What changed in this filing

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

2024-11-19 compared with 2023-11-17 · 253 added, 181 removed, 1415 unchanged (23% of the section changed)

1 unchanged sentence

Interest Rate Sensitivity

As of September 29, 2023, we had cash and cash equivalents of $745.4 million, which consisted of cash and highly liquid money market funds.

In addition, we had both short and long-term investments of $237.0 million, which consisted of corporate bonds, government bonds, municipal debt securities, U.S.

agency securities, commercial paper, and certificates of deposit.

Our investment policy is focused on the preservation of capital and support for our

liquidity requirements.

As of September 27, 2024, we had cash and cash equivalents of $482.0 million, which consisted of cash.

In addition, we had long-term investments of $89.3 million, which primarily consisted of an equity method investment and an equity security without a readily determinable value.

Our investment policy is focused on the preservation of capital and support for our liquidity requirements.

Under the policy, we invest in highly rated securities with a minimum credit rating of A- while limiting the amount of credit exposure to any one issuer other than the U.S.

As of September 29, 2023, the weighted-average credit quality of our investment portfolio was AA-, with a weighted-average maturity of approximately eleven months.

We do not invest in financial instruments for trading or speculative purposes, nor do we use leveraged financial instruments.

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The investments within our fixed-income portfolio are subject to fluctuations in interest rates, which could affect our financial position, and to a lesser extent, results of operations.

Based on our investment portfolio balance as of September 29, 2023, hypothetical changes in interest rates of 1% and 0.5% would have an impact on the carrying value of our portfolio of approximately $1.8 million and $0.9 million, respectively.

Foreign Currency Exchange Risk

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Amounts reclassified are recorded to the same line item in the consolidated statements of operations as the impact of the hedge transaction, concurrently with the hedged costs.

The pre-tax gain attributed to the effective portion of cash flow hedges recognized in AOCI was $4.9 million in fiscal 2023.

The pre-tax loss attributed to the effective portion of cash flow hedges recognized in AOCI was $1.6 million in fiscal 2024.

The pre-tax effective portion of the losses reclassified to the consolidated statements of operations was $0.7 million in fiscal 2023, and the pre-tax effective portion of the loss reclassified to the consolidated statements of operations was $2.1 million in fiscal 2022.

The pre-tax gain attributed to the effective portion of cash flow hedges recognized in AOCI was $4.9 million in fiscal 2023.

The pre-tax effective portion of the gain reclassified to the consolidated statements of operations was $2.1 million in fiscal 2024, and the pre-tax effective portion of the loss reclassified to the consolidated statements of operations in fiscal 2023 was not material.

We also enter into foreign currency forward contracts to hedge against assets and liabilities for which we have foreign currency exchange rate exposure and selected anticipated expenses.

The contracts hedging receivables and payables are carried at fair value with changes in the fair value recorded to other income/(expense), net, in our consolidated statements of operations.

The contracts hedging receivables and payables are carried at fair value with changes in the fair value recorded to other income/(expense), net, in our

consolidated statements of operations.

The contracts hedging foreign currency denominated operating expenses are carried at fair value with changes in the fair value recorded to other comprehensive income until the hedged expenses are reported in our consolidated statements of operations.

As of September 29, 2023, the outstanding derivative instruments had maturities of equal to or less than 12 months.

As of September 27, 2024 and September 29, 2023, the total notional amounts of outstanding contracts were $111.7 million and $134.8 million, respectively.

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Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 27, 2024 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

The Company acquired MPEG LA, L.L.C.

during fiscal 2023.

Management excluded from its assessment of the effectiveness of the Company’s internal control over financial reporting as of September 29, 2023, MPEG LA, L.L.C.’s internal control over financial reporting which represented 12% of total assets and less than 1.5% of total revenue included in the consolidated financial statements of the Company as of and for the year ended September 29, 2023.

Our audit of internal control over financial reporting of the Company also excluded an evaluation of the internal control over financial reporting of MPEG LA, L.L.C..

Basis for Opinions

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A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

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We identified the assessment of the revenue estimates related to the Company’s sales-based licensing arrangements as a critical audit matter.

Auditor judgement was required to evaluate the Company’s estimation of sales-based licensing revenue, which included the use of historical data, industry estimates of expected shipments, market penetration, and average sales prices.

Auditor judgment was required to evaluate the Company’s estimation of sales-based licensing revenue, which included the use of historical data, industry estimates of expected shipments, market penetration, and average sales prices.

The following are the primary procedures we performed to address this critical audit matter.

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Total liabilities 623,035 607,582

Commitments and Contingencies (See Note 14)

Stockholders’ equity:

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General and administrative 270,392 258,477 275,315

Gain on sale of assets — — ( 13,871 )

Restructuring charges 6,384 47,061 10,623

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Related party rent expense:

Included in operating expenses $ — $ — $ ( 392 )

Included in net income attributable to noncontrolling interest $ 283 $ 292 $ 284

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Net income — — — — — 184,087 — 184,087 ( 189 ) 183,898

Other comprehensive income, net of tax — — — — — — 564 564 257 821

Other comprehensive loss, net of tax — — — — — — ( 41,611 ) ( 41,611 ) ( 542 ) ( 42,153 )

Distributions to noncontrolling interest — — — — — — — — ( 1,435 ) ( 1,435 )

Stock-based compensation expense — — — — 114,925 — — 114,925 — 114,925

Capitalized stock-based compensation expense — — — — 746 — — 746 — 746

Repurchase of common stock ( 7,003 ) ( 7 ) — — ( 137,100 ) ( 393,379 ) — ( 530,486 ) — ( 530,486 )

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Common stock transfers - Class B to Class A 1 — ( 1 ) — — — — — — —

Deconsolidation of subsidiary — — — — — ( 820 ) — ( 820 ) 750 ( 70 )

Balance as of September 30, 2022 59,799 $ 53 36,086 $ 41 $ — $ 2,297,730 $ ( 51,641 ) $ 2,246,183 $ 4,837 $ 2,251,020

Net income — — — — — 200,656 — 200,656 988 201,644

Other comprehensive loss, net of tax — — — — — — ( 41,611 ) ( 41,611 ) ( 542 ) ( 42,153 )

Other comprehensive income, net of tax — — — — — — 14,657 14,657 331 14,988

Distributions to noncontrolling interest — — — — — — — — ( 266 ) ( 266 )

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Tax withholdings on vesting of restricted stock ( 422 ) — — — ( 31,144 ) — — ( 31,144 ) — ( 31,144 )

Common stock transfers - Class B to Class A 1 — ( 1 ) — — — — — — —

Deconsolidation of subsidiary — — — — — ( 820 ) — ( 820 ) 750 ( 70 )

Equity issued in connection with business combination — — — — 10,004 — — 10,004 11,194 21,198

Balance as of September 29, 2023 59,674 $ 53 36,086 $ 41 $ — $ 2,391,990 $ ( 36,984 ) $ 2,355,100 $ 17,084 $ 2,372,184

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Repurchase of common stock ( 1,936 ) ( 2 ) — — ( 116,341 ) ( 43,658 ) — ( 160,001 ) — ( 160,001 )

Excise tax on common stock repurchases — — — — ( 261 ) — — ( 261 ) — ( 261 )

Cash dividends declared and paid on common stock — — — — — ( 114,579 ) — ( 114,579 ) — ( 114,579 )

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Tax withholdings on vesting of restricted stock ( 450 ) — — — ( 39,075 ) — — ( 39,075 ) — ( 39,075 )

Common stock transfers - Class B to Class A 415 — ( 415 ) — — — — — — —

Purchase of non-controlling interest in business combinations — — — — ( 5,282 ) — — ( 5,282 ) ( 4,638 ) ( 9,920 )

Deconsolidation of subsidiary — — — — — 677 — 677 ( 677 ) —

Equity issued in connection with business combination — — — — 360 — — 360 362 722

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Impairment loss on internally developed software — 16,225 —

