Q1 2023 Dolby Laboratories Inc Earnings Call
Okay.
Ladies and gentlemen, thank you for standing by.
Welcome to the Dolby Laboratories conference call discussing fiscal first quarter was.
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.
At that time, if you have a question you will need to press star one on your telephone.
As a reminder, this call is being recorded Thursday February 2nd 2023.
I'd now like to turn the conference call over to Maggie O'donnell head of Investor Relations for Dolby Laboratories. Please go ahead Maggie.
Thank you.
Good afternoon, and thank you everyone for joining welcome to Dolby.
First quarter 2023 earnings conference call. Joining me today are Kevin Yeaman, Dolby Laboratories', CEO and Robert Park, our CFO .
As a reminder, today's discussion will include forward looking statements, including our second quarter and fiscal 2023 outlook and our assumptions underlying that outlook.
These statements are subject to risks and uncertainties that may cause actual results to differ materially from the statements made today, including among other things the impact of current macroeconomic events COVID-19 supply chain issues inflation changes in consumer spending and geopolitical instability on our business.
Discussion of these and additional risks and uncertainties can be found in the earnings press release, we issued today under the section captioned forward looking statements.
As well as in the risk factors section of our most recent quarterly report on Form 10-Q.
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 non-GAAP financial measures a reconciliation between GAAP and non-GAAP financial measures is available on our earnings press release, and then the new Interactive Analyst Center on the Investor Relations section of our website.
So last quarter, we spent some time covering 2022, what we were seeing as we were going into 2023 with a focus on the long term growth.
We're one quarter into the year, so Kevin must get started in our conversation.
Can you start with giving us a take on your Q1 results.
Yes of course.
Thanks, everybody for joining us today, so I guess I'd start by saying, it's nice to start the year with results coming in higher than what we expected when we came into the quarter.
That's largely because we see some transactions landing earlier in the year than we originally expected.
The underlying trends in our business are pretty consistent with what we thought coming into the year. There are of course, some end markets that are a little higher some that are lower Robert will take us through all those details in just a moment, but like I said it.
Net all that out pretty consistent with what we saw coming into the year. So it's early in the year, we continue to be operating in an uncertain environment. So we're going to keep focusing on what we can control and what drives growth in the long term.
Okay great.
So looking further ahead, how are you feeling about long term growth.
There's there continues to be strong demand from consumers for entertainment content.
And demand for content to be more immersive and engaging and that's what drives demand for Dolby experiences. So this quarter. We continued to make progress on each of our key focus areas movies and television music user generated content and so we continue to be confident that we can double our revenues from the Dolby Atmos Dolby vision in it.
Imaging patents over the next three to five years.
Which means we continue to target annual growth.
15% to 25%.
And of course, our foundational audio technologies are essential to the ecosystem for entertainment audio there are delivered across a very broad range of consumer entertainment devices, and so while that does make it sensitive to macro trends, it's a very strong position to be in and when the market settle down we expect this to be a.
We're here to grow.
And then of course, we continue to be focused on the opportunity to bring the Dolby experience to an even wider range of use cases, and that's what we're doing with Dolby Io. So overall, we continue to be very confident in our long term opportunities.
That's great to hear.
So just a few weeks ago, we were at CES in Las Vegas.
What were some of the highlights for Adobe from your perspective.
Well there were two big stories for us at CES. This year, Dolby Atmos music and movies and TV in the living room, but let me start music. So we kicked off CES with a concert by imagine Dragons, which was live in Dolby Atmos. It took place after we live in Las Vegas, and Dolby live is a venue.
You were.
One of the things that is exciting about it is that we can engage with artists to create an experience that they want to deliver and the result was that the energy and the excitement from the band and from the thousands of fans and partners who joined us.
It's just fantastic and so this is important because this is where the ecosystem starts for us. It is all about our ability to inspire creators to want to creating Dolby and artist passion for Dolby Atmos continues to grow we now have 85% of Billboard top 100 artists in 2000.
I do have one or more songs in Dolby Atmos.
Increasing availability of content on streaming services. So you can stream through Apple Amazon title Theres Melon in South Korea, Tencent in China.
It's this combination of content and availability, that's what creates the value proposition for the playback experience and our device partners and as I've shared before the car experience is a big focus for us and that's not just for US that's the whole industry. It's often it's very quickly. The first question from artists for music labels.
