Ladies and gentlemen, thank you for standing by. Welcome to the Dolby Laboratories conference call discussing fiscal fourth quarter results. During the presentation, all participants will be in a listen-only mode. Afterwards, you will be invited to participate in a question- and- answer session. At that time, if you have a question, you will need to press star one on your telephone. As a reminder, this call is being recorded Thursday, November 17th, 2022. I would now like to turn the conference over to Ashley Schwenoha, Senior Manager, Investor Relations for Dolby Laboratories. Please go ahead, Ashley. Good afternoon. Welcome to Dolby Laboratories' fourth quarter 2022 earnings conference call. Joining me today are Kevin Yeaman, Dolby Laboratories CEO, Robert Park, CFO, and Maggie O'Donnell, Head of Investor Relations. As a reminder, today's discussion will include forward-looking statements, including our first 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 annual report on Form 10-K. 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 in our earnings press release and in the new interactive analyst center on the Investor Relations section of our website. With that introduction behind us, I will now turn the call over to Maggie. Thank you, Ashley, and thanks everybody for joining us today. Last quarter, we tried something different with the format, and it seemed to be really well received, so we're gonna try to do the same thing today. I'm gonna be leading a conversation with both Kevin and Robert, and then we're gonna turn it over to our analysts for Q&A. Let's get started. Kevin, obviously, this is a really dynamic environment. Can you talk about that and how it's impacting our business? Yeah. The past year, and for that matter, the last few years, have been a challenging environment. I don't think that's news to anybody. It's a combination of the pandemic, geopolitical issues, supply chain, inflation. You know, all of this has come together to create an environment of uncertainty and change. Most of the industries we serve have been significantly impacted by some combination of these factors. As it relates to this quarter, it continues to be a tough environment, and our results did come in lower than what we expected. Since we last talked, the estimates for consumer device shipments have continued to come down across a number of categories, particularly in PC and TV, and transaction cycles are taking longer right now. We're in an environment with a lot of challenges that affect not just us, but our partners and our customers. Our customers, both current and potential, continue to be engaged, but we're seeing some of those engagements taking longer. At the same time, we've accomplished a lot over this quarter and over this last year. We're making progress in our key focus areas. We continue to strengthen our movies and TV ecosystem. We had significant growth with Dolby Vision and Dolby Atmos in terms of increased content across services and streamed content, and we've expanded across all the device categories that people use to enjoy their favorite movie and TV content. We had fantastic momentum across the Dolby Atmos music ecosystem. We have more artists, more studios on board. The amount of music in Dolby Atmos continues to expand, and we have more ways for people to enjoy that music across streaming services and devices and increasingly their car. We're building out our ecosystem for user-generated content, which this is what enables a growing number of consumers to capture and share their memories in Dolby Vision across their favorite platforms. Our strategy has not changed, and we're confident in the opportunity ahead, and consumers have a seemingly insatiable demand for entertainment content. We're hard at work to bring the Dolby experience to all the ways consumers experience that content, whether it's movies, TV, gaming, sports, music, user-generated content, and all the devices that those experiences are enjoyed on. We also see audio/video content and the ability to interact digitally in audio/video increasingly become a part of everything we do online. With Dolby.io, we can improve these experiences and bring Dolby to a far wider range of use cases. While there are near-term headwinds, we're staying focused on what we can control, and we're confident in the opportunity ahead. Great. That's great context. Let's talk a little bit about the revenue drivers. Mm-hmm. Over the last year, you've been talking about revenue drivers in the context of both foundational and Dolby Atmos, Dolby Vision, imaging patents. Yeah. Can you start with foundational? Yeah. Maybe as a reminder for people who might be new or newer to the story, our foundational audio revenues are made up of our audio codecs and audio patents. These technologies are deeply embedded in the ecosystem for entertainment audio, and they're delivered across a broad diversity of consumer devices. We're included on such a significant number of those devices that this part of the business is sensitive to the macroeconomic