Gain on sale of assets — — ( 13,871 )

Other non-cash items affecting net income ( 10,828 ) ( 2,800 ) ( 5,037 )

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Purchases of property, plant, and equipment ( 30,007 ) ( 30,339 ) ( 47,928 )

Proceeds from sale of assets — — 16,365

Business combinations, net of cash and restricted cash acquired ( 487,877 ) 25,703 ( 38,171 )

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Payment of cash dividend ( 114,579 ) ( 103,407 ) ( 100,067 )

Distribution to noncontrolling interest ( 266 ) ( 1,435 ) ( 7,362 )

Distributions to noncontrolling interest ( 5,164 ) ( 266 ) ( 1,435 )

Purchase of noncontrolling interest in business combinations ( 9,920 ) — —

Equity issued in connection with business combination 722 — —

Shares repurchased for tax withholdings on vesting of restricted stock ( 39,075 ) ( 31,144 ) ( 36,418 )

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Change in property, plant, and equipment purchased, unpaid at period-end $ 8,711 $ 3,882 $ ( 1,481 )

Accrual of unpaid stock repurchase excise tax $ 261 $ — $ —

Equity issued in connection with business combination $ — $ 21,198 $ —

Purchase consideration payable for business combinations — — 500

Purchase consideration payable for intangible assets — — 30

See accompanying notes to consolidated financial statements

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Actual or potential defaults of one or more financial institutions could impact our results of operations or financial position, and make it challenging to find alternative qualified counterparties.

The majority of our licensing revenue is generated from customers outside of the U.S.

The majority of our licensing revenue is generated from customers outside of the United States ("U.S.").

We manage the credit risk posed by non-U.S.

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Restricted cash also consists of cash contributed by Dolby and third-party licensors to Via LA, our subsidiary, that may only be used for licensor enforcement actions or licensee compliance activities related to certain Via LA-administered patent pools, as well as to disperse costs associated with any audit of Via LA for the Wideband Code Division Multiple Access (W-CDMA) patent pool .

All of our investments are classified as AFS, with the exception of our mutual fund investments held in our SERP, which are classified as trading securities, and our equity securities.

Restricted cash may also consist of other amounts for which contractual conditions restrict the use of the cash for general operations.

Historically, all of our investments are classified as AFS, with the exception of our mutual fund investments held in our SERP, which are classified as trading securities, and our equity securities.

Investments that have an original maturity of 91 days or more at the date of purchase and a current maturity of less than one year are classified as short-term investments, while investments with a current maturity of more than one year are classified as long-term investments.

Our AFS securities and trading securities are recorded at fair value in our consolidated balance sheets.

Our AFS securities, if any, and trading securities are recorded at fair value in our consolidated balance sheets.

Unrealized gains and losses on our AFS securities are reported as a component of AOCI, while realized gains and losses and credit losses are reported as a component of net income.

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Our equity method investment is included within long-term investments in our consolidated balance sheets.

We also hold an investment in an equity security of a privately-held company without a readily determinable fair value.

We elected to account for this investment using the measurement alternative, which is cost, less any impairment, adjusted for changes in fair value resulting from observable transactions for identical or similar investments of the same issuer.

We also hold several investments in equity securities of privately-held companies without a readily determinable fair value.

We elected to account for these investments using the measurement alternative, which is cost, less any impairment, adjusted for changes in fair value resulting from observable transactions for identical or similar investments of the same issuer.

We perform a qualitative assessment at each reporting date to determine whether there are triggering events for impairment.

This equity security is included within long-term investments in our consolidated balance sheets.

These equity securities are included within prepaids and other current assets and long-term investments in our consolidated balance sheets.

Allowance for Credit Losses

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In determining the provision, we pool receivables with similar risk characteristics to evaluate the collectability of our receivables.

Risk characteristics considered in creating these risk pools include assessing historical or expected loss patterns, credit ratings, current macroeconomic conditions that could impact collectability of cash flows, and structure of customer agreements.

In cases where circumstances have changed such that specific

customers no longer share similar risk characteristics, customers are excluded from their current pool and their risk profiles are evaluated separately.

cash flows, and structure of customer agreements.

In cases where circumstances have changed such that specific customers no longer share similar risk characteristics, customers are excluded from their current pool and their risk profiles are evaluated separately.

We recognize allowances for credit losses based on our actual historical loss information, the current business environment, and reasonable and supportable forecasts.

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Our capitalized internal use software costs are amortized on a straight-line basis over estimated useful lives of three years, unless another systematic and rational basis is more representative of the software’s useful life.

Business Combinations

For business combinations, we recognize the identifiable assets acquired, the liabilities assumed and any non-controlling interests in an acquiree, which are measured based on the acquisition date fair value.

Goodwill is measured as the excess of consideration transferred over the net amounts of the identifiable tangible and intangible assets acquired and the liabilities assumed at the acquisition date.

We use significant estimates and assumptions to determine the fair value of assets acquired and liabilities assumed, any contractual obligations assumed, pre-acquisition contingencies, and contingent consideration, and the related useful lives of the acquired assets, when applicable, as of the acquisition date.

These estimates and assumptions are inherently uncertain and may be subject to change as additional information is received and certain tax returns are finalized.

As a result, during the measurement period, which may be up to one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill.

After the measurement period, any subsequent adjustments are recorded in the consolidated statements of operations.

Acquisition costs are recorded in general and administrative and sales and marketing expenses on the consolidated statements of operations, and are recognized as incurred.

Goodwill, Intangible Assets, and Long-Lived Assets

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As a result, we recognize foreign currency transaction and re-measurement gains and losses, which are recorded within other income, net in our consolidated statements of operations.

These losses were as follows (in thousands):

These gains and losses were as follows (in thousands):

Fiscal Year Ended

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As of September 27, 2024 and September 29, 2023, the outstanding derivative instruments had maturities of equal to or less than 31 days, respectively, and the total notional amounts of outstanding contracts were $ 106.3 million and $ 61.7 million, respectively.

The fair values of these contracts are included within prepaid expenses and other current assets and within accrued liabilities in our consolidated balance sheets.

The fair values of these contracts are included within accrued liabilities in our consolidated balance sheets.

Cash Flow Hedges.

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Amounts reclassified are recorded to the same line item in the consolidated statements of operations as the impact of the hedge transaction, concurrently with the hedged costs.

The pre-tax gain attributed to the effective portion of cash flow hedges recognized in AOCI was $ 4.9 million in fiscal 2023.

The pre-tax loss attributed to the effective portion of cash flow hedges recognized in AOCI was $ 1.6 million in fiscal 2024.

The pre-tax effective portion of the losses reclassified to the consolidated statements of operations was $ 0.7 million and $ 2.1 million in fiscal 2023 and fiscal 2022, respectively.

The pre-tax gain attributed to the effective portion of cash flow hedges recognized in AOCI was $ 4.9 million in fiscal 2023.

The pre-tax effective portion of the gains reclassified to the consolidated statements of operations was $ 2.1 million in fiscal 2024.

The pre-tax effective portion of the losses reclassified to the consolidated statements of operations in fiscal 2023 was not material.

We use the asset and liability method, under which deferred income tax assets and liabilities are determined based upon the difference between the financial statement carrying amounts and the tax bases of assets and liabilities, and NOL carryforwards are measured using the enacted tax rate expected to apply to taxable income in the years in which the differences are expected to be reversed.

In assessing the realizability of deferred tax assets, we consider whether it is more likely than not that some portion or all of the deferred tax assets will not be realized.

In assessing the realizability of deferred tax assets, we

consider whether it is more likely than not that some portion or all of the deferred tax assets will not be realized.

The realization of deferred tax assets is additionally dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.

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Where it is determined that a new accounting pronouncement will result in a change to our financial reporting, we take the appropriate steps to ensure that such changes are properly reflected in our consolidated financial statements or notes thereto.

Adopted Standards

Business Combinations.

