What changed in this filing

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Item 1A. Risk Factors

2022-11-18 compared with 2021-11-17 · 126 added, 116 removed, 359 unchanged (40% of the section changed)

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REVENUE GENERATION

COVID-19, including the spread of the newer Delta variant, has had and will continue to have an adverse impact on our operations and financial performance .

COVID-19, including the spread of variants of SARS-CoV-2, has impacted and will continue to impact our operations and financial performance .

COVID-19 continues to impact several of our partners and has resulted in disruption of the supply chain of consumer products and delays in shipments, product development and product launches.

In addition, consumer demand for certain products that include our technologies has been, and we expect to continue to be, negatively impacted due to economic uncertainty from COVID-19 and a decline in discretionary spending by consumers.

In addition, it is unclear how demand for consumer products that include our technologies may change in response to the ongoing pandemic.

These factors have impacted revenue pertaining to customer-shipment royalties.

Further, these factors have and may continue to result in delays in the release of new products or services that contain our technologies by partners and licensees.

These factors may also result in delays in royalty reporting by partners and licensees, and in cases where a partner or licensee’s financial condition has significantly worsened, we may have difficulty collecting or be unable to collect amounts owed to us.

In addition, 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 products may change relative to demand levels during the pandemic.

The overall cinema market has been, and we expect to continue to be, adversely impacted by COVID-19 social distancing recommendations.

In cases where a partner or licensee’s financial condition has significantly worsened, we may have difficulty collecting or be unable to collect amounts owed to us.

We may also be negatively impacted by delays in transaction cycles and our recoveries efforts due to ongoing global restrictions related to the pandemic.

The cinema market has been adversely impacted by COVID-19.

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

This has resulted, and we expect will continue to result, in a significant reduction in box office receipts at Dolby Cinema sites and lower demand for our cinema products and services.

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

Further, the spread of Delta or other variants may result in renewed social distancing mandates or shutdowns.

The situation is continuing to evolve, and we cannot predict how or to what extent the cinema market, or other markets we target, may be impacted.

The spread of COVID-19 has caused us to modify our business practices (including temporary office closures, restricting employee travel, enabling and encouraging remote work, and cancellation of physical participation in meetings, events and conferences), and we may take further actions as may be required by government authorities or that we determine are in the best interests of our employees, licensees, partners, and community.

These actions may adversely impact our productivity and cause delays on new and existing projects.

Such delays may negatively impact our revenue.

Further, there is no certainty that the measures we have taken or will take will be sufficient to mitigate the risks posed by the virus to the well-being and productivity of our workforce.

The degree to which COVID-19 impacts our results will depend on future developments, which are highly uncertain and cannot be predicted with any certainty, including, but not limited to, the duration and extent of the pandemic, its severity, the rate and extent of vaccine distributions to the general population and other actions to contain the virus or its impact, additional subsequent outbreaks and variant strains, and how quickly and to what extent normal economic and operating conditions can resume.

Even after COVID-19 has subsided, we may continue to experience an adverse impact to our business as a result of its global economic impact, including any recession that has occurred or may occur.

Specifically, difficult macroeconomic conditions, such as decreases in per capita income and level of disposable income, increased and prolonged unemployment or a decline in consumer confidence as a result of COVID-19, could have a continuing adverse effect on demand for products and services that contain our technologies as well as limited or significantly reduced points of access to such products and services.

Box office receipts at Dolby Cinema sites and general demand for our cinema products and services have been, and we expect to remain, lower than that of pre-pandemic levels.

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

Further, the spread of variants of SARS-CoV-2 may result in renewed government responses.

The situation is continuing to evolve, and we cannot predict how or to what extent the cinema market, or other markets we target, may be impacted during the course of the pandemic and long-term.

We have modified our workforce policies in light of COVID-19 and changing norms, including implementing a flex work program and modifying health and safety policies.

We continue to monitor COVID-19 developments, including community transmission and hospitalization rates along with local requirements and we may take further actions that we determine are in the best interests of our employees, licensees, partners, and community.

Such actions may adversely impact our productivity and cause delays, which may negatively impact our revenue.

Further, there is no certainty that the measures we have taken or will take will be sufficient to mitigate the risks posed by COVID-19 to the well-being and productivity of our workforce.

The degree to which COVID-19 impacts our results will depend on future developments, which are highly uncertain and cannot be predicted with any certainty, including, but not limited to, the duration and extent of the pandemic, additional actions taken by governments, businesses and consumers in response to the pandemic, additional subsequent outbreaks and variant strains, and how quickly and to what extent normal economic and operating conditions can resume.

Even after COVID-19 has subsided, we may continue to experience an adverse impact to our business as a result of its global economic impact, including any recession that may occur.

Specifically, difficult macroeconomic conditions, such as rising inflation, ongoing supply chain constraints, decreases in per capita income and levels of disposable income, increased rates of resignation or a decline in consumer confidence as a result of COVID-19 or otherwise, could have an adverse effect on our results of operations.

