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What changed in Dolby Laboratories, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Dolby Laboratories, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+361 added−336 removedSource: 10-K (2023-11-17) vs 10-K (2022-11-18)

Top changes in Dolby Laboratories, Inc.'s 2023 10-K

361 paragraphs added · 336 removed · 270 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeIn mobile devices, HE-AAC is specified for various applications in the 3rd Generation Partnership Project suite of standards. • Extended HE-AAC is included in Digital Radio Mondiale radio broadcasting standards. 7 Table of Contents In addition, Dolby technologies have become, or are included in, de facto industry standards in many consumer entertainment products.
Biggest changeThe adoption of AC-4 7 Table of Contents continues to grow, and AC-4 is already widely supported in UHDTVs available worldwide from major manufacturers. • In mobile devices, HE-AAC v2 (3GPP eAAC +) is specified for various applications in the 3rd Generation Partnership Project suite of standards. • Extended HE-AAC is included in Digital Radio Mondiale radio broadcasting standards.
As it relates to AAC, HE-AAC, Extended HE-AAC, AVC, and HEVC, we jointly participate in patent licensing programs with other patent owners. 4 Table of Contents Technology Description AAC, HE-AAC & Extended HE-AAC Advanced digital audio codec solutions with high bandwidth efficiency used for a wide range of media applications.
As it relates to AAC, HE-AAC, Extended HE-AAC, AVC, and HEVC, we jointly participate in patent licensing programs with other patent owners. 4 Table of Contents Technology Description AAC, HE-AAC and Extended HE-AAC Advanced digital audio codec solutions with high bandwidth efficiency used for a wide range of media applications.
In addition, DD+ and HE-AAC are included in the digital terrestrial television specifications of emerging digital TV markets in Africa, Brazil, South-East Asia, and India while operators in China have selected DD and DD+ as optional technologies for transmissions using the country’s digital terrestrial television specification. • DD is mandated for HD broadcast in multiple regions including North America and South Korea, and for DVD players on a global basis. • AC-4 is Dolby’s next generation of audio coding technology that has been adopted for implementation in certain regions by worldwide standards organizations including the DVB and ATSC.
In addition, DD+ and HE-AAC are included in the digital terrestrial television specifications of emerging digital TV markets in Africa, Brazil, South-East Asia, and India while operators in China have selected DD and DD+ as optional technologies for transmissions using the country’s digital terrestrial television specification. • DD is mandated for HD broadcast in multiple regions including North America and South Korea, and for DVD players on a global basis. • AC-4 is Dolby’s audio coding technology that has been adopted for implementation for next generation broadcast services in certain regions by worldwide standards organizations including the DVB and ATSC.
Such technologies led to the development of our noise-reduction systems for analog tape recordings, and have since evolved into multiple offerings that enable more immersive sound for cinema, DTV transmissions and devices, mobile devices, OTT video and music services, and home entertainment devices. Today, we derive the majority of our revenue from licensing our audio technologies.
Such technologies led to the development of our noise-reduction systems for analog tape recordings, and have since evolved into multiple offerings that enable more immersive sound for cinema, DTV transmissions and devices, mobile devices, OTT video and music services, home entertainment devices, and automobiles. Today, we derive the majority of our revenue from licensing our audio technologies.
Our educational efforts are intended to share Dolby’s experiences, ideas and approaches from our unique position at the intersection of science, technology and art. Management Succession Planning Our Board of Directors works with the Nominating and Governance Committee on succession planning for our Chief Executive Officer, including a process for identifying potential successors.
Our efforts are intended to share Dolby’s experiences, ideas and approaches from our unique position at the intersection of science, technology and art. Management Succession Planning Our Board of Directors works with the Nominating and Governance Committee on succession planning for our Chief Executive Officer, including a process for identifying potential successors.
Patent Licensing Model. We license our patents through patent pools which are arrangements between multiple patent owners to jointly offer and license pooled patents to licensees. We also license our patents directly to manufacturers that use our IP in their products.
Patent Licensing Model. We license our patents directly to manufacturers that use our IP in their products. We also license our patents through patent pools which are arrangements between multiple patent owners to jointly offer and license pooled patents to licensees who use our IP in their products.
The amount of royalties we collect on a particular product depends on several factors including the nature of the implementations, the mix of Dolby technologies used, and the volume of products using our technologies that are shipped by the system licensee. Integrated Licensing Model .
The amount of royalties we collect on a particular product depends on several factors including the nature of the implementation, the mix of Dolby technologies used, and the volume of products using our technologies that are shipped by the system licensee. Integrated Licensing Model .
ITEM 1. BUSINESS OVERVIEW Dolby Laboratories creates audio and imaging technologies that transform entertainment and communications for content playback in movies, TV, music, and gaming. Founded in 1965, our strengths stem from expertise in analog and digital signal processing and digital compression technologies that have transformed the ability of artists to convey entertainment experiences to their audiences through recorded media.
ITEM 1. BUSINESS OVERVIEW Dolby Laboratories creates audio and imaging technologies that transform entertainment for content playback in movies, TV, music, gaming and user-generated content. Founded in 1965, our strengths stem from expertise in analog and digital signal processing and digital compression technologies that have transformed the ability of artists to convey entertainment experiences to their audiences through recorded media.
By offering an integrated system solution, these potential 8 Table of Contents competitors may also be able to offer competing technologies at lower prices than we can, which could adversely affect our operating results. Many products that include our audio and imaging technologies also include technologies developed by our competitors.
By offering an integrated system solution, these potential competitors may also be able to offer competing technologies at lower prices than we can, which could adversely affect our operating results. Many products that include our audio and imaging technologies also include technologies developed by our competitors.
Our currently issued patents expire at various times through December 2046. Some of our patents relating to DD technologies have expired, and others will expire over the next several years.
Our currently issued patents expire at various times through September 2045. Some of our patents relating to DD technologies have expired, and others will expire over the next several years.
Fiscal Year Ended Revenue September 30, 2022 September 24, 2021 September 25, 2020 Licensing 93% 95% 93% Products and services 7% 5% 7% Total 100% 100% 100% We generate revenue from licensing arrangements with approximately 500 electronics product OEM and software developer licensees.
Fiscal Year Ended Revenue September 29, 2023 September 30, 2022 September 24, 2021 Licensing 92% 93% 95% Products and services 8% 7% 5% Total 100% 100% 100% We generate revenue from licensing arrangements with approximately 500 electronics product OEM and software developer licensees.
HUMAN CAPITAL At Dolby, we strive to act as a good partner to our customers, employees, shareholders, and communities. We are committed to fostering a workplace environment in which every employee can contribute their fullest potential, based on their individual experiences and perspectives, to our common efforts and make a positive impact through their roles.
HUMAN CAPITAL At Dolby, we strive to act as a good partner to our customers, employees, shareholders, and communities. We are committed to fostering a workplace environment in which every employee can contribute their fullest potential and make a positive impact through their roles.
As of September 30, 2022, we had 2,336 employees worldwide, of whom 1,102 employees were based outside of the U.S. None of our employees are subject to a collective bargaining agreement. Employee Well-being Our workforce strategies prioritize employee well-being and take an integrated approach to mental, physical, and financial well-being for our employees.
As of September 29, 2023, we had 2,246 employees worldwide, of whom 1,060 employees were based outside of the U.S. None of our employees are subject to a collective bargaining agreement. Employee Well-being Our workforce strategies prioritize employee well-being and take an integrated approach to mental, physical, and financial well-being for our employees.
INTELLECTUAL PROPERTY We have a substantial base of IP assets, including patents, trademarks, copyrights, and trade secrets developed based on our technical expertise. 6 Table of Contents As of September 30, 2022, we had approximately 16,900 issued patents and approximately 4,100 pending patent applications in more than 100 jurisdictions throughout the world.
INTELLECTUAL PROPERTY We have a substantial base of IP assets, including patents, trademarks, copyrights, and trade secrets developed based on our technical expertise. 6 Table of Contents As of September 29, 2023, we had approximately 19,300 issued patents and approximately 1,900 pending patent applications in more than 100 jurisdictions throughout the world.
Each of these technologies can support many offerings, and we anticipate bringing new innovations to market in the future. PRODUCT MANUFACTURING Our product quality is enabled through the use of well-established, and in some cases, highly automated, assembly processes along with rigorous testing of our products.
Each of these technologies can support many offerings, and we anticipate bringing new innovations to market in the future. PRODUCT MANUFACTURING Our product quality is enabled through the use of well-established, and in some cases, highly automated, assembly processes along with rigorous testing of our products. We rely primarily upon contract manufacturers for the majority of our production capacity.
While in the past we derived a significant portion of our licensing revenue from our DD technologies, this is no longer the case as revenue attributed to DD technologies has declined and is expected to continue to decline. The primary products where DD is widely used include DVD players (but not Blu-ray players), TVs, and STBs.
While in the past we derived a significant portion of our licensing revenue from our DD technologies, this is no longer the case as revenue attributed to DD technologies has declined and is expected to continue to decline. The primary products where DD is widely used include automotive, TVs, and soundbars.
Accordingly, we have taken steps in the past to enforce our IP rights and expect to continue doing so in the future. Moreover, in certain countries, we have relatively few or no issued patents. For example, in China, Taiwan, and India, we have only limited patent protection for our Dolby technologies.
Accordingly, we have taken steps in the past to enforce our IP rights and expect to continue doing so in the future. Moreover, in certain countries, we have relatively few or no issued patents. For example, in some African and Central and South American countries, we have only limited patent protection for our technologies.
Key products from which we generate products revenue are summarized in the table below: Product Description Cinema Cinema Imaging Products Digital Cinema Servers used to load, store, decrypt, decode, watermark, and playback digital film files for presentation on digital cinema projectors and software used to encrypt, encode, and package digital media files for distribution Cinema Audio Products Cinema Processors, amplifiers, and loudspeakers used to decode, render, and optimally playback digital cinema soundtracks, including those using Dolby Atmos Other Other Products 3-D glasses and kits, broadcast hardware and software used to encode, transmit, and decode multiple channels of high-quality audio for DTV and HDTV distribution, monitors, accessibility solutions for hearing and visually impaired consumers, and Dolby.io Services We offer a developer platform, Dolby.io, that enables developers access to our technologies through APIs.
Key products from which we generate products revenue are summarized in the table below: Product Description Cinema Cinema Imaging Products Digital Cinema Servers used to load, store, decrypt, decode, watermark, and playback digital film files for presentation on digital cinema projectors and software used to encrypt, encode, and package digital media files for distribution Cinema Audio Products Cinema Processors, amplifiers, and loudspeakers used to decode, render, and optimally play back digital cinema soundtracks, including those using Dolby Atmos Other Other Products 3-D glasses and kits, broadcast hardware and software used to encode, transmit, and decode multiple channels of high-quality audio for DTV and HDTV distribution, monitors, and accessibility solutions for hearing and visually impaired consumers Services We offer solutions to companies building real-time digital experiences that increase audience engagement.
The following table presents the composition of revenue from our licensing business for all periods presented: Fiscal Year Ended Market September 30, 2022 September 24, 2021 September 25, 2020 Main Offerings Incorporating Our Technologies Broadcast 37% 39% 41% Televisions and STBs Mobile 21% 22% 21% Smartphones and Tablets CE 16% 15% 14% DMAs, Blu-ray Disc devices, AVRs, Soundbars, and DVDs PC 13% 12% 12% Windows and macOS operating systems Other 13% 12% 12% Gaming consoles, Auto DVD, and Dolby Cinema Total 100% 100% 100% We have various licensing models: a two-tier model, an integrated licensing model, a patent licensing model, recoveries, and collaboration arrangements.
The following table presents the composition of revenue from our licensing business for all periods presented: Fiscal Year Ended Market September 29, 2023 September 30, 2022 September 24, 2021 Main Components of Each Category Broadcast 38% 37% 39% Televisions and STBs Mobile 20% 21% 22% Smartphones and Tablets CE 14% 16% 15% DMAs, Blu-ray Disc devices, AVRs, Soundbars, and DVDs PC 10% 13% 12% Windows and macOS operating systems and devices Other 18% 13% 12% Dolby Cinema, Gaming consoles, Automotive, and Patent pool administrative services Total 100% 100% 100% We have various licensing models: a two-tier model, an integrated licensing model, a patent licensing model, recoveries, and collaboration arrangements.
We apply our understanding of the human senses, audio, and imaging engineering to develop technologies aimed at improving how people experience and interact with their entertainment and communications content. Providing Creative Solutions.
OUR STRATEGY Key elements of our strategy include: Advancing the Science of Sight and Sound. We apply our understanding of the human senses, audio, and imaging engineering to develop technologies aimed at improving how people experience and interact with their entertainment content. Providing Creative Solutions.
We look at DIB comprehensively through hiring, retention, progression, and employee experiences. We empower everyone at Dolby to be co-creators of change by offering employees opportunities to learn and grow through educational sessions, hands-on workshops, employee-led Employee Network ("EN") events, and company-led DIB programs.
We empower everyone at Dolby to be co-creators of change by offering employees opportunities to learn and grow through educational sessions, hands-on workshops, and employee-led Employee Network ("EN") events.
Consequently, we may realize less revenue from those regions in the future. Maintaining or growing our licensing revenue in developing countries such as China, Taiwan, and India will depend in part on our ability to obtain patent rights in these countries, which is uncertain.
Consequently, we may realize less revenue from those regions in the future. Maintaining or growing our licensing revenue in developing countries will depend in part on whether we obtain patent rights in those countries, which is uncertain.
We also partner with educational organizations in our local communities around the world, including Bay Area Video Coalition, Girls Who Code, Greene Scholars, IGNITE Worldwide, Inneract Project, Resource Area For Teaching, University of Sydney’s Women in Engineering Program, and Fundacja Rodziny Maciejko in Poland to organize volunteer opportunities.
We partner with organizations in our local communities around the world, including the Arts, Media and Entertainment Institute, Bay Area Video Coalition, Girls Make Beats, Girls Who Code, IGNITE Worldwide, Inneract Project, University of Sydney’s Women in Engineering Program, and Fundacja Rodziny Maciejko in Poland to organize employee volunteer opportunities.
COMPETITION The entertainment and communications industries are highly competitive, and we face aggressive competition in all areas of our business. Some of our current and future competitors may have significantly greater financial, technical, marketing, and other resources than we do, or may have more experience or advantages in the markets in which they compete.
Some of our current and future competitors may have significantly greater financial, technical, marketing, and other resources than we do, or may have more experience or advantages in the markets in which they compete.
In addition, we offer various services to support theatrical and television production for cinema exhibition, broadcast, and home entertainment, including equipment training and maintenance, mixing room alignment, equalization, as well as audio, color, and light image calibration.
Over time, we expect to significantly expand the amount and types of content that can be enhanced through our technologies and capabilities. In addition, we offer various services to support theatrical and television production for cinema exhibition, broadcast, and home entertainment, including equipment training and maintenance, mixing room alignment, equalization, as well as audio, color, and light image calibration.
We have programs and practices in place to support creating an environment where individual experiences and perspectives are welcome and where everyone can belong and thrive. This includes equipping our leaders, colleagues, and peers with tools to have open and authentic conversations with the goal of becoming more aware and more empathetic to others’ experiences.
We have programs and practices in place to support creating an environment where individual experiences and perspectives are welcome and where everyone can belong and thrive. This includes equipping our leaders, colleagues, and peers with tools to have open and authentic conversations. We look at diversity, inclusion and belonging comprehensively through hiring, retention, progression, and employee experiences.