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805):

A ccounting for Contract Assets and Contract Liabilities from Contracts with Customers , which requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by an acquirer in

accordance with ASC 606, Revenue from Contracts with Customers .

Standards Not Yet Effective

Segment Reporting.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures, which enhances the disclosures required for operating segments by requiring disclosure of significant segment expenses that are regularly provided to the CODM and included within each reported measure of segment profit or loss, among other expanded disclosures.

This standard will be effective for Dolby's annual period beginning September 28, 2024 and interim periods beginning September 27, 2025, with early adoption permitted, and will be applied retrospectively to all periods presented in the financial statements.

We are currently in the process of evaluating the impact of the standard's adoption on our consolidated financial statements and related disclosures.

Income Taxes.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures , which requires further enhancement of income tax disclosures, primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction.

This standard is effective for Dolby beginning September 27, 2025 on a prospective basis, but early adoption is permitted.

We early adopted this ASU in conjunction with the acquisition of MPEG LA by Via Corp (as defined below), and with that adoption, we recognized $38.1 million in deferred revenue.

Refer to Note 15 " Business Combinations " for a description of the recent business combination involving Via LA.

There were no other business combinations entered into during fiscal 2023.

We are currently in the process of evaluating the impact of the standard's adoption on our consolidated financial statements and related disclosures.

Income Statement.

In November 2024, the FASB issued ASU 2024-03, Income Statement Reporting— Comprehensive Income— Expense Disaggregation Disclosures (Subtopic 220-40) , which requires public companies to disclose, in interim and annual reporting periods, additional information about certain expenses in notes to financial statements, including purchases of inventory, employee compensation, depreciation, amortization of intangible assets, and selling expenses.

This standard will be effective for Dolby's annual period beginning September 25, 2027 and interim periods beginning September 30, 2028, with early adoption permitted.

We are currently in the process of evaluating the impact of the standard's adoption on our consolidated financial statements and related disclosures.

Revenue Recognition

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We provide various services to support theatrical and television production for cinema exhibition, broadcast, and home entertainment, including equipment training, mixing room alignment, equalization, as well as audio, color and light image calibration.

We also offer solutions to companies building real-time digital experiences that increase audience engagement.

We also offer solutions through our platform Dolby.io to companies building real-time digital experiences that increase audience engagement.

Our solution provides the capability to stream high quality audiovisual content in ultra-low latency which reduces the delay between the action and the viewer.

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We generate administrative fees for managing patent pools on behalf of third party patent owners through our subsidiary, Via LA.

See Note 15 " Business Combinations " for a description of the recent business combination involving Via LA.

Some of our revenue arrangements include multiple performance obligations, such as hardware, software, support and maintenance, and extended warranty services.

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Upon receipt of royalty statements from the licensees with the actual reporting of sales-based royalties that we estimated previously, we record a favorable or unfavorable adjustment based on the difference, if any, between estimated and actual sales.

In the first quarter of fiscal 2023, we recorded a favorable adjustment of approximately $ 10 million, which was primarily related to shipments that occurred in our fourth quarter of fiscal 2022 (July through September) and largely based on actual royalty statements received from licensees.

In the second quarter of fiscal

2023, we recorded a favorable adjustment of $ 1 million, and in the third and fourth quarter of fiscal 2023, we recorded a favorable adjustment of $ 1 million and $ 5 million, respectively, each primarily related to shipments that occurred in the prior two quarters, and largely based on actual royalty statements received from licensees.

In the first quarter of fiscal 2024, we recorded a favorable adjustment of approximately $ 1 million.

In the second and third quarters of fiscal 2024, we recorded unfavorable adjustments of $ 6 million and $ 7 million, respectively.

In the fourth quarter of fiscal 2024, we recorded a favorable adjustment of approximately $ 6 million.

Each of these adjustments is primarily related to shipments that occurred in the prior two quarters, and is largely based on actual royalty statements received from licensees.

Fixed and guaranteed licensing fees.

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Through compliance efforts, we identify misreported licensed activity related to non-current periods.

We may record a favorable or unfavorable revenue adjustment in connection with the findings from these compliance efforts generally upon resolution with the licensee through agreement of the findings, or upon receipt of the licensee’s correction statement.

the licensee’s correction statement.

Revenue from these arrangements is included as a component of licensing revenue.

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Under such collaborations, Dolby and the exhibitor are both active participants, and share the risks and rewards associated with the business.

Accordingly, these collaborations are governed by revenue sharing arrangements under which Dolby receives revenue based on box office receipts, reported to Dolby by exhibitor partners on a monthly or quarterly basis, our proprietary designs and trademarks as well as for the use of our equipment at the exhibitor's venue.

The use of our product solution meets the definition of a lease, and for the related portion of Dolby's share of revenue, we apply ASC 842, Leases , and recognize revenue based on monthly box office reports from exhibitors.

Accordingly, these collaborations are governed by revenue sharing arrangements under which Dolby receives revenue based on box office receipts, in exchange for our proprietary designs and trademarks as well as for the use of our equipment at the exhibitor's venue.

Our revenue share is recognized as licensing revenue in our consolidated statements of operations.

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We recognize our administrative fees net of the consideration paid to the patent licensors in the pool as licensing revenue.

See Note 15 " Business Combinations " to our consolidated financial statements for a description of the recent business combination involving Via LA.

Deferred revenue, which is a component of contract liabilities, represents amounts that are ultimately expected to be recognized as revenue, but for which we have yet to satisfy the performance obligation.

On September 29, 2023, we had $ 71.3 million of remaining performance obligations, 44 % of which we expect to recognize as revenue in fiscal 2024, 21 % in fiscal 2025, and the balance of 35 % in fiscal years beyond 2025.

As of September 27, 2024, we had $ 66.2 million of remaining performance obligations, 48 % of which we expect to recognize as revenue in fiscal 2025, 20 % in fiscal 2026, and the balance of 32 % in fiscal years beyond 2026.

Disaggregation of Revenue

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Actual amounts reported are typically paid within 60 days following the end of the quarter of shipment.

The main drivers for change in the contract assets account are variances in quarterly estimates, and to a lesser degree,

timing of receipt of actual royalty statements.

The main drivers for change in the contract assets account are variances in quarterly estimates, and to a lesser degree, timing of receipt of actual royalty statements.

Our contract liabilities consist of advance payments and billings in advance of performance and deferred revenue that is typically satisfied within one year.

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Total prepaid expenses and other current assets $ 69,994 $ 50,692

Other current assets includes certain acquired assets of $18.2 million as part of the acquisition of GE Licensing, which we plan to sell shortly after the acquisition date.

Refer to Note 15, " Business Combinations " for more information.

Accrued Liabilities

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Other liabilities (2)

52,551 29,555

Total other non-current liabilities $ 135,852 $ 108,339

(1) Refer to Note 12 " Income Taxes" for additional information related to our tax liabilities.

(2) Other liabilities includes a contingent liability of $ 14.2 million acquired as a part of the GE Licensing acquisition.

Refer to Note 15, " Business Combinations " for more information.

Investments and Fair Value Measurements

We use cash holdings to purchase investment-grade securities diversified among security types, industries, and issuers.

All of our investments in debt securities are measured at fair value, and are recorded within cash equivalents and both short-term and long-term investments in our consolidated balance sheets.

With the exception of our mutual fund investments held in our SERP and classified as trading securities and our other long-term investments, all of our investments are classified as AFS securities.

Derivative contracts are used to hedge currency risk, and these are carried at fair value and classified as other assets and other liabilities.

Our investments in debt securities consist of corporate bonds, government bonds, municipal debt securities, U.S.

agency securities, commercial paper, and certificates of deposit.

In addition, our cash and cash equivalents also consist of highly-liquid money market funds and U.S.

agency securities.

Consistent with our investment policy, none of our municipal debt investments are supported by letters of credit or standby purchase agreements.

