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Dolby Laboratories, Inc. (DLB)·Q1 2025 Earnings Summary

Executive Summary

  • Dolby delivered a solid Q1 FY25: revenue $357.0m (+13% YoY) at the high end of guidance and non-GAAP EPS $1.14 above the high end; strength included a $17m favorable Q4 shipment true-up and outsized mobile growth (+74% YoY) aided by GE Licensing and minimum volume commitments .
  • FY25 guide was maintained (revenue $1.33–$1.39b; non-GAAP EPS $3.99–$4.14), with Q2 revenue guided to $355–$385m and non-GAAP EPS $1.19–$1.34; management expects foundational audio to be roughly flat and Atmos/Vision/imaging patents to grow ~15% in FY25 .
  • Mix highlights: licensing $330.5m (92.6% of revenue) with mobile strength and steady broadcast; products/services $26.5m (+22% YoY) .
  • Capital returns continued: $15m buybacks (186k shares) with $387m authorization remaining, and a $0.33 dividend declared .

What Went Well and What Went Wrong

What Went Well

  • High-quality beat and strong start: “Both licensing revenue and total revenue came in towards the high end... and non-GAAP earnings... above the high end” and “We are off to a strong start for FY25” .
  • Mobile outperformance: Mobile licensing revenue up 74% YoY, driven by GE Licensing contribution and timing of minimum volume commitments; true-up also aided Q1 revenue by $17m, notably in broadcast and auto .
  • Ecosystem momentum: Visible multi-category product support at CES (TVs from Hisense/TCL/Panasonic/Sharp/RCA; PCs from ASUS/Dell/Lenovo/Samsung; new soundbars; Fire TV Omni Mini-LED with Atmos/Vision) and expanding auto pipeline including the first Dolby Vision-enabled car (Li Auto) .

What Went Wrong

  • Foundational flat and CE softness: Management reiterated foundational audio revenues roughly flat for FY25 and expects consumer electronics to be down mid-single digits, tempering overall growth trajectory .
  • Margin/expense pressures: GAAP gross margin of ~88.6% in Q1 was lower vs Q1’24 (~89.9%); GAAP OpEx included ~$5m restructuring; FY25 GAAP OpEx range was nudged higher vs prior guide ($915–$925m vs $908–$918m) .
  • Quarter-to-quarter volatility: Timing of recoveries, minimums, and true-ups creates variability; Q1 benefited from a $17m favorable true-up unlikely to repeat consistently .

Financial Results

Note: consensus estimates from S&P Global were unavailable at the time of analysis; estimate comparisons are therefore not shown.

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Millions)$288.8 $304.8 $357.0
GAAP Diluted EPS ($)$0.40 $0.61 $0.70
Non-GAAP Diluted EPS ($)$0.71 $0.81 $1.14
Gross Margin (%)87.7% (calc from $253.2/$288.8) 88.9% (calc from $270.8/$304.8) 88.6% (calc from $316.2/$357.0)
Operating Margin (%)12.7% (calc from $36.8/$288.8) 15.2% (calc from $46.4/$304.8) 22.4% (calc from $79.9/$357.0)
Net Income Margin (%)13.3% (calc from $38.4/$288.8) 19.2% (calc from $58.6/$304.8) 19.0% (calc from $67.8/$357.0)

Licensing revenue by market (quarterly):

Market ($USD Millions)Q3 2024Q4 2024Q1 2025
Broadcast$95.4 (36%) $95.8 (34%) $115.8 (35%)
Mobile$63.1 (24%) $48.7 (17%) $61.5 (19%)
Consumer Electronics (CE)$28.4 (11%) $42.0 (15%) $49.5 (15%)
PC$27.6 (10%) $34.1 (12%) $31.3 (9%)
Other$52.6 (19%) $62.1 (22%) $72.5 (22%)
Total Licensing$267.1 (100%) $282.7 (100%) $330.5 (100%)

Other KPIs:

