Ladies and gentlemen, thank you for being here. Welcome to the Dolby Laboratories Conference Call about our Fiscal First Quarter Results. During the presentation, all participants will only be able to listen. After that, you can join the question-and-answer session. This call is being recorded on Thursday, February 2, 2023. I will now hand the call over to Maggie O'Donnell, Head of Investor Relations for Dolby Laboratories. Please proceed, Maggie.

Thank you. Good afternoon, and thank you everyone for joining. Welcome to Dolby's first quarter 2023 earnings conference call. Joining me today are Kevin Yeaman, our CEO; and Robert Park, our CFO. As a reminder, today's discussion will include forward-looking statements including our second quarter and fiscal 2023 outlook and our assumptions underlying that outlook. These statements are subject to risks and uncertainties that may cause actual results to differ materially from the statements made today, including, among other things, the impact of current macroeconomic events, COVID-19, supply chain issues, inflation, changes in consumer spending, and geopolitical instability on our business. A discussion of these and additional risks and uncertainties can be found in the earnings press release that we issued today under the section captioned Forward-Looking Statements, as well as in the Risk Factors section of our most recent quarterly report on Form 10-Q. Dolby assumes no obligation and does not intend to update any forward-looking statements made during this call as a result of new information or future events. During today's call, we will discuss non-GAAP financial measures. A reconciliation between GAAP and non-GAAP financial measures is available on our earnings press release and in the new Interactive Analyst Center on the Investor Relations section of our website. So, last quarter, we spent some time covering 2022, what we were seeing as we were going into 2023 with a focus on the long-term growth. Now, we're one quarter into the year, so Kevin, let's get started in our conversation. Can you start with giving us a take on your Q1 results?

Yes, of course. And thanks everybody for joining us today. So, I guess I'd start by saying it's nice to start the year with results coming in higher than what we expected when we came into the quarter. That's largely because we see some transactions landing earlier in the year than we originally expected. The underlying trends in our business are pretty consistent with what we thought coming into the year. There are, of course, some end markets that are a little higher, some that are lower. Robert will take us through all those details in just a moment. But like I said, when I net all that out, pretty consistent with what we saw coming into the year. So, it's early in the year. We continue to be operating in an uncertain environment. So, we're going to keep focusing on what we can control and what guides growth in the long term.

Okay, great. So, looking further ahead, how are you feeling about long-term growth?

There continues to be strong demand from consumers for entertainment content, and demand for content to be more immersive and engaging. And that's what drives demand for Dolby experiences. So, this quarter, we continue to make progress on each of our key focus areas: movies and TV, music, user-generated content. And so, we continue to be confident that we can double our revenues from Dolby Atmos, Dolby Vision, and imaging patents over the next three to five years, which means we continue to target annual growth of 15% to 25%. And of course, our foundational audio technologies are essential to the ecosystem for entertainment audio. They're delivered across a very broad range of consumer entertainment devices. And so, while that does make it sensitive to macro trends, it's a very strong position to be in. And when the market settles down, we expect this to be a contributor to growth. And then, of course, we continue to be focused on the opportunity to bring the Dolby experience to an even wider range of use cases, and that's what we're doing with Dolby.io. So overall, we continue to be very confident in our long-term opportunity.

That's great to hear. So, just a few weeks ago, we were at CES in Las Vegas. What were some of the highlights for Dolby from your perspective?