We also derive revenue from licensing our consumer imaging technologies, as well as audio and imaging technologies for premium cinema offerings in collaboration with exhibitors. In addition, we provide products and services for a variety of applications in the cinema and broadcast markets, and offer audio and video APIs through our developer platform, Dolby.io.
We also derive revenue from licensing our consumer imaging technologies, as well as audio and imaging technologies for premium cinema offerings in collaboration with exhibitors. In addition to our licensing business, we provide products and services for a variety of applications in the cinema and broadcast markets, and offer solutions to companies building real-time digital experiences that increase audience engagement.
Our technologies and solutions optimize playback and communications so that users may enjoy richer, clearer, and more immersive sound and sight experiences. Expanding the Reach of our Technologies .
Our technologies and solutions optimize playback so that users may enjoy richer, clearer, and more immersive sound and sight experiences. Expanding the Reach of our Technologies . We look for new and innovative ways to expand the reach of our technologies to new content, media, devices and audiences.
SALES AND MARKETING Our marketing efforts focus on demonstrating how our solutions improve entertainment and communications experiences. We sell our solutions primarily using an internal sales organization to various customers in the markets where we operate.
We sell our solutions primarily using an internal sales organization to various customers in the markets where we operate.
Licensing revenue recognized in any given period may include revenue from licensees and/or settlements with third parties where the use of our technology occurred in previous periods.
See Note 15 " Business Combinations " to our consolidated financial statements for a description of the recent business combination involving Via LA. Recoveries. Licensing revenue recognized in any given period may include revenue from licensees and/or settlements with third parties where the use of our technology occurred in previous periods.
We have expanded our mental well-being programs to include therapy and access to wellness coaching, mindfulness training and live community sessions. As the communities we operate in adopt COVID-19 measures, we continue to implement business strategies that support the health and safety of our employees and enable business continuity.
We have expanded our well-being programs to include therapy and access to wellness coaching, mindfulness training and live community sessions. 9 Table of Contents We continue to implement business strategies that support the health and safety of our employees and enable business continuity. We have implemented a flex work program that enables employee connection and effective work delivery globally.
CUSTOMERS We license our technologies to a broad set of customers that operate in a wide range of industries, and we sell our professional products either directly to the end user or, more commonly, through dealers and distributors. Users of our professional products and services include film studios, content creators, post-production facilities, cinema operators, broadcasters, and video game designers.
We maintain more than 20 sales offices in key regions around the globe. CUSTOMERS We license our technologies to a broad set of customers that operate in a wide range of industries, and we sell our professional products either directly to the end user or, more commonly, through dealers and distributors.
HEVC A digital video codec with high bandwidth efficiency to support ultra-high definition experiences for a wide range of media devices.
Dolby Vision An imaging technology combining high dynamic range and dynamic metadata to deliver ultra vivid colors, sharper contrasts, and richer details for cinema and a wide range of media devices. HEVC A digital video codec with high bandwidth efficiency to support ultra-high definition experiences for a wide range of media devices.
Although we have some manufacturing facilities, we rely primarily upon contract manufacturers for the majority of our production capacity. We purchase components and fabricated parts from multiple suppliers; however, we rely on sole source suppliers for certain components used to manufacture our products. We source components and fabricated parts both domestically and internationally.
We purchase components and fabricated parts from multiple suppliers; however, we rely on sole source suppliers for certain components used to manufacture our products. We source components and fabricated parts both domestically and internationally. SALES AND MARKETING Our marketing efforts focus on demonstrating how our solutions improve entertainment experiences.
To invest in the talent of the future, we provide financial contributions, employee engagement, and in-kind support of science, technology, engineering, arts, and mathematics education and workforce initiatives at the K-12, university, and early-career levels and are engaged in strategic partnerships with universities to help develop the next generation of diverse talent at Dolby.
Our approach comprises investing in the next generation of talent, cultivating a culture of inclusion, and belonging and advancing and retaining our employees. To invest in the talent of the future, we provide financial contributions, employee engagement, and support of science, technology, engineering, arts, and mathematics education and partnerships at K-12 schools and universities.
The Via patent pools enable product manufacturers to efficiently and transparently secure patent licenses for collaboratively developed technologies. We offer our patents related to AAC, HE-AAC, Extended HE-AAC, AVC, HEVC, and other IP through a combination of patent pools and licensing directly to OEMs. Recoveries.
We offer our patents related to AAC, HE-AAC, Extended HE-AAC, AVC, HEVC, VVC and other standardized technologies through a combination of patent pools and licensing directly to OEMs. Finally, Via LA (as defined below) generates fees for administering patent pools on behalf of third party patent owners.
In addition, we hold the naming rights to the Dolby Theatre, home to the Academy Awards® in Hollywood, California, where we showcase our technology and host high-profile events. We maintain more than 20 sales offices in key regions around the globe.
In addition, we hold the naming rights to the Dolby Theatre, home to the Academy Awards® in Hollywood, California, where we showcase our technology and host high-profile events. We also hold the naming rights to Dolby Live at the Park MGM in Las Vegas, Nevada. Dolby Live is a fully integrated performance venue offering live concerts in Dolby Atmos.
We have implemented a flex work program that enables employee connection and effective work delivery in a hybrid work environment. In a company-wide survey in May 2022, Motivation & Commitment scores indicate that we remain highly connected to our work and each other.
In a company-wide survey in May 2023, Motivation & Commitment scores indicate that we remain highly connected to our work and each other. Diversity, Inclusion and Belonging ("DIB") To spark positive change, bolster employee resiliency, and strengthen our community, DIB is embedded across company programs.
Refer to Note 2 " Summary of Significant Accounting Policies " and Note 3 " Revenue Recognition " for further detail.
Everyone experiencing the action at the same time enables ways to interact with the content. REVENUE GENERATION The following table presents a summary of the composition of our revenue for all periods presented. Refer to Note 2 " Summary of Significant Accounting Policies " and Note 3 " Revenue Recognition " for further detail.
Finally, we generate service fees for managing patent pools on behalf of third party patent owners through our wholly-owned subsidiary, Via Licensing Corporation ("Via"). By aggregating and offering pooled IP, patent pools deliver efficiencies that reduce transactional costs for both IP owners and licensees.
By aggregating and offering pooled patents, these arrangements deliver efficiencies that reduce transactional costs for both IP owners and licensees. Patent pools enable product manufacturers to efficiently and transparently secure patent licenses for collaboratively developed technologies.
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COVID-19 Please refer to the Executive Summary section of Part II, Item 7 " Management's Discussion and Analysis of Financial Condition and Results of Operations " for information concerning the continuing effect of COVID-19 on our business. OUR STRATEGY Key elements of our strategy include: Advancing the Science of Sight and Sound.
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For example, we are expanding our addressable market to enhance a broader range of content, by offering solutions to companies building real-time digital experiences that increase audience engagement. Our solution provides the capability to stream high quality audiovisual content in ultra-low latency which reduces the delay between the action and the viewer.
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With the launch of our developer platform, Dolby.io, we are expanding our addressable market to enhance a broader range of content, by enabling developers to build high quality, interactive, and media centric applications. REVENUE GENERATION The following table presents a summary of the composition of our revenue for all periods presented.
Added
In Europe, AC-4 has been mandated in next generation broadcast specifications for Denmark, Finland, Iceland, Ireland, Italy, Norway, Poland and Sweden, and is also included in the specification for the new UHD terrestrial TV platform issued by regulator ARCOM in France. In North America, AC-4 is mandated for TVs for the NextGen TV over-the-air broadcast platform, based on ATSC3.0.
Removed
Dolby Vision® An imaging technology combining high dynamic range and dynamic metadata to deliver ultra vivid colors, sharper contrasts, and richer details for cinema and a wide range of media devices. Dolby Voice® An audio communications technology with superior spatial perception, voice clarity, and background noise reduction that emulates the in-person meeting experience.
Added
In addition, Dolby technologies have become, or are included in, de facto industry standards in many consumer entertainment products.
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These offerings currently include audio and video APIs for building high-quality communications, media, and streaming solutions. Over time, we expect to significantly expand the amount and types of content that can be enhanced through our technologies and capabilities.
Added
We also license our technologies and IP indirectly through patent pools, where owners of IP covering technology standards aggregate their patents and offer the pooled patents to implementers through patent pool licensing administrators who are responsible for the sales and marketing of the pooled patents .
Removed
AC-4 has also been adopted or proposed in forthcoming regional and country standards in North America, Europe, and Latin America. The transition for AC-4 continues to gain momentum, and is already being supported in a number of TVs that are available worldwide from major manufacturers.
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Users of 8 Table of Contents our professional products and services include film studios, content creators, post-production facilities, cinema operators, broadcasters, and video game designers. COMPETITION The entertainment industry are highly competitive, and we face aggressive competition in all areas of our business.
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Diversity, Inclusion and Belonging ("DIB") 9 Table of Contents We are committed to being a part of creating a more equitable world. Different backgrounds, perspectives, and beliefs bring critical value to our business, and we’re driven by the knowledge that diverse talent enhances our ability to imagine, innovate, and grow.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeWe are subject to a number of risks related to conducting business internationally, including: • U.S. and foreign government trade restrictions or sanctions, including those which may impose restrictions on the importation or exportation of products, equipment, materials, software, technologies, services, on technology transfers, or on the receipt or collection of payments and distribution of royalties, and any political or economic responses or counter-responses to such restrictions or sanctions, including any such restrictions, sanctions, responses, or counter-responses related to the military conflict between Russia and Ukraine or changes in US export controls related to China and other countries; • Changes in trade relationships, including new tariffs, trade protection measures, import or export licensing requirements, trade embargoes and other trade barriers imposed by the U.S. or by other countries; • Compliance with applicable international laws and regulations, including antitrust and other competition laws, that may change unexpectedly, differ, or conflict with laws in other countries where we conduct business, or are otherwise not harmonized with one another; • Foreign government taxes, regulations, and permit requirements, including foreign taxes that we may not 22 Table of Contents be able to offset against taxes imposed upon us in the U.S., and other laws limiting our ability to repatriate funds to the U.S.; • Potential adverse changes in the political, social, and/or economic stability of or conflicts within the regions in which we operate (including Europe, Russia, Asia, the Middle East, North Africa, Latin America and other emerging markets) or in diplomatic relations between governments; • Difficulty in establishing, staffing, and managing foreign operations, including but not limited to restrictions on the ability to obtain or retain licenses required for operation, relationships with local labor unions and works councils, investment restrictions and/or requirements, and restrictions on foreign ownership of subsidiaries; • Adverse fluctuations in foreign currency exchange rates and interest rates, including risks related to any interest rate swap or other hedging activities we undertake; • Poor recognition of IP rights; • Difficulties in enforcing contractual rights; • Multi-jurisdictional data protection and privacy laws, including the European Union's General Data Protection Regulation and restrictions on transferring personally identifiable information outside of a jurisdiction; • The global macroeconomic environment and potential slowing of key markets we serve; and • Changes in the regulatory and compliance landscape resulting from COVID-19.
Biggest changeWe are subject to a number of risks related to conducting business internationally, including: • U.S. and foreign government trade restrictions or sanctions, including those which may impose restrictions on the importation or exportation of products, equipment, materials, software, technologies, services, on technology transfers, or on the receipt or collection of payments and distribution of royalties, and any political or economic responses or counter-responses to such restrictions or sanctions, including any such restrictions, sanctions, responses, or counter-responses related to global military conflicts or changes in US export controls related to China and other countries; • Changes in trade relationships, including new tariffs, trade protection measures, import or export licensing requirements, trade embargoes and other trade barriers imposed by the U.S. or by other countries; • Compliance with applicable international laws and regulations, including antitrust and other competition laws and laws and regulations that relate to environmental, social, and governance matters, that may change unexpectedly, differ, or conflict with laws in other countries where we conduct business, or are otherwise not harmonized with one another; • Foreign government taxes, regulations, and permit requirements, including foreign taxes that we may not be able to offset against taxes imposed upon us in the U.S., and other laws limiting our ability to repatriate funds to the U.S.; 22 Table of Contents • Potential adverse changes in the political, social, and/or economic stability of or conflicts within the regions in which we operate (including Europe, Russia, Asia, the Middle East, North Africa, Latin America and other emerging markets) or in diplomatic relations between governments; • Difficulty in establishing, staffing, and managing foreign operations, including but not limited to restrictions on the ability to obtain or retain licenses required for operation, relationships with local labor unions and works councils, investment restrictions and/or requirements, and restrictions on foreign ownership of subsidiaries; • Adverse fluctuations in foreign currency exchange rates and interest rates, including risks related to any interest rate swap or other hedging activities we undertake; • Poor recognition and enforcement of IP rights; • Difficulties in enforcing contractual rights; • Multi-jurisdictional data protection and privacy laws, including, for example, the European Union's General Data Protection Regulation and restrictions on transferring personal data outside of a jurisdiction and potential legislation such as the Artificial Intelligence Act under consideration in the EU potentially impacting our development of products incorporating AI/ML or the use of AI/ML tools in our business; and • The global macroeconomic environment and potential slowing of key markets we serve.
Although we generally have agreements with these licensees or customers, these agreements typically do not require any minimum purchases or minimum royalty fees and do not prohibit licensees from using competing technologies or customers from purchasing products and services from competitors. Customer demand for our technologies and products can shift quickly as many of our markets are rapidly evolving.
Although we generally have agreements with these licensees and other customers, these agreements typically do not require any minimum purchases or minimum royalty fees and do not prohibit licensees from using competing technologies or customers from purchasing products and services from competitors. Customer demand for our technologies and products can shift quickly as many of our markets are rapidly evolving.
Further, although we have invested a substantial amount of time and resources developing Dolby Cinema, and expect to continue to invest and build partnerships in connection with the launch of Dolby Cinema locations, we may not continue to recognize a meaningful amount of revenue from these efforts in the near future.
Although we have invested a substantial amount of time and resources developing Dolby Cinema, and expect to continue to invest and build partnerships in connection with the launch of Dolby Cinema locations, we may not continue to recognize a meaningful amount of revenue from these efforts in the near future.
The revenue we receive from Dolby Cinema exhibitors are based on a portion of box-office receipts from the installed theaters, and the timing of such theater installations is dependent upon a number of factors beyond our control.
The revenue we receive from Dolby Cinema exhibitors is based on a portion of box-office receipts from the installed theaters, and the timing of such theater installations is dependent upon a number of factors beyond our control.
Our licensing revenue from system licensees depends in large part upon the availability of ICs that implement our technologies. IC manufacturers incorporate our technologies into these ICs, which are then incorporated in consumer entertainment products.
Our licensing revenue from OEM system licensees depends in large part upon the availability of ICs that implement our technologies. IC manufacturers incorporate our technologies into these ICs, which are then incorporated in consumer entertainment products.
Our inability to obtain timely delivery of key components of acceptable quality, any significant increases in the prices of components, or the redesign of our products could result in production delays, increased costs, and reductions in shipments of our products. Product Quality .
Our inability to obtain timely delivery of key components of acceptable quality, any significant increases in the prices of components, or the redesign of our products could result in production delays, increased costs, and reductions in shipments of our products.