From streaming services they want to know what the car experience is like and consumers care deeply about that and so over the past year, we've added more than half a dozen car manufacturers, including Mercedes Volvo lucid.
At CES Mercedes was featuring their electric SUV with Dolby Atmos music.
We have made box on hand at our at our Booth.
There were in car Entertainment partners like Bose, they were highlighting Dolby Atmos music in their proof of concept cars and it's not just about automotive you could experience Dolby Atmos music in a number of form factors that factor so across the show floor, there where partners who were demo ing the Dolby Atmos experience on sound bars.
On wireless speakers on mobile devices, and so when I step back.
Music today reminds me a lot of where we were with Dolby vision in the movies and television ecosystem not that long ago. It started with a handful of Warner brothers movies.
<unk> with they were available to.
You could experience the amount of LG and Vizio Tvs and we quickly broadened adoption to include partners like Netflix and Sony and if you scroll forward to today, we're deeply embedded across the movie and TV content ecosystem streaming is broadly available across all the major services and an increasing number of service.
<unk> and Dolby vision, Dolby Atmos are widely available across the TV market and other devices. So we've built these ecosystems many times over the years and so we have a pretty good sense of what signals to look for across content delivery and devices that tell us we're building momentum.
And that's what we're saying with Dolby Atmos music and so we continue to be confident in the opportunity there.
Okay, and you mentioned, specifically movies and television yeah, what stood out to you there.
Well with movies and television what was great about that was that our story was being told through the voice of our partners. This was across the show floor. So as as I talked about last quarter, a big focus of ours in that area is growing.
Beyond the premium tier of televisions and expanding that deeper into their lineup. So that's why it was so great to see announcements from partners like Tcl Tcl announced that Dolby vision and Dolby Atmos will now be included on all of their new <unk> ATV models in the U S.
Hi, Ted this is another great example.
<unk> announced several new Tvs that are going to include Dolby vision, and Dolby Atmos and it wasn't just Tvs, So Samsung and LG announced their new sound bar models with Dolby Atmos and what was exciting about their announcements is that they're taking they're becoming a part of smaller form factors Dolby Atmos as and.
So this creates the potential for a broader audience and to expand the reach of Dolby Atmos.
We continued to make progress on the content side as well. So we have already have a very strong presence and we also have added peacock to the roster of streaming companies that are streaming in Dolby vision.
We talked about this last quarter, Maggie, but the World Cup was available in Dolby vision Dolby Atmos, so that was exciting.
And I'm excited to share that Comcast will be broadcasting the Super Bowl on Fox in Dolby Vision next week and so.
If anyone out there has thrown a Super Bowl party, it's not it's not too late and there is a there is a dolby page on the Amazon store, which can point you toward all of our great partner products.
That's great.
What other highlights we're there for the quarter beyond what what happened and what was announced at CES.
Well, we haven't yet talked about mobile.
Dolby vision capture and as we've talked about before Dolby vision capture on mobile devices enables people to capture and share life's moments in a more realistic way on the device that we carry with US daily every hour of the day. So we're focused on continuing to expand that value.
Proposition.
And so we're excited that.
This quarter adopted Dolby vision capture and playback on its flagship phone.
They joined Apple and Xiaomi and <unk> launched its first phone with Dolby Atmos and Dolby vision playback and so we look forward to continuing to drive more momentum in mobile. We also have talked about Dolby Io, where we're focused on bringing Dolby to a far wider range of use cases.
We're seeing more developers signing up for accounts, we are seeing strong growth in the number of active developers who are working with our Apis for the first time and what we are enabling these developers to do is to make day to day interactions and the apps and services that that we're all using every day.
A more immersive more lifelike and how they sound in how they feel.
Great.
So before I hand, it over to Robert to go through the numbers is there anything else that you want to add and close on.
Yes, well if I take.
Taking a step back again this quarter I think further demonstrates that we continue to bring more dolby experiences to more people around the world.
There is an ever increasing demand for content and for that content to be more engaging and immersive and making that happen is what we do with Dolby.
<unk> continues to be uncertain environment, and that's not new I mean in a lot of different ways. It's been an uncertain environment for a number of years now and what I'm. Most proud of is all of the team has been able to accomplish during this period and identify staying focused focused on where Dolby can make a difference and focused on where the biggest opportunities are.
And so we're creating momentum across each of our ecosystems, we've launched entirely new ecosystems in the form of Dolby Atmos music and.
Just talking about user generated content.