This year at CES, there were two significant highlights for us: Dolby Atmos Music and Movies & TV in the living room. We began CES with a concert by Imagine Dragons, performed live in Dolby Atmos at Dolby Live in Las Vegas. This venue allows us to collaborate with artists to create tailored experiences. The energy from the band and the attendance of thousands of fans and partners was incredible. This is crucial because it’s where our ecosystem begins, focusing on inspiring creators to work in Dolby. The enthusiasm for Dolby Atmos among artists is growing, with 85% of Billboard's Top 100 artists in 2022 having one or more songs in Dolby Atmos. Content is increasingly available on streaming platforms, including Apple, Amazon, TIDAL, Melon in South Korea, and Tencent in China. The combination of diverse content and easy access is what enhances the playback experience and supports our device partners. The Car Experience is a key area of focus for us and the industry; it’s often the first question from artists and music labels who are keen to understand this aspect, which consumers value highly. Over the past year, we've partnered with more than half a dozen car manufacturers, such as Mercedes, Volvo, and Lucid. At CES, Mercedes showcased their electric SUV featuring Dolby Atmos Music, and we had Maybachs at our booth. In-car entertainment partners like Bose highlighted Dolby Atmos music in their concept cars. Additionally, Dolby Atmos Music can be experienced across various formats, with multiple partners demonstrating the Dolby Atmos experience on sound bars, wireless speakers, and mobile devices. Reflecting on music today, it reminds me of our early days with Dolby Vision in the movies and TV space. That began with a few Warner Brothers films on Voodoo, which you could watch on LG and VIZIO TVs, and quickly expanded to partners like Netflix and Sony. Now, we are well-integrated into the movie and TV content ecosystem, with streaming widely accessible among major services. Dolby Vision and Dolby Atmos are prevalent in the TV market and across other devices. We have successfully developed these ecosystems numerous times and understand the signals in content, delivery, and devices that indicate we are gaining momentum. This is exactly what we are observing with Dolby Atmos Music, and we remain confident in the opportunities ahead.

Great. And you mentioned specifically Movies & TV at CES. What stood out to you there?

With Movies & TV, what was great about that was that our story was being told through the voice of our partners. This was across the show floor. So, as I talked about last quarter, a big focus of ours in that area is growing beyond the premium tier of televisions and expanding that deeper into their lineup. So, that's why it was so great to see announcements from partners like TCL. TCL announced that Dolby Vision and Dolby Atmos will now be included on all of their new 4K TV models in the U.S. Hisense is another great example. They announced several new TVs that are going to include Dolby Vision and Dolby Atmos. And it wasn't just TVs. So, Samsung and LG announced their new soundbar models with Dolby Atmos. And what was exciting about their announcements is that they're becoming a part of smaller form factors; Dolby Atmos is. And so, this creates the potential for a broader audience and to expand the reach of Dolby Atmos. And we continue to make progress on the content side as well. So, we have already a very strong presence, and we also have added Peacock to the roster of streaming companies that are streaming in Dolby Vision. We talked about this last quarter, Maggie, but the World Cup was available in Dolby Vision and Dolby Atmos. So that was exciting. And excited to share that Comcast will be broadcasting the Super Bowl on Fox in Dolby Vision next week. And so, if anyone out there is throwing a Super Bowl party, it's not too late. There is a Dolby page on the Amazon store, which can point you toward all of our great partner products.

That's great. So, what other highlights were there for the quarter beyond what happened and what was announced at CES?

Well, we haven't yet talked about mobile and Dolby Vision capture. And as we've talked about before, Dolby Vision capture on mobile devices enables people to capture and share life’s moments in a more realistic way on the device that we carry with us daily, every hour of the day. So, we're focused on continuing to expand that value proposition. And so, we're excited that Vivo this quarter adopted Dolby Vision capture and playback on its flagship phone. They joined Apple and Xiaomi. OPPO launched its first phone with Dolby Atmos and Dolby Vision playback. And so, we look forward to continuing to drive more momentum in mobile. We also haven't talked about Dolby.io, where we're focused on bringing Dolby to a far wider range of use cases. We're seeing more developers signing up for accounts. We are seeing strong growth in the number of active developers who are working with our APIs for the first time. And what we're enabling these developers to do is to make day-to-day interactions in the apps and services that we’re all using every day more immersive and more lifelike in how they sound and how they feel.

Great. So, before I hand it over to Robert to go through the numbers, is there anything else that you want to add and close on?