Our cash, cash equivalents, and investments declined significantly as a result of the business combinations entered into in fiscal 2024.

Refer to Note 15 " Business Combinations " for more information.

In general, we use cash holdings to purchase investment-grade securities diversified among security types, industries, and issuers.

Our cash and investment portfolio consisted of the following (in thousands):

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Cash $ 482,047 $ — $ — $ 482,047 $ 482,047 $ — $ —

Cash equivalents:

Commercial paper 1,514 — — 1,514 — 1,514 —

Money market funds 139,831 — — 139,831 139,831 — —

Government Bonds 1,731 — — 1,731 1,731 — —

Cash and cash equivalents $ 482,047 $ — $ — $ 482,047 $ 482,047 $ — $ —

Short-term investments:

Certificate of deposit 530 — — 530 — 530 —

agency securities 5,956 1 ( 7 ) 5,950 — 5,950 —

Government bonds 50,220 3 ( 384 ) 49,839 46,246 3,593 —

Commercial paper 5,843 — ( 3 ) 5,840 — 5,840 —

Corporate bonds 61,803 — ( 431 ) 61,372 — 61,372 —

Municipal debt securities 15,801 — ( 184 ) 15,617 — 15,617 —

Short-term investments 140,153 4 ( 1,009 ) 139,148 46,246 92,902 —

Long-term investments:

Government bonds 33,227 — ( 1,046 ) 32,181 32,181 — —

Corporate bonds 39,057 6 ( 589 ) 38,474 — 38,474 —

Municipal debt securities 16,137 — ( 224 ) 15,913 — 15,913 —

Other investments (1)

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Included in other current assets $ — $ 299 $ — $ 299 $ — $ 299 $ —

included in other non-current assets — 2 — 2 — 2 —

Included in other accrued liabilities — — ( 618 ) ( 618 ) — ( 618 ) —

Included in other non-current liabilities — — ( 24 ) ( 24 ) — ( 24 ) —

(1) Other investments as of September 29, 2023 is primarily comprised of an equity method investment of $ 5.9 million and an equity security without a readily determinable fair value, valued at $ 5.0 million.

(1) Other investments as of September 27, 2024 is primarily comprised of our equity method investment in Access Advance of $ 83.9 million and an equity security without a readily determinable fair value, valued at $ 5.0 million.

Other investments increased in fiscal 2024 as a result of our acquisition of GE Licensing.

Refer to Note 15 for more information.

As of September 29, 2023, all of our investments in debt securities were measured at fair value, and were recorded within cash equivalents and both short-term and long-term investments in our consolidated balance sheets.

With the exception of our mutual fund investments held in our SERP and classified as trading securities and our other long-term investments, all of our investments have been classified as AFS securities.

Derivative contracts are used to hedge currency risk, and these are carried at fair value and classified as other assets and other liabilities.

As of September 29, 2023, our investments in debt securities consisted of corporate bonds, government bonds, municipal debt securities, U.S.

agency securities, commercial paper, and certificate of deposit.

In addition, our cash and cash equivalents also consisted of highly-liquid money market funds, government bonds, and commercial paper.

Consistent with our investment policy, none of our municipal debt investments have been supported by letters of credit or standby purchase agreements.

September 29, 2023

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Cash equivalents:

Commercial paper 1,514 — — 1,514 — 1,514 —

Money market funds 139,831 — — 139,831 139,831 — —

agency securities 10,328 — ( 1 ) 10,327 — 10,327 —

Government Bonds 1,731 — — 1,731 1,731 — —

Cash and cash equivalents 745,364 — — 745,364 743,850 1,514 —

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Long-term investments:

agency securities 861 — ( 39 ) 822 — 822 —

Government bonds 33,227 — ( 1,046 ) 32,181 32,181 — —

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Currency derivatives as hedge instruments:

Included in other current assets $ — $ 144 $ — $ 144 $ — $ 144 $ —

included in other non-current assets — 2 — 2 — 2 —

Included in other accrued liabilities — — ( 618 ) ( 618 ) — ( 618 ) —

Included in other non-current liabilities — — ( 24 ) ( 24 ) — ( 24 ) —

(1) Other investments as of September 30, 2022 is comprised of an equity method investment of $ 5.9 million and an equity security without a readily determinable fair value, valued at $ 5.0 million.

(1) Other investments as of September 29, 2023 is primarily comprised of our equity method investment in Access Advance of $ 5.9 million and an equity security without a readily determinable fair value, valued at $ 5.0 million.

Fair Value Hierarchy.

Fair value is the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability, in an orderly transaction between market participants at the measurement date.

We minimize the use of unobservable inputs and use observable market data, if available, when determining fair value.

We minimize the use of unobservable inputs and use observable market data,

if available, when determining fair value.

We classify our inputs to measure fair value using the following three-level hierarchy:

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To validate the fair value determination provided by our primary pricing service, we perform quality controls over values received which include comparing our pricing service provider’s assessment of the fair values of our investment securities against the fair values of our investment securities obtained from another independent source, reviewing the pricing movement in the context of overall market trends, and reviewing trading information from our investment managers.

In addition, we

assess the inputs and methods used in determining the fair value in order to determine the classification of securities in the fair value hierarchy.

In addition, we assess the inputs and methods used in determining the fair value in order to determine the classification of securities in the fair value hierarchy.

The fair value of the currency derivatives are calculated from market spot rates, forward rates, interest rates, and credit ratings at the end of the period.

Unobservable inputs are used when little or no market data is available and reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability.

The following table describes the valuation techniques and inputs applicable to each class of security held within our investment portfolio as of September 29, 2023:

The following table describes the valuation techniques and inputs applicable to each class of security held within our investment portfolio:

Asset Type Primary Source Update Frequency Fair Value Methodology Secondary Source

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Extel Financial Ltd Daily Evaluations based on various market factors Bloomberg

As a part of the acquisition of GE Licensing, we acquired GE Licensing’s ownership interest in Access Advance, which increased our equity method investment by $ 76 million.

This increase in our investment was classified as Level 3 within the fair value hierarchy, and measured using the discounted cash flows method, whereby the cash flows expected to be generated by the business are discounted to their present value using a rate of return that reflects the relative risk of the investment and the time value of money.

Inputs used in the valuation were the prospective financial information, including projected revenue associated with the investment, and discount rate to reflect the risk of the equity investment compared to the main operating business of GE Licensing.

In determining the discount rate, a risk assessment was performed, where revenue growth was assessed, among other factors, and as such, revenue growth and the discount rate are considered interrelated unobservable inputs.

Securities In Gross Unrealized Loss Position.

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The unrealized losses on our AFS securities were primarily the result of unfavorable changes in interest rates subsequent to the initial purchase of these securities.

The following table presents the gross unrealized losses and fair value for those AFS securities that were in an unrealized loss position for less than twelve months and for greater than twelve months as of September 29, 2023 and September 30, 2022 (in thousands):

September 29, 2023 September 30, 2022

Less Than 12 Months Greater Than 12 Months Less Than 12 Months Greater Than 12 Months

Investment Type Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses

Certificate of deposit $ — $ — $ — $ — $ 10,352 $ ( 47 ) $ — $ —

September 29, 2023

Less Than 12 Months Greater Than 12 Months

Investment Type Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses

agency securities $ 853 $ ( 7 ) $ — $ —

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Total $ 136,660 $ ( 921 ) $ 63,035 $ ( 1,947 )

Although we had certain securities that were in an unrealized loss position as of September 29, 2023 and September 30, 2022, we expect to recover the full carrying value of these securities.

Although we had certain securities that were in an unrealized loss position as of September 29, 2023, we expect to recover the full carrying value of these securities.

Investment Maturities.

