Dolby Cuts Full-Year Revenue Guidance on Expected Shipment Declines

Dolby Q1 results were above the midpoint of revenue guidance at $334.4 million, but the company lowered Q2 guidance to reflect the impact of “lower estimated TV, gaming and automotive shipments for the year,” said CEO Kevin Yeaman on the company’s Q2 FY ’22 earnings call Thursday.

Full-year guidance is for 1%-5% growth to $1.3 billion-$1.35 billion, said Chief Financial Officer Robert Park, saying the company is providing a “high-level estimate” for 2022 revenue due to “very limited” visibility into what customers will ship this year. For fiscal Q3, Dolby estimates revenue of $285 million-$310 million. Shares closed 5.2% lower Friday at $71.54.

Visibility challenges primarily affect foundational audio, which is more broadly adopted across a wider product range, said Park. Supply chain issues from gaming consoles and autos are extending further into the year than previously expected. The company anticipates total licensing growth in FY '22 will be driven by Dolby Atmos, Dolby Vision and imaging patents across all end markets with year-over-year growth above 35%, Park said.

The company came into the year expecting foundational audio to be down low-single digits; it’s now seen declining by high-single digits for the year due to lower TV shipments, which are estimated to drop mid-single digits globally, Yeaman said. TV shipment declines are expected to be steeper in North America and Europe after strong growth in 2021, Yeaman said. Q2 TV units were down more than 15% year-on-year in North America and Europe, said Park.

Supply chain issues continue to affect gaming and automotive, leading to lower unit estimates in those categories. Yeaman said “many uncertainties” are limiting Dolby’s visibility: COVID-19 shutdowns in China, war in Ukraine and ongoing supply chain and inflation concerns.

Dolby cut expected year-over-year growth estimates for the Other Markets category to 15%, due to ongoing supply issues in gaming and auto, which affected foundational audio revenue; Dolby Cinema had growth after a challenging 2021. PC market revenue is expected to grow high-single digits in ‘22, and mobile revenue is expected to grow mid-single digits, Park said. PC and mobile growth will be driven by Dolby Atmos, Dolby Vision and imaging patents, he said. CE is expected to be up “slightly” year on year.

Yeaman said premium products are “holding up better than the overall market,” an advantage for Dolby Vision and Dolby Atmos, which tend to be at the top end of product lineups before manufacturers start rolling the technologies out to the rest of the portfolio.