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Dolby (DLB) Q4 Earnings Miss Estimates, Revenues Up Y/Y

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Dolby Laboratories, Inc. (DLB - Free Report) reported healthy fourth-quarter fiscal 2019 results with year-over-year increase in earnings and revenues. Strong momentum of broadcast revenues, Dolby Vision and Dolby Atmos experience and new offerings from Apple Inc. (AAPL - Free Report) and The Walt Disney Company (DIS - Free Report) were the primary drivers.

Net Income

On a GAAP basis, net income for the quarter was $43.9 million or 43 cents per share compared with $26.7 million or 25 cents per share in the year-ago quarter. The significant rise in earnings was primarily backed by top-line growth. However, the bottom line missed the Zacks Consensus Estimate by 5 cents.

Non-GAAP net income came in at $67.6 million or 66 cents per share compared with $23.5 million or 22 cents per share in the prior-year quarter.

On a GAAP basis, fiscal 2019 net income was $255.2 million or $2.44 per share compared with $41.7 million or 39 cents per share in the prior fiscal year. On a non-GAAP basis, fiscal 2019 net income was $334.6 million or $3.20 per share compared with $215.8 million or $2.02 per share a year ago.

Dolby Laboratories Price, Consensus and EPS Surprise

Revenues

Total revenues were $298.8 million, up from $240.6 million in the year-ago quarter, primarily driven by growth in Licensing and Products and services segments. The top line surpassed the Zacks Consensus Estimate of $298 million. For fiscal 2019, Dolby reported total revenues of $1,241.6 million compared with $1,054.6 million in fiscal 2018.

Segmental Performance

Revenues from Licensing were $264.8 million, up 23.3% year over year, owing to higher revenues from Dolby vision coupled with higher recoveries in Broadcast business. Sales from Consumer Electronics declined 8% year over year due to lower recoveries. Mobile Devices represented 17% of total licensing, failing to create a major impact in the reported quarter, primarily due to the impact of 606 recast in prior-year revenues. Sales from PC decreased 5% year over year, mainly due to lower mix of ASPs, and the same from Licensing in other markets were down nearly 8% due to lower recoveries, offset partially by higher revenues from Dolby Cinema and gaming.

Products and services revenues came in at $34 million, up 31.5% due to higher sales of new product offerings in the Cinema business.

Other Details

Gross profit was $252.9 million compared with $209.3 million in the year-earlier quarter. Total operating expenses increased 2.5% year over year to $201.6 million, primarily due to restructuring expenses. Operating income was $51.2 million compared with $12.6 million a year ago.

Cash Flow and Liquidity

In fourth-quarter fiscal 2019, Dolby generated $130.5 million of net cash from operating activities compared with $111.7 million in the year-ago quarter. Cash flow from operations was $327.7 million in fiscal 2019 compared with $352.2 million in fiscal 2018. As of Sep 27, 2019, the company had $797.2 million in cash and equivalents with $177.5 million of non-current liabilities compared with the respective tallies of $918.1 million and $183.8 million a year ago.

Outlook

Dolby has provided guidance for first-quarter fiscal 2020. The company expects GAAP earnings per share in the range of 27-33 cents and non-GAAP earnings per share in the range of 45-51 cents, while revenues are anticipated to be $275-$295 million.

In addition, the company offered guidance for fiscal 2020. It currently estimates total revenues to be in the $1.30-$1.35 billion band. While GAAP gross margin is expected to be in the range of 87-88%, non-GAAP gross margin is projected to be 88-89%. The company expects GAAP earnings per share in the range of $2.64-$2.74 and non-GAAP earnings per share in the band of $3.40-$3.50.

Zacks Rank & A Key Pick

Dolby currently has a Zacks Rank #3 (Hold).

A better-ranked stock in the industry is Sony Corporation (SNE - Free Report) , sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Sony delivered average positive earnings surprise of 86.9% in each of the trailing four quarters.

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