The following table summarizes the amortized cost and estimated fair value of the AFS securities within our investment portfolio based on stated maturities as of September 29, 2023 and September 30, 2022, which are recorded within cash equivalents and both short and long-term investments in our consolidated balance sheets (in thousands):

September 29, 2023 September 30, 2022

Range of maturity Amortized Cost Fair Value Amortized Cost Fair Value

The following table summarizes the amortized cost and estimated fair value of the AFS securities within our investment portfolio based on stated maturities as of September 29, 2023, which are recorded within cash equivalents and both short and long-term investments in our consolidated balance sheets (in thousands):

Range of maturity Amortized Cost Fair Value

Due within 1 year $ 283,229 $ 282,225

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We determine if a contract contains a lease based on whether we have the right to obtain substantially all of the economic benefits from the use of an identified asset and whether we have the right to direct the use of an identified asset in exchange for consideration, which relates to an asset which we do not own.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.

ROU assets represent our right to use an underlying

asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.

ROU assets are recognized as the lease liability, adjusted for lease incentives received.

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Variable lease payments are recognized in operating expenses in the period in which the obligation for those payments is incurred.

The lease term of operating leases vary from less than a year to 10 years.

The lease term of operating leases vary from less than one year to 9 years.

We have leases that include one or more options to extend the lease term for up to 5 years as well as options to terminate the lease within one year.

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Lease components consist of fixed payments and/or variable lease payments based on contracted percentages of revenue.

Generally, leases do not grant any right to the lessee to purchase the underlying asset at the end of the lease term.

Generally, leases do not grant any right to the lessee to purchase the underlying asset at the

end of the lease term.

Dolby Cinema lease arrangements have options to extend the lease term at expiration by increments ranging from 1 to 5 years.

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Selling profit or loss arising from a sales-type lease is recorded at lease commencement and presented on a gross basis.

We recognized $ 2.3 million to revenue and $ 0.4 million to cost of revenue associated with sales-type leases in fiscal 2023.

Over the term of the lease, we recognize interest income on the net investment in the lease, and variable lease payments, which are not included in the net investment in the lease.

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Fiscal 2027 — 220

Fiscal 2028 and thereafter — 220

Total undiscounted cash flows $ 2,042 1,280

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Translation adjustments 4,132

Measurement period adjustments 4,235

Balance as of September 29, 2024 $ 533,208

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Total $ 823,093 $ ( 388,579 ) $ 434,514 $ 521,981 $ ( 354,554 ) $ 167,427

During fiscal 2023 and fiscal 2022, we acquired $ 86.0 million and $ 8.7 million of identifiable intangible assets in connection with the acquisition of MPEG LA and Millicast, Inc.

("Millicast"), respectively.

During fiscal 2024, we acquired $ 274.2 million and $ 24.6 million of identifiable intangible assets in connection with the acquisitions of GE Licensing and THEO, respectively.

During fiscal 2023, we acquired $ 86.0 million of identifiable intangible assets in connection with the acquisition of MPEG LA.

Refer to Note 15 " Business Combinations " for additional information.

During fiscal 2022, we purchased various patents for purchase consideration of $ 11.5 million, and upon acquisition, these intangible assets had a weighted-average useful life of 16 years.

These intangible assets facilitate our R&D efforts, technologies, and potential product offerings.

Amortization expense for our intangible assets is included in cost of licensing, cost of products and services, R&D, S&M, and G&A expenses in our consolidated statements of operations.

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Our 2020 Stock Plan, as amended and restated, provides for the ability to grant incentive stock options, non-qualified stock options, restricted stock, RSUs, stock appreciation rights, deferred stock units, performance units, performance bonus awards, and performance shares.

A total of 64.0 million shares of our Class A common stock have been authorized for issuance under the 2020 Stock Plan since inception of the plan.

A total of 64.0 million shares of our Class A common stock have been authorized for issuance under the 2020 Stock Plan in total since inception of the plan.

Any shares subject to an award with a per share price less than the fair market value of our Class A common stock on the date of grant and any shares subject to an outstanding RSU award will be counted against the authorized share reserve as 1.6 shares for every one share subject to the award, and if returned to the 2020 Stock Plan, such shares will be counted as 1.6 shares for every one share returned.

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From fiscal 2016 through fiscal 2019, we granted PSOs to certain officers with shares of our Class A common stock underlying such options.

The contractual term for the PSOs was seven years, with vesting contingent upon market-based performance conditions, representing the achievement of specified

Dolby annualized TSR targets at the end of a three-year measurement period following the date of grant.

The contractual term for the PSOs was seven years, with vesting contingent upon market-based performance conditions, representing the achievement of specified Dolby annualized TSR targets at the end of a three-year measurement period following the date of grant.

Anywhere from 0 % to 125 % of the shares subject to a PSO vested based on achievement of the performance conditions at the end of the three-year performance period.

In valuing the PSOs, which will be recognized as compensation cost, we used a Monte Carlo valuation model.

In valuing the PSOs, which are recognized as compensation cost, we used a Monte Carlo valuation model.

Aside from the use of an expected term for the PSOs commensurate with their shorter contractual term, the nature of the valuation inputs used in the Monte Carlo valuation model were consistent with those used to value our non-performance based options granted under the 2020 Stock Plan.

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December 15, 2023 77,283 154,566

On December 16, 2019, we granted PSUs vesting for an aggregate of 62,000 shares at the target award amount, which vested at 81% of the target award amount.

On December 16, 2019, we granted PSUs to our executive officers for an aggregate of 62,000 shares, which vested in December 2022 at 81 % of the target award amount.

On December 15, 2020, we granted PSUs to our executive officers for an aggregate of 66,138 shares, which vested in December 2023 at 80 % of the target award amount.

As of September 27, 2024, PSUs which would vest for an aggregate of 220,082 shares at the target award amount ( 440,164 shares at 200 % of the target award amount) were outstanding.

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Dividend yield 1.4 % 1.6 % 1.1 %

The following table summarizes the weighted-average fair value (per share) of stock options granted and the total intrinsic value of stock options exercised (in thousands):

Fiscal Year Ended

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(1) Stock-based compensation expense incurred by restricted stock units includes expense from PSUs.

(2) Excludes $ 1.2 million and $ 0.7 million of capitalized stock-based compensation related to internal use software in fiscal 2023 and fiscal 2022, respectively.

(2) Excludes $ 0.6 million, $ 1.2 million and $ 0.7 million of capitalized stock-based compensation related to internal use software in fiscal 2024, fiscal 2023 and fiscal 2022, respectively.

Expense - By Income Statement Line Item Classification

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The tax benefit that we recognize from shares issued under our ESPP is excluded from the tables above.

The tax benefit recognized was no t material in fiscal 2023 and fiscal 2022, and was $ 1.2 million in fiscal 2021.

The tax benefit recognized was no t material in fiscal 2024, fiscal 2023, and fiscal 2022.

Unrecognized Compensation Expense.

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August 2022 350,000

August 2024 350,000

Total $ 3,300,000

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The program does not have a specified expiration date, and can be limited, suspended, or terminated at our discretion at any time without prior notice.

Shares repurchased under the program will be returned to the status of authorized but unissued shares of Class A common stock.

Shares repurchased under the program will be retired and returned to the status of authorized but unissued shares of Class A common stock.

As of September 27, 2024, the remaining authorization to purchase additional shares was $ 401.6 million.

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Q3 - Quarter ended June 28, 2024 August 7, 2024 August 19, 2024 August 27, 2024 $ 0.30 $ 28.6 million

Q4 - Quarter ended September 29, 2023 November 16, 2023 November 28, 2023 December 5, 2023 $ 0.30 $ 28.7 million (1)

Q4 - Quarter ended September 27, 2024 November 19, 2024 December 3, 2024 December 10, 2024 $ 0.33 $ 31.5 million (1)

(1) The dividend payment amount for the dividend declared in the fourth quarter of fiscal 2024 is estimated based on the number of shares of our Class A and Class B common stock that we estimate will be outstanding as of the Record Date.

