Dolby Laboratories Inc
For the period ended Jun 28, 2024. Filed Aug 7, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 28, 2024 · Filed Aug 7, 2024
DLB$64.83+0.0%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-29; filed 2024-05-02.
0001628280-24-020061
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-28; filed 2024-08-07.
0001628280-24-035707
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 126 previous paragraphs and 128 current paragraphs.
103 unchanged; 23 reworded; 1 added; 0 removed; 0 previous and 1 current paragraphs rearranged.
Tables are not compared: 33 previous and 33 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (1)
Current report
On June 6, 2024, we announced that we entered into a definitive agreement with General Electric Company (operating as GE Aerospace) pursuant to which we would purchase all of the issued and outstanding equity interests of GE Intellectual Property Licensing, LLC and GE Technology Development, Inc, which, collectively with each of their subsidiaries, comprise GE Licensing, an intellectual property licensing business primarily targeting the consumer digital media and electronics sectors, for an aggregate cash purchase price of $429 million, subject to certain purchase price adjustments. The closing of the proposed transaction is contingent on expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and certain other customary closing conditions.
Reworded paragraphs (23)
Previous wording
We generate revenue from more than approximately 500 product OEMs and software developers. As of March 29, 2024, we had approximately 20,300 issued patents relating to technologies, which are licensed to third parties and comprise a significant portion of our licensing revenue. We have approximately 1,700 trademark registrations throughout the world for a variety of wordmarks, logos, and slogans. These trademarks are an integral part of our technology licensing program as licensees typically place them on their products which incorporate our technologies to inform consumers that they have met our quality specifications.
Current wording
We generate revenue from more than approximately 500 product OEMs and software developers. As of June 28, 2024, we had approximately 20,700 issued patents relating to technologies, which are licensed to third parties and comprise a significant portion of our licensing revenue. We have approximately 1,600 trademark registrations throughout the world for a variety of wordmarks, logos, and slogans. These trademarks are an integral part of our technology licensing program as licensees typically place them on their products which incorporate our technologies to inform consumers that they have met our quality specifications.
Previous wording
The current macroeconomic environment has negatively impacted many of our licensees and that directly impacts our financial results. Our revenue has been impacted by macroeconomic conditions, including but not limited to, inflation, heightened interest rates, restrictions and economic impacts related to COVID-19, supply chain constraints, increased shipping costs, international conflicts, reduced discretionary consumer spending, and reduced new product investment by our customers caused by elevated interest rates and lower demand. The macroeconomic conditions also impart substantial uncertainty into our operating environment, which presents additional challenges for our business. These factors and the related uncertainty may cause delays or a decrease in the adoption or implementation of our technologies into new products by partners and licensees. These conditions may impact consumer demand for devices and services and our partners’ ability to manufacture devices. Further, we may be negatively impacted by delays in transaction cycles and our recoveries efforts due to the noted macroeconomic conditions and related uncertainty. The future implications of these macroeconomic conditions on our business, results of operations and overall financial position remain uncertain. We continue to monitor the evolving macroeconomic environment and the impact on our business. Further discussion of the potential impacts of these macroeconomic effects on our business can be found in Part II, Item 1A "Risk Factors."
Current wording
The current macroeconomic environment has negatively impacted many of our licensees and that directly impacts our financial results. Our revenue has been impacted by macroeconomic conditions, including but not limited to, inflation, heightened interest rates, economic impacts related to COVID-19, supply chain constraints, increased shipping costs, international conflicts, reduced discretionary consumer spending, and reduced new product investment by our customers caused by elevated interest rates and lower demand. The macroeconomic conditions also impart substantial uncertainty into our operating environment, which presents additional challenges for our business. These factors and the related uncertainty may cause delays or a decrease in the adoption or implementation of our technologies into new products by partners and licensees. These conditions may impact consumer demand for devices and services and our partners’ ability to manufacture devices. Further, the noted macroeconomic conditions and related uncertainty may negatively impact transaction cycles and our recovery of revenue associated with past unauthorized or unreported usage. The future implications of these macroeconomic conditions on our business, results of operations and overall financial position remain uncertain. We continue to monitor the evolving macroeconomic environment and the impact on our business. Further discussion of the potential impacts of these macroeconomic effects on our business can be found in Part II, Item 1A "Risk Factors."
