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Item 7. Management’s Discussion and Analysis

2021-11-17 compared with 2020-11-16 · 203 added, 211 removed, 239 unchanged (63% of the section changed)

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The following discussion contains forward-looking statements that are subject to risks and uncertainties.

Actual results may differ substantially from those referred to herein due to a number of factors, including but not limited to key challenges listed below and risks described in Item 1A, “Risk Factors” and elsewhere in this Annual Report on Form 10-K.

We disclaim any duty to update any of the forward-looking statements to conform our prior statements to actual results.

Actual results may differ materially from those referred to herein due to a number of factors, including but not limited to key challenges listed below and risks described in Item 1A, "Risk Factors" and elsewhere in this Annual Report on Form 10-K.

We disclaim any duty to update any of the forward-looking statements after the date of this Annual Report on Form 10-K to conform our prior statements to actual results.

Investors and others should note that we disseminate information to the public about our company, our products, services and other matters through various channels, including our website (www.dolby.com), our investor relations website (http://investor.dolby.com), SEC filings, press releases, public conference calls, and webcasts, in order to achieve broad, non-exclusionary distribution of information to the public.

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.

In December 2019, a novel coronavirus disease was first reported and in January 2020, the World Health Organization ("WHO") declared it a Public Health Emergency of International Concern.

On March 11, 2020, the WHO characterized COVID-19 as a pandemic.

COVID-19 has triggered worldwide shutdowns, job losses, and other disruptions which in turn have negatively affected the global economy, including consumer purchasing activity.

Because Dolby technologies are featured in a wide array of electronic products that are primarily purchased by consumers, our revenues have been negatively affected by COVID-19.

The COVID-19 pandemic has triggered worldwide shutdowns, job losses, and other disruptions which in turn have negatively affected the global economy, including consumer purchasing activity.

Because Dolby technologies are featured in a wide array of electronic products that are primarily purchased by consumers, our revenue for certain consumer products has been negatively affected by COVID-19, although we have experienced heightened demand for certain consumer products that feature our technologies, including TVs and PCs, during the pandemic.

It is unclear how demand for these consumer products may change relative to demand levels experienced during the pandemic.

The issues and circumstances relating to COVID-19 continue to change rapidly and are difficult to predict.

We continue to monitor the evolving situation and the impact on our business.

The outbreak of COVID-19 has also affected many of our partners, resulting in the disruption of consumer products' supply chains and delays in shipments, product development, and product launches.

The outbreak of COVID-19 has also affected many of our partners, resulting in the disruption of consumer products' supply chains, shortages of certain semiconductor components, and delays in shipments, product development, and product launches.

Consumer demand for products that include our technologies may continue to be negatively impacted due to economic uncertainty resulting from COVID-19.

These factors have resulted in decreased revenue pertaining to royalties on consumer devices and may cause delays in the adoption of our technologies by partners.

These factors have impacted revenue pertaining to royalties on consumer devices and may cause delays in the adoption of our technologies by partners.

The overall cinema market has been adversely impacted by COVID-19 shelter-in-place and social distancing mandates.

Our exhibition partners and customers have had to either partially or fully discontinue operations.

At various times, our exhibition partners and customers have had to either partially or fully discontinue operations.

This has resulted in a significant reduction in box office receipts at Dolby Cinema sites and lower demand for our cinema products and services.

Though select cinema locations have been permitted to resume operations, many such locations are operating significantly below capacity.

It remains uncertain when the cinemas will be able to operate at full capacity.

At Dolby, we implemented work-from-home policies within all our offices in locations with ongoing outbreaks and put in place additional safety measures and global travel restrictions to ensure the well-being of our employees.

It remains uncertain when and where the cinemas will be able to operate at full capacity.

M ost cinema locations have been permitted to resume operations, but many such locations are operating under restricted capacity.

At Dolby, we implemented work-from-home options and practices within all our offices in locations with ongoing outbreaks and put in place additional safety measures and global travel restrictions to ensure the well-being of our employees.

We have enabled our employees with the tools and infrastructure they need to carry on our critical operations and progress the business forward in this remote working environment.

Select Dolby offices in certain locations have resumed in-office work at less than full capacity, dependent on local progress against COVID-19 and applicable rules and regulations in those jurisdictions, as well as the readiness of our facilities to accommodate appropriate safety measures for our employees.

We expect COVID-19 will continue to have an impact for the foreseeable future.

The degree of impact on our business will depend on several factors, such as the full duration and the extent of the pandemic, as well as actions taken by governments, businesses and consumers in response to the pandemic, all of which continue to evolve and remain uncertain at this time.

Dolby offices in certain locations have resumed in-office work at less than full capacity, dependent on local progress against COVID-19 and applicable rules and regulations in those jurisdictions.

We expect COVID-19 will continue to have an impact for the foreseeable future, with varying degrees of impact depending on geographic location.

The degree of impact on our business will depend on several factors, such as the full duration and the extent of the pandemic, the spread of Delta or other variants, the actions taken by governments, businesses and consumers in response to the pandemic, and the rate and extent of vaccine distributions to the general population, all of which continue to evolve and remain uncertain at this time.

Further discussion of the potential impacts of COVID-19 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 aim to drive revenue growth by broadening Dolby experiences to more types of content, such as music and gaming, that can increase our value proposition in our existing device categories and create opportunities in new device categories that can accelerate adoption of our technologies.

We can increase our value proposition and create opportunities by broadening Dolby technologies

into new types of content, such as music and gaming.

We are also beginning to leverage our audio and imaging expertise to expand the reach of our technologies to address content beyond premium entertainment that can create new revenue generating opportunities.

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Our imaging technologies are primarily comprised of Dolby Vision and our AVC and HEVC technologies.

The following are certain highlights from fiscal 2020 and key challenges related to audio and imaging licensing, by market.

Licensing revenue is primarily driven by the number of devices shipped by our licensees and by adoption of our technologies on additional devices.

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, and our revenue from these technologies is primarily impacted by device shipments by licensees.

Revenue growth from Dolby Vision, Dolby Atmos, our imaging patents, and Dolby Cinema are primarily a result of increased adoption.

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.

Our audio and imaging technologies have a strong presence within movie and episodic content through adoption across content creators and streaming services.

The availability of content on these platforms has driven strong adoption in devices such as TVs, STBs, speaker devices, and playback devices.

Our audio technologies have also been broadly adopted through many forms of content, including broadcast TV, streaming, and optical disc playback.

Major streaming partners and services such as Netflix, Disney+, Apple TV+, Amazon, HBO Max, and Paramount+ continue to enable more content in Dolby Vision and Dolby Atmos.

