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Dolby Laboratories Inc  (NYSE:DLB)
Q1 2019 Earnings Conference Call
Jan. 30, 2019, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Dolby Laboratories conference call discussing Fiscal First Quarter 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, Wednesday, January 30th, 2019.

I would now like to turn the conference call over to Elena Carr, Director of Investor Relations for Dolby Laboratories. Please go ahead, Elena.

Elena Carr -- Director of Investor Relations

Good afternoon. Welcome to Dolby Laboratories First Quarter 2019 earnings conference call. Joining me today are Kevin Yeaman, Dolby Laboratories' President and CEO; and Lewis Chew, Executive Vice President and Chief Financial Officer.

As a reminder, today's discussion will include forward-looking statements. These statements are subject to risks and uncertainties that may cause actual results to differ materially from the statements made today. A discussion of some of these risks and uncertainties can be found in the earnings press release that we issued today under the section captioned Risk Factors, as well as on our most recent Form 10-K.

Dolby assumes no obligation and does not intend to update any forward-looking statements made during this call as a result of new information or future events.

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

So I will now turn it over to Lewis.

Lewis Chew -- Executive Vice President and Chief Financial Officer

Okay. Good afternoon, everybody, and thank you for joining our first quarter call. As quick reminder from some comments I made last earnings call last quarter,

the new revenue accounting standard, formally referred to as 606, i.e. ASC 606, became effective for us at the beginning of the year, and we adopted that new standard using the full retrospective method and that required us to recast prior year's revenue by applying these new rules retrospectively.

So, during my comments today, any comparisons I make to prior year revenue numbers are in reference to those 606 recasted numbers. And in the earnings release that we put out today, we included a table that shows FY '18 revenue as adjusted under 606 by quarter. So, hopefully that will be helpful.

So here are the Q1 results, in the first quarter of FY '19, total revenue was $302 million. Within that, licensing revenue was $260 million, which was in line with our expectations, while products and services was $42 million, which was a little above the projection we had for the quarter.

Total revenue in Q1 of last year was $300 million and that included a large recovery of more than $20 million in mobile licensing that did not repeat in this year's Q1. So let's review the trends that we saw in licensing revenue in the end markets that we serve. First, broadcast. Broadcast represented about 38% of total licensing in the first quarter and revenues in this market were down about 2% sequentially, reflecting lower recoveries offset partially by seasonally higher TV revenue.

Year-over-year, broadcast was down about 9% due to lower recoveries and timing of revenue. Consumer electronics represented about 17% of total licensing in the first quarter. Licensing in this area increased sequentially by about 8% and year-over-year by about 16%.

The sequential growth was driven by seasonally higher volume and sound bars, DMAs and home theater offset partially by lower recoveries, and year-over-year we saw higher revenue from DMAs, sound bars and other products. Mobile devices represented approximately 13% of total licensing in the first quarter.

On a sequential basis, the percentage increase was quite large because this was an instance where the Q4 '18 mobile number was significantly reduced by the recast, which impacts this sequential trend. So if I set aside the impact from the recast, mobile business in Q1 '19 was about comparable to Q4. Year-over-year mobile was down about 40% or a little over 40% due primarily to the large recovery we got in Q1 last year that didn't repeat in this year's Q1.

PC represented about 9% of total licensing in the first quarter. PC was down sequentially by about 11% and this was driven by lower ASP due to mix as well as lower recoveries. PC year-over-year increased by around 14%, and that was due primarily to timing of revenue under contract.

Licensing and other markets represented about 23% of total licensing in the first quarter. They were up about 35% sequentially and about 37% year-over-year. In both cases, the increase was driven by gaining higher recoveries in auto and higher revenue from Dolby Cinema. So that's licensing.

Products and services revenue was $42.1 million in Q1 and that compares to $25.9 million in Q4 and $29.4 million in last year's Q1. And the prior year numbers were not materially affected by the 606 recast. The growth in products and services was largely driven by Dolby Cinema arrangements that have fixed amounts, paid or committed upfront along with the percentage of box office over time.

The upfront amounts are accounted for as product sales and any ongoing share of box office -- the percentage share will be accounted for as licensing revenue. And also in Q1, in products and services, we had growth in cinema products and in Dolby Voice products.

