payable on February 19, 2025, to stockholders of record as of the close of business on February 11, 2025.

Financial Outlook

Dolby's financial outlook relies, in part, on estimates of royalty-based revenue that take into consideration various factors that are subject to uncertainty, including consumer demand for electronic products. In addition, actual results could differ materially from the estimates Dolby is providingbelow due in part to uncertainty resulting from the macroeconomic effect of certain conditions, including supply chain constraints, international conflicts, geopolitical instability, and fluctuations in inflation and interest rates. The uncertainty resulting from these factors has greatly reduced its visibility into Dolby's future outlook. To the extent possible, the estimates Dolby is providing for future periods reflect certain assumptions about the potential impact of certain of these items, based upon a consideration of currently available external and internal data and information. These assumptions are subject to risks and uncertainties. For more information, see “Forward-Looking Statements” in this press release for a description of certain risks that Dolby faces, and the section captioned “Risk Factors” in its Quarterly Report on Form 10-Q for the first quarter of fiscal 2025, to be filed on or around the date hereof.

Dolby is providing the following estimates for its second quarter of fiscal 2025:

— Total revenue is estimated to range from $355 million to $385 million.

— Licensing revenue is estimated to range from $330 million to $360 million.

— Gross margins are anticipated to be approximately 89% on a GAAP basis and approximately 91% on a non-GAAP basis.

— Operating expenses are anticipated to range from $230 million to $240 million on a GAAP basis and from $190 million to $200 million on a non-GAAP basis.

— Effective tax rate is anticipated to be around 20.5% on a GAAP basis and around 18.5% on a non-GAAP basis.

— Diluted earnings per share is anticipated to range from $0.77 to $0.92 on a GAAP basis and from $1.19 to $1.34 on a non-GAAP basis.

Dolby is providing the following estimates for the full year of fiscal 2025:

— Total revenue is expected to range from $1.33 billion to $1.39 billion.

— Licensing revenue is estimated to range from $1.22 billion to $1.28 billion.

— Gross margins are anticipated to be approximately 87% on a GAAP basis and approximately 90% on a non-GAAP basis.

— Operating expenses are anticipated to range from $915 million to $925 million on a GAAP basis and from $765 million to $775 million on a non-GAAP basis.

— Dolby expects operating margins to be roughly 20% on a GAAP basis and to be roughly 33% on a non-GAAP basis.

— Diluted earnings per share is anticipated to range from $2.39 to $2.54 on a GAAP basis and from $3.99 to $4.14 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 2025 financial results for Dolby Laboratories at 2:00 p.m. PT (5:00 p.m. ET) on Wednesday, January29, 2025. Access to the teleconference will be available at http://investor.dolby.comor by dialing 1-800-210-2212 (+1-646-960-0390 for international callers) and entering confirmation code 5587811.

A replay of the call will be available from 5:00 p.m. PT (8:00 p.m. ET) on Wednesday, January29, 2025, until 8:59 p.m. PT (11:59 p.m. ET) onWednesday, February 5, 2025 by dialing 1-800-770-2030 (+1-647-362-9199 for international callers) and entering the confirmation code 5587811. 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 management uses, and Dolby provides to investors, certain non-GAAP financial measures as 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 and performance. We believe these non-GAAP financial measures are also helpful to investors in enabling comparability of operating performance between periods and among peer companies. Additionally, Dolby's management regularly uses our supplemental non-GAAP financial measures to make operating decisions, for planning and forecasting purposes and determining bonus payouts. Specifically, Dolby excludes the following as adjustments from one or more of its 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 Dolby grants. These assumptions may differ from those used by other companies. To facilitate more meaningful comparisons between its underlying operating results and those of other companies, Dolby excludes stock-based compensation expense.

Amortization of acquisition-related intangibles: Dolby amortizes intangible assets acquired in connection with business combinations. These intangible assets consist of patents and technology, customer relationships, and other intangibles. Dolby records amortization charges relating to these intangible assets in its GAAP financial statements, and Dolby views these charges as items arising from pre-acquisition activities that are determined by the timing and valuation of its acquisitions. As these amortization charges do not directly correlate to its operations during any particular period, Dolby excludes these charges to facilitate an evaluation of its current operating performance and comparisons to its past operating results. In addition, while amortization expense of acquisition-related intangible assets is excluded from Non-GAAP Net Income, the revenue generated from those assets is not excluded.