Previous wording
Our audio and imaging technologies have a strong presence within movie and episodic content through adoption across content creators and many forms of distribution, including broadcast TV, streaming, and optical disc playback. The availability of content on these platforms has driven strong adoption in devices such as TVs, STBs, and speaker devices. Major streaming partners and services such as Netflix, Disney+, Apple TV+, Amazon, Max, Paramount+, and other streaming partners and services internationally, continue to enhance content in Dolby Vision and Dolby Atmos. For example, in the second quarter of fiscal 2024, Max announced that live sports will be available to stream in Dolby Vision, in addition to Dolby Atmos. These streaming services launch local content in Dolby formats internationally. As we see an increase in new local content, we increase our value proposition for adoption of Dolby Vision and Dolby Atmos across devices in all market segments.
Current wording
Our audio and imaging technologies are included across movie and episodic content through adoption by content creators and many forms of distribution, including broadcast TV, streaming, and optical disc playback. The availability of content on these platforms drives adoption in devices such as TVs, STBs, and speaker devices. Major streaming partners and services such as Netflix, Disney+, Apple TV+, Amazon, Max, Paramount+, and other streaming partners and services internationally, continue to enhance content in Dolby Vision and Dolby Atmos. These streaming services launch local content in Dolby formats internationally. As we see an increase in new local content, we increase our value proposition for adoption of Dolby Vision and Dolby Atmos across devices in all market segments.
Previous wording
We are increasing the number of Dolby experiences that people can enjoy by enhancing new types of content, such as music, gaming, live sports, and user-generated content using Dolby technologies. Recently, the Indian Premier League broadcasted cricket in Dolby Atmos and Dolby Vision for the first time.
Current wording
We are increasing the number of Dolby experiences that people can enjoy by enhancing new types of content, such as music, gaming, live sports, and user-generated content using Dolby technologies. Recently, Comcast announced that the 2024 Olympics coverage will be available in Dolby Vision and Dolby Atmos. In the third quarter of fiscal 2024, the T20 Cricket World Cup, UEFA EURO 2024, Wimbledon, and the NHL and NBA post seasons were all available in Dolby Atmos and Dolby Vision.
Previous wording
The following are highlights from our second quarter of fiscal 2024 and key challenges related to audio and imaging licensing, by market. Further discussion of the potential impacts of these key challenges on our business can be found in Part II, Item 1A "Risk Factors."
Current wording
The following are highlights from our third quarter of fiscal 2024 and key challenges related to audio and imaging licensing, by market. Further discussion of the potential impacts of these key challenges on our business can be found in Part II, Item 1A "Risk Factors."
Previous wording
Highlights: We have an established global presence with respect to our DD+ and HE-AAC audio technologies in broadcast services and devices. We have expanded our offerings in the broadcast market through technologies such as Dolby Atmos and AC-4, Dolby Vision, as well as AVC and HEVC imaging technologies which we license through patent pools. We work with many TV OEMs and strategic partners to enable and promote Dolby Vision and Dolby Atmos experiences within their TV lineups. Many such partners continue to expand their support of the combined Dolby Vision and Dolby Atmos experience. At CES in January 2024, Hisense announced that its latest TV models will support Dolby Atmos FlexConnect. MediaTek also recently announced that its Pentonic smart TV platform will support Dolby Atmos FlexConnect. Dolby Atmos FlexConnect pairs accessory wireless speakers with a TV’s sound system, optimizing the Dolby Atmos experience for any room layout and speaker setup.
