Image source: Dolby Laboratories.

Lend me your ears, Dolby Laboratories (NYSE:DLB) investors. Your favorite audio technologist reported mixed fiscal fourth-quarter 2015 results on Wednesday after the market close, and the stock jumped more than 4% Thursday as a result.

Let's take a closer look at what Dolby accomplished this quarter:

Dolby Laboratories results: The raw numbers


Fiscal Q4 2015 Actuals

Fiscal Q4 2014 Actuals

Growth (YOY)


 $229.5 million

 $227 million


GAAP Net Income

 $44.5 million

 $45.9 million






*Excludes a pre-tax gain of $26 million related to the sale of real estate. YOY: year over year. Data source: Dolby Labs.

What happened with Dolby this quarter?

  • Revenue was near the low end of Dolby's guidance, which called for sales of $230 million to $240 million, due to slightly lower sales of set-top boxes and consumer electronics.
  • Similar to last quarter, however, Dolby's bottom line was well above expectations, albeit thanks mostly to a positive $0.16-per-share contribution from the sale of real estate during the quarter. Even then, however, Dolby's earnings would have fallen within its guidance range of $0.27 to $0.33.
  • Products and services revenue increased 63.3% to $29.4 million, helped by higher sales of Dolby Atmos products, but primarily driven by sales of products stemming from Dolby's acquisition of Doremi Labs just under one year ago.
  • Licensing revenue fell 4.2% year over year to $200.1 million
  • Within licensing, broadcast revenue 46% of total licensing, down 7% year over year on lower volumes of TVs and set-top boxes. Dolby expects this segment to resume growth in the current quarter.
  • PC represented 18% of total licensing, down 11% year over year on declining PC market volumes and lower optical disc drive-enabled units
  • Consumer electronics were 13% of total licensing, down 8% year over year on lower Blu-ray and DVD player sales.
  • Mobile also represented roughly 13% of licensing, up 10% year over year on higher volumes of mobile devices incorporating Dolby's flagship audio technology.
  • Licensing revenue from "other" markets comprised the remaining 10% of licensing, down around 7% sequentially due to timing of gaming console units reported, but still up 11% year over year on automotive wins and new revenue from Dolby Voice.
  • There are now 10 Dolby Cinema locations open globally with three partners including AMC Entertainment (NYSE:AMC) in the U.S., Cineplex in Austria, and JT Bioscopen in The Netherlands.
  • AMC, in particular, is so impressed by the initial results of Dolby Cinema at AMC Prime that they're now targeting an accelerated rollout of 50 sites by the end of calendar 2016. Previously, AMC set a goal of 50 Dolby Cinema at AMC Prime locations by the end of 2018.
  • Gross margin in fiscal Q4 was 89% on a GAAP basis, and 90.4% on a non-GAAP basis -- both in line with guidance.
  • Dolby spent $59 million to repurchase 1.8 million shares during the quarter.
  • Dolby raised its quarterly dividend 20% to $0.12 per share
  • Ended the quarter with $992 million in cash and investments, no debt

What management had to say
Dolby CEO Kevin Yeaman succinctly explained in a prepared statement, "Although revenue was at the low end of our expectations, we are projecting growth in fiscal 2016. Dolby Cinema and Dolby Voice have captivated customers, and we expect these initiatives to contribute to higher revenues."

During the subsequent conference call, Yeaman elaborated that given AMC's accelerated plans for Dolby Cinema, as well as the fact more than 90 customers have already signed up for the BT MeetMe with Dolby Voice, he would "like to see at least $20 million" in fiscal 2016 revenue come from these two relatively new initiatives. This should supplement expected growth in core licensing segments from mobile and broadcast.

Looking forward 
For the current quarter, Dolby expects revenue of $235 million to $245 million, including Licensing revenue of $210 million to $220 million, and products and services revenue of $25 million. This assumes the aforementioned return to growth in broadcast licensing, flat to slightly negative growth in PC licensing, flat consumer electronics licensing, and mobile licensing falling as a percentage of total licensing to a range of 11% to 12%. Meanwhile, fiscal first-quarter 2016 earnings should be between $0.26 and $0.32 on a GAAP basis and between $0.43 and $0.49 on an adjusted basis.

Similar to Dolby's guidance for each of the last two quarters, consensus estimates were predicting higher fiscal Q1 2016 revenue growth of 6.2% to $248.7 million, but lower adjusted earnings of $0.42 per share.

Finally, for the full fiscal-year 2016, Dolby expects revenue of $1 billion to $1.03 billion, or growth of roughly 3% to 6% over fiscal 2015. Again, however, the market was anticipating growth slightly above the midpoint of this range with fiscal 2016 revenue of $1.02 billion.

But that's likely of little consequence to investors, who have grown accustomed to seeing Dolby's come in light on the top line and heavy on the bottom line. In the end, there were really no big surprises here, though I am still mildly concerned with sluggish pace at which Dolby has been able to penetrate the potentially massive mobile market. That said, investors should be happy with the traction Dolby Cinema and Dolby Voice have gained so far, as we've waited a long time for a viable alternative revenue stream to help offset extended declines in the formerly large PC and consumer electronics markets.