Q1 2020 Earnings Call
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Ladies and gentlemen, thank you for standing by.
Turning to be Dolby Laboratories conference call discussing fiscal first quarter results. During the presentation, all participants will be any listen only mode.
Afterwards, you'll be invited to participate in a question answer session.
If you have a question you'll need to press star one on your telephone.
As a reminder, this call is being recorded Wednesday January 29 to 2020.
No what you're trying to conference call over to Mr., Jason do director of Investor Relations for Dolby Laboratories. Please go ahead Jason.
Good afternoon, welcome to Dolby Laboratories, first quarter 2020, <unk> earnings conference call joining.
Joining me today are getting Yemen, Dolby laboratories, President and CEO .
Sure Executive Vice President and Chief Financial Officer.
As a reminder to discussion will include forward looking statements.
I didnt are subject to risk.
Certainty that may cause actual results could differ materially.
Thank you guys.
Hey discussion that some of these risks and uncertainties can't be down.
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Actually caption risk factors.
I think our most recent report on Form 10-K .
So we assume no obligation I did not intend to do any forward looking statements made during this call.
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During today's call will discuss GAAP and non-GAAP financial measures reconciliation between Q.
In our earnings person here in the Dolby Laboratories, Investor Relations Duchy on the Investor Relations section.
Right.
Actually the corporate state.
Loose with gains every job Adobe financial goals and provider 2020.
Kevin will finish.
Yes.
So that you're talking to harness I got from the gold is okay. Thanks, Jason Good afternoon, everybody I think we'll get right into the Q1 numbers first quarter revenue was $292 million compared to 299 million Q4, that's $302 billion last year Q1.
Overall revenue for imported wouldn't mind.
During the quarter and as a reminder works, but in Q1 revenue down year over year.
Our product.
And the recovery.
Offset partially by higher Dawkins onboard.
Having said that we are expecting your your go to add for the full year and more about why go.
So back in Q1 revenue discussion for the quarter licensing was 200 to you.
While parts and services work burden for Ducs break down to Mike.
Your my commentary on wasn't being burdened by end market broadcast represented about 40% of total likes in first quarter.
Broadcast revenues were up by about 2% yard we saw some broke from higher adoption with Dolby vision that go beyond those this was partially offset by talking about another conquer.
On a sequential bases broadcasting down about 13% due to low recovery and.
Consumer electronic represented about 19%.
In the first quarter.
Our year over year basis, consumer electronics licensing increased by about 12%. This was driven by higher volume, but we saw more adoption.
On a sequential basis increased by about 41%. This was helped by holding seasonality along your car volume from devices like <unk> and <unk>.
He sees represented about 12% of total like from the first quarter P.C. was up by about 38% you every year and about 29% sequentially over keyboard.
These were driven mostly the higher recoveries along with some increased adoption of building technologies.
Other markets represented about 16% total licensing in the first quarter. They are down by about 42% of your year, mostly due to lower recovery automotive.
On a sequential basis, otherwise name is flat compared to queue for as grow some Dolby cinema with offset by law revenue from gaining due to the console life cycle.
Mmm.
Products and services revenue, a $34 million into one and now similar to the $34 million, we hadn't keys for and compared to 42 million in last year's Q1 thing here every year gap is attributable to hybrid he opened building cinema that we hadn't Q1 of last year, the getting repeated and see the ones. This year.
As a reminder, in limited instances, we have hybrid building send an idea that involve lots of different amounts that are accounted for as product sales when the appropriate parameters on that.
Let's move on to margins and operating expenses.
Total gross margin during the first quarter was 87.2% on a got basis and 87.7% on a non got basis.
[noise] products and services gross margin on the gas basis, with 27% and the first quarter compared to 14.2% into four.
And products and services gross margin on a non got basis was 29.7% and the first quarter compared to 18.9% 84.
Improved any both the gap and non got product margin was primarily due to lower in the Tories right now.
Operating expenses in the first court on the gap basis worth $206 million compared to 201.6 million <unk> four.
