Q3 2024 Dolby Laboratories Inc Earnings Call

Ladies and gentlemen, thank you for standing by.

Operator: Ladies and gentlemen, thank you for standing by.

Operator: Welcome to the Dolby Laboratories conference called Discussing Fiscal Third Quarter Results. During the presentation, all participants will be in a listen-only mode.

Speaker Change: Come to the Dolby Laboratories conference call discussing fiscal third quarter results.

Operator: 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. If you would like to ask a question, please press star, then the number 1 on your telephone keypad. To withdraw your question, press star 1 again.

Operator: At the end of this presentation, all participants will be in a listen-only mode. Afterward, you will be invited to participate in a question and answer session. If you would like to ask a question, please press star, then the number 1 on your telephone keypad. To withdraw your question, press star 1 again.

Speaker Change: During the presentation, all participants will be in a listen only mode.

Operator: Afterwards, you will be invited to participate in a question-and-answer session. If you would like to ask a question, please press star, then the number one on your telephone keypad. To withdraw your question, press star one again.

Afterwards, you'll be invited to participate in a question and answer session.

Speaker Change: If you would like to ask a question. Please press Star then the number one on your telephone keypad to withdraw your question Press Star one again.

Operator: As a reminder, this call is being recorded Wednesday, August 7, 2024.

Operator: As a reminder, this call is being recorded Wednesday, August 7th, 2024. I would now like to turn the conference over to Mr. Peter Goldmacher, Vice President of Investor Relations. Peter, please go ahead.

As a reminder, this call is being recorded Wednesday August 7th 2024.

Peter Goldmacher: I would now like to turn the conference over to Mr. Peter Goldmacher, Vice President of Investor Relations.

Peter Goldmacher: I would now like to turn the conference over to Mr. Peter Goldmacher, Vice President of Investor Relations. Peter. Please go ahead.

Kevin Yeaman: Peter, please go ahead. Thank you, operator, and good afternoon, everyone. Welcome to Dolby Laboratories Third Quarter, 2024 earnings conference call.

Peter Goldmacher: Thank you, Operator, and good afternoon, everyone. Welcome to Dolby Laboratories' third quarter 2024 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 fiscal 2024 fourth quarter and full year 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 macroeconomic events, supply chain issues, inflation rates, changes in consumer spending, and geopolitical instability on our business.

Peter Goldmacher: Thank you operator, and good afternoon, everyone welcome to Dolby Laboratories' third quarter 2024 earnings Conference call. Joining me today are Kevin Yeaman, Dolby Laboratories', CEO and Robert <unk>, Our CFO as a reminder, today's discussion will include forward looking statements, including our fiscal 2020 for fourth quarter and full.

Peter Goldmacher: Joining me today are Kevin Yeaman, Dolby Laboratories CEO, and Robert Park, RCFO. As a reminder, today's discussion will include forward-looking statements, including our fiscal 2024 fourth quarter and full year 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 macroeconomic events, supply chain issues, inflation rates, changes in consumer spending, and geopolitical instability on our business. A discussion of these risks and additional risks and uncertainties can be found in the earnings press release that we issued today under the section caption, forward-looking statements, as well as in the risk factors section of our most recent quarterly report on Form 10-Q.

Your 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 macroeconomic events supply chain issues inflation rates changes in consumer spending and geopolitical.

Speaker Change: Glen stability on our business a discussion of these risks and additional risks and uncertainties can be found in the earnings press release that 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.

Peter Goldmacher: A discussion of these risks and additional risks and uncertainties can be found in the earnings press release that 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.

Peter Goldmacher: 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.

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.

Peter Goldmacher: During today's call, we will discuss non-GAAP financial measures. A reconciliation between GAAP and non-GAAP financial measures is available in our earnings press release and in the Interactive Analyst Center on the Investor Relations section of our website.

Speaker Change: During today's call, we will discuss non-GAAP financial measures a reconciliation between GAAP and non-GAAP financial measures is available in our earnings press release and in the interactive Analyst Center on the Investor Relations section of our website with that I'd like to turn the call over to Kevin. Thank you Peter and thanks to everyone joining us on the call today.

Peter Goldmacher: A reconciliation between GAAP and non-GAAP financial measures is available in our earnings press release and in the Interactive Analyst Center in the investor relations section of our website. With that, I'd like to turn the call over to Kevin.

Kevin Yeaman: With that, I'd like to turn the call over to Kevin. Thank you, Peter, and thanks to everyone joining us on the call today. Revenue for the quarter came in just above the midpoint of the range that we provided you on the last earnings call, and earnings were above the high end of the range. For the full year, we now expect revenue to be down approximately one to two percent, which is at the lower end of what we've been expecting throughout the year. We are not making any changes to our non-GAAP EPS guidance for the year.

Kevin Yeaman: Thank you, Peter, and thanks to everyone joining us on the call today. Revenue for the quarter came in just above the midpoint of the range that we provided you on the last earnings call, and earnings were above the high end of the range. For the full year, we now expect revenue to be down approximately 1-2%, which is at the lower end of what we've been expecting throughout the year. We are not making any changes to our non-GAAP EPS guidance for the year.

Kevin: Revenue for the quarter came in just above the midpoint of the range that we provided you on the last earnings call and earnings were above the high end of the range.

Speaker Change: For the full year, we now expect revenue to be down approximately 1% to 2%, which is at the lower end of what we've been expecting throughout the year.

Speaker Change: We're not making any changes to our non-GAAP EPS guidance for the year are.

Kevin Yeaman: Our foundational audio revenue is coming in lower than we expected, as global device sales in aggregate have been soft all year, and we're seeing lower than expected units in set-top boxes and gaming consoles for the second half of the year. In products and services, cinema products are coming in lower than we expected as the box office remains sluggish and exhibitors continue to push out CapEx. Dolby Atmos and Dolby Vision are performing slightly ahead of our expectations as strong content growth continues to drive device attach rates.

Kevin Yeaman: Our foundational audio revenue is coming in lower than we expected, as global device sales in aggregate have been soft all year, and we're seeing lower than expected units in set-top boxes and gaming consoles for the second half of the year. In products and services, cinema products are coming in lower than we expected, as the box office remains sluggish, and exhibitors continue to push out CapEx. Dolby Atmos and Dolby Vision are performing slightly ahead of our expectations, as strong content growth continues to drive device attachments. Dynamics remain stable, and ongoing engagement from the broader ecosystem of creators, distributors, and device manufacturers are driving a steady stream of product launches across all device families.

Speaker Change: Our foundational audio revenue is coming in lower than we expected as global device sales in aggregate had been soft all year.

Speaker Change: And we're seeing lower than expected units and set top boxes and gaming consoles for the second half of the year.

Unknown Executive: In products and services, cinema products are coming in lower than we expected as the box office remains sluggish and exhibitors continue to push out CapEx. Moving on to the highlights for the quarter, we continue to enjoy momentum in content for Dolby Atmos and Dolby Vision, which is driving growth in autos, TVs, and mobile, our three biggest areas of opportunity. Starting with content, I'm happy to share that as of this spring, over 25,000 TV shows and movies have been made available in Dolby Vision, a significant milestone considering that we launched Dolby Vision in October of 2015 with just 13 movies from one studio and one TV OEM.

Speaker Change: And products and services some of our products are coming in lower than we expected as the box office remains sluggish and exhibitors continue to push out Capex Dolby.

Speaker Change: Dolby Atmos and Dolby vision are performing slightly ahead of our expectations as strong content growth continues to drive device attach rates.

Kevin Yeaman: Dynamics remains stable, and ongoing engagement from the broader ecosystem of creators, distributors, and device manufacturers is driving a steady stream of product launches across all device families. We continue to be confident in our growth opportunity with Dolby Atmos and Dolby Vision, and we have a strong position with our foundational audio technologies, which are well-positioned as our end markets return to more normal cycles. Moving on to the highlights for the quarter.

Speaker Change: Dynamics remained stable and ongoing engagement from the broader ecosystem of creators distributors and device manufacturers are driving a steady stream of product launches across all device families.

Kevin Yeaman: We continue to be confident in our growth opportunity with Dolby Atmos and Dolby Vision, and we have a strong position with our foundational audio technologies, which are well-positioned as our end-barkets return to more normal cycles.

Speaker Change: We continue to be confident in our growth opportunity with Dolby Atmos and Dolby vision, and we have a strong position with our foundational audio technologies, which are well positioned as our end markets returned to more normal cycles.

Kevin Yeaman: Moving on to the highlights for the quarter, we continue to enjoy momentum in content for Dolby Atmos and Dolby Vision, which is driving growth in autos, TVs, and mobile. These are three biggest areas of opportunity. Starting with content, I'm happy to share that as of this spring, over 25,000 TV shows and movies have been made available in Dolby Vision, a significant milestone considering that we launched Dolby Vision in October of 2015 with just 13 movies from one studio and one TV OEM. Since that initial launch, Dolby has worked across the ecosystem on a global basis to add studios, production companies, product partners, content service providers, and device partners to the Dolby Vision story.

Kevin Yeaman: We continue to enjoy momentum in content for Dolby Atmos and Dolby Vision, which is driving growth in autos, TVs, and mobile, our three biggest areas of opportunity. Starting with content, I'm happy to share that as of this spring, over 25,000 TV shows and movies have been made available in Dolby Vision, a significant milestone considering that we launched Dolby Vision in October of 2015 with just 13 movies from one studio and one TV OEM.

Speaker Change: Moving on to the highlights for the quarter, we continued to enjoy momentum and content for Dolby Atmos, and Dolby vision, which is driving growth in autos Tvs and mobile our three biggest areas of opportunity.

Speaker Change: Starting with content I'm happy to share that as of this spring over 25000, TV shows and movies have been made available in Dolby vision, a significant milestone considering that we launched Dolby vision in October of 2015, with just 13 movies from one studio and one TV OEM.