Yes. Well, if I take a step back again, this quarter, I think further demonstrates that we continue to bring more Dolby experiences to more people around the world. There is an ever-increasing demand for content and for that content to be more engaging and immersive, and making that happen is what we do at Dolby. So, continues to be uncertain environment, and that's not new. I mean in a lot of different ways, it's been an uncertain environment for a number of years now. And what I'm most proud of is all that the team has been able to accomplish during this period, and they've done it by staying focused: focused on where Dolby can make a difference and focused on where the biggest opportunities are. And so, we're creating momentum across each of our ecosystems. We've launched entirely new ecosystems in the form of Dolby Atmos Music, and we're just talking about user-generated content. And so, the long-term trends point to more opportunity. And we come at this from a position of strength. We have a very strong financial position with strong cash flows, a solid business model. I'm confident that our foundational technologies will continue to be central to the entertainment experience for many years to come. We continue to grow the adoption of Dolby Atmos and Dolby Vision, and we're reaching more use cases with Dolby.io. So, we're going to stay focused on raising the bar on all of these experiences and growing the business.

Great. Thanks so much, Kevin. So, Robert, before we get into all the details, I was thinking it would be helpful if you start out with some of the key things that investors and analysts should be focused on in our results.

Yes. Thanks, Maggie. Yes, before we get into the details, I wanted to point out three main highlights. First, total revenue of $335 million was higher than the guidance that we provided last quarter, largely due to transactions closing earlier in the year than anticipated and higher products revenue. As it relates to trends in our underlying business, we are on track with where we thought we would be coming into the year overall. We came in a little higher than expected in broadcast and gaming, mostly driven by higher Q4 shipments than we had estimated, lower in PC, driven by further weakness in the market and lower box office proceeds, which negatively impacted Dolby Cinema revenues. Second, operating expenses of $175 million on a non-GAAP basis were lower than we had guided for the quarter, which is mostly due to timing of marketing and patent program spending and lower labor costs. We will continue to be deliberate about our hiring, evaluate our long-term priorities and opportunities, and make spending adjustments accordingly. Third, I'm going to talk about guidance in detail in a few minutes. But based on where we're seeing today, our outlook for the full year is consistent with what we said last quarter. It's nice to start the year with a quarter that came in better than our expectations, but at the same time, it's still early in the year, and we continue to operate in a very uncertain environment. With that as the backdrop, let's get into the Q1 details. Q1 revenue was down 5% year-over-year, primarily due to mobile, PC, broadcast, and consumer electronics, consistent with the overall trends in the market. This was partially offset by the adoption of Dolby Atmos and Dolby Vision and higher products and services revenue. Q1 was comprised of $308 million in licensing revenue and $27 million in products and services revenue. Now, let's talk about licensing revenue by end market. As a reminder, our licensing business is based on unit shipments. In general, we estimate revenues from unit shipments each quarter and true up the following quarter based on actual reported unit shipments from our partners. We also have transactions that reflect revenue from units shipped in prior periods, which we call recoveries, and transactions where the customer will commit to minimum volumes for a given period where all or a portion of the revenue is recognized upfront. These transactions are all related to unit shipments. The only difference is the timing and amount of revenue in any given quarter. The timing of these transactions can vary depending on a number of internal and external factors. Broadcast represented about 38% of total licensing in Q1 2023, down $4 million or 4% on a year-over-year basis, driven primarily by lower TV unit shipments and lower recoveries. This was partially offset by the Q4 true-up for TVs and higher revenue from Dolby Atmos and Dolby Vision. Mobile represented about 21% of total licensing in Q1 '23, down $11 million or 14% on a year-over-year basis, as the prior year benefited from timing of revenue from minimum volume transactions and also lower units. This was partially offset by increased adoption of Dolby Atmos and Dolby Vision. Consumer electronics represented about 18% of total licensing in Q1 of '23, down $2 million or 4% on a year-over-year basis as the prior year benefited from higher recoveries, which is partially offset by increased adoption of Dolby Atmos and Dolby Vision. PC represented about 8% of total licensing in Q1 '23, down $10 million or 30% on a year-over-year basis, driven by lower