So stepping back and recapping the overall revenue for the quarter, Q1 of last year was $300 million and that included a large mobile recovery of $20 million plus. We didn't have that in this year's Q1, but we grew in Dolby Cinema, consumer electronics and gaming, to more than offset that factor and finish this year's Q1 at $302 million. So let's move on to margins and operating expenses.

Total gross margin in the first quarter was 87.2% on a GAAP basis and 87.8% on a non-GAAP basis. Products and services gross margin on a gap basis was 35.3% in the first quarter compared to 20.2% in Q4. And products and services gross margins on a non-GAAP basis was 37.8% in the first quarter compared to 23.8% in Q4.

Our operating expenses in the first quarter on a GAAP basis were $195.1 million compared to $196.8 million in the fourth quarter. Operating expenses on a non-GAAP basis were $173.4 million in Q1 compared to $178.6 million in the fourth quarter.

Operating income in the first quarter was $68.7 million on a GAAP basis or 22.7% of revenue compared to $94 million or 31.4% of revenue in Q1 of last year. Operating income on a non-GAAP basis in Q1 was $92 million or 30.4% of revenue compared to $114.4 million or 38.2% of revenue in Q1 of last year.

Income taxes on a GAAP basis was a benefit of $24.1 million, which includes $35 million of credits relating to US tax reform. And the non-GAAP income tax rate in Q1 was 19.2%. Net income on a GAAP basis in the first quarter was $98.2 million or $0.93 per diluted share compared to a loss of $53.3 million or $0.52 per diluted share in last year's Q1.

And just to note that last year's Q1 net results did include a discrete tax charge of $138 million for US tax reform. So net income on a non-GAAP basis in the first quarter was $78.7 million or $0.74 per diluted share and that compares to $95.4 million or $0.90 per diluted share in Q1 of last year.

During the first quarter, we generated about $57 million in cash from operations and ended the quarter with over $1.1 billion in cash and investments. We bought back about 1.6 million shares of our common stock in Q1 and ended the quarter with $239 million of stock repurchase authorization still available.

We also announced today a cash dividend of $0.19 per share, which will be payable on February 21, 2019 to shareholders of record on February 12, 2019. Now let me cover the outlook starting with the full year. For the full year FY '19, we are maintaining the guidance ranges for both revenue and operating expense that we gave last quarter.

We estimate that total revenue will range from $1.240 billion to $1.280 billion. Within that total, we estimate that licensing will range from $1.80 billion to $1.120 billion. While products and services are estimated to range from $150 million to $170 million for the year.

We've now completed our recap of last year's revenue under 606 and the FY '18 recasted revenue was $1.55 billion. Now, the final recasted revenue for FY '18 is lower than the estimate I provided at the last call and the primary reason for the difference between 605 and 606 revenue for FY '18 remains the same. Namely under 606, certain revenue was shifted to prior year, in some cases as far back as five years due to some differences in accounting related to multi-year contracts. So getting back to my discussion of the FY '19 forward outlook, incorporated into the revenue range for the year, that’s FY '19, are the following factors. We estimate that broadcast revenue will grow, as we see our technologies incorporated into more TVs and set-top boxes.

In PC licensing, we'll continue to see downward pressure from ASPs due to mix, but some of that will be offset by more adoption of our newer technologies. Consumer electronics is projected to grow modestly, driven by sound bars and DMAs. We expect mobile revenues to increase, we are seeing some organic growth helped by further penetration. Also, the year-over-year mobile comparison is impacted by the recast.

We expect growth in other licensing from Dolby Cinema, gaming and Dolby Voice. And finally, in product and services, we anticipate growth in cinema products, Dolby Voice and Dolby Cinema. As it relates to Dolby Cinema, the product revenue growth is associated with those transactions that include an element of fixed amounts paid or committed upfront like I discussed earlier.

Gross margin for the year is projected to be around 87% plus or minus on a GAAP basis and about 88% plus or minus on a non-GAAP basis. Operating expenses are projected to range from $786 million to $796 million on a GAAP basis and from $705 million to $715 million on a non-GAAP basis.

Other income is estimated to range from $21 million to $24 million for the year and the effective income tax rate for the year on a GAAP basis is expected to range from 13% to 15%, reflecting adjustments recorded this year for revised estimates and new legislation pertaining to US tax reform. And then the non-GAAP effective tax rate for the year is expected to range from 19% to 21%.

Let's move on to second quarter outlook. For Q2 of FY '19, we anticipate that total revenue will range from $325 million to $345 million. Within that, we estimate that licensing will range from $295 million to $305 million, while products and services is projected to range from $30 million to $40 million.