For example, in fiscal 2021, there was an increase in the global adoption of our technologies due to streaming services such as Netflix, Disney+, Apple TV+, Hotstar, and iQiyi launching local content in Dolby formats in countries such as Korea, India, Thailand, and Singapore.

Also, in fiscal 2021, it was announced that Amazon Prime Video will be the first to stream live Premier League matches in Dolby Atmos.

Recently, TV network operators have begun to broadcast live events in Dolby Vision and Dolby Atmos.

In fiscal 2021, Comcast enabled the Tokyo 2020 Olympics in both Dolby Vision and Dolby Atmos in the U.S.

Internationally, the Euro 2020 football championship was broadcast to several TV stations in Dolby Atmos.

We believe broadcast experiences such as these help drive further adoption of our technologies in devices such as TVs and smartphones.

We have also enabled a broader range of content, such as music, gaming, and user-generated content.

We believe enabling our technologies in these forms of content creates additional value for the adoption of Dolby within devices like mobile, PC, gaming consoles, and automotive.

In fiscal 2021, several music streaming services began supporting Dolby Atmos music including Apple with their Apple Music service, Naver Vibe in Korea, Hungama Music in India, and Anghami Plus in the Middle East.

Also in fiscal 2021, Vimeo, a platform to create, manage, and share videos, added support for Dolby Vision content within the Apple device ecosystem, and BiliBili, one of the largest video sharing platforms in China, launched support for Dolby Vision and Dolby Atmos.

Additionally, Tencent Games announced that QQ Speed Mobile was the first mobile game that supports Dolby Atmos, and BT began delivering sports content in Dolby Atmos to mobile devices via their BT Sports App.

The following are highlights from our fiscal 2021 and key challenges related to audio and imaging licensing, by market.

We have an established global presence with respect to our DD+ and HE-AAC audio technologies in broadcast services and devices.

In recent years, we have expanded our offerings in the broadcast market through the introduction of newer technologies, including our Dolby Atmos and AC-4 audio technologies, Dolby Vision, as well as AVC and HEVC imaging technologies which we license through patent pools.

We continue to add new TV partners for Dolby Vision and Dolby Atmos.

For example, during fiscal 2020, Xiaomi launched their first TV model that supports both Dolby Vision and Dolby Atmos.

In addition, many of our existing partners expanded their support of the combined Dolby Vision and Dolby Atmos experience by releasing more models and expanding into international markets, such as India.

As a result, the adoption of Dolby Vision and Dolby Atmos within 4K TV shipments grew compared to the previous year.

Also this year, we launched Dolby Vision IQ along with our TV partners LG and Panasonic.

Dolby Vision IQ automatically adjusts the TV picture according to the surrounding light and the type of content being viewed, creating an enhanced viewing experience.

We partner with many TV OEMs to enable Dolby Vision and Dolby Atmos experiences within their TV lineups.

Many such partners have continued to expand their support of the combined Dolby Vision and Dolby Atmos experience.

For example, in fiscal 2021, Amazon introduced a new smart TV series that will support Dolby Vision.

In addition, Xiaomi in China recently launched new TV models that support Dolby Vision and Dolby Atmos.

Also, in fiscal 2021, Toshiba, TCL, Skyworth, Xiaomi, and Hisense launched TVs equipped with Dolby Vision IQ.

Dolby Vision IQ creates an enhanced viewing experience by automatically adjusting the TV picture according to the surrounding light and the type of content being viewed.

We continued to see engagement with partners supporting our newer technologies in STBs.

In fiscal 2020, Free, a broadcast service provider in France, as well as Deutsche Telekom in Germany, both launched their first STBs supporting Dolby Vision and Dolby Atmos.

In fiscal 2021, Comcast announced the launch of XiOne, a new wireless streaming STB that supports Dolby Vision and Dolby Atmos, for their global customers including Sky in Europe.

Key Challenges :

Our pursuit of growth and further adoption of our technologies may be impacted by a number of factors.

In certain countries, such as China, we face difficulties enforcing our contractual and IP rights, including instances in which our licensees fail to accurately report the shipment of products using our technologies.

We must continue to present compelling reasons for consumers to demand our audio and imaging technologies, including ensuring that there is a breadth of available content in our formats and such content is being widely distributed.

To the extent that OEMs do not incorporate our technologies in current and future products, our revenue could be impacted.

Further, in certain countries, such as China, we face difficulties enforcing our contractual and IP rights, including instances in which our licensees fail to accurately report the shipment of products using our technologies.

Additionally, in the broadcast market, as well as other markets, we face geopolitical challenges including changes in diplomatic and trade relationships, trade protection measures, and import or export licensing requirements.

Further, COVID-19 is causing uncertainty about consumer demand for devices and services in the broadcast market, the ability of our partners to manufacture such devices due to supply chain disruption, timing of the adoption of our technologies into new products by partners and licensees, and the timing of launches for new products.

Further, COVID-19 continues to cause uncertainty about consumer demand for devices and services in the broadcast market, the ability of our partners to manufacture such devices due to supply chain disruption, timing of the adoption of our technologies into new products by partners and licensees, and the timing of launches for new products.

We continue to focus on adoption of our technologies across major mobile ecosystems, including Apple and Android.

HE-AAC and HEVC are widely adopted audio and video technologies across mobile devices.

We offer these technologies through our patent licensing programs.

HE-AAC and HEVC are widely adopted audio and video technologies across mobile devices, and we offer these technologies through our patent licensing programs.

We also continue to focus on expanding adoption of our DD+, AC-4, Dolby Atmos, and Dolby Vision technologies in the mobile market.

The breadth of mobile devices supporting Dolby technologies continues to increase globally.

In fiscal 2020, Apple continued to adopt Dolby Vision and Dolby Atmos across their portfolio of devices, leading to support for Dolby Vision capture and playback on Apple’s newest iPhone, and AirPods Pro support of Dolby Atmos with the

release of iOS14.

In addition, a majority of Apple's other iOS product offerings support the combined experience of Dolby Vision and Dolby Atmos.

Additional Dolby Atmos-enabled mobile devices are available in the market from partners such as Samsung, Amazon, Oppo, and Sony.

In fiscal 2021, Apple continued to deepen their adoption of the combined Dolby Vision and Dolby Atmos experience across Apple mobile devices.

In addition, mobile devices from Samsung, Sony, OPPO, and Lenovo support Dolby Atmos.

Also in fiscal 2021, Xiaomi launched its first smartphones supporting Dolby Vision and Dolby Atmos.