Unknown Executive: Since that initial launch, Dolby has worked across the ecosystem on a global basis to add studios, production companies, product partners, content service providers, and device partners to the Dolby Vision story. And we are taking that Dolby Vision momentum in TV and movies into live sports. Comcast Xfinity in the U.S. and a variety of global partners are making the Olympics available in Dolby Atmos and Dolby Vision, which builds on the momentum we've seen throughout this year. In Q3 alone, the Cricket World Cup, European Championship Soccer, Wimbledon, the NHL and NBA postseasons were all available in Dolby Atmos and Dolby Vision. And, of course, we aren't stopping there.

Kevin Yeaman: Since that initial launch, Dolby has worked across the ecosystem on a global basis to add studios, production companies, product partners, content service providers, and device partners to the Dolby Vision story. And we are taking that Dolby Vision momentum in TV and movies into live sports. Comcast Xfinity in the U.S. and a variety of global partners are making the Olympics available in Dolby Atmos and Dolby Vision, which builds on the momentum we've seen throughout this year. In Q3 alone, the Cricket World Cup, European Championship Soccer, Wimbledon, the NHL and NBA postseasons were all available in Dolby Atmos and Dolby Vision. And, of course, we aren't stopping there.

Speaker Change: Since that initial launch Dolby has worked across the ecosystem on a global basis to add studios production companies product partners content service providers and device partners to the Dolby Vision story, and we are taking that Dolby vision momentum in TV and movies into live sports Comcast Xfinity and the U S and a variety of global partners.

Kevin Yeaman: And we are taking that Dolby Vision momentum and TV and movies into live sports. Comcast extended in the US and a variety of global partners are making the Olympics available in Dolby Atmos and Dolby Vision, which builds in the momentum we seem throughout this year. In Q3 alone, the Cricket World Cup, European Championship soccer, Wimbledon, the NHL and NBA post seasons were all available in Dolby Atmos and Dolby Vision. And of course, we aren't stopping there. In May, Tencent Music cited Dolby Atmos Music on their earnings call, mentioning that we helped them to drive 20% year-over-year growth by making their music offerings more attractive and stickier, which is something we love to hear.

Speaker Change: Our making the Olympics available in Dolby, Atmos, and Dolby vision, which builds on the momentum we've seen throughout this year in Q3 alone the cricket World Cup European Championship Soccer Wimbledon, the NHL and NBA post season, where all available in Dolby Atmos and Dolby vision and of course, we aren't stopping there in May Tencent music.

Kevin Yeaman: In May, Tencent Music cited Dolby Atmos Music on their earnings call, mentioning that we helped them to drive 20% year-over-year growth by making their music offerings more attractive and stickier, which is something we love to hear. Audible recently announced that it will continue to expand its library of Dolby Atmos content with full cast audio productions of all seven Harry Potter books scheduled to premiere in late 2025. Moving on to the automotive industry, GM announced this quarter that the 2025 Cadillac Optic will feature Dolby Atmos, our first car with GM.

Unknown Executive: In May, Tencent Music cited Dolby Atmos Music on their earnings call, mentioning that we helped them to drive 20% year-over-year growth by making their music offerings more attractive and stickier, which is something we love to hear. On TVs, we are seeing a slight uptick in attach rates. Hisense and TCL, which are both strong adopters of Dolby Atmos and Dolby Vision, continue to gain market share, and we continue to get incremental wins as other TV OEMs look to bring Dolby Atmos and Dolby Vision deeper into their lineups in order to compete more aggressively in certain markets.

Speaker Change: Excited Dolby Atmos music on their earnings call mentioning that we help them to drive 20% year over year growth by making their music offerings more attractive and stickier, which is something we love to here in.

Speaker Change: An audible recently announced that they will continue to expand their library of Dolby Atmos content with forecast audio productions of all seven Harry Potter books scheduled to premiere in late 2025 move.

Speaker Change: Moving onto automotive GM announced this quarter that the 2025 Cadillac optic will feature Dolby Atmos, our first car with G. M and also this quarter Libyan announced that the second generation of its flagship vehicle are one will support Dolby Atmos and Hyundai announced that its luxury brand Genesis will make Dolby Atmos standard across <unk>.

Kevin Yeaman: Also this quarter, Rivian announced that the second generation of its flagship vehicle, the R1, will support Dolby Atmos. And Hyundai announced that its luxury brand, Genesis, will make Dolby Atmos standard across five models, starting in Korea.

Kevin Yeaman: And Hyundai announced that its luxury brand, Genesis, will make Dolby Atmos standard across five models, starting in Korea. We now have 20 OEM partners for Dolby Atmos, and the momentum continues to build. In TVs, we are seeing a slight uptick in attachments. High Sense and TCL, which are both strong adopters of Dolby Atmos and Dolby Vision, continue to gain market share. And we continue to get incremental wins as other TV OEMs look to bring Dolby Atmos and Dolby Vision deeper into their lineups in order to compete more aggressively in certain markets. Also contributing to the momentum are additional drivers, like the growth and sports content that we just covered.

Speaker Change: Five models starting in Korea.

Kevin Yeaman: We now have 20 OEM partners for Dolby Atmos, and the momentum continues to build. In TVs, we are seeing a slight uptick in attach rates. Hisense and TCL, which are both strong adopters of Dolby Atmos and Dolby Vision, continue to gain market share, and we continue to get incremental wins as other TV OEMs look to bring Dolby Atmos and Dolby Vision deeper into their lineups in order to compete more aggressively in certain markets.

Speaker Change: We now have 20 OEM partners for Dolby Atmos and the momentum continues to build in.

Speaker Change: In Tvs, we are seeing a slight uptick in attach rates high tenths in T. T L, which are both strong adopters of Dolby Atmos and Dolby vision continue to gain market share and we continue to get incremental wins as other TV Oems look to bring Dolby Atmos and Dolby vision deeper into their lineups in order to compete more aggressively in certain markets.

Kevin Yeaman: Also contributing to the momentum are additional drivers like the growth in sports content that we just covered. Lastly, in mobile, in addition to the steady rollout of new models from most of our mobile OEM partners, Transient added a Dolby-enabled low-cost phone to consumers in Malaysia as the company continues to sell affordably priced higher-end phones aggressively into Africa, the Middle East, India, and Southeast Asia.

Speaker Change: Also contributing to the momentum our additional drivers like the growth in sports content that we just covered.

Kevin Yeaman: Lastly, in mobile, in addition to the steady rollout of new models from most of our mobile OEM partners, Transian added a Dolby-enabled low-cost phone to consumers in Malaysia as the company continues to sell affordably priced higher-end phones aggressively into Africa, the Middle East, India, and Southeast Asia.

Speaker Change: Lastly in mobile in addition to the steady rollout of new models for most of our mobile OEM partners transient added a dolby enabled low cost phone to consumers in Malaysia as the company continues to sell affordably priced higher end phones aggressively into Africa, the Middle East, India and Southeast Asia moving.

Kevin Yeaman: Moving on to M&A, I'd like to briefly discuss our pending acquisition of GE licensing, which complements, strengthens, and expands Dolby's patent offerings, particularly in imaging, and represents a compelling financial profile of durable, recurring, high-margin revenue. This transaction adds a significant portfolio of video codec technologies that provide best-in-class video compression while also enabling better overall picture quality and higher resolution, which is particularly important in applications like streaming and video conferencing. In addition to strengthening our current video patent licensing programs, this acquisition continues to position us well for new licensing opportunities. These patents are primarily monetized through patent pools, which are collaborative licensing structures that enable industry efficiency and promote long-term growth by facilitating the adoption of its next-generation standardized technology.

Kevin Yeaman: Moving on to M&A, I'd like to briefly discuss our pending acquisition of GE Licensing, which complements, strengthens, and expands Dolby's patent offerings, particularly in imaging, and represents a compelling financial profile of durable, reoccurring, high-margin revenue. This transaction adds a significant portfolio of video codec technologies that provide best-in-class video compression while also enabling better overall In addition to strengthening our current video patent licensing programs, this acquisition continues to position us well for new licensing opportunities. These patents are primarily monetized through patent pools, which are collaborative licensing structures that enable industry efficiency and promote long-term growth by facilitating the adoption of next-generation standardized technologies.

Speaker Change: Moving onto M&A I'd like to briefly discuss our pending acquisition of GE licensing, which complements strengthens and expands Dolby is patent offerings, particularly in imaging and represents a compelling financial profile of durable reoccurring high margin revenue. This transaction as a significant portfolio of video codec technologies that provide.

Speaker Change: <unk> best in class video compression, while also enabling better overall picture quality and higher resolution, which is particularly important in applications like streaming and videoconferencing.

Speaker Change: In addition to strengthening our current video patent licensing programs. This acquisition continues to position us well for new licensing opportunities. These patents are primarily monetize through patent pools, which are collaborative licensing structures that enable industry efficiency and promote long term growth by facilitating the adoption of next generation standardized technology.

Speaker Change: <unk>.

Kevin Yeaman: We expect a transaction to close by the end of the fiscal year and expect it to be a creative on a non-GAAP basis to operating margins and EPS in fiscal 2025.

Unknown Executive: We expect the transaction to close by the end of the fiscal year and expect it to be accretive on a non-gap basis to operating margins and EPS in fiscal 2025. In summary, we continue to operate in an uncertain and dynamic market environment, with lower unit shipments and cinema box office weighing on revenues this year, particularly in foundational.

Kevin Yeaman: We expect the transaction to close by the end of the fiscal year and expect it to be accretive on a non-gap basis to operating margins and EPS in fiscal 2025. Also, in M&A, we recently enhanced our Dolby I-O offering with the acquisition of Theo Technologies for $55 million. As we've talked about, we are seeing demand from companies in sports and entertainment who are looking to create real-time and personalized experiences. Theo addresses a similar customer base with complementary technologies. This acquisition gives us more momentum from both a product and customer perspective and a stronger foundation to build on. Neither of these deals will have a material impact on FY24.