environment, especially as it relates to consumer device shipments. For this year, foundational was down nearly 15% and ended up at roughly 70% of our licensing revenues. While macro challenges continue to make it difficult to predict the near term, based on current data points, we're expecting foundational to be down again in FY 2023. It's important to note that these technologies are fundamental to the playback of content. They have been for decades, and they will continue to be for years to come, and this is a strong position to be in. We're gonna continue to strengthen it, and once the end markets stabilize, we expect that foundational revenue will continue to be a contributor to our growth. Makes sense. What about Dolby Atmos, Dolby Vision, and imaging patents? Yeah. Well, revenue from those areas grew roughly 30% versus last year. That is a little bit slower than we expected as of the last call. As I said, these areas are not as sensitive to the macro environment as foundational. It's more about getting on more of the devices with these relatively newer technologies, more of the devices that are shipping, but they're not immune to the macro. The largest growth driver, what drove the 30%, one of the largest growth drivers was movie and TV content. We've built this incredible ecosystem of content around Dolby Vision and Dolby Atmos, and that's led to broad adoption by content services. We're seeing growth in living room devices like TVs, set-top boxes, sound bars, and beyond. We also saw strong growth in Dolby Cinema as the box office began to improve from the pandemic lows. We also had a lot of progress beyond that, where we've laid the foundation for new ways to experience Dolby and laying the foundation for new growth in areas like music and automotive, user-generated content with Dolby Vision Capture. We're always looking for ways to bring Dolby to new experiences. The opportunity ahead of us is significant. We are confident that we have the opportunity to double the size of these revenues in the midterm, and we're targeting 15%-25% annual growth over the next three to five years. Got it. We're gonna let Robert talk a little bit more about revenue in a few minutes. First, let's dive into the three main focus areas that you mentioned at the beginning. First, the movies and TV ecosystem in the living room. There's music and auto, and there's also the user-generated content with Dolby Vision Capture. Can we start with the living room? Yeah. Well, with movies and TV, like you said earlier, we have very strong adoption across the creative community and great distribution across content services, and all of that means that it's easier than ever to access your favorite content in Dolby. We firmly established Dolby Vision and Dolby Atmos as the best way to enjoy movies and TV, and we have broad adoption across premium 4K models. Of course, we've begun to move this deeper into lineups, and that's what we're gonna be focused on, expanding more deeply into lineups like we've done with partners such as Sony and VIZIO. It also means pursuing remaining partners, and that includes the house brands at big box retailers. That makes up a part of the market. We're always looking for ways to become a part of more of the content that people care most about, and a great example of that is live sports. There's few examples of content that bring out more emotion than live sport. Big events can actually, you know, drive TV purchases, it's a way to bring Dolby into more living rooms. We're particularly excited that Comcast announced this morning that X1 customers are going to be able to enjoy the World Cup in Dolby Vision. That's great. That's huge news. Let's move on to the music and auto initiative. What are you seeing there? Well, as is the case with all of our ecosystems, it starts with content. Enthusiasm from artists, the increasing availability of mastering tools in studios means an increasing amount of music available in Dolby. Universal Music Group recently said on its earnings call that 80% of its top streaming artists have tracks available in Dolby Atmos. That makes up nearly half of streamed music consumption. They also said that 90% of consumers surveyed reported that they listen longer when they're listening in Dolby Atmos. Once you have the content, it's about the availability of the content to the consumer. We made a lot of progress this year. We added Tencent's QQ to our roster of streaming partners. With Apple and Amazon, that means that we now have three of the top five global streaming services in the world. We also added a number of top regional services in markets like South Korea, the Middle East, China, and this quarter, we added Gaana, which is a top music streaming service in India. It's that combination of content and availability, what we at Dolby refer to as our ecosystem, that's what creates the value proposition to our device partners. We continue to see demand signals across all the ways consumers enjoy their music, but we're especially focused on automotive, and we've added more than half a