Dolby Laboratories announced its fourth quarter 2016 financial results.
For more information visit: www.dolby.com
Unedited press release follows:
Dolby Laboratories Reports Fourth Quarter and Fiscal 2016 Financial Results
SAN FRANCISCO — Dolby Laboratories, Inc. (NYSE:DLB) today announced financial results for the fourth quarter (Q4) and fiscal year that ended September 30, 2016. For Q4, Dolby reported total revenue of $233.0 million, compared to $232.7 million for Q4 of fiscal 2015. For fiscal 2016, Dolby reported total revenue of $1.03 billion, compared to $970.6 million for fiscal 2015.
Fourth quarter GAAP net income was $23.9 million, or $0.23 per diluted share, compared to $46.6 million, or $0.45 per diluted share, for the fourth quarter of fiscal 2015. On a non-GAAP basis, fourth quarter net income was $38.6 million, or $0.37 per diluted share, compared to $44.4 million, or $0.43 per diluted share, for the fourth quarter of fiscal 2015.
Fiscal 2016 GAAP net income was $185.9 million, or $1.81 per diluted share, compared to $181.4 million, or $1.75 per diluted share, for fiscal 2015. On a non-GAAP basis, fiscal 2016 net income was $249.0 million, or $2.43 per diluted share, compared to $229.3 million, or $2.21 per diluted share, for fiscal 2015. Fourth quarter and fiscal 2015 GAAP results included a pre-tax gain of approximately $26 million related to the sale of real estate. Dolby’s non-GAAP measures are described and reconciled to the corresponding GAAP measures at the end of this release.
“Q4 wrapped up an important year for Dolby,” said Kevin Yeaman, President and CEO, Dolby Laboratories. “Dolby Audio was included in iOS, Dolby Cinema deployments accelerated, and Dolby Vision TVs shipped globally.”
Dividend
Today, Dolby announced an increase in our quarterly cash dividend to $0.14 per share of Class A and Class B common stock, payable on November 16, 2016, to stockholders of record as of the close of business on November 7, 2016. Last quarter, the cash dividend was $0.12 per share.
Financial Outlook
Q1 2017
Dolby estimates that total revenue for the first quarter (Q1) of fiscal 2017 will range from $250 million to $260 million. Gross margin percentages are projected to range between approximately 88 percent and 89 percent on a GAAP basis, and between 89 percent and 90 percent on a non-GAAP basis.
Dolby anticipates that operating expenses will be between $173 million and $177 million on a GAAP basis, and between $154 million and $158 million on a non-GAAP basis.
Dolby estimates that diluted earnings per share will be between $0.34 and $0.40 on a GAAP basis, and between $0.49 and $0.55 on a non-GAAP basis.
Dolby estimates that its fiscal Q1 2017 effective tax rate will be approximately 25 percent on both a GAAP and non-GAAP basis.
Fiscal 2017
Dolby anticipates that total revenue will range from $1.06 billion to $1.09 billion.
Dolby anticipates that operating expenses will range from $700 million to $710 million on a GAAP basis, and from $625 million to $635 million on a non-GAAP basis.
Conference Call Information
Members of Dolby management will lead a conference call open to all interested parties to discuss Q4 and fiscal 2016 financial results for Dolby Laboratories at 2:00 p.m. PT (5:00 p.m. ET) on Wednesday, October 26, 2016. Access to the teleconference will be available over the Internet from http://investor.dolby.com/events.cfm or by dialing 1-888-551-9018. International callers can access the conference call at 1-719-325-2216.
A replay of the call will be available from 5:00 p.m. PT on Wednesday, October 26, 2016, until 9:00 p.m. PT on Wednesday, November 2, 2016, by dialing 1-844-512-2921 (international callers can access the replay by dialing 1-412-317-6671) and entering the confirmation code 7817627. An archived version of the teleconference will also be available on the Dolby website, http://investor.dolby.com/events.cfm.