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Other comprehensive income/loss consists of three components:

unrealized gains or losses on our AFS marketable investment securities, gains and losses on derivatives in cash flow hedge relationships not yet recognized in earnings, and the gains and losses from the translation of assets and liabilities denominated in non-U.S.

unrealized gains or losses on our AFS marketable investment securities, gains and losses on derivatives in cash flow hedge relationships not yet recognized

in earnings, and the gains and losses from the translation of assets and liabilities denominated in non-U.S.

dollar functional currencies.

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Unrealized gains/(losses) 2,602 ( 1,567 ) — 1,035 3,313 4,869 — 8,182

Foreign currency translation gains/(losses) (1)

Foreign currency translation gains (1)

— — 14,760 14,760 — — 7,170 7,170

Income tax effect - benefit/(expense) — — 73 73 52 ( 8 ) ( 245 ) ( 201 )

Income tax effect - benefit — — 65 65 — — 73 73

Net of tax 2,602 ( 1,567 ) 14,825 15,860 3,313 4,869 7,243 15,425

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Net of tax 173 1,764 — 1,937 ( 185 ) ( 583 ) — ( 768 )

Net current-period other comprehensive income/(loss) 3,128 4,286 7,243 14,657 ( 6,206 ) ( 4,361 ) ( 31,044 ) ( 41,611 )

Net current-period other comprehensive income 2,775 197 14,825 17,797 3,128 4,286 7,243 14,657

Ending Balance $ ( 83 ) $ — $ ( 19,104 ) $ ( 19,187 ) $ ( 2,858 ) $ ( 197 ) $ ( 33,929 ) $ ( 36,984 )

(1) The foreign currency translation gains during fiscal 2023 were primarily due to the strengthening of other foreign currencies as compared to the U.S.

The foreign currency translation losses during fiscal 2022 were primarily due to the strengthening of the U.S.

dollar as compared to other foreign currencies.

(1) The foreign currency translation gains during fiscal 2024 and fiscal 2023 were primarily due to the strengthening of other foreign currencies as compared to the U.S.

(2) Realized gains or losses, if any, from the sale of our AFS investment securities or from foreign currency translation adjustments are included within other income/(expense), net in our consolidated statements of operations .

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As of September 27, 2024, the total undistributed earnings of our foreign subsidiaries were approximately $ 262 million.

The unrecognized deferred tax liability on the portion of the undistributed earnings considered indefinitely reinvested is not material.

The Company does not record any deferred tax liability on the portion of these foreign undistributed earnings considered indefinitely reinvested.

Deferred Income Taxes

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Depreciation and amortization 139,228 130,818

130,818 105,114

Lease liability 15,657 13,911

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Deferred income tax assets, net $ 219,758 $ 201,860

(1) Provisions enacted in the Tax Act related to the capitalization for tax purposes of research and development expenditures became effective on October 1,

These provisions require us to capitalize research and development expenditures and amortize them on our U.S.

tax return over five or fifteen

years, depending on where research is conducted.

Net Operating Losses and Tax Credit Carryforwards

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federal and California were $ 1.2 million and $ 1.6 million, respectively, and will start to expire in fiscal 2034 and 2029, respectively.

Additionally, we had foreign NOL carryforwards of $ 8.1 million as of September 27, 2024, an amount which is not subject to expiration.

As of September 27, 2024, we had foreign tax credit and federal R&D tax credit carryforwards of $ 15.1 million and $ 22.2 million, respectively, which will start to expire in fiscal 2029 and fiscal 2035, respectively.

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Increase (decrease) unrecognized tax benefit 0.6 1.9 2.8

Tax Act of 2017 ( 3.2 ) — —

Other 0.5 0.6 0.7

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Our effective tax rate was 15.4 % in fiscal 2024, compared with our federal statutory rate of 21.0 %, and with our effective tax rate in fiscal 2023 of 19.4 %.

The increase in our effective tax rate was primarily due to lower tax benefits related to settlement of stock-based awards and reduced benefit from less research and development tax credits.

The decrease in our effective tax rate was primarily due to a tax benefit related to the Transition Tax liability under the Tax Cuts and Jobs Act of 2017, which resulted from the application of a recent U.S.

Tax Court opinion in Varian Medical Systems, Inc.

Commissioner .

On August 26, 2024, the U.S.

Tax Court opined that a deduction for certain deemed foreign dividends can be claimed for otherwise taxable foreign dividends under the Transition Tax of the Tax Cuts and Jobs Act.

As a result of the opinion, we intend to timely file claims for refund to reduce a portion of our Transition Tax liability.

We recorded a benefit of $ 10.0 million with a corresponding increase of $ 10.8 million to taxes receivable and $ 0.8 million increase to uncertain tax benefit in fiscal 2024.

Additionally, we recognized tax benefits from previously unrecognized tax benefits due to a lapse in the statute of limitations and reduced benefit from foreign operations.

Our effective tax rate was 19.4 % in fiscal 2023, compared with our effective tax rate in fiscal 2022 of 14.6 %.

The increase in our effective tax rate was primarily due to a shift in the mix of earnings to jurisdictions with higher tax rates and lower tax benefits related to settlement of stock-based awards partially offset by benefit from additional research and development tax credits.

The increase in our effective tax rate was primarily due to lower tax benefits related to settlement of stock-based awards and reduced benefit from less R&D tax credits.

Uncertain Tax Positions

As of September 27, 2024, the total amount of gross unrecognized tax benefits was $ 81.6 million, of which $ 49.9 million, if recognized, would reduce our effective tax rate.

Our liability increased from fiscal 2022 primarily due to additional accruals in fiscal 2023.

Our liability increased from fiscal 2023 primarily due to additional accruals in fiscal 2024, partially offset by releases due to the lapse of statute of limitations.

Our liability for unrecognized tax benefits is classified within other non-current liabilities in our consolidated balance sheets.

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To the extent accrued interest and penalties do not ultimately become payable, amounts accrued are reduced in the period that such determination is made and are reflected as a reduction of the overall income tax provision.

In fiscal year 2023, our current tax provision was increased by interest expense of $ 3.5 million, while in fiscal year 2022, our current tax provision was increased by interest expense of $ 1.7 million.

In fiscal 2024, our current tax provision was increased by interest expense of $ 3.3 million, while in fiscal year 2023, our current tax provision was increased by interest expense of $ 3.5 million.

Accrued interest and penalties are included within the related tax liability line item in our consolidated balance sheets.

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Our operations in certain jurisdictions remain subject to examination for fiscal 2013 to 2023, some of which are currently under audit or review.

We are currently under audit by the IRS for our fiscal 2018 U.S.

federal tax year.

The resolution of each of these audits is not expected to be material to our consolidated financial statements.

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The final U.S.

foreign tax credit regulations, issued January 4, 2022, introduced significant changes to foreign tax credit utilization.

However, a one year relief delayed the effective date of the final U.S.

foreign tax credit regulations until our fiscal 2024.

These provisions are expected to have a material adverse effect on our fiscal 2024 and future tax provisions unless postponed or modified.

foreign tax credit regulations, issued on January 4, 2022, introduced significant changes to foreign tax credit utilization.

However, additional relief has delayed the effective date of the final U.S.

foreign tax credit regulations until further guidance to withdraw or modify the temporary relief.

These provisions may have a material adverse effect on our future tax provisions unless modified.

The Organisation for Economic Co-operation and Development (“OECD”) published its model rules “Tax Challenges Arising From the Digitalisation of the Economy - Global Anti-Base Erosion Model Rules (Pillar Two)” which established a global minimum corporate tax rate of 15% for certain multinational enterprises.

Many countries have implemented or are in the process of implementing the Pillar Two legislation, which will apply to Dolby beginning in fiscal year 2025.

While we do not currently estimate a material impact to our consolidated financial statements, we continue to monitor the impact as countries implement legislation and the OECD provides additional guidance.

Restructuring

Restructuring charges recorded in our consolidated statements of operations represent costs associated with separate individual restructuring plans implemented in various fiscal periods.