And so the long term trends point to more opportunity and we come at this from a position of strength, we have a very strong financial position with strong cash flows.
Our business model.
That our foundational technologies, we will continue to be central to the entertainment experience for many years to come.
We continue to grow the adoption of Dolby Atmos and Dolby vision.
And we're reaching more use cases with Dolby Io so.
We're going to stay focused on raising the bar on all of these experiences and growing the business.
Great. Thanks.
Thanks, so much Kevin.
So Robert before we get into all the details.
I was thinking it would be helpful. If you start out with some of the key things that investors and analysts should be focused on in our results.
Yeah. Thanks Maggie.
Before we get into the details I wanted to point out three main highlights first total revenue of $335 million was higher than the guidance that we provided last quarter largely due to transactions closing earlier in the year than anticipated and higher product revenue.
As it relates to trends in our underlying business. We are on track with where we thought we would be coming into the year. Overall, we came in a little higher than expected in broadcast and gaming, mostly driven by higher Q4 shipments that we had.
Made it lower than PC, driven by further weakness in the market and lower box office proceeds, which negatively impacted Dolby cinema revenues.
Operating expenses of $175 million on a non-GAAP basis were lower than we had guided for the quarter, which is mostly due to timing of marketing and patent program spend and lower labor costs. We will continue to be deliberate about our hiring evaluate our long term priorities and opportunities and make spending adjustments accordingly.
Third.
Talking about guidance in detail in a few minutes, but based on where we are seeing today our outlook for the full year is consistent with what we said last quarter.
It's nice to start the year with a quarter that came in better than our expectations, but at the same time, it's still early in the year and we continue to operate in a very uncertain environment.
With that as the backdrop, let's get into the Q1 details Q.
Q1 revenue was down 5% year over year, primarily due to mobile PC broadcast and consumer electronics consistent with overall trends in the market.
This was partially offset by adoption of Dolby, Atmos, and Dolby vision and higher product and services revenue.
Q1 was comprised of $308 million in licensing revenue and $27 million in products and services revenue.
Now, let's talk about licensing revenue by end market.
As a reminder, our licensing business is based on unit shipments in general we estimate revenues from unit shipments each quarter and true it up the following quarter based on actual reported unit shipments from our partners.
We also have transactions that reflect revenue from units shipped in prior periods, which we call recoveries and transactions, where the customer will commit to a minimum volumes for a given period, where all or a portion of the revenue is recognized upfront.
These transactions are all related to unit shipments. The only difference is the timing and amount of revenue in any given quarter. The timing of these centers that transactions can vary depending on a number internal and external factors.
Broadcast represented about 38% of total licensing in Q1, 'twenty, three down $4 million or 4% on a year over year basis, driven primarily by lower TV unit shipments and lower recoveries.
This was partially offset by the Q4 true up for Tvs and higher revenue from Dolby Atmos Dolby vision.
Mobile represented about 21% of total licensing in Q1, 'twenty, three down $11 million or 14% on a year over year basis as the prior year benefited from timing of revenue from minimum volume transactions and also lower yet.
This was partially offset by increased adoption of Dolby Atmos and Dolby vision.
Consumer electronics represented about 18% of total licensing in Q1 of 'twenty, three down $2 million or 4% on a year over year basis as the prior year benefited from higher recoveries, which is partially offset by increased adoption of Dolby Atmos Dolby vision.
PC represented about 8% of total licensing in Q1, 'twenty, three down $10 million or 30% on a year over year basis, driven by lower recoveries and lower PC unit shipments.
Other markets represented about 15% of total licensing in Q1 of 'twenty, three up $4 million or 8% on a year over year basis, driven by a favorable Q4 true up in gaming. This was partially offset by lower box office proceeds from Dolby cinema.
Beyond licensing our products and services revenue were $27 million in Q1 of 'twenty three up 39% on a year over year basis. The year over year increase was driven primarily by higher cinema product sales. We also saw growth in Dolby that Io.
Let's turn to expenses and margins total non-GAAP gross margin in the first quarter was 90% compared to 91% in the first quarter of fiscal year 'twenty. Two gross margins came in lower driven by a higher mix of products revenue.
non-GAAP operating expenses in the first quarter were $175 million compared to $195 million in the first quarter of fiscal year 'twenty. Two the decrease was driven by lower labor costs as we had an extra week extra week last year, lower head count and favorable FX.
