Dolby Laboratories

ladies and gentlemen thank you for standing by welcome to the dolby laboratories conference call discussing physical fiscal sorry first quarter results during the presentation all participants will be listening mode only afterwards you will be invited to participate in a question and answer session at this time if you have a question you will need to press star 1 on your telephone as a reminder this call will be recorded thursday february 3rd 2022. I would now like to transfer you over to Ashley Shanoa, Senior Manager, Investor Relations for Dolby Laboratories. Please go ahead, Ashley.

Good afternoon. Welcome to Dolby Laboratories' first quarter 2022 earnings conference call. Joining me today are Kevin Yehman, Dolby Laboratories CEO, and Robert Park, CFO. As a reminder, today's discussion will include forward-looking statements. including our second quarter and fiscal 2022 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 extent of the continuing impact of COVID-19 on our business. A discussion of these 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 GAAP and non-GAAP financial measures. A reconciliation between the two is available in our earnings press release and in the Dolby Laboratories investor relations data sheet on the investor relations section of our website. As for the content of today's call, Kevin will start with a discussion of the business, and Robert will follow with a recap of Dolby's financial results and provide our second quarter and fiscal 2022 outlook. So with that introduction behind us, I will now turn the call over to Kevin.

Thank you, Ashley, and good afternoon, everyone. It continues to be a dynamic environment. While revenue and EPS finished within our range of guidance, Both were impacted by a $6 million negative true-up for lower than estimated unit shipments in our foundational audio technologies. As we discussed last quarter, we are seeing year-over-year declines for foundational audio coming off of tough comps and now issues with the supply chain. But over the long term, we expect foundational audio to track roughly in line with market demand for the consumer devices we serve. At the same time, we see strength across Dolby Vision, Dolby Atmos, and our imaging patents portfolio, and we remain confident in our ability to grow these revenues at a rate of over 35% this year. We also see positive signs of momentum with Dolby I.O. All of this gives us confidence in the opportunity ahead. Robert will take you through the details of the financials in just a moment. I will start by covering our progress in Dolby Vision and Dolby Atmos. At CES last month, we saw our partnership with Samsung grow stronger as they announced the adoption of Dolby Atmos into their TVs for the first time. Samsung has been showcasing Dolby Atmos across their soundbar, PC, and mobile products for some time, and we are excited that they have decided to offer their TV customers the most immersive audio experience with Dolby Atmos. During LG's CES keynote, they highlighted their latest OLED TVs, the first to support Dolby Vision Gaming in 4K at 120 hertz. And Hisense debuted their first short throw consumer laser projectors to include the combined Dolby experience. We saw new soundbar products from Samsung and Hisense supporting Dolby Atmos and the latest TVs from Sony, Panasonic, and TCL all featuring the Dolby Vision and Dolby Atmos experience. Also during the quarter, Walmart's On and Best Buy's Pioneer TVs began supporting Dolby Vision. an important step toward addressing the mass market retailer brands and making Dolby experiences more widely available at all price points. Beyond the living room, we also made progress this quarter in PC, mobile, and gaming. In November, ASUS adopted Dolby Vision with the launch of their new 2-in-1 PC, marking their first device to include the combined experience. And more recently, They announced that their latest gaming laptops will also feature Dolby Vision and Dolby Atmos. Dell announced at CES that they will now support the combined Dolby experience across their latest Alienware gaming PC lineup, and they launched a new Alienware gaming headset with Dolby Atmos. Lenovo previewed their newly designed ThinkPad laptops, which feature Dolby Vision, Dolby Atmos, and Dolby Voice, expanding the number of models that include our communications technology. This quarter also brought new tablets from Lenovo and Asus and smartphones from Xiaomi and Motorola, highlighting Dolby technologies. We are also making strides in sports content. Just this week, Comcast announced that they will be broadcasting the 2022 Winter Olympics in Dolby Vision and Dolby Atmos. This major event adds to the growing list of sports coverage made available in Dolby. And in the world of esports, The honor of King's Challenger Cup finals was available in Dolby Atmos on Tencent Video and Bilibili. As we enable more Dolby experiences across music, gaming, and sports, we add to our value proposition for new and deeper adoption of Dolby Vision and Dolby Atmos across devices and end markets. While CES was far from normal this year, what remained the same was the strong engagement from our partners, and particularly in automotive. This quarter, Mio highlighted that they will be adding Dolby Atmos into their ET5 model, expanding beyond the ET7 model they announced previously. Consumers and artists alike continue to sing the praises of Dolby Atmos music, with AMA's New Artist of the Year, Olivia Rodrigo, describing the experience as magical. Two-thirds of the top 100 Billboard artists now have one or more tracks available in Dolby Atmos. As we gain more prominence in the music space, we have more reasons for adoption across mobile, PC, and automotive. Let me shift to cinema. There are currently about 98% of Dolby cinemas open globally with six new sites launched during our fiscal Q1. Even with the uncertainty of the pandemic, we saw ongoing recovery in the box office with titles like No Time to Die and Spider- No Way Home. As moviegoers return to the cinema, we continue to see a preference towards premium experiences, and Dolby Cinema is the ultimate way to experience movies in the theater. Let's talk about our developer platform, Dolby I.O., where we are focused on enabling developers to create the most compelling experiences in target markets where we can offer the most differentiation. Virtual live performances, online and hybrid events, social audio, premium education, gaming, and content production, which we estimate to represent a market opportunity of about $5 billion and growing. We are excited about the experiences developers are building and the pace of new developer accounts accelerated this quarter. This increased momentum is due in part to the interest we are seeing for our release of programmable spatial audio. While we have been providing an automated spatial mix for some time, this highly requested feature allows developers to choose where to render real-time voices around the listener. For example, we see developers building virtual concert experiences, virtual reality collaboration platforms, and virtual worlds in which listeners hear people from the location of the speaker or their avatar. There has been so much demand, customers were going into production on the beta ahead of our general availability release this week. We also completed an acquisition this quarter. With Millicast, developers can take the highly interactive experiences they build with Dolby IO and stream them to audiences of more than 60,000 people with ultra-low delay, a capability that is in demand in our focus verticals. Millicast has a notable presence in content production with companies such as NBC, the NFL, and Disney, and their expertise in the field makes them a great fit with Dolby IO. With our unique experience in media and communications, coupled with the ease of self-service on our platform, we are able to expand our capabilities for developers to offer high quality audio and visual interactions to much larger audiences. To wrap up, while we are still operating in an uncertain economic environment, we continue to have success in growing the number of Dolby Atmos and Dolby Vision experiences to new devices and services. There is much opportunity ahead of us, as we enable new experiences through music, gaming, and live content. And we are excited about bringing the Dolby Magic to a broader range of experiences and interactions with the power of Dolby I.O. All of this gives us confidence in our ability to drive revenue and earnings growth into the future. And with that, I'd like to hand it over to Robert to take us through the financials.