Costs arising from these actions, including fluctuations in related balances between fiscal periods, are based on the nature of activities under the various plans.

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 2024 Restructuring Events .

In April 2024, we initiated restructuring actions with the purpose of focusing our resources on our highest strategic priorities.

In connection with this plan, we recorded an expense in the third quarter of fiscal 2024 of $ 4.6 million in severance and other related benefits.

C ash payment of the severance and other termination benefits were substantially completed by the end of the fourth quarter of fiscal 2024.

These activities resulted in gross pre-tax operating income savings of approximately $ 3 million in fiscal 2024 and are expected to result in savings of approximately $ 11 million within fiscal 2025.

The impact of these estimated savings on our operating expenses have been and will be mostly offset by increased investment in our strategic priorities and the effects of inflation on our remaining expenses.

Fiscal 2023 Restructuring Events.

In September 2023, we initiated a restructuring plan with the purpose of focusing our resources on our highest strategic priorities.

We recorded expense of $ 13.4 million in severance and other related benefits offered to approximately 160 impacted employees.

In conjunction with focusing our resources on our top strategic priorities, we recorded an impairment loss of $ 16.9 million related primarily to internally developed software for projects we are no longer pursuing.

Cash payment of the severance and other termination benefits is expected to be completed by the second half of fiscal 2024.

In connection with this plan, we recorded an expense in the fourth quarter of fiscal 2023 of $ 13.4 million in severance and other related benefits and an impairment loss of $ 16.9 million related primarily to internally developed software for projects we are no longer pursuing.

In continuation with this plan, we recorded an expense in the first quarter of fiscal 2024 of $ 7.4 million in severance and other related benefits.

Cash payment of the severance and other termination benefits were substantially completed by the end of the second quarter of fiscal 2024.

These activities resulted in gross pre-tax operating income savings of approximately $ 40 million within fiscal 2024, which was consistent with our expectations.

The impact of these savings on our operating expenses was offset by increased investment in our strategic priorities and the effects of inflation on our remaining expenses.

In June 2023, we implemented a focused restructuring plan, primarily consisting of workforce reductions and facility consolidations to improve execution in alignment with our strategy and to reduce our cost structure through improved utilization of our global infrastructure.

As a result of these events, we recorded expense of $ 10.9 million in severance and other related benefits offered to approximately 130 impacted employees, and we recorded expense of $ 6.9 million related to a facility consolidation in New York, NY.

Actions related to this plan are expected to be completed by the second half of fiscal 2024.

As a result of these actions, we recorded expense in the third quarter of fiscal 2023 of $ 10.9 million in severance and other related benefits and expense of $ 6.9 million related to a facility consolidation in New York, NY.

Actions and expenses related to this plan were substantially completed by the end of the second quarter of fiscal 2024.

These activities resulted in gross pre-tax operating income savings of approximately $20 million in fiscal 2024, which was consistent with our expectations.

The impact of these savings on our operating expenses was mostly offset by increased investment in our strategic priorities and the effects of inflation on our remaining expenses.

The table presented below summarizes the changes in our restructuring accruals (in thousands):

Severance Leased facility exit costs and other costs Total

Severance Leased facility exit costs and other costs and adjustments Total

Balance at September 30, 2022 $ 5,781 $ — $ 5,781

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Cash payments and adjustments ( 9,372 ) ( 16,225 ) ( 25,597 )

Non-cash adjustment for leased facility exit costs — ( 6,893 ) ( 6,893 )

Balance at September 29, 2023 $ 20,352 $ — $ 20,352

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Cash payments and adjustments ( 24,000 ) 29 ( 23,971 )

Non-cash adjustment for leased facility exit costs — ( 6,893 ) ( 6,893 )

Balance at September 27, 2024 $ 2,765 $ — $ 2,765

The fiscal 2022 activities primarily related to our fiscal 2022 restructuring plan within our entertainment organization to align resources with a revised business strategy and outlook, and to support our higher priority focus areas.

Accruals for restructuring charges incurred for the restructuring plan described above are included within accrued liabilities in our consolidated balance sheets, while restructuring charges are included within restructuring charges in our consolidated statements of operations.

Accruals for restructuring charges/(credits) incurred for the restructuring plan described above are included within accrued liabilities in our consolidated balance sheets, while restructuring charges are included within restructuring charges in our consolidated statements of operations.

Commitments and Contingencies

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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 the protracted closure of the Dolby Theatre.

Our payment obligations may be suspended or reduced in certain circumstances,

including the protracted closure of the Dolby Theatre.

We also hold the naming rights to Dolby Live at the Park MGM in Las Vegas, Nevada.

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Purchase Obligations.

Purchase obligations primarily consist of our commitments made under agreements to purchase goods and services related to Dolby Cinema and for purposes that include information technology and telecommunications, marketing and professional services, and other R&D activities.

Also included in purchase obligations are non-cancelable commitments to contract manufacturers, including potentially variable obligations related to inventory based on demand forecasts we provide to the contract manufacturers.

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

Additionally, and although not a contractual requirement, we have at times elected to defend our licensees from third

party IP infringement claims.

Additionally, and although not a contractual requirement, we have at times elected to defend our licensees from third party IP infringement claims.

Since the terms and conditions of our contractual indemnification clauses do not explicitly specify our obligations, we are unable to reasonably estimate the maximum potential exposure for which we could be liable.

Business Combinations

On August 19, 2024, we acquired 100 % of the issued and outstanding equity interests of GE Intellectual Property Licensing, LLC and GE Technology Development, Inc., which, collectively with each of their subsidiaries, comprised General Electric’s intellectual property licensing business that primarily targeted the consumer digital media and electronics sectors ("GE Licensing" or the "acquiree").

The acquisition is an extension of our existing licensing businesses and is expected to strengthen and expand the scale of our intellectual property portfolio.

The total consideration for the acquisition is comprised as the following (in thousands):

Total amount paid for consideration $ 443,565

Noncontrolling interest in Via LA ( 9,921 )

Settlement of pre-existing relationship ( 750 )

Total consideration transferred for acquisition of GE Licensing 432,894

Cash acquired ( 2,232 )

Total consideration, net of cash acquired $ 430,662

Prior to the acquisition, GE Licensing held a noncontrolling interest in the Company’s majority owned subsidiary Via LA.

The indirect acquisition of this noncontrolling interest was accounted for as a separate transaction under ASC 810.

The difference between the fair value of the consideration paid of $ 9.9 million and the carrying amount of the noncontrolling interest acquired of $ 4.6 million was recognized as a $ 5.3 million adjustment to equity on the Company’s consolidated financial statements.

We have accounted for the taxable transaction under the acquisition method of accounting for business combinations, and the results of operations of GE Licensing have been included in our consolidated statements of operations from the date of acquisition.

Additionally, we have estimated the fair values of the net tangible and intangible assets acquired, and liabilities assumed as of the acquisition date, with any amounts paid in excess of the net assets recorded as goodwill.

The fair values assigned to assets acquired and liabilities assumed are based on management’s estimates and assumptions and may be subject to change as additional information is received and certain tax returns are finalized, including potential changes to income tax-related accounts and certain assets held for sale.

We expect to finalize the valuation within the one year measurement period.

It is impracticable to provide historical supplemental pro forma financial information along with earnings during the period subsequent to the acquisition due to the lack of access to historical information.

The following table summarizes the preliminary acquisition date fair values of the assets acquired and liabilities assumed (in thousands):

Recognized Identifiable Assets Acquired and Liabilities Assumed Purchase Price Allocation (Preliminary)

Cash and cash equivalents $ 2,232

Accounts receivable 20,135

Other current assets 9,636

Assets held for sale, current 18,231

Long-term investments 76,000

Intangible assets 274,197

Goodwill 80,763

Other non-current assets 3,503

Other current liabilities ( 15,765 )

Contingent liabilities ( 14,199 )

Other non-current liabilities ( 21,839 )

Purchase Consideration $ 432,894

We acquired certain assets valued of $ 18.2 million as part of the acquisition which we plan to sell shortly after the acquisition date.