Program marketing spend was also lower due to timing of campaigns in the prior year compared to this year.
And we benefited from lower bad debt expense compared to the prior year.
non-GAAP operating income for Q1 was $126 million or 38% of revenue compared to 36% of revenue in Q1 of last year.
non-GAAP income tax in Q1 was within our guidance range at 19% compared to 18% in the last year's Q1.
Net income on a non-GAAP basis in the first quarter was $107 million or $1 11 per diluted share compared to $104 million or $1 <unk> per diluted share in Q1 of 'twenty two.
During the first quarter, we generated $56 million in cash from operations compared to $31 million generated in last year's first quarter.
We ended the first quarter with approximately $900 million in cash and investments.
During the quarter, we bought back about 700000 shares of our common stock and ended the quarter with $311 million of stock repurchase authorization available going forward.
We also announced today, a cash dividend of <unk> 27 per share.
The dividend will be payable on February 22023 to shareholders of record on February 14th 2023.
Now, let's move on to guidance.
We continue to operate in a challenging and uncertain environment.
For fiscal 'twenty three we continue to expect that our foundational audio revenue will decline mid single digits year over year, reflecting lower unit shipments, particularly in PC TV consumer electronics and mobile.
We are still targeting 15% to 25% growth in Dolby vision, Dolby Atmos and empty patents and we expect this to be driven by growth in broadcast mobile and other markets. This would more than offset the declines in foundation of audio that we are expecting.
With these assumptions we continue to project that total revenue for fiscal 'twenty, three we will grow low single digits year over year.
Within this we anticipate license revenue to be up low single digits with growth in mobile broadcast in other markets.
Pacing the decline in PC and consumer electronics.
Product and services revenue is expected to grow low double digits.
In terms of the full year split given more transactions are expected to close earlier in the year than anticipated.
We currently expect revenue in the first half to be higher than the second half closer to last year's split.
We still expect that non-GAAP operating expenses will increase roughly 2% compared to prior year and expect operating margins of roughly 30% on a non-GAAP basis for the year.
We will continue to be disciplined with our spend review our resource envelope and allocations on a regular basis and evaluate the need to make adjustments based on the economic realities of the business.
We anticipate that non-GAAP earnings per share could grow at a slightly higher rate than revenue.
So now let's move on to guidance for the second quarter.
Q2 revenue is expected to range from $340 million to $370 million.
Within that licensing revenue is estimated to range from $320 million to $345 million, while products and services revenue is projected to range from 20 million to $25 million.
Compared to Q2 of last year, we expect growth in Dolby Atmos, Dolby vision and imaging patents, particularly in broadcast and mobile to more than offset lower foundational revenue driven by lower unit shipments estimates and consumer electronics, PC and Tvs and lower recoveries.
non-GAAP gross margin is estimated to be 89% plus or minus.
Operating expenses in Q2 on a non-GAAP basis are estimated to range from $193 million to $203 million as we expect certain marketing and patent program expenses to shift from Q1 to Q2.
Our effective effective tax rate for Q2 is projected to range from 19% to 20%, 21% on a non-GAAP basis.
We estimate that non-GAAP Q2 diluted earnings per share could range from <unk> 90.
To a $1 five.
In summary, it's a good start to the year as Kevin said it is still early days and we continue to navigate through an uncertain environment.
That said, we remain laser focused on the things we can control and are excited about the progress we're making on our long term growth opportunities ahead.
While the economic realities around us continue to change the fundamentals of Dolby durable business model of high gross margins healthy cash flows and a strong balance sheet have not changed.
Okay. Thank you Robert.
Operator, I think we are ready to turn it over for questions.
Absolutely.
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If time allows we will then come back to answer any remaining questions.
One moment please for the first question.
Your first question comes from Steven Frankel with Rosenblatt. Please proceed.
Thank you Kevin Congratulations on the Super Bowl, that's a long time coming.
A big win.
Maybe start with what do you think finally chips.
Comcast and Fox to do this.
Well I think as with.
All of our big wins.
This is Ben.
Journey from the premium restart offered movies and Tvs for movies, you have three months to produce and for TV shows you have days to weeks to months and then we get started on life support obviously, you have a matter of seconds.
So it's a combination of engaging with the community.
Working through all the technical demands are being enrolled.
It's working.
The mixers are the creators.
And then of course, it's always working through.
All of the business arrangements that go far beyond just Dolby, there's all the all the rights of all the other things that are going on but we are super pleased to have the.
