Dolby Laboratories

Ladies and gentlemen, thank you for standing by. Welcome to the Dolby Laboratories conference call discussing fourth quarter fiscal year 2025 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'd like to ask a question at that time, please press star then the number one on your telephone keypad. If you'd like to withdraw your question at any time, simply press star one again. As a reminder, this call is being recorded Tuesday, November 18th, 2025. I would now like to turn the conference over to Mr. Peter Goldmacher, Vice President of Investor Relations. Peter, please go ahead.

Good afternoon. Welcome to Dolby Laboratory's fourth quarter 2025 earnings conference call. Joining me today are Kevin Yehman, Dolby Laboratory CEO, and Robert Park, our CFO. As a reminder, today's discussion will include forward-looking statements, including our fiscal 2026 first quarter and full year outlook, management's expectations for our future performance, and other statements regarding our plans, opportunities, and expectations. 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, changes in customer demand, changes in law and regulation, and the impact of macroeconomic events on our business. A discussion of these and additional risks and uncertainties can be found in our earnings press release as well as in the risk factors section of our Forms 10-K and 10-Q. Dolby assumes no obligation to update any forward-looking statements. During today's call, we will discuss non-GAAP financial measures. These measures should be considered in addition to and not as a substitute for GAAP 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 for joining the call today. I'd like to share a brief overview of our financial results and a few highlights for the quarter, and then I'd like to talk about our unique position in the market and our opportunities heading into FY26 and beyond. After that, I'll turn the call over to Robert to cover the financials before we get to Q&A. We wrapped up Q4 and the full year in line with the expectations we provided on the last earnings call. In FY25, we grew revenue by 6%, aided by the acquisition of GE licensing, and we expanded our operating margins by 1.8 percentage points. Robert will walk through the results in more detail in just a moment. I'll start by walking through some of the Q4 highlights as it relates to Dolby Atmos, Dolby Vision, and imaging patents. For Dolby Atmos and Dolby Vision, we continue to see strong engagement from our ecosystem of content creators, content distributors, and device OEMs as they increasingly embrace the value of content created in Dolby Atmos and Dolby Vision across sports, music, TV, and movies. In September, we announced Dolby Vision 2, which will dramatically improve picture quality and unleash the full capabilities of modern TVs from mainstream sets to the top-of-the-line models. Some of the benefits of Dolby Vision 2 include automatically adjusting contrast via ambient light detection, motion control to optimize sports and gaming content, and features that enable creators to take full advantage of the latest advancements in higher-end TV displays. By bringing two distinct offerings to market, Dolby Vision 2 will allow TV OEMs to bring Dolby Vision deeper into their lineups by improving their mid-range offerings, while Dolby Vision 2 Max will offer important differentiation at the high end. Dolby Vision 2 is receiving a strong reception from the industry. Hisense and TCL, two of the top three global TV OEMs, are the first TV makers to announce support, with release dates yet to be announced. This quarter, we had several TV launches with Dolby Atmos and or Dolby Vision with device partners including TCL, Samsung, Hisense, Xiaomi, and Amazon. And Peacock is now streaming its Sunday night football games and this season's NBA games in Dolby Atmos. Moving on to automotive, the value proposition for Dolby Atmos and increasingly Dolby Vision continues to resonate in the auto world. This past quarter, we signed agreements with Maruti Suzuki, the top passenger vehicle brand in India with over 40% market share, DePaul in China, and VinFast in Vietnam. Also, the first in-car game featuring Dolby Atmos, Loner, officially launched on Lee Auto Vehicles as more content creators are looking to add value by taking advantage of Dolby Atmos in the car. A number of partners recently announced new models with Dolby Technologies, including Lee Auto, Mahindra, Cadillac, Zeekr, and Mercedes. In mobile, we are very happy to share that Instagram is now distributing content in Dolby Vision with initial support for iOS. In a blog post, Instagram concluded that content in Dolby Vision increased the time spent in-app. The blog post also noted that Meta intends to expand Dolby Vision to other Meta apps and corresponding operating systems. Additionally, Daoyin, known in many parts of the world as TikTok, has made Dolby Vision available to its users in China, joining other Chinese social media companies. including Xiao Hongshu, Kuaishou, and Bilibili in offering their users the ability to capture, share, and edit content in Dolby Vision. We've seen how