These assets are classified as held for sale within prepaid expenses and other current assets on the consolidated balance sheets and are measured at fair value less cost to sell.

Acquired contingencies relate to contingent payments due under an assumed agreement.

The payments are contingent on the Company achieving certain revenue targets in the future and are based on a percentage of revenue that exceeds such targets.

The Company determined that it is probable at the acquisition date that a liability has been incurred and the amount of the liability can be reasonably estimated in accordance with ASC 450.

The Company recognized a contingent liability of $ 14.2 million on the acquisition date based on a discounted cash flow valuation technique.

Goodwill is representative of our expectation of the benefits and synergies from the integration of GE Licensing operations and the associated assembled workforce, which does not qualify for separate recognition as an intangible asset.

All of the goodwill recognized is expected to be deductible for income tax purposes.

The following table summarizes the preliminary fair values allocated to the various intangible assets acquired and the weighted-average useful lives over which they will be amortized using the straight-line method:

Purchase Price Allocation Weighted-Average Useful Life

Intangible Assets Acquired (in thousands) (in years)

Patents and technology – HEVC Codecs $ 261,697 11

Patents and technology – non-HEVC Codecs 12,500 11

Total $ 274,197 11

The preliminary value of acquired intangibles was determined based on the present value of estimated future cash flows using the multi-period excess earnings method with the following inputs such as projected revenue attributable to licensors in the patent pools, revenue retention rate, maintenance sales and marketing expenses, income tax rate, post-tax returns for contributory assets, and discount rate.

Acquisition-related costs of $ 6.4 million were incurred during fiscal 2024.

These acquisition-related costs were included in G&A expenses for $ 4.3 million and in S&M expenses for $ 2.1 million in the consolidated statements of operations.

THEO Technologies

On July 24, 2024, we completed the acquisition of all outstanding equity interests of THEO, a privately held company.

THEO' s products enable high-quality online video experiences for customers across sports and entertainment.

This acquisition expands on our suite of cloud solutions to provide seamless, synchronized viewer

experiences in sports and entertainment.

We have included the financial results of THEO in our consolidated financial statements from the date of acquisition, and these results were not material.

Additionally, the transaction costs associated with the acquisition were not material.

The total purchase consideration of the acquisition was $ 58.7 million.

We allocated $ 24.6 million in purchase consideration to identifiable intangible assets, which primarily consisted of customer relationships and developed technology, with estimated useful lives of 3 years to 13 years.

We also recorded $ 39.9 million of goodwill, which is representative of our expectation of benefits and synergies from the integration of THEO technology with our existing technology and the assembled workforce of THEO.

On April 28, 2023, our wholly-owned subsidiary Via Licensing Corporation ("Via Corp") acquired 100 % of MPEG LA, L.L.C.

("MPEG LA"), a privately held patent pool administrator that managed several collaborative licensing programs in video imaging and other technologies.

In connection with the transaction, Via Corp changed its structure and name to Via Licensing Alliance LLC ("Via LA") and became a majority owned subsidiary of Dolby.

In connection with the transaction, Via Corp changed its structure and name to Via LA and became a majority owned subsidiary of Dolby.

The acquisition is expected to strengthen Via LA's licensing capabilities, particularly in video, diversify its revenues, and reinforce its ability to develop new patent licensing programs.

12 unchanged sentences

The assumed settlement of pre-existing relationships was determined based on the contractual amounts of payables and receivables between the parties as such amounts approximate fair value.

We have accounted for the taxable transaction under the acquisition method of accounting for business combinations, and the results of operations of MPEG LA have been included in the Company's consolidated statements of operations from the date of acquisition and were not material.

We expect to finalize the valuation within the one year measurement period.

We accounted for the taxable transaction under the acquisition method of accounting for business combinations, and the results of operations of MPEG LA have been included in the Company's consolidated statements of operations from the date of acquisition and were not material.

Additionally, we estimated the fair values of the net tangible and intangible assets acquired, and liabilities assumed as of the acquisition date, with any amounts paid in excess of the net assets recorded as goodwill.

The fair values assigned to assets acquired and liabilities assumed were based on management’s estimates and assumptions, and any changes to these fair values were not material.

As this acquisition was not significant to our reported operating results, pro forma results of operations are not provided.

The following table summarizes the preliminary acquisition date fair values allocated to the net assets acquired (in thousands):

Recognized Identifiable Assets Acquired and Liabilities Assumed Purchase Price Allocation (Preliminary)

The following table summarizes the acquisition date fair values allocated to the net assets acquired (in thousands):

Recognized Identifiable Assets Acquired and Liabilities Assumed Purchase Price Allocation

Cash and cash equivalents $ 80,633

8 unchanged sentences

Purchase Consideration $ 219,693

In connection with the preparation of our consolidated financial statements, we identified an immaterial error related to the preliminary acquisition date fair values allocated to net assets acquired, whereby we overstated certain accounts payable to patent administrative program partners and, as a consequence, correspondingly overstated goodwill as of the quarter ended June 30, 2023.

In connection with the preparation of our consolidated financial statements, we identified an immaterial error related to the acquisition date fair values allocated to net assets acquired, whereby we overstated certain accounts payable to patent administrative program partners and, as a consequence, correspondingly overstated goodwill as of the quarter ended June 30, 2023.

We evaluated the error quantitatively and qualitatively, and determined that the related impact was not material to our condensed consolidated financial statements for the third quarter of fiscal 2023.

3 unchanged sentences

All of the goodwill recognized is expected to be deductible for income tax purposes.

The following table summarizes the fair values allocated to the various intangible assets acquired and the weighted-average useful lives over which they will be amortized using the straight-line method:

Purchase Price Allocation Weighted-Average Useful Life

5 unchanged sentences

Total $ 86,000 12

The preliminary value of acquired intangibles was determined based on the present value of estimated future cash flows using the following methodologies and inputs:

The value of acquired intangibles was determined based on the present value of estimated future cash flows using the following methodologies and inputs:

• Licensor Relationships - the multi-period excess earnings method using inputs such as projected revenue attributable to licensors in the patent pools, revenue retention rate, maintenance sales and marketing expenses, income tax rate, post-tax returns for contributory assets, and discount rate.

7 unchanged sentences

The total purchase consideration of the acquisition was $ 38.8 million.

We allocated $ 8.7 million in purchase consideration to identifiable intangible assets, which primarily consisted of developed technology, with estimated useful lives of 1.5 years to 8 years.

We allocated $ 8.7 million in purchase consideration to identifiable intangible assets, which primarily consisted of developed technology, with estimated

useful lives of 1.5 years to 8 years.

We also recorded $ 31.7 million of goodwill, which is representative of our expectation of benefits and synergies from the integration of Millicast technology with our existing technology and the assembled workforce of Millicast.

3 unchanged sentences

Our CODM is our Chief Executive Officer.

Reporting segments are operating

segments exceeding specified revenue, profit or loss, or asset thresholds for which separate disclosure of information is necessary.

Reporting segments are operating segments exceeding specified revenue, profit or loss, or asset thresholds for which separate disclosure of information is necessary.

We operate as a single reportable segment.

56 unchanged sentences

During fiscal 2022, we ceased leasing the Wootton Bassett facility.

The property leased to Dolby Laboratories through Dolby Properties Brisbane, LLC, located in Brisbane, California, was sold during fiscal 2021.

We also lease from our principal stockholder a commercial office building located at 100 Potrero Avenue in San Francisco, California under a term that expires on October 31, 2024.

Related party rent expense included in operating expenses in our consolidated statements of operations were as follows (in thousands):

Fiscal Year Ended

September 29,

2023 September 30,

2022 September 24,

Related party rent expense included in operating expenses $ — $ — $ ( 392 )

Distributions.

18 unchanged sentences

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 7A. Quantitative and Qualitative Disclosures About Market Risk