Hopping sense, and if you want war about $8 million last send the low end of the range that we had guided.
A little over 4 million of that came from the resolution of a property taxes be in our favor into one sooner than we anticipated.
Spending was also lower than we are projected in certain legal areas and also in our marketing programs. A lot of this is tiny you still expect the activity took her just later in here.
Operating expenses when I first quarter on an ongoing basis, where $182 million compared to 177.5 million in the fourth quarter. The comments I made route gap expensive apply similarly here to non Gal.
Operating income in the first quarter was $48.6 million on gas basis, or 16.6% of revenue compared to $68.7 million or 22.7 per cent of M. Q1 of last year.
Operating income in the first quarter on any non got basis was $74.1 million or 25.4% of revenue compared to $92 million or 30.4% about into one last year.
The effect of income tax rate in Q1, with 10.8% on a gap basis and 18.3% on a non gap basis.
The gas tax rate was lower than guidance, because a discrete items that benefitting during the quarter.
Net income I guess basis in the first quarter was $48.8 million or 47 cents per diluted chair.
Pair to $98.2 million or 93 cents per diluted chair in last year's T. one.
As we expected E.P.F. was below last year because of the year over year revenue you. Please and also because last year Q1. The net income Lashinsky. One that is included a 35 million dollar income tax benefit related to U.S. tax reform.
Thinking about guidance, though gap and P.S. or the core was above our guidance as we benefited from lower than projected operating expenses and the lower taxes.
Yeah, and then come on a non got faces in the first quarter, well $65.5 million or 64 times pretty new to chair that comparison $78.7 million or 74 cents for that wouldn't share things you want to last year.
Decrease due to the grabbing you Andy expense friends that I've already gone over.
No I'm getting P.S. for the core was above our guidance as we benefited from revenue being at upper end of our range and from expenses would be lower than projected.
During the first according generated about $31 billion in cash from operation with what blow actually with Q1, driven by the lower income I was like and stuff.
<unk> first quarter with a little over $1 billion and catching investments and drink you why don't we bought back about 430000 shares of our common stock and we ended the quarter was about $330 million a stock purchase authorization still available.
We also announced today, a cash dividend of 22 cents per share and which will be payable on February 22020 to shareholders. The record on several attempts to thousands one.
Let's move on to the outlook and I'll start with a full year.
We're holding outlook for the year unchanged from from what we Guy did last quarter, except for a small tweak on income taxes.
So to reiterate for fiscal Twangy, we anticipate in total gravity will range from 1.300 billion to 1.350 billion.
Within that total we estimate that licensing will range from 1.160 billion to one 200 a month.
While products and services are estimated range from 130 them to 169.
Here factors that we've incorporated into the full year outlook.
Escapade that broadcast revenues would benefit from more adopt an adult we got rose and globalization and T., even set top boxes.
We are protecting lower recoveries, which would largely all sectors.
In mobile.
The real evolve accompanying average with contributions from our brand new technologies and from our parents in program.
Consumer electronics is projected to grow primarily from D.N.A. Soundbars and smart speakers.
If you feel like they expect to benefit from higher recovery, along with increase adoption of our New York technologies, and definitely partially offset by downward pressure from A.S.P. due to mix.
In other licensing we expect grow from W. cinema, we plan to add a similar number of new screens and F.Y. 20, as he did an F.Y. 19.
But also on the other category, we are projecting lower recovering automotive and lower gaming revenues because of their life cycle console and my comments about Q1 was like some of that happened already.
And finally had products and services, we are projecting cinema product relatively flat, while Golden voice is expected to grow.
Gross margin per year on a gap basis projected range from 87% 88%.
<unk>, we expect gross margin the range from 88% to 89%.
Operating expenses are projected range from 829 known to 849 million on the gap basis and from 740 million to 760 them on a non got basis.
Oh, there anytime has estimated ranged from $15 million a $21 for the year for both gap and on gap.