The Super Bowl coming right after.
Just not only up and.
This is the kind of thing that we think really broadens the demand for the experience.
Okay, and then on the notion that you had some.
Minimum paid contracts that were signed earlier in the year.
Than you expected was there any strategic reason for that to happen.
Or was this just it's hard to tell when those are coming in and they just came in and any kind of characterization you can give us.
I think it's more the latter than the former Steve and remember that our transactions.
We have two types. There is the minimum volume commitments like you've just pointed to is also recoveries for past practice. Those are both types of transactions, we have and we do our best to predict when those are going to sign throughout the year and.
Some of those were led earlier this year, which is a it's a nice way, it's a nice way to start but I Wouldnt I don't think at this point I think it would be too early for me to draw any particular trends from from that information.
Okay, and one quick one more in.
And this probably is going to be difficult for you guys.
To answer, but let me try.
Obviously, you have wider more steelmaker that.
Yeah, one large TV maker, that's yet to get the vision religion.
A lot of others that have but.
Everybody outside the one.
Where do you think you are in your ultimate penetration in 2023 are you, 70% there or are you not even that high yet.
Well I think.
I mean, obviously.
Sure.
We're patient and persistent so one thing we do is we are always looking to continue to increase the value that we're providing we just talked about the Super Bowl coming up broke up that's another example of how we will.
The hard at work increasing the value proposition to.
To bring as many partners on board as we can while we talked about coming into the year in terms of increasing the attach rate is we have a very strong presence at the premium end of our partner lineups and we're really looking to drive that all the way through their <unk>.
Lineups and so that's why that's the significance of announcement like Tcl's, where all of their four K models going forward in the U S will be Dolby vision and Dolby Atmos, We also feel like we have.
An opportunity to increase penetration as it relates to the big box retailers and some of the house White label brands that they have so we.
We still think there's room.
Room to grow Steve and it was as you know it was.
One of the biggest drivers of the strong growth in Dolby vision, Dolby Atmos last year, and we continue to see it to be a big growth driver this year.
Okay. Thank you I'll jump back into queue.
Thank you.
The next question comes from the line of Paul Chung with Jpmorgan. Please proceed.
Hey, guys. Thanks for taking my questions.
So just talk about the I know you mentioned it briefly but.
If you could talk about kind of the traction and momentum you saw at CES, particularly for <unk>.
Most of the car and for IL.
Have you seen some uptick in interest from other auto Oems and App developers and and.
And I guess I know, it's early days, but how do we think about sizing atmos in the car.
In terms of both kind of a reasonable auto penetration rate and the respective asps for car kind of in both the near term and long term it sounds like a pretty pretty interesting opportunity.
Yes, so as it relates to music I think what was.
What what was really fun about CES for US. This year was the opportunity to really tangibly demonstrate the entire ecosystem starting with the concert in Dolby Atmos, but having all of our partners there.
Throughout the ecosystem punctuated of course by the ability for people to actually experience Dolby Atmos music in the Mercedes.
Some of the partner.
Booz liked what those have going on so.
That yes, there is a lot of great momentum there.
We had a lot of engagement going into CES, and we have very strong agent coming out of CES. The team is.
Busy at work working with major players from throughout the ecosystem throughout the industry.
And working with them on on on their plan. So.
So it was it was a good.
It was a very good show for Dolby Atmos music and it was the highlight of our show really.
We also.
We're we did have Nio presence, we were demonstrating so in fact.
Our customers some of our customers and developers, we're demonstrating what they have built with Dolby Io and so that was a nice opportunity for us to I guess cross pollinate. If you will some of our partners from.
The broad ecosystems that we serve and give them an opportunity to see what we're doing with Dolby Io.
A lot of partners that were using both.
Real time streaming and our ability to have audio video interactions with large audiences and sophisticated specialization and.
I think that what.
We continue to be excited about is we feel like we're still at the early stages with the companies that are looking to build the next generation virtual.
Your answers.
The future.
And to be clear that it's.
At its most immersive that could be at a headset environment. But these are experiences that are largely going to be enjoyed on Pcs and mobile devices and with Io developers can build those experiences.
And and so yes, we did have customer.
Customers there that we're demonstrating some of those experiences and it sparks ideas of what our other partners.
Want to be able to do in the future.
Got you thanks for that and then the Opex guide was reiterated.
Obviously for the year.