Key Challenges:

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Additionally, we must continue to support the development and distribution of Dolby-enabled content via various ecosystems.

Further, COVID-19 is causing uncertainty about consumer demand for devices in the mobile market, the ability of our partners to manufacture such devices due to supply chain disruption, timing of the adoption of our technologies into new products by partners and licensees, and the timing of launches for new products.

Further, COVID-19 continues to cause uncertainty about consumer demand for devices in the mobile market, the ability of our partners to manufacture such devices due to supply chain disruption, timing of the adoption of our technologies into new products by partners and licensees, and the timing of launches for new products.

Consumer Electronics

We have an established presence in the home entertainment market across devices such as AVRs, soundbars, smart speakers, Blu-Ray players, and DMAs, through the inclusion of our DD+ technology, and increasingly through the inclusion of our Dolby Atmos technology.

We have an established presence in the home entertainment market across devices such as AVRs, soundbars, 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.

These home entertainment devices can be paired with a growing array of Dolby enabled content via OTT services and Blu-ray discs.

In fiscal 2020, the breadth of devices in the home entertainment market supporting Dolby Atmos continued to expand.

Sonos launched a new soundbar that supports Dolby Atmos, and Roku launched their new DMA supporting Dolby Vision and Dolby Atmos.

In addition, content available in Dolby Vision and Dolby Atmos continued to grow in fiscal 2020, broadening our opportunities for increased adoption in more devices.

Google Play, Showtime, and CBS began supporting Dolby Vision content.

Additional OTT services currently supporting the combined experience of Dolby Vision and Dolby Atmos include Netflix, Disney+, Amazon, and Apple TV+.

We have also expanded our global presence with Hotstar supporting Dolby Vision within their Disney+ content in India, and Tencent and iQiYi supporting Dolby Vision and Dolby Atmos in China.

We continue to focus on expanding the availability of Dolby technologies to new devices and new forms of content such as music, bringing new Dolby experiences to the market.

In fiscal 2020, TIDAL began enabling Dolby Atmos for music to a growing number of TVs, soundbars, and AVR devices through their streaming app.

In addition, Dolby Atmos music is available on the Amazon Echo Studio smart speaker streaming from Amazon Music HD.

Key Challenges :

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To the extent that OEMs do not incorporate our technologies in current and future products, our revenue could be impacted.

Further, COVID-19 is causing uncertainty about consumer demand for devices in the home entertainment market, the ability of our partners to manufacture such devices due to supply chain disruption, timing of the adoption of our technologies into new products by partners and licensees, and the timing of launches for new products.

Further, COVID-19 continues to cause uncertainty about consumer demand for devices in the home entertainment market, the ability of our partners to manufacture such devices due to supply chain disruption, timing of the adoption of our technologies into new products by partners and licensees, and the timing of launches for new products.

Personal Computers

DD+ continues to enhance playback in both Mac and Windows operating systems, including native support in their respective Safari and Microsoft Edge browsers.

DD+ continues to enhance audio playback in both Mac and Windows operating systems, including native support in their respective Safari and Microsoft Edge browsers.

Dolby's presence in these browsers enables us to reach more users through various types of content, including streaming video entertainment.

In fiscal 2020, Lenovo and ASUS released a number of gaming laptops with Dolby Atmos broadening the consumer base that can experience Dolby technologies.

Also during the year, a number of gaming titles enabled in Dolby Atmos were released across multiple gaming platforms such as PCs.

In addition, a number of PCs from partners such as Apple, Lenovo, Dell, and ASUS support Dolby Vision and Dolby Atmos.

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.

In fiscal 2021, Microsoft launched the Surface Pro 8 and Surface Studio, which enable playback in Dolby Vision, Dolby Vision IQ, and Dolby Atmos.

Key Challenges :

PC revenues have been impacted by a decline in the portion of PCs that have optical disc functionality in recent years, which has resulted in a decline in our ASPs, and we expect this decline in ASPs to continue.

If declining conditions and trends persist, and OEMs do not incorporate our technologies in current and future products, our PC revenues will face continuing downward pressure.

We must continuously collaborate and maintain our key partnership relationships with PC manufacturers to incorporate our technologies, and we must continue to support the development and distribution of Dolby content via various ecosystems.

Further, COVID-19 is causing uncertainty about consumer demand for devices in the PC market, the ability of our partners to manufacture such devices due to supply chain disruption, timing of the adoption of our technologies into new products by partners and licensees, and the timing of launches for new products.

PC revenue from audio technologies such as DD+ has been impacted by a decline in the portion of PCs that have optical disc functionality in recent years, which has resulted in a decline in our ASPs, and we expect this decline in ASPs to continue.

We must continuously collaborate and maintain our key partnerships with PC manufacturers to incorporate our technologies, and we must continue to support the development and distribution of Dolby content via various ecosystems.

Demand in the PC market has been positively impacted in recent quarters by work-from-remote policies due to COVID-19.

It is unclear whether this heightened demand will be sustained.

COVID-19 continues to cause uncertainty about the ability of our partners to manufacture such devices due to supply chain disruption, timing of the adoption of our technologies into new products by partners and licensees, and the timing of launches for new products.

Other Markets

DD+ is incorporated in the Xbox and PlayStation gaming consoles and streaming platforms for movie and television content.

In fiscal 2020, Microsoft announced that their next generation Xbox Series X and Series S will be the first gaming consoles to support Dolby Vision and Dolby Atmos for gaming content.

We also generate revenue from the automotive industry primarily through disc playback devices as well as other elements of the entertainment system, and are focused on expanding our presence in music in the automotive industry.

DD+ is incorporated in the Xbox and PlayStation gaming consoles that support gaming content and streaming for movie and television content.

The most recently launched Xbox gaming console supports Dolby Vision and Dolby Atmos for streaming and gaming content.

We also generate revenue from the automotive industry primarily through disc playback devices as well as other elements of the entertainment system, including in the future, enabling the playback of Dolby Atmos music.

In fiscal 2021, Lucid Motors announced that their Lucid Air model is the first vehicle that features Dolby Atmos in its entertainment system.

Subsequent to fiscal 2021, Mercedes-Benz announced that they expect to adopt the Dolby Atmos Car Experience in two of their luxury car models, the Mercedes-Maybach and Mercedes-Benz S-Class.

Key Challenges :

Consumer demand for devices in the gaming industry is impacted by the anticipation of console refresh cycles.

Consumer demand for devices in the gaming industry is impacted by anticipation of console refresh cycles.

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.

These factors may impact our future revenues.

If OEMs do not incorporate our technologies in current and future products, our revenues will face downward pressure.