Effective income tax rate for the year is expected ranged from 17% to 90% on a gap basis and from 18% to 20% on a noncat basis.
Based on factors above we estimate the food here to leave earnings per share will range from $2.64.
Two hours and 74 cents on got basis.
<unk> $3.40 to $3.50 on a non got basis.
Now, let me cover the second quarter numbers.
For the second quarter of Air flights, one we anticipate a total revenue were range for 370 million to $390 million.
Then that we estimate that licensing will range from 345 million for $355 million, while products and services projected range for 25 million to $35 million.
Last year, Q2 told value what $338 billion, which means that are outlook in tuesday's. That's a cue to your your revenue growth would range from about 9% to 15%.
This growth reflects a combination of positive drivers, including higher recovery.
Adoption Adobe technologies and timing of revenue under contract.
Gross margin for Q2 on a gap cases estimated the around 89% plus or minus and non got gross margins estimated the around 90% plus or minus.
Operating expenses you two are estimated range from 213, though you into $290 million on a gap basis.
I'm from 191 million $297 million on a non got basis.
Other income is projected range from $4 million to $5 million for the quarter and are effective tax rate for the second quarters projected range from 18% of 20% there's for both gap and non gap.
So based on a combination of factors like just reviewed we estimate the cute choose the leaves earnings per share will range from 97 cents for a dollar and three that's a dollar and returns on a gap bases from $1.15 cents to $1.21 sense on a non get basis. So now I'd like to hand over to <unk>.
<unk>.
Thank you notes and get up and then everyone.
Well if it was strong start in 2020 and their wealth position for another year mid to high single digit revenue growth and even higher earnings per share.
And they focus on the opportunity to it so exactly further.
Or focus within the consumer entertaining ecosystem continues to be growing the number of devices that support globalization adobe outlets.
Broadening the device categories to include our technologies by able and new forms of content like music and increasing the value we bring to these devices that new innovations.
This quarter, we made progress at all three of these areas.
They envision as though the outlets experiences are becoming increasingly available to hundreds of millions of consumers around the world and at the same time. They believe the opportunity is still ahead of us get in the early stages.
Option cycles.
Over the course of 2000 late kids when you saw steady growth in the adoption rate Adobe vision within four K.T.V.
Our partners like video Panasonic MTP vision added support if Daddy vision deeper than their lamps.
More recently, yes, we continue to see that millennium.
Skylar, Sony and high cents each added support for the combined Dolby digital there'll be outlets experience into additional models within their T.V. it either.
Over the last year. So we've isn't T.V.'s have become increasingly affordable across a wide range of price points.
Available you know $250.
He on T.V., we remain focused on the label and they'll be vision Adobe out notes across a broad range of devices.
Last year, and if you teach base sell chip there first P.T. that support Toby vision and Apple began to support the combined Dolby Asian Adobe outlets experience with a natural products joining the window.
This year at T., yes.
Though increase the number of models that support the combined experience.
Latest T.C.L.A.S.
A tune it's also an out their first game laptops that includes support for Bill the ambulance.
We've also seen growing adoption of go yeah, most within Soundbars all five of the best Soundbars of C.E.S. 2020 names by digital trends includes report for Adobe out in us.
The content for these devices continues to expand the recent launch a business class and Apple T.V. plus.
Both services like the combined only experienced available after a standard pricing rather than reserving it for a premiums here.
This gives consumers moral even just keep television and they'll be out those experiences within their devices.
Impressive list of content available to conceal as around the world continues to grow up with a strong support of our partners like Netflix Amazon rockets tends to and I cheat.
There are now over 2800 pieces of cause it available until the vision and 1800 pieces of content and all the animals.
And they continue to see our partners highlight they'll be visiting Adobe out knows that they're high profile titles, such as that but since the Irish name and apples the morning show.
Last quarter, we began enabling u. get content with Dolby Atlas, which enabled us to play additional value to devices and creates opportunities to increase our relevant to new device categories.