Speaker Change: We expect the transaction to close by the end of the fiscal year and expect it to be accretive on a non-GAAP basis to operating margins and EPS in fiscal 2000 and twenty-five.

Kevin Yeaman: Also on M&A, we recently enhanced our Dolby I.O. offering with the acquisition of Theo Technologies for $55 million. As we've talked about, we are seeing demand from companies in sports and entertainment who are looking to create real-time and personalized experiences. Theo addresses a similar customer base with complementary technologies. This acquisition gives us more momentum from both a product and customer perspective, and a stronger foundation to build on. Neither of these deals will have a material impact on FY24.

Speaker Change: Also on M&A, we recently enhanced our Dolby Io offering with the acquisition of Theo technologies for $55 million as we've talked about we're seeing demand from companies in sports and entertainment, who are looking to create real time and personalized experiences.

Speaker Change: T O addresses a similar customer base with complementary technologies.

Speaker Change: This acquisition gives us more momentum from both a product and customer perspective, and a stronger foundation to build on.

Speaker Change: Neither of these deals will have a material impact on FY 'twenty four.

Kevin Yeaman: In summary, we continue to operate in an uncertain and dynamic market environment with lower unit shipments and cinema box office weighing on revenues this year, particularly in foundational. At the same time, we continue to grow our Dolby Atmos and Dolby Vision content ecosystems across movie, TV, sports, and music and to grow device adoption, particularly in automotive, TV, and mobile. We remain committed to growing earnings faster than revenue while investing in a healthy portfolio of innovation, and we are strengthening our imaging offerings with a financially attractive acquisition. I continue to be very excited about the opportunities in front of us and the opportunities to deliver revenue and earnings growth.

Kevin Yeaman: In summary, we continue to operate in an uncertain and dynamic market environment, with lower unit shipments and cinema box office weighing on revenues this year, particularly in foundational. At the same time, we continue to grow our Dolby Atmos and Dolby Vision content ecosystems across movie, TV, sports, and music, and to grow device adoption, particularly in automotive, TV, and mobile. We remain committed to growing earnings faster than revenue while investing in a healthy portfolio of innovation, and we are strengthening our imaging offerings with a financially attractive acquisition. I continue to be very excited about the opportunities in front of us and the opportunity to deliver revenue and earnings growth. And with that, I'll turn the call over to Robert.

Speaker Change: In summary, we continue to operate in an uncertain and dynamic market environment with lower unit shipments in cinema box office weighing on revenues this year, particularly in foundational.

Speaker Change: Same time, we continue to grow our Dolby Atmos and Dolby vision content ecosystems across movie television sports and music and to grow device adoption, particularly in automotive TV and mobile we remain committed to growing earnings faster than revenue, while investing in a healthy portfolio of innovation and we are strengthening our imaging offerings with a finance.

Robert: Really attractive acquisition I continue to be very excited about the opportunities in front of us and the opportunity to deliver revenue and earnings growth and with that I'll turn the call over to Robert Thanks, Kevin and thanks to everyone. Joining us on this call today before we review the quarter in some detail I'd like to hit the highlights first.

Robert Park: And with that, I'll turn the call over to Robert. Thanks, Kevin, and thanks to everyone joining us on this call today. Before we review the quarter in some detail, I'd like to hit the highlights. First, revenues for Q3 were above the midpoint of the range we laid out on the Q2 earnings call, and profitability came in above the high end of the range. Second, the environment remains uncertain and dynamic.

Robert Park: Robert. Thanks, Kevin. And thanks to everyone joining us on this call today. Before we review the quarter in some detail, I'd like to hit the highlights. First, revenues for Q3 were above the midpoint of the range we laid out on the Q2 earnings call, and profitability came in above the high end of the range. Second, the environment remains uncertain and dynamic.

Robert: <unk> revenues for Q3 were above the midpoint of the range, we laid out on the Q2 earnings call and profitability came in above the high end of the range.

Speaker Change: Second the environment remains uncertain and dynamic.

Robert Park: Our revenue guidance for the full year is skewing towards the lower end of what we've been describing as roughly flat all year, and our non-GAAP EPS range is unchanged. And third, as I have said before, we feel good about our long-term growth prospects, and our value propositions remain strong, and our financials are solid. Q3 revenue was 289 million, down 3% compared to the year-ago quarter, but above the midpoint of guidance we shared with you on the last earnings call. Licensing revenue of 267 million was down 2% year over year. Products and services revenue was $22 million, down 14% year over year.

Robert Park: Our revenue guidance for the full year is skewing towards the lower end of what we've been describing as roughly flat all year, and our non-GAAP EPS range is unchanged. And third, as I said before, we feel good about our long-term growth prospects, and our value proposition remains strong, and our financials are solid. Q3 revenue was $289 million, down 3% compared to the year-ago quarter, but above the midpoint of the guidance we shared with you on the last earnings call.

Unknown Executive: Our revenue guidance for the full year is skewing towards the lower end of what we've been describing as roughly flat all year and our non-GAAP EPS range is unchanged.

Unknown Executive: And third, as I have said before, we feel good about our long-term growth prospects, our value proposition remains strong, and our financials are solid. Q3 revenue was $289 million, down 3% compared to the year-ago quarter, but above the midpoint of guidance we shared with you on the last earnings call. Licensing revenue of $267 million was down 2% year over year. At the same time, we continue to see steady growth of content created and distributed in Dolby technology, strong engagement from our partners, and revenue from Dolby Atmos and Dolby Vision and imaging patents is performing a bit better than expected.

Speaker Change: And third as I have said before we feel good about our long term growth prospects and our value proposition remains strong and our financials. Our solid Q3 revenue was $289 million down 3% compared to the year ago quarter, but above the midpoint of guidance. We shared with you on the last earnings call licensing revenue of 260 <unk>.

Robert Park: Licensing revenue of $267 million was down 2% year-over-year. Products and services revenue was $22 million, down 14% year-over-year. Detailed licensing performance by NMarket is on our IR website, but I'd like to point out some noteworthy details.

Speaker Change: $7 million was down 2% year over year products and services revenue was $22 million down 14% year over year.

Robert Park: Detailed licensing performance by Anne Market is on our IR website, but I'd like to point out some noteworthy details. As a reminder, timing of recovery's minimum volume commitments and true-ups can drive volatility between quarters. For example, mobile, which benefited from minimum volume commitments as quarter, was up 25% year over year but will still be down slightly for the full year. Similarly, consumer electronics revenue was down 18% year over year in the quarter, but we expect revenue to be down slightly for the full year. We expect broadcast revenue to be down year over year for the full year, driven by tough comps in terms of timing and size of deals, and lower set top box revenue.

Unknown Executive: Detailed licensing performance by end market is on our IR website, but I'd like to point out some noteworthy details.

Speaker Change: As a reminder, timing of recoveries minimum volume commitments and true ups can drive volatility between quarters.

Robert Park: As a reminder, timing of recoveries, minimum volume commitments, and true ups can drive volatility between quarters. For example, mobile, which benefited from minimum volume commitments this quarter, was up 25% year over year, but will still be down slightly for the full year. Similarly, consumer electronics revenue was down 18% year-over-year in the quarter, but we expect revenue to be down slightly for the full year. We expect broadcast revenue to be down year-over-year for the full year driven by tough comps in terms of timing and size of deals and lower set-top-box revenue.

Speaker Change: For example, mobile which benefited from minimum volume commitments. This quarter was up 25% year over year, but will still be down slightly for the full year <unk>.

Speaker Change: Similarly, consumer electronics revenue was down 18% year over year in the quarter, but we expect revenue to be down slightly for the full year.

Speaker Change: We expect broadcast revenue to be down year over year for the full year driven by tough comps in terms of timing and size of the deals and lower set top box revenue.

Robert Park: On the flip side, we continue to expect solid growth in other markets driven by imaging patent admin fees and increased adoption of Dolby Atmos and Auto. PC is benefiting from minimum volume commitments and slightly moving to the bottom line. We earned 71 cents per diluted share on a non-GAAP basis, above the high end of our guidance, primarily due to stronger revenue, lower operating expenses, and higher non-operating income. We generated 21 million in operating cash flow. As a reminder, cash flow will fluctuate quarter to quarter due to timing ideals, but over time, operating cash flow will correlate to non-GAAP net income.

Robert Park: On the flip side, we continue to expect solid growth in other markets driven by imaging patent admin fees and increased adoption of Dolby Atmos and Auto. PC is benefiting from minimum volume commitments and slightly higher unit volumes.

Speaker Change: On the flip side, we continue to expect solid growth in other markets driven by imaging patent admin fees and increased adoption of Dolby Atmos in auto.

Speaker Change: PC is benefiting from minimum volume commitments and slightly higher unit volumes.

Speaker Change: Moving to the bottom line, we earned <unk> 71 per diluted share on a non-GAAP basis above the high end of our guidance, primarily due to stronger revenue lower operating expenses and higher non operating income and we generated $21 million in operating cash flow.

Robert Park: Moving to the bottom line, we earned $0.71 per diluted share on a non-gap basis, above the high end of our guidance primarily due to stronger revenue, lower operating expenses, and higher non-operating income. Additionally, we generated $21 million in operating cash flow. As a reminder, cash flow will fluctuate quarter to quarter due to the timing of deals, but over time, operating cash flow will correlate to non-GAAP net income. GAAP operating expenses included a restructuring charge of approximately $4 million for severance and related benefits as we continue to align resources with our strategic priorities.

Speaker Change: As a reminder, cash flow will fluctuate quarter to quarter due to timing of deals, but over time operating cash level correlate to non-GAAP net income.

Robert Park: Gap operating expenses included the restructuring charge of approximately 4 million for several related benefits as we continue to align resources with our strategic priorities. Moving on, we repurchased 35 million of common stock, and we have 72 million remaining on our repurchased plan authorization. We recently received board approval to increase the existing share repurchased authorization by 350 million, bringing our total authorization to about 420 million dollars. We declared a 30 cent dividend, up 11% from our dividend a year ago, and ended the quarter with cash and investments of just under 1 billion dollars.

