Dolby Laboratories, Inc. (NYSE:DLB) Q4 2018 Earnings Conference Call Transcript

Oct 24, 2018 • 05:00 pm ET


Dolby Laboratories, Inc. (NYSE:DLB) Q4 2018 Earnings Conference Call Transcript


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Ladies and gentlemen, thank you for standing by. Welcome to the Dolby Laboratories conference call discussing Fiscal Fourth Quarter and Fiscal 2018 Results. During the presentation, all participants will be in a listen-only mode. Afterwards, you will be invited to participate in a question-and-answer session. (Operator Instructions) As a reminder, this call is being recorded today, Wednesday, October 24, 2018.

I would now like to turn the conference call over to Elena Carr, Director of Corporate Finance and IR for Dolby Laboratories. Please go ahead, ma'am.

Elena Carr

Good afternoon. Welcome to Dolby Laboratories' Fourth Quarter 2018 Earnings Conference Call. Joining me today are Kevin Yeaman, Dolby Laboratories' President and CEO; and Lewis Chew, EVP and CFO.

(Forward-Looking Cautionary Statements)

During today's call, we will discuss GAAP and non-GAAP financial measures. A reconciliation between the two is available in our earnings press release and in the Dolby Laboratories Investor Relations data sheet on the Investor Relations section of our website.

As for the content of the call, Lewis will begin with a recap of Dolby's financial results and provide our fiscal 2019 outlook, and Kevin will finish with a discussion of the business.

So with that introduction behind us, I will turn the call over to Lewis.

Lewis Chew

Thanks, Elena. I love how you do that from memory. Okay, good afternoon, everyone. I will focus on three topics today, Q4 results, FY18 results, and the outlook for fiscal 2019. Now, Q4 is the last quarter that we will be reporting revenue under ASC 605, the old revenue accounting standard. Starting Q1 of FY19, we will be applying ASC 606, the new revenue accounting standard. So, when I get to the forward outlook, I will preface that with a few comments on our adoption of 606 and what the changes are compared to 605.

So let's go with the results, starting with Q4 that we just completed. Total revenue in the fourth quarter was $265 million, licensing revenue for the quarter was $240 million, which was ahead of our projections, while products and services came in at $25 million, which was below expectation. I'll comment more on that in a minute.

But first, here the trends we saw in licensing revenue during Q4, broken down by the end markets that we serve. Broadcast represented about 45% of total licensing in the fourth quarter. Revenues in this market were up about 15% sequentially, driven by higher recoveries, along with higher volume from set-top boxes. Year over year, broadcast was up 7%, due to higher recoveries, along with higher volume in TVs.

Consumer electronics represented about 16% of total licensing in the fourth quarter. Licensing in this area was down sequentially by about 6%, due mainly to timing of revenue. For year over year, consumer electronics was up about 50%, due to higher recoveries, along with higher revenue from DMAs and sound bars.

Mobile devices. Mobile devices represented approximately 12% of total licensing in the fourth quarter, and sequentially, mobile was down by about 56% due to