recoveries and lower PC unit shipments. Other markets represented about 15% of total licensing in Q1 of '23, up $4 million or 8% on a year-over-year basis, driven by a favorable Q4 true-up in gaming. This was partially offset by lower box office proceeds from Dolby Cinema. Beyond licensing, our products and services revenue were $27 million in Q1 of '23, up 39% on a year-over-year basis. The year-over-year increase was driven primarily by higher cinema product sales. We also saw growth in Dolby.io. Let's turn to expenses and margins. Total non-GAAP gross margin in the first quarter was 90% compared to 91% in the first quarter of fiscal year '22. Gross margins came in lower driven by a higher mix of products revenue. Non-GAAP operating expenses in the first quarter were $175 million compared to $195 million in the first quarter of fiscal year '22. The decrease was driven by lower labor costs as we had an extra week last year, lower headcount, and favorable FX. Program marketing spending was also lower due to the timing of campaigns in the prior year compared to this year. And we benefited from lower bad debt expense compared to the prior year. Non-GAAP operating income for Q1 was $126 million or 38% of revenue compared to 36% of revenue in Q1 of last year. Non-GAAP income tax in Q1 was within our guidance range at 19% compared to 18% in last year's Q1. Net income on a non-GAAP basis in the first quarter was $107 million or $1.11 per diluted share compared to $104 million or $1.01 per diluted share in Q1 of '22. During the first quarter, we generated $56 million in cash from operations compared to $31 million generated in last year's first quarter. We ended the first quarter with approximately $900 million in cash and investments. During the quarter, we bought back about 700,000 shares of our common stock and ended the quarter with $311 million of stock repurchase authorization available going forward. We also announced today a cash dividend of $0.27 per share. The dividend will be payable on February 22, 2023, to shareholders of record on February 14, 2023. Now, let's move on to guidance. We continue to operate in a challenging and uncertain environment. For fiscal '23, we continue to expect that our foundational audio revenue will decline mid-single digits year-over-year, reflecting lower unit shipments, particularly in PC, TV, consumer electronics, and mobile. We are still targeting 15% to 25% growth in Dolby Vision, Dolby Atmos, and imaging patents, and we expect this to be driven by growth in broadcast, mobile, and other markets. This could more than offset the declines in foundational audio that we are expecting. With these assumptions, we continue to project that total revenue for fiscal '23 will grow low-single digits year-over-year. Within this, we anticipate licensing revenue to be up low-single digits with growth in mobile, broadcast, and other markets outpacing the decline in PC and consumer electronics. Products and services revenue is expected to grow low-double digits. In terms of the full year split, given more transactions are expected to close earlier in the year than anticipated, we currently expect revenue in the first half to be higher than the second half, closer to last year's split. We still expect that non-GAAP operating expenses will increase roughly 2% compared to the prior year, and expect operating margins of roughly 30% on a non-GAAP basis for the year. We will continue to be disciplined with our spending, review our resource envelope and allocations on a regular basis, and evaluate the need to make adjustments based on the economic realities of the business. We anticipate that non-GAAP earnings per share could grow at a slightly higher rate than revenue. So, now let's move on to guidance for the second quarter. Q2 revenue is expected to range from $340 million to $370 million. Within that, licensing revenue is estimated to range from $320 million to $345 million, while products and services revenue is projected to range from $20 million to $25 million. Compared to Q2 of last year, we expect growth in Dolby Atmos, Dolby Vision, and imaging patents, particularly in broadcast and mobile to more than offset lower foundational revenue, driven by lower unit shipments estimates in consumer electronics, PC and TVs, and lower recoveries. Non-GAAP gross margin is estimated to be 89% plus or minus. Operating expenses in Q2 on a non-GAAP basis are estimated to range from $193 million to $203 million, as we expect certain marketing and patent program expenses to shift from Q1 to Q2. Our effective tax rate for Q2 is projected to range from 19% to 21% on a non-GAAP basis. We estimate that non-GAAP Q2 diluted earnings per share could range from $0.90 to $1.05. In summary, it's a good start to the year as Kevin said. It is still early days and we continue to navigate through an uncertain environment. That said, we remain laser-focused on the things we can control and are excited about the progress we're making on the long-term growth opportunities ahead. While the economic realities around us continue to change, the fundamentals of Dolby's durable business model of high gross margins, healthy cash flows, and a strong balance sheet have not changed.