Speaker Change: GAAP operating expenses included a restructuring charge of approximately $4 million for severance and related benefits as we continue to align resources with our strategic priorities.

Speaker Change: Moving on we repurchased $35 million of common stock and we have $72 million remaining on our repurchase plan authorization.

Robert Park: Moving on, we repurchased $35 million of common stock, and we have $72 million remaining on our repurchase plan authorization. We recently received board approval to increase the existing share repurchase authorization by 350 million, bringing our total authorization to about $420 million. We declared a $0.30 dividend, up 11% from our dividend a year ago, and ended the quarter with cash-in investments of just under $1 billion. Turning to Guidance.

Speaker Change: We recently received board approval to increase the existing share repurchase authorization by $350 million, bringing our total authorization to about $420 million.

Speaker Change: We declared a 30 cent dividend up 11% from our dividend a year ago and ended the quarter with cash and investments of just under $1 billion.

Speaker Change: Turning to guidance.

Robert Park: Turning to guidance, it continues to be an uncertain and dynamic market. Device shipments remain soft, and the box office remains sluggish, which has negative implications for both our licensing and product and services revenue. At the same time, we continue to see steady growth of content created and distributed in Dolby technology, strong engagement from our partners, and revenue from Dolby Atmos and Dolby Vision and imaging patents is performing a bit better than expected. For Q4 to go 24, we expect revenue to be between 300 million and 320 million. Within that, licensing revenue is estimated to range from 275 million to 295 million.

Robert Park: It continues to be an uncertain and dynamic market. Device shipments remain soft, and the box office remains sluggish, which has negative implications for both our licensing and product and services revenue. At the same time, we continue to see steady growth of content created and distributed in Dolby technology, strong engagement from our partners, and revenue from Dolby Atmos and Dolby Vision and imaging patents is performing a bit better than expected. For Q4 Fiscal 24, we expect revenue to be between $300 million and $320 million.

Speaker Change: Continues to be an uncertain and dynamic market device shipments remained soft and the box office remains sluggish, which has negative implications for both our licensing and product and services revenue.

Robert Park: Within that, licensing revenue is estimated to range from $275 million to $295 million, and gross margins should be approximately 88% on a non-gap basis. We expect non-GAAP operating expenses to be between $190 million and $200 million. Our effective tax rate for Q2 is projected to be around 23% on a non-GAAP basis. So, as a result, we estimate that non-GAAP EPS should be between $0.61 and 76% per diluted share. This Q4 guidance implies full-year revenue between $1,270,000,000 and $1,290,000,000, at the lower end of what we've been describing as roughly flat revenue all year, as we are seeing lower than expected unit shipments and lower revenue from cinema.

Unknown Executive: At the same time, we continue to see steady growth of content created and distributed in Dolby technology strong engagement from our partners and revenue from Dolby Atmos, and Dolby vision and imaging patents is performing a bit better than expected.

Speaker Change: For Q4 fiscal 'twenty, four we expect revenue to be between $300 million and $320 million.

Speaker Change: Within that licensing revenue is estimated to range from $275 million to $295 million.

Robert Park: Gross margins should be approximately 88% on a non-GAAP basis. We expect non-GAAP operating expenses to be between 190 million and 200 million. Our effective tax rate for Q2 is projected to be around 23% on a non-GAAP basis. So, as a result, we estimate that non-GAAP EPS should be between 61 cents and 76% per due due to chair. This Q4 guidance implies full year revenue between 1,270 million and 1,290 million. At the lower end of what we have been describing as roughly flat revenue all year, as we are saying lower than expected unit shipments and lower revenue from cinema.

Unknown Executive: Gross margins should be approximately 88% on a non-GAAP basis.

Speaker Change: We expect non-GAAP operating expenses to be between $190 million and $200 million.

Speaker Change: Our effective tax rate for Q2 is projected to be around 23% on a non-GAAP basis.

Unknown Executive: So as a result, we estimate that non-GAAP EPS should be between 61 cents and 76% per diluted share.

Speaker Change: This Q4 guidance implies full year revenue between $1 billion $270 million and $1.290 billion at the lower end of what we've been describing as roughly flat revenue all year.

Unknown Executive: As we were saying a lower than expected unit shipments and lower revenue from cinema.

Robert Park: However, we still expect non-GAAP earnings to be within the range we have been discussing all year of $3.60 and $3.75. To wrap things up, the creation and distribution of Dolby-enabled content continues to grow nicely, and our partners are still very engaged. Our financials remain solid, and we are well-positioned for growth when economic conditions improve.

Robert Park: However, we still expect non-GAAP earnings to be within the range we've been discussing all year of $3.60 and $3.75. To wrap things up, the creation and distribution of Dolby-enabled content continues to grow nicely, and our partners are still very engaged. Our financials remain solid, and we are well-positioned for growth when economic conditions improve. With that, I'd like to turn it back to the operator to open the line for your questions.

Unknown Executive: However, we still expect non-GAAP earnings to be within the range. We've been discussing all year of $3 60, and $3 75 sets.

Unknown Executive: To wrap things up the creation and distribution of Dolby enabled content continues to grow nicely and our partners are still very engaged our financials remains solid and we are well positioned for growth when economic conditions improve.

Operator: With that, I'd like to turn it back to the operator to open the line for your questions.

Speaker Change: With that I'd like to turn it back to the operator to open the line for your questions.

Operator: Operator? Thank you. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, press star one again.

Unknown Executive: Operator.

Unknown Executive: Thank you.

Operator: Thank you. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, press star 1 again. If you are dialed in and listening via the loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Our first question comes from the line of Ralph Schackart with William Blair. Please go ahead.

Speaker Change: You have to hold and we'd like to ask a question. Please press star one on your telephone keypad to raise your hand and join the queue.

Speaker Change: If you would like to withdraw your question Press Star one again.

Operator: If you are dialed in and listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question.

Speaker Change: You are dialed in and listening via loud speaker on your device. Please pickup your handset and ensure that your phone is not on mute when asking your question.

Ralph Shackhart: Our first question comes from the line of Ralph Shackhart with William Blair. Please go ahead. Good afternoon. Thanks for taking the question.

Ralph <unk>: Our first question comes from the line of Ralph <unk> with William Blair. Please go ahead.

Ralph Schackart: Good afternoon, thanks for taking the question. Kevin, just on the macro, just to kick things off, I'm just curious what you observed in this quarter in relation to what you observed last quarter, you know, was it sort of within bounds, maybe at the lower end, you know, given sort of the slight tweak to guidance, but if anything you could add on the macro, and then I have a follow-up.

Ralph Schackart: Good afternoon, thanks for taking the question. Kevin, just on the macro, just to kick things off, just curious what you observed in this quarter in relation to what you observed last quarter, you know, was it sort of within bounds, maybe at the lower end, you know, given sort of the slight tweak to guidance, but anything you could add on the macro, and then I have a follow-up.

Speaker Change: Hi, good afternoon. Thanks for taking the question Kevin just on the macro just to kick it off.

Kevin Yeaman: Kevin, just on the macro, just to kick it off, just curious what you observed in this quarter in relation to what you observed last quarter. You know, was it sort of within bounds, maybe at the lower end, you know, given sort of the slight tweaked guidance, but anything you could have the macro, then I have a follow up. Yeah, of course. Thanks, Ralph. Yeah, I would say that as far as the macro goes, we're seeing much the same we've been seeing all year. I think that, you know, it's been a, you know, I think it's fair to say it's been a tough environment for our OEM customers over the last several years, but we see them, you know, I think cautiously optimistic that things are stabilizing, looking for opportunities for growth.

Ralph Schackart: Okay, great. That's really helpful. Thanks, Kevin. And just one more.

Ralph Schackart: Just curious what you observed in this quarter in relation to what you observed last quarter and it was sort of within bounds maybe at the lower end given sort of a slight tweak to guidance, but anything you could add in the macro that I have.

Ralph Schackart: Hello.

Kevin Yeaman: Yeah, of course. Thanks, Ralph.

Kevin: Yes of course, thanks, Ralph Yes, I would say that as far as the macro goes we're seeing much. The same we've been seeing all year I think that it's been a.

Kevin Yeaman: Yeah, I would say that as far as the macro goes, we're seeing much the same we've been seeing all year. I think that, you know, it's been a tough environment for our OEM customers over the last several years, but we see them, you know, I think it's fair to say it's been a tough environment for them, but we see them, you know, I think, cautiously optimistic that things are stabilizing and And we continue to have really strong engagement on content distribution devices for Dolby Atmos and Dolby Vision. What we did see this quarter, Ralph, that was a little more specific, is, as I mentioned, some softness in set-top boxes and gaming consoles. So it's really just set-top boxes.

Speaker Change: I think it's fair to say, it's been a tough environment for our OEM customers over the last several years, but we see them.

Speaker Change: I think cautiously optimistic that things are stabilizing looking for opportunities for growth and we continue to have really strong engagement on content distribution devices for Dolby Atmos and Dolby vision.

Kevin Yeaman: And we continue to have really strong engagement on content, distribution, devices for Dolby Atmos and Dolby Vision. What we did see this quarter, Ralph, that was a little more specific is we, as I mentioned, some softness in set top boxes and game console. So it's really to set top boxes are the industry analysts and our customers and partners were expecting set top boxes to begin to tick up through the year. They'd worked through a pretty big inventory level last year. And we're not seeing that; we're seeing it stay kind of ladish. And so we had a negative true-up in Q3, $8 million, which was, you know, set-top box for the biggest part; also continued weakness in gaming consoles.

Ralph Schackart: We did see this quarter Ralph there's little.

Speaker Change: More specific is we as at risk.

Speaker Change: I mentioned, some softness in set top boxes and gaming console. So as it relates to set top boxes are the industry analysts at our customers and partners, we're expecting set top boxes to begin to tick up through the year.