Non-GAAP Financial Information
To supplement Dolby’s financial statements presented on a GAAP basis, Dolby provides certain non-GAAP financial measures. These measures are adjusted to exclude amounts related to stock-based compensation, expense associated with dividend equivalents paid on restricted stock units, the amortization of intangibles from business combinations, restructuring charges, and the related tax impact of these items. In the fourth quarter of fiscal 2015, our non-GAAP results exclude a one-time gain on the sale of real estate. Dolby presents non-GAAP financial measures in reporting its financial results 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. Dolby’s management believes it is useful for itself and investors to review both GAAP and non-GAAP measures in order to assess the performance of Dolby’s business for planning and forecasting in subsequent periods. 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 investor relations data sheet at http://investor.dolby.com/downloads.cfm.
Forward-Looking Statements
Certain statements in this press release, including, but not limited to, statements relating to Dolby’s expected financial results for Q1 2017 and fiscal 2017, our ability to advance our long-term objectives, and future quarterly 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 projected. The following important factors, without limitation, could cause actual results to differ materially from those in the forward-looking statements: risks associated with trends in the markets in which Dolby operates, including the personal computer, DVD, and Blu-ray Disc™, broadcast, consumer electronics, cinema, gaming, mobile, communications, and automotive markets; the loss of, or reduction in sales by, a key customer or licensee; pricing pressures; risks associated with the rate at which OEMs include optical disc playback in Windows® devices and the rate of consumer adoption of Windows operating systems; risks that a shift from disc-based media to online media content could result in fewer devices with Dolby® technologies; risks associated with the effects of macroeconomic conditions, including trends in consumer spending; risks relating to the expiration of patents; the timing of Dolby’s receipt of royalty reports and payments from its licensees, including back payments; timing of revenue recognition under licensing agreements and other contractual arrangements; Dolby’s accuracy of calculation of royalties due to its licensors; 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; the development and growth of the market for digital cinema and digital 3D and Dolby’s ability to successfully penetrate this market; Dolby’s ability to expand its business generally, and to expand its business beyond sound 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 its 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) creates audio, video, and voice technologies that transform entertainment and communications in mobile devices, at the cinema, at home, and at work. For more than 50 years, sight and sound experiences have become more vibrant, clear, and powerful in Dolby. For more information, please visit www.dolby.com.
Dolby and the double-D symbol are registered trademarks of Dolby Laboratories. Dolby Audio, Dolby Cinema, and Dolby Vision are trademarks of Dolby Laboratories. All other trademarks remain the property of their respective owners. DLB-F
DOLBY LABORATORIES, INC.
| CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||||||||
| (in thousands, except per share amounts) | ||||||||||||||||||||||
| Fiscal Quarter Ended | Fiscal Year Ended | |||||||||||||||||||||
| September 30, | September 25, | September 30, | September 25, | |||||||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||||||||
| Revenue: | (unaudited) | (unaudited) | (unaudited) | |||||||||||||||||||