Where do you kind of see some flexibility for additional cost execution, maybe on the SG&A line and then.
On R&D.
Putting new investments to work how do we think about the spending related to Atmos vision.
Are those kind of ongoing expenses or bulk of those costs are behind us and it's kind of new innovations that youre investing in for the most part.
Well the first thing I would say is that we.
Endeavor to be and are very dynamic in our allocation of resources. So we're regularly shifting resources between initiatives and it relates to Dolby Atmos Dolby vision that includes shifting resources between ecosystems that are getting more mature.
Two newer ecosystems and so so so while the headline number is the increase of about 2% underneath that.
Italy.
Moving people and resources to where the biggest opportunities are of the future.
Got you and then lastly.
Cinema, you answered my questions. The first time I feel like I, just remember that I felt like I forgot.
Just that.
Our we've said our goal is for we would like Dolby Atmos music to be the way everybody experiences music all the time everywhere on every car and we aim that we aim high and we stay focused.
<unk> on building those ecosystems, and we have a track record of being able to get to some pretty high adoption rates, but we set our sights on being relevant to all the ways people enjoying music.
Yes, I've got the demo was excellent so.
On cinema.
Where are you in terms of footprint today and.
Are there expectations to kind of expand after some pause this year, maybe with other partners and then talk about the expectations for contribution from this business on maybe an annual run rate business and margin profile will be very helpful. Thank you.
Well.
To answer your first question, we're at 287 to 87 Dolby cinema screens.
<unk>.
The new screens coming online is still lower than pre pandemic.
It's still an industry obviously that is.
Also subject to all of the uncertainties in the world and they're all very varying positions as it relates to their ability to invest right now, but I think.
<unk>.
Avatar was a big.
Win for the industry a lot of that will be Q1 box office. It was great to see that.
And we are still our partners are still engaged they're still thinking about the future and we do see an opportunity to continue to expand because we think that.
Sure.
What has held true throughout this.
At a time.
Is that more a greater percentage of people who are going to the movies are wanting to go to or wanted to have the most immersive experience until the premium experiences are getting a greater share of the box office and.
We continue to have strong engagement as people are thinking about their future plans for how they.
Grow their portfolio of of Hyatt experiences.
Thank you to merchandise the other part of your question today that's.
As you know that Dolby cinema.
As a share of box office.
That's part of our other markets licensing revenue.
And.
We're not breaking that out separately, yet thats still in the other category.
Okay, great. Thank you.
Okay.
Thank you.
The next question comes from the lineup Ravi Shankar with William Blair. Please proceed.
Good afternoon, Thanks for taking the question within products revenue.
The strong growth there you called out as contributing to that growth and just curious if you could sort of give us a sense of the contribution there I'm sure you don't want to break out the exact number but just perhaps some relative contribution or growth rate or any sort of context, you could add there would be great.
Hey, Ralph most of that growth came from cinema products. If you will there was some growth in Io, but the majority of the growth came from cinema products.
Through higher supplier.
<unk>.
Service in stores that we have but also increased demand for some of our audio processors and other equipment.
Okay, and then just kind of turning to the macro it sounds like so far we are early in January where it's playing out as you expected I guess, which is good in terms of the way you guided but you obviously have a lot of global customers, but as you talk to them about as you look through the year, maybe just give us some <unk>.
<unk> and sort of what they are thinking on the macro.
Sort of same as it marginally worse any better or any pockets that maybe have changed as you look forward since somewhat since last call.
Yes.
Well it very much depends on the partner, but I would say the one word that.
Would come up consistently in that.
Probably already said it doesn't tie to the uncertainty I mean, it is an uncertain environment.
And I wouldn't go so far has there been any changes just as far as our guidance goes there had been some end markets and partners that are seeing things a little.
<unk> been a little better than what we estimated coming into the year and some that have been a little to the downside and net net as the portfolio across all of these devices and ecosystems.
We see the underlying business and about where we thought coming into the year.
Okay. Thanks, Kevin.
I think Robert said at the outset, we did see specifically we saw.
We saw for the first quarter, we saw broadcast and gain income in at a little higher in Q4 shipments were a little higher than we had estimated I would say.
We already saw unit shipment weakness coming into the year might be just slightly.
Lower than continue to soften a bit.
Box office for Q4 was light.
Again, most of a lot of avatar will benefit Q1.
I think mobile mobile unit shipments.