dozen auto partners in just over a year. In just the past couple weeks, we've added Polestar and Lotus. At the Paris Auto Show a few weeks ago, Mercedes-Benz was showcasing the Dolby Atmos music experience, and it got rave reviews. Just last week, Volvo announced the EX90, which is the soon-to-be-released electric SUV, will feature Dolby Atmos. We're really excited about all of that. We're gonna stay focused on bringing more streaming services to life, bringing on more auto partners, going deeper into lineups with the partners we've brought on board, and that's what drives growth in this ecosystem. Our goal is to make Dolby Atmos music the way everyone experiences music all the time. Right. That's awesome. On the third focus area, Dolby Vision Capture, can you talk about that? Yeah. What's exciting about this is enabling consumers to engage with Dolby Vision content on a daily basis, and that significantly enhances our value across the mobile device ecosystem. It started a couple of years ago when Apple introduced Dolby Vision Capture, and this year we expanded into Android. Last quarter, Xiaomi launched the first Android smartphone with Dolby Vision Capture in China. They launched another model with Dolby Vision Capture this quarter. You know, it's often striking when we look back at our videos that we've taken over the years, how, you know, sometimes that older content can be a little unfulfilling. It can be washed out, the colors aren't right. With Dolby Vision, you get a giant leap in quality, and you can tell things like, you know, from the light what time of day it was or what season was it, what was the weather. Everything looks more vivid and just like you remember it. This is important to smartphone makers because, you know, we all use our phones as these memory capture devices every day, and the camera is a major reason that people upgrade their phone. We expect to see more adoption of this. Capturing the memories is one thing, but it's even more important to sharing them. That's why we're so excited to see the ecosystem coming together with services in China. We have services like WeChat, QQ, Bilibili, enabling the sharing of Dolby Vision content so that hundreds of millions of users on these platforms can experience those same vivid memories. This year, look for us to continue to be focused on expanding this Dolby Vision Capture ecosystem with more services and more devices. Got it. Of course, in addition to those three main focus areas, there are a lot of other things we're working on. One of those is Dolby.io. Can you talk about that a little bit? Yeah. With Dolby.io, we've created a platform that enables developers to create experiences that are highly immersive. Audiovisual content and interactivity are increasingly a part of everything we do online. Dolby.io makes it easy to integrate the Dolby experience into a wide range of use cases that have become a part of our everyday lives. It's been a little over two years since we launched. We're continuing to see strong increases in developer engagement. That takes the form of developers signing up for the platform and engaging with and working with our APIs. One area we're seeing a lot of demand is in real-time streaming. This is a use case that developers are looking for, so it's easy for them to understand, it's also easy for them to integrate. Our offering is differentiated because, of course, it brings very high quality, it can scale to a very high number of users, and we have exceptionally low delay times, and that's what brings the action and the viewer closer together. It makes the experience as close to real-time as possible, and that's critical for a number of use cases. We're also seeing a lot of customers that are starting with or have started with real-time streaming and then expanding to enable our real-time interaction so that the audience can interact with one another, the presenter can interact with the participants, and have a conversation that flows very naturally. That's made possible by things like our audio spatialization, which makes it easier to know where the sounds are coming from, and combined with extremely low latency, you don't have those delays that can get caused when people are talking over one another. Beyond that, we're having a lot of conversations with companies and developers who are focused on inventing the next generation of online immersive experiences, and the audio experience is top of mind. They are creating rich and complex environments that require high-quality audio and spatialization to be realistic to keep people in those experiences. A lot of interest in areas like virtual performance, social events, sports, big company events. Music is also top of mind, and we just talked about the momentum we have in Dolby Atmos music, and of course, that can come into play in these worlds. Combined with spatialization, it creates the opportunity for if it's a virtual concert, for instance, then the audience can be having a realistic experience interacting with one another. If it's some kind of a social event