Double-Digit Revenue Growth at Dolby Rests on Future Mix Shift: Colliers

Dolby expects a low single-digit decline in its Foundational Audio business due to supply chain constraints against last year’s “COVID-driven strength” in TVs and PCs, Colliers analyst Steven Frankel wrote investors Monday, after a series of virtual investor meetings with Dolby Chief Financial Officer Robert Park last week. The Foundational Audio business that’s part of “nearly all CE devices” -- including smartphones, PCs, TVs, set-top boxes, digital media players and AV receivers -- fluctuates annually between a low single-digit decline and low single-digit growth given the maturity of several categories, Frankel noted. The Vision/Atmos/Imaging patents portion of the business is in the “early stages of accelerated growth,” he said, citing “broad support” of Vision and Atmos on the streaming content side from Netflix, Apple TV+, Disney+, Comcast, Apple Music, Tencent and others, which drives device makers to add Vision and Atmos on top of core Foundational Audio, “growing the royalty per device.” Dolby has penetrated the 4K TV market, including in aggressively priced private-label brands at Best Buy and Walmart, while Samsung remains the “lone holdout” sticking with its HDR10+ high dynamic range technology vs. Dolby Vision. Colliers sees Dolby.IO as a “game-changer” that expands the company's addressable market and creates a recurring revenue stream, despite short-term headwinds. Frankel maintained a “buy” rating on the company, saying the open question is how long before the mix shifts toward Atmos and Vision, along with some assistance from Dolby.IO, “enable the company to achieve sustainable double-digit revenue growth.”