In order for our compensation packages to be viewed as competitive, prospective employees must perceive our equity awards to be a valuable benefit. 26 Table of Contents
In order for our 26 Table of Contents compensation packages to be viewed as competitive, prospective employees must perceive our equity awards to be a valuable benefit. 27 Table of Contents
A portion of our opportunity lies in the China market, which is subject to unique economic and geopolitical risks. Furthermore, future growth of our cinema products business also depends upon new theater construction and entering into an equipment replacement cycle whereby previously purchased cinema products are upgraded or replaced.
Also, a portion of our opportunity lies in the China market, which is subject to unique economic and geopolitical risks. Furthermore, future growth of our cinema products offerings also depends upon new theater construction and entering into an equipment replacement cycle whereby previously purchased cinema products are upgraded or replaced.
Upon receipt of 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. This may cause volatility in our quarterly figures because of the estimation process and the corresponding true-up adjustments, which we disclose. Royalties We Owe Others .
Upon receipt of 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. This may cause volatility in our quarterly figures because of the estimation process and the corresponding true-up adjustments, which we disclose.
Because we do not carry earthquake insurance for earthquake–related losses and significant recovery time could be required to resume operations, our financial condition and operating results could be materially adversely affected in the event of a major earthquake or catastrophic event. Competition for Employees .
Because we do not carry earthquake insurance for earthquake–related losses and significant recovery time could be required to resume operations, our financial condition and operating results could be materially adversely affected in the event of a major earthquake or catastrophic event. We face intense competition for employees .
If our large shareholders, officers, directors or employees sell, or indicate an intention to sell, substantial amounts of our Class A common stock in the public market, including shares of Class A common stock issuable upon conversion of shares of Class B common stock, the trading price of our Class A common stock could decline. Stock Repurchase Program .
If our large shareholders, officers, directors or employees sell, or indicate an intention to sell, substantial amounts of our Class A common stock in the public market, including shares of Class A common stock issuable upon conversion of shares of Class B common stock, the trading price of our Class A common stock could decline.
A small number of our licensees or customers may represent a significant percentage of our licensing, products, or services revenue.
A small number of our licensees or other customers may represent a significant percentage of our licensing, products, or services revenue.
We could incur costs, fines, and civil or criminal sanctions, third party property damage or personal injury claims, or could be required to incur substantial investigation or remediation costs, if we were to violate or become liable under environmental laws. Conflict Minerals .
We could incur costs, fines, and civil or criminal sanctions, third party property damage or personal injury claims, or could be required to incur substantial investigation or remediation costs, if we were to violate or become liable under environmental laws.
Weakness in general economic conditions due to inflation, rising interest rates, lower consumer confidence, a potential recession, pandemic or other worsening economic conditions, may suppress consumer demand in our markets and consumers going to the movies.
Weakness in general economic conditions due to inflation, heightened interest rates, lower consumer confidence, a potential recession, pandemic or other worsening economic conditions, may suppress consumer demand in our markets and consumers going to the movies.
Our efforts to detect and investigate such attempts and incidents and to prevent their recurrence where practicable through changes to our internal processes and tools, but in some cases preventive and remedial action might not be successful.
We make efforts to detect and investigate such attempts and incidents and to prevent their recurrence where practicable through changes to our internal processes and tools, but in some cases preventive and remedial action might not be successful.
In 23 Table of Contents circumstances where sources of conflict minerals from the Democratic Republic of the Congo or surrounding countries are not validated as conflict free, we may take actions to change materials, designs or manufacturers to reduce the possibility that our contracts to manufacture products that contain conflict minerals finance or benefit local armed groups in the region.
In circumstances where sources of conflict minerals from the Democratic Republic of the Congo or surrounding countries are not validated as conflict free, we may take actions to change materials, designs or manufacturers to reduce the possibility that our contracts to manufacture products that contain conflict minerals finance or benefit local armed groups in the region.
Industry relationships have historically played an important role in the markets that we serve, particularly in the 21 Table of Contents entertainment market. For example, sales of our products and services are particularly dependent upon our relationships with major film studios and broadcasters, and licensing of our technologies is particularly dependent upon our relationships with system licensees and IC manufacturers.
Industry relationships have historically played an important role in the markets that we serve, particularly in the entertainment market. For example, sales of our products and services are particularly dependent upon our relationships with major film studios and broadcasters, and licensing of our technologies is particularly dependent upon our relationships with system licensees and IC manufacturers.
Inaccurate Licensee Royalty Reporting . We generate licensing revenue primarily from OEMs who license our technologies and incorporate those technologies into their products. Our license agreements generally obligate our licensees to pay us a specified royalty for every product they ship that incorporates our technologies, and we rely on our licensees to report their shipments accurately.
We generate licensing revenue primarily from OEMs who license our technologies and incorporate those technologies into their products. Our license agreements generally obligate our licensees to pay us a specified royalty for every product they ship that incorporates our technologies, and we rely on our licensees to report their shipments accurately.
In the past, licensees have understated or failed to report the number of products incorporating our technologies that they shipped, and we have not been able to collect and recognize revenue to which we were entitled. We expect that we will continue to experience understatement and non-reporting of royalties by our licensees.
In the past, licensees have understated or failed to report the number of products incorporating our technologies that they shipped, and we have not been able to collect and recognize revenue to which we were 15 Table of Contents entitled. We expect that we will continue to experience understatement and non-reporting of royalties by our licensees.
The markets for our technologies and products are defined by: • Rapid technological change; • New and improved technology and frequent product introductions; • Changing consumer and licensee demands; • Evolving industry standards; and • Technology and product obsolescence.
The markets for our technologies and products are influenced by: • Rapid technological change; • New and improved technology and frequent product introductions; • Changing consumer and licensee demands; • Evolving industry standards; and • Technology and product obsolescence.
Royalty Reporting Our operating results fluctuate based on the risks set forth in this section, as well as, among other factors, on: • Royalty reports including positive or negative corrective adjustments; • Retroactive royalties that cover extended periods of time; and • Timing of revenue recognition under licensing agreements and other contractual arrangements, including 15 Table of Contents recognition of unusually large amounts of revenue in any given quarter.
Our operating results fluctuate based on the risks set forth in this section, as well as, among other factors, on: • Royalty reports including positive or negative corrective adjustments; • Retroactive royalties that cover extended periods of time; and • Timing of revenue recognition under licensing agreements and other contractual arrangements, including recognition of unusually large amounts of revenue in any given quarter.
Although we maintain crisis management plans, our business operations are subject to interruption by natural disasters and catastrophic events beyond our control, including, but not limited to, earthquakes, hurricanes, typhoons, tropical storms, floods, tsunamis, 25 Table of Contents fires, droughts, tornadoes, public health issues and pandemics, severe changes in climate, war, terrorism, and geopolitical unrest and uncertainties.
Although we maintain crisis management plans, our business operations are subject to interruption by natural disasters and catastrophic events beyond our control, including, but not limited to, earthquakes, hurricanes, typhoons, tropical storms, floods, tsunamis, fires, droughts, tornadoes, public health issues and pandemics, severe changes in climate, war, terrorism, and geopolitical unrest and uncertainties.
In order to be successful in these markets, we will need to cultivate new industry relationships and strengthen existing relationships to bring our products, services, and technologies to market. Our limited experience in this or other new markets could limit our ability to successfully execute on our growth strategy.
In order to be successful in these markets, we will need to cultivate new industry relationships and strengthen existing relationships to bring our products, services, and technologies to market. Our limited experience in new markets could limit our ability to successfully execute on our growth strategy.
For instance, to broaden adoption of Dolby Vision and Dolby Atmos, we will need to continue to expand the array of products and consumer devices that incorporate Dolby Atmos and Dolby Vision, expand the pipeline of Dolby Atmos and Dolby Vision content available from content creators, and encourage consumer adoption in the face of competing products and technologies.
For instance, to broaden adoption of Dolby Vision and Dolby Atmos, we will need to continue to expand the 16 Table of Contents array of products and consumer devices that incorporate Dolby Atmos and Dolby Vision, expand the pipeline of Dolby Atmos and Dolby Vision content available from content creators, and encourage consumer adoption in the face of competing products and technologies.
Foreign acquisitions involve unique risks in addition to those mentioned above, including those related to integration of operations across different geographies, cultures, and languages; currency risks; and risks associated with the economic, political, and regulatory environment in specific countries, including delays related to COVID-19.
Foreign acquisitions involve unique risks in addition to those mentioned above, including those related to integration of operations across different geographies, cultures, and languages; currency risks; and risks associated with the economic, political, and regulatory environment in specific countries.
For example, we have R&D facilities and a large number of employees in Eastern Europe, and any business interruptions or other spillover effects from such conflict could adversely impact our business. Additionally, several of our offices, including our corporate headquarters in San Francisco, are located in seismically active regions.
For example, we have R&D facilities and a large number of employees in Eastern Europe, and any business interruptions or other spillover effects from the Russia-Ukraine conflict could adversely impact our business. Additionally, several of our offices, including our corporate headquarters in San Francisco, are located in seismically active regions.
Even when a standards-setting organization incorporates our technologies in an industry standard for a particular market or geographic region, our technologies may not be the sole technologies adopted for that market. Furthermore, different standards may be adopted for different markets and regions.
Even when a standards-setting organization incorporates our technologies in an industry standard for a particular market or geographic region, our technologies may not be the sole technologies adopted for that market. Furthermore, different standards may be adopted within a single market or region, and across different markets and regions.
While in the past, we derived a significant portion of our licensing revenue from our DD technologies, this is no longer the case as revenue attributed to DD technologies have declined and are expected to continue to decline.
While in the past, we derived a significant portion of our licensing revenue from our DD technologies, this is no longer the case as revenue attributed to DD technologies has declined and is expected to continue to decline.
Additionally, we have collaborations with multiple exhibitors in foreign markets, including Asia, Europe, and the Middle East, and we may face a number of risks in expanding Dolby Cinema in these and other new international markets.
Additionally, we collaborate with multiple exhibitors in foreign markets, including Asia, Europe, and the Middle East, and we may face a number of risks in expanding Dolby Cinema in these and other new international markets.
In general, our agreements with our licensees require them to pay us a full royalty with respect to a particular 17 Table of Contents technology only until there are no patents or, in some cases, no patent applications covering that technology in countries where applicable products are made and sold.
In general, our agreements with our licensees require them to pay us a full royalty with respect to a particular technology only until there are no patents or, in some cases, no patent applications covering that technology in countries where applicable products are made and sold.
In addition, because techniques used by malicious actors (many of whom are highly sophisticated and well-funded) to access or sabotage networks and computer systems change frequently and often are not recognized until after they are used, we may be unable to anticipate or immediately detect these techniques.
Since techniques used by malicious actors (many of whom are highly sophisticated and well-funded) to access or sabotage networks and computer systems change frequently and often are not recognized until after they are used, we may be unable to anticipate or immediately detect these techniques.
Our commercial and cybersecurity insurance policies may be insufficient to insure us against these risks, and future escalations in premiums and deductibles under these policies may render them uneconomical. 20 Table of Contents COMPETITION The markets for our technologies are highly competitive, and we face competitive threats and pricing pressure in our markets.
Our commercial and cybersecurity insurance policies may be insufficient to insure us against these risks, and future escalations in premiums and deductibles under these policies may render them uneconomical. COMPETITION The markets for our technologies are highly competitive . The markets for our technologies are highly competitive, and we face competitive threats and pricing pressure in our markets.
Incorporation of Dolby Formats into New Products and Availability of Content in Dolby Formats . The success of many of our newer initiatives, such as Dolby Atmos, Dolby Vision, and Dolby Cinema, is dependent upon the availability and success of (i) products that incorporate Dolby formats and (ii) content produced in Dolby formats.
The success of many of our newer initiatives, such as Dolby Atmos, Dolby Vision, and Dolby Cinema, is dependent upon the availability and success of (i) products that incorporate Dolby formats and (ii) content produced in Dolby formats.
Similarly, the success of Dolby Cinema is dependent upon our ability to partner with movie theater exhibitors to launch new Dolby Cinema sites and deploy new sites in accordance with plans, as well as the continued release and box-office success of new films in the Dolby Vision and Dolby Atmos formats released through Dolby Cinemas.
Similarly, the success of Dolby Cinema is dependent on our ability to partner with movie theater exhibitors to launch new Dolby Cinema sites and to deploy new sites in accordance with plans, and on the continued release and box-office success of new films in the Dolby Vision and Dolby Atmos formats released through Dolby Cinemas.
Important factors that could cause us to discontinue or decrease our share repurchases include, among others, unfavorable market conditions, the market price of our Class A common stock, the nature of other investment or strategic opportunities presented to us, the rate of dilution of our equity compensation programs, our ability to make appropriate, timely, and beneficial decisions as to when, how, and whether to purchase shares under the stock repurchase program, the tax consequences of any repurchases, and the availability of funds necessary to continue purchasing stock.
Important factors that could cause us to discontinue or decrease our share repurchases include, among others, unfavorable market conditions, the market price of our Class A common stock, the nature of other investment or strategic opportunities presented to us, the rate of dilution of our equity compensation programs, our ability to make appropriate, timely, and beneficial decisions as to when, how, and whether to purchase shares under the stock repurchase program, the tax consequences of any repurchases (including the potential impact of the 1% excise tax on certain stock repurchases), and the availability of funds necessary to continue purchasing stock.
If we curtail our repurchase program, our stock price may be negatively affected. Dividend Program . We cannot provide assurance that we will continue to increase dividend payments and/or pay dividends. We are not obligated to pay dividends on our Class A and Class B common stock.
If we curtail our repurchase program, our stock price may be negatively affected. There are risks associated with our dividend program . We cannot provide assurance that we will continue to increase dividend payments and/or pay dividends. We are not obligated to pay dividends on our Class A and Class B common stock.
In order to attract and retain employees, we must provide a competitive compensation package, including cash and equity compensation. Our equity awards include stock options and RSUs. The future value of these awards is uncertain, and depends on our stock price performance over time.
In order to attract and retain employees, we must provide competitive compensation packages, including cash and equity compensation. Our equity awards include stock options, RSUs and performance-based RSUs. The future value of these awards is uncertain and depends on our stock price performance over time.
Our results of operations could be significantly affected to the extent that actual revenue differ significantly from estimated revenue, or that we are required to accelerate recognition of revenue under certain arrangements, potentially causing the amount of revenue we recognize to vary materially from quarter to quarter.
Our results of operations could be impacted to the extent that actual revenue differs significantly from estimated revenue, or that we are required to accelerate recognition of revenue under certain arrangements, potentially causing the amount of revenue we recognize to vary materially from quarter to quarter.
Any such breach or other incident can result in the information stored on our networks and systems, or our vendors' networks and systems, being improperly accessed or acquired, publicly disclosed, lost, or stolen, which could subject us to liability to our customers, suppliers, business partners and others, as well as regulatory investigations, fines or penalties, and brand and reputational damage.
Any such breach or other incident can result in the information stored on our networks and systems, or our vendors' networks and systems, being improperly accessed or acquired, publicly disclosed, lost, or stolen, which could subject us to liability to our customers, suppliers, business partners and others, as well as regulatory investigations, fines or penalties, and such incidents and the public disclosure of such incidents may cause brand and reputational damage.
We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes and to consider potential responsive actions, but an adverse decision by tax authorities exceeding our reserves could significantly impact our financial results. STOCK-RELATED ISSUES Controlling Stockholder .
We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes and to consider potential responsive actions, but an adverse decision by tax authorities exceeding our reserves could significantly impact our financial results.