Further, COVID-19 is causing uncertainty about consumer demand for devices in the gaming industry, the ability of our partners to manufacture such devices due to supply chain disruption, timing of the adoption of our technologies into new products by partners and licensees, and the timing of launches for new products.

In addition to licensing revenue derived from the licensing of audio and imaging technologies from the markets discussed above, we offer our audio and imaging technologies to create Dolby experiences through Dolby Cinema.

We continued to expand our global presence for Dolby Cinema.

In fiscal 2020, the first Dolby Cinemas were opened in South Korea and Saudi Arabia, and we established more partnerships with global exhibitors.

At the end of the fiscal year, we had over 250 Dolby Cinema locations established across 13 countries.

The breadth of motion pictures for Dolby Cinema continues to grow with over 300 theatrical titles in Dolby Vision and Dolby Atmos having been announced or released from all the major studios.

Also, automotive revenue has been negatively impacted by a decline in the portion of cars that have optical disc playback in recent years.

These factors may impact our future revenue.

If OEMs do not incorporate our technologies in current and future products, our revenue will face downward pressure.

Further, COVID-19 continues to cause uncertainty about consumer demand for devices in the gaming industry, the ability of our partners to manufacture such devices due to supply chain disruption, timing of the adoption of our technologies into new products by partners and licensees, and the timing of launches for new products.

In addition to licensing revenue derived from the licensing of audio and imaging technologies into the markets discussed above, we offer our audio and imaging technologies to create Dolby experiences through Dolby Cinema.

We continue to expand our global presence for Dolby Cinema.

As of the end of fiscal 2021, we had over 260 Dolby Cinema locations established across 14 countries, as compared to over 250 Dolby Cinema locations established across 13 countries as of the end of fiscal 2020.

In fiscal 2021, over 95% of those sites reopened within capacity restrictions per local regulations.

The breadth of motion pictures for Dolby Cinema continues to grow with over 375 theatrical titles in Dolby Vision and Dolby Atmos having been announced or released from all of the major studios, as compared to over 300 theatrical titles as of the end of fiscal 2020.

Key Challenges:

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In addition, the success of our Dolby Cinema offering will be tied to global box office performance generally.

COVID-19 has had, and is likely to continue to have, a significant effect on theatrical exhibition.

The response to COVID-19 including the closure of cinemas, shelter-in-place mandates and government-imposed social-distancing restrictions have had, and are likely to continue to have, a negative impact on our cinema-related revenues and consumer demand.

Further, studios have delayed the release of a number of new movie titles and temporarily suspended the production of future releases.

It is uncertain whether consumer demand for the cinema and other forms of indoor recreation will return to previous levels.

In addition, when cinemas reopen, exhibitor partners may operate fewer screens in response to decreased attendance.

PRODUCTS & SERVICES

A majority of our products and services revenues are derived from the sale of audio and imaging products for the cinema, television, broadcast, communication, and entertainment industries.

Revenues from the sale of Dolby Conference Phones, Dolby Voice Room, as well as our recently launched Developer Platform are included in products and services.

Cinema Products & Services

COVID-19 has had a significant effect on theatrical exhibition, which could impact the

financial viability of our key partners.

The response to COVID-19 including the closure of cinemas, shelter-in-place mandates and government-imposed social-distancing restrictions has had a negative impact on our cinema-related revenue and consumer demand, although consumer demand for the cinema has improved recently.

Further, certain studios have delayed the release of a number of new movie titles and/or are shifting towards a direct-to-streaming model, which as a result, has negatively impacted the rate of new Dolby Cinema content.

It is uncertain whether consumer demand for the cinema will return to previous levels.

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 the sale of Dolby Conference Phones and Dolby Voice Room, a business which have exited, is included in products and services.

Revenue from our recently launched developer platform, Dolby.io, is also included in products and services.

Cinema Products and Services

To help enable the playback of content in Dolby formats, we offer a range of servers and audio processors to cinema exhibitors globally.

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We may also be faced with pricing pressures or competing technologies, which would affect our revenue.

Additionally, the effects of COVID-19 such as the closure of cinemas, social distancing requirements, and shelter-in-place mandates have had, and are likely to continue to have, a negative impact on demand for cinema products and services.

Additionally, the effects of COVID-19 such as the closure of cinemas, social distancing requirements, and shelter-in-place mandates have had a negative impact on demand for cinema products and services, and it remains uncertain whether it will continue to have a negative impact on the demand for these products and services.

COVID-19 has also negatively impacted the financial health of our cinema customers and partners.

If cinemas permanently close, our equipment may be available for resale on the secondary market, and erode the demand for new products.

These conditions are likely to continue after the end of government-imposed restrictions.

In fiscal 2020, we sold hardware products such as the Dolby Conference Phone and the Dolby Voice Room, which include our Dolby Voice technology.

In response to the changing market opportunities, in the first quarter of fiscal 2021 we decided to begin exiting the sale and leasing of conference hardware.

Going forward, our Dolby Voice efforts will be focused on expanding the availability of our technologies through our developer platform and our software solutions for enterprise communications partners.

These conditions are likely to continue as government-imposed restrictions continue to lift in certain locations.

Historically, we sold hardware products such as the Dolby Conference Phone and the Dolby Voice Room, that included our Dolby Voice technology.

However, in the first quarter of fiscal 2021, we decided to exit our conference hardware business and focus instead on expanding the availability of Dolby Voice technology through software solutions and services.

Key Challenges:

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Our success will depend on our ability to attract a robust developer community and new industry relationships as we to bring our services and technologies to market.

Other Services

We are focused on bringing our expertise in media and communications to a broader range of digital experiences.

In fiscal 2020 we launched our developer platform, Dolby.io, which enables developers to access our technologies through APIs.

The initial offerings include media processing APIs for analyzing and improving the sound of recorded audio files, and interactivity APIs for enabling developers to embed enhanced communications experiences within their applications.

Following the initial launch of Dolby.io, we have seen increased customer engagement with our media and interactivity APIs for use cases such as entertainment, online education and telehealth.

For example, we have partnered with SoundCloud to incorporate our music mastering APIs within their online music distribution platform.

Developer Platform Services

We are focused on bringing our expertise in media and communications to a broader range of content and digital experiences .

For example, we are increasing our engagement with new customers across different industries through our developer platform, Dolby.io, that enables developers to access our technologies through APIs.

The initial offerings include media processing APIs for analyzing and improving the sound of recorded audio files, for example, and interactivity APIs for enabling developers to embed enhanced communications experiences within their applications.