or a company trade show, if you have background music, the music can be high quality, but you also have the realistic ambient environment. Early days, but we're really excited about the opportunities. Cool. Lastly, you know, the macro environment is obviously gonna continue to be challenging. How are you planning to manage the business throughout this period? Well, Dolby's managed through many economic downturns and many technology transitions, and we're coming at this from a position of strength given our strong business model, balance sheet, proven ability to generate cash. We're planning for it to continue to be a tough environment in the near term. We're gonna be wise with our resources. Our head count is roughly flat year-over-year. We've paused hiring except for the most critical hires, and we've taken a number of cost savings measures. On top of all that, the management team is regularly reviewing our resource envelope and our resource allocation to make sure that we continue to be aligned to where the opportunities are. Robert can elaborate on this further. We understand what it takes to go through an environment like this and come out the other side strong. For us, the formula starts with first and foremost, staying true to who we are. Consumers have this seemingly insatiable demand for entertainment content, and audiovisual experiences are becoming a pervasive part of everything we do. Our purpose has never been more relevant, and there's incredible opportunity to bring more Dolby experiences to more people around the world. We're always hard at work reinventing what it means to have a Dolby experience and bringing those experiences to the content that's most important to them. We know that to do all this in this kind of environment requires extraordinary focus, and that's why you hear us talking about our key focus areas. We've just talked about the momentum that we have across movies and TV, music, user-generated content, bringing more developers to IO. We're clear on what our most present opportunities are. We're gonna focus on what we can control, and we're gonna act with urgency to bring more Dolby experiences to more people, and that's what grows the business. Great. Makes a ton of sense. Thanks, Kevin. Let's now turn to some of the numbers. Robert, can you walk us through the financials for both the fourth quarter fiscal year 2022? Thanks, Maggie. Of course. Let's start with Q4. Total revenue in the fourth quarter was $278 million, which fell short of the total revenue guidance we provided on our last call. This was driven by a couple of factors. Based on what we're seeing, including data points from industry analysts, there were further declines in consumer device shipments, especially for TVs and PCs, compared to when we provided guidance in August. This negatively impacted our current quarter revenue estimate. Last quarter, we mentioned that we were seeing transaction cycles take longer in the environment, particularly in Asia and within mobile, and this had a greater impact than we expected on Q4. Now, as a reminder, our licensing business is based on unit shipments. In general, we estimate revenues from unit shipments each quarter and true it up the following quarter based on actual reported 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. Our partners remain actively engaged, and we expect these transactions to close, but the process is taking longer. Now let's get into the Q4 details. Q4 revenue was down 2% year-over-year, driven primarily by lower unit shipments in PC, broadcast, CE, and gaming. This was partially offset by growth in Dolby Atmos, Dolby Vision, and imaging patents, as well as an increase in products and services revenue driven by improvements in the cinema industry. Q4 revenue comprised of $249 million in licensing revenue and $29 million in products and services revenue. Now to our full-year results. Fiscal year 2022 revenues were $1.25 billion, compared to $1.28 billion fiscal year 2021, resulting in a year-over-year decline of 2%. Within that, licensing revenue was $1.16 billion, while products and services revenue was $89 million. Fiscal year 2022 licensing revenue was $1.16 billion, down 4% year-over-year. Foundational audio made up roughly 70% of our licensing revenue fiscal year 2022. Revenue for foundational audio declined about 15% year-over-year, primarily as a result of lower device shipments, especially in areas like broadcast, gaming, and auto, and lower recoveries in broadcast and mobile. We also had a tough comp against the higher than normal true-up fiscal year 2021. Dolby Atmos, Dolby Vision, and imaging patents were about 30% of total licensing revenue. This portion of our licensing revenue grew roughly 30% fiscal year 2022 compared to nearly 20% growth in fiscal 2021, driven by higher adoption and new licensees, as well as increased box office, which positively impacted Dolby Cinema. Now let's get into the end markets. Broadcast represented about 37% of total licensing fiscal year 2022. Full year broadcast revenues declined by $42 