Markets We Target

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Our license agreements generally do not have minimum purchase commitments, are typically non-exclusive, and frequently do not require incorporation or use of our technologies.

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 revenue will decline if our licensees choose not to incorporate our technologies into their products or if they sell fewer products incorporating our technologies.

Trends in Media Content Distribution .

For many years, a large portion of media content distribution has been through optical disc media, such as DVD and Blu-ray Disc, and cable and satellite television providers.

However, the rapid advancement of online and mobile content delivery has resulted in a trend toward downloading and streaming services, resulting in decreased royalty revenue in certain of our end device markets.

The shift away from optical disc media to has resulted in a decline in revenue from the sale of devices that include DVD and Blu-ray Disc players.

For example, the number of PCs that include optical disc drives has decreased significantly in recent years.

Because PC OEMs are required to pay us a higher per-unit royalty for Windows PCs that include optical disc playback functionality than Windows PCs that do not include such functionality, further decreases in inclusion of optical disc drives in PCs will result in lower per-unit royalties.

Further, consumers in certain markets are shifting away from subscription-based cable and satellite television providers toward streaming services, commonly referred to as “cord-cutting.” While cable and satellite television often require a STB, today consumers can also access streaming media through smart TVs or DMA devices.

Changing trends in the way that media is distributed and consumed may

impact our existing business and future opportunities for growth.

One such trend is the shift by consumers in certain markets away from subscription-based cable and satellite television providers toward streaming services, commonly referred to as "cord-cutting." While cable and satellite television often require a STB, today consumers can also access streaming media through smart TVs or DMA devices.

As consumers trend toward canceling subscriptions to these traditional cable and satellite providers and turn to streaming media, we expect demand for STBs in certain regions to continue to decline.

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The mobile device market, particularly smartphones and tablets, is characterized by rapidly changing market conditions, frequent product introductions and intense competition based on features and price.

Our technologies are not mandated as an industry standard for mobile devices.

Our technologies usually are not mandated as an industry standard for mobile devices.

We must continually convince mobile device OEMs and end users of mobile devices of the value of our technologies.

With shorter product lifecycles, it is easier for mobile device OEMs to add or remove our technologies from mobile devices than it is for TV OEMs and other hardware OEMs.

In order to increase the value of our technologies in the mobile market, we have worked with online and mobile media content service providers to encode their content with our technologies, which could affect OEM and software vendor demand for our decoding technologies.

In addition, because the mobile industry is concentrated, we rely on a small number of partnerships with key participants in the mobile market.

If we are unable to maintain these key relationships, we may experience a decline in mobile devices incorporating our technologies.

In order to increase the value of our technologies in the mobile market and increase OEM and software vendor demand for our decoding technologies, we have worked with online and mobile media content service providers to encode their content with our technologies.

However, the online and mobile media content services markets are also characterized by intense competition, evolving industry standards and business and distribution models, disruptive software and hardware technology developments, frequent product and service introductions and short life cycles, and price sensitivity on the part of consumers, all of which may result in downward pressure on pricing or the removal of our technologies by these providers and may result in decreased revenue from our mobile market.

Further, COVID-19 may adversely impact consumer demand for mobile devices, the ability of our partners to manufacture such devices, impacts to supply chain and distribution, timing of the adoption of our technologies into products by partners and licensees, and the timing of launches for new products.

Further, current macroeconomic conditions due to inflation, COVID-19, geopolitical instability, and other factors may adversely impact consumer demand for mobile devices, and may continue to adversely impact the ability of our partners to manufacture such devices, supply chain and distribution, timing of the adoption of our technologies into products by partners and licensees, and the timing of launches for new products.

PC Industry Risks .

Revenue from our PC market depends on several factors, including underlying PC unit shipment growth, the extent to which our technologies are included on computers, including through operating systems, the inclusion of optical disc drives or otherwise, and the terms of any royalties or other payments we receive.

Revenue from our 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, the inclusion of optical disc drives or otherwise, 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.

If we are unable to maintain these key relationships, we may experience a decline in PCs incorporating our technologies.

COVID-19 may also adversely impact consumer demand for PCs, PC manufacturing, supply chain and distribution, timing of the adoption of our technologies into products by partners and licensees, and the timing of launches for new products.

COVID-19 may also adversely impact consumer demand for PCs, and may continue to adversely impact PC manufacturing, supply chain and distribution, timing of the adoption of our technologies into products by partners and licensees, and the timing of launches for new products.

Cinema Industry Risks .

Revenue from Dolby Cinema and cinema product sales is subject to the pace of construction or upgrade of screens, the advent of new or competing technologies, the willingness of movie studios to produce films in our Dolby Atmos and Dolby Vision formats, consumer trends, box-office performance generally, and other events or conditions in the cinema industry.

Although we have invested a substantial amount of time and resources developing Dolby Cinema, and expect to continue to invest and build partnerships in connection with the launch of Dolby Cinema locations, we may not continue to recognize a meaningful amount of revenue from these efforts in the near future.