Kevin Yeaman: The industry analysts and our customers and partners were expecting set-top box sales to begin to tick up through the year. But they had worked through a pretty big inventory level last year, and we're not seeing that. We're seeing it stay kind of flattish. And so we had a negative true up in Q3 of $8 million, which was, you know, the set-top box was the biggest part. Also, there has been continued weakness in gaming consoles, and we see that continuing through the year. At the same time, you know, there's always puts and takes in the quarter.

Speaker Change: They worked through a pretty big inventory level last year, and we're not seeing that we're seeing it stay kind of flattish and so we had a negative true up in Q3.

Speaker Change: $8 million, which was set.

Speaker Change: Set top box or the biggest part also continued weakness in gaming consoles.

Kevin Yeaman: And we see that continuing through the year. At the same time, you know, there's always puts and takes in the quarter. So we had a few things come in early in Q3, which is why you didn't see it show up relative to our guidance for Q3. So, and then I would say on top of that, the box office continued to be pretty soft through the end of Q3. So we continue to see the pushing out of cinema product purchases. So I would say those two specific things were what contributed to the slide adjustment, but I wouldn't characterize it as a big macro change.

Kevin: And we see that continuing through the year at the same time, you know, there's always puts and takes in the quarter. So we had a few things come in early in Q3, which is why you didn't see it show up relative to two our guidance for Q3, So and then I would say on top of that.

Kevin Yeaman: So we had a few things come in early in Q3, which is why you didn't see it show up relative to our guidance for Q3. And then, on top of that, the box office continued to be pretty soft through the end of Q3. So we continued to see the pushing out of cinema product purchases. So I would say those two specific things contributed to the slight adjustment, but I wouldn't characterize it as a big macro change.

Speaker Change: The box office continued to be pretty soft through the end of Q3. So we continued to see the pushing out of cinema product purchases. So I would say those two specific things or what contributed to the slight adjustment.

Kevin: Wouldn't characterize it as a big macro change.

Ralph Schackart: Okay, great. That's really helpful. Thanks, Kevin. And just one more.

James Goss: Just on the new patents that you acquired from GE, curious if you could leverage these patents either into existing products or potentially for future products. I noticed, in part, that they apply to video compression. So, overall, perhaps, could this help your Dolby I-O efforts as well?

Ralph Shackhart: Okay, great. It's really helpful. Thank you, Kevin.

Ralph Schackart: Okay, Great Super helpful. Thanks, Kevin just one more.

Kevin Yeaman: And just one more. Just on the new patents that you acquired from GE, curious if you could leverage these patents, either into existing products or potentially for future products. I noticed in part that they have applied a video compression. So overall, curious, perhaps could this help you or do the IO efforts as well. This is really, so first of all, we're always looking for opportunities that can expand or accelerate our existing business initiatives. And this is very much focused on our imaging patent business where we license are through patent pools, which are collaborative licensing structures.

Speaker Change: On the new patents that you acquired from GE.

James Goss: Curious if you could leverage these patents either into existing products or potential for future products. I know some part of that there are quite a video compression. So overall curious perhaps could this help your Dolby Io efforts as well.

James Goss:

Kevin Yeaman: Just on the new patents that you acquired from GE, curious if you could leverage these patents either into existing products or potentially for future products. I noticed, in part, that they apply to video compression. So, overall, perhaps, could this help your Dolby I-O efforts as well?

Unknown Executive: This is really, so first of all, we're always looking for opportunities that can expand or accelerate our existing business initiatives, and this is very much focused on our imaging patent business, where we license our patents through patent pools, which are collaborative licensing structures. And this is really, this

Speaker Change: This is really.

Unknown Executive: So first of all we're always looking for opportunities that can expand or accelerate.

Unknown Executive: Our existing business initiatives and this is very much focused on our imaging patent business, where we license our through patent pools, which are collaborative licensing structures and this is really this.

Kevin Yeaman: And this is a really, this for us, this is a pretty unique opportunity in terms of the ability to bring on a very attractive portfolio patent portfolio in the particularly in the video code technology space. So it expands our presence in imaging patents. It's a very attractive and durable set of revenue streams. And we expect it to be a creative to both non-operating or, sorry, non-GAAP operating income and EPS in the first year.

Unknown Executive: For us this is a pretty unique opportunity in terms of the ability to bring on a very attractive portfolio patent portfolio in the.

Kevin Yeaman: This is really, so first of all, we're always looking for opportunities that can expand or accelerate our existing business initiatives, and this is very much focused on our imaging patent business, where we license our patents through patent pools, which are collaborative licensing structures, and this is, for us, a pretty unique opportunity in terms of the ability to bring on a very attractive patent portfolio, particularly in the video codec technology space. So it expands our presencing and imaging patents.

Unknown Executive: Particularly in the video codec technology space. So it expands our presence in imaging patents are very attractive and durable.

Unknown Executive: Set of revenue streams, and we expect it to be accretive to both non operating or sorry, non-GAAP operating income and EPS.

Unknown Executive: In the first year.

Kevin Yeaman: We also did, as it relates to IO, we did also this quarter acquire a startup by the name of the technologies, which we, which does enhance the WIO offering. And you know, we're very much focused on sports and entertainment companies that are looking to offer real-time, more interactive digital experiences. We really refocused our efforts around that coming into the beginning of this fiscal year. BIO has a video player and features and functions that increase interactivity. They serve a very similar customer base. And so it's, on the one hand, it's a buy versus build because it's a very complimentary set of technologies that allows us to provide a more complete solution.

Unknown Executive: We also did as it relates to I O. We did also this quarter.

Kevin Yeaman: It's a very attractive and durable set of revenue streams, and we expect it to be accretive to both non-GAAP operating income and EPS in the first year. We also did, as it relates to I.O., this quarter acquired a startup by the name of Theo Technologies, which does enhance the Dolby I.O. offering.

Speaker Change: Acquire startup by the name of Theo technologies, which we which does enhance the Dolby Io offering.

Unknown Executive: As you know we're very much focused on.

Operator: As you know, we're very much focused on sports and entertainment companies that are looking to offer real-time, more interactive digital experiences. We really refocused our efforts around that at the beginning of this fiscal year. Theo has a video player and features and functions that increase interactivity. Nevertheless, they serve a very similar customer base. And so, on the one hand, it's a buy versus build because it's a very complementary set of technologies that allows us to provide a more complete solution.

Unknown Executive: Sports and entertainment companies that are looking to offer real time more interactive digital experiences.

Unknown Executive: Well, we really refocused our efforts around that coming into the beginning of this fiscal year.

Unknown Executive: <unk> has a video player.

Unknown Executive: And features and functions that increase interactivity they serve a very similar customer base.

Unknown Executive: And so it's on the one hand, it's it's a buy versus build because it's a very complementary set of technologies allows us to provide a more complete solution and we also think it can increase sales momentum because of the the ability to cross sell in fact, we have a number of customer prospects and common we're getting very positive feedback and so we're excited about.

Operator: And we also think it can increase sales momentum because of the ability to cross-sell. In fact, we have a number of customer prospects in common. We're getting very positive feedback, and so we're excited about that one as well.

Kevin Yeaman: And we also think it can increase sales momentum because the ability to cross-sell. In fact, we have a number of customer prospects in common. We're getting very positive feedback. And so we're excited about that one as well.

Unknown Executive: That one as well.

Ralph Shackhart: Okay, great. Thanks, Deb.

Kevin: Okay, great. Thanks, Kevin.

Jim Goss: Our next question comes from the line of Jim Goss with Barrington Research. Please go ahead. Thanks. First of all, like I asked about, have most in cars. You gave a number of usage points, including Cadillac, Optic, Rivian, Genesis. In the Genesis, with the five different models being used. That's pretty rare, I think, to this point. But I'm wondering if you're seeing that in a number of the other applications. And how do you feel you are picking up momentum and in broadening the usage within cars? Yeah, thanks, Jim. Very excited to have Cadillac on board with the first model.

Speaker Change: Our next question comes from the line of Jim Goss with Barrington Research. Please go ahead.

Jim Goss: Our next question comes from the line of Jim Goss with Barrington Research. Please go ahead.

Unknown Executive: Okay.

Kevin Yeaman: Thanks. First, I'd like to ask about Atmos in Cars. You gave a number of Use cases, including Cadillac, Uptiq, Rivian, and Genesis. In the Genesis, with five different models being used, that's pretty rare, I think, at this point, but I wonder if you're seeing that in a number of the other applications. Do you feel you are picking up momentum in broadening the usage within C

Unknown Executive: Thanks.

Speaker Change: Firstly I'd like to ask about <unk>.

Unknown Executive: And cars.

Unknown Executive: Give us a number of.

Unknown Executive: Okay.

Unknown Executive: Usage points, including Cadillac peak, Ruby and Genesis.

Operator: Ladies and gentlemen, thank you for standing by.

Unknown Executive: And the Genesis.

Operator: Welcome to the Dolby Laboratories conference called discussing fiscal third 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. If you would like to ask a question, please press star then the number one on your telephone keypad. To withdraw your question, press star one again. As a reminder, this call is being recorded Wednesday, August 7, 2024.

Speaker Change: With the five different models being used is it that's a pretty rare I think to this point.

Speaker Change: But I'm wondering if you're seeing that in a number of the other applications now.

Peter Goldmacher: Do you feel you are picking up momentum in broadening its usage within CARS?

Speaker Change: Or do you do you feel you are picking up momentum and and broadening the usage within curves.

Kevin Yeaman: Yeah, thanks, Jim. Very excited to have Cadillac on board with the first model. And also, you would have seen that we added the Rivian. Hyundai is now offering five models in Korea. And we continue to see, we now have 20 OEM partners, and we continue to see many of them expanding into additional models and getting deeper into lineups. And so, this is an area where, in Dolby Atmos and Dolby Vision for, sorry, Dolby Atmos for Automotive, we're doing better than we expected coming into the year. And that's a function of going deeper into lineups, continuing to bring on new models, and some of those doing, you know, just exceeding their unit projections.