It's quarterly familiarity theories of artist stories, featuring some of today's biggest names and music, including post below window, Coldplay and gave all of it.
These stories highlight the emotional reactions from artists when they experience their music and go the out knows.
He also enable by that most experiences at the American music awards, including performances from post below.
And do a leap up.
There's been a strong positive reaction for music.
I'll be experience from boat artists and consumers.
It is clearly sparked a lot of interest and it's exactly the type of innovation. It gets our partners more reason to adopt our technologies.
They haven't got like a studio and Amazon music, H.D., where the first mark speaker and streaming service to enable that they'll be out those music experience to consumers and has received highly favorable reviews. After his first me like a day available and market.
Title, an artist needed platform became the second stream each of us to support though the Atlas music.
Title hi-fi consumers are now able to enjoy Adobe outmost music experience on at most enable enter like devices, including Sam So, although and sell the mobile phones.
Title I by teachers poll toilets available until the out notes from artists such as the weekend Oh, you haven't gone day and make no.
But <unk> music experiences, bringing new values to mobile phones, and smart speakers, which will give us the opportunity to increasing the adoption at 30 out notes with their needs devices.
And create new opportunities in areas like automotive and heads so.
We also the main focus on continuing innovation and increasing the value proposition.
<unk>.
He he has to be launched Goldie vision, I Q, along with our partners L.G. and catatonic.
Dolby vision I.Q. intelligently optimize the picture on your T.V. at every moment by adjusting to the surrounding white and the type of content you are watching as you switch channels.
Named is in gadgets best home theater product of C.E.S. 2020 vision I.Q. is providing another reason to adopt the w., there's an experience and things additional value each device.
<unk>.
This past quarter cent of 2019 talk blockbuster movies Star Wars, right that skywalker frozen to joke or came to the big screen, featuring globalization and they'll be out knows.
2019, all over the top 10 global box office titles were available and all these center.
We also continue continued to expand the global footprint, it's 80% of.
Just last week, we entered into a new partnership with <unk> cinemas.
Able to first of all these sort of a in Taiwan.
They were all we now have about 250 W. set of a site open globally across 11 countries and over 20 exhibit her partners.
In addition to go and the number of told he experiences that people are enjoying three movies T.V. and music.
We see compelling opportunities to enable more daddy experiences beyond entertainment.
We had a solid quarter for building voice as our rooms is a service offering is driving a growing number w. voice rooms.
Yeah on this.
Cited by the opportunity to bottom the availability Adobe experiences. For example, we have created a platform for developers to access certain is only technologies that naval higher quality media in communications experiences within their applications and services.
These initial examples can range from enhancing the quality of an online learning course or improving the communication within the now that connection to a medical advisor.
I believe these offerings can vote reinforce our existing propositions as well as create new revenue opportunities.
We're still in the early stages of these efforts afford to updating more as we progress.
So to wrap up.
It's going to continue to make progress across each of our remote areas the amount that daily vision and the only out most contact continues to grow.
Higher adoption, if it's only experience in our partners devices.
We've received a strong reception for the guilty out those music experience from artists and consumers, which give more reasons for partners to adopt early on more devices.
We continue to bring new value to our partners and consumers with our latest innovations like Dolby vision I Q.
And at the same time, we're going to ways that people can handle daddy experience, including the expansion beyond entertainment.
As the number of totally experiences available to people around the world grows we continue to strengthen our opportunities to drive revenue in earnings growth to 2020 and beyond.
I look forward to updating your next color and with that I will turn over the kinetic.
Thank you, ladies and gentlemen, if you wish to register a question for today's question answer session. You may do so that <unk> by the digit one.
I could try your question is supposed to start coupons digit too.
He's using a speaker phone priests pick up your hand check before entering your request.
Please be sure to identify yourself and your friends at the outset.
Fair to all the participants we actually pays moving yourself to one question in one follow up question into all participants have had a chance to ask a question.
<unk>.
Back answer any remaining questions.