Revenue from Dolby Cinema and cinema product sales is subject to the pace of construction or upgrade of screens, the financial stability of exhibitors, the advent of new or competing technologies, the willingness of movie studios to produce films in our Dolby Atmos and Dolby Vision formats, consumer trends, box-office performance generally, and other events or conditions in the cinema industry.

Revenue from Dolby Cinema and cinema products sales is also subject to macroeconomic conditions that could negatively impact discretionary consumer spending, including inflation and recession.

Further, although we have invested a substantial amount of time and resources developing Dolby Cinema, and expect to continue to invest and build partnerships in connection with the launch of Dolby Cinema locations, we may not continue to recognize a meaningful amount of revenue from these efforts in the near future.

Additionally, we have collaborations with multiple exhibitors in foreign markets, including Asia, Europe, and the Middle East, and we may face a number of risks in expanding Dolby Cinema in these and other new international markets.

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In addition, the success of our Dolby Cinema offering will be tied to the pipeline and success of motion pictures available at Dolby Cinema locations generally.

The success of Dolby Cinema depends in large part on

our ability to differentiate our offering, deploy new sites in accordance with plans, provide a compelling experience, and attract and retain a viewing audience.

The success of Dolby Cinema depends in large part on our ability to differentiate our offering, deploy new sites in accordance with plans, provide a compelling experience, and attract and retain a viewing audience.

A decrease in our ability to develop and introduce new cinema products and services successfully could affect licensing of our consumer technologies, because the strength of our brand and our ability to use professional product developments to introduce new consumer technologies would be negatively impacted.

These factors are subject to increased risk due to COVID-19, including related social distancing restrictions, delays in cinematic releases, shortened theatrical release windows, temporary suspensions of production of future releases, delay in royalty and other payments and solvency of our exhibitor partners.

Further, it remains uncertain when cinemas will return to full capacity and how quickly moviegoers will return to theaters.

These factors are subject to increased risk due to COVID-19, including related government responses.

Further, it remains uncertain when cinemas will return to full capacity and how quickly moviegoers will

return to theaters at pre-pandemic levels.

Our revenue and associated demand from cinema product sales is dependent upon industry and economic cycles, which are subject to risks including delays in cinematic releases and reduced operating capacity related to COVID-19, along with our ability to develop and introduce new technologies, further our relationships with content creators, and promote new cinematic audio and imaging experiences.

A significant portion of our growth opportunity lies in the China market, which is subject to economic risks as well as geo-political risks.

A portion of our opportunity lies in the China market, which is subject to unique economic and geopolitical risks.

Furthermore, future growth of our cinema products business also depends upon new theater construction and entering into an equipment replacement cycle whereby previously purchased cinema products are upgraded or replaced.

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We do not control the IC manufacturers’ decisions on whether or not to incorporate our technologies into their ICs, and we do not control their product development or commercialization efforts.

Further, demand levels related to COVID-19 have resulted in shortages of semiconductor components and other key materials that may adversely impact the ability of our implementation and system licensees and customers to meet product demand in a timely fashion.

Further, current demand levels have resulted in ongoing shortages of semiconductor components and other key materials that may adversely impact the ability of our implementation and system licensees and customers to meet product demand in a timely fashion.

Consumer Spending Weakness .

Weakness in general economic conditions may suppress consumer demand in our markets.

Weakness in general economic conditions due to inflation, rising interest rates, lower consumer confidence, a potential recession, pandemic or other worsening economic conditions, may suppress consumer demand in our markets and consumers going to the movies.

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.

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Importance of Brand Strength .

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, including Dolby Voice for the communications market, Dolby Cinema, Dolby Vision and other imaging offerings for the consumer market, and others.

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 entertainment, PC, broadcast, and gaming markets.

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, including Dolby Cinema, Dolby Vision and other imaging offerings for the consumer market, Dolby.io, and others.

If we fail to promote and maintain the Dolby brand successfully in licensing, products or services, our business will suffer.

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Our ability to maintain and strengthen our brand will depend heavily on our ability to develop innovative technologies for the entertainment industry, to enter into new markets successfully, and to provide high quality products and services in these new markets.

In addition, our practices and public disclosures related to environmental, social and governance (ESG) matters could impact our brand and reputation.

If our ESG practices do not meet evolving investor or other stakeholder expectations and societal and regulatory standards, or if we are unable to make progress on or achieve our goals and objectives in this area, then our reputation, our ability to attract or retain employees, and our attractiveness as an investment or business partner could be negatively impacted, which could adversely affect our operating results.

Industry Standards

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The market for broadcast technologies has traditionally been heavily based on industry standards, often 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 may alter the landscape for broadcast standards and impact the importance of inclusion in certain broadcast standards in the future, and we cannot predict if and to what extent this may impact our revenue.

The continued advancement of OTT media delivery and consumption is altering the landscape for broadcast standards and impacting the importance of the inclusion of our technology in certain broadcast standards, and we cannot predict if and to what extent this may impact our revenue.