Great. Thank you, Robert. Operator, I think we're ready to turn it over to questions.

Absolutely. Your first question comes from Steven Frankel with Rosenblatt. Please proceed.

Thank you. Kevin, congratulations on the Super Bowl. That's a long time coming. That's a big win. Maybe start with what do you think finally tipped Comcast and Fox to do this?

Well, I think as with all of our big wins, this has been a journey from the team. We start off with movies and TVs. For movies, you have three months to produce, and for TV shows, you have days to weeks to months. And then, we get started on live sports; obviously, you have a matter of seconds. So, it's a combination of engagement with the community, it's working through all the technical issues, working with the mixers and the creators, and then, of course, it's always working through all of the business arrangements that go far beyond just Dolby. There's all the rights and all the other things that are going on. But we're just super pleased to have the Super Bowl coming right after the World Cup, just not long ago. And this is the kind of thing that we think really broadens demand for the Dolby experience.

Okay. And on the notion that you had some minimum paid contracts that were signed earlier in the year than you expected, was there any strategic reason for that to happen? Or was this just hard to tell when those are coming in and they just came in? Any kind of characterization you can give us?

I think it's more the latter than the former, Steve. Remember that we have two types of transactions: minimum volume commitments and recoveries from past transactions. We do our best to predict when these will be signed throughout the year, and some of them were finalized earlier this year, which is a positive start. However, I believe it is too early for me to draw any specific trends from that information.

Okay, I'll ask one more question, and it might be challenging to answer. You have one major TV manufacturer that hasn't adopted Dolby Vision yet. Considering everyone else, where do you think you stand regarding your overall market penetration? In 2023, do you believe you're at 70% or even higher?

Well, I think, I mean, obviously, we're patient and persistent. So, one thing we do is we are always looking to continue to increase the value that we're providing. We just talked about the Super Bowl coming after the World Cup, that's another example of how we will be hard at work, increasing the value proposition to bring as many partners on board as we can. What we talked about coming into the year in terms of increasing the attach rate is we have a very strong presence at the premium end of our partner lineups, and we're really looking to drive that all the way through their 4K lineups. And so, that's why the significance of an announcement like TCL's, where all of their 4K models going forward in the U.S. will be Dolby Vision and Dolby Atmos. We also feel like we have an opportunity to increase penetration as it relates to the big box retailers and some of the house white-label brands that they have. So, we still think there's room to grow, Steve. And it was, as you know, it was one of the biggest drivers of the strong growth in Dolby Vision and Dolby Atmos last year, and we continue to see it to be a big growth driver this year.

Thank you. The next question comes from the line of Paul Chung with J.P. Morgan. Please proceed.

Thank you for taking my questions. Can you discuss the traction and momentum you observed at CES, especially regarding Atmos in vehicles and Dolby.io? Have you experienced an increase in interest from other auto manufacturers and app developers? Although it's early, how should we approach sizing Atmos in cars, considering potential auto penetration rates and average selling prices for vehicles in both the short and long term? This seems like a fascinating opportunity.