Restructuring charges or credits: 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. Dolby excludes restructuring costs, including any adjustments to charges recorded in prior periods (which may be credits), as Dolby believes that these costs are not representative of its normal operating activities and therefore, excluding these amounts enables a more effective comparison of its past operating performance and to that of other companies.

Income tax adjustments: The income tax effects of the aforementioned non-GAAP adjustments do not directly correlate to its operating performance so Dolby believes that excluding such income tax effects provides a more meaningful view of its underlying operating results to management and investors.

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, includingas a means to evaluate period-to-period comparisons.Dolby's management does not itself, nor does it suggest that investors should, consider non-GAAP financial measures in isolation from, superior to, 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 and below. 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 and in our earnings calls, including, but not limited to, expected financial results for the second quarter of fiscal 2025 and full year fiscal 2025, Dolby's ability to expand existing business, navigate challenging periods, pursue its long-term growth opportunities, and advance its other long-term objectives are “forward-looking statements” that inherently involve substantial 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 economic conditions 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; the level at which Dolby technologies are incorporated into products and the consumer demand for such products; 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; lengthening sales cycles; the impact to the overall cinema market including adverse impact to Dolby's revenue recognized on box-office sales and demand for cinema products and services; and macroeconomic conditions that affect discretionary spending and access to products that contain Dolby technologies); risks associated with geopolitical issues and international conflicts; risks associated with trends in the markets in which Dolby operates, including the broadcast, mobile, consumer electronics, PC, and other markets; the loss of, or reduction in sales by, a key customer, partner, or licenseeÍ¾ pricing pressuresÍ¾ risks relating to changing trends in the way that content is distributed and consumed; risks relating to conducting business internationally, including trade restrictions and changes in diplomatic or trade relationships; risks relating to maintaining patent coverageÍ¾ the timing of Dolby's receipt of royalty reports and payments from its licensees, including recoveriesÍ¾ changes in tax regulations; timing of revenue recognition under licensing agreements and other contractual arrangementsÍ¾ Dolby's ability to develop, maintain, and strengthen relationships with industry participantsÍ¾ Dolby's ability to develop and deliver innovative products and technologies in response to new and growing marketsÍ¾ competitive risksÍ¾ risks associated with conducting business in countries that have historically limited recognition and enforcement of intellectual property and contractual rightsÍ¾ risks associated with the health of the motion picture and cinema industries generallyÍ¾ Dolby's ability to increase its revenue streams and to expand its business generally, and to continue to expand its business beyond its current technology offeringsÍ¾ risks associated with acquiring and successfully integrating businesses or technologiesÍ¾ and other risks detailed in Dolby's SEC filings and reports, including the risks identified under the section captioned “Risk Factors” in its Quarterly Report on Form 10-Q filed on or around the date hereof. Dolby may not actually achieve the plans, intentions, or expectations disclosed in its forward-looking statements. Forward-looking statements are based upon information available to us as of the date of such statements, and while Dolby believes such information forms a reasonable basis for such statements, such information may be limited or incomplete. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements. Except as required by law, 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 inSan 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. Dolby partners with artists, storytellers, developers, and businesses to revolutionize entertainment and communications with DolbyAtmos, DolbyVision, DolbyCinema, 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 in the United States and/or other countries.Other trademarks remain the property of their respective owners.

DOLBY LABORATORIES, INC.INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(in thousands, except per share amounts; unaudited) Fiscal Quarter Ended December 27, December 29, 2024 2023Revenue:Licensing $ 330,479 $ 293,767Products and services 26,520 21,807Total revenue 356,999 315,574Cost of revenue:Cost of licensing 21,110 15,736Cost of products and services 19,664 16,324Total cost of revenue 40,774 32,060Gross profit 316,225 283,514Operating expenses:Research and development 66,638 67,033Sales and marketing 94,399 79,003General and administrative 70,092 65,166Restructuring charges 5,216 6,091Total operating expenses 236,345 217,293Operating income 79,880 66,221Other income/(expense):Interest income/(expense), net 2,646 9,187Other income, net 3,525 5,425Total other income 6,171 14,612Income before income taxes 86,051 80,833Provision for income taxes (17,981) (13,252)Net income including noncontrolling interest 68,070 67,581Less: net income attributable to noncontrolling interest (248) (600)Net income attributable to Dolby Laboratories, Inc. $ 67,822 $ 66,981Net income per share:Basic $ 0.71 $ 0.70Diluted $ 0.70 $ 0.69Weighted-average shares outstanding:Basic 95,615 95,376Diluted 97,147 97,439