We'll take a first question from Stephen cycles historian company.
Please go ahead.
A good afternoon, Kevin do you have any metrics she might be able to share with us about fish increase penetration of a vision and out and I was I mean, I certainly noticed 60, yes.
More T.V.'s with to combine experience I, just wonder if you're able to quantify that for us at all.
Well so.
So first of all we we get as we said last quarter me for 2019, we were on about 10% of four K.T.V.'s with Dolby vision and four K.T.V.'s worry about half of the overall T.V. market.
And that was the third year in a row of doubling the number of games out there with all the vision. So as we go into this year, we're looking to continue to to stay on that Hey.
Get into somewhere around Dublin, those numbers and.
The you know part of the foundation for that is.
Sounds like you've observed her and she's got a nice tea and we had and number partners that we're expanding further into their line out. So of course, we came out of 2019 with a higher expert rate than the average for a year and the C.E.S.H.R. more partners expanding like Sony like Sky or like high sense, So metric why Steve.
We're looking to stay on the pay six continuing to to to double those volumes and as it relates to the combined they'll be vision and all the Atlas experience Dolby vision is on more more T.V.'s, then ah they'll be out most but it's it's a it's a healthy abortion up days T.V.'s that also have to combine to experience.
Yeah.
Okay.
And then in music what should we watch for what what's coming next big advantages.
Another label is it more sparse smart speakers more artists coming out in support of you I don't know.
How should we judge the progress as we go from here.
Well I think it's all of those things, even I and I and I would and I would hate to glossed over the point of just how strongly we've come out at the gate in this first quarter, because we've come from a standing start to our first smart speaker Amazon music H.
Straining.
And title hype.
And just a.
<unk> now of engagement and support the artistic community, which is what has led to a U.M.G.M. and warn are coming on board. So as we go forward more or less T.S. continue that straight into an increasing amount.
Music available to continuing to Stoker fire that we've created with artists who want to create their music in this way and they want their consumers to experience. It I think our marketing efforts into warn you really effective at at and highlighting.
That and say, we're seeing good reaction from consumers as well and then ultimately of course, you want it to Avenue and these are all the things except the foundation for getting the contents page to more devices into getting our our technologies on those devices that will include by the way working with our straining partners too.
You know activate the W. outmost music experience on a daily outmost devices that are in the market today as well as of course selling into more devices that that enable us experience and you know they've they've said I believe that opens up the possibility for a lot of new devices.
Deeper I think is the mobile phone line ups, where people want to have this experience on mobile devices and think that it gives us a very compelling proposition in the automobile.
Examples.
Okay, Great and then a couple of cash flow question. So I, you know I understand that tough year over year and comparison in cash flow, but just in general free cash flow is percentage of either with this kind of at the low end of of recent history.
They were anything in particular in this quarter or that that might have a in the short run negatively impacted cash flow generation.
Yeah in the short run this is the quarter, Steve whether one big notable items that we have annual in central time to all pay out in the corner you know do that <unk>. So you have a whole years work without p. out this corner, which reflects and paid on on some or Cleveland. So yeah, I would say as or more macro comment and now we're we've completed.
First lap annual laugh on six or six we should go back and be accompanied where there was a very tight correlation between our earnings and our castle generation and so this quarter specifically no of course, we have to pay out of all the annual intensive print shop. This quarter's cash flow operating cash flow.
Okay. That's helpful and then I couldn't help noticing that the buyback pace had slowed significantly in the quarter or is that related to the same issue or have you kind of made a higher level decision that you might scale back.
It takes buyback.
No. We we consider me is that in the past that.
As a company you have a phenomenal business models anomaly generates a lot of profit Vermont from our operations that are engaging.
Enforcing that goes into returning in form of dividends buybacks. This quarter in particular, though because it was coupon and there's a protracted period for US you may recall, but then he announced queue for her easily later because with the year and that's fine became almost concurrently without it gave us a short window to execute otherwise you know not.
