Dolby Laboratories reports 79.3% Net Income decline in 2018 and 5.7 pp EBITDA Margin decline from 30.8% to 25.1%
10/24/2018 • About Dolby Laboratories (
$DLB) • By InTwits
Dolby Laboratories reported FY2018 financial results today. Here are the key drivers of the company's long term financial model:
- Dolby Laboratories spends a lot for Stock Based Compensation (SBC): average SBC/Revenue for FY2014-FY2018 is 6.5%. Average EBITDA Margin for the same period was 29.9%. In FY2018 SBC/Revenue was even higher: 6.8%
- Dolby Laboratories has high CAPEX intensity: 5 year average CAPEX/Revenue was 10.1%. At the same time it's in pair with industry average of 3.6%
- CAPEX is quite volatile: $37m in 2018, $29m in 2017, $13m in 2016, $18m in 2015, $21m in 2014
- The company has business model with low profitability: ROIC is 8.4%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
The company's Revenue decreased on 2.5%. Annual revenue decline showed slowdown in FY18Q4 - revenue decreased slightly on 0.61%. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased slightly on 1.6 pp from 20.0% to 21.7% in 2018.
Gross Margin decreased slightly on 1.2 pp from 89.1% to 87.9% in FY2018. Gross Margin stuck to a declining trend at -1.1 pp per annum in FY2014-FY2018. SG&A as a % of Revenue increased on 4.8 pp from 43.3% to 48.1% in FY2018. Stock Based Compensation (SBC) as a % of Revenue increased slightly on 0.71 pp from 6.0% to 6.8% in FY2018.
Net Income margin dropped on 14.7 pp from 18.7% to 4.0% in FY2018. The efficient tax rate was 78.7% in FY2018 while the average for the last five years was 32.2%.
Investments (CAPEX, working capital and M&A)
Dolby Laboratories's CAPEX/Revenue was 6.9% in FY2018. CAPEX/Revenue decreased on 9.3 pp from 16.2% in FY2015 to 6.9% in FY2018. For the last three years the average CAPEX/Revenue was 8.6%. During FY2014-FY2018 CAPEX as a % of Revenue topped in FY2015 at 16.2% and was declining since that time.
Accounts receivable as a % of Revenue increased on 6.2 pp from 6.8% to 13.0% in FY2018. Inventories as a % of Revenue showed almost no change at 2.5% in FY2018. Accounts payable as a % of Revenue increased on 5.0 pp from 12.1% to 17.2% in FY2018.
Dolby Laboratories has spent
$23m on M&A in FY2018 which accounts for 2.2% of revenue.
Return on investment
The company operates at low ROIC (8.4%) and ROE (1.9%). ROIC decreased on 3.6 pp from 12.0% to 8.4% in FY2018. ROE decreased on 7.9 pp from 9.8% to 1.9% in FY2018. ROIC followed a declining trend at -1.7 pp per annum in FY2014-FY2018. ROE pursued a declining trend in FY2014-FY2018.
Leverage (Debt)
The company has no debt. Cash surged on 46.4%.
Valuation and dividends
The company's trades at EV/EBITDA 13.2x and P/E 105.5x.
The company paid 158.1% of Net Income as dividends in FY2018.
Management team
Kevin J Yeaman is a the company's CEO. Kevin J Yeaman is a founder and has spent 10 years with the company. CEO total compensation was
$8,157,746 in FY2018 which included
$783,250 salary.
Insider ownership is 1.8%. Insider ownership didn't change in 2018.
At the end of financial year the company had 2,151 employees. The number of employees increased slightly on 1.4%. Average revenue per employee in FY2018 was
$490,283 and it decreased on 3.8%.