million or -9% on a year-over-year basis, driven by lower TV unit shipments and lower recoveries, both impacting primarily foundational audio. This was partially offset by growth in Dolby Vision and Dolby Atmos in TVs and set-top boxes. In Q4, broadcast revenues declined year-over-year, driven by lower unit shipments, partially offset by increases in Dolby Vision and Dolby Atmos. Mobile represented about 21% of total licensing fiscal year 2022. Full year mobile revenues declined by $22 million or -9% on a year-over-year basis as the prior year benefited from timing of deals, including recoveries partially offset by increases in Dolby Atmos, Dolby Vision, and imaging patents. Q4 mobile revenues were down year-over-year, driven by lower unit shipments. Consumer electronics represented about 16% of total licensing fiscal year 2022. Full year CE revenues increased by $4 million or 2% on a year-over-year basis, driven by growth in Dolby Atmos, Dolby Vision, partially offset by lower units. Q4 CE revenues were down year-over-year, driven by lower recoveries and lower unit shipments, partially offset by growth from Dolby Vision, Dolby Atmos, and imaging patents. PC represented about 13% of total licensing in fiscal year 2022. Full year PC revenues increased by $9 million or 6%, driven by Dolby Atmos, Dolby Vision, and imaging patents, and higher recoveries compared fiscal year 2021. This is partially offset by lower PC shipments primarily in the back half of the year. Q4 P.C. revenues are down year-over-year, driven by lower unit shipments, partially offset by growth in Dolby Vision, Dolby Atmos, and imaging patents. Other markets represented about 13% of total licensing fiscal year 2022. Other markets were flat year-over-year, driven by improvements in Dolby Cinema, offset by unit declines in gaming and auto. Q4 other markets declined, driven by lower gaming units and true-ups. Beyond licensing, our products and service revenue were $89 million fiscal year 2022 compared to $67 million fiscal year 2021. The year-over-year increase was primarily driven by higher product sales as a result of improvements in the cinema industry, and we also saw revenue growth from Dolby.io. Total non-GAAP gross margin in the fourth quarter was 87%, compared to 90% in the fourth quarter fiscal year 2021. Gross margins came in lower, driven by a higher mix of products revenue. Non-GAAP operating expenses in the fourth quarter were $182 million, compared to $190 million in the fourth quarter fiscal year 2021. Operating expenses were below the low end of our guidance for Q4, driven by lower variable incentive compensation expenses. Non-GAAP operating income for Q4 was $60 million or 22% of revenue, compared to 23% of revenue in Q4 of last year. Non-GAAP income tax in Q4 was within our range of guidance at 18% compared to 12.7% in last year's Q4. The year-over-year increase was primarily driven by the mix of our income between different tax jurisdictions and lower discrete benefits. Net income on a non-GAAP basis in the fourth quarter was $53 million, or $0.54 per share, per diluted share, compared to $60 million or $0.58 per diluted share in Q4 of 2021. On a full year basis, non-GAAP operating income was $376 million or 30% of revenue, compared to $451 million or 35% in fiscal 2021. Full year net income on a non-GAAP basis was $320 million or $3.14 per diluted share, compared to $383 million or $3.66 per diluted share in fiscal 2021. During the fourth quarter, we generated $51 million in cash from operations, compared to $110 million generated in last year's fourth quarter. We ended the fourth quarter with just over $900 million in cash and investments. During the fourth quarter, we bought back about 2.9 million shares of our common stock and ended the quarter with about $361 million, the stock repurchase authorization available going forward. We also announced today a cash dividend of $0.27 per share, an increase of $0.02 or 8% compared to the prior quarter. The dividend will be payable on December 8th, 2022, to shareholders of record on November 30th, 2022. All right. Before you get into the numbers fiscal year 2023, how are you thinking about guidance going forward? Well, I'd start by saying, you know, we are continuing to operate in a challenging and uncertain environment. Not only is the world still dealing with repercussions from the pandemic, but there has also been supply chain imbalances, geopolitical instability, high inflation and monetary tightening to address it, and the list goes on. Our customers and partners are similarly impacted by the uncertainty in the environment. As a result, we are seeing this impact not only our unit shipments, but the timing of some of the transactions, as discussed earlier. Many companies who stopped giving guidance during the pandemic are still not providing guidance. All of this is to say that our visibility is limited and predicting what will happen in the next year is difficult. With this as the backdrop, I'll be providing a high-level scenario fiscal year 2023. Based on what we're