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What changed in Dolby Laboratories, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Dolby Laboratories, Inc.'s 2023 and 2024 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 2024 report.

+333 added−318 removedSource: 10-K (2024-11-19) vs 10-K (2023-11-17)

Top changes in Dolby Laboratories, Inc.'s 2024 10-K

333 paragraphs added · 318 removed · 211 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeRESEARCH AND DEVELOPMENT We conduct R&D activities at numerous locations in the U.S. and internationally. Dolby’s history of producing innovative technology has created many forms of IP. This IP generates licensing revenue that enables us to fund and pursue further innovation. The majority of our R&D resources are focused on developing leading audio and imaging technologies for consumer entertainment.
Biggest changeThis IP generates licensing revenue that enables us to fund and pursue further innovation. Most of our R&D resources are focused on audio and video technologies for consumer entertainment. A significant portion of the R&D budget is dedicated to forward looking research because innovation is a core and critical function at Dolby.
We actively pursue new applications to expand our patent portfolio to address new technological innovations, and we also make strategic acquisitions of technology and patents from time to time. We have multiple patents covering aspects and improvements for many of our technologies. We have approximately 1,600 trademark registrations throughout the world for a variety of wordmarks, logos, and slogans.
We actively pursue new applications to expand our patent portfolio to address new technological innovations, and we also make strategic acquisitions of technology and patents from time to time. We have multiple patents covering aspects and improvements for many of our technologies. We have approximately 1,500 trademark registrations throughout the world for a variety of wordmarks, logos, and slogans.
Our SEC reports can be accessed through the Investor Relations section of our website at www.investor.dolby.com. The information found on our website is not part of this or any other report we file with or furnish to the SEC. The SEC also maintains a website that contains our SEC filings at www.sec.gov. 11 Table of Contents
Our SEC reports can be accessed through the Investor Relations section of our website at www.investor.dolby.com. The information found on our website is not part of this or any other report we file with or furnish to the SEC. The SEC also maintains a website that contains our SEC filings at www.sec.gov. 12 Table of Contents
We have transitioned a number of our DD licensees to DD+ technologies, an extension of our DD technologies, whose patents generally expire later than the DD patents. We pursue a general practice of filing patent applications for our technologies in the United States ("U.S.") and foreign countries where our customers manufacture, distribute, or sell licensed products.
We have transitioned a number of our DD licensees to DD+ technologies, an extension of our DD technologies, whose patents generally expire later than the DD patents. We pursue a general practice of filing patent applications for our technologies in the United States and foreign countries where our customers manufacture, distribute, or sell licensed products.
We protect our IP rights both domestically and internationally. From time to time, OEMs have failed to report or have underreported shipments of their products that incorporate our technologies. We have also had problems with implementation licensees selling ICs with our technologies to third parties that are not system licensees. We anticipate that such problems will continue to occur.
We protect our IP rights both domestically and internationally. From time to time, OEMs have failed to report or have underreported shipments of their products that incorporate our technologies. We have experienced implementation licensees selling ICs with our technologies to third parties that are not system licensees. We anticipate that such problems will continue to occur.
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.
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 end products where DD is widely used include automobiles, TVs, and soundbars.
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.
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 end products that include our audio and video technologies also include technologies developed by our competitors.
We make available on our website, free of charge, our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any amendments to those reports, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.
We make available on our website our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any amendments to those reports, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.
We promote our solutions and our brand through industry events such as trade-shows, film festivals, movie premieres, product launches, as well as through our website, public relations, direct marketing, co-marketing programs, and social media.
We promote our solutions and our brand through industry events such as tradeshows, film festivals, movie premieres, product launches, as well as through our website, public relations, direct marketing, co-marketing programs, and social media.
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.
Our currently issued patents expire at various times through December 2047. Some of our patents relating to DD technologies have expired, and others will expire over the next several years.
Within the Results of Operations section of Part II, Item 7 " Management's Discussion and Analysis of Financial Condition and Results of Operations, " revenue attributable to previous periods' usage including settlements are collectively referred to as "recoveries." Such recoveries have become a recurring element of our business and are particularly subject to fluctuation and unpredictability.
Within the Results of Operations section of Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations ," revenue attributable to previous periods' usage including settlements are collectively referred to as "recoveries." Recoveries are a reoccurring element of our business and are subject to fluctuation and unpredictability.
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 .
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. We maintain more than 20 sales offices in key regions around the globe.
Details of this work are available in our Sustainability Report, and we encourage you to read it on our website and learn more. Nothing in our Sustainability Report shall be deemed incorporated by reference into this Annual Report on Form 10-K.
Details of this work, along with our sustainability, social impact, employee wellbeing, and inclusion and belonging initiatives, are included in our Sustainability Report, and we encourage you to read it on our website to learn more. Nothing in our Sustainability Report shall be deemed incorporated by reference into this Annual Report on Form 10-K.
Certain foreign governments, particularly in China, have advanced arguments under their competition laws that exert downward pressure on royalties for IP, which can impact the licensing fees that we are able to collect. The regulatory enforcement activities in such jurisdictions can be unpredictable, in some cases because these jurisdictions have only recently implemented competition laws.
Certain foreign governments and industry participants have advanced arguments under competition laws that exert downward pressure on royalties for IP, which can impact the licensing fees that we are able to collect. The regulatory enforcement activities in such jurisdictions can be unpredictable.
In addition to comprehensive health benefits and the ESPP, depending on the location, employees may also enjoy free or subsidized fitness programs, commuter benefits, wellness credits, tuition reimbursement opportunities, and personal development courses, among other benefits.
In addition to comprehensive health benefits and the ESPP, depending on the location, employees may also enjoy free or subsidized fitness programs, commuter benefits, wellness credits, tuition reimbursement opportunities, and personal development courses, among other benefits. Board Oversight of Human Capital Management Through our Compensation Committee, our Board of Directors provides oversight of human capital matters.
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.
PRODUCT MANUFACTURING Our hardware 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.
We also provide PCS for products sold and equipment installed at Dolby Cinema theaters operated by exhibitor partners and support the implementation of our technologies into products manufactured by our licensees.
We also provide PCS for products sold and equipment installed at Dolby 8 Table of Contents Cinema theaters operated by exhibitor partners and support the implementation of our technologies into products manufactured by our licensees. Revenue Generation We generate revenue from Dolby Cinema Products by selling and leasing products to exhibitors, excluding Dolby Cinemas, and offering PCS to exhibitors .
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.
The following table presents the end market composition of revenue from our licensing business for all periods presented: Fiscal Year Ended Market September 27, 2024 September 29, 2023 September 30, 2022 Main Components of Each Category Broadcast 35% 38% 37% Televisions and STBs Mobile 20% 20% 21% Smartphones and Tablets CE 14% 14% 16% DMAs, Blu-ray Disc devices, AVRs, Soundbars, and DVDs PC 12% 10% 13% Windows and macOS operating systems and devices Other 19% 18% 13% Dolby Cinema, Gaming consoles, Automotive, and Patent pool administrative fees Total 100% 100% 100% INTELLECTUAL PROPERTY Our base of IP assets includes patents, trademarks, copyrights, and trade secrets developed based on our technical expertise.
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.
In addition, we offer various services to support theatrical and television production for cinema, broadcast, and home entertainment, including equipment training and maintenance, mixing room alignment, equalization, as well as audio, color, and light image calibration.
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.
We look for new and innovative ways to apply our expertise in the science of sight and sound to expand the reach of our technologies to new content, media, devices and audiences.
Our principal corporate offices are located at 1275 Market Street, San Francisco, California 94103. Our telephone number is (415) 558-0200. Our website is www.dolby.com.
CORPORATE AND AVAILABLE INFORMATION We were founded in London, England in 1965 and incorporated in the State of New York in 1967. We reincorporated in California in 1976 and reincorporated in Delaware in September 2004. Our principal corporate offices are located at 1275 Market Street, San Francisco, California 94103. Our telephone number is (415) 558-0200. Our website is www.dolby.com.
Implementation licensees incorporate our technologies into their chipsets that, once approved by Dolby, are available for purchase from implementation licensees by OEMs for use in end-user products. Implementation licensees only pay us a nominal initial fee on contract execution as consideration for the ongoing services that we provide to assist in their implementation process.
These semiconductor licensees pay us a nominal initial fee for use of our technology and the services that we provide in their implementation process. Second, we license OEMs, who are then authorized to purchase chips from the chip makers, and incorporate those chips into Dolby-approved products.
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.
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. 10 Table of Contents COMPETITION The entertainment industry is highly competitive, and we face aggressive competition in all areas of our business.
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 apply our understanding of the human senses, audio, and imaging engineering by collaborating with music, TV and movie creators, and innovating in emerging categories like user-generated content, sports and podcasts, to develop and update technologies aimed at enabling and improving how people experience and interact with entertainment content. Delivering Superior Creative Experiences.
We sell our solutions primarily using an internal sales organization to various customers in the markets where we operate.
SALES AND MARKETING Our marketing efforts focus on cultivating strong relationships with consumers, creators and our partners in an effort to share how Dolby’s innovations in product and services transform entertainment experiences. We sell our solutions primarily using an internal sales organization to various customers in the markets where we operate.
We promote the use of our solutions as creative tools, and provide our products, services, and technologies to filmmakers, musical artists, sound mixers, and other content creators and providers. Our tools help showcase the quality and impact of their efforts and intent, which in turn may generate market demand. Delivering Superior Experiences.
