Release Date: August 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Revenue for the quarter came in just above the midpoint of the range provided in the last earnings call, and earnings were above the high end of the range.
- Dolby Atmos and Dolby Vision are performing slightly ahead of expectations, driven by strong content growth and device attach rates.
- Significant milestones in content for Dolby Vision, with over 25,000 TV shows and movies available as of this spring.
- Momentum in automotive with new partnerships, including GM's Cadillac OPTIQ and Hyundai's Genesis, expanding Dolby Atmos to more models.
- Pending acquisition of GE licensing, which will strengthen and expand Dolby's patent offerings, particularly in imaging, and is expected to be accretive to operating margins and EPS in fiscal 2025.
Negative Points
- Full-year revenue is expected to be down approximately 1% to 2%, at the lower end of expectations.
- Foundational audio revenue is lower than expected due to soft global device sales, particularly in set-top boxes and gaming consoles.
- Cinema products are underperforming as the box office remains sluggish and exhibitors delay capital expenditures.
- Revenue guidance for the full year is skewing towards the lower end of what has been described as roughly flat all year.
- Consumer electronics revenue was down 18% year over year in the quarter, and broadcast revenue is expected to be down for the full year due to tough comparisons and lower set-top box revenue.
Q & A Highlights
Q: Kevin, just on the macros to kick it off. Just curious what you observed in this quarter in relation to what you observed last quarter. Was it sort of within bounds maybe at the lower end given sort of the slight tweak to guidance, but anything you could add of the macro that have held?
A: Yeah, I guess I would say that as far as the macro goes, we're seeing much the same we've been seeing all year. It's been a tough environment for our OEM customers over the last several years, but we see them cautiously optimistic that things are stabilizing. Specifically, we saw softness in set-top boxes and gaming consoles, and the box office continued to be pretty soft through the end of Q3.
Q: Just on the new patents that you acquired from GE, curious if you could leverage these patents either into existing products or potential for future products. Could this help your Dolby.io efforts as well?
A: This acquisition is focused on our imaging patent business, particularly in video codec technology. It expands our presence in imaging patents and is expected to be accretive to non-GAAP operating income and EPS in the first year. Additionally, we acquired THEO Technologies to enhance the Dolby.io offering, which serves a similar customer base and provides complementary technologies.
Q: First, I'd like to ask about Atmos in cars. You gave a number of them and usage points, including Cadillac OPTIQ, Rivian, Genesis. Do you feel you are picking up momentum and broadening the usage within cars?
A: Yes, we are very excited to have Cadillac on board and have added Rivian and Hyundai, which is now offering five models in Korea. We have 20 OEM partners, and we continue to see many of them expanding into additional models and getting deeper into lineups. Dolby Atmos for automotive is doing better than we expected coming into the year.
Q: The movie business is at a low point, but expectations are high for '25 and '26. Are you increasing the number of theater installations, either domestically or internationally?
A: We are optimistic about '25 and '26 due to a lot of great titles ready to come out. We are seeing increased engagement as it relates to Dolby Cinema and the ability to incorporate Dolby Vision and Dolby Atmos into existing exhibitor branded DLFs. The percentage of the box office going to premium large-format experiences, including Dolby Cinema, has significantly increased.
Q: Within the United States, your contract is still exclusive with AMC for the full vision, Atmos package. Are you finding other areas around the world where you are increasing that penetration?
A: Yes, AMC is our partner in the US with over 150 screens. We also have partners in Japan, Europe, and Korea, where Megabox recently announced expansion with us. We have a good footprint globally and demand around the globe. We are optimistic about increasing the number of Dolby Cinema and Dolby Atmos, Dolby Vision installations next year.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