| Licensing | $ | 203,541 | $ | 203,325 | $ | 917,032 | $ | 868,111 | ||||||||||||||
| Products | 25,033 | 25,060 | 90,543 | 83,904 | ||||||||||||||||||
| Services | 4,423 | 4,363 | 18,163 | 18,623 | ||||||||||||||||||
| Total revenue | 232,997 | 232,748 | 1,025,738 | 970,638 | ||||||||||||||||||
| Cost of revenue: | ||||||||||||||||||||||
| Cost of licensing | 8,482 | 2,264 | 28,333 | 10,879 | ||||||||||||||||||
| Cost of products | 17,739 | 19,642 | 64,853 | 70,490 | ||||||||||||||||||
| Cost of services | 4,001 | 3,471 | 15,796 | 13,447 | ||||||||||||||||||
| Total cost of revenue | 30,222 | 25,377 | 108,982 | 94,816 | ||||||||||||||||||
| Gross margin | 202,775 | 207,371 | 916,756 | 875,822 | ||||||||||||||||||
| Operating expenses: | ||||||||||||||||||||||
| Research and development | 59,214 | 50,621 | 219,607 | 201,324 | ||||||||||||||||||
| Sales and marketing | 74,764 | 74,434 | 295,267 | 279,174 | ||||||||||||||||||
| General and administrative | 39,724 | 46,220 | 168,854 | 182,176 | ||||||||||||||||||
| Restructuring charges/(credits) | (12 | ) | (41 | ) | 1,233 | (80 | ) | |||||||||||||||
| Total operating expenses | 173,690 | 171,234 | 684,961 | 662,594 | ||||||||||||||||||
| Operating income | 29,085 | 36,137 | 231,795 | 213,228 | ||||||||||||||||||
| Other income/expense: | ||||||||||||||||||||||
| Interest income | 1,673 | 1,100 | 5,684 | 4,544 | ||||||||||||||||||
| Interest expense | (37 | ) | (68 | ) | (125 | ) | (183 | ) | ||||||||||||||
| Other income/(expense), net | 92 | 27,034 | (1,450 | ) | 28,193 | |||||||||||||||||
| Total other income | 1,728 | 28,066 | 4,109 | 32,554 | ||||||||||||||||||
| Income before income taxes | 30,813 | 64,203 | 235,904 | 245,782 | ||||||||||||||||||
| Provision for income taxes | (6,734 | ) | (17,288 | ) | (49,502 | ) | (62,542 | ) | ||||||||||||||
| Net income including controlling interest | 24,079 | 46,915 | 186,402 | 183,240 | ||||||||||||||||||
| Less: net (income) attributable to controlling interest | (146 | ) | (362 | ) | (542 | ) | (1,850 | ) | ||||||||||||||
| Net income attributable to Dolby Laboratories, Inc. | $ | 23,933 | $ | 46,553 | $ | 185,860 | $ | 181,390 | ||||||||||||||
| Net Income Per Share: | ||||||||||||||||||||||
| Basic | $ | 0.24 | $ | 0.46 | $ | 1.85 | $ | 1.77 | ||||||||||||||
| Diluted | $ | 0.23 | $ | 0.45 | $ | 1.81 | $ | 1.75 | ||||||||||||||
| Weighted-Average Shares Outstanding: | ||||||||||||||||||||||
| Basic | 101,145 | 101,935 | 100,717 | 102,354 | ||||||||||||||||||
| Diluted | 103,766 | 103,059 | 102,424 | 103,862 | ||||||||||||||||||
| DOLBY LABORATORIES, INC. | |||||||||||
| CONSOLIDATED BALANCE SHEETS | |||||||||||
| (in thousands) | |||||||||||
| September 30, | September 25, | ||||||||||
| 2016 | 2015 | ||||||||||
| ASSETS | (unaudited) | ||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 516,112 | $ | 531,926 | |||||||
| Restricted cash | 3,645 | 2,936 | |||||||||
| Short-term investments | 121,629 | 138,901 | |||||||||
| Accounts receivable, net | 75,688 | 101,563 | |||||||||
| Inventories | 16,354 | 13,872 | |||||||||
| Prepaid expenses and other current assets | 26,302 | 32,031 | |||||||||
| Total current assets | 759,730 | 821,229 | |||||||||
| Long-term investments | 393,904 | 321,015 | |||||||||
| Property, plant and equipment, net | 443,656 | 403,091 | |||||||||
| Intangible assets, net | 215,342 | 127,507 | |||||||||
| Goodwill | 309,616 | 307,708 | |||||||||
| Deferred taxes | 166,790 | 143,279 | |||||||||
| Other non-current assets | 21,068 | 9,464 | |||||||||
| Total assets | $ | 2,310,106 | $ | 2,133,293 | |||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | 17,544 | $ | 20,710 | |||||||
| Accrued liabilities | 169,055 | 169,307 | |||||||||
| Income taxes payable | 2,304 | 754 | |||||||||
| Deferred revenue | 24,180 | 18,910 | |||||||||
| Total current liabilities | 213,083 | 209,681 | |||||||||
| Long-term deferred revenue | 35,366 | 30,581 | |||||||||
| Other non-current liabilities | 82,922 | 77,024 | |||||||||
| Total liabilities | 331,371 | 317,286 | |||||||||
| Stockholders’ equity: | |||||||||||
| Class A common stock | 57 | 51 | |||||||||
| Class B common stock | 44 | 51 | |||||||||
| Additional paid-in capital | 42,032 | 17,571 | |||||||||
| Retained earnings | 1,938,320 | 1,800,857 | |||||||||
| Accumulated other comprehensive (loss) | (10,197 | ) | (11,462 | ) | |||||||
| Total stockholders’ equity – Dolby Laboratories, Inc. | 1,970,256 | 1,807,068 | |||||||||
| Controlling interest | 8,479 | 8,939 | |||||||||
| Total stockholders’ equity | 1,978,735 | 1,816,007 | |||||||||
| Total liabilities and stockholders’ equity | $ | 2,310,106 | $ | 2,133,293 | |||||||
| DOLBY LABORATORIES, INC. | |||||||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||||
| (in thousands) | |||||||||||
| Fiscal Year Ended | |||||||||||
| September 30, | September 25, | ||||||||||
| 2016 | 2015 | ||||||||||
| Operating activities: | (unaudited) | ||||||||||
| Net income including controlling interest | $ | 186,402 | $ | 183,240 | |||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
| Depreciation and amortization | 85,152 | 69,133 | |||||||||
| Stock-based compensation | 66,985 | 67,069 | |||||||||
| Amortization of premium on investments | 3,824 | 9,162 | |||||||||
| Excess tax benefit from exercise of stock options | (3,225 | ) | (2,544 | ) | |||||||
| Provision for doubtful accounts | 1,017 | 33 | |||||||||
| Deferred income taxes | (22,798 | ) | (14,484 | ) | |||||||
| Gain on sale of ownership interest in subsidiary (pre-tax) | — | (26,221 | ) | ||||||||
| Other non-cash items affecting net income | 1,779 | 5,125 | |||||||||
| Changes in operating assets and liabilities: | |||||||||||
| Accounts receivable | 24,886 | (7,008 | ) | ||||||||
| Inventories | (2,949 | ) | 5,835 | ||||||||
| Prepaid expenses and other assets | (15,217 | ) | (3,595 | ) | |||||||
| Accounts payable and other liabilities | 2,834 | (7,384 | ) | ||||||||
| Income taxes, net | 17,265 | 21,767 | |||||||||
| Deferred revenue | 10,288 | 8,981 | |||||||||
| Other non-current liabilities | 596 | 268 | |||||||||
| Net cash provided by operating activities | 356,839 | 309,377 | |||||||||
| Investing activities: | |||||||||||
| Purchase of investments | (426,118 | ) | (392,936 | ) | |||||||
| Proceeds from sales of investment securities | 262,125 | 305,225 | |||||||||
| Proceeds from maturities of investment securities | 103,987 | 146,152 | |||||||||
| Purchases of PP&E | (100,762 | ) | (157,526 | ) | |||||||
| Payments for business acquisitions, net of cash acquired | — | (93,516 | ) | ||||||||
| Purchase of intangible assets | (121,020 | ) | (37,416 | ) | |||||||
| Proceeds from sale of ownership interest in subsidiary (net) | — | 27,216 | |||||||||
| Change in restricted cash | (709 | ) | (794 | ) | |||||||
| Net cash used in investing activities | (282,497 | ) | (203,595 | ) | |||||||
| Financing activities: | |||||||||||
| Proceeds from issuance of common stock | 71,111 | 28,627 | |||||||||
| Repurchase of common stock | (100,854 | ) | (107,349 | ) | |||||||
| Payment of cash dividend | (48,397 | ) | (41,018 | ) | |||||||
| Distribution to controlling interest | (214 | ) | (5,615 | ) | |||||||
| Excess tax benefit from exercise of stock options | 3,225 | 2,544 | |||||||||
| Shares repurchased for tax withholdings on vesting of restricted stock | (13,632 | ) | (15,708 | ) | |||||||
| Net cash used in financing activities | (88,761 | ) | (138,519 | ) | |||||||
| Effect of foreign exchange rate changes on cash and cash equivalents | (1,395 | ) | (3,809 | ) | |||||||
| Net (decrease) in cash and cash equivalents | (15,814 | ) | (36,546 | ) | |||||||
| Cash and cash equivalents at beginning of period | 531,926 | 568,472 | |||||||||
| Cash and cash equivalents at end of period | $ | 516,112 | $ | 531,926 | |||||||
| GAAP to Non-GAAP Reconciliations | |||||||||||||||||||||
| (in millions, except per share data) | |||||||||||||||||||||
| The following tables present Dolby’s GAAP financial measures reconciled to the non-GAAP financial measures included in this release for the fourth quarter of fiscal 2016 and 2015 and fiscal 2016 and 2015: | |||||||||||||||||||||
| Net income: | Fiscal Quarter Ended | Fiscal Year Ended | |||||||||||||||||||
| September 30, | September 25, | September 30, | September 25, | ||||||||||||||||||
| 2016 | 2015 | 2016 | 2015 | ||||||||||||||||||
| GAAP net income | $ | 23.9 | $ | 46.6 | $ | 185.9 | $ | 181.4 | |||||||||||||
| Stock-based compensation | 15.5 | 16.3 | 67.0 | 67.1 | |||||||||||||||||
| RSU dividend equivalent | 0.2 | 0.5 | 1.2 | 2.4 | |||||||||||||||||
| Amortization of acquired intangibles | 3.7 | 4.0 | 15.4 | 17.0 | |||||||||||||||||
| Restructuring charges, net | — | — | 1.2 | — | |||||||||||||||||
| Other non-operating income adjustments | — | (26.2 | ) | — | (26.2 | ) | |||||||||||||||
| Income tax adjustments | (4.7 | ) | 3.2 | (21.7 | ) | (12.4 | ) | ||||||||||||||
| Non-GAAP net income | $ | 38.6 | $ | 44.4 | $ | 249.0 | $ | 229.3 | |||||||||||||
| Diluted earnings per share: | Fiscal Quarter Ended | Fiscal Year Ended | |||||||||||||||||||
| September 30, | September 25, | September 30, | September 25, | ||||||||||||||||||
| 2016 | 2015 | 2016 | 2015 | ||||||||||||||||||
| GAAP diluted earnings per share | $ | 0.23 | $ | 0.45 | $ | 1.81 | $ | 1.75 | |||||||||||||
| Stock-based compensation | 0.15 | 0.16 | 0.66 | 0.65 | |||||||||||||||||
| RSU dividend equivalent | — | — | 0.01 | 0.02 | |||||||||||||||||
| Amortization of acquired intangibles | 0.04 | 0.04 | 0.15 | 0.16 | |||||||||||||||||
| Restructuring charges, net | — | — | 0.01 | — | |||||||||||||||||
| Other non-operating income adjustments | — | (0.25 | ) | — | (0.25 | ) | |||||||||||||||
| Income tax adjustments | (0.05 | ) | 0.03 | (0.21 | ) | (0.12 | ) | ||||||||||||||
| Non-GAAP diluted earnings per share | $ | 0.37 | $ | 0.43 | $ | 2.43 | $ | 2.21 | |||||||||||||
| Shares used in computing diluted earnings per share | 104 | 103 | 102 | 104 | |||||||||||||||||
| The following tables present a reconciliation between GAAP and non-GAAP versions of the estimated financial amounts for the first quarter of fiscal 2017 and fiscal 2017 included in this release: | |||||||||||||||||||||
| Gross margin: | Q1 2017 | ||||||||||||||||||||
| GAAP gross margin (low – high end of range) | 88% – 89% | ||||||||||||||||||||
| Stock-based compensation | 0.1 | % | |||||||||||||||||||
| Amortization of acquired intangibles | 0.9 | % | |||||||||||||||||||
| Non-GAAP gross margin (low – high end of range) | 89% – 90% | ||||||||||||||||||||
| Operating expenses: | Q1 2017 | Fiscal 2017 | |||||||||||||||||||
| GAAP operating expenses (low – high end of range) | $173 – $177 | $700 – $710 | |||||||||||||||||||
| Stock-based compensation | (17.5 | ) | (70.0 | ) | |||||||||||||||||
| Amortization of acquired intangibles | (1.5 | ) | (5.0 | ) | |||||||||||||||||
| Non-GAAP operating expenses (low – high end of range) | $154 – $158 | $625 – $635 | |||||||||||||||||||
| Diluted earnings per share: | Q1 2017 | ||||||||||||||||||||
| Low | High | ||||||||||||||||||||
| GAAP diluted earnings per share | $ | 0.34 | $ | 0.40 | |||||||||||||||||
| Stock-based compensation | 0.17 | 0.17 | |||||||||||||||||||
| Amortization of acquired intangibles | 0.03 | 0.03 | |||||||||||||||||||
| Income tax adjustments | (0.05 | ) | (0.05 | ) | |||||||||||||||||
| Non-GAAP diluted earnings per share | $ | 0.49 | $ | 0.55 | |||||||||||||||||
| Shares used in computing diluted earnings per share | 103 | 103 | |||||||||||||||||||