Financial and operational results
FY ended 09/28/2018
Dolby Laboratories ($DLB) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 960 | 971 | 1,026 | 1,081 | 1,055 | -2.5% |
| Gross Profit | 890 | 876 | 917 | 963 | 927 | -3.7% |
| SG&A | 431 | 461 | 464 | 468 | 507 | 8.3% |
| EBITDA | 327 | 282 | 317 | 333 | 265 | -20.5% |
| EBIT | 274 | 213 | 232 | 249 | 184 | -26.2% |
| Interest expence | | 0 | 0 | 0 | 0 | 55.9% |
| Tax | 67 | 63 | 50 | 54 | 154 | 184.2% |
| Net Income | 206 | 181 | 186 | 202 | 42 | -79.3% |
| Stock Based Compensation | 63 | 65 | 67 | 65 | 71 | 9.0% |
Balance Sheet
|
|---|
| Cash | 568 | 532 | 516 | 627 | 918 | 46.4% |
| Accounts Receivable | 86 | 102 | 76 | 74 | 137 | 86.0% |
| Inventory | 9 | 14 | 16 | 25 | 26 | 4.6% |
| Accounts Payable | 16 | 21 | 18 | 14 | 22 | 52.5% |
| Short Term Debt | 0 | 0 | 0 | 0 | 0 | |
| Long Term Debt | 0 | 0 | 0 | 0 | 0 | |
Cash flow
|
|---|
| Capex | 79 | 158 | 101 | 100 | 73 | -26.9% |
| Dividends | | 41 | 48 | 57 | 66 | 15.8% |
| Acquisitions | | 94 | | | 23 | |
Ratios
|
|---|
| Revenue growth | 5.6% | 1.1% | 5.7% | 5.4% | -2.5% | |
| EBITDA growth | 9.5% | -13.7% | 12.2% | 5.0% | -20.5% | |
|
|---|
| Gross Margin | 92.7% | 90.2% | 89.4% | 89.1% | 87.9% | -1.2% |
| EBITDA Margin | 34.1% | 29.1% | 30.9% | 30.8% | 25.1% | -5.7% |
| EBIT Margin | 28.5% | 22.0% | 22.6% | 23.0% | 17.4% | -5.6% |
| SG&A, % of revenue | 44.9% | 47.5% | 45.2% | 43.3% | 48.1% | 4.8% |
| SBC, % of revenue | 6.6% | 6.6% | 6.5% | 6.0% | 6.8% | 0.7% |
| Net Income Margin | 21.5% | 18.7% | 18.1% | 18.7% | 4.0% | -14.7% |
| CAPEX, % of revenue | 8.2% | 16.2% | 9.8% | 9.2% | 6.9% | -2.3% |
|
|---|
| ROIC | 17.1% | 12.0% | 12.2% | 12.0% | 8.4% | -3.6% |
| ROE | 12.9% | 10.3% | 9.8% | 9.8% | 1.9% | -7.9% |
| Net Debt/EBITDA | -1.7x | -1.9x | -1.6x | -1.9x | -3.5x | -1.6x |
People
|
|---|
| Insider ownership | 1.8% | 1.8% | 1.8% | 1.8% | 1.8% | 0.0% |
| Employees | 1,667 | 1,867 | 2,030 | 2,122 | 2,151 | 1.4% |
| Revenue/Employee, th. $ | 576 | 520 | 505 | 510 | 490 | -3.8% |
Dolby Laboratories ($DLB) key quoterly financial indicators
| mln. $ | FY18Q1 | FY18Q2 | FY18Q3 | FY18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 300 | 300 | 215 | 241 | | 12.5% | 12.1% | -29.7% | -0.6% |
| EBITDA | 114 | 105 | 13 | 32 | | 29.5% | 23.2% | -88.7% | -24.8% |
| Net Income | -53 | 65 | 3 | 27 | | -199.9% | 28.9% | -95.9% | 22.6% |
Balance Sheet
|
|---|
| Cash | 596 | 706 | 830 | 918 | | 16.3% | 32.5% | 40.0% | 46.4% |
| Short Term Debt | 0 | 0 | 0 | 0 | | | | | |
| Long Term Debt | 0 | 0 | 0 | 0 | | | | | |
Ratios
|
|---|
| Gross Margin | 89.7% | 89.6% | 84.0% | 87.0% | | 0.9% | -0.3% | -5.5% | -0.9% |
| EBITDA Margin | 38.0% | 35.2% | 6.1% | 13.5% | | 5.0% | 3.2% | -32.0% | -4.3% |
| Net Income Margin | -17.8% | 21.8% | 1.5% | 11.1% | | -37.8% | 2.8% | -23.4% | 2.1% |
Peers in Electronic Components
Below you can find Dolby Laboratories benchmarking vs. other companies in Electronic Components industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Superconductor Technologies Inc. ($SCON) | | -61.4% | -46.3% | 240.5% | 248.9% |