John Couling: Yeah, thanks, Jim. I'm very excited to have Cadillac on board with the first model. And also, you would have seen that we added the Rivian. Hyundai is now offering five models in Korea. And we continue to see, we now have 20 OEM partners, and we continue to see many of them expanding into additional models and getting deeper into lineups. And so, this is an area where, with Dolby Atmos and Dolby Vision for, or sorry, Dolby Atmos for Automotive, we're doing better than we expected coming into the year. And that's a function of going deeper into lineups, continuing to bring on new models, and some of those doing, you know, just exceeding their unit projections.

Jim: Yeah. Thanks, Jim.

John Couling: We are excited to have.

John Couling: Cadillac onboard with the first model and.

Peter Goldmacher: I would now like to turn the conference over to Mr. Peter Goldmacher, Vice President of Investor Relations. Peter, please go ahead. Thank you, operator, and good afternoon, everyone. Welcome to Dolby Laboratories third quarter, 2024 earnings conference call. Joining me today are Kevin Yeaman, Dolby Laboratories CEO, and Robert Park RCFO. As a reminder, today's discussion will include forward-looking statements, including our fiscal 2024 fourth quarter and full year outlook, and our assumptions underlying that outlook.

Kevin Yeaman: And also you would have seen that we had Rivian. Hyundai is now offering five models in Korea. And we continue to see; we now have 20 OAM partners. And we continue to see many of them expanding into additional models. And get deeper into lineups. And so this is an area where, in Dolby Atmos and Dolby Vision, sorry, Dolby Atmos for automotive, we're doing better than we expected coming into the year. And it's a function of going deeper into lineups, continuing to bring on new models. And some of those doing, you know, just exceeding their unit projections.

John Couling: And also.

John Couling: You would've seen that we added Vivian.

John Couling: <unk> is now offering five models in Korea.

John Couling: And we continue to see we now have 20 OEM partners.

John Couling: And we continue to see many of them expanding into additional models and get deeper into lineups and so.

Speaker Change: Yeah. This is an area where we're in.

John Couling: In Dolby Atmos, and Dolby vision for Dolby Atmos for automotive we're doing.

Peter Goldmacher: 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 macroeconomic events, supply chain issues, inflation rates, changes in consumer spending, and geopolitical instability on our business. A discussion of these risks and additional risks and uncertainties can be found in the earnings press release that 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 10Q.

John Couling: Better than we expected coming into the year and it's a function of going deeper into lineups continuing to bring on new models and some of those doing just exceeding their unit projections.

Jim Goss: Okay, and the way you're monetizing this is payment for, it's not a royalty base, but it's more of an installation base in the product area. Is that correct? It's a typical model; we get an amount for each car. Okay. And the movie business is at a low point, obviously, but it's been starting to recover, and expectations are pretty high for 25 and 26. I'm wondering if that's prodding you to increase the number of theater installations, either domestically or internationally, or both. And, you know, just, you know, any comments you might have on that, but also the real monetization has been via TV applications, other consumer products.

Speaker Change: Okay and then the way you are.

Jim Goss: Okay, and the way you're monetizing this is payment for, it's not a royalty base, but it's more of an installation base in the products area. Is that correct? It's a- it's a-

Peter Goldmacher: Okay, and the way you're monetizing this is payment for, it's not a royalty base, but it's more of an installation base in the products area. Is that correct? It's a-

Speaker Change: Monetizing this is.

Peter Goldmacher: Yeah.

Speaker Change: Payment for it's not a royalty base, but it's more of an installation base.

Peter Goldmacher: The products area is that correct.

John Couling: It's a, it's a, it's our, it's our typical model. We get an amount for each, for each car.

Kevin Yeaman: It's a, it's a, it's our, it's our typical model. We get an amount for each, for each car.

Peter Goldmacher: It's a it's a.

John Couling: So it's our typical model we get.

Peter Goldmacher: 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-gap financial measures, a reconciliation between gap and non-gap financial measures, is available in our earnings press release and in the Interactive Vanilla Center on the Investor Relations section of our website.

John Couling: The amount for each for each car.

John Couling: Okay.

Jim Goss: And the movie business is.... at a low point, obviously, but it's been starting to recover, and expectations are pretty high for 25 and 26. I'm wondering if that's prodding you to increase the number of theater installations either domestically or... internationally or both, and just any comments you might have on that, but also the real malaise has been here. TV Applications, and other consumer products. And I wonder if you might also elaborate on just how that penetration continues to go and whether you're getting similar royalties as you move to an expanded, lower-priced SKU.

Steven Frankel: And the movie business is... at a low point, obviously, but it's been starting to recover, and expectations are pretty high for 25 and 26. I'm wondering if that's prodding you to increase the number of theater installations, either domestically or TV applications, and other consumer products. And I wonder if you might also elaborate on just how that penetration continues to go and whether you're getting similar royalties as you move to an expanded, lower-priced SKU.

John Couling: And.

Speaker Change: The movie business is.

Steven Frankel: At a low point, obviously, but it's been.

Steven Frankel: Starting to recover and expectations are pretty high for 25 and 26 I'm wondering if that's a.

Kevin Yeaman: With that, I'd like to turn the call over to Kevin. Thank you, Peter, and thanks to everyone joining us on the call today. Revenue for the quarter came in just above the midpoint of the range that we provided you on the last earnings call, and earnings were above the high end of the range.

Speaker Change: I'm proud of you to increase the number of theater installations, either domestically or.

Speaker Change: Internationally or both.

Speaker Change: Uh huh.

Speaker Change: No just the.

Kevin Yeaman: For the full year, we now expect revenue to be down approximately 1% to 2%, which is at the lower end of what we've been expecting throughout the year. We are not making any changes to our non-gap EPS guidance for the year. Our foundational audio revenue is coming in lower than we expected, as global device sales in aggregate have been soft all year, and we're seeing lower than expected units in set-top boxes and gaming consoles for the second half of the year.

Speaker Change: And any comments you might have on that.

Steven Frankel: But also the real monetization has been we are.

Speaker Change: TV applications other consumer products.

Steven Frankel: Products.

Kevin Yeaman: And I wonder if you might also elaborate on just how that penetration continues to go. And whether you're getting similar royalties as you move to an expanded lower price just a use. Yeah, thanks, Jim. So, of course, as you know, we came into the year expecting that box office this year would be affected by the lingering effects of the strikes and the scheduling and the release schedule. And if anything, through, you know, through the end of June, there's probably a little softer than most expected. But at the same time, we in the industry are optimistic about 25 and 26 because a lot of those titles are, you know, a lot of great titles that will be ready to come out.

Steven Frankel: And I Wonder if you might also elaborate on just how that penetration.

Steven Frankel: It continues to go and whether you're getting similar royalties as you move to an expanded lower priced as a use.

Kevin Yeaman: In products and services, cinema products are coming in lower than we expected, as the box office remains sluggish, and exhibitors continue to push out CapEx. Dolby Atmos and Dolby Vision are performing slightly ahead of our expectations, as strong content growth continues to drive device attachments. Dynamics remain stable and ongoing engagement from the broader ecosystem of creators, distributors, and device manufacturers are driving a steady stream of product launches across all device families.

Kevin Yeaman: Yeah, thanks, Jim. So, of course, as you know, we came into the year expecting that box office this year would be affected by the lingering effects of the strikes and the scheduling and the release schedule. And if anything, through, you know, through the end of June, it was probably a little softer than most expected. But at the same time, we in the industry are optimistic about 25 and 26, because a lot of those titles are, you know, there's a lot of great titles that will be ready to come out. And it's nice to see this quarter, the September quarter, off to a really strong start.

Speaker Change: Yeah, Thanks, Jim so.

Speaker Change: Of course as you know we came into the year expecting that box office. This year would be affected by the lingering effects of the strikes in the scheduling and the release schedule and if anything through through the end of June and there's probably a little softer than most expected.

Steven Frankel: But at the same time.

Speaker Change: And the industry are optimistic about 25% and 26, because a lot of those titles are you know there's a lot of great titles that will be ready to come out and its nice to see the this quarter the September quarter off to a really strong start.

Kevin Yeaman: We continue to be confident in our growth opportunity with Dolby Atmos and Dolby Vision, and we have a strong position with our foundational audio technologies, which are well-positioned as our end-barkets return to more normal cycles. Moving on to the highlights for the quarter, we continue to enjoy momentum in content for Dolby Atmos and Dolby Vision, which is driving growth in autos, TVs, and mobile are three biggest areas of opportunity. Starting with content, I'm happy to share that as of this spring, over 25,000 TV shows and movies have been made available in Dolby Vision, a significant milestone considering that we launched Dolby Vision in October of 2015 with just 13 movies from one studio and one TV OEM.

Kevin Yeaman: And it's nice to see the, this quarter, the September quarter off to a really strong start.

Jim Goss: So, to answer your question, even as we've seen people pushing product sales later into the year or into next year, we're seeing increased engagement as it relates to Dolby Cinema and also the ability that we announced at CinemaCon to incorporate Dolby Vision and Dolby Atmos into existing exhibitor-branded PLFs. And that's because, you know, even throughout this period of time, beginning with the pandemic, and it's continued to be strong, the percentage of the box office that is going to premium large-format experiences, including Dolby Cinema, has significantly increased as a percentage of the box office. So exhibitors see that, and we have increased engagement as they look to increase their premium experience footprint and with optimism as they look at the potential for box office in 2025 and 2026.

Kevin Yeaman: So, to answer your question, even as we've seen people pushing product sales later into the year or into next year, we're seeing increased engagement as it relates to Dolby Cinema and also the ability that we announced at CinemaCon to incorporate Dolby Vision and Dolby Atmos into existing exhibitor branded PLFs. And that's because, you know, even throughout this period of time, beginning with the pandemic, and it's continued to be strong, the percentage of the box office that is going to premium large format experiences, including Dolby Cinema, is significantly increased as a percentage of the box office.

Speaker Change: So to answer your question, even as we've seen.