Philosophy on that so we didn't feel very comfortable that our our overarching philosophy on turn <unk>, it's not cheap.
Great. Thank you.
Yep.
Thank you will not take on next question from Paul Chung with J.P. Morgan.
Hey, guys. Thanks for taking my question so.
First on the on the Amazon Echo studio Speaker can you just expand on you know how you secured atmosphere. The speaker how long are typical center and his parents you know some near term opportunity to maybe expand cost you know kind of a home.
Marched speaker space feature kind of trying to free flights.
No potential when influences a function that.
When you can't and market demand.
Well so first of all the relates to Amazon I would say that we've had a a strong relationship with Amazon that has evolved over many years, including their support Dolby vision and all the nodes.
On their fire T.V. devices on Anna they'll probably video and it's you know those relationships that evolve and the ability to kind of share with each other with possible in in this case, there was a and in one respect to natural follow aren't they because you can pair too.
Echo studios together to get the Adobe Atlas experience related to your Prime video content and then we had and then of course, the ability to pray that entirely new music experience to life and being able to partner with not just the echo studio to me, but the Amazon music H.D.
To me it was just a great entree pairs entirely new experience. So it's a combination of building that kind of a relationship over many years and then having the kind of relationship where where that that we can introduce these.
Innovations together.
Clearly the the the opportunity is to expand that they'll be out most experienced two additional smart speakers and one speaker products to.
That said areas like automotive and the next year mobile devices I think <unk> I think you described it <unk> near term opportunity I would say that we are absolutely engaged in a broad range of discussions across all of those device types and I think we created a lot of a lot of interest in energy around them.
In terms of timing of analysis and then they come to market. If we had our way then everything will be near term, but obviously each partner has its own road maps, it's really schedules and and occasions and how they want to go about those things. So we'll just keep doing what we do which is getting more content getting more of it available.
Through a more strutting platforms and and then you know we we think we know I think we know we have a road map for what we usually when you have this much energy.
Areas like this and that kind of support we have come August and partners and so we're going to keep our heads down to keep doing that and.
Things will happen.
Okay, Great and then just on soon and I mean, when can we start kind of screwing out segment want the licensing part not to eat the talk shows but.
You know you found a lot of locations running for quite awhile now kind of any and clarity on current contributions you know future contributions per screen.
And how to think about the future pipeline and then <unk> any near term in pack from.
You know the Corona fires from the New York and.
Coming in China.
<unk>. There are lot next question for me tick off the P.C. one the one as as we said we're not prepared comments were in the neighborhood 250 screen now the Wow I mentioned last quarter in the same through this quarter because you can.
Each quarter incrementally the numbers don't call significantly that Dolby send them on revenues were still less than 5% of our company's nothing. So that's why not yet. So can now temper continue to look for me right in as much information as we can chatting mentioned that we are competing and expand our footprint sounds pretty good too because where continued or.
To have more locations opened up in areas, there's nothing before and cheer last point yeah in terms of the current a virus issues that are going on in China.
Extent there there are all these cinema locations out there will be affected like everyone else and it's a pretty small pieces of companies like I said using the business and told me I want to reaffirm that it's below 5% of the company. We're trying to the small slices math in fact, the majority of our 250 screens are not in China, there can spread around the world with the biggest Trump.
And you ask which is over half that number about half that number give or take.
So that's that's good I answer everything you asked about you know.
Yes, Yes, you did but you very much.
Right.
Came on I'll pick on next question from Jim Goss Action research.
Thanks for I guess, what I was going to just following up on what you were.
Thing about you mention dovish cinema revenues about her w. cinema without her less than 5% of total revenues I'm wondering what share of your total revenues.
Touched by the technologies that comprise don't because I don't know inefficient and at most.
You have any way of guessing about that because I think the pay off isn't that just.
Yeah, yeah, but.
Because that's my thesis I think that this is driving and it's got much greater importance 10.
It's tough.