Difficulty Becoming Incorporated in an Industry Standard .

Standards-setting organizations establish technology standards for use in a wide range of consumer entertainment products.

It can be difficult for companies to have their technologies adopted as an industry standard, as multiple companies, including ones that typically compete against one another, are involved in the development of new technology standards for use in entertainment-oriented products.

Standards-setting organizations establish technology standards for use in a wide range of consumer products.

Furthermore, some standards-setting organizations choose to adopt a set of optional standards or a combination of mandatory and optional standards;

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Participants May Choose Among Alternative Technologies within Standards .

Even when a standards-setting organization incorporates our technologies in an industry standard for a particular market, our technologies may not be the sole technologies adopted for that market.

Furthermore, different standards may be adopted for different markets.

Even when a standards-setting organization incorporates our technologies in an industry standard for a particular market or geographic region, our technologies may not be the sole technologies adopted for that market.

Furthermore, different standards may be adopted for different markets and regions.

Our operating results depend upon participants in that market choosing to adopt our technologies instead of competitive technologies that also may be acceptable under such standard.

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• Retroactive royalties that cover extended periods of time;

• Timing of revenue recognition under licensing agreements and other contractual arrangements, including recognition of unusually large amounts of revenue in any given quarter.

• Timing of revenue recognition under licensing agreements and other contractual arrangements, including

recognition of unusually large amounts of revenue in any given quarter.

Inaccurate Licensee Royalty Reporting .

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however, we are unable to predict with certainty the revenue that we may recover in the future or our ability to continue to obtain such recoveries at all.

Further, as COVID-19 continues to impact our licensees, it may result in delays in royalty reporting or payment by some of our licensees.

Ongoing global restrictions and economic impacts related to COVID-19 may also cause longer transaction cycles and delays in royalty reporting, payment, or recoveries efforts.

Estimation of Sales-Based Royalties .

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Our future success depends on our ability to enhance our technologies and products and to develop new technologies and products that address the market needs in a timely manner.

Technology development is a complex,

uncertain process requiring high levels of innovation, highly-skilled engineering and development personnel, and the accurate anticipation of technological and market trends.

We may not be able to identify, develop, acquire, market, or support new or enhanced technologies or products on a timely basis, if at all.

Technology development is a complex, uncertain process requiring high levels of innovation, highly-skilled engineering and development personnel, and the accurate anticipation of technological and market trends.

We may not be able to identify, develop, acquire, market, or

support new or enhanced technologies or products on a timely basis, if at all.

Experience with New Markets and Business Models .

Our future growth will depend, in part, upon our continued expansion into areas beyond our audio licensing business.

Over the past few years, we have introduced Dolby Cinema, our branded-theater experience, Dolby Vision for the home and cinema markets, Dolby Voice technology for the communications market, and more recently, Dolby.io, our developer platform.

In connection with entering into these new markets, we face new sources of competition, new business models, and new customer relationships.

For example, we recently introduced Dolby.io, our platform that allows developers to access our technologies through APIs.

As we enter into this and other new markets, we will face new sources of competition, new business models, and new customer relationships.

In order to be successful in these markets, we will need to cultivate new industry relationships and strengthen existing relationships to bring our products, services, and technologies to market.

Our limited experience to date in one or more of these markets could limit our ability to successfully execute on our growth strategy.

Our limited experience in this or other new markets could limit our ability to successfully execute on our growth strategy.

Incorporation of Dolby Formats into New Products and Availability of Content in Dolby Formats .

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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.

In general, our agreements with our licensees require them to pay us a full royalty with respect to a particular technology only until the last patent covering that technology expires in a particular country.

In general, our agreements with our licensees require them to pay us a full royalty with respect to a particular

technology only until there are no patents or, in some cases, no patent applications covering that technology in countries where applicable products are made and sold.

As of September 30, 2022, we had approximately 16,900 issued patents in addition to approximately 4,100 pending patent applications in more than 100 jurisdictions throughout the world.

Our currently issued patents expire at various times through September 2045.

Our currently issued patents expire at various times through December 2046.

If we are unable to expand on our patent portfolio or refresh our technology with new patented inventions, our revenue could decline.

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DD is our solution that includes technology necessary to implement AC-3 as it has been updated over time.

We have continued to innovate and develop intellectual property to support the standard and its implementation.

We have continued to innovate and develop IP to support the standard and its implementation.

Our customers use our DD implementation for quality, reliability, and performance, even in locations where we have not had applicable patent coverage.

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Additionally, at times we have chosen to defend our licensees from third party IP infringement claims even where such defense was not contractually required, and we may choose to take on such defense in the future.

See Note 14 " Commitments and Contingencies " to our consolidated financial statements for a discussion of the Intertrust matter.

Licensee Disputes .

At times, we are engaged in disputes regarding the licensing of our IP rights, including matters related to our royalty rates and other terms of our licensing arrangements.