We promote the use of our solutions as creative tools that allow filmmakers, musical artists, sound mixers, and other content creators and providers to fully express their creative intent to their audiences. Our technologies and solutions significantly improve delivery and playback so that consumers may enjoy richer, clearer, and immersive sound and sight experiences.
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.
Refer to Note 2 " Summary of Significant Accounting Policies " and Note 3 " Revenue Recognition " for further detail.
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.
As of September 27, 2024, we had 2,080 employees worldwide, of whom 1,018 employees were based outside of the U.S. None of our employees are subject to a collective bargaining agreement. Compensation and Benefits We offer competitive compensation (including salary, incentive bonus, and equity) and benefits packages in each of our locations around the globe.
Collaboration Arrangements Dolby Cinema: We partner with exhibitors to deliver a premium cinema offering with Dolby Vision and Dolby Atmos at new and pre-existing venues. We receive revenue at Dolby Cinema sites through a share of box office receipts, which is recognized as licensing revenue.
We typically provide Dolby Cinema exhibitors with the requisite Dolby technology at minimal or no upfront cost and generate revenue from these sites through a share of box office receipts, which we recognize as licensing revenue.
The Board and Board committees are supported in these efforts by our management team, People, Legal and Compliance. 10 Table of Contents CORPORATE AND AVAILABLE INFORMATION We were founded in London, England in 1965 and incorporated in the State of New York in 1967. We reincorporated in California in 1976 and reincorporated in Delaware in September 2004.
Our Nominating and Governance Committee works with the Board of Directors on management succession planning. The 11 Table of Contents Board and Board committees are supported in these efforts by our management team and People, Legal and Compliance teams.
Products We design and manufacture audio and imaging hardware and software products for the cinema, television, broadcast, and entertainment industries. Distributed in approximately 90 countries, these products are used in content creation, distribution, and playback to enhance image and sound quality, and improve transmission and playback.
PRODUCTS & SERVICES We design and manufacture audio, imaging, accessibility, and other hardware and software solutions primarily for the cinema, with occasional applications in the television, broadcast, and live entertainment industries. Cinema Imaging Products include digital cinema servers used to load, store, decrypt, decode, watermark and playback digital film files for presentation on cinema projectors.
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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.
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ITEM 1. BUSINESS OVERVIEW Founded in 1965, Dolby Laboratories is in the business of improving the entertainment experience by inventing and innovating technology that advances audio and video. We enable highly compelling experiences in movies and TV shows, music, sports and more by meeting the needs of content creators, distributors and consumer electronics manufacturers.
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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.
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We have been at the forefront of multiple audio and video revolutions over the last sixty years including the transitions from mono to stereo then surround, analog to digital, and terrestrial broadcasting to streaming.
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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.
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Our strength and durability stem from our ability to combine our expertise in signal processing with our close relationships with artists and other industry experts to continually bring to the creative community technology that allows them to express themselves in new and compelling ways.
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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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Dolby is synonymous with high quality entertainment from a consumer perspective and has become critical to makers of consumer electronic devices as our technology is an important component of the creation and delivery of audio and video content.
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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.
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While some of our technology represents relatively elemental functions like audio signal compression that enable playback, we also offer technology that is innovating in emerging categories including spatial audio and high contrast video.
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Licensing We license our technologies to a range of customers who incorporate them into their products for enhanced audio and imaging functionality for content playback in movies, TV, music, and gaming. Our key technologies are summarized in the table below.
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We derive the majority of our revenue from licensing audio and video technology to electronics manufacturers, and a lesser portion of our revenue by offering premium audio and video technologies to cinema exhibitors. STRATEGY Key elements of our strategy include: Advancing the Science of Sight and Sound.
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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.
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Building Ecosystems that Benefit from and Sustain Demand for our Solutions. We work closely with content creators, content distributors, and device makers to enable them to deliver great experiences to their audiences, creating a virtuous cycle of product development, improved experiences, and sustained demand for our solutions.
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AVC A digital video codec with high bandwidth efficiency used in a wide range of media devices. Dolby AC-4 A next-generation digital audio coding technology that increases transmission efficiency while delivering new audio experiences, including Dolby Atmos, to a wide range of playback devices.
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We also work closely with technology developers to create and promote standardized technologies that enable content to be enjoyed any place, any time on a broad range of devices. Expanding the Reach of our Technologies .
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Dolby Atmos An object-oriented audio technology for cinema and a wide range of media devices that allows sound to be precisely placed and moved anywhere in the listening environment including the overhead dimension. Dolby Atmos provides an immersive experience that can be provided via multiple Dolby audio coding technologies.
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PRODUCTS AND REVENUE GENERATION We generate most of our revenue by licensing technology, our brand, and patents to device manufacturers, and selling cinema hardware and services to movie exhibitors. The following table presents a summary of the composition of our revenue for all periods presented.
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DD A digital audio coding technology that provides multichannel sound to a variety of media applications. DD+ An advanced digital audio coding technology that offers more efficient audio transmission for a wide range of media applications and devices. Dolby TrueHD A digital audio coding technology providing lossless encoding for premium quality media applications.
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Fiscal Year Ended Revenue September 27, 2024 September 29, 2023 September 30, 2022 Licensing 93% 92% 93% Products and services 7% 8% 7% Total 100% 100% 100% 4 Table of Contents LICENSING The two primary components of our licensing business are Branded Technologies which include Branded Audio Codecs, Dolby Atmos & Dolby Vision, and Patents, which include Audio Patents and Imaging Patents.
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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.
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We generated over 90% of our revenue in fiscal 2024 by licensing branded technology and patents that enable 1,000 electronic device manufacturers to enhance the audio and visual capabilities of their products by incorporating our technology.
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Most of our consumer entertainment licensing business consists of a two-tier licensing model whereby our decoding technologies, included in reference software and firmware code, are first provided under license to semiconductor manufacturers whom we refer to as "implementation licensees." Implementation licensees incorporate our technologies in ICs which they sell to OEMs of consumer entertainment products, whom we refer to as "system licensees." System licensees separately obtain licenses from us that allow them to make and sell end-user products using ICs that incorporate our technologies.
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Branded Technology Licensing Dolby branded technologies enable compelling audio and video experiences for consumers and offer seamless integration and reliability in devices in which they are incorporated.
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Revenue from these initial fees is recognized ratably over the contractual term as a component of licensing revenue. System licensees provide us with prototypes of products, or self-test results of products that incorporate our technologies.
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Dolby branded technologies enjoy widespread adoption, are occasionally mandated as standards, and are frequently considered fundamental to a wide variety of devices and types of entertainment content, including movies, TV shows, sports and music. Our branded technology solutions are complete solutions. We provide licensees with software, patent rights, and know how to enable content creation, delivery, and playback.
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Upon our confirmation that our technologies are optimally and consistently incorporated, the system licensee may buy ICs under a license for the same Dolby technology from our network of implementation licensees, and may further sell approved products to retailers, distributors, and consumers.
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Our branded offerings are distinguished by a focus on ease of adoption and deployment. Additionally, our device partners derive value from the use of the Dolby brand, which is synonymous with high quality entertainment. Dolby branded technologies are part of a unique and broad ecosystem that includes content creators, distributors (such as streaming media companies and broadcasters) and device manufacturers.
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For the use of our technologies, our system licensees pay an initial licensing fee as well as royalties, which represent the majority of the revenue recognized from these arrangements.
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Initial ecosystem adoption of these technologies yields a virtuous cycle. The more content made available using our branded technologies, the higher the likelihood that more devices embed our technology to facilitate the playback of that content. The more device manufacturers include our technology, the more content creators and distributors want to make content available in Dolby formats.
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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 .
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Branded Audio Codecs A significant portion of our branded licensing is centered on audio codecs: compression and decompression technologies for audio. The most important of these are the following: • DD+. DD+ is an advanced surround sound audio codec technology that enables the Dolby audio experience across home theaters, smartphones, operating systems, and browsers.
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We also license our technologies to software operating system vendors and to certain other OEMs that act as combined implementation and system licensees. These licensees incorporate our technologies in their software used on PCs, in mobile applications, or in ICs they manufacture and incorporate into their products.
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A versatile, bandwidth efficient and scalable home theater grade audio codec for A/V content, DD+ is designed to deliver up to 7.1 channels of surround sound across multiple platforms and content types. It is also able to carry channel-based configurations. • Dolby AC-4.
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As with the two-tier licensing model, the combined implementation and system licensee pays us an initial licensing fee in addition to royalties as determined by the mix of Dolby technologies used, the nature of the 5 Table of Contents implementations, and the volume of products using our technologies that are shipped, and is subject to the same quality control evaluation process.
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Dolby AC-4 is an audio codec that uses cutting edge compression to deliver equivalent experiences at half the bitrate of DD+, its predecessor. Dolby AC-4 matches the delivery method with the optimal configuration, enabling encodes tailored for broadcast or streaming and catering for headphone or speaker playback. It is also capable of delivering enhanced, user-configurable, and accessible experiences.
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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.
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The Dolby AC-4 coding system utilizes new aspects of object audio for features like dialogue enhancement or commentator substitution. Dolby Atmos and Dolby Vision Dolby Atmos and Dolby Vision are Dolby’s next generation of branded licensing products. They represent significant innovations, and enable consumers to enjoy increasingly immersive audio and video experiences.
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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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Dolby Atmos and Dolby Vision include encoding technologies that artists use to create more compelling and immersive audio and video experiences, as well as a set of decoding technologies that device manufacturers include on their devices to decode the content the artists have created. • Dolby Atmos.
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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.