Following the initial launch of Dolby.io, we have seen growing developer engagement with our media and interactivity APIs for use cases such as entertainment, online education and collaboration tools.

For example, in fiscal 2021, we completed an integration with Box by using embedded Dolby media processing APIs, that allows Box customers to enable their users to easily enhance the quality of their audio files.

Key Challenges:

Our success in this market will depend on the number of developers we are able to attract, the volume of usage of the service, and our ability to monetize our services.

Dolby.io is still considered in its initial stages of product launch, and it is uncertain when and if it will be a material revenue driver for the Company.

Our success in this market will depend on the number of developers we are able to attract and maintain, the volume of usage of the service, and our ability to monetize our services.

In addition, the development and maintenance needed to provide a reliable and scalable platform may require us to internally develop new skills for our current employees or hire external specialized talent.

Although the market for online experiences has been growing, Dolby's interactivity API technologies compete with other offerings.

In addition, our pursuit of growth and further adoption depends on our ability to continue to innovate and add additional value to our services.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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Generally, revenue is recognized upon transfer of control of promised products, services or intellectual property and technologies ("IP") rights to customers in an amount that reflects the consideration that we expect to receive in exchange for those products, services or licensing of the IP rights.

The primary judgments include estimating sales-based revenues in advance of receiving statements from our licensees, estimating variable consideration, identifying the performance obligations in the contract, and determining whether the performance obligations are distinct, and allocating consideration accordingly.

The primary judgments include estimating sales-based revenue in advance of receiving statements from our licensees, estimating variable consideration, identifying the performance obligations in the contract, and determining whether the performance obligations are distinct, and allocating consideration accordingly.

Most of our licensing arrangements are structured as sales-based whereby we are paid a unit-based royalty.

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In these cases, control is transferred and the transaction price - the amount we expect to be entitled to in exchange for the license right - is recognized upon the later of contract execution or the effective date.

Transaction price is determined at contract execution and, to the extent variable consideration applies, is updated

each subsequent reporting period until the completion of the contract.

In addition, we evaluate whether a significant financing component exists when we recognize revenue in advance of customer payments that occur over time and extend beyond one year.

Transaction price is determined at contract execution and, to the extent variable consideration applies, is updated each subsequent reporting period until the completion of the contract.

We evaluate whether other distinct performance obligations exist, such as PCS, and determine the stand-alone selling price based on the actual selling prices made to customers.

If the performance obligation is not sold separately, we estimate the stand-alone selling price.

We do so by considering market conditions such as competitor pricing strategies, customer specific information and industry technology lifecycles, internal conditions such as cost and pricing practices, or applying the residual approach method when the selling price of the good, most commonly a license, is highly variable or uncertain.

In addition, we evaluate

whether a significant financing component exists when we recognize revenue in advance of customer payments that occur over time and extend beyond one year.

In general, if the payment arrangements extend beyond the first year of the contract, we treat a portion of the payments as a financing component.

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The portion related to the financing component is recorded as interest income, and is not material to our consolidated financial statements.

For additional information, see Note 3 “ Revenue Recognition ” to our consolidated financial statements in Part II, Item 8 of this Annual Report.

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.

IMPACT OF NEW ACCOUNTING STANDARDS NOT YET ADOPTED

Collaborative Arrangements.

In November 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (Topic 808):

Clarifying the Interaction between Topic 808 and Topic 606 , which clarifies that certain transactions between participants in a collaborative arrangement should be accounted for under ASC 606 when the counterparty is a customer.

In addition, ASU 2018-18 precludes an entity from presenting consideration from a transaction in a collaborative arrangement as revenue from contracts with customers if the counterparty is not a customer for that transaction.

This standard will be effective for Dolby beginning September 26, 2020.

While we have a number of collaborative arrangements, we do not believe that this standard will have a material impact on our consolidated financial statements.

Financial Instruments.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments (Topic 326):

Measurement of Credit Losses on Financial Instruments , which modifies the measurement of expected credit losses of certain financial instruments, including trade receivables, contract assets, and lease receivables.

This standard will be effective for Dolby beginning September 26, 2020.

We do not believe that this standard will have a material impact on our consolidated financial statements.

Income Taxes.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes , which modifies and eliminates certain exceptions to the general principles of ASC 740, Income Taxes.

This standard will be effective for Dolby beginning September 25, 2021.

We are currently evaluating the impact of the standard on our consolidated financial statements.

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.

RESULTS OF OPERATIONS

For each line item included on our consolidated statements of operations described and analyzed below, the significant factors identified as the leading drivers contributing to the overall fluctuation are presented in descending order of their impact on the overall change (from an absolute value perspective).

This discussion and analysis highlights comparisons of material changes in the consolidated financial statements for years ended September 25, 2020, September 27, 2019, and September 28, 2018.

This discussion and analysis highlights comparisons of material changes in the consolidated financial statements for the years ended September 24, 2021 and September 25, 2020.

For the discussion and analysis highlighting comparisons of material changes in the consolidated financial statements for the years ended September 25, 2020 and September 27, 2019, 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 25, 2020, which is incorporated herein by reference.

Note that adjustments related to previously under-reported sales-based royalties as well as unlicensed settlement activity, are collectively referred to as "recoveries." Amounts displayed, except percentages, are in thousands.

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A significant portion of our licensing revenue pertains to customer-shipment royalties that we recognize based on estimates of our licensees’ shipments.

To the extent that shipment data reported by licensees differs from estimates we made and recorded, we recognize an adjustment to revenue for such difference.

Our cost of licensing consists mainly of amortization of certain purchased intangible assets and intangible assets acquired in business combinations, depreciation, third party royalty obligations, and associated fees.

Fiscal Year Ended 2020 vs.

2019 2019 vs.

To the extent that shipment data reported by licensees differs from estimates we made and recorded, we recognize an adjustment to revenue for such difference in the period we receive the reported shipment data.