Yes. What was really enjoyable about CES for us this year was the chance to clearly showcase our entire ecosystem, beginning with the concert in Dolby Atmos, and having all our partners present throughout the ecosystem, highlighted by the opportunity for people to actually experience Dolby Atmos Music in the Mercedes and with partners like Bose. There is significant momentum in this area. We had strong engagement leading up to CES, and we maintained that momentum coming out of it. The team is actively collaborating with major players across the industry, working on their plans. CES was a great event for Dolby Atmos Music and truly the highlight for us. We also had a presence for Dolby.io, where some of our customers and developers demonstrated their creations using our platform. It provided a nice opportunity to introduce some of our partners to what we are doing with Dolby.io. Many partners were utilizing our real-time streaming capabilities and engaging in audio/video interactions with large audiences, experiencing sophisticated spatialization. We are excited because we feel we're in the early stages of collaboration with companies seeking to create the next-generation virtual experiences. These experiences may be most immersive in a headset but are primarily designed for PCs and mobile devices. Developers can leverage Dolby.io to build these experiences. Several customers showcased these innovative experiences, sparking ideas for what other partners might pursue in the future.

Got you. Thanks for that. And then, the OpEx guide was reiterated, up modestly for the year. Where do you see some flexibility for additional cost execution, maybe on the SG&A line? And then, on R&D, where are you putting new investments to work? And how do we think about the spend related to Atmos, Vision, io? Are those kind of ongoing expenses or bulk of those costs are behind us, and it's kind of new innovations that you're investing in for the most part?

The first thing I would say is that we endeavor to be and are very dynamic in our allocation of resources. So, we're regularly shifting resources between initiatives, and it relates to Dolby Atmos and Dolby Vision that includes shifting resources between ecosystems that are getting more mature to newer ecosystems. And so, while the headline number is the increase of about 2%, underneath that, we are constantly moving people and resources to where the biggest opportunities are of the future.

Got you. And then, lastly on Cinema, where are you in terms of footprint today? And are there expectations to kind of expand after some pauses here maybe with other partners? And then, talk about the expectations for kind of contribution from this business on maybe an annual run rate business and margin profile would be very helpful. Thank you.

Well, to answer your first question, we're at 287 Dolby Cinema screens. I think we added seven, is that right, Robert?

Added five.

We added five. The new screens coming online are still lower than pre-pandemic. That's still an industry, obviously, that is also subject to all of the uncertainties in the world, and they're all in varying positions as it relates to their ability to invest right now. But I think the Avatar was a big win for the industry. A lot of that will be Q1 box office, but it was great to see that. And our partners are still engaged. They're still thinking about the future, and we do see an opportunity to continue to expand, because we think that what has held true throughout this period of time is that a greater percentage of people who are going to the movies are wanting to have the most immersive experience. And so, the premium experiences are getting a greater share of the box office. And so, we continue to have strong engagement as people are thinking about their future plans for how they grow their portfolio of high-end experiences.

Thank you so much.

And today, regarding your question, the Dolby Cinema contributes to shared box office revenue, which is included in our other markets licensing revenue. Not breaking that up separately, it's still categorized under other.

Thank you. The next question comes from the line of Ralph Schackart with William Blair. Please proceed.

Good afternoon. Thanks for taking the question. Within products revenue, with the strong growth there, you called out io as contributing to that growth. And just curious if you could sort of give us a sense of the contribution there. I'm sure you don't want to break out the exact number, but just perhaps some relative contribution or growth rate or any sort of context you could add there would be great.

Hey, Ralph. Most of that growth came from cinema products, if you will. There were some growth in io, but the majority of that growth came from cinema products through higher supply of services and stores that we have, but also increased demand for some of our audio processors and other equipment.

Okay. As we look at the macro landscape early in January, it seems to be aligning with our expectations based on our guidance, which is encouraging. Given our wide range of global customers, could you share some insights on their perspectives as we move through the year? Are their views similar to last time, slightly more pessimistic, or perhaps a bit more optimistic? Have there been any notable changes in specific areas since our last call?