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Dolby Atmos is the evolution of surround sound technology that creates a three-dimensional audio experience with object-based sound technology with up to 128 audio objects that can be positioned anywhere to allow for precise placement and movement of sound in a three dimensional space. This is achieved by adding height channels and spatially encoded digital signals.
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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.
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Dolby Atmos can adapt to varied playback environments and devices, including stereo headphones, speakers, receivers, TVs, soundbars, AVRs and automotive systems. 5 Table of Contents • Dolby Vision. Dolby Vision is a visual technology that uses HDR to improve the quality of images in movies, TV shows, sports and games.
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Additionally, some of our Dolby Cinema arrangements are classified as sales-type leases, and as a result are included in products sales.
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Dolby Vision is designed to make images appear more realistic by enhancing details in both dark and bright areas, and by increasing brightness, increasing the range of colors, and depicting deep blacks. It includes dynamic metadata that adjusts the picture based on a display's capabilities on a per-frame or per-shot basis.
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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.
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A device must support Dolby Atmos and Dolby Vision to fully experience content in Dolby Atmos and Dolby Vision. Ecosystems for these products flourish because creatives appreciate that creating content using Dolby Atmos and Dolby Vision tools enables them to express their creativity in unique and compelling ways. Distributors see value in distributing this differentiated content.
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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.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeWe face challenges protecting our IP in foreign jurisdictions, including: • Our ability to enforce our contractual and IP rights, especially in countries that do not recognize and enforce IP rights to the same extent as the U.S., Japan, Korea, and European countries do, which increases the risk of unauthorized use of our technologies; and • Because of limitations in the legal systems in many countries, our ability to obtain and enforce patents in many countries is uncertain, and we must strengthen and develop relationships with entertainment industry participants worldwide to increase our ability to enforce our IP and contractual rights without relying solely on the legal systems in the countries in which we operate. 18 Table of Contents OPERATIONS Reliance on key suppliers presents certain risks to our business, many of which are beyond our control .
Biggest changeAlso, because of limitations in the legal systems in many countries, our ability to obtain and enforce patents in many countries is uncertain, and we must strengthen and develop relationships with entertainment industry participants worldwide to increase our ability to enforce our IP and contractual rights without relying solely on the legal systems in the countries in which we operate. 19 Table of Contents OPERATIONS Reliance on key suppliers presents certain risks to our business, many of which are beyond our control .
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.
Prolonged 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.
Our business is dependent upon protecting our patents, trademarks, trade secrets, copyrights, and other IP rights, the loss or expiration of which may significantly impact our results of operations and financial condition. Effective IP rights protection, however, may not be available under the laws of every country in which our products and services and those of our licensees are distributed.
Our business is dependent upon protecting our patents, trademarks, trade secrets, copyrights, and other IP rights, the loss or expiration of which may significantly impact our results of operations and financial condition. Effective IP rights protection, however, may not be available under the laws of every country in which our products and those of our licensees are distributed.
Our reliance on distributors may impact sales of certain products and present compliance risks. We rely significantly on a global network of independent, regional distributors to market and distribute our cinema and broadcast products. Our distributor arrangements are non-exclusive and our distributors are not obligated to buy our products and can represent competing products.
Our reliance on distributors may impact sales of certain products and present compliance risks. We rely significantly on a global network of independent, regional distributors to market and distribute our cinema products. Our distributor arrangements are non-exclusive and our distributors are not obligated to buy our products and can represent competing products.
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 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 part upon the life of such patents.
Our future success depends on our ability to enhance our technologies and products and to develop new technologies and products that address market needs in a timely manner, including the development of technologies and products that incorporate rapidly developing machine learning and other artificial intelligence technologies (“AI/ML”).
Our future success depends on our ability to enhance our technologies and products and to develop new technologies and products that address market needs in a timely manner, including the development of technologies and products that incorporate rapidly developing generative artificial intelligence and other artificial intelligence and machine learning technologies (“AI/ML”).
For example, Samsung is a significant customer, but some of its technologies are competitive with some of our consumer, broadcast, and cinema technologies. Our customers may choose to use competing technologies they have developed or in which they have an interest rather than use our technologies.
For example, Samsung is a significant customer, but some of its technologies are competitive with some of our consumer and cinema technologies. Our customers may choose to use competing technologies they have developed or in which they have an interest rather than use our technologies.
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 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.
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
In order for our compensation packages to be viewed as competitive, prospective employees must perceive our equity awards to be a valuable benefit. 27 Table of Contents
This appreciation may not occur and our Class A common stock may in fact depreciate in value. GENERAL RISK FACTORS Macroeconomic conditions, including elevated inflation, rising interest rates, supply chain constraints, and the lasting effects of COVID-19 have impacted and may continue to impact the markets we serve and our business and results of operations.
This appreciation may not occur and our Class A common stock may in fact depreciate in value. GENERAL RISK FACTORS Macroeconomic conditions, including inflation, elevated interest rates, supply chain constraints and the lasting effects of the COVID-19 pandemic have impacted and may continue to impact the markets we serve and our business and results of operations.
If we fail to maintain and strengthen our industry relationships, industry 21 Table of Contents participants may be less likely to purchase and use our technologies, products, and services, or create content incorporating our technologies. Our M&A activity is subject to certain risks, including risks associated with integrating acquired businesses .
If we fail to maintain and strengthen our industry relationships, industry participants may be less likely to purchase and use our technologies, products, and services, or create content incorporating our technologies. 22 Table of Contents Our M&A activity is subject to certain risks, including risks associated with integrating acquired businesses .
Future acquisitions may also require us to obtain additional equity or debt financing, which may not be available on favorable terms or at all, particularly during times of market volatility, rising interest rates, and general economic instability. Also, the anticipated benefits of our acquisitions may not materialize.
Future acquisitions may also require us to obtain additional equity or debt financing, which may not be available on favorable terms or at all, particularly during times of market volatility, elevated interest rates, and general economic instability. Also, the anticipated benefits of our acquisitions may not materialize.
Measures we have undertaken to protect our information technology systems may be unsuccessful in deterring or repelling malicious actors.
Measures we have undertaken to protect our information systems may be unsuccessful in deterring or repelling malicious actors.
Certain of those minerals are used in the manufacturing process of electrical components that our products utilize. The potential inclusion of conflict minerals in the materials used in our products could affect the sourcing, 23 Table of Contents availability and pricing of such materials as well as the companies we use to manufacture our products.
Certain of those minerals are used in the manufacturing process of electrical components that our products utilize. The potential inclusion of conflict minerals in the materials used in our products could affect the sourcing, 24 Table of Contents availability and pricing of such materials as well as the companies we use to manufacture our products.
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.
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 sufficient or successful.
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.
In the past, some 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 16 Table of Contents licensees.
Further, the commercial success of products incorporating Dolby formats, content released in Dolby formats, and Dolby Cinemas generally, depends upon a number of factors outside of our control, including, but not limited to, consumer preferences, critical reception, timing of release, marketing efforts of third-parties, and general market conditions.
Further, the commercial success of products incorporating Dolby formats, content released in Dolby formats, 17 Table of Contents and Dolby Cinemas generally, depends upon a number of factors outside of our control, including, but not limited to, consumer preferences, critical reception, timing of release, marketing efforts of third parties, and general market conditions.
Further, outbreaks of pandemic diseases, or the fear of such events, could provoke (and in the case of COVID-19 has provoked) responses, including government-imposed travel restrictions and limits on access to entertainment venues. These responses could negatively affect consumer demand and our business, particularly in international markets.
Further, outbreaks of pandemic diseases, or the fear of such events, could provoke (and, in the case of COVID-19, did provoke) responses, including government-imposed travel restrictions and limits on access to entertainment venues. These responses could negatively affect consumer demand and our business, particularly in international markets.
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.
Revenue from Dolby Cinema 13 Table of Contents 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.
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 .
Further, demand levels may result in shortages 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 .
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.
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 in the Middle East, and other potential interruptions to the supply chain.
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.
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.
We 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.
We 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.; 23 Table of Contents • Potential adverse changes in the political, social, and/or economic stability of or conflicts within the regions in which we operate or in diplomatic relations between governments, including policy changes, turmoil or disruptions resulting from elections or other leadership changes; • 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.
We expect to face increased royalty pricing pressure for our technologies as we seek to drive the adoption of our technologies into online content and portable devices, such as tablets and smartphones. Such pricing pressures may be exacerbated by elevated rates of inflation, which may cause device manufacturers to take additional steps to limit costs.
We expect to face increased royalty pricing pressure for our technologies as we seek to increase the adoption of our technologies in online content and portable devices, such as tablets and smartphones. Such pricing pressures may be exacerbated by elevated rates of inflation, which may cause device manufacturers to take additional steps to limit costs.
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 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 leverage professional product developments to introduce new consumer technologies could be negatively impacted.
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.
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.
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.
Our inability to obtain timely delivery of key components or projectors of acceptable quality, any significant increases in the prices of such products, or the redesign of our products could result in production delays, increased costs, and reductions in shipments of our offerings.
These competitors may also be able to develop and market new technologies that render our existing or future products less competitive. For example, disruptive technologies such as AI/ML may significantly alter the market for our products in unpredictable ways and reduce customer demand.
These competitors may also be able to develop and market new technologies that render our 21 Table of Contents existing or future products less competitive. For example, disruptive technologies such as AI/ML may significantly alter the market for our products in unpredictable ways and reduce customer demand.
STOCK-RELATED ISSUES The Dolby family has control over stockholder decisions as a result of the control of a majority of the voting power of our outstanding common stock by them and their affiliates .
STOCK-RELATED ISSUES The Dolby family has control over stockholder decisions as a result of the control of a majority of the voting 25 Table of Contents power of our outstanding common stock by them and their affiliates .