Fiscal Year Ended Change

Licensing September 24,

2021 September 25,

2019 September 28,

Revenue $1,214,147 $1,078,577 $135,570 13%

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Gross margin percentage 95% 95%

Factor Licensing Revenue Gross Margin

Other â Lower revenues from Dolby Cinema resulting from the closure of cinemas and lower attendance due to COVID-19, lower automotive recoveries, and gaming, partially offset by higher patent administration fees from Via Licensing ßà No significant fluctuations

Mobile á Higher revenues from increased adoption of our patent licensing technologies and increased adoption of Dolby Atmos and Dolby Vision, partially offset by lower recoveries

PC á Higher revenues from recoveries, higher adoption of Dolby Vision and Dolby Atmos in more PC models, and higher revenues from patent licensing technologies

Broadcast â Lower revenues from patent licensing and decreased market volume of STBs, partially offset by higher adoption of Dolby Atmos and Dolby Vision, primarily in TVs

CE â Lower market volumes of AVRs and home theater equipment, partially offset by increased adoption of our patent licensing technologies, and increased adoption of Dolby Atmos and Dolby Vision in DMAs and soundbars

Fiscal Year Ended

Licensing Revenue By Market September 24, 2021 September 25, 2020

Broadcast $ 475,648 39 % $ 439,415 41 %

Mobile 261,232 22 % 226,972 21 %

CE 181,944 15 % 152,608 14 %

PC 141,919 12 % 132,302 12 %

Other 153,404 12 % 127,280 12 %

Total licensing revenue $ 1,214,147 100 % $ 1,078,577 100 %

Factor Licensing Revenue Gross Margin

Mobile á Higher revenues from increased adoption of our patent licensing technologies and the adoption of our technologies into more devices, partially offset by lower recoveries ßà No significant fluctuations

Broadcast á Higher revenues from increased adoption of our patent licensing technologies, recoveries, and TVs, partially offset by lower market volume of STBs

Other á Higher revenues from Dolby Cinema, gaming, and automotive recoveries, partially offset by lower licensing in Dolby Voice

CE á Higher volume of DMAs and increased adoption of our patent licensing technologies, partially offset by lower recoveries

PC á Higher revenues from recoveries and increased adoption of our patent licensing technologies, partially offset by lower ASP from decreasing number of PCs with optical disc functionality

Broadcast á Higher revenue from higher unit shipments in North America and Europe, increased adoption of our technologies, and higher revenue from our patent licensing technologies, partially offset by lower recoveries ßà No significant fluctuations

Mobile á Higher revenue from recoveries, as well as higher adoption of our technologies and higher unit shipments

CE á Higher revenue from higher unit shipments, increased adoption of our Dolby Atmos and Dolby Vision technologies, and higher revenue from recoveries and from our patent licensing technologies

Other á Higher gaming revenue primarily from gaming consoles, higher revenue from our patent licensing technologies, and higher patent administration fees from Via, partially offset by lower automotive recoveries

PC á Higher unit shipments due to demand from working from home conditions of COVID-19, and higher adoption of our Dolby Atmos and Dolby Vision technologies, partially offset by lower recoveries

Products and Services

Products revenue is generated from the sale of audio, imaging, and voice products for the cinema, television broadcast, communications, and consumer products industries.

Products revenue is generated from the sale of audio and voice products for the cinema, television broadcast, and communications.

Also included in products revenue are amounts relating to certain Dolby Cinema arrangements that are considered sales-type leases that involve fixed or minimum fees.

Cost of products consists of materials, labor, and manufacturing overhead, amortization of certain intangible assets, as well as third party royalty obligations.

Cost of products includes materials, labor, manufacturing overhead, amortization of certain intangible assets, and certain third party royalty obligations.

Services revenue consists of fees charged 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.

Services revenue also includes PCS for products sold and equipment installed at Dolby Cinema theaters operated by exhibitor partners and support for the implementation of our technologies into products manufactured by our licensees.

Also included in services revenue are amounts generated through our Dolby.io developer platform.

Cost of services consists of personnel and personnel-related costs for providing our professional services, software maintenance and support, external consultants, and other direct expenses incurred on behalf of customers.

Fiscal Year Ended 2020 vs.

2019 2019 vs.

Fiscal Year Ended Change

Products and Services September 24,

2021 September 25,

2019 September 28,

Revenue $67,109 $83,215 $(16,106) (19)%

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Factor Products and Services Revenue Gross Margin

Products â Lower sales of cinema equipment attributable to COVID-19 and lower revenues from Dolby Cinema sales-type leases (hybrid agreements), partially offset by higher units of Dolby Voice products â Lower utilization of manufacturing capacity and higher excess & obsolescence charges

Services ßà No significant fluctuations â Lower utilization of available capacity

Factor Products and Services Revenue Gross Margin

Products á Higher revenues from Dolby Cinema and Dolby Voice products, and higher units of cinema equipment â Higher excess & obsolescence charges

Services ßà No significant fluctuations á Higher utilization of available capacity

Products â Lower sales of cinema products and cinema hardware attributable to COVID-19, and lower units of conferencing hardware products as a result of exiting that business

á Lower excess and obsolescence charges and favorable product mix offset by lower utilization of available capacity

Services ßà No significant fluctuations â Higher systems and consulting costs to support the developer platform, and higher depreciation expense

Operating Expenses

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R&D expenses consist primarily of employee compensation and benefits expenses, stock-based compensation, consulting and contract labor costs, depreciation and amortization, facilities costs, costs for outside materials, and information technology expenses.

Fiscal Year Ended 2020 vs.

2019 2019 vs.

September 25,

Fiscal Year Ended Change

September 24,

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Category Key Drivers

Compensation & Benefits á Higher headcount and annual merit increases across the existing employee base

Travel â Lower costs due to COVID-19 travel restrictions

Professional & Consulting â Lower costs for external professional and consulting services for new product development

Category Key Drivers

Research & Development ßà No significant fluctuations

Compensation & Benefits á Higher costs of $6.0 million due to higher salaries expense primarily related to increased headcount, and higher costs of $3.3 million due to higher incentive compensation

Stock-based Compensation á Higher costs of $4.1 million due to increased fair value of RSUs

Travel â Lower costs of $2.1 million for company travel due to COVID-19 travel restrictions

Sales and Marketing

S&M expenses consist primarily of employee compensation and benefits expenses, stock-based compensation, marketing and promotional expenses for events such as trade shows and conferences, marketing campaigns, travel-related expenses, consulting fees, facilities costs, depreciation and amortization, information technology expenses, and legal costs associated with the protection of our IP.

Fiscal Year Ended 2020 vs.

2019 2019 vs.