support on social media platforms and video sharing sites in China drives demand for Dolby Vision on mobile devices. These new partnerships with Instagram and Dalian are another important catalyst to further penetrating the mobile device ecosystem. In wearables, Meta announced that the MetaQuest will have Dolby Atmos and Dolby Vision and Samsung announced that its Galaxy XR comes with Dolby Atmos. The wearables market is still early days, and we are working with the ecosystem to ensure that we are able to offer all device makers the technology to help them create the most immersive and connected experience possible. Turning to imaging patents, where we participate in patent pools which help device makers license critical imaging technology, the primary growth driver to date has been growth in OEM licensees. In FY25, we helped launch a new patent pool focused on providing critical imaging technology to content streaming providers using a consumption-based pricing model. This video distribution program significantly expands the TAM for imaging patents beyond devices. The pool signed its first licensees in the second half of fiscal 25, and we will start recognizing revenue in fiscal 26. The progress we've made in FY25 gives us confidence that we can grow Dolby Atmos, Dolby Vision, and imaging patents at a growth rate of about 15% to 20% per year over the next three to five years. Now, before I wrap up, I'd like to take a few minutes to talk about Dolby and where we're going. Today, we are at the beginning of an opportunity to expand our total addressable market by delivering value to new sets of customers via consumption-based revenue models. We currently have two such offerings, We just discussed the first, which is the video distribution program for content streamers. The second is Dolby OptiView. Dolby OptiView is our software as a service solution that is focused on delivering real-time, personalized, and interactive streaming experiences in sports, sports betting, and iGaming. Dolby OptiView combines very low latency video streaming with the ability to optimize advertising and integrate additional content. for example, highlights of another game that's happening, to engage viewers and drive higher revenue through subscriptions and advertising. We see a significant opportunity in reinventing the fan experience for live sports, aligning with content owners to increase the value of their content. The NFL has been delivering Red Zone to the NFL Plus app using Dolby OptiView streaming since the start of the season, and they've seen significant increases in the quality of the streaming experience while delivering content at half the previous latency. All of these improvements contribute to longer viewing time. While our focus in the near term is on scaling these two new offerings, Dolby OptiView and the video distribution program for content distributors, we believe that there will be opportunities in the future to deliver new value to trusted partners and new customers, expanding into new verticals with consumption-based revenue models. And this is increasingly an important focus of our innovation pipeline. Dolby has maintained its leadership position for 60 years by innovating and raising the bar on the quality and efficiency of entertainment. We do this by working with each part of the ecosystem, creatives, content distributors, device makers, and earning their trust. This gives us a unique connection to their needs, challenges, and opportunities, enabling us to deliver experiences that come to life in the highest possible quality. As we look to the next chapter of the Dolby story, our expansion into consumption-based models is a natural extension of our work to date. We have always delivered value to the distributors in our ecosystem, and the opportunity to bring new experiences to life through the power of streaming is an opportunity to create new revenue streams. The world is changing fast, and we are too. In the last three years, we have transformed our research and innovation capabilities in our advanced technology group. bringing in new capabilities aligned with the future, particularly as it relates to AI. This team is focused on AI-powered innovations to enhance our current and future offerings. So what does this mean for Dolby going forward? We are very excited about where we are, where the world is going, and our ability to work with our customers and partners to grow our ecosystems. I'm proud of the progress and confident in our strategy to grow Dolby Atmos, Dolby Vision, and imaging patents at 15 to 20% per year over the next several years. And now that Dolby Atmos, Dolby Vision, and imaging patents is approaching 50% of our licensing revenue, its impact on our overall growth rate is more meaningful. And while it's still early days, There is a significant opportunity to expand our total addressable market with consumption-based revenue models by serving the providers of audio-video content that are looking to deliver more engaging and interactive entertainment experiences. With that, I'd like to turn the call over to Robert to review our Q4 and FY25 results and our guidance for FY26.