Q2 gross margin on a GAAP basis is estimated to be around 88% and the non-GAAP gross margin is estimated to be around 89% plus or minus. Operating expenses in Q2 are projected to range from $206 million to $210 million on a GAAP basis and from $186 million to $190 million on a non-GAAP basis. Other income is projected to be around $5 million for the quarter.

And regarding the effective tax rate, on a GAAP basis, we anticipated in Q2, we will record a discrete tax expense of $18 million to $22 million to account for a revision of US tax reform that was just enacted into law earlier this month. And because of this, our GAAP tax rate in Q2 is estimated to range from 38% to 42%.

Our non-GAAP effective tax rate for Q2 is projected to range from 19% to 21%. So based on a combination of the factors, I just covered, we estimate that Q2 diluted earnings per share will range from $0.48 to $0.54 on a GAAP basis and from $0.81 to $0.87 on a non-GAAP basis.

So now, I would like to hand it over to Kevin. Kevin?

Kevin Yeaman -- President, Chief Executive Officer

Thank you, Lewis, and good afternoon, everyone. We're off to a strong start to 2019. We're just back from CES where Dolby Vision and Dolby Atmos, were once again on display across the show floor.

Before diving in, it's worth reflecting our journey. Three years ago, Dolby Vision was introduced at CES with LG and VIZIO TVs, while Dolby Atmos was just moving beyond AVRs to sound bars. In 2017 at CES, Sony announced support for Dolby Vision and our first combined Dolby Vision and Dolby Atmos experience was launched by LG.

Last year, we saw the adoption of these experiences on an increasing range of device types and content services. This year, Dolby Vision and Dolby Atmos have become robust ecosystems with increasing momentum across a broad range of content and devices.

New announcements included Panasonic's first TV with Dolby Vision and Dolby Atmos. They joined eight other partners that have embraced the combined experience for TVs including LG, Sony and TCL. Dell announced its first Dolby Vision PC, and Lenovo expanded its support for the combined Dolby Vision and Dolby Atmos experience further into its line of PCs.

Also at CES, we demonstrated our solutions for mobile, including iPhone support of Dolby Vision as well as Samsung and Huawei smartphones with Dolby Atmos. In the home entertainment space, we showcased Apple 4K TV as well as the Amazon 4K Fire TV, both of which support the combined Dolby Vision and Dolby Atmos experience.

The number of sound bars supporting Dolby Atmos continues to grow and are available in a broad range of price points. And Xbox, which is the first game console with the combined experience, is now in market. We expect the first pay-TV set-top boxes with Dolby Vision and Dolby Atmos in market later this year.

Partners such as iTunes, Netflix, Amazon, Rakuten, Tencent and iQiyi are streaming an increasing amount of content in Dolby Vision and Dolby Atmos. For example, as it relates to Dolby Vision, iTunes currently has over 400 movies and Netflix has over 500 hours of content. We are also bringing the Dolby Vision and Dolby Atmos experience to more forms of content including live sports.

Some examples of major live sporting events broadcasted in Dolby Atmos this year were Premier League Soccer in Europe and the Winter Olympics. We've also had a number of trials in Dolby Vision. And this quarter marked the first live professional sports broadcast in North America in Dolby Atmos, as DIRECTV began broadcasting select NBA games in November.

We have a robust ecosystem with a broad base of content and consumer products, and even with this strong presence, most of the opportunity is still ahead of us. Let's turn to Dolby Cinema. We currently have more than 20 exhibitor partners with about 200 screens open and another 200 committed. This quarter, Tahoe Cinemas in China announced plans to open 10 Dolby Cinema screens.

This adds to our growing presence in the Chinese market where we now have eight Dolby Cinema partners including Wanda, Jinyi and CGV. We're excited that the first Dolby Cinema opened in the UK at Odeon Leicester Square, which is one of the most iconic venues in Europe and a frequent home to movie premieres. Also this quarter, the first Dolby cinema in Japan opened with T-Joy.

There are now over 200 titles, which have been released or announced in Dolby Vision and Dolby Atmos, including the top 15 box office leaders in 2018. Beyond Dolby Atmos, Dolby Vision and Dolby Cinema, we continue to apply our innovations across the many ways in which people experience entertainment and communications.

Recent examples include, Dolby Voice Room, which includes an integrated video solution to go along with the Dolby Conference Phone. We see a solid uptake of Dolby Voice Room in our first full quarter of sales, and we're encouraged by the growth in the pipeline.

More recently, we launched Dolby Dimension, which is the first wireless headphone optimized for entertainment in the home. It allows people to have more immersive experiences in situations where they were otherwise making compromises. And we are happy to see the initial response. It is currently available on Amazon, as well as the dolby.com website.

So to wrap up, I'm pleased with our start to the year. We are seeing growing momentum for Dolby Atmos, Dolby Vision and Dolby Cinema. We have a healthy pipeline of innovation, which will enable us to elevate a broad range of audio visual and communication experiences, as we are doing most recently with Dolby Voice Room and Dolby Dimension. All of this gives us confidence that we will continue to deliver revenue and earnings growth.

I look forward to updating you next quarter. And with that I'll turn it over to Q&A.

Questions and Answers:

Operator

Thank you. (Operator Instructions) And we will take our first question from Steven Frankel with Dougherty. Please go ahead.

Steven Frankel -- Dougherty & Co. -- Analyst

Good afternoon. Kevin, maybe we can start by talking about the Panasonic and TP Vision decision to add Dolby Vision. What should we take away from that, especially in terms of the "format war between HDR10+ and Dolby Vision"?

Kevin Yeaman -- President, Chief Executive Officer

Well, I think, that Steve, as I said in my prepared remarks, we see a very robust ecosystem for Dolby Vision, broad adoption across TV, other devices, content. And I would say that, you know, at CES our team collectively every year takes over 400 meetings. And what I consistently heard from my team this year is that there was a notable shift in conversations from the what and the why, the evangelizing why one ought to have Dolby Vision or Dolby Atmos and a notable shift towards the how and the when. And so I think that in terms of the Dolby Vision and Dolby Atmos being established -- ecosystems establish value propositions, we feel really good about where we are and Panasonic and TP Vision are just, you know, another -- are another couple of examples of people who have come on board.

Steven Frankel -- Dougherty & Co. -- Analyst

And there's been some concern in the media about the Chinese economy. It seems like you have new announcement here with an exhibitor in China. What's your business like in China and if you've seen any headwinds from what's going on there?

Kevin Yeaman -- President, Chief Executive Officer

I think one area that we've talked about in prior quarters and that we consider coming to the year is we did start to see some slower activity on the cinema product side. On the other hand, in terms of our partnerships and plans as it relates to Dolby Cinema, Dolby Vision and Dolby Atmos, we haven't detected any major changes in the tone of the conversation and people's plans.

Now having said that, we are well aware of all the news in the market and we have looked very closely at all of these data points, including announcements of other companies that have a significant presence in China, many of whom are customers and partners of ours, information from analyst, industry and financial et cetera. So we've looked at all that, and certainly it's clear that there could be some softness in China this year and that's something that we, very much, considered as we built our guidance range and ultimately held our guidance the same. And an important consideration there, on the other side of the equation is that, we do see strength in -- particularly at our consumer imaging, licensing programs in Dolby Vision and our patent licensing programs. And so when we weighed all that together, that's what led to feeling good about our outlook for the year and maintaining our guidance range.

Steven Frankel -- Dougherty & Co. -- Analyst

Great. And, Lewis, maybe you can help me understand the new seasonality when it comes to mobile. Your large, once a year customer that pays, is it correct that it now is going to be in the March quarter rather than the traditional June quarter payment?

Lewis Chew -- Executive Vice President and Chief Financial Officer

In general, our seasonality does shift to the previous quarter. And so, yes, to the extent and I'm not going to make a comment about a particular customer. If – in under 605, if we had things happening, let's say, in our Q3. For the most part those types of ongoing licensing revenue streams would shift to the previous quarter, yes.

Steven Frankel -- Dougherty & Co. -- Analyst

Okay. And on Dolby Voice, it's been a while it seems like it's on a slow build, but building, is there anything that you can do to maybe light a fire to that business and step it up some or is this just one of those businesses that's going to rollout kind of slow and steady as opposed to step function like Vision did?