September 25,

Fiscal Year Ended Change

September 24,

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Category Key Drivers

Travel â Lower costs due to COVID-19 travel restrictions

Marketing Programs á Higher costs related to marketing efforts for company growth initiatives and branding activities

Legal, Professional, & Consulting â Lower costs for IP recovery activities

Category Key Drivers

Legal, Professional, & Consulting á Increased IP related activities aimed at revenue generation

Marketing Programs á Higher costs related to marketing programs, including branding activities, and new product launches

Travel â Lower costs of $7.1 million for company travel due to COVID-19 travel restrictions

Marketing Programs â Lower costs of $6.3 million primarily related to marketing programs that were higher in the prior year and lower spending due to COVID-19

Consulting and External Labor á Higher costs of $6.0 million primarily due to increased spend on marketing campaigns, including digital and social marketing efforts

Facilities Costs â Lower facilities costs of $6.0 million due to reduced occupancy during COVID-19 related office closures

Stock-based Compensation á Higher costs of $4.5 million due to increased fair value of RSUs

Compensation & Benefits á Higher costs of $4.0 million due to higher salaries expense primarily related to increased headcount

General and Administrative

G&A expenses consist primarily of employee compensation and benefits expenses, stock-based compensation, depreciation, facilities and information technology costs, as well as professional fees and other costs associated with external consulting and contract labor.

Fiscal Year Ended 2020 vs.

2019 2019 vs.

September 25,

Fiscal Year Ended Change

September 24,

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Category Key Drivers

Compensation & Benefits á Higher headcount and annual merit increases across the existing employee base

Bad Debt á Higher charges recorded in the current period

Category Key Drivers

Legal, Professional, & Consulting á Higher costs associated with various legal activities and patent filings

Compensation & Benefits á Higher headcount and annual merit increases across the existing employee base

Bad Debt á Higher charges recorded in the current period

Restructuring

Restructuring charges/(credits) recorded as operating expenses in our statements of operations represent costs associated with separate individual restructuring plans implemented in various fiscal periods.

The extent of our costs arising as a result of these actions, including fluctuations in related balances between fiscal periods, is based on the nature of activities under the various plans.

Fiscal Year Ended 2020 vs.

2019 2019 vs.

Bad Debt Expense â Lower costs of $10.5 million primarily due to higher charges recorded in the prior year attributable to the onset of COVID-19, and higher net collections in the current year

Taxes and Insurance á Higher costs of $6.1 million primarily due to a property tax credit recorded in the prior year that did not repeat in the current period, and due to changes in nature of local business taxes

Stock-based Compensation á Higher costs of $4.5 million due to increased fair value of RSUs

Compensation & Benefits á Higher costs of $3.6 million due to higher salaries expense due to increased headcount

Gain on Sale of Assets

Fiscal Year Ended Change

September 24,

2021 September 25,

Gain on sale of assets $(13,871) $— $(13,871) (100)%

Percentage of total revenue (1)% —%

In fiscal year 2019, management committed to a plan to sell a property, which included land and a building, after the lease on the property expired and we re-assessed the real estate needs of our business.

This property had a carrying value of $2.2 million as of September 25, 2020.

In the fiscal 2021, we finalized the sale of this property, and as a result, we realized a gain of $13.9 million, which was recorded to gain on sale of assets o n the consolidated statements of operations.

Refer to "Net Income Attributable to Controlling Interest" section below for more information.

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 extent of our costs arising as a result of these actions, including fluctuations in related balances between fiscal periods, is based on the nature of activities under the various plans.

Fiscal Year Ended Change

September 24,

Restructuring charges/(credits) $1,821 $36,558 $(446) $ (34,737) (95) % $ 37,004 (8,297) %

2021 September 25,

Restructuring charges $10,240 $1,821 $8,419 462%

Percentage of total revenue 1% —%

Subsequent to the fiscal year ended September 25, 2020, we approved a plan to reduce certain activities in order to reallocate those resources towards higher priority investment areas and growth opportunities for the future of our business.

Restructuring charges associated with this plan will be reflected in fiscal 2021 financial statements.

For additional information on this restructuring program, see Note 20 " Subsequent Events " to our consolidated financial statements.

Restructuring charges recorded in fiscal 2019 of $33.5 million represents costs incurred as a result of our early exit of leased facilities.

Included in those costs are the write-off of the carrying value of the leasehold improvements associated with the facilities and other expenses associated with the exit of the facilities.

Restructuring charges recorded in fiscal 2019 also include $3.1 million associated with a reorganization of our marketing function that resulted in severance and other related benefits for approximately 50 positions that were eliminated.

Restructuring charges recorded in fiscal 2021 of $9.5 million were incurred in relation to our fiscal 2021 plan to reduce certain activities, such as exiting our conferencing hardware business, in order to focus our efforts on higher priority investment areas, and reduce the cost structure of our manufacturing operations.

These costs represented severance and related benefits that were offered to approximately 100 employees impacted by this action.

For additional information on our Restructuring programs, see Note 13 " Restructuring " to our consolidated financial statements.

Other Income/Expense

Other income/(expense) primarily consists of interest income earned on cash and investments and the net gains/(losses) from foreign currency transactions, derivative instruments, and sales of marketable securities from our investment portfolio.

Fiscal Year Ended 2020 vs.

2019 2019 vs.

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, and sales of marketable securities from our investment portfolio.

Fiscal Year Ended Change

Other income/(expense) September 24,

2021 September 25,

2019 September 28,

Interest income $3,493 $12,725 $(9,232) (73)%

Interest expense (479) (186) (293) 158%

Other income/(expense), net 8,434 481 (5,903) 7,953 1,653% 6,384 (108)%

Other income, net 7,108 8,434 (1,326) (16)%

Total $10,122 $20,973 $(10,851) (52)%

Category Key Drivers

Interest Income â Lower yields on current year investment balances due to decreased interest rates

Other Income á Increase in realized gains from sales of investments and higher valuation on equity method investments

Category Key Drivers

Other Income/(Expense) á Decrease in other expense due to impairment charges recorded in the prior year on cost method equity investments that did not re-occur in 2019, higher valuation of current year equity method investment, and lower foreign currency translation losses

Interest Income á Higher yields on investment balances

Interest Income â Lower yields of $9.2 million on current year investment balances due to decreased interest rates

Our effective tax rate is based on our fiscal year results and is affected by several factors.

These reflect the current statutory rates in our domestic and foreign jurisdictions, the relative income earned in our foreign jurisdictions, and nonrecurring items such as changes to our unrecognized tax benefits that may occur in but are not necessarily consistent between periods.

Our fiscal 2020 income tax provision reflects a decrease in unrecognized tax benefits due to a lapse in the statute of limitations.

Our fiscal 2018 income tax provision reflects amounts accrued in connection with the Tax Act enacted in December 2017.

For additional information related to effective tax rates, see Note 12 " Income Taxes" to our consolidated financial statements.

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2021 September 25,

2019 September 28,

Provision for income taxes $(36,689) $(8,096)

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Factor Impact On Effective Tax Rate

Unrecognized Tax Benefits

â Additional benefit in the current year attributable to reversals of unrecognized tax benefits in the third quarter due to a lapse in the statute of limitations.

