Dolby Laboratories, Inc. Q1 FY2025 earnings call

• Both licensing revenue and total revenue came in towards the high end of the guidance range, and non-GAAP earnings were above the high end of the range. - Creative community shows strong support for Dolby Atmos and Dolby Vision; 8 out of 8 2025 Grammy nominees for Best New Artist are in Dolby Atmos, etc. - Over 80% of domestic box office and almost 70% of global box office in 2024 were from titles in Dolby Atmos and Dolby Vision. - CES highlights: partnerships with over 20 OEMs in auto, TV, PC, soundbar launches with Dolby Atmos/Vision, Samsung Display and Texas Instruments supporting Dolby in automotive, etc.

In Q1, revenue was $357 million, up 13% compared to the year ago quarter. Licensing revenue was $330 million, up 12% year-over-year, including a $70 million favorable true-up for Q4 fiscal '24 shipments. Products and services revenue was $27 million, up 22% year-over-year. Mobile revenue was up 74% year-over-year due to GE licensing revenue and timing of minimum volume commitments. Licensing revenue contributed significantly, with mobile showing a notable increase in the quarter.

• Full year revenue is typically weighted more towards the first half. Q2 fiscal year '25 revenue expected between $355 million and $385 million, with licensing revenue ranging from $330 million to $360 million, gross margin ~91% non-GAAP, non-GAAP operating expenses $190-$200 million, non-GAAP EPS $1.19-$1.34. - Full year guidance maintained: non-GAAP earnings between $3.99 and $4.14 on revenue between $1.33 billion and $1.39 billion, license revenue between $1.22 billion and $1.28 billion, non-GAAP operating expenses $765-$775 million; foundational audio tech revenue roughly flat, Dolby Atmos, Vision, imaging patents growth ~15%.

• Impact of macroeconomic events, supply chain issues, inflation rates, changes in consumer spending, and geopolitical instability on the business.

Q: Comment on relative flatness of foundational for the year and Q1 trends.

A: Full year still expected to be flattish, nothing in Q1 indicated deviation.

Q: Outsized growth in mobile in Q1, cause?

A: Timing of minimum volume commitments in mobile and integration of GE licensing.

Q: Timetable for Samsung OLED screens in cars?

A: Excited about opportunity, expect progress throughout the year.

Q: Outsized true-up in quarter, specific manufacturer?

A: Not one particular vendor, up across all markets particularly TVs and auto.

Q: Key variables for growth in Atmos, Vision, image patent licensing?

A: Automotive momentum, TV adoption rate growth, mobile focus on Dolby Vision capture and content ecosystem.

Q: Update on Dolby Cinema screen base?

A: Ad screens this quarter, year-over-year improvement in Dolby Cinema and cinema products, exhibitors showing greater confidence in adding screens.

Q: Product momentum comparison to a year ago and IO opportunity?

A: Customers/partners more optimistic, automotive partners expanding, TV adoption growing; IO focuses on real-time interactive digital experiences with low-latency streaming, used by Paddy Power in in-shop experiences with improved reliability.