The minimum tax directive has been adopted by the EU for implementation by its Member States into national legislation by the end of 2023 and may be adopted by other jurisdictions, including the U.S.
The minimum tax directive has been adopted by the EU for implementation by its Member States into national legislation and may be adopted by other jurisdictions, including the U.S.
Our actual or perceived failure to adequately comply with applicable laws and regulations relating to privacy and data protection (including regimes such as the CPRA and continuing developments in the European Union, U.K., and U.S. data privacy frameworks that are rapidly evolving) could result in regulatory fines, investigations and enforcement actions, penalties and other liabilities, claims for damages by affected individuals, and damage to our reputation, any of which could have a material adverse effect on our operations, financial performance, and business.
Our actual or perceived failure to adequately comply with applicable laws and regulations relating to privacy and data protection (including regimes such as the California Consumer Privacy Act, as amended and supplemented by the CPRA, and continuing developments in the European Union, U.K., and U.S. data privacy frameworks that are rapidly evolving) could result in regulatory fines, investigations and other proceedings, penalties and other liabilities, claims for damages by affected individuals, and damage to our reputation, any of which could have a material adverse effect on our operations, financial performance, and business.
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.
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 other proposed changes to law could further impact our corporate trading structure and adversely affect our tax rate and cash flow in future years.
Any or all of these factors may impact our ability to operate in foreign countries and our ability to develop, the demand for, and profitability of, our technologies and products, as well as our customers' products that incorporate our technologies.
Any or all of these factors, and the uncertainties associated with them, may impact our ability to operate in foreign countries and our ability to develop, the demand for, and profitability of, our technologies and products, as well as our customers' products that incorporate our technologies.
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.
War, including the military conflicts between Russia and Ukraine and in the Middle East, 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.
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 .
Although we implement policies and procedures designed to ensure compliance with the FCPA and U.S. export controls, such measures can not guarantee 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 .
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, our success in fostering content and device ecosystems and to the strength of our brand.
Certain foreign governments, particularly in China, have advanced arguments under their competition laws that exert downward pressure on royalties for IP. The regulatory enforcement activities in such jurisdictions can be unpredictable, in some cases because these jurisdictions have only recently implemented competition laws.
Certain foreign governments and industry participants have advanced arguments under competition laws that exert downward pressure on royalties for IP. The regulatory enforcement activities in such jurisdictions can be unpredictable, in some cases because these jurisdictions have only recently implemented competition laws.
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.
Many of the products in which our technologies are incorporated are discretionary goods, such as PCs, TVs, STBs, video game consoles, AV Receivers, mobile devices, in-car entertainment systems, and home-theater systems, which makes revenue generated by such technologies vulnerable to weakness in consumer spending.
Our customers use our 17 Table of Contents DD implementation for quality, reliability, and performance, even in locations where we have not had applicable patent coverage.
Our customers use our DD implementation for quality, reliability, and performance, even in locations where we have not had applicable patent coverage.
Our revenue and operations and the markets we serve have been, and may continue to be, impacted by macroeconomic conditions, including but not limited to, elevated inflation, rising interest rates, COVID-19-related economic impacts, 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 and operations and the markets we serve have been, and may continue to be, impacted by macroeconomic conditions, including but not limited to, inflation, elevated interest rates, the lasting effects of the COVID-19 pandemic, supply chain constraints, increased shipping costs, international conflicts, reduced discretionary consumer spending, and reduced new product investment by our customers caused by elevated interest rates and lower demand.
Our revenue growth will depend upon our success in new and existing markets for our technologies, such as digital broadcast, mobile devices, online and mobile media distribution, cinema, consumer imaging and communications.
Our revenue growth will depend upon our success in new and existing markets for our technologies, such as digital broadcast, mobile devices, online and mobile media distribution, cinema, and cloud services.
Approximately 64%, 63% and 67% of our revenue was derived outside of the U.S. in fiscal year 2023, 2022, and 2021, respectively .
Approximately 65%, 64% and 63% of our revenue was derived outside of the U.S. in fiscal year 2024, 2023, and 2022, respectively .
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.
Additionally, our results of operations could be impacted to the extent 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.
Changing trends in content distribution and consumption may negatively impact our business . Changing trends in the way that content is distributed and consumed may impact our existing business and future opportunities for growth.
REVENUE GENERATION Markets We Target Changing trends in content distribution and consumption may negatively impact our business . Changing trends in the way that content is distributed and consumed may impact our existing business and future opportunities for growth.
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.
As of September 27, 2024, 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 85.6% of the combined voting power of our outstanding Class A and Class B common stock.
REVENUE GENERATION Markets We Target Our licensing business depends on the incorporation of our technologies into products and the sales of such products, which are, in large part, not within our control. Our licensing businesses depend on OEMs and other licensees to incorporate our technologies into their products.
Customers and Distributors Our licensing business depends on the incorporation of our technologies into products and the sales of such products, which are, in large part, not within our control . Our licensing businesses depend on OEMs and other licensees to incorporate our technologies into their products.
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.
The number and sophistication of cyber attacks and disruptions that companies have experienced has increased in recent 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 geopolitical conflicts.
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.
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.
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 .
While our reporting practices do not change the cash flows or total revenue we ultimately receive from our contracts with customers, they 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.
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.
Weakness in general economic conditions due to inflation, elevated interest rates, lower consumer confidence, a potential 14 Table of Contents recession, pandemic or other adverse economic conditions, may suppress consumer demand in our markets and consumers going to the movies.
Our revenue from the PC market depends on several factors, including underlying PC unit shipments, the extent to which our technologies are included on computers, including through operating systems and various subsystems, and the terms of any royalties or other payments we receive. Further, we rely on a small number of partnerships with key participants in the PC market.
Our revenue from the PC market depends on several factors, including underlying PC unit shipments, the extent to which our technologies are included on computers, including through operating systems and various subsystems, and the terms of any royalties or other payments we receive.
Companies in the technology and entertainment industries frequently engage in litigation based on allegations of infringement or other violations of IP rights. We have faced such claims in the past, and we expect to face similar claims in the future.
Our business may be negatively impacted by intellectual property litigation . Companies in the technology and entertainment industries frequently engage in litigation based on allegations of infringement or other violations of IP rights. We have faced such claims in the past, and we expect to face similar claims in the future.
The impacts of the current macroeconomic environment on our partners have resulted in, and may continue to cause, 25 Table of Contents the disruption of consumer products' supply chains, shortages of certain semiconductor components, and delays in shipments, product development, and product launches.
The current macroeconomic environment has negatively impacted, and may continue to negatively impact, many of our licensees and that directly impacts, and may continue to impact, our financial results. 26 Table of Contents The impacts of the current macroeconomic environment on our partners have resulted in, and may continue to cause, the disruption of consumer products' supply chains, shortages of certain semiconductor components, and delays in shipments, product development, and product launches.
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.
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 addition to patents covering technology we license directly, if patents we license through patent pool arrangements expire or are otherwise deemed not to be valuable by the licensees of such patent pools, they may not renew their licenses, which could impact our revenue. We seek to mitigate this risk in a variety of ways.
Additionally, if the patents licensed through a patent pool arrangement are deemed not to be valuable in the aggregate by the licensees of such patent pool, they may not renew their licenses, which could impact our revenue. We seek to mitigate this risk in a variety of ways.
We have often experienced, and expect to continue to experience, problems with non-licensee OEMs and software vendors, particularly in China and certain emerging economies, incorporating our technologies and trademarks into their products without our authorization and without paying us any licensing fees.
We have often experienced, and expect to continue to experience, problems with non-licensee OEMs and software vendors, particularly in certain emerging economies, incorporating our technologies and trademarks into their products without our authorization and without paying us any licensing fees. Manufacturers of ICs containing our technologies occasionally sell these ICs to third parties who are not our system licensees.
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.
Demand for PCs has also fluctuated significantly in recent years. Macroeconomic conditions may also 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.
Our license agreements generally do not have minimum purchase commitments, are typically non-exclusive, and frequently do not mandate incorporation or use of our technologies. Our revenue will decline if our licensees choose not to incorporate our technologies into their products or if they sell fewer products incorporating our technologies.
Our license agreements are typically non-exclusive,and frequently do not mandate use of our technologies. Our revenue will decline if our licensees choose not to incorporate our technologies into their products or if they sell fewer products incorporating our technologies. The loss of a key licensee or customer may materially impact our revenue .
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.
Furthermore, 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, stolen, modified, made unavailable, or otherwise processed without authorization, and any such breach or other incident, or the perception any has occurred, could subject us to demands, litigation, and liability to our customers, suppliers, business partners and others, as well as regulatory investigations and other proceedings, fines, penalties, and other liabilities, and brand and reputational damage.
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.
Our information technology systems, applications and infrastructure may be vulnerable to attacks by malicious actors including, but not limited to, nation-states and cyber criminals, 20 Table of Contents malware, software defects or other technical malfunctions, ransomware attacks, or other disruptions.
Furthermore, we believe that the strength of our brand may affect the likelihood that our technologies are adopted as industry standards in various markets and for various applications.
If we fail to promote and maintain the Dolby brand successfully in licensing, products or services, our business will suffer. Furthermore, we believe that the strength of our brand may affect the likelihood that our technologies are adopted as industry standards in various markets and for various applications.
Many of these systems contain sensitive and confidential information, including our trade secrets and proprietary business information, and personal data, as well as content and information owned by or pertaining to our customers, suppliers and business partners. The secure maintenance of this information is critical to our operations and business strategy.
We rely on information technology systems in the conduct of our business, including systems designed and managed by third parties. Many of these systems contain sensitive and confidential information, including our trade secrets and proprietary business information, and personal data, as well as content and information owned by or pertaining to our customers, suppliers and business partners.
Standards may also change in ways that are unfavorable to Dolby. 14 Table of Contents The market for broadcast technologies in particular has traditionally been heavily based on industry standards, in some cases mandated by governments choosing from among alternative standards, and we expect this to continue to be the case in the future.
The market for broadcast technologies in particular has traditionally been heavily based on industry standards, in some cases mandated by governments choosing from among alternative standards, and we expect this to continue to be the case in the future. The continued advancement of OTT media delivery and consumption is altering the landscape for broadcast standards.
Our continued success depends on our reputation for providing high quality technologies, products, and services across a wide range of entertainment markets, including the consumer electronics, PC, broadcast, and gaming markets. If we fail to promote and maintain the Dolby brand successfully in licensing, products or services, our business will suffer.
Maintaining and strengthening the Dolby brand is critical to maintaining and expanding our licensing, products, and services business, as well as our ability to offer technologies for new markets. Our continued success depends on our reputation for providing high quality technologies, products, and services across a wide range of entertainment markets, including the consumer electronics, PC, broadcast, and gaming markets.
We earn revenue, pay expenses, own assets and incur liabilities in foreign countries using several currencies other than the U.S. dollar. As a result, we face exposure to adverse movements in currency exchange rates as the financial results of our international operations are translated from local currency into U.S. dollars upon consolidation.
As a result, we face exposure to adverse movements in currency exchange rates as the financial results of our international operations are translated from local currency into U.S. dollars upon consolidation. The majority of our revenue generated from international markets is denominated in U.S. dollars, while the operating expenses of our foreign subsidiaries are predominantly denominated in local currencies.
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.
If production of our products is interrupted, we may not be able to manufacture products on a timely basis. 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 manufacturing capacity to rapidly changing market conditions, such as fluctuations in customer demand.
As emerging economies transition from analog to digital content, such as the transition from analog to digital broadcast, we expect to experience an increase in problems with this form of piracy. Our business may be negatively impacted by intellectual property litigation .
These sales, and the failure of such manufacturers to report the sales, facilitate the unauthorized use of our IP. As emerging economies transition from analog to digital content, such as the transition from analog to digital broadcast, we expect to experience an increase in problems with this form of piracy.
Many of our partners have adopted newer generations of our offerings such as DD+, and the range of products incorporating DD solutions is now limited to DVD players (but not Blu-ray players) and some TVs, STBs and soundbars.
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. 18 Table of Contents Many of our partners have adopted newer generations of our offerings such as DD+, and the range of products incorporating DD solutions is now limited to DVD players (but not Blu-ray players) and some TVs, STBs and soundbars.
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. Further, our hedging programs may not be effective to offset any, or more than a portion, of the adverse impact of currency exchange rate movements.
Further, our hedging programs may not be effective to offset any, or more than a portion, of the adverse impact of currency exchange rate movements.
Moreover, we rely on sole source suppliers for some of the components that we use to manufacture our products, including specific charged coupled devices, light emitting diodes, and digital signal processors.
Due to the bespoke nature of some of the components and products we purchase and relatively low quantities needed, sourcing multiple suppliers for every item we purchase is not practicable. Some of the components that we use to manufacture our products are sole-sourced, including specific charged coupled devices, light emitting diodes, and digital signal processors.
A small number of our licensees or other 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. Customer demand for our technologies and products can shift quickly as many of our markets are rapidly evolving.
At September 29, 2023, the Dolby family and 24 Table of Contents their affiliates owned 388,372 shares of our Class A common stock and 36,012,733 shares of our Class B common stock.
At September 27, 2024, the Dolby family and their affiliates owned 314,968 shares of our Class A common stock and 35,597,733 shares of our Class B common stock.
Production difficulties or inefficiencies can interrupt production, resulting in our inability to deliver products on time or in a cost effective manner, which could harm our competitive position. While we have one production facility, we increasingly use contract manufacturers for a significant portion of our production capacity.
Production difficulties or inefficiencies can interrupt production, resulting in our inability to deliver products on time or in a cost effective manner, which could harm our competitive position. We rely on contract manufacturers to manufacture our products and such reliance involves risks, including limited control over timely delivery and quality of such products.
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 .
This trend is reducing the importance of the inclusion of our technology in certain 15 Table of Contents broadcast standards while increasing the importance of inclusion within internet and mobile industry standards. We cannot predict the extent to which this trend may impact our revenue. Participants may choose alternative technologies within standards .
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.
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. To the extent that such cinema industry and macroeconomic challenges constrain the growth of our Dolby Cinema and cinema products offerings, our revenue may be adversely impacted.
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.
Our currently issued patents expire at various times through December 2047. If we are unable to refresh our technology with new patented inventions or expand our patent portfolio, our revenue could decline.
Further, macroeconomic conditions due to inflation, geopolitical instability, global health risks, and other factors may adversely impact consumer demand for mobile devices.
Further, macroeconomic conditions such as inflation, geopolitical instability, global health risks, and other factors may adversely impact the ability of our partners to manufacture and distribute mobile devices and consumer demand for mobile devices. Our revenue from the PC market is reliant on key partnerships and is vulnerable to macroeconomic risks .
These sole source suppliers may become unable or unwilling to deliver these components to us at an acceptable cost or at all, which could force us to redesign those specific products.
Also, the projectors offered as part of our cinema offerings are provided by a single supplier. These sole source suppliers may become unable or unwilling to deliver their products to us at an acceptable cost or at all, which could force us to redesign certain products or locate alternative suppliers.
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.
We recognize a material portion of our licensing revenue based on our estimate of sales of royalty-bearing products. Upon receipt of actual reporting of sales-based royalties, we record a favorable or unfavorable adjustment based on the difference, if any, between estimated and actual sales.
At times we underutilize our manufacturing facilities as a result of reduced demand for some of our products. Supply chain disruptions and extended lead times for semiconductor and electrical components may limit the availability of products and result in difficulty meeting demand.
Supply chain disruptions and extended lead times for semiconductor and electrical components may limit the availability of products and result in difficulty meeting demand. We face threats to the confidentiality, integrity, and availability of our information systems, which could result in the misappropriation of sensitive information, disruption of our business, reputational damage, legal exposure, and financial losses.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe also have a sublease with a subtenant for the remaining lease term at 100 Potrero Avenue, pursuant to which the subtenant is required to reimburse us with respect to the foregoing expenses and taxes with respect to the subleased premises and to indemnify and hold us harmless with respect to the subleased premises in the same manner described above.
Biggest changeWe also had a sublease with a subtenant for the remaining lease term at 100 Potrero Avenue, pursuant to which the subtenant was required to reimburse us with respect to the foregoing expenses and taxes with respect to the subleased premises and to indemnify and hold us harmless with respect to the subleased premises in the same manner described above. 29 Table of Contents
We have also agreed to indemnify and hold the Dolby family trusts, as landlord, harmless from and against certain liabilities, damages, claims, costs, penalties, and expenses arising from our conduct related to the premises.
We also agreed to indemnify and hold the Dolby family trusts, as landlord, harmless from and against certain liabilities, damages, claims, costs, penalties, and expenses arising from our conduct related to the premises.
The Dolby family trusts retain the right, which they have exercised, to sublease approximately 1,617 square feet of office space in the premises at a rental rate equal to the then current base rent per square foot paid by us plus $14 per square foot per year (reflecting estimated costs payable by us for the operation and maintenance of the premises, subject to an annual increase of 1.5% per year during each year of the sublease term).
The Dolby family trusts retained the right, which they have exercised, to sublease approximately 1,617 square feet of office space in the premises at a rental rate equal to the then current base rent per square foot paid by us plus $14 per square foot per year (reflecting estimated costs payable by us for the operation and maintenance of the premises, subject to an annual increase of 1.5% per year during each year of the sublease term).
We ceased occupancy of the leased space at 100 Potrero Avenue, and do not intend to re-occupy this location. We remain responsible for operating expenses, taxes, and the condition, operation, repair, maintenance, security, and management of the premises.
We ceased occupancy of the leased space at 100 Potrero Avenue, and do not intend to re-occupy this location. We remained responsible for operating expenses, taxes, and the condition, operation, repair, maintenance, security, and management of the premises.
The lease for this office expires on October 31, 2024, and provides approximately 70,000 square feet of space.
The lease for this office expired on October 31, 2024, and provided approximately 70,000 square feet of space.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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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.
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 S&P MidCap 400 Index ("S&P 400") for the five fiscal years ended September 27, 2024.
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.
As of October 25, 2024, there were 105 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.
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.
The following table summarizes the initial amount of authorized repurchases as well as additional repurchases approved by our Board of Directors as of September 27, 2024 (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 Fiscal 2024: August 2024 350,000 Total $ 3,300,000 31 Table of Contents The following table provides information regarding our share repurchases made under this program during the fourth quarter of fiscal 2024: 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) June 29, 2024 - July 26, 2024 250,757 $ 79.76 250,757 $ 51.6 million July 27, 2024 - August 23, 2024 — — — $ 401.6 million August 24, 2024 - September 27, 2024 — — — $ 401.6 million Total 250,757 250,757 (1) Average price paid per share excludes commission costs.
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 figures represented below assume an investment of $100 in our Class A common stock at the closing price of $63.79 on September 27, 2019, and in the NYSE Composite and S&P 400 on the same date and the reinvestment of dividends into shares of common stock.
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.
Most recently, on November 19, 2024, we announced a dividend in the amount of $0.33 per share, payable on December 10, 2024, to stockholders of record as of the close of business on December 3, 2024.
Removed
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.
Added
(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.
Removed
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 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.
Biggest changeOperating Activities Fiscal Year Ended September 27, 2024 September 29, 2023 Net cash provided by operating activities $ 327,252 $ 367,081 Net cash provided by operating activities decreased $39.8 million in fiscal 2024 compared to fiscal 2023, primarily due to the following: Factor Impact On Cash Flows Operating assets and liabilities â Lower inflows due to higher accounts receivable and lower non-current liabilities, offset by higher accounts payable and accrued liabilities Net Income á Lower restructuring charges, offset by lower revenue Investing Activities Fiscal Year Ended September 27, 2024 September 29, 2023 Net cash provided by/(used in) investing activities $ (286,292) $ 54,206 Net cash provided by/(used in) investing activities was $340.5 million lower in fiscal 2024 compared to fiscal 2023, primarily due to the following: Factor Impact On Cash Flows Business Combinations â Higher outflows due to business combinations Proceeds from Investments á Higher inflows from the sale of marketable investment securities 44 Table of Contents Financing Activities Fiscal Year Ended September 27, 2024 September 29, 2023 Net cash used in financing activities $ (287,814) $ (236,812) Net cash used in financing activities was $51.0 million higher in fiscal 2024 compared to fiscal 2023, primarily due to the following: Factor Impact On Cash Flows Dividend Payments â Higher outflows for the payment of our quarterly cash dividend to common stockholders primarily as a result of a $0.03 per share increase compared to the prior fiscal year Share Repurchases â Higher outflows due to higher common stock repurchases Purchase of non-controlling interest in business combination â Higher outflows related to acquiring a portion of the noncontrolling interest in our consolidated subsidiary Shares Repurchased for Tax Withholdings â Higher outflows due to higher fair value of shares withheld for taxes Common Stock Issuance â Lower inflows from employee stock option exercises Contractual Obligations and Commitments Naming Rights.
Upon receipt of royalty statements from the licensees with the actual reporting of sales-based royalties that we previously estimated, we record a favorable or unfavorable adjustment based on the difference, if any, between estimated and actual sales. We also enter into fixed and guaranteed licensing fees arrangements, which require the licensee to pay a fixed, non-refundable fee.
Upon receipt of royalty statements from the licensees with the actual reporting of sales-based royalties that we previously estimated, we record a favorable or unfavorable adjustment based on the difference, if any, between estimated and actual sales. We also enter into fixed and guaranteed licensing fees arrangements, that require the licensee to pay a fixed, non-refundable fee.
Key Challenges: Demand for our cinema products is dependent upon our partners and their success in the market, industry and economic cycles, box office performance, and our ability to develop and introduce new technologies, further our relationships with content creators, and promote new cinematic audio and imaging experiences.
Key Challenges: Demand for our cinema products is dependent upon our partners and their success in the market, industry and economic cycles, box office performance, and our ability to develop and introduce new technologies, further our relationships with content creators, and promote new cinematic audio and video experiences.
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.
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 this directly impacts our financial results.
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.
Included within Other Markets is also licensing revenue from audio and video 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.
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.
Our stock repurchase program was approved in fiscal 2010, and since then we have completed approximately $2.9 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 2023 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 2024 and additional information regarding our stock repurchase program. Stock Repurchase Program.
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.
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.
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.
Consumer demand for gaming devices 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.
Dolby's presence in these browsers enables us to reach more users through various types of content, including streaming video entertainment. A number of PCs from partners such as Apple, Lenovo, Dell, Samsung, and ASUS also support Dolby Vision and/or Dolby Atmos, with continued expansion of applications through music, streaming, and gaming.
Dolby's presence in these browsers enables us to reach more users through various types of content, including streaming video entertainment. A number of personal computers from partners such as Apple, Lenovo, Dell, Samsung, Microsoft and ASUS also support Dolby Vision and/or Dolby Atmos, with continued expansion of applications through music, streaming, and gaming.
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.
For the discussion and analysis highlighting comparisons of material changes in the consolidated financial statements for the years ended September 29, 2023 and September 30, 2022, 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 29, 2023, which is incorporated herein by reference.
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.
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 in Access Advance, and gains and losses on the sales of marketable securities from our investment portfolio.
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.
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 industry challenges, or other economic conditions, which may impact supply chain activities as well as demand for shipments.
Additionally, we face geopolitical challenges including changes in diplomatic and trade relationships, trade protection measures, and import or export licensing requirements.
Finally, we face geopolitical challenges including changes in diplomatic and trade relationships, trade protection measures, and import or export licensing requirements.
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 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 noncontrolling interests in our wholly-owned and majority-owned subsidiaries.
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.
As of September 27, 2024, we had an accrued liability for unrecognized tax benefits without interest, penalties, and related deferred tax assets, totaling $81.6 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.
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.
This discussion and analysis highlights comparisons of material changes in the consolidated financial statements for the years ended September 27, 2024 and September 29, 2023.
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.
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. 38 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.
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.
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.
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.
The following table presents selected financial information as of September 27, 2024 and September 29, 2023 (in thousands): September 27, 2024 September 29, 2023 Cash and cash equivalents $ 482,047 $ 745,364 Short-term investments — 139,148 Long-term investments 89,267 97,812 Accounts receivable, net 315,465 262,245 Accounts payable and accrued liabilities 364,909 372,324 Working capital 776,581 1,065,578 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.
Cinema Products and Services Highlights : To help enable the playback of content in Dolby formats, we offer a range of servers, which include the IMS3000 (an integrated imaging and audio server with Dolby Atmos), and audio processors, such as the CP950, to cinema exhibitors globally. Dolby Atmos has been adopted broadly across studios, content creators, post-production facilities, and exhibitors.
Revenue from Dolby.io is also included in products and services. Cinema Products and Services Highlights : To help enable the playback of content in Dolby formats, we offer a range of servers, which include the IMS3000 (an integrated imaging and audio server with Dolby Atmos), and audio processors, such as the CP950, to cinema exhibitors globally.
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.
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.
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.
For additional details regarding indemnification clauses within our contractual agreements, see Note 14 " Commitments and Contingencies " to our consolidated financial statements. 45 Table of Contents In fiscal 2024, 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.
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.
We must continue to present compelling reasons for consumers to demand our audio and video technologies, including ensuring that there is a breadth of available content in our formats and such content is being widely distributed.
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.
Quarterly Dividend Program. During fiscal 2015, we initiated a recurring quarterly cash dividend program for our stockholders. For fiscal 2024, quarterly dividends of $0.30 per share were paid on our Class A and Class B common stock to eligible stockholders of record.
Additionally, included in capital expenditures are amounts associated with Dolby Cinema locations. We continue to invest in S&M and R&D to promote the overall growth of our business and technological innovation. We retain sufficient cash holdings to support our operations and we also purchase investment-grade securities diversified among security types, industries, and issuers.
Additionally, included in capital expenditures are amounts associated with Dolby Cinema locations. We continue to invest in S&M and R&D to promote the overall growth of our business and technological innovation.
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.
We must continuously collaborate and maintain our key partnerships with personal computer manufacturers to incorporate our technologies, and we must continue to support the development and distribution of Dolby content via various ecosystems. To the extent that personal computer manufacturers do not incorporate our technologies in current and future products, our revenue could be impacted.
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 Licensing September 27, 2024 September 29, 2023 $ % Revenue $ 1,181,794 $ 1,197,930 $ (16,136) (1) % Percentage of total revenue 93 % 92 % Cost of licensing 67,204 64,890 2,314 4 % Gross margin 1,114,590 1,133,040 (18,450) (2) % Gross margin percentage 94 % 95 % Fiscal Year Ended Licensing Revenue By Market September 27, 2024 September 29, 2023 Broadcast $ 409,105 35 % $ 451,719 38 % Mobile 235,774 20 % 243,897 20 % CE 165,817 14 % 170,197 14 % PC 141,300 12 % 124,362 10 % Other 229,798 19 % 207,755 18 % Total licensing revenue $ 1,181,794 100 % $ 1,197,930 100 % 39 Table of Contents Factor Licensing Revenue Gross Margin Broadcast â Lower revenue primarily due to timing of minimum volume commitments in imaging patents, lower recoveries, lower true-up impacting foundational technologies and imaging patents, and lower STB unit shipments, partially offset by adoption of Dolby Vision and Dolby Atmos ßà No significant fluctuations Mobile â Lower revenue primarily due to timing of minimum volume commitments in our audio patent programs partially offset by timing of minimum volume commitments in our imaging patent programs and Dolby Vision adoption CE â Lower revenue from unit shipments, including lower true up, and timing of minimum volume commitments in imaging patents, partially offset by higher recoveries PC á Higher revenue from timing of minimum volume commitments in imaging patents, higher true-up, and higher recoveries Other á Higher revenue from imaging patent pool administrative fees and higher automotive revenue driven by adoption of Dolby Atmos, partially offset by lower gaming revenue driven by lower unit shipments 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 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.
Fiscal Year Ended Change September 27, 2024 September 29, 2023 $ % Sales and marketing $334,460 $354,364 $(19,904) (6)% Percentage of total revenue 26% 27% Category Key Drivers Compensation & Benefits â Lower costs of $9.3 million in payroll salaries due to lower headcount resulting from restructuring activities Tradeshows â Lower costs of $7.2 million primarily due to non-repeating events in the prior year Contractors â Lower costs of $4.6 million primarily due to lower patent litigation expenses Other á Higher costs of $5.0 million primarily due to larger marketing activations in the current year General and Administrative G&A expenses consist primarily of employee compensation and benefits expenses, stock-based compensation, depreciation and amortization, facilities and information technology costs, as well as professional fees and other costs associated with external contractors.
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.
Dolby Vision and Dolby Atmos have not been in the market as long as our branded audio codecs, thus revenue growth is driven by device shipments, increased adoption and the addition of new licensees.
Fiscal Year Ended Change September 29, 2023 September 30, 2022 $ % Restructuring charges $47,061 $10,623 $36,438 343% Percentage of total revenue 4% 1% In June 2023, we implemented a focused restructuring plan, primarily consisting of workforce reductions and facility consolidations to improve execution in alignment with our strategy and to reduce our cost structure through improved utilization of our global infrastructure.
In June 2023, we implemented a focused restructuring plan, primarily consisting of workforce reductions and facility consolidations to improve execution in alignment with our strategy and to reduce our cost structure through improved utilization of our global infrastructure.
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.
Our branded technologies are primarily comprised of Branded Audio Codecs (DD+ and AC-4) and Dolby Atmos and Dolby Vision (Dolby Atmos for audio, and Dolby Vision for imaging). Licensing revenue is primarily driven by the adoption of our technologies on devices and the number of devices shipped by licensees.
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.
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.
These products allow us to offer exhibitors a more complete Dolby Atmos solution that is often more cost effective than other commercially available options.
We also offer a variety of other cinema products, such as the Dolby Multichannel Amplifier and our high-power flexible line of speakers. These products allow us to offer exhibitors a more complete Dolby Atmos solution that is often more cost effective than other commercially available options.
Consumer Electronics Highlights : We have an established presence in the home entertainment market across devices such as AVRs, soundbars, wireless and smart speakers, DMAs, and Blu-Ray players, through the inclusion of our DD+ technology, and increasingly through the inclusion of Dolby Atmos and Dolby Vision. AAC and HE-AAC technologies also have broad adoption through our patent licensing programs.
Consumer Electronics Highlights : We have an established presence in the home entertainment market across devices such as wireless and smart speakers, soundbars, DMAs (devices that connect a computer to a home media system), and AVRs, through the inclusion of our branded audio codecs, and increasingly through the inclusion of Dolby Atmos and Dolby Vision.
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.
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. These conditions may impact consumer demand for devices and services and our partners’ ability to manufacture devices.
Changing trends in the way that video content is distributed and consumed may impact our business and future growth in the broadcast market, such as the trend away from subscription-based cable and satellite television providers toward streaming services. Additionally, we face geopolitical challenges including changes in diplomatic and trade relationships, trade protection measures, and import or export licensing requirements.
Changing trends in the way that video content is distributed and consumed may impact our business and future growth in the broadcast market, such as the trend away from subscription-based cable and satellite television providers toward streaming services. Mobile Highlights: We continue to promote adoption of our technologies across major mobile ecosystems, including Apple and Android.
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.
Fiscal Year Ended Change Products and Services September 27, 2024 September 29, 2023 $ % Revenue $ 91,927 $ 101,814 $ (9,887) (10) % Percentage of total revenue 7 % 8 % Cost of products and services 73,292 87,676 (14,384) (16) % Gross margin 18,635 14,138 4,497 32 % Gross margin percentage 20 % 14 % Factor Products and Services Revenue Gross Margin Products â Lower cinema products revenue as compared to the prior year á Higher gross margin due to higher inventory reserve provision in prior year 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. 40 Table of Contents Fiscal Year Ended Change September 27, 2024 September 29, 2023 $ % Research and development $263,663 $271,523 $(7,860) (3)% Percentage of total revenue 21% 21% Category Key Drivers Other â Lower contractor spend, stock-based compensation expense, depreciation, salaries, bonus and other miscellaneous expenses 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.
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 believe that these sources will be sufficient to satisfy our currently anticipated cash requirements through at least the next twelve months. As of September 27, 2024, we had cash and cash equivalents of $482.0 million, which consisted of cash.
The resulting impacts of those stoppages may lead to decreased box office receipts in the near term, which could potentially impact exhibitors' willingness and ability to invest in our cinema products . Dolby.io Highlights: We are focused on bringing Dolby’s decades of sight and sound technology to a broader range of media content and digital experiences.
The resulting impacts of those stoppages have resulted in, and may continue to lead to, decreased box office receipts in the near term, which could potentially impact exhibitors' willingness and ability to invest in our cinema products .
Key Challenges: Dolby.io is an early-stage business, and it is uncertain when or if it will be a material revenue driver. Our success in this market will depend on adoption from companies building real-time digital experiences that 36 Table of Contents increase audience engagement, the volume of usage of the services and our ability to monetize our services.
Our success in this market will depend on adoption by companies building real-time digital experiences that increase audience engagement, the volume of usage of the services and our ability to monetize our services.
Due to short product life cycles, mobile device OEMs can readily add or remove certain of our technologies from their devices. Our success depends on our ability to address the rapid pace of change in mobile devices, and we must continuously collaborate with mobile device OEMs to incorporate our technologies.
Our success depends on our ability to address the rapid pace of change in mobile devices, and we must continuously collaborate with mobile device OEMs to incorporate our technologies. We rely on a small number of partnerships with key participants in this market.
We do not currently expect the excise tax to have a material impact on our results of operations or financial position, and its ongoing impact will be dependent on the extent of our future net stock repurchase activities. 42 Table of Contents 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. We do not currently expect the excise tax to have a material impact on our results of operations or financial position, and its ongoing impact will be dependent on the extent of our future net stock repurchase activities.
Additionally, 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. The resulting impacts of those stoppages may result in near-term decreases in box office receipts and our cinema-related revenue.
In addition, the strikes by the Writers Guild of America and SAG-AFTRA in 2023 effectively halted the production, release and promotion of certain films for an extended period.
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.
Further, the noted macroeconomic conditions and related uncertainty may negatively impact transaction cycles and our recovery of revenue associated with past unauthorized or unreported usage. The future implications of these macroeconomic conditions on our business, results of operations and overall financial position remain uncertain. We continue to monitor the evolving macroeconomic environment and the impact on our business.
We may also be faced with pricing pressures or competing technologies, which would affect our revenue. We have also experienced supply chain shortages and increased shipping costs that have created challenges to maintain the sufficient supply of cinema products to meet the demand in the market.
We may also be faced with pricing pressures or competing technologies, which would affect our revenue. In addition, supply chain constraints may impact our ability to provide cinema products and services to our customers.
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.
In addition, the development and maintenance needed to provide a reliable and scalable platform may require us to incur additional costs to develop new skills within our existing employee base or hire external specialized talent.
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.
Finally, Meta announced support for Dolby Atmos across its MetaQuest headset device lineup. 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.
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.
Our revenue has been impacted by macroeconomic conditions, including but not limited to, inflation, heightened interest rates, rising costs of material, increased shipping costs, international conflicts, labor disputes, reduced discretionary consumer spending, and reduced new product investment by our customers. The macroeconomic conditions also impart substantial uncertainty into our operating environment, which presents additional challenges for our business.
Content being delivered with almost no delay enables our customers to create real-time interaction in their apps and services. This lifelike interaction is essential to the experiences companies, particularly in sports and entertainment, are creating. Over time, we believe this way of delivering and engaging with content will be used more broadly.
This near instantaneous interaction is essential to the experiences companies, particularly in sports and entertainment, are creating. Over time, we believe this way of delivering and engaging with content will be used more broadly, thereby increasing their business opportunity. Key Challenges: Dolby.io is an early-stage business, and it is uncertain when or if it will be a material revenue driver.
As a result of these actions, we recorded restructuring charges of $10.9 million in severance and other related benefits offered to approximately 130 impacted employees and $6.9 million related to facility consolidation in New York, NY. In September 2023, we initiated a focused restructuring plan with the purpose of focusing our resources on our highest strategic priorities.
As a result of these actions, we recorded expense in the third quarter of fiscal 2023 of $10.9 million in severance and other related benefits and expense of $6.9 million related to a facility consolidation in New York, NY. Actions and expenses related to this plan were substantially completed by the end of the second quarter of fiscal 2024.
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.
Dolby.io Highlights: Our strategy for Dolby.io is to bring Dolby’s audio and video technologies to a broader range of media content and digital experiences. We are expanding our addressable market by offering solutions to companies building real-time digital experiences that increase audience engagement.
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.
As of September 27, 2024, we had $16.3 million remaining on these commitments, with $12.8 million due during fiscal 2025. Donation Commitments. Our donation commitments relate to non-cancelable obligations that consist of maintenance services and installation of audio and imaging products in exchange for various marketing, branding, and publicity benefits.
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.
Patent Licensing Our patents are incorporated into the AAC, HE-AAC, and Extended HE-AAC standards for audio, and the AVC and HEVC standards for imaging. The licensing of these patents forms the core of our patent licensing.
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.
Fiscal Year Ended Change Other income/(expense) September 27, 2024 September 29, 2023 $ % Interest income $34,077 $28,086 $5,991 21% Other income, net 20,076 6,214 13,862 223% Total $54,153 $34,300 $19,853 58% 42 Table of Contents Category Key Drivers Other Income á Higher income from an equity method investment in the current year Interest Income á Higher yields on invested cash balance Income Taxes Our effective tax rate is based on our fiscal year results and is affected by several factors.
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.
In particular, factors such as global supply constraints or device lifecycles may impact licensing revenue. Further, in certain countries, we and other IP owners face difficulties enforcing contractual and IP rights, including instances in which our licensees fail to accurately report the shipment of products using our technologies.
