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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended April 1, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From              To             
Commission File Number: 001-32431
dlb-20220401_g1.jpg
DOLBY LABORATORIES, INC.
(Exact name of registrant as specified in its charter)
Delaware90-0199783
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
1275 Market StreetSan FranciscoCalifornia94103-1410
(Address of principal executive offices)(Zip Code)

(415) 558-0200
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A common stock, $0.001 par valueDLBThe New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large Accelerated FilerAccelerated Filer  
Non-accelerated Filer  Smaller Reporting Company  
Emerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes     No 
On April 29, 2022, the registrant had 64,807,955 shares of Class A common stock, par value $0.001 per share, and 36,086,629 shares of Class B common stock, par value $0.001 per share, outstanding.


DOLBY LABORATORIES, INC.
FORM 10-Q
For the Fiscal Quarter Ended April 1, 2022
TABLE OF CONTENTS
 
Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 6.

2

GLOSSARY OF TERMS
The following table summarizes certain terms and abbreviations that may be used within the text of this report:
AbbreviationTerm
AACAdvanced Audio Coding
AFSAvailable-For-Sale (Securities)
AOCIAccumulated Other Comprehensive Income (Loss)
APIApplication Programming Interface
APICAdditional Paid In-Capital
ASCAccounting Standards Codification
ASPAverage Selling Price
ASUAccounting Standards Update
ATSCAdvanced Television Systems Committee
AVCAdvanced Video Coding
AVRAudio/Video Receiver
CEConsumer Electronics
CODMChief Operating Decision Maker
COGSCost Of Goods Sold
COSOCommittee Of Sponsoring Organizations (Of The Treadway Commission)
DDDolby Digital®
DD+Dolby Digital Plus™
DMADigital Media Adapter
DTVDigital Television
DVBDigital Video Broadcasting
DVDDigital Versatile Disc
EPSEarnings Per Share
ESPEstimated Selling Price
ESPPEmployee Stock Purchase Plan
FASBFinancial Accounting Standards Board
FCPAForeign Corrupt Practices Act
G&AGeneral and Administrative
HDHigh Definition
HDRHigh-Dynamic Range
HDTVHigh Definition Television
HE-AACHigh Efficiency Advanced Audio Coding
HEVCHigh Efficiency Video Coding
HTIBHome Theater In-A-Box
ICIntegrated Circuit
IMBIntegrated Media Block
IBRIncremental Borrowing Rate
IPIntellectual Property
LPLimited Partner/Partnership
NOLNet Operating Loss
OECDOrganization For Economic Co-Operation & Development
OEMOriginal Equipment Manufacturer
OTTOver-The-Top
PCPersonal Computer
PCSPost-Contract Support
PP&EProperty, Plant, and Equipment
PSOPerformance-Based Stock Option
PSUPerformance-Based Restricted Stock Unit
R&DResearch and Development
ROURight-Of-Use
RSURestricted Stock Unit
S&MSales and Marketing
SECU.S. Securities and Exchange Commission
SERPSupplemental Executive Retirement Plan
STBSet-Top Box
TSRTotal Stockholder Return
UHDUltra-High Definition
U.S. GAAPGenerally Accepted Accounting Principles In The United States