It really depends on the partner, but the consistent theme I see is uncertainty. We are in an uncertain environment. While I wouldn't claim there have been no changes, our guidance indicates that some end markets and partners have performed slightly better than we anticipated at the start of the year, while others have performed a bit worse. Overall, we view our business portfolio as being about the same as it was when we entered the year. I think Robert mentioned at the beginning that for the first quarter, we observed a slight increase in broadcast and gaming. Shipments for Q4 were somewhat higher than expected. Regarding PCs, we anticipated some weakness in unit shipments at the start of the year, which appears to be slightly lower and has continued to decline a bit. Q4 box office performance was below expectations. However, a significant portion of Avatar's revenue will contribute to Q1. Mobile unit shipments are also down, which has been widely reported in this earnings cycle. We observed a decrease in units over the year. Additionally, as we've mentioned before, minimum volume commitment arrangements are more common in the mobile sector, which may reduce our sensitivity to fluctuations on a quarterly basis. Furthermore, we are actively developing initiatives related to user-generated content, our value proposition, and other mobile applications.

Okay. Thanks, Kevin.

I think Robert mentioned earlier that we observed a slight increase in broadcast and gaming for the first quarter, and Q4 shipments were somewhat higher than we initially estimated. In terms of PC, we anticipated some weakness in unit shipments coming into the year, which may be slightly lower, and that continued to decline a bit. The box office for Q4 was modest, but most of the revenues from Avatar will carry into Q1. We have noted a decline in mobile unit shipments, which has been widely reported in this earnings cycle. We've seen units decrease over the year. Additionally, as we have previously stated, minimum volume commitment arrangements are becoming more common in our mobile sector, which may make us less sensitive to fluctuations on a quarter-to-quarter basis. We also have a pipeline of projects in development, including user-generated content, value propositions, and other applications in mobile.

Thank you. The next question comes from the line of Jim Goss with Barrington Research. Please proceed.

Okay, thanks. One question related to the Atmos for music. You mentioned the live event that involved Imagine Dragons. And I was wondering to the extent that Atmos is striving to recreate a live experience, what exactly did it add to the live event?

What it adds is that Dolby Live operates year-round, featuring top artists who typically have multiple performances. This extended engagement allows for deeper consideration of Dolby Atmos and how it enhances the experience. At this scale, the focus is on creating a spatial audio experience that immerses the audience in the performance. We manage this by collaborating with mixers to ensure the artist's vision is realized in real-time. The unique aspect is that the immersive experience is felt throughout the arena, distinguishing it from other environments. For us, this is a chance to connect with renowned artists visiting Dolby Live, allowing around 5,000 fans each night to experience Dolby Atmos Music, making it an excellent showcase for our technology.

Okay. How are you planning to approach the main monetization opportunities for Atmos in music? Will it involve PCs or phones, or which devices do you think will generate the most revenue with this application?

Let's start by acknowledging both points positively. We aim to enhance the experience on all devices where people listen to music. However, our main focus currently is on the car sector. The entire industry is deeply invested in improving that experience, and car manufacturers are continually striving to innovate. Our strong engagement within the industry is evident from our successes in the past year and a half. Thus, automotive is a significant priority for us. Additionally, at the event and in our booth, attendees can experience Dolby Atmos on sound bars and smartphones. We aspire to integrate Dolby Atmos into all the ways people enjoy music.

Okay. Additionally, regarding potential price competition in the TV market as companies seek to monetize their smart TV features, can you discuss any impact this might have on Dolby and the generation of those features from such devices?

We are focused on integrating Dolby Vision and Dolby Atmos more extensively into our product offerings. The ability to access Dolby Vision and Dolby Atmos at lower price points is beneficial for us. The more we reach these affordable price levels, the larger our audience becomes for both Dolby Vision and Dolby Atmos. Increased awareness of the exceptional experience, positive word of mouth, and wider availability will all contribute to building momentum within these ecosystems.

Okay. So the penetration in the television area is progressing well.

Yes. Sorry, Jim. I didn't hear that fully, but I think you asked whether I thought that was going well. And yes, like you said, I mean, the Dolby Vision, Dolby Atmos in the living room, which TV being the primary device, there is our largest driver for Dolby Atmos and Dolby Vision last year. And again, we see that as a big driver this year of our growth in those areas.

Thank you. There are no additional questions at this time. That concludes the Dolby Laboratories conference call discussing fiscal first quarter results. Thank you. You may now disconnect your lines.