At times, we are engaged in disputes regarding the licensing of our IP rights, including matters related to our royalty rates, whether products are royalty-bearing, and other terms of our licensing arrangements.

These types of disputes can be asserted by our customers or prospective customers or by other third parties as part of negotiations with us or in private actions seeking monetary damages or injunctive relief, or in regulatory actions.

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and abroad may limit our ability to obtain, license, and enforce our rights.

Additionally, court and administrative rulings may interpret existing patent laws and regulations in ways that hurt our ability to obtain, license, and enforce our patents.

Additionally, court and administrative rulings may interpret existing

patent laws and regulations in ways that hurt our ability to obtain, license, and enforce our patents.

We 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;

• Limited or no patent protection for our DD technologies in countries such as China, Taiwan, and India, which may require us to obtain patent rights for new and existing technologies in order to grow or maintain our revenue;

• Limited or no patent protection for our DD technologies in geographies such as China, Taiwan, and India, which may require us to obtain patent rights for new and existing technologies in order to grow or maintain our revenue;

• 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.

Reliance on Key Suppliers .

Our reliance on suppliers for some of the key materials and components we use in manufacturing our products involves risks, including limited control over the price, timely delivery, and quality of such components, as well as the risk of delay caused by COVID-19 and related interruptions to the supply chain.

We generally have no formal agreements in place with our suppliers for the continued supply of materials and components.

Due to the relatively small volume of components we purchase for use in manufacturing, we purchase such components primarily through distributors.

As such, we have relatively limited influence over the suppliers of such components to, for example, ensure continuity of supply.

Although we have identified alternate suppliers for most of our key materials and components, any required changes in our suppliers could cause delays in our operations and increase our production costs.

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Product Quality .

Our products, and products that incorporate our technologies, are complex and sometimes contain undetected software or hardware errors, particularly when first introduced or when new versions are released.

Our products, and products that incorporate our technologies, are complex and sometimes contain software or hardware errors that are not detected during testing, particularly when first introduced or when new versions are released.

In addition, we have limited control over manufacturing performed by contract manufacturers, which could result in quality problems.

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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.

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.

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.

Data Security .

Information Security .

We rely on information technology systems in the conduct of our business, including systems designed and managed by third parties.

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Increasingly, companies are subject to a wide variety of attacks on their networks and systems on an ongoing basis.

Our information technology and infrastructure may be vulnerable to attacks by hackers, malware, software bugs or other technical malfunctions, or other disruptions.

If we use a vendor that stores information as part of its service or product offerings, we assess the security of such services prior to using the service.

Nevertheless, our sensitive, confidential or proprietary information may be misappropriated by that vendor or others who may inappropriately access or exfiltrate that information from the vendor’s system.

While we have taken a number of steps to protect our information technology systems (including physical access controls, encryption, and authentication technologies), the number and sophistication of malicious attacks that companies have experienced has increased over the past few years.

Our information technology and infrastructure may be vulnerable to attacks by malicious actors including nation-states and cyber criminals, malware, software bugs or other technical malfunctions, ransomware attacks, or other disruptions.

Our sensitive, confidential or proprietary information may be misappropriated by third-party service providers or others who may inappropriately access or exfiltrate that information from the vendor’s system.

The number and sophistication of malicious attacks and disruptions that companies have experienced has increased over the past few years, including computer viruses, malware, ransomware, cyber extortion, social engineering, denial of service, and other similar attacks and disruptions.

These risks could be elevated in connection with the military conflict between Russia and Ukraine.

Measures we have undertaken to protect our information technology systems (including physical access controls, encryption, and authentication technologies) may be unsuccessful in deterring or repelling malicious actors.

In addition, because techniques used by hackers (many of whom are highly sophisticated and well-funded) to access or sabotage networks and computer systems change frequently and often are not recognized until after they are used, we may be unable to anticipate or immediately detect these techniques.

Moreover, system updates and security patches may suffer delayed implementation in endpoint devices during extended remote working circumstances.

In addition, because techniques used by malicious actors (many of whom are highly sophisticated and well-funded) to access or sabotage networks and computer systems change frequently and often are not recognized until after they are used, we may be unable to anticipate or immediately detect these techniques.

This could delay our response or the effectiveness of our response and impede our operations and ability to limit our exposure to third-party claims and other potential liability.

Attacks on our systems are sometimes successful, and, in some instances, we might be unaware of an incident or its nature, magnitude and effects.

We also may suffer data security breaches and the unauthorized access to, misuse or acquisition of, personal data or other sensitive and confidential information as the result of intentional or inadvertent breaches or other compromises by our employees or service providers.

Any data security breach or other incident, whether external or internal in origin, could compromise our networks and systems, creating system disruptions or slowdowns and exploiting security vulnerabilities of our products.

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.

We seek to detect and investigate such attempts and incidents and to prevent their recurrence where practicable through changes to our internal processes and tools, but in some cases preventive and remedial action might not be successful.