Unknown Executive: Pushing product sales later into the year or into next year, we're seeing increased engagement as it relates to Dolby Cinema and also the ability that we announced at CinemaCon to incorporate Dolby Vision and Dolby Atmos into existing exhibitor-branded PLFs. And that's because, you know, even throughout this period of time, beginning with the pandemic, and it's continued to be strong, the percentage of the box office that is going to premium large-format experiences, including Dolby Cinema, has significantly increased as a percentage of the box office. So exhibitors see that, and we have increased engagement as they look to increase their premium experience footprint and with optimism as they look at the potential for box office in 2025 and 2026.

Speaker Change: People pushing product sales later into the year or into next year, we're seeing.

Unknown Executive: This increased engagement as it relates to Dolby cinema, and also the ability that we announced that cinema con to incorporate Dolby vision and Dolby atmos into existing exhibitor branded pls and that's because.

Unknown Executive: Even throughout this period of time, beginning with the pandemic and its and its continued to be strong.

Unknown Executive: The percentage of the box office that is going to premium large format experiences, including Dolby cinema.

Kevin Yeaman: Since that initial launch, Dolby has worked across the ecosystem on a global basis to add studios, production companies, product partners, content service providers and device partners to the Dolby Vision story. And we are taking that Dolby Vision momentum in TV and movies into live sports, Comcast Accentity in the US and a variety of global partners are making the Olympics available in Dolby Atmos and Dolby Vision, which builds in the momentum we seem throughout this year.

Unknown Executive: Is significant.

Unknown Executive: <unk> increased as a percentage of the box office, so exhibitors see that.

Jim Goss: So exhibitors see that, and we have increased engagement as they look to increase their premium experience footprint as they, and with optimism as they look at the potential for box office in 25 and 26. Within the United States, though, it's your contract to still an exclusive with AMC, I believe, with the full vision at most package. So are you, and I don't think that's changing. Are you finding a number of other areas around the world where you are increasing that penetration and hoping to do the same in terms of spurring device shipments in those other markets as well?

Unknown Executive: And we have increased engagement as they look to increase their there.

Unknown Executive: There are premium experience footprint as they are and with optimism as they look at the potential for box office and 25% and 26.

Kevin Yeaman: In Q3 alone, the Cricket World Cup, European Championship Soccer, Wimbledon, the NHL and NBA post seasons were all available in Dolby Atmos and Dolby Vision. And of course, we aren't stopping there. In May, Tencent Music cited Dolby Atmos Music on their earnings call, mentioning that we helped them to drive 20% year of year growth by making their music offerings more attractive and stickier, which is something we love to hear. And Audible recently announced that they will continue to expand their library at Dolby Atmos content with full cast audio productions of all seven Harry Potter books scheduled to premiere in late 2025.

Erik Woodring: Within the United States, though, your contract is still an exclusive with AMC, I believe, with the Full Vision Atmos package. So, are you, and I don't think that's changing, are you finding a number of other areas around the world where you are increasing that penetration and hoping to do the same in terms of spurring growth?

Jim Goss: Within the United States, though, your contract is still an exclusive with AMC, I believe, with the Full Vision Atmos package. So, are you, and I don't think that's changing, are you finding a number of other areas around the world where you are increasing that penetration and hoping to do the same in terms of spurring?????? Device Shipments and...

Speaker Change: Within the United States. So it's your contract is still in exclusive with AMC I believe with the full vision Atmos package.

Erik Woodring: So are you and I don't think that's changing.

Erik Woodring: You are you finding a number of other areas around the world, where you are increasing that penetration and hoping to do the same in terms of.

Erik Woodring: Spring.

Jim Goss: You said device shipments. Are we still on Dolby? Did you mean Dolby Cinema, or did you mean Dolby Digital? Dolby Digital. Yeah, okay.

Speaker Change: Device shipments in those other markets as well.

Kevin Yeaman: Moving on to automotive, GM announced this quarter that the 2025 Cadillac Optic will feature Dolby Atmos, our first car with GM, and also this quarter, Rivian announced that the second generation of its flagship vehicle, the R1, will support Dolby Atmos. And Hyundai announced that its luxury brand, Genesis, will make Dolby Atmos standard across five models starting in Korea. We now have 20 OEM partners for Dolby Atmos and the momentum continues to build.

Erik Woodring: Yeah.

Jim Goss: Yeah, you said device shipments. Are we still on Dolby?

Speaker Change: So you said device shipments are we still Unbilled did you mean.

Jim Goss: Did you mean Dolby shipments?

Speaker Change: Our TV Dolby cinema Dolby cinema, Okay.

Jim Goss: Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments, Dolby shipments We have no further questions at this time.

Kevin Yeaman: So, so yes, today, AMC is our partner in the US, and they're, you know, well over 150 screens. So it's a great, great partnership with us. We also have a number of partners in Japan, in Europe, and in Korea, where Megabox recently announced that they would expand with us. So we have a pretty good footprint across the globe and demand around the globe. So, I think as we go into next year, you know, and it's like I said, it's a positive sign that Q4 is off to a good start. We're, we're optimistic that we can begin to increase the number of Dolby Cinema and Dolby Atmos, and Dolby Vision installations.

Speaker Change: So so yes today AMC is our partner in the U S in there.

Speaker Change: All of our 150 screens, so it's a great great.

Speaker Change: Partner with us.

Speaker Change: We also have a number of partners in Japan.

Kevin Yeaman: In TVs, we are seeing a slight uptick in the tax rates, high cents in TCL, which are both strong adopters of Dolby Atmos and Dolby Vision, continue to gain market share. And we continue to get incremental wins as other TV OEMs look to bring Dolby Atmos and Dolby Vision deeper into their lineups in order to compete more aggressively in certain markets. Also contributing to the momentum are additional drivers like the growth and sports content that we just covered.

Speaker Change: In Europe in <unk>.

Speaker Change: Korea, where mega box recently announced that they would expand with us So we have a.

Speaker Change: A pretty good footprint across the globe and in demand around the globe.

Erik Woodring: So.

Erik Woodring: So I think as we as we go into next year.

Speaker Change: And it's like I said, it's a positive sign that Q4 is off to a good start.

Kevin Yeaman: Lastly, in mobile, in addition to the steady rollout of new models from most of our mobile OEM partners, Transian added a Dolby-enabled low-cost phone to consumers in Malaysia as the company continues to sell affordably priced higher-end phones aggressively into Africa, the Middle East, India, and Southeast Asia.

Speaker Change: We're we're optimistic that we can we can begin to increase the number of <unk>.

Speaker Change: Dolby cinema, and Dolby Atmos Dolby vision installations.

Speaker Change: Alright, thank you.

Speaker Change: We have no further questions at this time with that we will conclude today's conference call. Thank you all for your participation you may now disconnect.

Operator: We have no further questions at this time. With that, we will conclude today's conference call.

Operator: We have no further questions at this time. With that, we will conclude today's conference call. Thank you all for your participation. You may now disconnect.

Operator: With that, we will conclude today's conference call. Thank you all for your participation.

Kevin Yeaman: Moving on to M&A, I'd like to briefly discuss our pending acquisition of GE licensing, which complements strengthens and expands Dolby's patent offerings, particularly in imaging, and represents a compelling financial profile of durable, reoccurring, high margin revenue. This transaction adds a significant portfolio of video codec technologies that provide best-in-class video compression while also enabling better overall picture quality and higher resolution, which is particularly important in applications like streaming and video conferencing. In addition to strengthening our current video patent licensing programs, this acquisition continues to position as well for new licensing opportunities.

Operator: You may now disconnect next. Thank you.

Operator: [music].

Kevin Yeaman: These patents are primarily monetized through patent pools, which are collaborative licensing structures that enable industry efficiency and promote long-term growth by facilitating the adoption of next-generation standardized technologies. We expect the transaction to close by the end of the fiscal year and expect it to be a creative on a non-gap basis to operating margins and EPS in fiscal 2025.

Operator: Sure.

Operator: Okay.

Operator: Yes.

Operator: [music].

Kevin Yeaman: Also on M&A, we recently enhanced our Dolby I.O, offering with the acquisition of Theo Technologies for $55 million. As we've talked about, we are seeing demand from companies in sports and entertainment who are looking to create real-time and personalized experiences. Theo addresses a similar customer base with complimentary technologies. This acquisition gives us more momentum from both a product and customer perspective and a stronger foundation to build on.

Kevin Yeaman: Neither of these deals will have a material impact on FY24. In summary, we continue to operate in an uncertain and dynamic market environment with lower unit shipments and cinema box office weighing on revenues this year, particularly in foundational. At the same time, we continue to grow our Dolby Atmos and Dolby Vision content ecosystems across movie, TV, sports and music and to grow device adoption, particularly in automotive TV and mobile. We remain committed to growing earnings faster than revenue while investing in a healthy portfolio of innovation. And we are strengthening our imaging offerings with a financially attractive acquisition. I continue to be very excited about the opportunities in front of us and the opportunities to deliver revenue and earnings growth.

Robert Park: And with that, I'll turn the call over to Robert. Thanks Kevin and thanks to everyone joining us on this call today. Before we review the quarter in some detail, I'd like to hit the highlights. First, revenues for Q3 were above the midpoint of the range we laid out on the Q2 earnings call and profitability came in above the high end of the range. Second, the environment remains uncertain and dynamic. Our revenue guidance for the full year is skewing towards the lower end of what we've been describing as roughly flat all year and our non-gap EPS range is unchanged.

Robert Park: And third, as I have said before, we feel good about our long-term growth prospects and our value propositions remain strong and our financials are solid. Q3 revenue was 289 million down 3% compared to the year ago quarter but above the midpoint of guidance we shared with you on the last earnings call. Licensing revenue of 267 million was down 2% year over year. Products and services revenue was 22 million down 14% year over year.