Current wording
Highlights: We have an established global presence with respect to our DD+ and HE-AAC audio technologies in broadcast services and devices. We have expanded our offerings in the broadcast market through technologies such as Dolby Atmos and AC-4, Dolby Vision, as well as AVC and HEVC imaging technologies which we license through patent pools. We work with many TV OEMs and strategic partners to enable and promote Dolby Vision and Dolby Atmos experiences within their TV lineups. Many such partners continue to expand their support of the combined Dolby Vision and Dolby Atmos experience.
Previous wording
Highlights: We continue to focus on adoption of our technologies across major mobile ecosystems, including Apple and Android. HE-AAC and HEVC are widely adopted audio and video technologies across mobile devices, and we offer these technologies through our patent licensing programs. We also continue to focus on expanding adoption of our DD+, AC-4, Dolby Atmos, and Dolby Vision technologies in the mobile market. The breadth of mobile devices supporting Dolby technologies continues to increase globally. In the second quarter of fiscal 2024, Transsion, a global mobile device maker, announced that their latest smartphones will support Dolby Atmos. Additionally, Xiaomi expanded its premium smartphone portfolio in India, which support Dolby Vision Capture, Dolby Vision, and Dolby Atmos. Also, Honor launched the Magic 6 Pro smartphone that supports Dolby Vision, and Lava Mobiles launched its new Blaze Curve 5G smartphone in India that supports Dolby Atmos. Oppo recently announced that they introduced five new phones supporting Dolby Vision Capture.
Current wording
Highlights: We continue to focus on adoption of our technologies across major mobile ecosystems, including Apple and Android. HE-AAC and HEVC are widely adopted audio and video technologies across mobile devices, and we offer these technologies through our patent licensing programs. We also continue to focus on expanding adoption of our DD+, AC-4, Dolby Atmos, and Dolby Vision technologies in the mobile market. The breadth of mobile devices supporting Dolby technologies continues to increase globally. In the third quarter of fiscal 2024 Transsion added a Dolby enabled low cost phone for consumers in Malaysia. Additionally, Sharp Singapore launched the R8s Pro smartphone series with Dolby Vision and Dolby Atmos and Realme launched the GT6, the first smartphone to support Dolby Vision video capture in telephoto video.
Previous wording
Highlights: We have an established presence in the home entertainment market across devices such as soundbars, DMAs, wireless and smart speakers, AVRs, and Blu-Ray players, through the inclusion of our DD+ technology, and increasingly through the inclusion of Dolby Atmos and Dolby Vision. AAC and HE-AAC technologies also have broad adoption through our patent licensing programs. We continue to focus on expanding the availability of Dolby technologies to new devices.
Current wording
Highlights: We have an established presence in the home entertainment market across devices such as soundbars, DMAs, wireless and smart speakers, AVRs, and Blu-Ray players, through the inclusion of our DD+ technology, and increasingly through the inclusion of Dolby Atmos and Dolby Vision. AAC and HE-AAC technologies also have broad adoption through our patent licensing programs. We continue to focus on expanding the availability of Dolby technologies to new devices. In the third quarter of fiscal 2024 Sonos launched headphones that support Dolby Head Tracking with Dolby Atmos. Additionally, VIZIO announced integration of Dolby Atmos across its entire 2024 soundbar lineup.
Previous wording
Highlights: DD+ continues to enhance audio playback in both Mac and Windows operating systems, including native support in their respective Safari and Microsoft Edge browsers. Dolby's presence in these browsers enables us to reach more users through various types of content, including streaming video entertainment. A number of PCs from partners such as Apple, Lenovo, Dell, Samsung, and ASUS also support Dolby Vision and/or Dolby Atmos, with continued expansion of applications through music, streaming, and gaming. At CES in January 2024, Alienware and ASUS announced their first gaming PC monitors to support Dolby Vision, and Dell announced that its latest XPS laptops will offer the combined Dolby Vision and Dolby Atmos experience.