In addition, despite the implementation of network security measures, our networks, or our vendors' networks, also may be vulnerable to computer viruses, malware, ransomware, cyber extortion, social engineering, denial of service, and other similar disruptions.

Such risks are also faced by our vendors and other third parties, and form another vector for malicious attacks on our systems.

Any data security breach or other incident, whether external or internal in origin, could compromise our networks and systems, create system disruptions or slowdowns and exploit security vulnerabilities of our products.

Our efforts to detect and investigate such attempts and incidents and to prevent their recurrence where practicable through changes to our internal processes and tools, but in some cases preventive and remedial action might not be successful.

Disruptions to our information technology systems, due to outages, security breaches or other causes, could also have severe consequences to our business, including financial loss and reputational damage.

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These laws and regulations are evolving and may result in ever-increasing regulatory and public scrutiny and escalating levels of enforcement and sanctions.

For example, the California Privacy Rights Act of 2020, or CPRA, which was approved by California voters in November 2020, amends and expands the California Consumer Privacy Act of 2018, or CCPA (which had required us to modify certain of our information practices and provide new disclosures to California consumers), by creating additional privacy rights for California consumers, establishing the California Privacy Protection Agency to enforce the new law, and imposing additional obligations on businesses.

These new obligations, which will take effect on January 1, 2023 (with certain provisions having retroactive effect to January 1, 2022), may require us to further modify certain of our information practices and could subject us to additional compliance costs and expenses.

Our actual or perceived failure to adequately comply with applicable laws and regulations relating to privacy and data protection (including regimes such as the CCPA and CPRA 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.

For example, the California Privacy Rights Act (CPRA), which will take effect on January 1, 2023 (with certain provisions having retroactive effect to January 1, 2022), as well as obligations from new privacy laws in Colorado, Connecticut, Utah and Virginia, which will also take effect in 2023, may require us to further modify certain of our information practices and could subject us to additional compliance costs and expenses.

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 commercial and cybersecurity insurance policies may be insufficient to insure us against these risks, and future escalations in premiums and deductibles under these policies may render them uneconomical.

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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 increased rates of inflation, which may cause device manufacturers to take additional steps to limit costs.

Retail prices for consumer entertainment products that include our sound technologies, such as DVD and Blu-ray players and home theater systems, have decreased significantly, and we expect prices to decrease for the foreseeable future.

In response, OEMs have sought to reduce their product costs, which can result in additional downward pressure on the licensing fees we charge.

Further, Dolby.io faces significant pricing pressure from other developer platforms offering media and communication APIs that may be able to offer competing services at lower prices.

Customers as Competitors .

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Competition from Other Audio Formats, Imaging Solutions, and Integrated System Offerings .

We believe that the success we have had licensing our audio technologies is due, in part, to the perception that our technologies provide a high quality solution for multichannel audio and the strength of our brand.

However, both free and proprietary sound technologies are becoming increasingly prevalent, and we expect competitors to continue to enter this field with other offerings.

Furthermore, to the extent that customers perceive our competitors’ products as providing the same or similar advantages as our technologies at a lower or comparable price, there is a risk that these customers may treat sound encoding technologies as commodities, resulting in loss of status of our technologies, decline in their use, and significant pricing pressure.

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.

However, both free and proprietary sound and imaging technologies are becoming increasingly prevalent, and we expect competitors to continue to enter these fields with other offerings.

Furthermore, to the extent that customers perceive our competitors’ products as providing the same or similar advantages as our technologies at a lower or comparable price, there is a risk that these customers may treat sound and video encoding technologies as commodities, resulting in loss of status of our technologies, decline in their use, and significant pricing pressure.

For example, we face competition with respect to our HDR imaging technology, Dolby Vision, and there can be no assurance that additional consumers will adopt Dolby Vision in the near future, or at all, or that we will maintain our existing customers.

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• Leading companies in the audio and video conferencing markets;

• Developers relying on media and communication APIs offered by Dolby.io;

• Device manufacturers.

Industry relationships have historically played an important role in the markets that we serve, particularly in the entertainment market.

Industry relationships have historically played an important role in the markets that we serve, particularly in the

entertainment market.

For example, sales of our products and services are particularly dependent upon our relationships with major film studios and broadcasters, and licensing of our technologies is particularly dependent upon our relationships with system licensees and IC manufacturers.

If we fail to maintain and strengthen these relationships, these entertainment industry participants may be less likely to purchase and use our technologies,

products, and services, or create content incorporating our technologies.

If we fail to maintain and strengthen these relationships, these entertainment industry participants may be less likely to purchase and use our technologies, products, and services, or create content incorporating our technologies.

Industry relationships also play an important role in other markets we serve;

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Future acquisitions could result in potentially dilutive issuances of our equity securities, the incurrence of debt, contingent liabilities, amortization expenses, and write-offs of goodwill.

Future acquisitions may also require us to obtain additional equity or debt financing, which may not be available on favorable terms or at all.

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.

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Approximately 63%, 67% and 60% of our revenue was derived outside of the U.S.

in fiscal 2021, 2020, and 2019, respectively .

in fiscal year 2022, 2021, and 2020, respectively .