Factor Impact On Effective Tax Rate

Enactment of Tax Act â Lower tax expense due to a large tax charge for US tax reform in the prior year, a large tax benefit in the current year, and the reduction of the federal statutory rate

Unrecognized Tax Benefits á Lower expense in prior period due to a discrete benefit associated with the release of liabilities related to unrecognized tax benefits

Foreign Operations â Higher benefit from changes in jurisdictional mix of income

Stock-Based Compensation â Higher benefit related to the settlement of stock-based awards

Net Income Attributable to Controlling Interest

Fiscal Year Ended Change

September 24,

2021 September 25,

Net income attributable to controlling interest $(7,596) $(256) $(7,340) 2,867%

Percentage of total revenue (1)% —%

In fiscal 2021, we finalized the sale of a property, which included land and building, and as a result, we recognized a gain of $13.9 million from this transaction, which was recorded to gain on sale of assets on the consolidated statements of operations.

The property was 51% owned by the controlling interest, and therefore 51% of the gain on sale of assets has been attributed to the controlling interest.

LIQUIDITY, CAPITAL RESOURCES, AND FINANCIAL CONDITION

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As of September 24, 2021, we had cash and cash equivalents of $1,225.4 million, which mainly consisted of cash and highly-liquid money market funds.

In addition, we had short and long-term investments of $99.1 million, which consisted primarily of municipal debt securities, certificates of deposit, government bonds, commercial paper, corporate bonds, and U.S.

agency securities.

The following table presents selected financial information as of the fiscal years ended September 25, 2020 and September 27, 2019 (amounts displayed are in thousands):

In addition, we had short and long-term investments of $101.7 million,

which consisted primarily of corporate bonds, municipal debt securities, government bonds, commercial paper, U.S.

agency securities, and certificates of deposit.

The following table presents selected financial information as of the fiscal years ended September 24, 2021 and September 25, 2020 (in thousands):

September 24,

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We have returned cash to stockholders through both repurchases of Class A common stock under our repurchase program initiated in fiscal 2010 and our quarterly dividend program initiated in fiscal 2015.

Refer to Note 9 " Stockholders' Equity & Stock-Based Compensation " of our consolidated financial statements for a summary of dividend payments made under the program during fiscal 2020 and additional information regarding our 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 2021 and additional information regarding our stock repurchase program.

Stock Repurchase Program.

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Quarterly Dividend Program.

During the first quarter of fiscal 2015, we initiated a recurring quarterly cash dividend program for our stockholders.

During fiscal 2015, we initiated a recurring quarterly cash dividend program for our stockholders.

For fiscal 2021, quarterly dividends of $0.22 per share were paid on our Class A and Class B common stock to eligible stockholders of record.

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Factor Impact On Cash Flows

Working Capital á Higher inflows due to decreases in accounts receivable and contract assets, partially offset by higher outflows to settle remaining exit obligations for a terminated lease of an office building

Working Capital á Increase due to higher accounts payable and accrued liabilities, partially offset by increased accounts receivable

Net Income á Higher revenue and lower COGS

Gain on Sale of Assets â Non-cash adjustment for the gain recognized on the sale of property that was 51% owned by the controlling interest

Investing Activities

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Net cash provided by (used in) investing activities $ (44,905) $ 134,374

Net cash provided by investing activities was $190.6 million greater in fiscal 2020 compared to fiscal 2019, primarily due to the following:

Net cash provided by/(used in) investing activities was $179.3 million lower in fiscal 2021 compared to fiscal 2020, primarily due to the following:

Factor Impact On Cash Flows

Proceeds From Investments á Higher inflows from the sale & maturity of marketable investment securities

Capital Expenditures á Lower expenditures for PP&E

Purchase of Investments â Higher outflows for the purchase of marketable investment securities

Proceeds from Investments â Lower inflows from the sale and maturity of marketable investment securities

Purchase of Investments á Lower outflows for the purchase of marketable investment securities

Sale of Assets á Higher inflows for the sale of property that was 51% owned by the controlling interest

Capital Expenditures á Lower expenditures for PP&E in the current year due to reduced Dolby Cinema spending

Financing Activities

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Net cash used in financing activities $ (252,515) $ (207,775)

Net cash used in financing activities was $177.5 million lower in fiscal 2020 compared to fiscal 2019, primarily due to the following:

Net cash used in financing activities was $44.7 million higher in fiscal 2021 compared to fiscal 2020, primarily due to the following:

Factor Impact On Cash Flows

Share Repurchases á Lower outflows for common stock repurchases

Share Repurchases â Higher outflows for common stock repurchases as part of our stock repurchase program

Common Stock Issuance á Higher inflows from employee stock option exercises

Off-Balance Sheet Arrangements and Contractual Obligations

Our liquidity is not dependent upon the use of off-balance sheet financing arrangements, and we have not entered into any arrangements that are expected to have a material effect on liquidity or the availability of capital resources.

Shares Repurchased for Tax Withholdings â Higher outflows due to higher fair value of shares withheld for taxes

Distribution to Controlling Interest â Higher outflows for distributions to controlling interest due to the sale of property that was 51% owned by the controlling interest

Contractual Obligations and Commitments

The following table presents a summary of our contractual obligations and commitments as of September 24, 2021 (in thousands):

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The term of the agreement is 20 years, over which we will make payments on a semi-annual basis until fiscal 2032.

Our ongoing annual payment obligations are conditioned in part on the Academy Awards being held and broadcast from the Dolby Theatre.

Our payment obligations may be suspended or reduced in certain circumstances, including protracted closure of the Dolby Theatre.

For additional details regarding our naming rights commitments, see Note 14 " Commitments and Contingencies " to our consolidated financial statements.

Operating Leases.

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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.

The recipients of these donations participate in or promote the cinema and entertainment industry and our commitments vary in length, lasting up to 15 years.

For additional details regarding our donation commitments, see Note 14 " Commitments and Contingencies " to our consolidated financial statements.

Unrecognized Tax Benefits.

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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.

For additional details regarding our contractual obligations, see Note 14 “ Commitments & Contingencies ” to our consolidated financial statements.

Indemnification Clauses

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In addition, we have entered into indemnification agreements with our officers, directors, and certain employees, and our certificate of incorporation and bylaws contain similar indemnification obligations.

For additional details regarding indemnification clauses within our contractual agreements, see Note 14 “ Commitments & Contingencies ” to our consolidated financial statements.

For additional details regarding indemnification clauses within our contractual agreements, see Note 14 " Commitments and Contingencies " to our consolidated financial statements.

In fiscal 2021, 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 .

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis