Dolby Laboratories, Inc. Q2 FY2025 earnings call

• Automotive: High demand for in-car entertainment; Porsche, Cadillac, Volvo, Xiaomi, Hyundai, NIO, and Zeekr announced model integrations with Dolby Atmos/Dolby Vision. • Mobile: Focus on bringing Dolby Atmos and Dolby Vision to smartphones; added partners Xiaohongshu and Kuaishou in China, and progress in expanding Dolby Vision in Android ecosystem with support from video editing apps like Filmora and CapCut. • Living room/TV ecosystem: Super Bowl and March Madness available in Dolby Atmos/Dolby Vision; waipu.tv, TOD, Sky, LG, Sharp, and Hisense announced support/launch of models with Dolby technologies. • Cinema: AMC and Dolby to add 40 Dolby Cinemas in US by end-2027; Dolby Vision and Atmos added to theaters in India and South Korea.

In the second quarter, revenue was $370 million, in line with the midpoint of guidance. Licensing revenue was $346 million, up 2% year-over-year. Products and services revenue was $24 million, slightly below the midpoint of guidance and down 10% year-over-year. For the full year, the company expects strong growth in mobile and other markets, broadcast and PC to be flattish, and CE to be down mid-single digits.

• Q3 revenue outlook: $290 million to $320 million, with licensing revenue $265 million to $295 million, gross margins ~88% non-GAAP, non-GAAP operating expenses $190 million to $200 million, and non-GAAP EPS $0.62 to $0.77 per diluted share. • Full-year revenue range revised to $1.31 billion to $1.38 billion, licensing revenue $1.21 billion to $1.28 billion, non-GAAP operating expenses $760 million to $775 million, and non-GAAP EPS $3.88 to $4.03.

• Impact of macroeconomic events, supply-chain issues, tariffs and other trade barriers, inflation rates, changes in consumer spending, and geopolitical instability on business.

Q: As you're talking to your OEM partners, those that may be in less, I guess, lower tariff regions, I guess what's sort of the ability for them to increase capacity if that should play out?

A: Varies by end-market; Mexico is largest TV manufacturer location, generally exempt from tariff status, about 10% in China; ultimately, forecast models how many devices ship and factors like tariffs, consumer spending, supply chain adjustments.

Q: In terms of the overall environment, to what extent if you see the environment continuing to deteriorate, might you adjust OpEx for the back half of the year or is that expense level pretty much locked-in at this point?

A: Given uncertainty, staying focused on driving long-term value, not making quick changes to operating plans; will be attuned to environment changes impacting growth opportunities and adjust if needed.

Q: What do you think it takes to get to the tipping point in the car with Atmos Music?

A: Pleased with momentum, continuing to bring on new manufacturers and have existing customers expand deeper into lineups; looking forward to getting into high-volume mainstream models.

Q: Just curious in terms of like the type of vehicles that you're getting adoption from Vision as well as Atmos. Is that more focused on EV, or like a specific dash screen size, or anything like that? And then on products and services, I was just wondering if you could detail any like tariff exposure on that side?

A: Automotive adoption in Chinese EV manufacturers due to faster implementations, aggressive investment in in-car entertainment, and more screens; impact of tariffs on products business is fairly small, as large portion of products shipped to non-U.S. markets.