We are subject to a number of risks related to conducting business internationally, including:

and foreign government trade restrictions or sanctions, including those which may impose restrictions on the importation of programming, technology, or components to or from the U.S., and those which may put restrictions or prohibitions on the exportation, reexportation, sale, shipment or other transfer of programming, technology, components, and/or services to foreign persons;

• Changes in trade relationships, including new tariffs, trade protection measures, import or export licensing requirements, trade embargoes and other trade barriers;

• Tariffs imposed by the U.S.

on goods from other countries or tariffs imposed by other countries on U.S.

goods, including the tariffs imposed over the course of 2018 and 2019 by the U.S.

government on various imports from China and by the Chinese government on certain U.S.

goods, the scope and duration of which remain uncertain;

and foreign government trade restrictions or sanctions, including those which may impose restrictions on the importation or exportation of products, equipment, materials, software, technologies, services, on technology transfers, or on the receipt or collection of payments and distribution of royalties, and any political or economic responses or counter-responses to such restrictions or sanctions, including any such restrictions, sanctions, responses, or counter-responses related to the military conflict between Russia and Ukraine or changes in US export controls related to China and other countries;

• Changes in trade relationships, including new tariffs, trade protection measures, import or export licensing requirements, trade embargoes and other trade barriers imposed by the U.S.

or by other countries;

• Compliance with applicable international laws and regulations, including antitrust and other competition laws, that may change unexpectedly, differ, or conflict with laws in other countries where we conduct business, or are otherwise not harmonized with one another;

• Foreign government taxes, regulations, and permit requirements, including foreign taxes that we may not be able to offset against taxes imposed upon us in the U.S., and other laws limiting our ability to repatriate funds to the U.S.;

• Potential adverse changes in the political and/or economic stability of the regions in which we operate or in diplomatic relations between governments;

• 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.;

• 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;

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• Multi-jurisdictional data protection and privacy laws, including the European Union's General Data Protection Regulation and restrictions on transferring personally identifiable information outside of a jurisdiction;

• Political or social instability in the U.K.

and Europe (including but not limited to uncertainty resulting from the Brexit referendum in the U.K.) and in Russia, the Middle East, North Africa, Latin America and other emerging markets;

• The global macroeconomic environment and potential slowing of key markets we serve;

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SEC rules require the disclosure of the use of tantalum, tin, tungsten, and gold (commonly referred to as "conflict minerals") that are sourced from the Democratic Republic of the Congo and surrounding countries.

This requirement could affect the sourcing, availability and pricing of materials used in our products as well as the companies we use to manufacture our products.

In circumstances where sources of conflict minerals from the Democratic Republic of the Congo or surrounding countries are not validated as conflict free, we may take actions to

change materials, designs or manufacturers to reduce the possibility that our contracts to manufacture products that contain conflict minerals finance or benefit local armed groups in the region.

The SEC disclosure requirements could adversely affect the sourcing, supply and pricing of materials used in our products.

As there may be only a limited number of suppliers that can certify to us that they are offering “conflict free” conflict minerals, we cannot be sure that we will be able to obtain necessary conflict minerals from such suppliers in sufficient quantities or at competitive prices.

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, availability and pricing of such materials as well as the companies we use to manufacture our products.

circumstances where sources of conflict minerals from the Democratic Republic of the Congo or surrounding countries are not validated as conflict free, we may take actions to change materials, designs or manufacturers to reduce the possibility that our contracts to manufacture products that contain conflict minerals finance or benefit local armed groups in the region.

As there may be only a limited number of suppliers that can certify that they are offering “conflict free” conflict minerals, we cannot be sure that our component suppliers will be able to obtain necessary conflict minerals from such suppliers in sufficient quantities or at competitive prices.

These actions could also add engineering and other costs in connection with the manufacturing of our products.

We may not be able to sufficiently verify the origins for the minerals used in our products.

Our reputation may suffer if we determine that our products contain conflict minerals that are not determined to be conflict free or if we are unable to sufficiently verify the origins for all conflict minerals used in our products.

If conflict minerals are used in our products, even if inadvertently, disclosure of such use could affect public and investor perception of the Company and our products.

We may not be able to sufficiently verify the origins for the minerals used in our components.

Our reputation may suffer if we determine that our components contain conflict minerals that are not determined to be conflict free or if we are unable to sufficiently verify the origins for all conflict minerals used in our components.

In addition, some customers may require that all of our products are certified to be conflict free and if we cannot satisfy these customers, they may choose a competitor's products.

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We must use judgment to determine our worldwide tax provision.

We receive significant tax benefits from a portion of our foreign sales, and realizability of these benefits are contingent upon existing current tax laws and regulations in the U.S.

We earn a significant amount of our income outside the U.S.

and receive tax benefits from a portion of these foreign sales.

Realizability of these benefits are contingent upon existing current tax laws and regulations in the U.S.

and countries where we operate.