Kevin Yeaman -- President, Chief Executive Officer

Well, I think, it did grow nicely year-over-year. I think it's fair to characterize it, as it's been a steady build. And it's always our goal to get to an inflection point. And, I think, one of the things we have done is, released the Dolby Voice Room product which we think addresses the huddle room market and the desire for an integrated solution that solves both the video and audio conference you need to get the value of all the value that comes along with Dolby Voice, with additional innovation and an integrated video experience. So that's -- that was step, that was one step toward what we think is necessary to get to an inflection point. That did contribute to the growth in Dolby Voice this quarter. And I think to get to that next point, we have to both make sure that we are a natural part of the sales motion with the people that we're partnered with and, yes, we have a number of programs and initiatives in place to make sure that we're as aligned as we can be with them. And then of course we're always in pursuit of additional partnerships and channels to get the Dolby Voice Room experience to market.

Steven Frankel -- Dougherty & Co. -- Analyst

And so should we expect additional reseller partners as we go through the year?

Kevin Yeaman -- President, Chief Executive Officer

Well, I think, like, as within any of our areas, I would say, that we think we can add value to a wide range of partners. And you can certainly assume that we're in pursuit of additional partnerships and we'll keep you posted.

Steven Frankel -- Dougherty & Co. -- Analyst

Okay, great. Thank you.

Lewis Chew -- Executive Vice President and Chief Financial Officer

Yeah, and then based on your question, I think, now their new slogan is going to be Baby, Come On Light My Fire.

Kevin Yeaman -- President, Chief Executive Officer

There you go.

Lewis Chew -- Executive Vice President and Chief Financial Officer

Oh, that's already a song. That's already a song. See, there's no more questions. One more joke, there's no more questions.

Operator

We will now take our next question from Ralph Schackart with William Blair. Please go ahead.

Eric Kogut -- William Blair & Company -- Analyst

Hey, this is Eric in for Ralph. So, with the accounting change, how soon or late do your licensing customers provide you with the previous quarter’s shipment counts. So right now, for example, it's about a month into Q2. Are any of the true-ups and true-downs considered into the Q2 guidance? And if not, is there a ballpark, I'm just trying to get a sense of the magnitude of these true-ups? Thanks.

Kevin Yeaman -- President, Chief Executive Officer

Sure, the typical pattern would be that our customers will report our Q1 shipments to us throughout the course of Q2. And so we in fact won't know that true up until the quarter is done. So, at this point, I can't comment on a true up. Our estimated revenue we booked for Q1 tries to contemplate the most accurate number we can come up with. But the true up is really going to be whatever is the difference between that estimate and actual which we will only know when we get the reports.

Eric Kogut -- William Blair & Company -- Analyst

Okay. Thanks a lot. And then just a follow-up. Last quarter you said that new products revenue for this year was on pace to grow at the same rate as last year. I think that's about 65% or 67%. Is that still the case, and if there's any upside to that estimate where do you think that would come from? Thanks.

Kevin Yeaman -- President, Chief Executive Officer

Yeah. So the -- that references our consumer imaging licensing programs including Dolby Vision and our patent programs, Dolby Cinema, and Dolby Voice. And we said that we expected that it would grow, we felt like, it could grow at least the same rate as last year, which you remember correctly was 65%, I think. I think that there's obviously a range of outcomes. I think that any of those individual programs, there are scenarios where they could contribute to the upside to the 65%. One of the things I said earlier is we're -- as we're contemplating guidance for Q1 specifically is consumer imaging licensing programs is in an area where we have seen some strength that we considered into as we formulated guidance in the context of all that's going on in the market.

Lewis Chew -- Executive Vice President and Chief Financial Officer

Well, it's fair to say, Kevin, that we are absolutely still comfortable with that same statement.

Kevin Yeaman -- President, Chief Executive Officer

That is correct, yeah.

Eric Kogut -- William Blair & Company -- Analyst

Great. Thanks a lot.

Operator

Our next question will come from Eric Wold with B. Riley. Please go ahead.

Eric Wold -- B. Riley & Co., LLC -- Analyst

Thank you. Good afternoon. A couple of questions, I guess, one around Vision. Clearly, content creators are speaking with their decision to focus on Vision, and that's also helped you to drive the decision with the product manufacturers to entering the licenses. I mean, the trends you're seeing and discussions you're having with both parties, is this an environment we're going to have both HDR10 and Dolby Vision in the market in number of years, do you think it won't make sense to have both. And then two, where do you ultimately think penetration rates for Vision and Atmos across SKU counts pick the end market you want or the product can be in the coming years and how high you can get (inaudible) may get?

Kevin Yeaman -- President, Chief Executive Officer

So, to the first point, I mean, our approach to the market has been that there will be Dolby Vision and that there will also be support for HDR10. And in fact, we offer an implementation which can work both to make that easy for our customers. And as to your second question, like you said, we are really pleased with our adoption. So, broadly across both playback and content, that is primarily still concentrated at the high end, whether you're talking about TVs or PCs or any category, we're still mostly concentrated in the high end. And that's been a great start for us and it's been a great contributor to revenue growth. But over the longer term, we think that this expectation for the highest quality content is going to spread broadly across these categories. And our goal is to grow with it to make sure that when everybody -- whenever someone is experiencing UHD and 4K, they're also getting the benefit of Dolby Vision and Dolby Atmos.

Eric Wold -- B. Riley & Co., LLC -- Analyst

And then last question on mobile. I think you mentioned in the, Lewis, in your comments around guidance. We expect mobile will increase and obviously mobile is being, I guess, the growth rates for this year is benefiting from the recasting last year. Can you give us a sense of kind of what an apples-to-apples growth rate for mobile would be in this year’s guidance? And then, any kind of level of that that you consider minimum guarantees or I don’t say fixed, but kind of minimum guarantee levels versus something that would be 100% unit based?

Lewis Chew -- Executive Vice President and Chief Financial Officer

Sure. There's a lot in there. So maybe, I'll do a little bit of level setting for the whole audience. What Eric is referring to is that in the 606 recast, one of the things I tried to highlight in my prepared comments, but I took a lot more deliberation a quarter ago was mentioning that in some cases under 605, revenue that could not ever have been recognized upfront was actually required to be recognized upfront under 606. So when we did the recast, you see revenue moving out one year into prior years, and in some cases as far back as five years. And so, as you pointed out, Eric, some of these things are affecting the comparisons year-over-year. But another thing that I said last quarter that I'll reiterate this quarter is that in FY '19, we don't anticipate a significant change in upfront revenue compared to what we had been doing under 605. So, under 605, we ran the business where our revenue sought to emulate or closely align with our customers’ shipment behavior and demand. And so our FY '19 numbers, as just sort of a broader statement is not -- our FY '19 guidance is not assuming or benefiting from some assumption with the uptick in upfront revenue because of 606. So I think broadly that's across everything including mobile, and this is really as it pertains to licensing, setting aside a product sale, product sales recognized when you have the sale of course. And then within mobile. Mobile, if you look at the mobile percentages, and if you haven't had a chance to look at the press release our -- even our recasted mobile number for last year was 16% of revenue. I'll remind the audience that just a few years ago that number was 10%. So we have shown steady growth in mobile, we expect growth this year. The hard part about your question to answer is some sort of magical comparison that sets aside this recast issue. Like I said, setting aside the recast issue, we do expect mobile to grow, but it's hard for me to give you some sort of quantified number. Overall, the company's growth rate is healthy this year no matter whether you look at it from a 605 or 606 basis. And in mobile, the growth we get will come from not necessarily just relying on the market to grow, but we are seeing more adoption or penetration through both our direct licensing programs and patent licensing programs. So, I think, mobile is still a good story for us.

Eric Wold -- B. Riley & Co., LLC -- Analyst

Perfect. Thank you guys.

Operator

We will now take our next question from Jim Goss with Barrington Research. Please go ahead.

James Goss -- Barrington Research -- Analyst

Thanks. First, I would like to ask Cinema and Vision and Atmos. As you've pointed out over the quarters -- in a number of categories both in products and services. Is there any way to estimate what the overall impact and sizes and the whole business or is it too intertwined to really breakout. I know it can't be broken out neatly, but is there any judgment you'd make on that score?

Lewis Chew -- Executive Vice President and Chief Financial Officer

Yeah, a couple of comments. And first of all, I'm happy to confirm that in fact Dolby Cinema is growing at a nice pace and you can see the non, per se, non-financial data every quarter. You can see Kevin talks about the number of screens growing, so we're now up to 200 screens. So both quarter-on-quarter and year-over-year we're seeing growth. Typically or historically, the company we've broken things out when they get to 10% of revenue, I'll be happy when we get to that point, we haven't broken it out so far. I will say though that I pointed out in my prepared comments, that in the growth in products and services this quarter that was healthily driven by these blended deals on Dolby Cinema that involve some upfront amounts. But within our licensing, we don't have it broken out, so I can appreciate you want that and we'll look to that, look to break that out as we get to the point of what our historical practice has been.

James Goss -- Barrington Research -- Analyst

Okay. And actually my next question was going to be in gaming and consumer electronics at 23% (ph) there. I'm assuming that that's the one that's pushing the envelope. So that you might be able to justify breaking it up at some stage. But even when you get to that, it's still intertwined in broadcast and PC and some of the others, I would imagine?

Lewis Chew -- Executive Vice President and Chief Financial Officer

Yeah, I think, if your question, Jim, is, are we looking to break out some line item called Vision revenue that's not our current expectation because Dolby Vision is a very important and fundamental platform that we have that goes into lots of devices. So today we try to talk about our revenues in terms of breaking out more by end market than by a "technology".

James Goss -- Barrington Research -- Analyst

Okay. And I know in the Cinema business, per say, within the theatrical space AMC is the only partner, only major partner you have in the US, the others aren't necessarily inclined to coordinate with you. Are you seeing more uptake in some of the smaller players that there will be something to accompany AMC, even if it's not one of the majors partnering with you the way they do?

Kevin Yeaman -- President, Chief Executive Officer

Well, I think, as we've talked about in the past, we're very excited about our relationship with AMC. They've taken us to, you know, over a 100 screens. There -- they've been growing very quickly, and so it's given us a fantastic footprint in the United States. And so they said in previous discussions, our focus has been on opening up other markets. And so to that end, opening our first of what we believe will be many screens in the UK is a real highlight for us this quarter, especially ODEON Leicester Square, which really is one of the most iconic locations they've just renovated it. They've put significant effort into that. It's absolutely stunning. And then we also opened our first Dolby Cinema in Japan. So, you know, in general, the more the program developed, the stronger the value proposition is that we have to sell generally because we have more content, a proven value proposition, and our focus is going to continue to be expanding in North America. We've been doing that very swiftly with AMC and opening up these additional markets.

James Goss -- Barrington Research -- Analyst

Okay. Are the payments related to Vision and Atmos and devices based on numbers of devices or the value of the devices at the moment?

Kevin Yeaman -- President, Chief Executive Officer

In general, our licensing business practices are tied to customer unit volumes, that's our general practice.

James Goss -- Barrington Research -- Analyst

Okay. That's made it that way too. Then finally, in the video conferencing area what is your competition. You know, you talked about maybe that's a way that voice could grow. Going back to Steve's question and this thing you were talking about today, the Dolby Voice Room I think. Is that -- that does seem like a way to break through a little bit unless you're bucking up against a market that already exists and you have to sort of carve your way into it. You know what -- how would you characterize that opportunity?

Kevin Yeaman -- President, Chief Executive Officer

Yeah, I mean, we started a few years back in the more traditional audio conferencing space, and that's populated by all the players that you're used to seeing in conference rooms in your travel. As we've shifted to the huddle room, you'll see a lot of the same players targeting that space, but it's much more open playing field because the customers are looking for solutions like Dolby Voice Room, which haven't been available in the past and people are investing in a lot more huddle rooms within their spaces. And so they're looking for new equipment. And so we're much less inclined to be selling against, we have something that works, and it's not fully depreciated, and more likely to be selling with our partners into we need something for these rooms that we haven't had in the past. And then, of course, that's all with the Dolby difference, the Dolby Voice experience, we think that we can bring to life better than anybody. And the differentiating features on the video experience as well.

James Goss -- Barrington Research -- Analyst

All right. Thanks very much. Appreciate it.

Lewis Chew -- Executive Vice President and Chief Financial Officer

Okay, Jim. Thanks.

Operator

(Operator Instructions) We'll take our next question from Paul Chung with JPMorgan. Please go ahead.

Paul Chung -- J.P. Morgan Securities -- Analyst

Hi, guys. Thanks for taking my questions. So just on broadcast, you mentioned you expect modest growth this year. First, just want to confirm this is from your recast numbers, and I'm getting to around 390ish. And then you mentioned set-top boxes releases later this year, but what do you see from your customers that gives you some more confidence for growth in broadcast this year?

Lewis Chew -- Executive Vice President and Chief Financial Officer

Yes, I mean, I'll take the first half of that, but certainly, yes, for the audience and for yourself, all of the comments I made in the call unless I specifically said otherwise are versus 606, that makes it easy. So, yes, when I talk about growth it's against the 606 number. In terms of where we see some of the strength, I mean let Kevin talk a little bit about that.