Current wording
Highlights: DD+ continues to enhance audio playback in both Mac and Windows operating systems, including native support in their respective Safari and Microsoft Edge browsers. Dolby's presence in these browsers enables us to reach more users through various types of content, including streaming video entertainment. A number of PCs from partners such as Apple, Lenovo, Dell, Samsung, and ASUS also support Dolby Vision and/or Dolby Atmos, with continued expansion of applications through music, streaming, and gaming. In the third quarter of fiscal 2024 Lenovo launched several new flagship products that support Dolby Vision and Dolby Atmos - including the Yoga Air, moto razr and moto S50 Neo.
Previous wording
Key Challenges: Demand for PCs has recently been declining and it remains uncertain when, if, and to what extent PC demand will return to historic levels. We must continuously collaborate and maintain our key partnerships with PC manufacturers to incorporate our technologies, and we must continue to support the development and distribution of Dolby content via various ecosystems.
Current wording
Key Challenges: Demand for PCs has fluctuated significantly in recent years. We must continuously collaborate and maintain our key partnerships with PC manufacturers to incorporate our technologies, and we must continue to support the development and distribution of Dolby content via various ecosystems. To the extent that PC manufacturers do not incorporate our technologies in current and future products, our revenue could be impacted. Beginning with PCs shipping with the 24H2 version of Windows 11, Microsoft will change the way Dolby’s DD and DD+ decoders are provided to third party PC OEMs. For such devices, Dolby will be distributing those codecs directly to PC OEMs instead of through Microsoft’s Windows operating system. We do not expect this change to have a material impact on our revenue.
Previous wording
We also generate revenue from the automotive industry through the adoption of Dolby Atmos Music and through disc playback devices as well as other elements of the entertainment system. In the second quarter of fiscal 2024, Xiaomi announced that their first electric vehicle, the SU7, will support Dolby Atmos. Additionally, automotive manufacturer Hyundai began shipping its Genesis model that supports Dolby Atmos. At CES in January 2024, it was announced that Mercedes-Benz, Audible, and Amazon Music have collaborated to make Audible and Amazon Music's catalog of content in Dolby Atmos available in Mercedes-Benz vehicles. Also at CES, Lotus announced that its new Eletre hyper-SUV will support Dolby Atmos.
Current wording
We also generate revenue from the automotive industry through the adoption of Dolby Atmos Music and through disc playback devices as well as other elements of the entertainment system. In the third quarter of fiscal 2024 Cadillac announced the 2025 OPTIQ EV with Dolby Atmos. Electric automotive manufacturer Rivian launched the second generation of its flagship vehicles, the R1S SUV and R1T pickup, that feature support for Dolby Atmos. Additionally, Great Wall Motors launched its new smart cabin system, Coffee OS 3, and a new automobile model with Dolby Atmos.
Previous wording
Key Challenges: Consumer demand for devices in the gaming industry is impacted by anticipation of console refresh cycles, which could result in fluctuations in our revenue. In addition, the gaming console market has competition from mobile devices and gaming PCs, which have faster refresh cycles and appeal to a broader consumer base. Automotive revenue has been negatively impacted by a decline in the portion of cars that have optical disc playback. Shortages of certain semiconductor components could result in lower implementation of our technologies in vehicles by automotive manufacturers. Our revenue growth will be impacted if OEMs do not incorporate our technologies in their latest products, which can be more prominent in industries with longer development cycles such as the automotive industry.
Current wording
Key Challenges: Consumer demand for devices in the gaming industry is impacted by anticipation of console refresh cycles, which could result in fluctuations in our revenue. In addition, the gaming console market has competition from mobile devices and gaming PCs, which have faster refresh cycles and appeal to a broader consumer base. Automotive revenue has been negatively impacted by a decline in the portion of cars that have optical disc playback. Shortages of certain semiconductor components could result in lower implementation of our technologies in vehicles by automotive manufacturers. Our revenue growth will be impacted if OEMs do not incorporate our technologies in their latest products, which can be more prominent in industries with longer development cycles such as the automotive industry. Additionally, the automotive industry is cyclical, so our revenue from the auto market is affected by the broader cycles of the industry.