Yeah, I think I'll I'll give you the first piece written out of hand over to Kevin and color as just trying to question has been half before we go breakout <unk> per se biotechnology. So so.
You're saying you <unk> total revenue from Dolby digital they'll be out in those of course, those technology as of now spreading through a lot of area too.
Not just send them out but.
Now of course.
Devices, some P.C.C.B. set top boxes, so yeah, Dolby there isn't an adobe out most aren't very core the girl.
Company, so, but unfortunately, we don't have a way to say Oh sure X. percent Department and he would come from happy you know it's not how like are you try to do that more of my M. Mark again, that's why go through them from some sense of how much revenue coming from broadcast persons P.C. versus mobile phones, we seek out we're more useful I mean.
<unk>. So I can go with the advent of building Outmost for music. That's another example of technology, but we were hoping prime driving in multiple vertical area, including some areas you don't have long presentation today like automotive.
Continue to talk about our more by the market, we address and things like I'm supposed to sing here like per cent of our revenue comes from but he doesn't believe yeah. Most.
Okay. How are you finding the.
Energy in terms of some vision.
The branding and exposure and key markets.
Different and different markets and which are dealing.
In terms of impact on the categories that fast.
Yeah, the United States versus Europe for such wherever else and I feel to be generating revenue.
Well, we certainly have.
Tools and each of those markets and I would say we have a a combination of what we would consider to be global marketing efforts you had certainly when they're talking about title marketing initiatives with building set of or.
<unk> Yeah. These are lessons that we would typically be.
Relevant to the World you know how you actually reach people in each of those markets. They do have teens and each of those markets to to either make the appropriate adaptations or in in some cases could run programs are more specific to those markets.
But I think the you know the.
The the big development for Us and marketing this quarter was the the the coming out party for David Music and.
What you see that.
These artists stories around their experience.
Music.
Is.
Having I think the intended to attack, which is it's celebrating the artist and how excited they are it is getting a number of impressions engagements with consumers, which are higher level than needs to get all the and then ultimately yet it's doing is increasing that age that with partners.
And and our customers so that they see the value of brains and that they have a story to tell their consumers about why this is important.
Okay, maybe lastly, I lived their minds Adobe music some true just profit up again they <unk>.
<unk> and terms of.
Celebrity sponsorship or is there something more to it in terms of how they create some music how the music like get paid play back and you know what.
Now what equipment, you know like selling what relatives or might be able to generate that to tie into this whole process.
Well so first of all it always starts with in this is true whether it's a movie director or in addition, or any of the <unk> created that we deal with it always starts with a passion for wanting to.
This experience because they in fact <unk> artist sorry. It is they speak about what Goliat boats does for for them and the story that they want to be able to tell consumers would always starts there.
Where are you jump to the N.B. a question in terms of our ultimate you know one of our goals and of course that experience life is going to additional devices that really has.
Nothing to do with the marketing and promotion arrangements and you know in between it really depends on on the on the program. While they were looking to promote it through social media or he did.
You saw some work with at that American Music Awards, there were some T.V. spots and selectively. So so most of the marketing budget goes into the you know our our production and creative assets.
The costs associated with that and then spreading to work, but it's not related to licensing if that's if that's what you were asking.
Okay.
I mean oh.
<unk> coming to the bottom line and that kind of just looking at how the <unk> tied together.
I appreciate but again I do I think for US it's person starts with a genuine passion for what we do our goal is to provide these creatives that the power to tell stories in a more meaningful way and each of our programs starts with that and I think that.
It gives the opportunities.
To promote the experience in a moment that can have begun.
Okay. Thanks very much.
Thank you and once again as a reminder, that star I Wonder if you'd like to ask a question.
[laughter], we have no further questions and the cure at this time, just your name and I'd like to tend to come back over to you for any additional closing remarks.
Right well. Thank you everybody for joining us today and you look forward to keeping the posted on our progress. Thank you.
Q and that does come for today's conference taking off your participation you may not disconnect.
[laughter].
[laughter].
[laughter].