seeing right now, including data points from industry analysts, we're expecting declines in consumer device shipments, particularly for TVs in North America and Europe, and globally for PC and CE. This mostly impacts our foundational audio revenue, which we project will decline mid-single digits during the year. As Kevin said earlier, we are targeting 15%-25% growth in Dolby Vision, Dolby Atmos, and imaging patents, and we expect this to be driven by growth in the broadcast, mobile, and other markets. We assume this will more than offset the declines in foundational audio that we are expecting. With these assumptions, we are projecting total revenue fiscal year 2023 to grow low single digits year-over-year. Within this, we anticipate licensing revenue to be up low single digits, with products and services revenue expected to grow high single digits. Now let's talk about OpEx. For the full year, we are currently anticipating non-GAAP operating expenses to increase roughly 2% compared to the prior year. We'll see growth in our annual merit increases and normalization of the incentive compensation for employees compared fiscal year 2022, which came in significantly below 100%. We are also seeing inflationary pressures in some areas and increased travel expenses. This is mostly offset by cost-saving measures we've taken, such as organizational adjustments and reductions in infrastructure costs. We will continue to limit hiring to the most critical roles while focusing our investments on the areas that have the largest impact towards our long-term opportunities. This would result in operating margins of roughly 30% on a non-GAAP basis for the year. We will continue to be disciplined with our spend, review our resource envelope and allocations on a regular basis, and make adjustments as the year progresses. We anticipate that non-GAAP earnings per share will grow at a slightly higher rate than revenue. Great. Thanks for the full year context and perspective. How about Q1? Well, let me reiterate that volatility from this economic environment has made forecasting more challenging in the near term, and that includes visibility into Q1. In addition, revenue lumpiness from timing of deals is more acute in the quarter than on the full year. That said, based on what we're seeing right now, we see Q1 revenue ranging from $300 million-$333 million. Within that, licensing revenue is estimated to range from $280 million-$305 million, while products and services is projected to range from $20 million-$25 million. Compared to Q1 last year, we expect lower unit declines in TV and P.C. and lower recoveries. At the same time, we continue to see growth from Dolby Vision and Dolby Atmos. Non-GAAP gross margin estimated to be 90% ±. Operating expenses in Q1 on a non-GAAP basis are estimated to range from $180 million-$190 million. Our effective tax rate for Q1 is projected to range from 19%-21% on a non-GAAP basis. This is higher fiscal year 2022, as we are forecasting lower benefit foreign tax credits. We also benefited from discrete items fiscal year 2022 that are not included in fiscal 2023. We anticipate the full year tax rate will be in a similar range. Based on a combination of the factors I just covered, we estimate that non-GAAP Q1 diluted earnings per share could range from $0.76-$0.91. Oh, let me restate. Q1 revenue range is $300 million-$330 million. All right. Robert, do you have any closing remarks? Yeah, Maggie. Yeah, it remains a tough environment, and while the near term is uncertain, we are well-positioned for growth in the long term. Dolby has a durable business model, strong balance sheet, and healthy cash flows, even with today's tough market conditions. Our foundational audio technologies are broadly penetrated across a wide variety of content and devices, and much of the opportunity lays ahead, Dolby Atmos, Dolby Vision, and imaging patents as we continue to expand further into new use cases like live sports, user-generated content, and auto. We are also excited about Dolby IO as a long-term growth factor as it greatly expands our addressable market. All of this gives us confidence in our ability to drive revenue and earnings growth into the future. Great. All right. That wraps up my portion. Let's turn it over to the operator and our analysts for some Q&A. Thank you. Ladies and gentlemen, if you would like to register a question for today's question-and-answer session, you may do so by pressing star one. If you would like to withdraw your question, press star two. If you are on a speakerphone, please pick up your handset before entering your request. Be sure to identify yourself and your firm at the outset. To be fair to all participants, we ask that you limit yourself to one question and a follow-up question until all participants have had a chance in the first round. If time allows, we will then come back to answer any remaining questions. One moment, please, for the first question. The first question is from Ralph Schackart with William Blair. Please proceed. Good afternoon. Thanks for taking the