Previous wording
Highlights: We continue to expand our global presence for Dolby Cinema, with sites located in the U.S. and internationally. The breadth of motion pictures for Dolby Cinema continues to grow with over 580 theatrical titles in both Dolby Vision and Dolby Atmos having been announced or released from all of the major studios as of the end of second quarter of fiscal 2024.
Current wording
Highlights: We continue to expand our global presence for Dolby Cinema, with sites located in the U.S. and internationally. The breadth of motion pictures for Dolby Cinema continues to grow with over 630 theatrical titles in both Dolby Vision and Dolby Atmos having been announced or released from all of the major studios as of the end of the third quarter of fiscal 2024. In the third quarter of fiscal 2024 Melco Resorts & Entertainment opened Studio City Cinema, which is the first Dolby Cinema in the Hong Kong Macau Region.
Previous wording
Highlights: To help enable the playback of content in Dolby formats, we offer a range of servers, which include the IMS3000 (an integrated imaging and audio server with Dolby Atmos), and audio processors, such as the CP950, to cinema exhibitors globally. Dolby Atmos has been adopted broadly across studios, content creators, post-production facilities, and exhibitors. As of the end of the second quarter of fiscal 2024, there are over 7,500 Dolby Atmos screens installed or committed and over 3,000 Dolby Atmos theatrical titles have been announced or released.
Current wording
Highlights: To help enable the playback of content in Dolby formats, we offer a range of servers, which include the IMS3000 (an integrated imaging and audio server with Dolby Atmos), and audio processors, such as the CP950, to cinema exhibitors globally. Dolby Atmos has been adopted broadly across studios, content creators, post-production facilities, and exhibitors. As of the end of the third quarter of fiscal 2024, there are over 8,000 Dolby Atmos screens installed or committed and over 3,200 Dolby Atmos theatrical titles have been announced or released.
Previous wording
In September 2023, we initiated a restructuring plan with the purpose of focusing our resources on our highest strategic priorities. In connection with this plan, we recorded an expense in the fourth quarter of fiscal 2023 of $13.4 million in severance and other related benefits and an impairment loss of $16.9 million related primarily to internally developed software for projects we are no longer pursuing. In continuation with this plan, we recorded an expense in the first quarter of fiscal 2024 of $7.4 million in severance and other related benefits. Cash payment of the severance and other termination benefits were substantially completed by the end of the second quarter of fiscal 2024. These activities are expected to result in estimated gross pre-tax operating income savings of approximately $40 million to $45 million within fiscal 2024. The impact of these estimated savings on our operating expenses will be mostly offset by increased investment in our strategic priorities and the effects of inflation on our remaining expenses.
Current wording
In September 2023, we initiated a restructuring plan with the purpose of focusing our resources on our highest strategic priorities. In connection with this plan, we recorded an expense in the fourth quarter of fiscal 2023 of $13.4 million in severance and other related benefits and an impairment loss of $16.9 million related primarily to internally developed software for projects we are no longer pursuing. In continuation with this plan, we recorded an expense in the first quarter of fiscal 2024 of $7.4 million in severance and other related benefits. Cash payment of the severance and other termination benefits were substantially completed by the end of the second quarter of fiscal 2024. These activities are expected to result in estimated gross pre-tax oper ating income savings of approximately $40 million to $45 million within fiscal 2024. The impact of these estimated savings on our operating expenses will be mostly offset by increased investment in our strategic priorities and the effects of inflation on our remaining expenses.
Previous wording
We recorded a benefit of $2.5 million in the second quarter of fiscal 2024 primarily due to a true-up of estimated restructuring expenses.
