A Dazzling Dolby Display: Fool by Numbers

By Anders Bylund – Updated Apr 5, 2017 at 10:09PM

Fast facts the Fool way.

On Jan. 31, media technologist Dolby Labs (NYSE: DLB) released first-quarter 2008 earnings for the period ended Dec. 28.

Most of the revenue growth came from a positively exploding licensing division, which grew sales by 49% over last year. Meanwhile, the cost to produce and maintain those licensing assets shrank by 57%. Neat trick, that -- not to mention profitable.
Dolby is enjoying the rise of the notebook computer, because consumers don't much mind paying a little more for a laptop that can double as a high-end, portable media center with Dolby technologies inside.
The company also collects royalties on every Blu-ray and HD-DVD player sold. Sony (NYSE: SNE) seems to have won, and Toshiba has apparently lost -- but Dolby is just happy to see the rivalry wrapped up either way.

(Figures in millions, except per-share data)

Income Statement Highlights

	Q1 2008	Q1 2007	Change
Sales	$150.2	$104.4	44.0%
Net Profit	$47.7	$29.9	59.5%
Earnings Per Share	$0.42	$0.27	55.6%
Diluted Shares	114.7	112.8	1.7%

Get back to basics with the income statement.

Margin Checkup

	Q1 2008	Q1 2007	Change*
Gross Margin	88.0%	81.8%	6.2
Operating Margin	44.8%	37.6%	7.2
Net Margin	31.7%	28.6%	3.1

*Expressed in percentage points.

Margins are the earnings engine.

Balance Sheet Highlights

Assets	Q1 2008	Q1 2007	Change
Cash + Short-Term Investments	$481.0	$528.4	(9.0%)
Accounts Receivable	$38.0	$12.4	205.7%
Inventory	$14.6	$11.6	25.9%

Liabilities	Q1 2008	Q1 2007	Change
Long-Term Debt	$9.2	$10.7	(13.9%)

The balance sheet reflects the company's health.

Cash Flow Highlights

	Q1 2008	Q1 2007	Change
Cash From Operations	$76.0	$47.2	61.1%
Capital Expenditures	$4.0	$1.8	122.5%
Free Cash Flow	$72.0	$45.4	58.7%
Owner Earnings	$47.7	$31.3	52.2%

Operating cash flow culled from the earnings call. Capital expenditures and depreciation/amortization were estimated at $4 million each, approximating the worst-case points of recent historical trends. Next time, just give us a cash-flow statement, OK?

Free cash flow is a Fool's best friend.

Competitive Context

	Market Cap	Trailing P/E Ratio	CAPS Rating
Dolby Laboratories	$4,739	38.8	*****
RealNetworks (Nasdaq: RNWK)	$865	12.1	**
DivX (Nasdaq: DIVX)	$493	39.0	**
DTS (Nasdaq: DTSI)	$400	N/A	*
Sonic Solutions (Nasdaq: SNIC)	$233	13.6	**

Using the latest reported numbers from Capital IQ, a division of Standard & Poor's.

Keep your partners close and the competition in your vest pocket.

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About the Author

Anders Bylund is a contributing Motley Fool media and technology analyst covering semiconductors, cloud computing, internet infrastructure, quantum computing, and streaming media. Previously, Anders was a systems administrator for Nielsen Technology and CSX, gaining hands-on experience with enterprise-class systems. He was also a freelance writer for Ars Technica, TIME, USA Today, CNN, WIRED, and AOL's Daily Finance. He holds a bachelor’s degree in English and a master’s degree in library and information sciences from Florida State University. He believes in coyotes and time as an abstract.

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