Kevin Yeaman -- President, Chief Executive Officer

Yes, I would say, the primary driver are the adoptions of our newer technologies, including Dolby Vision and Dolby Atmos, our consumer imaging programs more broadly, broadcast is probably where we have -- it is probably where we have -- it is where we have the largest additional footprint because we started with consumer licensing, primarily in the TV area. We're now seeing growth in the set-top box area as well as other device categories, but it's primarily driven by adoption of additional Dolby experiences.

Paul Chung -- J.P. Morgan Securities -- Analyst

Okay, great. Thanks. And second question just on, from the 606 accounting change. I assume your cash flow seasonality stay the same. Can you confirm?

Lewis Chew -- Executive Vice President and Chief Financial Officer

Yeah, the cash flow that we presented historically is largely unaffected by the 606 recast. Going forward, our cash flow pattern shouldn't change dramatically as a result of 606. Remember, 606 is very much an accounting driven standard, not so much change in the way we do business per se which ultimately manifests itself and what you're asking about which is the cash flow.

Paul Chung -- J.P. Morgan Securities -- Analyst

Right. And then lastly just one number looked weird in the recast that I saw is the mobile with 1% of licensing in Q4. Is that correct? And is it safe to assume that in 4Q this year we should see a much higher revenue number there? Thanks

Lewis Chew -- Executive Vice President and Chief Financial Officer

Yeah, it will probably not be a good time to make a joke that we forgot the decimal. Yes, that number is correct, and we anticipate that would come up. The first thing I would highlight is, you swoop up to a high level for the full year, as I said earlier in anticipation of people looking at that table. Mobile for the year even as recast for the full year was 16% of revenue and that compares, like I said, it was probably 10%, three or four years ago. In terms of Q4, we had some negative adjustments in that Q4 that amplified revenue that was shifting to our prior year. It’s for a small number of instances where we may have contracts that get modified for normal business purposes, and under 606, there in the context of the recast, we may have some situations where you have revenue that's recorded as a positive in a prior year, and in a negative in a subsequent year in the context of recast and some of that fell into -- affected the whole recast, but some of that fell into Q4 mobile in particular and that's what's affecting that number. But obviously we don't believe that 1% per say is reflective of our true business presence in mobile because we see actually an expanding number of people using us. So, going forward, I don't think we see quarters where that 1% will repeat itself. It really is sort of an artifact of the mechanics of the 606 recast.

Paul Chung -- J.P. Morgan Securities -- Analyst

Okay, thanks. And then last question is on your share repurchase was pretty materially in 1Q. How should we think about the cadence of buybacks throughout the rest of the year? Thank you.

Lewis Chew -- Executive Vice President and Chief Financial Officer

Sure. I think at a high level both Kevin and I have committed to having a multi-pronged strategy of returning cash to shareholders, but also reinvesting in the business, and we do all of those. And over the last year, one of the offshoots of tax reform is that more of the cash that’s used to be restricted to be used overseas is now available. So what you saw this quarter was we had an approval, we came into the quarter with over $300 million of approval. So we took an advantage of that to buyback stock, return cash to shareholders, and we ended the quarter with still over $1.1 billion, which we feel is more than adequate to run the company. So I think, we don't ever project buybacks going forward, but obviously you can always look at a recent quarter and read off of that wherever you want to.

Paul Chung -- J.P. Morgan Securities -- Analyst

Thank you very much.

Operator

And this concludes today's question-and-answer session. I'd now like to turn the call back over to Kevin for any additional or closing remarks.

Kevin Yeaman -- President, Chief Executive Officer

Great. Thank you all for joining, and we look forward to keeping you updated on our progress.

Operator

This concludes today's conference. Thank you for your participation. You may now disconnect.

Duration: 46 minutes

Call participants:

Elena Carr -- Director of Investor Relations

Lewis Chew -- Executive Vice President and Chief Financial Officer

Kevin Yeaman -- President, Chief Executive Officer

Steven Frankel -- Dougherty & Co. -- Analyst

Eric Kogut -- William Blair & Company -- Analyst

Eric Wold -- B. Riley & Co., LLC -- Analyst

James Goss -- Barrington Research -- Analyst

Paul Chung -- J.P. Morgan Securities -- Analyst

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