| Akoustis Technologies, Inc. ($AKTS) | | | | | 148.3% |
| CPS Technologies Corp. ($CPSH) | | -5.9% | -29.5% | -5.0% | 48.0% |
| Littelfuse, Inc. ($LFUS) | | 1.9% | 21.7% | 15.7% | 40.7% |
| Cavitation Technologies Inc ($CVAT) | | -73.6% | 267.5% | -40.9% | 22.6% |
| |
|---|
| Median (22 companies) | | -5.9% | 1.1% | 8.3% | 16.6% |
|---|
| Dolby Laboratories ($DLB) | | 1.1% | 5.7% | 5.4% | -2.5% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Cavitation Technologies Inc ($CVAT) | 93.5% | 85.0% | 93.2% | 93.5% | 90.6% |
| Flexpoint Sensor Systems Inc ($FLXT) | 96.7% | 95.2% | 92.7% | 87.9% | 86.1% |
| Airgain, Inc. ($AIRG) | 44.6% | 41.9% | 44.4% | 47.1% | 43.7% |
| II-VI Incorporated ($IIVI) | 33.2% | 36.6% | 37.8% | 40.0% | 39.8% |
| Corning Incorporated ($GLW) | 41.7% | 40.1% | 40.1% | 39.7% | 39.5% |
| |
|---|
| Median (22 companies) | 31.7% | 36.6% | 33.7% | 34.9% | 36.3% |
|---|
| Dolby Laboratories ($DLB) | 92.7% | 90.2% | 89.4% | 89.1% | 87.9% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Corning Incorporated ($GLW) | 32.2% | 27.5% | 27.9% | 27.3% | 25.4% |
| Amphenol Corporation ($APH) | 22.5% | 22.9% | 22.6% | 23.6% | 24.2% |
| Vishay Intertechnology, Inc. ($VSH) | 14.8% | 11.9% | 15.4% | 18.7% | 21.3% |
| IEH Corp ($IEHC) | 18.4% | 21.2% | 18.0% | 16.3% | 20.2% |
| Littelfuse, Inc. ($LFUS) | 20.6% | 16.8% | 17.4% | 23.0% | 19.1% |
| |
|---|
| Median (22 companies) | 8.6% | 11.9% | 13.6% | 8.7% | 9.3% |
|---|
| Dolby Laboratories ($DLB) | 34.1% | 29.1% | 30.9% | 30.8% | 25.1% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Akoustis Technologies, Inc. ($AKTS) | | | | 334.0% | 574.7% |
| CBAK Energy Technology, Inc. ($CBAK) | 8.0% | 92.4% | 57.2% | 20.6% | 30.1% |
| Corning Incorporated ($GLW) | 11.1% | 13.7% | 12.0% | 17.8% | 19.9% |
| II-VI Incorporated ($IIVI) | 4.3% | 7.1% | 7.0% | 14.3% | 13.2% |
| Superconductor Technologies Inc. ($SCON) | 586.1% | 57.8% | 0.0% | 34.1% | 12.1% |
| |
|---|
| Median (22 companies) | 3.9% | 2.7% | 3.0% | 4.2% | 3.8% |
|---|
| Dolby Laboratories ($DLB) | 8.2% | 16.2% | 9.8% | 9.2% | 6.9% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Vishay Intertechnology, Inc. ($VSH) | 8.3% | 4.5% | 9.8% | 18.4% | 27.8% |
| IEH Corp ($IEHC) | 27.7% | 28.2% | 24.2% | 19.2% | 26.1% |
| Amphenol Corporation ($APH) | 19.1% | 18.5% | 18.3% | 19.2% | 21.1% |
| Inrad Optics Inc ($INRD) | -26.7% | -5.2% | -9.2% | -10.4% | 17.7% |
| Littelfuse, Inc. ($LFUS) | 14.3% | 11.1% | 11.7% | 15.8% | 12.1% |
| |
|---|
| Median (22 companies) | 6.8% | 5.8% | 4.7% | 6.0% | 7.8% |
|---|
| Dolby Laboratories ($DLB) | 17.1% | 12.0% | 12.2% | 12.0% | 8.4% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Belden Inc ($BDC) | 3.9x | 5.2x | 2.1x | 2.6x | 2.3x |
| Inrad Optics Inc ($INRD) | | 9.9x | | | 1.4x |
| Corning Incorporated ($GLW) | -0.7x | -0.0x | -0.5x | 0.3x | 1.3x |
| Bel Fuse Inc. ($BELFA) | 4.6x | 2.0x | | 1.4x | 1.3x |
| Amphenol Corporation ($APH) | 1.4x | 0.8x | 1.4x | 1.1x | 1.2x |
| |
|---|
| Median (14 companies) | -0.6x | -0.1x | -0.4x | -0.0x | 0.7x |
|---|
| Dolby Laboratories ($DLB) | -1.7x | -1.9x | -1.6x | -1.9x | -3.5x |
