Dolby rallies as FQ3 beat overshadows soft outlook

Dolby (DLB +3%) expects FQ4 revenue of $210M-$220M and GAAP EPS of $0.28-$0.33, below a consensus of $223.1M and $0.34. But with a strong FQ3 revenue beat in tow, the top-line outlook translates into revenue of $945M-$955M, above a $941.6M consensus.

The FQ3 beat was fueled by a 25% Y/Y increase in broadcast licensing revenue (43% of total licensing), and a 20% increase in mobile licensing (13% of total). The broadcast growth is attributed to higher TV tax rates, higher set-top units, and back payments. The mobile growth stems from higher tablet units and smartphone design wins.

PC licensing revenue (19% of total) fell 2% due to industry weakness, and consumer electronics rose slightly, with DVD/Blu-ray player declines offset by growth in other segments. Product/services revenue (8% of total revenue) fell 21%.

On its FQ3 CC (transcript), Dolby attributes the light Q4 guidance to expectations of a 5%-6% drop in PC licensing revenue, and a 20%-25% drop in mobile licensing. The latter could be due to slumping revenue from Samsung. The company disclosed earlier this year Dolby Digital wasn't built into the Galaxy S5 (unlike the S4).

$29M was spent on buybacks in FQ3. Opex rose 6% Y/Y to $153.9M.

FQ3 results, PR

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