In the past, licensees have threatened to initiate litigation against us based on potential antitrust claims or regarding our licensing royalty rate practices. Damages and requests for injunctive relief asserted in claims like these could be significant, and could be disruptive to our business. U.S. and Foreign Patent Rights .
In the past, licensees have threatened to initiate litigation against us based on potential antitrust claims or regarding our licensing royalty rate practices. Damages and requests for injunctive relief asserted in claims like these could be significant, and could be disruptive to our business.
Industry Standards The entertainment industry has historically depended upon industry standards to ensure compatibility across delivery platforms and a wide variety of consumer entertainment products.
The entertainment industry in particular has historically depended upon industry standards to ensure compatibility and interoperability across delivery platforms and a wide variety of consumer entertainment products.
Increasingly, companies are subject to a wide variety of attacks on their networks and systems on an ongoing basis. Our information technology and infrastructure may be vulnerable to attacks by malicious actors including nation-states and cyber criminals, malware, software bugs or other technical malfunctions, ransomware attacks, or other disruptions.
Increasingly, companies are subject to a wide 19 Table of Contents variety of attacks on their networks and systems on an ongoing basis. Our information technology and infrastructure may be vulnerable to attacks by malicious actors including, but not limited to, nation-states and cyber criminals, malware, software bugs or other technical malfunctions, ransomware attacks, or other disruptions.
As of September 30, 2022, the Dolby family and their affiliates had voting power of 99.8% of our outstanding Class B common stock, which combined with their shares of our Class A common stock, represented 85.7% of the combined voting power of our outstanding Class A and Class B common stock.
As of September 29, 2023, the Dolby family and their affiliates had voting power of 99.8% of our outstanding Class B common stock, which combined with their shares of our Class A common stock, represented 85.7% of the combined voting power of our outstanding Class A and Class B common stock.
Under our certificate of incorporation, holders of Class B common stock are 24 Table of Contents entitled to ten votes per share while holders of Class A common stock are entitled to one vote per share.
Under our certificate of incorporation, holders of Class B common stock are entitled to ten votes per share while holders of Class A common stock are entitled to one vote per share.
These competitors may also be able to offer integrated systems in markets for entertainment technologies on a royalty-free basis or at a lower price than our technologies, including audio, imaging, and other technologies, which could make competing technologies that we develop less attractive. Pricing Pressures .
These competitors may also be able to offer 20 Table of Contents integrated systems in markets for entertainment technologies on a royalty-free basis or at a lower price than our technologies, including audio, imaging, and other technologies, which could make competing technologies that we develop less attractive.
Although we generally attempt to contractually limit our liability, if these contract provisions are not enforced, or are unenforceable for any reason, or if liabilities arise that are not effectively limited, we could incur substantial costs in defending and settling product liability claims. Production Processes and Production .
Although we generally attempt to contractually limit our liability, if these contract provisions are not enforced, or are unenforceable for any reason, or if liabilities arise that are not effectively limited, we could incur substantial costs in defending and settling product liability claims. Production processes for our products are subject to interruption, delay, and other risks .
Our stock repurchase program may reduce the public float of shares available for trading on a daily basis. Such purchases may be limited, suspended, or terminated at any time without prior notice.
There are risks associated with our stock repurchase program . Our stock repurchase program may reduce the public float of shares available for trading on a daily basis. Such purchases may be limited, suspended, or terminated at any time without prior notice.
Additionally, court and administrative rulings may interpret existing 18 Table of Contents patent laws and regulations in ways that hurt our ability to obtain, license, and enforce our patents.
Additionally, court and administrative rulings may interpret existing patent laws and regulations in ways that hurt our ability to obtain, license, and enforce our patents.
To continue to be successful in our audio licensing business, we must keep transitioning our DD licensees to our newer technologies, including our DD+ and Dolby AC-4 technologies. Unauthorized Use of Our Intellectual Property .
To continue to be successful in our audio licensing business, we must keep transitioning our DD licensees to our newer technologies, including our DD+ and Dolby AC-4 technologies. Unauthorized use of our intellectual property has occurred and will likely continue to occur .
The degree to which COVID-19 impacts our results will depend on future developments, which are highly uncertain and cannot be predicted with any certainty, including, but not limited to, the duration and extent of the pandemic, additional actions taken by governments, businesses and consumers in response to the pandemic, additional subsequent outbreaks and variant strains, and how quickly and to what extent normal economic and operating conditions can resume.
The degree to which COVID-19 impacts our results will depend on future developments, which cannot be predicted with any certainty, including, but not limited to, the duration and extent of the pandemic, additional actions taken by governments, businesses and consumers in response to the pandemic, additional subsequent outbreaks and variant strains, and to what extent economic and operating conditions can return to pre-pandemic conditions.
War, including the military conflict between Russia and Ukraine and any related political or economic responses and counter-responses or otherwise by various global actors or the general effect on the global economy and supply chain, could also affect our business.
War, including the military conflicts between Russia and Ukraine and between Israel and Hamas, as well as any related political or economic responses and counter-responses or otherwise by various global actors or the general effect on the global economy and supply chain, could also affect our business.
By offering an integrated system solution, these potential competitors may also be able to offer competing technologies at lower prices than we can, which could adversely affect our operating results. STRATEGIC ACTIVITIES Importance of Industry Relationships .
By offering an integrated system solution, these potential competitors may also be able to offer competing technologies at lower prices than we can, which could adversely affect our operating results. STRATEGIC ACTIVITIES The success of our business depends on strong industry relationships .
A shortage of manufacturing capacity for our products could negatively impact our operating results and damage our customer relationships. We may be unable to quickly adapt our manufacturing capacity to rapidly changing market conditions and a contract manufacturer may encounter similar difficulties.
A shortage of manufacturing capacity for our products could negatively impact our operating results and damage our customer relationships. We may be unable to quickly adapt our manufacturing capacity to rapidly changing market conditions and a contract manufacturer may encounter similar difficulties. Likewise, we may be unable to quickly respond to fluctuations in customer demand or contract manufacturer interruptions.
Although we implement policies and procedures designed to ensure compliance with the FCPA and U.S. export controls, there can be no assurance that all of our employees, distributors, dealers, and agents will not take actions in violation of our policies or these regulations. Costs of Environmental Laws and Regulation .
Although we implement policies and procedures designed to ensure compliance with the FCPA and U.S. export controls, there can be no assurance that all of our employees, distributors, dealers, and agents will not take actions in violation of our policies or these regulations. Environmental laws and regulations may pose additional costs on and otherwise impact our products and operations .
The number and sophistication of malicious attacks and disruptions that companies have experienced has increased over the past few years, including computer viruses, malware, ransomware, cyber extortion, social engineering, denial of service, and other similar attacks and disruptions. These risks could be elevated in connection with the military conflict between Russia and Ukraine.
The number and sophistication of malicious cyber attacks and disruptions that companies have experienced has increased over the past few years, including computer viruses, malware, ransomware, cyber extortion, social engineering, denial of service, supply chain attacks, and other similar attacks and disruptions. These risks could be elevated in connection with military conflicts around the world.
Our reliance on suppliers for some of the key materials and components we use in manufacturing our products involves risks, including limited control over the price, timely delivery, and quality of such components, as well as the risk of delay caused by COVID-19, the military conflict between Russia and Ukraine, and other potential interruptions to the supply chain.
Our reliance on suppliers for some of the key materials and components we use in manufacturing our products involves risks, including limited control over the price, timely delivery, and quality of such components, as well as delays caused by military conflicts, including those between Russia and Ukraine and between Israel and Hamas, and other potential interruptions to the supply chain.
Many of the products in which our technologies are incorporated are discretionary goods, such as PCs, TVs, STBs, Blu-ray Disc players, video game consoles, AVRs, mobile devices, in-car entertainment systems, and home-theater systems.
Many of the products in which our technologies are incorporated are discretionary goods, such as PCs, TVs, STBs, Blu-ray Disc players, video game consoles, AVRs, mobile devices, in-car entertainment systems, and home-theater systems, which makes revenue generated by such technologies vulnerable to weakness in consumer spending.
Competition from Other Audio Formats, Imaging Solutions, and Integrated System Offerings . We believe that the success we have had licensing our audio and imaging technologies is due, in part, to the high quality of the solutions that our technologies provide and to the strength of our brand.
We believe that the success we have had licensing our audio and imaging technologies is due, in part, to the high quality of the solutions that our technologies provide and to the strength of our brand.
While our reporting practices do not change the cash flows or total revenue we receive from our contracts with customers, it could result in changes to the timing of our reported revenue and income, which in turn could cause volatility in the price of our Class A common stock. TECHNOLOGY TRENDS AND DEVELOPMENTS Technology Innovation .
While our reporting practices do not change the cash flows or total revenue we receive from our contracts with customers, it could result in changes to the timing of our reported revenue and income, which in turn could cause volatility in the price of our Class A common stock. Royalty reporting by our licensees may be inaccurate or understated .
Our sensitive, confidential or proprietary information may be misappropriated by third-party service providers or others who may inappropriately access or exfiltrate that information from the vendor’s system.
This sensitive, confidential or proprietary information may be misappropriated by third-party service providers or others who may inappropriately access or exfiltrate that information from a third-party service provider's system.
We seek to mitigate this risk in a variety of ways. We regularly look for opportunities to expand our patent portfolio through organic development and acquisitions. We develop proprietary technologies to replace licensing revenue from technologies covered by expiring patents with licensing revenue supported by patents with a longer remaining life.
We regularly look for opportunities to expand our patent portfolio through organic development and acquisitions. We develop technologies to replace licensing revenue from technologies covered by expiring patents with licensing revenue supported by patents with a longer remaining life.
Weakness in general economic conditions may also lead to licensees and customers becoming delinquent on their obligations to us or being unable to pay, resulting in a higher level of write-offs. Economic conditions, including business slowdown caused by COVID-19, may increase underreporting and non-reporting of royalty-bearing revenue by our licensees as well as increase the unauthorized use of our technologies.
Weakness in consumer spending may also lead to licensees and other customers becoming delinquent on their obligations to us or being unable to pay, resulting in a higher level of write-offs. Weakness in consumer spending may also increase underreporting and non-reporting of royalty-bearing revenue by our licensees as well as increase the unauthorized use of our technologies.
As of September 30, 2022, we had approximately 16,900 issued patents in addition to approximately 4,100 pending patent applications in more than 100 jurisdictions throughout the world. Our currently issued patents expire at various times through December 2046. If we are unable to expand on our patent portfolio or refresh our technology with new patented inventions, our revenue could decline.
As of September 29, 2023, we had approximately 19,300 issued patents in addition to approximately 1,900 pending patent applications in more than 100 jurisdictions throughout the world. Our currently issued patents expire at various times through September 2045. If we are unable to refresh our technology with new patented inventions or expand our patent portfolio, our revenue could decline.
Patent Royalties and Expiration . Many of the technologies that we license to our system licensees are covered by patents, and the licensing revenue that we receive from those licenses depends in large part upon the life of such patents.
Our revenue could decline if we are unable to maintain patent coverage for our technologies . Many of the technologies that we license to our system licensees are covered by patents, and the licensing revenue that we receive from those licenses depends in large part upon the life of such patents.
Our operations use substances regulated under federal, state, local, and international laws governing the environment, including those governing the discharge of pollutants into the air and water, the management, disposal, and labeling of hazardous substances and wastes, and the cleanup of contaminated sites.
Our products and operations may be regulated under federal, state, local, and international laws governing the environment, including those governing the discharge of pollutants into the air and water, the management, disposal, and labeling of hazardous substances and wastes, the achievement of certain energy performance criteria, and the cleanup of contaminated sites.
The U.S. tax law changes enacted through the Tax Cuts and Jobs Act ("Tax Act") include provisions that affect our business. These provisions, their interpretations, and proposed changes to this law introduced by the Biden administration could further impact our corporate trading structure and adversely affect our tax rate and cash flow in future years.
Changes in U.S. tax law, including the Tax Cuts and Jobs Act ("Tax Act") and the Inflation Reduction Act, may affect our business. These provisions, their interpretations, and proposed changes to law introduced by the current administration could further impact our corporate trading structure and adversely affect our tax rate and cash flow in future years.
For example, the California Privacy Rights Act (CPRA), which will take effect on January 1, 2023 (with certain provisions having retroactive effect to January 1, 2022), as well as obligations from new privacy laws in Colorado, Connecticut, Utah and Virginia, which will also take effect in 2023, may require us to further modify certain of our information practices and could subject us to additional compliance costs and expenses.
For example, the California Privacy Rights Act (CPRA), which took effect on January 1, 2023 (with certain provisions of the CPRA having retroactive effect to January 1, 2022), as well as obligations from new privacy laws in Virginia, Colorado, Connecticut, Utah, Iowa, Indiana, Texas, Montana, Oregon, Delaware, Florida, and Tennessee that have taken or will take effect between 2023 and 2026, may require us to further modify certain of our information practices and could subject us to additional compliance costs and expenses.
The continued advancement of OTT media delivery and consumption is altering the landscape for broadcast standards and impacting the importance of the inclusion of our technology in certain broadcast standards, and we cannot predict if and to what extent this may impact our revenue. Difficulty Becoming Incorporated in an Industry Standard .
The continued advancement of OTT media delivery and consumption is altering the landscape for broadcast standards and impacting the importance of the inclusion of our technology in certain broadcast standards, and we cannot predict if and to what extent this may impact our revenue. Participants may choose alternative technologies within standards .
Most of our license agreements permit us to audit our licensees’ records, and we routinely exercise these rights, but audits are generally expensive, time-consuming, and potentially detrimental to our ongoing business relationships with our licensees.
Most of our license agreements permit us to audit our licensees’ records, and we routinely exercise these rights, typically by using an independent third party auditor. Such audits are generally expensive, time-consuming, and potentially detrimental to our ongoing business relationships with our licensees.
Further, current demand levels have resulted in ongoing shortages of semiconductor components and other key materials that may adversely impact the ability of our implementation and system licensees and customers to meet product demand in a timely fashion. Consumer Spending Weakness .
Further, demand levels may result in shortages 13 Table of Contents of semiconductor components and other key materials that may adversely impact the ability of our implementation and system licensees and other customers to meet product demand in a timely fashion. Consumer spending weakness may impact our licensees and licensing revenues generally .
In addition, failure of our distributors to adhere to our policies designed to promote compliance with global anticorruption laws, export controls, and local laws, could subject us to criminal or civil penalties and stockholder litigation. Marketing and Branding Importance of Brand Strength .
In addition, failure of our distributors to adhere to our policies designed to promote compliance with global anticorruption laws, export controls, and local laws, could subject us to criminal or civil penalties and stockholder litigation. Marketing and Branding If we fail to promote and maintain the Dolby brand, our business will suffer.
However, we have difficulty independently determining whether our licensees are reporting shipments accurately, particularly with respect to software incorporating our technologies because unauthorized copies of such software can be made relatively easily.
However, it is inherently difficult to independently determine whether our licensees are reporting shipments accurately, particularly with respect to software incorporating our technologies because unauthorized copies of such software can be made relatively easily.
Furthermore, some standards-setting organizations choose to adopt a set of optional standards or a combination of mandatory and optional standards; in such cases, our technologies may be adopted only as an optional standard and not a mandatory standard. Standards may also change in ways that are unfavorable to Dolby. Participants May Choose Among Alternative Technologies within Standards .