3

PART I – FINANCIAL INFORMATION

ITEM 1. UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DOLBY LABORATORIES, INC.
INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
(unaudited)
April 1,
2022
September 24,
2021
ASSETS
Current assets:
Cash and cash equivalents$900,393 $1,225,380 
Restricted cash8,445 7,652 
Short-term investments141,688 38,839 
Accounts receivable, net of allowance for credit losses of $10,156 and $8,744
227,263 232,609 
Contract assets, net of allowance for credit losses of $125 and $208
258,846 182,316 
Inventories, net16,623 10,965 
Prepaid expenses and other current assets68,312 62,737 
Total current assets1,621,570 1,760,498 
Long-term investments124,142 62,819 
Property, plant and equipment, net527,623 534,381 
Operating lease right-of-use assets58,934 67,128 
Intangible assets, net126,281 122,890 
Goodwill371,738 340,694 
Deferred taxes175,238 156,020 
Other non-current assets57,464 61,257 
Total assets$3,062,990 $3,105,687 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$11,373 $17,779 
Accrued liabilities228,545 262,728 
Income taxes payable3,519 1,334 
Contract liabilities 22,109 18,473 
Operating lease liabilities15,413 15,403 
Total current liabilities280,959 315,717 
Non-current contract liabilities24,569 23,713 
Non-current operating lease liabilities48,191 56,715 
Other non-current liabilities104,083 105,310 
Total liabilities457,802 501,455 
Stockholders’ equity:
Class A, $0.001 par value, one vote per share, 500,000,000 shares authorized: 64,789,579 shares issued and outstanding at April 1, 2022 and 64,986,316 at September 24, 2021
58 59 
Class B, $0.001 par value, ten votes per share, 500,000,000 shares authorized: 36,086,629 shares issued and outstanding at April 1, 2022 and 36,086,779 at September 24, 2021
41 41 
Retained earnings2,615,354 2,607,909 
Accumulated other comprehensive loss(15,681)(10,030)
Total stockholders’ equity – Dolby Laboratories, Inc.2,599,772 2,597,979 
Controlling interest5,416 6,253 
Total stockholders’ equity2,605,188 2,604,232 
Total liabilities and stockholders’ equity$3,062,990 $3,105,687 
See accompanying notes to unaudited interim condensed consolidated financial statements
4

DOLBY LABORATORIES, INC.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
 
Fiscal Quarter EndedFiscal Year-To-Date Ended
April 1,
2022
March 26,
2021
April 1,
2022
March 26,
2021
Revenue:
Licensing$313,833 $303,585 $646,117 $676,590 
Products and services20,538 15,973 39,887 32,842 
Total revenue334,371 319,558 686,004 709,432 
Cost of revenue:
Cost of licensing16,672 16,060 31,607 29,006 
Cost of products and services18,843 16,318 36,617 38,676 
Total cost of revenue35,515 32,378 68,224 67,682 
Gross margin298,856 287,180 617,780 641,750 
Operating expenses:
Research and development67,421 65,808 136,245 129,580 
Sales and marketing84,230 78,046 181,400 153,491 
General and administrative98,693 59,398 161,137 113,852 
Gain on sale of assets   (13,871)
Restructuring charges5,162 741 5,067 10,764 
Total operating expenses255,506 203,993 483,849 393,816 
Operating income43,350 83,187 133,931 247,934 
Other income/(expense):
Interest income1,098 962 1,814 1,936 
Interest expense(87)(167)(171)(252)
Other income/(expense), net(910)1,385 (681)2,711 
Total other income101 2,180 962 4,395 
Income before income taxes43,451 85,367 134,893 252,329 
Provision for income taxes(6,932)(9,022)(18,364)(33,294)
Net income including controlling interest36,519 76,345 116,529 219,035 
Less: net (income)/loss attributable to controlling interest201 (128)205 (7,620)
Net income attributable to Dolby Laboratories, Inc.$36,720 $76,217 $116,734 $211,415 
Net income per share:
Basic$0.36 $0.75 $1.15 $2.09 
Diluted$0.36 $0.73 $1.13 $2.02 
Weighted-average shares outstanding:
Basic101,343 101,464 101,285 101,090 
Diluted102,707 104,581 103,477 104,414 
Related party rent expense:
Included in operating expenses$ $(403)$ $(387)
Included in net income attributable to controlling interest$71 $121 $142 $240 
Cash dividend declared per common share$0.25 $0.22 $0.50 $0.44 
Cash dividend paid per common share$0.25 $0.22 $0.50 $0.44 
See accompanying notes to unaudited interim condensed consolidated financial statements
5

DOLBY LABORATORIES, INC.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(unaudited)

 Fiscal Quarter EndedFiscal Year-To-Date Ended
 April 1,
2022
March 26,
2021
April 1,
2022
March 26,
2021
Net income including controlling interest$36,519 $76,345 $116,529 $219,035 
Other comprehensive income:
Currency translation adjustments gains/(losses), net of tax benefit/(expense) of $34 , ($35), $0, and ($507)
(485)(766)(1,756)7,402 
Unrealized losses on investments, net of tax benefit/(expense) of ($1), $44, ($5), and $46
(3,516)(195)(4,020)(360)
Unrealized gains/(losses) on cash flow hedges, net of tax expense of ($49), ($40), ($80), and ($330)
(59)(2,364)178 (218)
Total other comprehensive income/(loss), net of tax(4,060)(3,325)(5,598)6,824 
Total comprehensive income32,459 73,020 110,931 225,859 
Less: comprehensive (income)/loss attributable to controlling interest101 (234)152 (7,889)
Comprehensive income attributable to Dolby Laboratories, Inc.$32,560 $72,786 $111,083 $217,970 
See accompanying notes to unaudited interim condensed consolidated financial statements
6

DOLBY LABORATORIES, INC.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands)
(unaudited)

Fiscal Quarter Ended
 Dolby Laboratories, Inc.  
 Common
Stock
Additional
Paid-In
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Total Stockholders' Equity - Dolby
Laboratories,
Inc.
Controlling
Interest
Total Stockholders' Equity
Balance at December 31, 2021$100 $ $2,649,175 $(11,521)$2,637,754 $4,767 $2,642,521 
Net income— 36,720 — 36,720 (201)36,519 
Other comprehensive income/(loss), net of tax— — — (4,160)(4,160)100 (4,060)
Stock-based compensation expense— 27,699 — — 27,699 — 27,699 
Repurchase of common stock(2)(40,588)(44,323)— (84,913)— (84,913)
Cash dividends declared and paid on common stock— — (25,398)— (25,398)— (25,398)
Common stock issued under employee stock plans1 13,689 — — 13,690 — 13,690 
Tax withholdings on vesting of restricted stock— (800)— — (800)— (800)
Deconsolidation of subsidiary— — (820)— (820)750 (70)
Balance at April 1, 2022$99 $ $2,615,354 $(15,681)$2,599,772 $5,416 $2,605,188 

Fiscal Year-To-Date Ended
 Dolby Laboratories, Inc.  
 Common
Stock
Additional
Paid-In
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Total Stockholders' Equity - Dolby
Laboratories,
Inc.
Controlling
Interest
Total Stockholders' Equity
Balance at September 24, 2021$100 $ $2,607,909 $(10,030)$2,597,979 $6,253 $2,604,232 
Net income— — 116,734 — 116,734 (205)116,529 
Other comprehensive income/(loss), net of tax— — — (5,651)(5,651)53 (5,598)
Distributions to controlling interest— — — — — (1,435)(1,435)
Stock-based compensation expense— 60,355 — — 60,355 — 60,355 
Repurchase of common stock(2)(62,696)(57,788)— (120,486)— (120,486)
Cash dividends declared and paid on common stock— — (50,681)— (50,681)— (50,681)
Common stock issued under employee stock plans1 35,061 — — 35,062 — 35,062 
Tax withholdings on vesting of restricted stock— (32,720)— — (32,720)— (32,720)
Deconsolidation of subsidiary— — (820)— (820)750 (70)
Balance at April 1, 2022$99 $ $2,615,354 $(15,681)$2,599,772 $5,416 $2,605,188 


7


Fiscal Quarter Ended
 Dolby Laboratories, Inc.  
 Common
Stock
Additional
Paid-In
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Total Stockholders' Equity - Dolby
Laboratories,
Inc.
Controlling
Interest
Total Stockholders' Equity
Balance at December 25, 2020$100 $ $2,565,670 $(608)$2,565,162 $6,055 $2,571,217 
Net income— — 76,217 — 76,217 128 76,345 
Other comprehensive income/(loss), net of tax— — — (3,431)(3,431)106 (3,325)
Stock-based compensation expense— 24,413 — — 24,413 — 24,413 
Repurchase of common stock(1)(43,115)(27,674)— (70,790)— (70,790)
Cash dividends declared and paid on common stock— — (22,343)— (22,343)— (22,343)
Common stock issued under employee stock plans 19,834 — — 19,834 — 19,834 
Tax withholdings on vesting of restricted stock1 (1,132)— — (1,131) (1,131)
Balance at March 26, 2021$100 $ $2,591,870 $(4,039)$2,587,931 $6,289 $2,594,220 

Fiscal Year-To-Date Ended
 Dolby Laboratories, Inc.  
 Common
Stock
Additional
Paid-In
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income/(Loss)
Total Stockholders' Equity - Dolby
Laboratories,
Inc.
Controlling
Interest
Total Stockholders' Equity
Balance at September 25, 2020$99 $ $2,443,138 $(10,594)$2,432,643 $5,762 $2,438,405 
Net income— — 211,415 — 211,415 7,620 219,035 
Other comprehensive income, net of tax— — — 6,555 6,555 269 6,824 
Distributions to controlling interest— — — — — (7,362)(7,362)
Stock-based compensation expense— 50,726 — — 50,726 — 50,726 
Repurchase of common stock(1)(92,665)(18,109)— (110,775)— (110,775)
Cash dividends declared and paid on common stock— — (44,574)— (44,574)— (44,574)
Common stock issued under employee stock plans2 71,155 — — 71,157 — 71,157 
Tax withholdings on vesting of restricted stock (29,216)— — (29,216)— (29,216)
Balance at March 26, 2021$100 $ $2,591,870 $(4,039)$2,587,931 $6,289 $2,594,220 

See accompanying notes to unaudited interim condensed consolidated financial statements
8

DOLBY LABORATORIES, INC.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 Fiscal Year-To-Date Ended
 April 1,
2022
March 26,
2021
Operating activities:
Net income including controlling interest$116,529 $219,035 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization45,832 47,399 
Stock-based compensation60,355 50,726 
Amortization of operating lease right-of-use assets7,953 8,538 
Amortization of premium on investments673 697 
Provision for/(benefit from) credit losses2,333 (65)
Deferred income taxes(19,363)(16,992)
Gain on sale of assets (13,871)
Other non-cash items affecting net income560 (1,847)
Changes in operating assets and liabilities:
Accounts receivable, net3,498 (102,791)
Contract assets, net(76,447)(72,197)
Inventories(5,045)10,398 
Operating lease right-of-use assets(265)(1,729)
Prepaid expenses and other assets(1,683)10,552 
Accounts payable and accrued liabilities(37,472)26,926 
Income taxes, net5,117 9,982 
Contract liabilities4,364 3,589 
Operating lease liabilities(7,924)(6,987)
Other non-current liabilities(4,356)(5,735)
Net cash provided by operating activities94,659 165,628 
Investing activities:
Purchases of marketable securities(201,231)(26,449)
Proceeds from sales of marketable securities5,107 4,594 
Proceeds from maturities of marketable securities29,055 18,620 
Return of investment from equity method investees826  
Purchases of property, plant, and equipment(26,053)(28,887)
Proceeds from sale of assets 16,365 
Payments for business combinations, net of cash acquired(38,228) 
Purchases of intangible assets(11,528) 
Purchases of other investments(5,000) 
Net cash used in investing activities(247,052)(15,757)
Financing activities:
Proceeds from issuance of common stock35,062 71,157 
Repurchase of common stock(120,486)(110,775)
Payment of cash dividend(50,681)(44,574)
Distribution to controlling interest(1,435)(7,362)
Shares repurchased for tax withholdings on vesting of restricted stock(32,720)(29,216)
Net cash used in financing activities(170,260)(120,770)
Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash(1,541)4,416 
Net increase/(decrease) in cash, cash equivalents, and restricted cash(324,194)33,517 
Cash, cash equivalents, and restricted cash at beginning of period1,233,032 1,079,979 
Cash, cash equivalents, and restricted cash at end of period$908,838 $1,113,496 
Supplemental disclosure:
Cash paid for income taxes, net of refunds received$24,016 $29,584 
Non-cash investing activities and financing activities:
Change in property, plant, and equipment purchased, unpaid at period-end$(2,996)$1,799 
See accompanying notes to unaudited interim condensed consolidated financial statements
9

DOLBY LABORATORIES, INC.
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation
Unaudited Interim Condensed Consolidated Financial Statements
We have prepared the accompanying unaudited interim condensed consolidated financial statements in accordance with U.S. GAAP, and with SEC rules and regulations, which allow for certain information and footnote disclosures that are normally included in annual financial statements prepared in accordance with U.S. GAAP to be condensed or omitted. In our opinion, these unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements for the fiscal year ended September 24, 2021 and include all adjustments necessary for fair presentation. The accompanying unaudited interim condensed consolidated financial statements should be read in conjunction with our consolidated financial statements for the fiscal year ended September 24, 2021, which are included in our Annual Report on Form 10-K filed with the SEC.
The results for the fiscal quarter and year-to-date period ended April 1, 2022 are not necessarily indicative of the results to be expected for any subsequent quarterly or annual financial period, including the fiscal year ending September 30, 2022.
Principles of Consolidation
The unaudited interim condensed consolidated financial statements include the accounts of Dolby Laboratories, Inc. and our wholly owned subsidiaries. In addition, we have consolidated the financial results of jointly owned affiliated companies in which our principal stockholder has a controlling interest. We report these controlling interests as a separate line in our condensed consolidated statements of operations as net income attributable to controlling interest and in our condensed consolidated balance sheets as a controlling interest. We eliminate all intercompany accounts and transactions upon consolidation.
Operating Segments
Since we operate as a single reportable segment, all required financial segment information is included in our unaudited interim condensed consolidated financial statements. This reflects the fact that our CODM, our Chief Executive Officer ("CEO"), evaluates our financial information and resources, and assesses the performance of these resources on a consolidated basis.
Use of Estimates
The preparation of our financial statements in accordance with U.S. GAAP requires management to make certain estimates and assumptions that affect the amounts reported and disclosed in our unaudited interim condensed consolidated financial statements and accompanying notes.
Significant items subject to such estimates and assumptions include estimated shipments by our licensees for which we are owed a sales-based royalty. These estimates involve the use of historical data and judgment for several key attributes including industry estimates of expected shipments, the percentage of markets using our technologies, and average sale prices. Our estimates of royalty-based revenue also take into consideration the macroeconomic effect of global events, such as the coronavirus pandemic ("COVID-19") or other natural disasters which may impact our licensees' supply chain activities as well as demand for shipments.
Additional significant items subject to such estimates and assumptions include ESPs for performance obligations within revenue arrangements; allowances for credit losses for accounts receivable; carrying values of inventories and certain PP&E, goodwill and intangible assets; fair values of investments; accrued liabilities including unrecognized tax benefits, deferred income tax assets and liabilities, and contingent liabilities; and stock-based compensation. Actual results could differ from our estimates.
Fiscal Year
Our fiscal year is a 52 or 53 week period ending on the last Friday in September. The fiscal periods presented herein include the 13 week period ended April 1, 2022 and March 26, 2021. Our fiscal year ending September 30,
10

2022 (fiscal 2022) consists of 53 weeks, and our fiscal year ended September 24, 2021 (fiscal 2021) consisted of 52 weeks.

2. Summary of Significant Accounting Policies
Recently Issued Accounting Standards
Adopted Standards
Income Taxes. In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which modifies and eliminates certain exceptions to the general principles of ASC 740, Income Taxes. We adopted this standard in the first quarter of fiscal 2022, and it did not have a material impact on our condensed consolidated financial statements.
Standards Not Yet Adopted
Business Combinations.     In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by an acquirer in accordance with ASC 606, Revenue from Contracts with Customers. Currently, we recognize acquired contract assets and contract liabilities at fair value as of the acquisition date, in accordance with ASC 805. This standard will be effective for Dolby beginning September 30, 2023 on a prospective basis, but early adoption is permitted. We do not expect the adoption of this standard to have a material impact on our condensed consolidated financial statements.



3. Revenue Recognition
We enter into revenue arrangements with our customers to license technologies, trademarks and patents for sound, imaging and voice solutions, and to sell products and services. We recognize revenue when we satisfy a performance obligation by transferring control over the use of a license, product, or service to a customer.
A. Identification of the Contract or Contracts with Customers
We generally determine that a contract with a customer exists upon the execution of an agreement and after consideration of collectability, which could include an evaluation of the customer's payment history, the existence of a standby letter-of-credit between the customer’s financial institution and our financial institution, public financial information, and other factors. At contract inception, we also evaluate whether two or more non-standard agreements with a customer should be combined and accounted for as a single contract.
B. Identification of Performance Obligations in a Contract
We generate revenue principally from the following sources, which represent performance obligations in our contracts with customers:
Licensing.   We license our technologies, including patents, to a range of customers who incorporate them into their products for enhanced audio, imaging and voice functionality across broadcast, mobile, CE, PC, gaming, and other markets.
Product Sales. We design and provide audio and imaging products for the cinema, television, broadcast, communications, and entertainment industries.
Services.   We provide various services to support theatrical and television production for cinema exhibition, broadcast, and home entertainment, including equipment training, mixing room alignment, equalization, as well as audio, color and light image calibration. We also offer a developer platform, Dolby.io, that enables developers to access our technologies through audio and video APIs for building high-quality communications, media, and streaming solutions.
PCS. We provide PCS for products sold and for equipment leased, and we support the implementation of our licensing technologies in our licensees’ products.
Equipment Leases. We collaborate with established cinema exhibitors to offer Dolby Cinema, a branded premium cinema offering for movie audiences by leasing equipment and licensing our IP. We also lease hardware that facilitates the Dolby conferencing experience, including the Dolby Conference Phone, and the Dolby Voice Room solution.
Licensing Administration Fees. We generate service fees for managing patent pools on behalf of third party patent owners through our wholly-owned subsidiary, Via Licensing Corporation ("Via").
Some of our revenue arrangements include multiple performance obligations, such as hardware, software, support and maintenance, and extended warranty services. We evaluate whether promised products and services are distinct performance obligations.
The majority of our arrangements with multiple performance obligations pertain to our digital cinema server and processor sales that include the following distinct performance obligations to which we allocate portions of the transaction price based on their stand-alone selling price:
Digital cinema server hardware and embedded software, which is dependent on and interrelated with the hardware. Accordingly, the hardware and embedded software represent a single performance obligation.
The right to support and maintenance, which is included with the purchase of the digital cinema server hardware, is a distinct performance obligation.
The right to receive commissioning services is a distinct performance obligation within the sale of the Dolby Atmos Cinema Processor. These services consist of the review of venue designs specifying proposed speaker placement as well as calibration services performed for installed speakers to ensure optimal playback.
C. Determination of Transaction Price for Performance Obligations in a Contract
12

After identifying the distinct performance obligations, we determine the transaction price in accordance with the terms of the underlying executed contract which may include variable consideration such as discounts, rebates, refunds, rights of returns, and incentives. We assess and update, if necessary, the amount of variable consideration to which we are entitled for each reporting period. At the end of each reporting period, we estimate and accrue a liability for returns and adjustments as a reduction to revenue based on several factors, including past returns history.
With the exception of our sales-based royalties, we evaluate whether a significant financing component exists when we recognize revenue in advance of customer payments that occur over time. For example, some of our licensing arrangements include payment terms greater than one year from when we transfer control of our IP to a licensee and the receipt of the final payment for that IP. If a significant financing component exists, we classify a portion of the transaction price as interest income, instead of recognizing all of the transaction price as revenue. We do not adjust the transaction price for the effects of financing if, at contract inception, the period between the transfer of control to a customer and final payment is expected to be one year or less.
D. Allocation of Transaction Price to Distinct Performance Obligations in a Contract
For our sales-based royalties where the license is the predominant item to which the royalties relate, we present all revenue as licensing.
For revenue arrangements that include multiple performance obligations, we determine the stand-alone selling price for each distinct performance obligation based on the actual selling prices made to customers. If the performance obligation is not sold separately, we estimate the stand-alone selling price. We do so by considering market conditions such as competitor pricing strategies, customer specific information and industry technology lifecycles, internal conditions such as cost and pricing practices, or applying the residual approach method when the selling price of the good, most commonly a license, is highly variable or uncertain.
Once the transaction price, including any variable consideration, has been determined, we allocate the transaction price to the performance obligations identified in the contract, and recognize revenue as or when control is transferred for each distinct performance obligation.
E. Revenue Recognition as Control is Transferred to a Customer
We generate our licensing revenue by licensing our technologies and patents to various types of licensees, such as chip manufacturers ("implementation licensees"), consumer product manufacturers, software vendors, and communications service providers. Our revenue recognition policies for each of these arrangements are summarized below.
Initial fees from implementation licensees. Implementation licensees incorporate our technologies into their chipsets that, once approved by Dolby, are available for purchase by OEMs for use in end-user products. Implementation licensees only pay us a nominal initial fee on contract execution as consideration for the ongoing services that we provide to assist in their implementation process. Revenue from these initial fees is recognized ratably over the contractual term as a component of licensing revenue.
Sales-based licensing fees. In our royalty bearing licensing agreements with OEMs, control is transferred upon the later of contract execution or the contract’s effective date. We apply the royalty exception, which requires that we recognize sales-based royalties when the sales occur based on our estimates. These estimates involve the use of historical data and judgment for several key attributes including industry estimates of expected shipments, the percentage of markets using our technologies, and average sale prices. Generally, our estimates represent the current period’s shipments to which we expect our licensees to submit royalty statements in the following quarter. Upon receipt of royalty statements from the licensees with the actual reporting of sales-based royalties that we estimated previously, we record a favorable or unfavorable adjustment based on the difference, if any, between estimated and actual sales. In the second quarter of fiscal 2022, we recorded an unfavorable adjustment of approximately $3 million, which was primarily related to October through December shipments and largely based on actual royalty statements received from licensees.
Fixed and guaranteed licensing fees.   In certain cases, our arrangements require the licensee to pay fixed, non-refundable fees. In these cases, control is transferred and fees are recognized upon the later of contract execution or the effective date. Additionally and separate from initial fees from implementation licensees, our sales- and usage-based licensing agreements include a nominal fee, which is also recognized at a point in time in which control of the IP has been transferred. Revenue from these arrangements is included as a component of licensing revenue.
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Recoveries.   Through compliance efforts, we identify misreported licensed activity related to non-current periods. We may record a favorable or unfavorable revenue adjustment in connection with the findings from these compliance efforts generally upon resolution with the licensee through agreement of the findings, or upon receipt of the licensee’s correction statement. Revenue from these arrangements is included as a component of licensing revenue.
We undertake activities aimed at identifying potential unauthorized uses of our technologies, which when successful result in the recognition of revenue. Recoveries stem from third parties who agree to remit payments to us based on past use of our technology. In these scenarios, a legally binding contract did not exist at time of use of our technology, and therefore, we recognize revenue recoveries upon execution of the agreement as that is the point in time to which a contract exists and control is transferred. This revenue is classified as licensing revenue.
In general, we classify legal costs associated with activities aimed at identifying potential unauthorized uses of our technologies, auditing existing licensees, and on occasion, pursuing litigation as S&M in our condensed consolidated statements of operations.
We recognize licensing revenue gross of withholding taxes, which our licensees remit directly to their local tax authorities, and for which we receive a partial foreign tax credit in our income tax provision.
In addition to our licensing arrangements, we also enter into arrangements to deliver products and services.
Product Sales.   Revenue from the sale of products is recognized when the customer obtains control of the promised good or service, which is generally upon shipment. Payments are generally made within 90 days of sale.
Services.   We provide various services, such as engineering services related to movie soundtrack print mastering, equipment training and maintenance, mixing room alignment, equalization, and image calibration, which we bill on a fixed fee and time and materials basis. Most of these services are of a short duration and are recognized as control of the performance obligations are transferred which is when the related services are performed.
Cloud Services. We provide access to audio and video APIs through our developer platform as well as cloud encoding services, generally, on either a consumption or subscription basis. Revenue related to cloud services provided on a consumption basis is recognized when the customer utilizes the services, based on the quantity of services consumed. Revenue related to cloud services provided on a subscription basis is recognized ratably over the contract term as the customer receives and consumes the benefits of the cloud services.
Collaborative Arrangements.   We collaborate with established cinema exhibitors to offer Dolby Cinema, a branded premium cinema offering for movie audiences. Under such collaborations, Dolby and the exhibitor are both active participants, and share the risks and rewards associated with the business. Accordingly, these collaborations are governed by revenue sharing arrangements under which Dolby receives revenue based on box office receipts, reported to Dolby by exhibitor partners on a monthly or quarterly basis, our proprietary designs and trademarks as well as for the use of our equipment at the exhibitor's venue. The use of our product solution meets the definition of a lease, and for the related portion of Dolby's share of revenue, we apply ASC 842, Leases, and recognize revenue based on monthly box office reports from exhibitors. Our revenue share is recognized as licensing revenue in our condensed consolidated statements of operations.
In addition, we also enter into hybrid agreements where a portion of our revenue share involves guaranteed payments, which in some cases result in classifying the arrangement as a sales-type lease. In such arrangements, we consider control to transfer at the point in time to which we have installed and tested the equipment, at which point we record such guaranteed payments as product revenue.
Via Administration Fee. We generate service fees for managing patent pools on behalf of third party patent owners through our wholly-owned subsidiary, Via. As an agent to licensors in the patent pool, Via receives a share of the sales-based royalty that the patent pool licensors earn from licensees. As such, we apply the sales-based royalty exception as the service provided is directly related to the patent pool licensors’ provision of IP, which results in recognition based on estimates of the licensee’s quarter shipments that use the pool’s patents. In addition to sales-based royalties, Via also has contracts where the fees are fixed. The revenue share Via receives from licensors on fixed fee contracts is recognized over the term in which we are providing services associated with the fixed fee contract. We recognize our administrative fees net of the consideration paid to the patent licensors in the pool as licensing revenue.
Deferred revenue, which is a component of contract liabilities, represents amounts that are ultimately expected
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to be recognized as revenue, but for which we have yet to satisfy the performance obligation. As of April 1, 2022, we had $44.9 million of remaining performance obligations, 33% of which we expect to recognize as revenue in fiscal 2022, 24% in fiscal 2023, and the balance of 43% in fiscal years beyond 2023.
F. Disaggregation of revenue
The following table presents a summary of the composition of our revenue for all periods presented (in thousands, except percentage amounts):
Fiscal Quarter EndedFiscal Year-To-Date Ended
RevenueApril 1, 2022March 26, 2021April 1, 2022March 26, 2021
Licensing$313,833 94 %$303,585 95 %$646,117