<unk> are down and we've seen a lot of news around that in this earning cycle so far.
And.
We saw units coming out of the year and also we as we've said before.
Minimum volume commitment arrangements are more prevalent in our mobile space, which maybe makes us a little less sensitive than we might otherwise be on a quarter to quarter basis.
And of course, we have a pipeline that we're working for things like our user generated content value proposition and other use cases on the mobile phone.
Okay. Thanks for the extra color.
Okay.
Thank you.
The next question comes from the line of Jim Goss with Barrington Research. Please proceed.
Okay. Thanks.
One question related to <unk>.
What most for music.
You mentioned the lack of wrong.
Yeah.
We were involved in that.
And I was just wondering can you shrink that atmos.
Striving to recreate arise experienced what exactly does it add to the live event.
Well.
What it adds Jim is working with the <unk>.
Let me backup a minute so Dolby life is.
Running all year round it tends to have top artists who are doing.
Resident fees that can be shorter or longer residents' fees, but they tend to be doing more than one performance, which is great for us because because they are investing that much time. It also.
<unk>.
Creates the opportunity to invest more time in thinking about Dolby Atmos and what can be done with Dolby Atmos and.
At that large scale.
It's about creep.
Creating that that spatial realization.
And that Dolby Atmos experience, where the where you are immersed in the performance and that's what we do at Dolby line and depending on.
The performance that could be a combination of.
The prerecorded backtracks, but it is also is alive and that means working with the mixers. So that they know what the artist wants in making that happen in real time. The other thing that is spectacular about it is that you really do get that experience wherever you are in that arena and.
And that is some.
That people really notice compared to other environments and so.
And for US again, it's this opportunity to engage with each of these top name artists who are coming through Dolby lie throughout the year, it's an opportunity to have.
5000, or so fans each night get exposed to the Dolby Atmos music.
And.
Yes, so it's a great it's a great showcase for Dolby Atmos.
Okay and.
How are you thinking in terms of the primary monetization avenues for.
Almost.
Music is it.
Okay.
<unk>.
Pcs or phones or what type of device since you think viewpoint, we get the greatest.
Revenue generation from.
And with this particular application.
Well I'm going to start by saying, yes, and yes, we're looking to improve the experience on all the devices that people enjoy music on.
But I.
I would say the focus that stands out.
Today is the car because as I said earlier.
The entire industry is passionate about that experience and.
And automobile manufacturers are always looking to push the boundaries on.
On that experience, we've got great engagement across the industry as you've seen from our wins over the last year year and a half.
So automotive is a big focus of ours.
But you.
Around the show floor and of course at our Booth you could also experienced Dolby Atmos on.
Sound bars phones.
So all the way as you listen to music, we would like to bring Dolby atmos to that to that experience.
Okay and one other thing.
To the extent that there are some PVC price wars.
As they attempt to monetize their smart TV features.
Where in fact, you can cross sell with Dolby insurance, including in included features.
Generation.
Those types of deals.
License.
Well.
What I will say I guess is that we are.
As I said, we are looking big focus of ours is bringing Dolby vision, and Dolby atmos deeper and deeper into lineups and so.
The fact that you can now get a Dolby vision Dolby Atmos experience for.
I want to say.
I think $250 probably at the low end that you can.
I don't know if im exactly precise on that so you can check the.
The Dolby page on Amazon on that but.
But thats good for us the more we get obviously the more we get into those lower price points.
The broader audience for Dolby vision, and Dolby Atmos in the more momentum we can build because.
Wariness of how.
How great. The experience is in word of mouth and more availability all of that is what helps to build momentum in each of these ecosystems.
Okay.
Penetration and with TV.
Yeah. It is.
Lenny it's of course pretty well.
We're pretty deep into those.
<unk>.
Yes, sorry, Jim I didn't hear that slowly, but I think.
I think you asked whether whether I thought that was going well and and yes like you said I mean.
Dolby vision, Dolby Atmos in the living room, which television being the <unk>.
Primary device there is our largest driver.
For Dolby Atmos, and Dolby vision last year and again.
We see that as a big driver of this year of our growth in those areas.
Alright, Thank you very much and I'm, sorry, if I missed a part of your question you can repeat it I just didnt that didnt come through clear.
Thank you.
Good morning.
Thank you.
There are no additional questions at this time.
That concludes the Dolby Laboratories conference call discussing fiscal first quarter results. Thank you you may now disconnect your line.