Robert Park: Detailed licensing performance by Anne Market is on our IR website but I'd like to point out some noteworthy details. As a reminder, timing of recovery's minimum volume commitments and true ups can drive volatility between quarters. For example, mobile which benefited from minimum volume commitments as quarter was up 25% year over year but will still be down slightly for the full year. Similarly, consumer electronics revenue was down 18% year over year in the quarter but we expect revenue to be down slightly for the full year.

Robert Park: We expect broadcast revenue to be down year over year for the full year driven by tough comps in terms of timing and size of deals and lower set top box revenue. On the flip side, we continue to expect solid growth and other markets driven by imaging patent admin fees and increased adoption of Dolby Atmos and Auto. PC is benefiting from minimum volume commitments and slightly higher unit volume. Moving to the bottom line, we earned 71 cents per diluted share on a non-gap basis above the high end of our guidance, primarily due to stronger revenue, lower operating expenses, and higher non-operating income, and we generated 21 million in operating cash flow.

Robert Park: As a reminder, cash flow will fluctuate quarter to quarter due to timing ideals, but over time, operating cash flow will correlate to non-gap net income. Gap operating expenses included the restructuring charge of approximately 4 million for several related benefits as we continue to align resources with our strategic priorities. Moving on, we repurchased 35 million of common stock and we have 72 million remaining on our repurchased plan authorization. We recently received board approval to increase the existing share repurchased authorization by 350 million, bringing our total authorization to about 420 million dollars.

Robert Park: We declared a 30 cent dividend up 11 percent from our dividend a year ago and ended the quarter with cash and investments of just under $1 billion. Turning to guidance, it continues to be an uncertain and dynamic market. Device shipments remain soft and the box office remains sluggish which has negative implications for both our licensing and product and services revenue. At the same time, we continue to see steady growth of content created and distributed in Dolby technology, strong engagement from our partners, and revenue from Dolby Atmos and Dolby Vision and imaging patents is performing a bit better than expected.

Robert Park: For Q4 to go 24, we expect revenue to be between 300 million and 320 million. Within that, licensing revenue is estimated to range from 275 million to 295 million. Gross margins should be approximately 88 percent on a non-gap basis. We expect non-gap operating expenses to be between 190 million and 200 million. Our effective tax rate for Q2 is projected to be around 23 percent on a non-gap basis. So as a result, we estimate that non-gap EPS should be between 61 cents and 76 percent per diluted share.

Robert Park: This Q4 guidance implies full year revenue between 1 billion, 270 million, and 1 billion, 290 million. At the lower end of what we've been describing as roughly flat revenue all year, as we are saying lower than expected unit shipments and lower revenue from cinema. However, we still expect non-gap earnings to be within the range we've been discussing all year of $3.60 and $3.75. To wrap things up, the creation and distribution of Dolby-enabled content continues to grow nicely and our partners are still very engaged.

Robert Park: Our financials remain solid and we are well-positioned for growth when economic conditions improve.

Operator: With that, I'd like to turn it back to the operator to open the line for your questions. Operator? Thank you. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, press star one again. If you are dialed in and listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question.

Ralph Schackart: Our first question comes from the line of Ralph's Shackart with William Blair. Please go ahead. Good afternoon, thanks for taking the question. Kevin, just on the macro, just to kick it off, just curious what you observed in this quarter, in relation to what you observed last quarter, was it sort of within bounds, maybe at the lower end, given sort of the slight tweaked guidance, but anything you could add on the macro, then I have a follow-up.

Ralph Schackart: Yeah, of course, thanks, Ralph. Yeah, I would say that as far as the macro goes, we're seeing much the same we've been seeing all year. I think that, you know, it's been a, you know, I think it's fair to say it's been a tough environment for our OEM customers over the last several years, but we see them, you know, I think cautiously optimistic that things are stabilizing, looking for opportunities for growth, and we continue to have really strong engagement on content, distribution, devices for Dolby Atmos and Dolby Vision.

Ralph Schackart: What we did see this quarter, Ralph, that was a little more specific, is we, as I mentioned, some softness and set top boxes and gaming consoles. So it's really to set top boxes. Our industry analysts and our customers and partners were expecting set top boxes to begin to tick up through the year. They had worked through a pretty big inventory level last year, and we're not seeing that. We're seeing it stay kind of flatish.

Ralph Schackart: And so we had a negative true up in Q3, $8 million, which was set top box for the biggest part, also continued weakness and gaming consoles, and we see that continuing through the year. At the same time, you know, there's always puts and takes in the quarter. So we had a few things come in early in Q3, which is why you didn't see it show up relative to our guidance for Q3. So, and then I would say on top of that, the box office continued to be pretty soft through the end of Q3. So we continued to see the pushing out of cinema product purchases.

Kevin Yeaman: So I would say those two specific things were what contributed to the slide adjustment, but I wouldn't characterize it as a big macro change. Okay, great. Really helpful.

Kevin Yeaman: Thank you, Kevin, and just one more. Just on the new patents that you acquired from GE curious, if you could leverage these patents, either into existing products or potentially for future products. I noticed in part that they have applied a video compression. So overall, curious, perhaps could this help your doldy IO author as well. This is really, so first of all, we're always looking for opportunities that can expand or accelerate our existing business initiatives.

Kevin Yeaman: And this is very much focused on our imaging patent business where we license are through patent pools, which are collaborative licensing structures. And this is a really, this for us, this is a pretty unique opportunity in terms of the ability to bring on a very attractive portfolio patent portfolio in the, particularly in the video codec technology space. So it expands our presence in imaging patents. It's a very attractive and durable set of revenue streams.

Kevin Yeaman: And we expect it to be accretive to both non-operating or sorry non-gap operating income and EPS in the first year. We also did as it relates to IO, we did also this quarter acquire a startup by the name of the technologies, which we, which does enhance the doldy IO offering. As you know, we're very much focused on sports and entertainment companies that are looking to offer real time, more interactive digital experiences.

Kevin Yeaman: We really refocused our efforts around that coming into the beginning of this fiscal year. IO has a video player and features and functions that increase interactivity. They serve a very similar customer base. And so it's on the one hand, it's a biver's build because it's a very complimentary set of technologies allows us to provide a more complete solution. And we also think it can increase sales momentum because the ability to cross sell. In fact, we have a number of customer prospects in common. We're getting very positive feedback. And so we're excited about that one as well. Okay, great. Thanks, Deb.

Jim Goss: Our next question comes from the line of Jim Goss with Barrington Research. Please go ahead. Thanks.

Kevin Yeaman: First of all, like I asked about have most in cars, you gave a number of usage points, including Cadillac, Optic, Rivian, Genesis. In the Genesis, with the five different models being used. That's pretty rare, I think, to this point. But I wonder if you're seeing that in a number of the other applications. And how do you feel you are picking up momentum and in broadening the usage within cars? Yeah, thanks, Jim.

Kevin Yeaman: Very excited to have Cadillac on board with the first model. And also you would have seen that we had Rivian. Hyundai is now offering five models in Korea. And we continue to see, we don't have 20 OAM partners. And we continue to see many of them expanding into additional models. And get deeper into lineups. And so this is an area where in Dolby Atmos and Dolby Vision, sorry Dolby Atmos for Automotive, we're doing better than we expected coming into the year.

Kevin Yeaman: And it's a function of going deeper into lineups, continuing to bring on new models. And some of those doing just exceeding their unit projections. And the way you're monetizing this is payment for, it's not a royalty base, but it's more of an installation base in the product area. Is that correct? It's a typical model we get an amount for each car. Okay.

Kevin Yeaman: And the movie business is at a low point obviously, but it's been starting to recover and expectations are pretty high for 25 and 26. I'm wondering if that's prodding you to increase the number of theater installations either domestically or internationally or both. And just any comments you might have on that, but also the real monetization has been via TV applications, other consumer products. And I wonder if you might also elaborate on just how that penetration continues to go.

Kevin Yeaman: And whether you're getting similar royalties as you move to an expanded lower price just reuse. Yeah, thanks Jim. So of course, as you know, we came into the year expecting that box office this year would be affected by the lingering effects of the strikes and the scheduling and the release schedule. And if anything through, you know, through the end of June, there's probably a little softer than most expected. But at the same time, we in the industry are optimistic about 25 and 26 because a lot of those titles are, you know, a lot of great titles that will be ready to come out.

Kevin Yeaman: And it's nice to see this quarter, the September quarter off to a really strong start. So to answer your question, even as we've seen people pushing product sales later into the year or into next year, we're seeing increased engagement as it relates to Dolby Cinema and also the ability that we announced at CinemaCon to incorporate Dolby Vision and Dolby Atmos into existing exhibitor branded PLFs. And that's because, you know, even throughout this period of time, beginning with the pandemic and it's continued to be strong, the percentage of the box office that is going to premium, large format experiences, including Dolby Cinema is significantly increased as a percentage of the box office.

Kevin Yeaman: So exhibitors see that and we have increased engagement as they look to increase their premium experience footprint and with optimism as they look at the potential for box office in 25 and 26. Within the United States, though, it's your contract is still an exclusive with AMC, I believe, with the full vision at most package. So, are you, and I don't think that's changing, are you finding a number of other areas around the world where you are increasing that penetration and hoping to do the same in terms of spurring device shipments in those other markets as well?

Kevin Yeaman: Yeah, you said device shipments, are we still on Dolby, did you mean Dolby shipments? Dolby shipments, Dolby shipments, Dolby shipments. So, yes, today AMC is our partner in the U.S., and they're, you know, well of our 150 screens, so it's a great, great partner with us. We also have a number of partners in Japan, in Europe, in Korea, where Megavox recently announced that they would expand with us. So, we have a pretty good footprint across the globe and demand around the globe.

Kevin Yeaman: So, I think as we go into next year, you know, and it's, like I said, it's a positive sign that Q4 is off to a good start. We're optimistic that we can begin to increase the number of Dolby cinema and Dolby Atmos Dolby vision installations.

Operator: All right, thank you. We have no further questions at this time. With that, we will conclude today's conference call. Thank you all for your participation.

Operator: You may now disconnect.