A few global comments on DLB's quarterly numbers(CC notes to follow)
After reviewing the notes and getting the first quarter with an Acctg 606 adjustment, I wanted to put together some guidepost notes for the future.
DLB is a technology provider primarily into the consumer electronics space. As such, their business is seasonal and YoY comparisons are the most meaningful. I believe they are growing revenues at a double digit rate, but as with any growing company, the growth is not in a straight line. So with this backdrop, non-linear growth with seasonality, there are 3 significant quarterly variables:
- The biggest is what they call recoveries, I would call them royalty adjustments based on yearly audits. They are "almost" always positive(customer underpaid), they can be large, and they are recognized in the quarter the audit is completed. It appears each customer has a schedule for their yearly audit, so they occur throughout the year. Apple is in the March quarter, so that tends to be a big one.
- 606 adjustments. These began this fiscal year and involve estimating royalties each quarter and then adjusting them the following quarter based on the actuals. The March quarter was the first Q with an adjustment, it was +$8M. they will probably get better with practice.
- Dolby Cinema openings. These can come in spurts, they have some upfront revenue recognition, and each contract can vary in structure which impacts the upfront number. They indicated the Chinese openings are proceeding slower than they expected, China as a whole is their #2 Cinema market after the US(AMC). This resulted in a weak product revenue number. They did indicate they just signed a new Chinese theater operator.
Cooters
PS Thankfully they restated last year's numbers as if they were under 606, so we are at least comparing apples to apples |