DOLBY LABORATORIES, INC.INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS(in thousands; unaudited) December 27, September 27, 2024 2024ASSETSCurrent assets:Cash and cash equivalents $ 520,821 $ 482,047Restricted cash 90,836 95,705Accounts receivable, net 339,304 315,465Contract assets, net 220,892 197,478Inventories, net 31,833 33,728Prepaid expenses and other current assets 82,113 69,994Total current assets 1,285,799 1,194,417Long-term investments 86,304 89,267Property, plant, and equipment, net 476,113 479,109Operating lease right-of-use assets 36,972 39,046Goodwill and intangible assets, net 941,661 967,722Deferred taxes 227,021 219,758Other non-current assets 104,732 120,609Total assets $ 3,158,602 $ 3,109,928LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilities:Accounts payable $ 11,550 $ 17,380Accrued liabilities 360,915 347,529Income taxes payable 20,875 9,045Contract liabilities 37,111 31,644Operating lease liabilities 11,426 12,238Total current liabilities 441,877 417,836Non-current contract liabilities 32,481 34,593Non-current operating lease liabilities 33,019 34,754Other non-current liabilities 134,197 135,852Total liabilities 641,574 623,035Stockholders' equity:ClassA common stock 55 53Class B common stock 40 41Retained earnings 2,543,413 2,496,255Accumulated other comprehensive loss (35,542) (19,187)Total stockholders' equity – Dolby Laboratories, Inc. 2,507,966 2,477,162Noncontrolling interest 9,062 9,731Total stockholders' equity 2,517,028 2,486,893Total liabilities and stockholders' equity $ 3,158,602 $ 3,109,928

DOLBY LABORATORIES, INC.INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands; unaudited) Fiscal Quarter Ended December 27, December 29, 2024 2023Operating activities:Net income including noncontrolling interest $ 68,070 $ 67,581Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization 22,362 17,872Stock-based compensation 36,070 31,894Amortization of operating lease right-of-use assets 2,835 3,088Amortization of premium on investments – (895)Provision for/(benefit from) credit losses 730 (2,101)Deferred income taxes (7,307) (5,397)Other non-cash items affecting net income (3,059) (1,745)Changes in operating assets and liabilities:Accounts receivable, net (24,647) (28,935)Contract assets, net (23,416) (35,400)Inventories 1,340 (9,297)Operating lease right-of-use assets (2,487) 570Prepaid expenses and other assets 16,867 5,866Accounts payable and accrued liabilities 4,804 (31,993)Income taxes, net 15,305 6,184Contract liabilities 3,691 (1,116)Operating lease liabilities (798) (4,264)Other non-current liabilities (3,581) (3,503)Net cash provided by operating activities 106,779 8,409Investing activities:Purchases of marketable securities – (35,753)Proceeds from sales of marketable securities – 1,226Proceeds from maturities of marketable securities – 41,259Purchases of property, plant, and equipment (6,779) (6,099)Business combinations, net of cash and restricted cash acquired, and other related payments (1,362) -Net cash provided by/(used in) investing activities (8,141) 633Financing activities:Proceeds from issuance of common stock 22,157 18,301Repurchase of common stock (15,000) (80,002)Payment of cash dividend (31,548) (28,552)Distributions to noncontrolling interest (740) (1,047)Shares repurchased for tax withholdings on vesting of restricted stock (32,440) (34,562)Equity issued in connection with business combination – 722Net cash used in financing activities (57,571) (125,140)Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash (7,162) 6,790Net increase/(decrease) in cash, cash equivalents, and restricted cash 33,905 (109,308)Cash, cash equivalents, and restricted cash at beginning of period 577,752 817,966Cash, cash equivalents, and restricted cash at end of period $ 611,657 $ 708,658

