Dolby Profit Falls as Revenue Growth Reverses
Fourth-quarter revenue guidance centered on $377 million, implying a 24% sequential rebound.
Dolby Laboratories (DLB), the audio-technology company, posted a 38% drop in third-quarter net income as lower revenue and higher operating expenses weighed on results.
Revenue fell 3.3% from a year earlier to $305.0 million, reversing the second quarter’s 7.0% growth. Sales dropped 23% sequentially after rising 14% in the previous quarter.
GAAP net income declined to $28.6 million, or $0.30 a diluted share, from $46.1 million, or $0.48 a share, a year earlier. Adjusted earnings fell to $0.69 a share from $0.78 and roughly halved from the second quarter.
Licensing revenue declined 2.6% to $282.4 million, while products-and-services revenue fell 12% to $22.6 million. Within licensing, consumer-electronics revenue rose 12%, but PC and mobile revenue dropped 16% and 9%, respectively.
Gross margin expanded to 86.8% as cost of revenue fell faster than sales. That improvement did not carry through to operating profit: operating margin narrowed to 11.3% from 15.1% as expenses rose 2.9%, and restructuring costs reached $4.0 million.
Fourth-quarter revenue is expected to range from $362 million to $392 million, with licensing revenue between $335 million and $365 million. The company forecasts GAAP gross margin of about 88% and adjusted gross margin of about 90%, both above the levels projected for the third quarter.
The board added $350 million to Dolby’s repurchase authorization, leaving about $427 million available. Year-to-date buybacks more than doubled to $200.0 million as operating cash flow declined 9.9%, extending capital returns even as cash generation weakened.