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Dolby Reports Q2 2011 Results

Dolby Laboratories announced financial results for its second quarter of fiscal 2011.

Dolby trades on the NYSE under the symbol DLB.

For more information visit: www.dolby.com


Edited press release follows:

Dolby Laboratories Reports Second Quarter Fiscal 2011 Results

SAN FRANCISCO–Dolby Laboratories, Inc. (NYSE:DLB) today announced the Company’s financial results for its second quarter of fiscal 2011.

For the second quarter, Dolby reported total revenue of $250.0 million, compared to $243.4 million for the second quarter of fiscal 2010.

Second quarter GAAP net income was $82.1 million, or $0.72 per diluted share, compared to $85.9 million, or $0.74 per diluted share, for the second quarter of fiscal 2010. On a non-GAAP basis, second quarter net income was $92.2 million, or $0.81 per diluted share, compared to $93.1 million, or $0.80 per diluted share, for the second quarter of fiscal 2010. Dolby’s non-GAAP measures exclude expenses related to stock-based compensation, the amortization of intangibles from business combinations, restructuring charges, and the related tax impact of these items.

“Strong performance from broadcast, mobile, and gaming led to higher than expected licensing revenue, while deployments of our cinema products slowed,” said Kevin Yeaman, President and Chief Executive Officer, Dolby Laboratories. “With our technologies included in a wide range of entertainment devices around the world, we remain focused on extending these technologies into new geographies and new devices.”

Financial Targets
For fiscal 2011, Dolby is now targeting revenue of $905 million to $945 million, and continues to target total gross margin of approximately 88 percent on a GAAP basis, and approximately 89 percent on a non-GAAP basis. In addition, on a GAAP basis, Dolby is now targeting fiscal 2011 operating expense of $401 million to $413 million and other income of approximately $6 million to $7 million, and continues to target a tax rate of approximately 30 percent. On a non-GAAP basis, Dolby is now targeting fiscal 2011 operating expense of $350 million to $360 million and other income of approximately $6 million to $7 million, and continues to target a tax rate of approximately 33 percent. Dolby’s non-GAAP targets exclude expenses related to stock-based compensation, the amortization of intangibles from business combinations, restructuring charges, and the related tax impact of these items. The non-GAAP measures also exclude the one-time tax benefit resulting from the release of the deferred tax liability for the first quarter of fiscal 2011. While stock-based compensation expense may vary based on factors such as stock price or volatility, Dolby continues to target stock-based compensation expense for fiscal 2011 of approximately $47 million to $48 million. In addition, Dolby continues to target charges related to the amortization of acquired intangibles for fiscal 2011 of approximately $13 million and restructuring charges of approximately $1 million to $2 million. Dolby is now targeting diluted shares outstanding of approximately $113 million.

These targets lead to an updated fiscal 2011 diluted earnings per share target range of $2.49 to $2.65 on a GAAP basis and $2.75 to $2.91 on a non-GAAP basis.

The Company’s Conference Call Information
Members of Dolby management will lead a conference call open to all interested parties to discuss Dolby Laboratories’ Q2 2011 fiscal year financial results at 2:00 p.m. PT (5:00 p.m. ET) on Thursday, May 5, 2011.

Access to the teleconference will be available over the Internet from http://investor.dolby.com/medialist.cfm or by dialing 1-888-428-9496. International callers can access the conference call at 1-719-325-2495.

A replay of the call will be available from 5:00 p.m. PT on Thursday, May 5, 2011, until 9:00 p.m. PT on May 12, 2011 by dialing 1-877-870-5176 (international callers can access the replay by dialing 1-858-384-5517) and entering the confirmation code 6039019. An archived version of the teleconference will also be available at www.dolby.com.

Non-GAAP Financial Information
To supplement Dolby’s financial statements presented on a GAAP basis, Dolby provides non-GAAP financial measures of gross margin, operating expense, tax rate, and diluted earnings per share. These measures are adjusted to exclude the charges and expenses discussed above. Dolby presents such 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, as applicable, both GAAP information that includes the impact of stock-based compensation expense, amortization of acquired intangible assets through business combinations, restructuring charges, and the related tax impact of all of these items on the provision for income taxes, and the non-GAAP measures that exclude such information 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 such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Whenever Dolby uses such a non-GAAP financial measure, it provides a reconciliation of the non-GAAP financial measure to the most closely applicable GAAP financial measure. 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 measure as detailed above. Investors are also encouraged to review Dolby’s GAAP financial statements as reported in its SEC filings. A reconciliation between GAAP and non-GAAP financial measures is provided at the end of this press release and at http://investor.dolby.com/medialist.cfm.

Forward-Looking Statements
Certain statements in this press release, including statements relating to Dolby’s expectations regarding revenue, gross margin, operating expense, tax rate, and diluted earnings per share for fiscal 2011, and its statements regarding extending its technologies into new geographies and new devices and the benefits that may be derived from them 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 the effects of macroeconomic conditions; risks associated with trends in the markets in which Dolby operates, including the personal computer, DVD and Blu-ray Disc™, broadcast, consumer electronics, gaming, mobile, and automobile markets; pricing pressures; the timing of Dolby’s receipt of royalty reports and/or payments from its licensees; 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 in the entertainment industry; 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 related to digital entertainment delivery, by acquiring and successfully integrating businesses or technologies; and other risks detailed in Dolby’s Securities and Exchange Commission 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) is the global leader in technologies that are essential elements in the best entertainment experiences. Founded in 1965 and best known for high-quality audio and surround sound, Dolby creates innovations that enrich entertainment at the movies, at home, or on the go. For more information about Dolby Laboratories or Dolby® technologies, visit www.dolby.com.

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