In conjunction with focusing our resources on our top strategic priorities, we recorded an impairment loss of $16.9 million related primarily to internally developed software for projects we are no longer pursuing. For additional information on our Restructuring programs, see Note 13 " Restructuring " to our consolidated financial statements.
In connection with this plan, we recorded an expense in the fourth quarter of fiscal 2023 of $13.4 million in severance and other related benefits and an impairment loss of $16.9 million related primarily to internally developed software for projects we are no longer pursuing.
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.
In movies and TV, thousands of movie titles and tens of thousands of TV episodes have been created and released in Dolby Atmos and/or Dolby Vision. Major streaming partners and services such as Netflix, Disney+, Apple TV+, Amazon, Max, Paramount+, and other streaming partners and services internationally, continue to enhance content in Dolby Vision and Dolby Atmos.
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.
Our branded audio codecs have broad penetration across a diverse set of devices and end markets. Revenue from these technologies is primarily driven by device shipments from licensees, and as such, is impacted by consumer spending The remaining portion of our branded licensing revenue is derived from Dolby Vision and Dolby Atmos.
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.
Revenue generated 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. This year we, together with our patent pool partners, had success renewing existing licensees and increasing licensee penetration in established programs across multiple end markets.
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.
Fiscal Year Ended September 27, 2024 September 29, 2023 Provision for income taxes $(48,163) $(48,409) Effective tax rate 15% 19% Factor Impact On Effective Tax Rate Tax Cuts and Jobs Act of 2017 â Current year benefit related to lower Transition Tax liability under the Tax Cuts and Jobs Act of 2017 resulting from the application of a recent Tax Court opinion in Varian Medical Systems, Inc. v.
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. For additional details regarding our naming rights commitments, see Note 14 " Commitments and Contingencies " to our consolidated financial statements. Operating Leases.
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. As of September 27, 2024, we had $79.4 million remaining on these agreements, with $13.1 million due during fiscal 2025.
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.
Our patent licensing technologies also have broad adoption in the home entertainment market. We continue to focus on expanding the availability of Dolby technologies to new devices. In fiscal 2024 Sonos launched headphones that support Dolby Head Tracking with Dolby Atmos. Additionally, VIZIO announced integration of Dolby Atmos across its entire 2024 soundbar lineup.
Other Markets Highlights : DD+ is incorporated in the Xbox and PlayStation gaming consoles that support gaming content and streaming for movie and television content. The Xbox Series X and Series S gaming consoles support Dolby Vision and Dolby Atmos for streaming and gaming content. Additionally, our technologies continue to be incorporated into the latest headphones by various OEMs.
Gaming consoles such as the Sony PlayStation and the Microsoft Xbox use DD+ to support gaming content and streaming for movie and television content. The PlayStation 5 supports compatible Dolby Atmos-enabled living room devices. The Xbox Series X and Series S gaming consoles support Dolby Vision and Dolby Atmos for streaming and gaming content.
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.
That disruption resulted in, and similar disruptions to movie production and exhibition in the future may lead to, decreases in box office receipts and our cinema-related revenue. PRODUCTS AND SERVICES A majority of our products and services revenue is derived from the sale of audio and imaging products for the cinema industry.
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.
Fiscal Year Ended Change September 27, 2024 September 29, 2023 $ % General and administrative $270,392 $258,477 $11,915 5% Percentage of total revenue 21% 20% Category Key Drivers Legal, Professional, and Contractors á Higher costs of $6.9 million in legal and professional services largely due to M&A activities Other á Higher costs of $2.7 million in stock-based compensation expense, and higher depreciation expense 41 Table of Contents Restructuring Charges Restructuring charges recorded as operating expenses in our consolidated statements of operations represent costs associated with separate individual restructuring plans implemented in various fiscal periods.
The mobile market is heavily concentrated, so we rely on a small number of partnerships with key participants in this market. If we are unable to maintain these key relationships, we may experience a decline in mobile devices incorporating our technologies.
If we are unable to maintain these key relationships, we may experience a decline in mobile devices incorporating our technologies. 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 have expanded our offerings in the broadcast market through technologies such as Dolby Atmos and AC-4, Dolby Vision, as well as AVC and HEVC imaging technologies which we license through patent pools. We work with many TV OEMs and strategic partners to enable and promote Dolby Vision and Dolby Atmos experiences within their TV lineups.
In fiscal 2024, Australia selected AC-4 as part of its new broadcast STB specification. We work with many TV OEMs and strategic partners to enable and promote Dolby Vision and Dolby Atmos experiences within their TV lineups. We have strong attach rates for Dolby Atmos and Dolby Vision with high end TVs and continue to grow adoption on mid-range TVs.
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.
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, and our 36 Table of Contents ability to differentiate our offering and deploy new sites.
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.
In addition, the success of our Dolby Cinema offering is tied to global movie production and box office performance generally. For example, the strikes by the Writers Guild of America and Screen Actors Guild - American Federation of Television and Radio Artists ("SAG-AFTRA") in 2023 effectively halted the production, release and promotion of certain films for an extended period.
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.
Dolby Atmos has been adopted broadly across studios, content creators, post-production facilities, and exhibitors. As of the end of fiscal 2024, there are over 8,100 Dolby Atmos screens installed or committed and over 3,500 Dolby Atmos theatrical titles have been announced or released.
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.
For additional information on our Restructuring programs, see Note 13 " Restructuring " to our consolidated financial statements.
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.
Further discussion of the potential impacts of the key challenges on our business can be found in Part I, Item 1A " Risk Factors ." Branded Technology Licensing Dolby’s branded technology licensing offers complete technology solutions to our licensees, primarily device manufacturers. Licenses include rights to software, patent rights, know how, and the relevant Dolby brand .
The following are highlights from our fiscal 2023 and key challenges related to audio and imaging licensing, by market.
Licensing End Markets The following are highlights from our fiscal 2024 and key challenges related to Dolby’s licensing businesses, by market. Broadcast Highlights: We have an established global presence and broad adoption of our branded audio and patent licensing technologies in broadcast services and devices, which primarily include TVs and STBs.
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.
We estimate that Dolby Atmos and Dolby Vision were on approximately 30% of all 4K TVs shipped during fiscal 2024, 34 Table of Contents and many partners continue to expand their support of the combined Dolby Vision and Dolby Atmos experience. Throughout 2024, TCL and HiSense continued to adopt Dolby Vision and Dolby Atmos deeper within their TV lineups.
We recorded expense of $13.4 million in severance and other related benefits offered to approximately 160 impacted employees. The remaining components of this plan are expected to be completed in November 2023, resulting in an additional charge of approximately $5.0 million in severance and other termination benefits.
In connection with this plan, we recorded an expense in the third quarter of fiscal 2024 of $4.6 million in severance and other related benefits. Cash payment of the severance and other termination benefits were substantially completed by the end of the fourth quarter of fiscal 2024.
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We continue to monitor the evolving macroeconomic environment and the impact on our business.
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Further discussion of the potential impacts of these macroeconomic effects on our business can be found in Part I, Item 1A " Risk Factors ." LICENSING The majority of our revenue is derived from two licensing models: Branded Technology Licensing, and Patent Licensing. While each has had successes in fiscal 2024, they share certain challenges.
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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.
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We work across our ecosystem of partners including creators, distributors and device manufacturers to increase the number of Dolby experiences that people can enjoy by enhancing content, including 33 Table of Contents movies and TV, music and live sports, using Dolby branded technologies. Increased content in these areas increases our value proposition across our end markets.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeAs 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.
Biggest changeFor additional information related to our foreign currency forward contracts, see Note 2 " Summary of Significant Accounting Policies " to our consolidated financial statements. A sensitivity analysis was performed on all of our foreign currency forward contracts as of September 27, 2024.
We also enter into foreign currency forward contracts to hedge against assets and liabilities for which we have foreign currency exchange rate exposure and selected anticipated expenses. The contracts hedging receivables and payables are carried at fair value with changes in the fair value recorded to other income/(expense), net, in our consolidated statements of operations.
We also enter into foreign currency forward contracts to hedge against assets and liabilities for which we have foreign currency exchange rate exposure and selected anticipated expenses. The contracts hedging receivables and payables are carried at fair value with changes in the fair value recorded to other income/(expense), net, in our 46 Table of Contents consolidated statements of operations.
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.
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 $1.6 million in fiscal 2024.
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
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 $4.4 million. 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 $4.4 million. 47 Table of Contents
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 effective portion of the gain reclassified to the consolidated statements of operations was $2.1 million in fiscal 2024, and the pre-tax effective portion of the loss reclassified to the consolidated statements of operations in fiscal 2023 was not material.
The pre-tax loss attributed to the effective portion of cash flow hedges recognized in AOCI was $2.6 million in fiscal 2022.
The pre-tax gain attributed to the effective portion of cash flow hedges recognized in AOCI was $4.9 million in fiscal 2023.
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.
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. For these forward contracts, duration modeling was used where hypothetical changes were made to the spot rates of the currency.
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.
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 27, 2024 and September 29, 2023, the total notional amounts of outstanding contracts were $111.7 million and $134.8 million, respectively.
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.
Our investment policy is focused on the preservation of capital and support for our liquidity requirements. 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.
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.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Interest Rate Sensitivity As of September 27, 2024, we had cash and cash equivalents of $482.0 million, which consisted of cash. In addition, we had long-term investments of $89.3 million, which primarily consisted of an equity method investment and an equity security without a readily determinable value.
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In 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.
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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.
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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.

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