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• Changes in tax laws and regulations in the countries in which we operate, including an increase in tax rates, or an adverse change in the treatment of an item of income or expense;

• Our ability to effectively implement changes to our corporate structure in response to changes in applicable tax laws and regulations in the countries in which we operate.

tax law changes enacted through the Tax Cuts and Jobs Act ("Tax Act") include provisions that affect our business.

These provisions, their interpretations, and proposed changes to this law introduced by the Biden administration and a Democratic-controlled Congress could further impact our corporate trading structure and adversely affect our tax rate and cash flow in future years.

In addition, the Organization of Economic Cooperation and Development (“OECD”), an international association of many countries including the U.S., has made changes to many long-standing transfer pricing and cross-border taxation rules.

These provisions, their interpretations, and proposed changes to this law introduced by the Biden administration could further impact our corporate trading structure and adversely affect our tax rate and cash flow in future years.

Further, the OECD, European Commission, EU Member States and other individual countries have made and could make additional competing jurisdictional claims over the taxes owed on earnings of multinational companies in their respective countries or regions.

To the extent these actions take place in the countries that we operate, such as the Netherlands, it is possible that in the future, these efforts may increase uncertainty and have an adverse impact on our effective tax rates or operations.

To the extent these actions take place in the countries that we operate, it is possible that these law changes and efforts may increase uncertainty and have an adverse impact on our effective tax rates or operations.

We are subject to the periodic examination of our income tax returns by tax authorities.

We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes, but an adverse decision by tax authorities exceeding our reserves could significantly impact our financial results.

We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes and to consider potential responsive actions, but an adverse decision by tax authorities exceeding our reserves could significantly impact our financial results.

STOCK-RELATED ISSUES

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As of September 30, 2022, the Dolby family and their affiliates had voting power of 99.8% of our outstanding Class B common stock, which combined with their shares of our Class A common stock, represented 85.7% of the combined voting power of our outstanding Class A and Class B common stock.

Under our certificate of incorporation, holders of Class B common stock are entitled to ten votes per share while holders of Class A common stock are entitled to one vote per share.

Under our certificate of incorporation, holders of Class B common stock are

entitled to ten votes per share while holders of Class A common stock are entitled to one vote per share.

Generally, shares of Class B common stock automatically convert into shares of Class A common stock upon transfer of such Class B common stock, other than transfers to certain specified persons and entities, including the spouse and descendants of Ray Dolby and the spouses and domestic partners of such descendants.

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There can be no assurance that we will buy additional shares of our Class A common stock under our stock repurchase program or that any future repurchases will have a positive impact on our stock price or EPS.

Important factors that could cause us to discontinue or decrease our share repurchases include, among others, unfavorable market conditions, the market price of our Class A common stock, the nature of other investment or strategic opportunities presented to us, the rate of dilution of our equity compensation programs, our ability to make appropriate, timely, and beneficial decisions as to when, how, and whether to purchase shares under the stock repurchase program, and the availability of funds necessary to continue purchasing stock.

Important factors that could cause us to discontinue or decrease our share repurchases include, among others, unfavorable market conditions, the market price of our Class A common stock, the nature of other investment or strategic opportunities presented to us, the rate of dilution of our equity compensation programs, our ability to make appropriate, timely, and beneficial decisions as to when, how, and whether to purchase shares under the stock repurchase program, the tax consequences of any repurchases, and the availability of funds necessary to continue purchasing stock.

If we curtail our repurchase program, our stock price may be negatively affected.

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In October 2014, we announced a quarterly cash dividend program for our stockholders that was initiated by our Board of Directors.

Since the initial commencement of our dividend program, our Board of Directors has annually approved an increase to our cash dividend.

Although we anticipate paying regular quarterly dividends for the foreseeable future, dividend declarations and the establishment of future record and payment dates are subject to the Board of Directors’ continuing determination that the dividend policy is in the best interests of our stockholders.

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Business Interruptions by Natural Disasters and Other Events Beyond Our Control .

Although we maintain crisis management plans, our business operations are subject to interruption by natural disasters and catastrophic events beyond our control, including, but not limited to, earthquakes, hurricanes, typhoons, tropical storms, floods, tsunamis, fires, droughts, tornadoes, public health issues and pandemics, severe changes in climate, war, terrorism, and geo-political unrest and uncertainties.

fires, droughts, tornadoes, public health issues and pandemics, severe changes in climate, war, terrorism, and geopolitical unrest and uncertainties.

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.

These responses could negatively affect consumer demand and our business, particularly in international markets.

War, including the military conflict between Russia and Ukraine and any related political or economic responses and counter-responses or otherwise by various global actors or the general effect on the global economy and supply chain, could also affect our business.

For example, we have R&D facilities and a large number of employees in Eastern Europe, and any business interruptions or other spillover effects from such conflict could adversely impact our business.

Additionally, several of our offices, including our corporate headquarters in San Francisco, are located in seismically active regions.

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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 1A. Risk Factors