Furthermore, some standards-setting organizations choose to adopt a set of optional standards or a combination of mandatory and optional standards; in such cases, our technologies may be adopted only as an optional standard and not a mandatory standard.
Revenue from Dolby Cinema and cinema product sales is subject to the pace of construction or upgrade of screens, the financial stability of exhibitors, the advent of new or competing technologies, the willingness of movie studios to produce films in our Dolby Atmos and Dolby Vision formats, consumer trends, box-office performance generally, and other events or conditions in the cinema industry.
Revenue from Dolby Cinema and cinema product sales is subject to our ability to develop and implement new technologies, the pace of construction or upgrade of screens, the financial stability of exhibitors, the advent of new or competing technologies, and the willingness of movie studios to produce films in our Dolby Atmos and Dolby Vision formats.
COVID-19 may also adversely impact consumer demand for PCs, and may continue to adversely impact PC manufacturing, supply chain and distribution, timing of the adoption of our technologies into products by partners and licensees, and the timing of launches for new products. Cinema Industry Risks .
Such conditions may also continue to adversely impact PC manufacturing, supply chain and distribution, the timing of the adoption of our technologies into products by partners and licensees, and the timing of launches for new products.
Moreover, the Dolby family and their affiliates may take actions in their own interests that our other stockholders do not view as beneficial. Insider Sales of Common Stock .
Moreover, the Dolby family and their affiliates may take actions in their own interests that our other stockholders do not view as beneficial. Sales of substantial amounts of our Class A common stock in the public markets could reduce the price of our Class A common stock .
We consider these types of transactions in connection with, among other things, our efforts to strengthen our audio and cinema businesses and expand beyond sound technologies.
We evaluate a wide array of possible strategic transactions, including acquisitions. We consider these types of transactions in connection with, among other things, our efforts to strengthen our audio and cinema businesses and expand beyond audio technologies.
A decrease in our ability to develop and introduce new cinema products and services successfully could affect licensing of our consumer technologies, because the strength of our brand and our ability to use professional product developments to introduce new consumer technologies would be negatively impacted. These factors are subject to increased risk due to COVID-19, including related government responses.
A decrease in our ability to develop and introduce new cinema products and services successfully could affect licensing of our consumer technologies, because the strength of our brand and our ability to use professional product developments to introduce new consumer technologies would be negatively impacted.
A third party may disagree with our interpretation of the terms of a license agreement or, as a result of an audit, a third party could challenge the accuracy of our calculation. We are regularly involved in discussions with third party technology licensors regarding license terms.
A third party may disagree with our interpretation of the terms of a license agreement or, as a result of an audit, a third party could challenge the accuracy of our calculation.

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Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeGiven the unpredictable nature of legal proceedings, it is possible that an unfavorable resolution of one or more such proceedings could materially affect our future operating results or financial condition in a particular period; however, based on the information known by us as of the date of this filing and the rules and regulations applicable to the preparation of our consolidated financial statements, other than the impact of the litigation matter discussed in Note 14 to the consolidated financial statements, any such amounts are either immaterial, or it is not probable that a potential loss has been incurred or the amount of loss cannot be reasonably estimated.
Biggest changeGiven the unpredictable nature of legal proceedings, it is possible that an unfavorable resolution of one or more such proceedings could materially affect our future operating results or financial condition in a particular period; however, based on the information known by us as of the date of this filing and the rules and regulations applicable to the preparation of our consolidated financial statements, any such amounts are either immaterial, or it is not probable that a potential loss has been incurred or the amount of loss cannot be reasonably estimated.
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For additional information on this litigation matter, see Note 14 " Commitments and Contingencies " to our consolidated financial statements. 27 Table of Contents

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeStock Price Performance Graph The following graph compares the total cumulative return of our Class A common stock with the total cumulative return for the New York Stock Exchange Composite Index ("NYSE Composite") and the Russell 3000 Index ("Russell 3000") for the five fiscal years ended September 30, 2022.
Biggest change(2) Amounts represent the approximate dollar value of the maximum remaining number of shares that may yet be purchased under the stock repurchase program as of the end of the applicable period and excludes commission costs. 30 Table of Contents Stock Price Performance Graph The following graph compares the total cumulative return of our Class A common stock with the total cumulative return for the New York Stock Exchange Composite Index ("NYSE Composite"), the Russell 3000 Index ("Russell 3000"), and the S&P MidCap 400 Index ("S&P 400") for the five fiscal years ended September 29, 2023.
As of October 28, 2022, there were 79 holders of record of our Class A common stock and 34 holders of record of our Class B common stock. The number of Class A beneficial stockholders is substantially greater than the number of holders of record since a large portion of our common stock is held through brokerage firms.
As of October 27, 2023, there were 93 holders of record of our Class A common stock and 34 holders of record of our Class B common stock. The number of Class A beneficial stockholders is substantially greater than the number of holders of record since a large portion of our common stock is held through brokerage firms.
Most recently, on November 17, 2022, we announced a dividend in the amount of $0.27 per share, payable on December 8, 2022, to stockholders of record as of the close of business on November 30, 2022.
Most recently, on November 16, 2023, we announced a dividend in the amount of $0.30 per share, payable on December 5, 2023, to stockholders of record as of the close of business on November 28, 2023.
The figures represented below assume an investment of $100 in our Class A common stock at the closing price of $57.52 on September 29, 2017, and in the NYSE Composite and Russell 3000 on the same date and the reinvestment of dividends into shares of common stock.
The figures represented below assume an investment of $100 in our Class A common stock at the closing price of $69.97 on September 28, 2018, and in the NYSE Composite, Russell 3000, and S&P 400 on the same date and the reinvestment of dividends into shares of common stock.
The following table summarizes the initial amount of authorized repurchases as well as additional repurchases approved by our Board of Directors as of September 30, 2022 (in thousands): Authorization Period Authorization Amount Fiscal 2010: November 2009 $ 250,000 Fiscal 2010: July 2010 300,000 Fiscal 2011: July 2011 250,000 Fiscal 2012: February 2012 100,000 Fiscal 2015: October 2014 200,000 Fiscal 2017: January 2017 200,000 Fiscal 2018: July 2018 350,000 Fiscal 2019: July 2019 350,000 Fiscal 2021: July 2021 350,000 Fiscal 2022: February 2022 250,000 Fiscal 2022: August 2022 350,000 Total $ 2,950,000 29 Table of Contents The following table provides information regarding our share repurchases made under this program during the fourth quarter of fiscal 2022: Repurchase Activity Total Shares Purchased Average Price Paid Per Share (1) Total Shares Purchased As Part Of Publicly Announced Programs Remaining Authorized Share Repurchases (2) July 2, 2022 - July 29, 2022 1,127,366 $73.95 1,127,366 $147.5 million July 30, 2022 - August 26, 2022 933,331 $77.82 933,331 $424.9 million August 27, 2022 - September 30, 2022 867,939 $73.75 867,939 $360.9 million Total 2,928,636 2,928,636 (1) Average price paid per share excludes commission costs.
The following table summarizes the initial amount of authorized repurchases as well as additional repurchases approved by our Board of Directors as of September 29, 2023 (in thousands): Date of Authorization Authorization Amount Fiscal 2010: November 2009 $ 250,000 Fiscal 2010: July 2010 300,000 Fiscal 2011: July 2011 250,000 Fiscal 2012: February 2012 100,000 Fiscal 2015: October 2014 200,000 Fiscal 2017: January 2017 200,000 Fiscal 2018: July 2018 350,000 Fiscal 2019: July 2019 350,000 Fiscal 2021: July 2021 350,000 Fiscal 2022: February 2022 250,000 Fiscal 2022: August 2022 350,000 Total $ 2,950,000 29 Table of Contents The following table provides information regarding our share repurchases made under this program during the fourth quarter of fiscal 2023: Repurchase Activity Total Shares Purchased Average Price Paid Per Share (1) Total Shares Purchased As Part Of Publicly Announced Programs Remaining Authorized Share Repurchases (2) July 1, 2023 - July 28, 2023 285,499 $87.57 285,499 $211.6 million July 29, 2023 - August 25, 2023 — $ — — $211.6 million August 26, 2023 - September 29, 2023 — $ — — $211.6 million Total 285,499 285,499 (1) Average price paid per share excludes commission costs.
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(2) Amounts represent the approximate dollar value of the maximum remaining number of shares that may yet be purchased under the stock repurchase program, and excludes commission costs.
Added
We have elected to replace the Russell 3000 with the S&P 400 because we believe the components of the S&P 400 represent more similar market capitalizations to our own and the S&P 400 will provide a more meaningful comparison of our stock performance going forward.
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For this transitional year, both the Russell 3000 and the S&P 400 are reflected in the following graph, but we do not expect to include the Russell 3000 in future years.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeOperating Activities Fiscal Year Ended September 30, 2022 September 24, 2021 Net cash provided by operating activities $ 318,576 $ 447,753 Net cash provided by operating activities decreased $129.2 million in fiscal 2022 compared to fiscal 2021, primarily due to the following: Factor Impact On Cash Flows Net Income â Lower revenue, higher costs associated with the resolution of a legal matter discussed in Note 15 to the consolidated financial statements, and higher S&M expenses Working Capital â Decrease due to lower accounts payable and accrued liabilities and higher inventories, partially offset by lower accounts receivable and contract assets Investing Activities Fiscal Year Ended September 30, 2022 September 24, 2021 Net cash used in investing activities $ (295,935) $ (44,905) 42 Table of Contents Net cash used in investing activities was $251.0 million higher in fiscal 2022 compared to fiscal 2021, primarily due to the following: Factor Impact On Cash Flows Purchase of Investments â Higher outflows for the purchase of marketable investment securities, and other investments Proceeds from Investments á Higher inflows from the sale and maturity of marketable investment securities Business Combinations â Higher outflows for the acquisition of Millicast, Inc.
Biggest changeOperating Activities Fiscal Year Ended September 29, 2023 September 30, 2022 Net cash provided by operating activities $ 367,081 $ 318,576 Net cash provided by operating activities increased $48.5 million in fiscal 2023 compared to fiscal 2022, primarily due to the following: Factor Impact On Cash Flows Operating assets and liabilities á Higher inflows due to lower accounts receivable and higher operating lease liabilities, partially offset by lower accounts payable and accrued liabilities and lower income taxes Investing Activities Fiscal Year Ended September 29, 2023 September 30, 2022 Net cash provided by/(used in) investing activities $ 54,206 $ (295,935) Net cash provided by/(used in) investing activities was $350.1 million higher in fiscal 2023 compared to fiscal 2022, primarily due to the following: Factor Impact On Cash Flows Purchase of Investments á Lower outflows for the purchase of marketable investment securities Proceeds from Investments á Higher inflows from the sale and maturity of marketable investment securities Business Combinations á Inflows due to restricted cash balances acquired in connection with the MPEG LA acquisition Financing Activities Fiscal Year Ended September 29, 2023 September 30, 2022 Net cash used in financing activities $ (236,812) $ (610,558) Net cash used in financing activities was $373.7 million lower in fiscal 2023 compared to fiscal 2022, primarily due to the following: Factor Impact On Cash Flows Share Repurchases á Lower outflows due to lower common stock repurchases Common Stock Issuance â Lower inflows from employee stock option exercises 43 Table of Contents Contractual Obligations and Commitments The following table presents a summary of our contractual obligations and commitments as of September 29, 2023 (in thousands): Payments Due By Fiscal Period 1 Year 2 - 3 Years 4 - 5 Years More Than 5 Years Total Naming rights $ 12,794 $ 26,598 $ 17,176 $ 35,674 $ 92,242 Purchase obligations 29,934 4,667 — — 34,601 Donation commitments 1,718 232 172 332 2,454 Total $ 44,446 $ 31,497 $ 17,348 $ 36,006 $ 129,297 Naming Rights.
Other Income/Expense Other income/expense primarily consists of interest income earned on cash and investments and the net gains or losses from foreign currency transactions, derivative instruments, our proportionate share of net income or losses from our equity method investment, and sales of marketable securities from our investment portfolio.
Other Income/Expense Other income/expense primarily consists of interest income earned on cash and investments and the net gains or losses from foreign currency transactions, derivative instruments, our proportionate share of net income or losses from our equity method investment, and gains and losses on the sales of marketable securities from our investment portfolio.
Key Challenges : We must continue to present compelling reasons for consumers to demand our technologies wherever they enjoy entertainment content, while promoting creation and broad availability of 33 Table of Contents content in our formats. To the extent that OEMs do not incorporate our technologies in current and future products, our revenue could be impacted.
Key Challenges : We must continue to present compelling reasons for consumers to demand our technologies wherever they enjoy entertainment content, while promoting creation and broad availability of content in our formats. 34 Table of Contents To the extent that OEMs do not incorporate our technologies in current and future products, our revenue could be impacted.
In fiscal 2022, there have been no material changes in either our off-balance sheet financing arrangements or contractual obligations outside the ordinary course of business, and we did not enter into any off-balance sheet arrangements that are expected to have a material effect on Dolby's liquidity or the availability of capital resources.
In fiscal 2023, there have been no material changes in either our off-balance sheet financing arrangements or contractual obligations outside the ordinary course of business, and we did not enter into any off-balance sheet arrangements that are expected to have a material effect on Dolby's liquidity or the availability of capital resources.
Services revenue also includes PCS for products sold and equipment installed at Dolby Cinema theaters operated by exhibitor partners and support for the implementation of our technologies into products manufactured by our licensees. Also included in services revenue are amounts generated through our Dolby.io developer platform.
Services revenue also includes PCS for products sold and equipment installed at Dolby Cinema theaters operated by exhibitor partners and support for the implementation of our technologies into products manufactured by our licensees. Also included in services revenue are amounts generated through Dolby.io.
Further 31 Table of Contents discussion of the potential impacts of these macroeconomic effects on our business can be found in Part I, Item 1A "Risk Factors." EXPANDING OUR LEADERSHIP IN AUDIO AND IMAGING EXPERIENCES We are focused on expanding our leadership in audio and imaging solutions for premium entertainment content by increasing the number of Dolby experiences that people can enjoy, which will drive revenue growth across the markets we serve.
Further discussion of the potential impacts of these macroeconomic effects on our business can be found in Part I, Item 1A " Risk Factors ." EXPANDING OUR LEADERSHIP IN AUDIO AND IMAGING EXPERIENCES We are focused on expanding our leadership in audio and imaging solutions for premium entertainment content by increasing the number of Dolby experiences that people can enjoy, which will drive revenue growth across the markets we serve.
These reflect the current statutory rates in our domestic and foreign jurisdictions, the relative income earned in our foreign jurisdictions, and nonrecurring items such as changes to our unrecognized tax benefits that may occur in but are not necessarily consistent between periods.
These include the current statutory rates in our domestic and foreign jurisdictions, the relative income earned in our foreign jurisdictions, and nonrecurring items such as changes to our unrecognized tax benefits that may occur in but are not necessarily consistent between periods.
Our stock repurchase program was approved in fiscal 2010, and since then we have completed approximately $2.6 billion of stock repurchases under the program. The Inflation Reduction Act and CHIPS and Science Act were signed into law in August 2022.
Our stock repurchase program was approved in fiscal 2010, and since then we have completed approximately $2.7 billion of stock repurchases under the program. The Inflation Reduction Act and CHIPS and Science Act were signed into law in August 2022.
Refer to Note 9 " Stockholders' Equity and Stock-Based Compensation " to our consolidated financial statements for a summary of dividend payments made under the program during fiscal 2022 and additional information regarding our stock repurchase program. Stock Repurchase Program.
Refer to Note 9 " Stockholders' Equity and Stock-Based Compensation " to our consolidated financial statements for a summary of dividend payments made under the program during fiscal 2023 and additional information regarding our stock repurchase program. Stock Repurchase Program.
Our revenue has been impacted by macroeconomic conditions, including but not limited to, rising inflation, rising interest rates, COVID-19 related restrictions, supply chain constraints, increased shipping costs, international conflicts, reduced discretionary consumer spending, and reduced new product investment by our customers caused by higher interest rates and lower demand.
Our revenue has been impacted by macroeconomic conditions, including but not limited to, elevated inflation, rising interest rates, restrictions and economic impacts related to COVID-19, supply chain constraints, increased shipping costs, international conflicts, reduced discretionary consumer spending, and reduced new product investment by our customers caused by higher interest rates and lower demand.
PRODUCTS AND SERVICES A majority of our products and services revenue is derived from the sale of audio and imaging products for the cinema, television, broadcast, communication, and entertainment industries. Revenue from our developer platform, Dolby.io, is also included in products and services.
PRODUCTS AND SERVICES A majority of our products and services revenue is derived from the sale of audio and imaging products for the cinema, television, broadcast, communication, and entertainment industries. Revenue from Dolby.io is also included in products and services.
If we assess the financing component to be significant to the contract, the amount of fixed fee revenue recognized at the beginning of the license term will be reduced by the calculated financing component. The portion related to the financing component is recorded as interest income, and is not material to our consolidated financial statements.
If we assess the financing component to be significant to the contract, the amount of fixed fee revenue recognized at the beginning of the license term will be reduced by the calculated 37 Table of Contents financing component. The portion related to the financing component is recorded as interest income, and is not material to our consolidated financial statements.
Our donation commitments relate to non-cancelable obligations that consist of maintenance services and installation of imaging and audio products in exchange for various marketing, branding, and publicity benefits. For additional details regarding our donation commitments, see Note 14 " Commitments and Contingencies " to our consolidated financial statements. 43 Table of Contents Unrecognized Tax Benefits.
Our donation commitments relate to non-cancelable obligations that consist of maintenance services and installation of imaging and audio products in exchange for various marketing, branding, and publicity benefits. For additional details regarding our donation commitments, see Note 14 " Commitments and Contingencies " to our consolidated financial statements. Unrecognized Tax Benefits.
Cost of services consists of personnel and personnel-related costs for providing our professional services, software maintenance and support, external consultants, and other direct expenses incurred on behalf of customers.
Cost of services consists of personnel and personnel-related costs for providing our professional services, software maintenance and support, external contractors, and other direct expenses incurred on behalf of customers.
For the discussion and analysis highlighting comparisons of material changes in the consolidated financial statements for the years ended September 24, 2021 and September 25, 2020, refer to Part II, Item 7 " Management's Discussion and Analysis of Financial Condition and Results of Operations " included in our Annual Report on Form 10-K for the year ended September 24, 2021, which is incorporated herein by reference.
For the discussion and analysis highlighting comparisons of material changes in the consolidated financial statements for the years ended September 30, 2022 and September 24, 2021, refer to Part II, Item 7 " Management's Discussion and Analysis of Financial Condition and Results of Operations " included in our Annual Report on Form 10-K for the year ended September 30, 2022, which is incorporated herein by reference.
Cash Flows Analysis For the following comparative analysis performed for each of the sections of the statement of cash flows, the significant factors identified as the leading drivers contributing to the fluctuation are presented in descending order of their impact relative to the overall change (in thousands).
Cash Flows Analysis For the following comparative analysis performed for each of the sections of the consolidated statements of cash flows, the significant factors identified as the leading drivers contributing to the fluctuation are presented in descending order of their impact relative to the overall change (in thousands).
A significant portion of our growth opportunity lies in international markets, such as China, which are subject to economic risks as well as geopolitical risks. Additionally, weakness in general economic conditions due to inflation, recession, pandemic or other worsening economic conditions could have a negative impact on our cinema-related revenue due to reduced consumer discretionary spending.
A significant portion of our growth opportunity lies in international markets, which are subject to geopolitical risks. Additionally, weakness in general economic conditions due to inflation, recession, pandemic or other worsening economic conditions could have a negative impact on our cinema-related revenue due to reduced consumer discretionary spending.
As of the end of fiscal 2022, there are over 7,000 Dolby Atmos screens installed or committed and over 2,200 Dolby Atmos theatrical titles have been announced or released. We also offer a variety of other cinema products, such as the Dolby Multichannel Amplifier and our high-power flexible line of speakers.
As of the end of fiscal 2023, there are over 7,500 Dolby Atmos screens installed or committed and over 2,800 Dolby Atmos theatrical titles have been announced or released. We also offer a variety of other cinema products, such as the Dolby Multichannel Amplifier and our high-power flexible line of speakers.
We can increase our value proposition and create opportunities by broadening Dolby technologies into new types of content, such as music, gaming, live sports, and user-generated content. We are also beginning to make our audio and imaging technologies available for content beyond premium entertainment through Dolby.io, creating new revenue generating opportunities.
We can increase our value proposition and create opportunities by broadening Dolby technologies into new types of content, such as music, gaming, live sports, and user-generated content. We are increasingly making our audio and imaging technologies available for content beyond premium entertainment through Dolby.io, creating new revenue generating opportunities.
Transaction price is determined at contract execution and, to the extent variable consideration applies, is updated each subsequent reporting period until the completion of the contract. We evaluate whether other distinct performance obligations exist, such as PCS, and determine the stand-alone selling price based on the actual selling prices made to customers.
Transaction price is determined at contract execution and, to the extent variable consideration applies, is updated each subsequent reporting period until the completion of the contract. We evaluate whether other distinct performance obligations exist, such as PCS, and determine the stand-alone selling price.
As of September 30, 2022, we had an accrued liability for unrecognized tax benefits without interest, penalties, and related deferred tax assets, totaling $69.7 million. We are unable to estimate when any cash settlement with a taxing authority might occur and, therefore, have not reflected these anticipated future outflows in the table above.
As of September 29, 2023, we had an accrued liability for unrecognized tax benefits without interest, penalties, and related deferred tax assets, totaling $76.3 million. We are unable to estimate when any cash settlement with a taxing authority might occur and, therefore, have not reflected these anticipated future outflows in the table above.
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.
We do so by considering actual stand-alone sales in addition to 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.
Our estimates of royalty-based revenue take into consideration the macroeconomic effect of global events, such as inflation, COVID-19, or other economic conditions, which may impact supply chain activities as well as demand for shipments.
Our estimates of royalty-based revenue take into consideration the macroeconomic effect of global events, such as inflation, elevated interest rates, economic impacts related to COVID-19, or other economic conditions, which may impact supply chain activities as well as demand for shipments.
For fiscal 2022, quarterly dividends of $0.25 per share were paid on our Class A and Class B common stock to eligible stockholders of record.
For fiscal 2023, quarterly dividends of $0.27 per share were paid on our Class A and Class B common stock to eligible stockholders of record.
This discussion and analysis highlights comparisons of material changes in the consolidated financial statements for the years ended September 30, 2022 and September 24, 2021.
This discussion and analysis highlights comparisons of material changes in the consolidated financial statements for the years ended September 29, 2023 and September 30, 2022.
Our audio and imaging technologies are also widely available through many forms of distribution, including broadcast TV, streaming, and optical disc playback. Major streaming partners and services such as Netflix, Disney+, Apple TV+, Amazon, HBO Max, and Paramount+ continue to enable content in Dolby Vision and Dolby Atmos. These streaming services launch local content in Dolby formats internationally.
Our audio and imaging technologies are also widely available through many forms of distribution, including broadcast TV, streaming, and optical disc playback. Major streaming partners and services such as Netflix, Disney+, Apple TV+, Amazon, Max, and Paramount+ continue to enhance content in Dolby Vision and Dolby Atmos.
For additional details regarding our naming rights commitments, see Note 14 " Commitments and Contingencies " to our consolidated financial statements. Operating Leases. Operating lease payments represent our commitments for future minimum rent made under non-cancelable leases for office space, including those payable to our principal stockholder and portions attributable to the controlling interests in our wholly owned subsidiaries.
Operating lease payments represent our commitments for future minimum rent made under non-cancelable leases for office space, including those payable to our principal stockholder and portions attributable to the noncontrolling interests in our wholly-owned and majority-owned subsidiaries. For additional details regarding our leases, see Note 7 " Leases " to our consolidated financial statements. Purchase Obligations.
For additional details regarding our leases, see Note 7 " Leases " to our consolidated financial statements. Purchase Obligations. Purchase obligations primarily consist of our non-cancelable commitments made under agreements to purchase goods and services related to Dolby Cinema and for purposes that include information technology and telecommunications, marketing and professional services, and manufacturing and other R&D activities. Donation Commitments.
Purchase obligations primarily consist of our non-cancelable commitments made under agreements to purchase goods and services related to Dolby Cinema and for purposes that include information technology and telecommunications, marketing and professional services, and manufacturing and other R&D activities. Donation Commitments.
Note that adjustments related to previously under-reported sales-based royalties as well as unlicensed settlement activity, are collectively referred to as "recoveries." Amounts displayed, except percentages, are in thousands.
Note that adjustments related to sales-based royalties that were misreported by licensees as well as unlicensed settlement activity, are collectively referred to as "recoveries." Amounts displayed, except percentages, are in thousands.
For additional information, see Note 3 " Revenue Recognition " to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K. 36 Table of Contents IMPACT OF NEW ACCOUNTING STANDARDS NOT YET ADOPTED For information on recent accounting standards that have not been adopted yet and the impact of these standards on our consolidated financial statements, refer to Note 2 " Summary of Significant Accounting Policies " to our consolidated financial statements in this Annual Report on Form 10-K.
IMPACT OF NEW ACCOUNTING STANDARDS NOT YET ADOPTED For information on recent accounting standards that have not been adopted yet and the impact of these standards on our consolidated financial statements, refer to Note 2 " Summary of Significant Accounting Policies " to our consolidated financial statements in this Annual Report on Form 10-K.
We also continue to focus on expanding adoption of our DD+, AC-4, Dolby Atmos, and Dolby Vision technologies in the mobile market. The breadth of mobile devices supporting Dolby technologies continues to increase globally.
We also continue to focus on expanding adoption of our DD+, AC-4, Dolby Atmos, and Dolby Vision technologies in the mobile market. The breadth of mobile devices supporting Dolby technologies continues to increase globally. In fiscal 2023, OPPO launched the OnePlus 11, its first phone that supports Dolby Vision and Dolby Atmos.
Fiscal Year Ended Change September 30, 2022 September 24, 2021 $ % General and administrative $275,315 $224,161 $51,154 23% Percentage of total revenue 22% 17% 39 Table of Contents On August 7, 2019, Intertrust Technologies ("Intertrust") filed complaints against each of our customers AMC Entertainment Holdings, Inc., Cinemark Holdings, Inc., and Regal Entertainment Group in the U.S.
Fiscal Year Ended Change September 29, 2023 September 30, 2022 $ % General and administrative $258,477 $275,315 $(16,838) (6)% Percentage of total revenue 20% 22% On August 7, 2019, Intertrust Technologies ("Intertrust") filed complaints against each of our customers AMC Entertainment Holdings, Inc., Cinemark Holdings, Inc., and Regal Entertainment Group in the U.S.
In addition, the development and maintenance needed to provide a reliable and scalable platform may require us to develop new skills internally for our current employees or hire external specialized talent.
In addition, the development and maintenance needed to provide a reliable and scalable platform may require us to develop new skills internally for our current employees or hire external specialized talent. Although the market for real-time experiences has been growing, Dolby.io competes with other offerings.
A significant portion of our licensing revenue pertains to customer-shipment royalties that we recognize based on estimates of our licensees’ shipments. To the extent that shipment data reported by licensees differs from estimates we made and recorded, we recognize an adjustment to revenue for such difference in the period we receive the reported shipment data.
To the extent that shipment data reported by licensees differs from estimates we made and recorded, we recognize an adjustment to revenue for such difference in the period we receive the reported shipment data.
The following table presents selected financial information as of September 30, 2022 and September 24, 2021 (in thousands): September 30, 2022 September 24, 2021 Cash and cash equivalents $ 620,127 $ 1,225,380 Short-term investments 189,213 38,839 Long-term investments 102,514 62,819 Accounts receivable, net 243,593 232,609 Accounts payable and accrued liabilities 244,408 280,507 Working capital 1,033,376 1,444,781 41 Table of Contents Capital Expenditures and Uses of Capital Our capital expenditures consist of purchases of land, building, building fixtures, laboratory equipment, office equipment, computer hardware and software, leasehold improvements, and production and test equipment.
The following table presents selected financial information as of September 29, 2023 and September 30, 2022 (in thousands): September 29, 2023 September 30, 2022 Cash and cash equivalents $ 745,364 $ 620,127 Short-term investments 139,148 189,213 Long-term investments 97,812 102,514 Accounts receivable, net 262,245 243,593 Accounts payable and accrued liabilities 372,324 244,408 Working capital 1,065,578 1,033,376 Capital Expenditures and Uses of Capital Our capital expenditures consist of purchases of land, building, building fixtures, laboratory equipment, office equipment, computer hardware and software, leasehold improvements, and production and test equipment.
We have worked with industry leaders to enhance these forms of content through the use of our technologies, creating additional value for the adoption of Dolby within devices such as mobile, PC, gaming consoles, and automotive.
We work with industry leaders to enhance these forms of content through the use of our technologies, creating additional value for the adoption of Dolby within devices such as mobile phones and tablets, PCs, gaming consoles, and automobiles. We have enhanced a broad range of content, such as music, gaming, live sports, and user-generated content.
DD+, AC-4, and our AAC and HE-AAC audio patents (collectively, our "foundational audio technologies") have broad penetration across a diverse set of devices and end markets. Our revenue from these technologies is primarily driven by device shipments from licensees, and as such, is impacted by consumer spending.
Licensing revenue is primarily driven by the adoption of our technologies on devices, the number of devices shipped by licensees, and by the expansion of the number of licensees adopting our technologies. DD+, AC-4, and our AAC and HE-AAC audio patents (collectively, our "foundational audio technologies") have broad penetration across a diverse set of devices and end markets.
To the extent that OEMs do not incorporate our technologies in current and future products, our revenue could be impacted. We must also continue to support the development and distribution of Dolby-enabled content via various ecosystems. Additionally, we face geopolitical challenges including changes in diplomatic and trade relationships, trade protection measures, and import or export licensing requirements.
To the extent that OEMs do not incorporate our technologies in current and future products or our technology is not included in future mobile industry standards, our revenue could be impacted. We must also continue to support the development and distribution of Dolby-enabled content via various ecosystems.
In addition, we had short and long-term investments of $291.7 million, which consisted primarily of corporate bonds, government bonds, municipal debt securities, certificates of deposit, commercial paper, and U.S. agency securities.
As of September 29, 2023, we had cash and cash equivalents of $745.4 million, which consisted of cash and highly liquid money market funds. In addition, we had short and long-term investments of $237.0 million, which primarily consisted of government bonds, corporate bonds, municipal debt securities, certificates of deposit, commercial paper, and U.S. agency securities.
The preparation of these financial statements requires us to establish accounting policies and make certain estimates and assumptions that affect the reported amounts of assets and liabilities, revenue and expenses.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES Our consolidated financial statements and accompanying notes are prepared in accordance with U.S. GAAP, pursuant to SEC rules and regulations. The preparation of these financial statements requires us to establish accounting policies and make certain estimates and assumptions that affect the reported amounts of assets and liabilities, revenue and expenses.
We must continue to present compelling reasons for consumers to demand our audio and imaging technologies, including ensuring that there is a breadth of available content in our formats and such content is being widely distributed. To the extent that OEMs do not incorporate our technologies in current and future products, our revenue could be impacted.
Key Challenges: Our pursuit of new licensees and further adoption of our technologies by existing licensees may be impacted by a number of factors. We must continue to present compelling reasons for consumers to demand our audio and imaging technologies, including ensuring that there is a breadth of available content in our formats and such content is being widely distributed.
Following is a discussion of the key markets that we address and the various Dolby technologies and solutions that serve these markets. LICENSING The majority of our licensing revenue is derived from the licensing of audio and imaging technologies for premium entertainment playback. Our audio technologies are primarily comprised of DD+, Dolby Atmos, AC-4, and our AAC and HE-AAC technologies.
LICENSING The majority of our licensing revenue is derived from the licensing of audio and imaging technologies for entertainment playback. Our branded technologies are primarily comprised of DD+, Dolby Atmos, and AC-4 for audio, and Dolby Vision for imaging.
The breadth of motion pictures for Dolby Cinema continues to grow with over 400 theatrical titles in Dolby Vision and Dolby Atmos having been announced or released from all of the major studios as of the end of fiscal 2022.
The breadth of motion pictures for Dolby Cinema continues to grow with over 500 theatrical titles in both Dolby Vision and Dolby Atmos having been announced or released from all of the major studios as of the end of fiscal 2023. 35 Table of Contents Key Challenges: Although the premium large format market for the cinema industry has been growing, Dolby Cinema competes with other existing offerings.
The response to COVID-19 including the closure of cinemas in China and government-imposed restrictions has had a negative impact on our cinema-related revenue and consumer demand, although consumer demand for the cinema has improved recently. It is uncertain whether consumer demand for the cinema will return to previous levels.
COVID-19 has had a significant effect on theatrical exhibition, which could impact the financial viability of our key partners. The response to COVID-19 has had a negative impact on our cinema-related revenue and consumer demand, although consumer demand for the cinema has been improving. It is uncertain whether consumer demand for the cinema will return to previous levels.
Fiscal Year Ended Change September 30, 2022 September 24, 2021 $ % Sales and marketing $358,716 $332,671 $26,045 8% Percentage of total revenue 29% 26% Category Key Drivers Legal, Professional, & Consulting á Higher costs of $13.1 million primarily due to legal support for patents and licensee audits, and higher consulting expense for the increased development of digital marketing programs Stock-based Compensation á Higher costs of $6.0 million primarily due to increased fair value of RSUs, offset by lower costs of $1.4 million due to fewer outstanding unearned options Travel á Higher costs of $4.5 million for increased company travel as a result of fewer COVID-19 travel restrictions Compensation & Benefits â Lower costs of $7.6 million primarily due to our annual bonus program, partially offset by higher costs of $7.1 million for higher salaries expense primarily due to increased headcount and the extra week in the current fiscal year General and Administrative G&A expenses consist primarily of employee compensation and benefits expenses, stock-based compensation, depreciation, facilities and information technology costs, as well as professional fees and other costs associated with external consulting and contract labor.
Fiscal Year Ended Change September 29, 2023 September 30, 2022 $ % Sales and marketing $354,364 $358,716 $(4,352) (1)% Percentage of total revenue 27% 29% Category Key Drivers Legal, Professional, and Contractors â Lower costs of $10.6 million primarily due to timing of patent program-related expenses Marketing Programs á Higher costs of $8.3 million primarily due to increased marketing activities Travel á Higher costs of $5.2 million due to increased travel as a result of fewer COVID-19 travel restrictions, and increased in-person presence at certain events Compensation & Benefits â Lower payroll salaries expense of $4.7 million primarily due to lower headcount General and Administrative G&A expenses consist primarily of employee compensation and benefits, stock-based compensation, depreciation and amortization, facilities and information technology costs, as well as professional fees and other costs associated with external contractors.
In addition, the gaming console market has competition from mobile devices and gaming PCs, which have faster refresh cycles and appeal to a broader consumer base. Also, automotive revenue has been negatively impacted by a decline in the portion of cars that have optical disc playback in recent years.
Key Challenges : Consumer demand for devices in the gaming industry is impacted by anticipation of console refresh cycles, which could result in fluctuations in our revenue. In addition, the gaming console market has competition from mobile devices and gaming PCs, which have faster refresh cycles and appeal to a broader consumer base.
The Inflation Reduction Act introduced a one percent non-deductible excise tax on certain public company stock buybacks made after December 31, 2022. We are currently analyzing the impact of the excise tax on our future operations. Quarterly Dividend Program. During fiscal 2015, we initiated a recurring quarterly cash dividend program for our stockholders.
The Inflation Reduction Act introduced a one percent non-deductible excise tax on certain public company stock buybacks made after December 31, 2022.
Fiscal Year Ended Change Licensing September 30, 2022 September 24, 2021 $ % Revenue $1,164,533 $1,214,147 $(49,614) (4)% Percentage of total revenue 93% 95% Cost of licensing 61,597 55,421 6,176 11% Gross margin 1,102,936 1,158,726 (55,790) (5)% Gross margin percentage 95% 95% Fiscal Year Ended Licensing Revenue By Market September 30, 2022 September 24, 2021 Broadcast $ 433,992 37 % $ 475,648 39 % Mobile 238,735 21 % 261,232 22 % CE 186,285 16 % 181,944 15 % PC 151,079 13 % 141,919 12 % Other 154,442 13 % 153,404 12 % Total licensing revenue $ 1,164,533 100 % $ 1,214,147 100 % 37 Table of Contents Factor Licensing Revenue Gross Margin Broadcast â Lower foundational audio revenue due to lower TV unit shipments globally and lower recoveries, partially offset by higher adoption of Dolby Vision and Dolby Atmos technologies in TVs and STBs ßà No significant fluctuations Mobile â Lower revenue due to timing, including recoveries, partially offset by higher adoption of Dolby Vision and Dolby Atmos technologies and new licensees in our imaging patent programs PC á Higher adoption of Dolby Vision and Dolby Atmos technologies and new licensees in our imaging patent programs, and higher recoveries, partially offset by lower unit shipments CE á Higher adoption of Dolby Atmos and Dolby Vision across devices, partially offset by lower unit shipments Other ßà Higher Dolby Cinema revenue due to more screens being open and strong box office performance in fiscal 2022, partially offset by lower gaming and automotive revenue Products and Services Products revenue is generated from the sale of audio and imaging hardware and software products for the cinema, television, broadcast and entertainment industries.
Fiscal Year Ended Change Licensing September 29, 2023 September 30, 2022 $ % Revenue $1,197,930 $1,164,533 $33,397 3% Percentage of total revenue 92% 93% Cost of licensing 64,890 61,597 3,293 5% Gross margin 1,133,040 1,102,936 30,104 3% Gross margin percentage 95% 95% Fiscal Year Ended Licensing Revenue By Market September 29, 2023 September 30, 2022 Broadcast $ 451,719 38 % $ 433,992 37 % Mobile 243,897 20 % 238,735 21 % CE 170,197 14 % 186,285 16 % PC 124,362 10 % 151,079 13 % Other 207,755 18 % 154,442 13 % Total licensing revenue $ 1,197,930 100 % $ 1,164,533 100 % 38 Table of Contents Factor Licensing Revenue Gross Margin Other á Higher revenue from imaging patent pool administrative fees, higher revenue due to gaming console shipments, higher automotive revenue driven by higher adoption of Dolby Atmos ßà No significant fluctuations PC â Lower revenue driven by lower shipments and lower recoveries, primarily from foundational audio technologies, partially offset by higher revenue from our imaging patent programs Broadcast á Higher revenue from our imaging patent programs, partially offset by lower unit shipments primarily in STBs, impacting revenue from foundational audio technologies CE â Lower revenue from unit shipments in DMAs, and lower revenue due to timing of minimum volume commitments, primarily impacting revenue from foundational audio technologies, partially offset by higher revenue from our imaging patent programs Mobile á Higher revenue from new licensees in our audio patent programs and increased adoption of Dolby Vision, partially offset by lower revenue from minimum volume commitments Products and Services Products revenue is generated from the sale of audio and imaging hardware and software products for the cinema, television, broadcast and entertainment industries.
Fiscal Year Ended Change Other income/(expense) September 30, 2022 September 24, 2021 $ % Interest income $6,568 $3,493 $3,075 88% Interest expense (394) (479) 85 (18)% Other income, net 2,500 7,108 (4,608) (65)% Total $8,674 $10,122 $(1,448) (14)% 40 Table of Contents Category Key Drivers Interest Income á Higher yields on current year investment balances due to increased interest rates Other Income â Lower income primarily due to lower yields on our SERP balances in the current year Income Taxes Our effective tax rate is based on our fiscal year results and is affected by several factors.
Fiscal Year Ended Change Other income/(expense) September 29, 2023 September 30, 2022 $ % Interest income $28,086 $6,174 $21,912 355% Other income, net 6,214 2,500 3,714 149% Total $34,300 $8,674 $25,626 295% Category Key Drivers Interest Income á Higher yields on current year investment balances due to increased interest rates Other Income á Higher income primarily due to higher yields on our SERP balances in the current year, and higher foreign currency transaction gains Income Taxes Our effective tax rate is based on our fiscal year results and is affected by several factors.
In fiscal 2022, Cosmic Byte, Alienware, and Zebronics launched headsets that support Dolby Atmos. We also generate revenue from the automotive industry primarily through disc playback devices as well as other elements of the entertainment system, and more recently through the adoption of Dolby Atmos Music.
We also generate revenue from the automotive industry through disc playback devices as well as other elements of the entertainment system, and through the adoption of Dolby Atmos Music. In fiscal 2023, Mercedes-Benz adopted Dolby Atmos and Dolby Atmos Music in several of its car models, and continues to add our technologies to more models and ship more models globally.
These offerings have not been in the market as long as our foundational audio technologies, thus revenue growth is primarily driven by increased adoption and the addition of new licensees. The availability of content in Dolby formats is an important part of creating the ecosystems that drive adoption of our technologies within a wide range of devices.
The remaining portion of our licensing revenue is derived from offerings such as Dolby Vision, Dolby Atmos, our imaging patents, and Dolby Cinema. Dolby Vision and Dolby Atmos have not been in the market as long as our foundational audio technologies, thus revenue growth is primarily driven by increased adoption and the addition of new licensees.
The future implications of these macroeconomic conditions on our business, results of operations and overall financial position remain uncertain. Across all of our markets, these conditions may affect consumer demand for devices and services, our partners’ ability to manufacture devices, and the timing of adoption of our technologies into new products by partners and licensees.
These conditions may impact consumer demand for devices and services and our partners’ ability to manufacture devices. Further, we may be negatively impacted by delays in transaction cycles and our recoveries efforts due to the noted macroeconomic conditions and related uncertainty. The future implications of these macroeconomic conditions on our business, results of operations and overall financial position remain uncertain.
For additional information related to effective tax rates, see Note 12 " Income Taxes" to our consolidated financial statements. Fiscal Year Ended September 30, 2022 September 24, 2021 Provision for income taxes $(31,381) $(36,689) Effective tax rate 15% 10% Factor Impact On Effective Tax Rate Stock-based Compensation á Lower benefit related to the settlement of stock-based awards.
Fiscal Year Ended September 29, 2023 September 30, 2022 Provision for income taxes $(48,409) $(31,381) Effective tax rate 19% 15% 41 Table of Contents Factor Impact On Effective Tax Rate Stock-based Compensation á Lower benefit related to the settlement of stock-based awards. Research and Development á Lower benefit from R&D tax credits.
We believe that these sources will be sufficient to satisfy our currently anticipated cash requirements through at least the next twelve months. As of September 30, 2022, we had cash and cash equivalents of $620.1 million, which mainly consisted of cash and highly-liquid money market funds.
LIQUIDITY, CAPITAL RESOURCES, AND FINANCIAL CONDITION Our principal sources of liquidity are cash, cash equivalents, and investments, as well as cash flows from operations. We believe that these sources will be sufficient to satisfy our currently anticipated cash requirements through at least the next twelve months.
We continue to focus on expanding the availability of Dolby technologies to new devices. In fiscal 2022, Samsung, Hisense, Prism+, and Bose all launched new soundbar models that support Dolby Atmos.
We continue to focus on expanding the availability of Dolby technologies to new devices. At CES in January 2023, LG and Samsung each announced 2023 soundbar lineups that support Dolby Atmos. Also in fiscal 2023, Sonos launched their premium smart speaker, the Sonos Era 300, with Dolby Atmos.
Many such partners have continued to expand their support of the combined Dolby Vision and Dolby Atmos experience. For example, in fiscal 2022, LG launched new TVs that support Dolby Vision, Dolby Vision IQ, and Dolby Atmos, and Samsung launched new TVs that support Dolby Atmos.
Many such partners continue to expand their support of the 33 Table of Contents combined Dolby Vision and Dolby Atmos experience. For example, at CES in January 2023, LG announced its TV lineup that supports Dolby Vision and Dolby Atmos, and Hisense announced several new UHD TVs and Laser TVs that support Dolby Vision and Dolby Atmos.
For additional information on our Restructuring programs, see Note 13 " Restructuring " to our consolidated financial statements.
For additional information related to effective tax rates, see Note 12 " Income Taxes" to our consolidated financial statements.
The following are highlights from our fiscal 2022 and key challenges related to audio and imaging licensing, by market. 32 Table of Contents Broadcast Highlights: We have an established global presence with respect to our DD+ and HE-AAC audio technologies in broadcast services and devices.
Further discussion of the potential impacts of these key challenges on our business can be found in Part I, Item 1A " Risk Factors ." Broadcast Highlights: We have an established global presence with respect to our DD+ and HE-AAC audio technologies in broadcast services and devices.
Key Challenges: Although the premium large format market for the cinema industry has been growing, Dolby Cinema competes with other existing offerings. Our success depends on our partners and their success, 34 Table of Contents and our ability to differentiate our offering, deploy new sites in accordance with plans, and attract and retain a global viewing audience.
Our success depends on our partners and their success, and our ability to differentiate our offering, deploy new sites, and attract and retain a global viewing audience. In addition, the success of our Dolby Cinema offering is tied to global box office performance generally.
In addition, recent shortages of certain semiconductor components could result in lower implementation of our technologies in vehicles by automotive manufacturers. If OEMs do not incorporate our technologies in current and future products, our revenue will face downward pressure. Additionally, we face geopolitical challenges including changes in diplomatic and trade relationships, trade protection measures, and import or export licensing requirements.
Our revenue growth will be impacted if OEMs do not incorporate our technologies in their latest products, which can be more prominent in industries with longer development cycles such as the automotive industry. Additionally, we face geopolitical challenges including changes in diplomatic and trade relationships, trade protection measures, and import or export licensing requirements.