KPIQ1 2025
Operating Cash Flow$106.8m
Share Repurchases~$15m (~186k shares)
Dividend Declared$0.33 per share
Cash, Cash Equivalents & Restricted Cash$611.7m
Auto OEMs and Models (narrative)>20 OEMs; >60 models with Atmos; first car with Atmos+Vision (Li Auto)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total RevenueQ2 FY25N/A$355m–$385m New
Licensing RevenueQ2 FY25N/A$330m–$360m New
GAAP Gross MarginQ2 FY25N/A~89% New
Non-GAAP Gross MarginQ2 FY25N/A~91% New
GAAP OpExQ2 FY25N/A$230m–$240m New
Non-GAAP OpExQ2 FY25N/A$190m–$200m New
GAAP ETRQ2 FY25N/A~20.5% New
Non-GAAP ETRQ2 FY25N/A~18.5% New
GAAP EPSQ2 FY25N/A$0.77–$0.92 New
Non-GAAP EPSQ2 FY25N/A$1.19–$1.34 New
Total RevenueFY25$1.33b–$1.39b $1.33b–$1.39b Maintained
Licensing RevenueFY25N/A$1.22b–$1.28b New metric
GAAP Gross MarginFY25~87% ~87% Maintained
Non-GAAP Gross MarginFY25~90% ~90% Maintained
GAAP OpExFY25$908m–$918m $915m–$925m Raised slightly
Non-GAAP OpExFY25$765m–$775m $765m–$775m Maintained
GAAP Operating MarginFY25~20% ~20% Maintained
Non-GAAP Operating MarginFY25~33% ~33% Maintained
GAAP EPSFY25$2.43–$2.58 $2.39–$2.54 Slightly lower low end
Non-GAAP EPSFY25$3.99–$4.14 $3.99–$4.14 Maintained
DividendQ1 FY25$0.33 in prior quarter $0.33 declared Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3’24, Q4’24)Current Period (Q1’25)Trend
Auto adoption (Atmos/Vision)Added OEMs; >20 OEMs by Q4; expanding models >20 OEMs, >60 models; first Dolby Vision car (Li Auto); Samsung Display/TI support announced Accelerating ecosystem
Living room TV penetrationOngoing TV OEM launches ; 4K TV penetration rising [implied]4K TVs with Atmos+Vision ~30% vs ~25% two years ago; breadth across Hisense/TCL/Panasonic/Sharp/RCA Improving penetration
MobileMixed in FY24; OEM launches +74% YoY on GE Licensing and MVC timing Strong near-term; timing volatile
Foundational audioMacro stabilization into FY25; foundational flat implied Foundational revenue “flattish” reiterated Stable/flat
Dolby.io (real-time streaming)THEO acquisition in Q4 to bolster platform Low-latency use cases; Paddy Power live in 600 shops, reliability gains Building customer traction
CinemaPremium large format importance; screen base gradual “Added screens” modestly; exhibitors prioritizing premium formats Gradual recovery

Management Commentary

  • Strategy and setup: “We are off to a strong start for FY25… Atmos and Vision momentum continued across device categories” (Kevin Yeaman, CEO) .
  • Quarter quality: “Revenue… near the high end… primarily driven by a favorable true-up… earnings above the high end” (Robert Park, CFO) .
  • Growth mix: “We expect foundational revenues to be roughly flat… Atmos, Vision and imaging patents… to grow roughly 15% for the full year” (Kevin Yeaman) .
  • Auto pipeline: “Over 20 OEMs… over 60 models in market with Dolby Atmos… first car in market with both Dolby Atmos and Dolby Vision (Li Auto)” (Kevin Yeaman) .
  • Mobile drivers: “Increase [in mobile] are revenue from GE licensing and the timing of minimum volume commitments” (Kevin Yeaman) .

Q&A Highlights

  • Foundational audio: Still expected to be flattish for FY25; no change indicated by Q1 results (CFO) .
  • Mobile spike: Timing of minimum volume commitments and GE Licensing integration were the primary drivers of +74% YoY mobile; not a single OEM true-up concentration (Mgmt) .
  • Auto cadence: Samsung OLED auto displays with Dolby Vision should ease OEM implementation; management expects continued progress in 2025 (CEO) .
  • Dolby Cinema: Screen base growth resumed modestly; exhibitors prioritizing premium formats as box office outlook improves for 2025–2026 (CEO) .
  • Dolby.io: Real-time, low-latency streaming solution scaling beyond apps; live in 600 Paddy Power betting shops with materially higher reliability (CEO) .

Estimates Context

  • S&P Global consensus estimates were unavailable at the time of retrieval due to access limits. As a result, we cannot quantify beats/misses vs Wall Street consensus for Q1 FY25 or update estimate-driven comparisons for Q2/FY25 at this time. If desired, we can refresh and add a consensus vs actuals table when access resumes.

Key Takeaways for Investors

  • Quality start to FY25: Revenue at the high end and non-GAAP EPS above the range, aided by a $17m true-up; confidence in maintaining FY25 outlook should support estimate stability near-term .
  • Mix tailwinds in mobile/auto/TV: Structural adoption across devices and auto, plus GE Licensing, are driving growth, though quarter-to-quarter timing variability (MVCs/true-ups) remains a key watch item for traders .
  • Expense/margin guardrails intact: FY25 non-GAAP margins/OpEx targets maintained; GAAP OpEx raised modestly; monitor restructuring and amortization drag vs non-GAAP leverage .
  • Foundational flat, CE softness: Headwinds in CE (mid-single-digit decline expected) and flat foundational audio temper the setup; narrative hinges on Atmos/Vision/imaging growth achieving ~15% for the year .
  • Auto is a multi-year catalyst: Growing OEM/model count, Vision entering cars, and ecosystem support (Samsung Display, TI) suggest an expanding royalty base over time .
  • Dolby.io optionality: Early proof points (e.g., Paddy Power) in ultra-low-latency, real-time streaming can broaden TAM; not yet a primary earnings driver but a potential medium-term lever .
  • Near-term trading implications: Q2 guide brackets Q1 run-rate; absent consensus data, positioning likely focuses on sustainability of mobile strength, cadence of auto wins, and visibility into true-ups/recoveries dynamics .

Citations:

  • Q1 FY25 press release, financial statements, guidance, and non-GAAP reconciliations .
  • Q1 FY25 8-K with Item 2.02 press release and detailed tables .
  • Q1 FY25 earnings call: prepared remarks and Q&A .
  • Prior quarters for trend analysis: Q4 FY24 press release and Q3 FY24 press release .