Current wording
We recorded an expense of $4.6 million in the third quarter of fiscal 2024 primarily due to new restructuring activities.
Previous wording
As of March 29, 2024, we had cash and cash equivalents of $709.5 million, which consisted of cash and highly-liquid money market funds. In addition, we had short and long-term investments of $243.8 million, which primarily consisted of corporate bonds, government bonds, municipal debt securities, commercial paper, and U.S. agency securities.
Current wording
As of June 28, 2024, we had cash and cash equivalents of $741.6 million, which consisted of cash and highly-liquid money market funds. In addition, we had short and long-term investments of $245.2 million, which primarily consisted of corporate bonds, government bonds, municipal debt securities, commercial paper, and U.S. agency securities.
Previous wording
Stock Repurchase Program. Our stock repurchase program was approved in fiscal 2010, and since then we have completed approximately $2.8 billion of stock repurchases under the program.
Current wording
Stock Repurchase Program. Our stock repurchase program was approved in fiscal 2010, and since then we have completed approximately $2.9 billion of stock repurchases under the program.
Previous wording
Quarterly Dividend Program. During fiscal 2015, we initiated a recurring quarterly cash dividend program for our stockholders. In the second quarter of fiscal 2024, a quarterly dividend of $0.30 per share was paid on our Class A and Class B common stock to eligible stockholders of record.
Current wording
Quarterly Dividend Program. During fiscal 2015, we initiated a recurring quarterly cash dividend program for our stockholders. In the third quarter of fiscal 2024, a quarterly dividend of $0.30 per share was paid on our Class A and Class B common stock to eligible stockholders of record.
Previous wording
Net cash provided by operating activities increased $28.9 million in the fiscal year-to-date period ended March 29, 2024 as compared to the fiscal year-to-date period ended March 31, 2023, primarily due to the following:
Current wording
Net cash provided by operating activities decreased $71.0 million in the fiscal year-to-date period ended June 28, 2024 as compared to the fiscal year-to-date period ended June 30, 2023, primarily due to the following:
Previous wording
Net cash provided by (used in) investing activities was $69.1 million lower in the fiscal year-to-date period ended March 29, 2024 as compared to the fiscal year-to-date period ended March 31, 2023, primarily due to the following:
Current wording
Net cash provided by (used in) investing activities was $98.9 million lower in the fiscal year-to-date period ended June 28, 2024 as compared to the fiscal year-to-date period ended June 30, 2023, primarily due to the following:
Previous wording
Net cash used in financing activities was $12.1 million higher in the fiscal year-to-date period ended March 29, 2024 as compared to the fiscal year-to-date period ended March 31, 2023, primarily due to the following:
Current wording
Net cash used in financing activities was $33.7 million higher in the fiscal year-to-date period ended June 28, 2024 as compared to the fiscal year-to-date period ended June 30, 2023, primarily due to the following:
Previous wording
In the second quarter of fiscal 2024, we did not enter into any off-balance sheet arrangements that are expected to have a material effect on Dolby's liquidity or the availability of capital resources.
Current wording
In the third quarter of fiscal 2024, we did not enter into any off-balance sheet arrangements that are expected to have a material effect on Dolby's liquidity or the availability of capital resources.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
In April 2024, we initiated restructuring actions with the purpose of focusing our resources on our highest strategic priorities. In connection with this plan, we recorded an expense in the third quarter of fiscal 2024 of $4.6 million in severance and other related benefits. Cash payment of the severance and other termination benefits are expected to be substantially completed by the end of the fourth quarter of fiscal 2024. These activities are expected to result in estimated gross pre-tax operating income savings of approximately $3 million in fiscal 2024 and approximately $11 million within fiscal 2025. The impact of these estimated savings on our operating expenses will be mostly offset by increased investment in our strategic priorities and the effects of inflation on our remaining expenses.