Licensing Revenue by Market(unaudited)The following table presents the composition of our licensing revenue and percentage of total licensing revenue for all periods presented (in thousands, except percentage amounts): Fiscal Quarter EndedMarket December 27, 2024 December 29, 2023Broadcast $ 115,762 35% $ 112,416 38%Mobile 61,524 19% 35,287 12%CE 49,457 15% 53,220 18%PC 31,256 9% 29,679 10%Other 72,480 22% 63,165 22%Total licensing revenue $ 330,479 100% $ 293,767 100%

GAAP to Non-GAAP Reconciliations(unaudited)The following tables present Dolby's GAAP financial measures reconciled to the non-GAAP financial measures included in this release for the first quarters of fiscal 2025 and fiscal 2024:Net income: Fiscal Quarter Ended(in thousands) December 27, December 29, 2024 2023GAAP net income attributable to Dolby Laboratories, Inc. $ 67,822 $ 66,981Stock-based compensation (1) 36,070 31,894Amortization of acquisition-related intangibles (2) 10,647 3,124Restructuring charges 5,216 6,091Income tax adjustments (8,886) (9,450)Non-GAAP net income attributable to Dolby Laboratories, Inc. $ 110,869 $ 98,640(1) Stock-based compensation included in above line items:Cost of products and services $ 487 $ 410Research and development 10,984 10,106Sales and marketing 12,645 10,481General and administrative 11,954 10,897(2) Amortization of acquisition-related intangibles included in above line items:Cost of licensing $ 6,704 $ 62Cost of products and services 834 534Sales and marketing 754 656General and administrative 1,872 1,872Other income, net 483 -Diluted earnings per share: Fiscal Quarter Ended December 27, December 29, 2024 2023GAAP diluted earnings per share $ 0.70 $ 0.69Stock-based compensation 0.37 0.33Amortization of acquisition-related intangibles 0.11 0.03Restructuring charges 0.05 0.06Income tax adjustments (0.09) (0.10)Non-GAAP diluted earnings per share $ 1.14 $ 1.01Weighted-average shares outstanding – diluted (in thousands) 97,147 97,439

The following tables present a reconciliation between GAAP and non-GAAP versions of the estimated financial measures for the second quarter of fiscal 2025 and full year fiscal 2025 included in this release:Gross margin: Q2 2025 Fiscal 2025GAAP gross margin 89.0% 87.0%Stock-based compensation 0.1% 0.1%Amortization of acquisition-related intangibles 1.9% 2.9%Non-GAAP gross margin 91.0% 90.0%Operating expenses (in millions): Q2 2025 Fiscal 2025GAAP operating expenses (low – high end of range) $230 – $240 $915 – $925Stock-based compensation (34) (131)Amortization of acquisition-related intangibles (3) (9)Restructuring charges (3) (10)Non-GAAP operating expenses (low – high end of range) $190 – $200 $765 – $775Operating margin: Fiscal 2025GAAP operating margin 20% +/-Stock-based compensation 10%Amortization of acquisition-related intangibles 3%Non-GAAP operating margin 33% +/-Effective tax rate: Q2 2025GAAP effective tax rate 20.5%Stock-based compensation (low – high end of range) (2%) – 0%Amortization of acquisition-related intangibles (low – high end of range) (1%) – 0%Non-GAAP effective tax rate 18.5%Diluted earnings per share: Q2 2025 Fiscal 2025 Low High Low HighGAAP diluted earnings per share (low – high end of range) $ 0.77 $ 0.92 $ 2.39 $ 2.54Stock-based compensation 0.34 0.34 1.36 1.36Amortization of acquisition-related intangibles 0.12 0.12 0.42 0.42Restructuring charges 0.03 0.03 0.10 0.10Income tax adjustments (0.07) (0.07) (0.28) (0.28)Non-GAAP diluted earnings per share (low – high end of range) $ 1.19 $ 1.34 $ 3.99 $ 4.14Weighted-average shares outstanding – diluted (in thousands) 97,400 97,400 97,500 97,500

Investor Contact:Peter Goldmacher415-254-7415peter.goldmacher@dolby.com

Media Contact:media@dolby.com

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