As we see an increase in new local content, we increase our value proposition for adoption of Dolby Vision and Dolby Atmos across devices in all market segments. We have also enabled a broader range of content, such as music, gaming, live sports, and user-generated content.
For example, in fiscal 2023, Max launched its top tier service with Dolby Vision and Dolby Atmos. These streaming services launch local content in Dolby formats internationally. As we see an increase in new local content, we increase our value proposition for adoption of Dolby Vision and Dolby Atmos across devices in all market segments.
Dolby Cinema Highlights: We continue to expand our global presence for Dolby Cinema, with over 280 open Dolby Cinema sites located in the U.S. and internationally, subject to capacity restrictions per local regulations.
Included within Other Markets is also licensing revenue from audio and imaging technologies used to create Dolby experiences through Dolby Cinema. Dolby Cinema Highlights: We continue to expand our global presence for Dolby Cinema, with sites located in the U.S. and internationally.
Other factors, such as global supply constraints or device lifecycles, may also impact revenue from these technologies. In the future, we expect revenue from our foundational audio technologies to generally reflect market trends in device shipments. The remaining portion of our licensing revenue is derived from offerings such as Dolby Vision, Dolby Atmos, our imaging patents, and Dolby Cinema.
Our revenue from these technologies is primarily driven by device shipments from licensees, and as such, is impacted by consumer spending. In the future, we expect revenue from our foundational audio technologies to generally reflect market trends in device shipments.
Further, in certain countries, such as China, we face difficulties enforcing our contractual and IP rights, including instances in which our licensees fail to accurately report the shipment of products using our technologies. Additionally, we face geopolitical challenges including changes in diplomatic and trade relationships, trade protection measures, and import or export licensing requirements.
Further, in certain countries, we face difficulties enforcing our contractual and IP rights, including instances in which our licensees fail to accurately report the shipment of products using our technologies. The availability of content in Dolby formats is an important part of creating the ecosystems that drive adoption of our technologies within a wide range of devices.
Fiscal Year Ended Change September 30, 2022 September 24, 2021 $ % Research and development $261,174 $253,640 $7,534 3% Percentage of total revenue 21% 20% Category Key Drivers Compensation & Benefits â Lower costs of $10.5 million due to our annual bonus program, partially offset by higher salaries expense due to the extra week in the current fiscal year Stock-based Compensation á Higher costs of $7.0 million due to increased fair value of RSUs Systems, Telecommunications and Computer Equipment á Higher costs of $4.1 million primarily due to higher cloud hosting costs Sales and Marketing S&M expenses consist primarily of employee compensation and benefits expenses, stock-based compensation, marketing and promotional expenses for events such as trade shows and conferences, marketing campaigns, travel-related expenses, consulting fees, facilities costs, depreciation and amortization, information technology expenses, and legal costs associated with the protection of our IP.
Fiscal Year Ended Change Products and Services September 29, 2023 September 30, 2022 $ % Revenue $101,814 $89,260 $12,554 14% Percentage of total revenue 8% 7% Cost of products and services 87,676 79,763 7,913 10% Gross margin 14,138 9,497 4,641 49% Gross margin percentage 14% 11% Factor Products and Services Revenue Gross Margin Products á Increased demand for cinema equipment as the exhibitor market continues to recover á Higher cinema product sales partially offset by excess and obsolescence reserve Services ßà No significant fluctuations ßà No significant fluctuations Operating Expenses Research and Development R&D expenses consist primarily of employee compensation and benefits expenses, stock-based compensation, external contractor costs, depreciation and amortization, facilities costs, costs for outside materials, and information technology expenses. 39 Table of Contents Fiscal Year Ended Change September 29, 2023 September 30, 2022 $ % Research and development $271,523 $261,174 $10,349 4% Percentage of total revenue 21% 21% Category Key Drivers Compensation & Benefits á Higher costs of $6.8 million primarily due to higher variable compensation Travel á Higher costs of $2.5 million due to increased company travel as a result of fewer COVID-19 travel restrictions, and increased in-person presence at certain events Sales and Marketing S&M expenses consist primarily of employee compensation and benefits expenses, stock-based compensation, marketing and promotional expenses for events such as trade shows and conferences, marketing campaigns, travel-related expenses, contractor fees, facilities costs, depreciation and amortization, information technology expenses, and legal costs associated with the protection of our IP.
Additionally, the effects of COVID-19 such as the closure of cinemas and public health mandates have had a negative impact on Dolby Cinema attendance. As demand continues to recover, supply chain constraints may impact our ability to provide cinema products and services to our customers. COVID-19 has also negatively impacted the financial health of our cinema customers and partners.
In addition, supply chain constraints may impact our ability to provide cinema products and services to our customers. COVID-19 has also negatively impacted the financial health of our cinema customers and partners. In addition, the recently concluded strikes by the Writers Guild of America and SAG-AFTRA effectively halted the production, release and promotion of certain films for an extended period.
Category Key Drivers Other Miscellaneous Expenses á Higher costs of $34.4 million related to the resolution of the legal matter discussed above Credit Loss Expense á Higher credit loss expense of $8.4 million primarily due to aging license receivable balances Compensation & Benefits â Lower costs of $6.3 million primarily due to our annual bonus program, partially offset by higher costs of $5.9 million for higher salaries expense primarily due to increased headcount and the extra week in the current fiscal year Gain on Sale of Assets Fiscal Year Ended Change September 30, 2022 September 24, 2021 $ % Gain on sale of assets $— $(13,871) $13,871 100% Percentage of total revenue —% (1)% In fiscal 2021, we finalized the sale of a property, which included land and a building, resulting in a gain of $13.9 million, which was recorded to gain on sale of assets o n the consolidated statements of operations.
Category Key Drivers Other Miscellaneous Expenses â Lower costs of $34.4 million related to the resolution of the legal matter discussed above, in the prior year Credit Loss Expense â Lower credit loss expense of $6.3 million primarily due to higher collections Compensation & Benefits á Higher costs of $5.3 million primarily due to higher variable compensation, higher payroll salaries expense of $4.3 million due to increased headcount due to the MPEG LA (as defined below) acquisition Legal, Professional, and Contractors á Higher costs of $2.2 million primarily due to transaction costs resulting from the MPEG LA acquisition 40 Table of Contents Restructuring Charges Restructuring charges recorded as operating expenses in our consolidated statements of operations represent costs associated with separate restructuring plans implemented in various fiscal periods.
Further discussion of the potential impacts of COVID-19 on our business can be found in Part I, Item 1A " Risk Factors ." MACROECONOMIC CONDITIONS The current macroeconomic environment has negatively impacted many of our licensees and that directly impacts our financial results.
We encourage investors and others to review the information we make public through these channels, as such information could be deemed to be material information. MACROECONOMIC CONDITIONS The current macroeconomic environment has negatively impacted many of our licensees and that directly impacts our financial results.
Removed
We encourage investors and others to review the information we make public through these channels, as such information could be deemed to be material information. EXECUTIVE SUMMARY COVID-19 The COVID-19 pandemic triggered worldwide shutdowns, supply chain constraints, and other disruptions which in turn have negatively affected the global economy, including consumer purchasing activity.
Added
The macroeconomic conditions also impart substantial uncertainty into our operating environment, which presents additional challenges for our business. These factors and the related uncertainty may cause delays or a decrease in the adoption or implementation of our technologies into new products by partners and licensees.
Removed
It is unclear how demand for consumer products that include our technologies may change in response to the ongoing pandemic. The issues and circumstances relating to COVID-19 continue to change and are difficult to predict. We continue to monitor the evolving situation and the impact on our business.
Added
We continue to monitor the evolving macroeconomic environment and the impact on our business.
Removed
The outbreak of COVID-19 has also affected many of our partners, resulting in the disruption of consumer products' supply chains, shortages of certain semiconductor components, and delays in shipments, product development, and product launches. Consumer demand for products that include our technologies may continue to be negatively impacted due to economic uncertainty resulting from COVID-19.
Added
We also seek to expand the reach of our technology by incorporating it into industry standards and offering licenses to our patents covering that technology, along with our partners, through patent pools. The following is a discussion of the key markets that we address and the various Dolby technologies and solutions that serve these markets.
Removed
These factors may cause delays in the adoption of our technologies by partners. Further, we may be negatively impacted by delays in transaction cycles and our recoveries efforts due to ongoing global restrictions related to the pandemic. The cinema market has been, and we expect to continue to be, adversely impacted by COVID-19.
Added
Our audio technologies offered jointly through patent pools are incorporated into the AAC, HE-AAC, xHE-AAC, MPEG H and Opus standards for audio, and the AVC, HEVC, VVC and AV1 standards for imaging.
Removed
At various times, our exhibition partners and customers have had to either partially or fully discontinue operations. Box office receipts at Dolby Cinema sites and general demand for our cinema products and services by our broader exhibition partners have been, and we expect to remain, lower than that of pre-pandemic levels.
Added
Revenue from 32 Table of Contents technologies licensed through our patent licensing model is driven primarily by our royalty share within patent pools, licensee penetration, device shipments, and the introduction of new standardized technologies and patent programs. Factors such as global supply constraints or device lifecycles may also impact licensing revenue generally.
Removed
Most cinema locations have been permitted to resume operations, but many such locations are operating under restricted capacity. Further, the spread of variants of SARS-CoV-2 may result in renewed government responses.
Added
In the current fiscal year: • In music, the Belgian music festival Tomorrowland streamed its festival in Dolby Atmos, and released replay footage of the event on Apple Music in Dolby Atmos.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

14 edited+0 added−0 removed7 unchanged
Biggest changeIn addition, we had both short and long-term investments of $291.7 million, which consisted primarily of corporate bonds, municipal debt securities, government bonds, commercial paper, U.S. agency securities, and certificates of deposit. Our investment policy is focused on the preservation of capital and support for our liquidity requirements.
Biggest changeIn addition, we had both short and long-term investments of $237.0 million, which consisted of corporate bonds, government bonds, municipal debt securities, U.S. agency securities, commercial paper, and certificates of deposit. Our investment policy is focused on the preservation of capital and support for our 44 Table of Contents liquidity requirements.
For these forward contracts, duration modeling was used where hypothetical changes were made to the spot rates of the currency. A 10% increase in the value of the U.S. dollar would lead to a decrease in the fair value of our financial instruments by $7.1 million.
For these forward contracts, duration modeling was used where hypothetical changes were made to the spot rates of the currency. A 10% increase in the value of the U.S. dollar would lead to a decrease in the fair value of our financial instruments by $7.0 million.
Foreign Currency Exchange Risk We maintain business operations in foreign countries, most significantly in Australia, China, Germany, the Netherlands, Poland, and the U.K.
Foreign Currency Exchange Risk We maintain business operations in foreign countries, most significantly in Australia, China, Germany, Ireland, Poland, and the U.K.
A sensitivity analysis was performed on all of our foreign currency forward contracts as of September 30, 2022. This sensitivity analysis was based on a modeling technique that measures the hypothetical market value resulting from a 10% shift in the value of exchange rates relative to the U.S. dollar.
A sensitivity analysis was performed on all of our foreign currency forward contracts as of September 29, 2023. This sensitivity analysis was based on a modeling technique that measures the hypothetical market value resulting from a 10% shift in the value of exchange rates relative to the U.S. dollar.
Additionally, foreign exchange rate fluctuations on transactions denominated in currencies 44 Table of Contents other than the functional currency result in gains or losses that are reflected in our consolidated statements of operations.
Additionally, foreign exchange rate fluctuations on transactions denominated in currencies other than the functional currency result in gains or losses that are reflected in our consolidated statements of operations.
Under the policy, we invest in highly rated securities with a minimum credit rating of A- while limiting the amount of credit exposure to any one issuer other than the U.S. government. As of September 30, 2022, the weighted-average credit quality of our investment portfolio was AA+, with a weighted-average maturity of approximately ten months.
Under the policy, we invest in highly rated securities with a minimum credit rating of A- while limiting the amount of credit exposure to any one issuer other than the U.S. government. As of September 29, 2023, the weighted-average credit quality of our investment portfolio was AA-, with a weighted-average maturity of approximately eleven months.
The contracts hedging foreign currency denominated operating expenses are carried at fair value with changes in the fair value recorded to other comprehensive income until the hedged expenses are reported in our consolidated statements of operations. As of September 30, 2022, the outstanding derivative instruments had maturities of equal to or less than 12 months.
The contracts hedging foreign currency denominated operating expenses are carried at fair value with changes in the fair value recorded to other comprehensive income until the hedged expenses are reported in our consolidated statements of operations. 45 Table of Contents As of September 29, 2023, the outstanding derivative instruments had maturities of equal to or less than 12 months.
Conversely, a 10% decrease in the value of the U.S. dollar would result in an increase in the fair value of these financial instruments by $7.1 million. 45 Table of Contents
Conversely, a 10% decrease in the value of the U.S. dollar would result in an increase in the fair value of these financial instruments by $7.0 million. 46 Table of Contents
As of September 30, 2022 and September 24, 2021, the total notional amounts of outstanding contracts were $130.8 million and $51.0 million, respectively. For additional information related to our foreign currency forward contracts, see Note 2 " Summary of Significant Accounting Policies " to our consolidated financial statements.
As of September 29, 2023 and September 30, 2022, the total notional amounts of outstanding contracts were $134.8 million and $130.8 million, respectively. For additional information related to our foreign currency forward contracts, see Note 2 " Summary of Significant Accounting Policies " to our consolidated financial statements.
Amounts reclassified are recorded to the same line item in the consolidated statements of operations as the impact of the hedge transaction, concurrently with the hedged costs. The pre-tax loss attributed to the effective portion of cash flow hedges recognized in AOCI was $2.6 million in fiscal 2022.
Amounts reclassified are recorded to the same line item in the consolidated statements of operations as the impact of the hedge transaction, concurrently with the hedged costs. The pre-tax gain attributed to the effective portion of cash flow hedges recognized in AOCI was $4.9 million in fiscal 2023.
Based on our investment portfolio balance as of September 30, 2022, hypothetical changes in interest rates of 1% and 0.5% would have an impact on the carrying value of our portfolio of approximately $2.3 million and $1.1 million, respectively.
Based on our investment portfolio balance as of September 29, 2023, hypothetical changes in interest rates of 1% and 0.5% would have an impact on the carrying value of our portfolio of approximately $1.8 million and $0.9 million, respectively.
The pre-tax effective portion of the loss reclassified to the consolidated statements of operations was $2.1 million in fiscal 2022, and the pre-tax effective portion of the gain reclassified to the consolidated statements of operations was $9.0 million in fiscal 2021.
The pre-tax effective portion of the losses reclassified to the consolidated statements of operations was $0.7 million in fiscal 2023, and the pre-tax effective portion of the loss reclassified to the consolidated statements of operations was $2.1 million in fiscal 2022.
The pre-tax loss attributed to the effective portion of cash flow hedges recognized in AOCI was $12.7 million in fiscal 2021.
The pre-tax loss attributed to the effective portion of cash flow hedges recognized in AOCI was $2.6 million in fiscal 2022.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Interest Rate Sensitivity As of September 30, 2022, we had cash and cash equivalents of $620.1 million, which consisted of cash and highly liquid money market funds and U.S. agency securities.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Interest Rate Sensitivity As of September 29, 2023, we had cash and cash equivalents of $745.4 million, which consisted of cash and highly liquid money market funds.

Other DLB 10-K year-over-year comparisons