question. Kevin, just on the macro, if you could just maybe give us a perspective. It's obviously changing fairly dynamically. You know, as you sit here in mid-November, how does the macro outlook, I guess, look today versus perhaps how you exited Q4? Just trying to get a sense of, you know, how dynamic or how things are changing at Dolby. Well, I think in terms of the macro environment, Ralph, I mean, you know, we could talk about kinda what the kinda economic narrative is this week versus last week, the week before, and I think the word of the day is still uncertainty and what will the narrative be next week. I think, you know, fundamentally, we have a really strong position in our foundational revenues, and markets will stabilize, and that's when we expect to return to growth and better visibility. You know, what we continue to see is great demand for immersive experiences, and specifically Dolby Atmos and Dolby Vision, and, you know, gave some examples of that a moment ago. You know, the World Cup in Dolby Vision we're really excited about. Movies and TV and devices in the living room will continue to be one of the growth drivers for Dolby Atmos and Dolby Vision this year. Of course, we're really excited about music and auto, user-generated content, and mobile, and those are things that are contributing to revenue, but you know, they're the early days. You know, we're getting our first partners, our first models. We have yet to, you know, have the time to, you know, what comes next is driving further into lineups, adding more partners. We're really confident that those are gonna become big contributors to Dolby Atmos, Dolby Vision, and imaging patents growth over the long term, where we see the opportunity to double it. Yeah. Great. Maybe a follow-up for Robert. Robert, could you just remind us in terms of mobile, you know, it saw a pretty stiff year-over-year decline, a little bit more color on the driver of that? Just sort of fast-forwarding as we think about the fiscal year, I know you have some headwinds with foundational and some growth with Atmos and Vision, but if you could sort of walk us through, you know, starting with broadcast and mobile and CE, as we set our models, which line items would you expect to, you know, perhaps be growing year-over-year in 2023? That'd be really helpful. Thank you. Yeah. Hey, Ralph. You know, mobile decreased 9% year-over-year in fiscal 2022. You know, last year, it benefited from timing of certain deals including recoveries, and then we had some solid growth in Dolby Atmos and Dolby Vision. In Q4, we just saw that the units were lower in our mobile space. In terms of next year, you know, if we talk about a level of uncertainty and our guidance is kind of more directional than anything that we're gonna see declines in unit shipments, particularly in TVs in North America and Europe, where we have higher attach rates, and then globally for PC and CE. More pronounced in the first quarter because there are easier comps in the back half of the year. That's why the Q1 is a little bit more acute. As some of these markets started to decrease fiscal year 2022, we're gonna be coming off those compares fiscal year 2023. Q1 is really the first compare off of a starting to decline in Q1 of last year. Those are the markets I would say are gonna be down next year. We'll see other growth in Dolby Atmos, Vision, and imaging to offset those units. Okay. Thank you. Thank you, Mr. Schackart. The next question is from Steven Frankel with Rosenblatt. Please proceed. Good afternoon. As we think about the. The growth trajectory that you're talking about for Vision, Atmos, and patents, it's a lot slower than last year, a little slower than I think everyone was expecting. To what extent is it this uncertain environment that's either causing design decisions to be delayed or customers to hesitate adding those premium technologies because it's, you know, gonna raise the cost of the bill of materials? Yeah. Well, we still see great demand for adoption of the technologies. You know, like I said, just in the last few weeks, we've added Polestar, Lotus, Volvo on the automotive side. Yes, we did come in a little bit lower than the expectation we set last quarter. We did have a couple of engagements that took longer, but we grew 30%, and that's on the strength of movies and TV Remember, it was also driven by the improvement in the box office for Dolby Cinema, which, you know, continues that growth next year, but probably not the level of box office improvement that we had coming off of those pandemic lows. At 15%-25%, we are allowing for a range of outcomes in that guidance because we continue to see great demand signals across each of the areas we talked about. At the same time, we recognize that we have been seeing engagements take a little longer, so we allow for that in our range of outcomes. Okay. Just to refine that a little further, you're not necessarily getting pushback because of the incremental cost. It's more about the demand picture and decision cycles. Yeah, yes. What we're not seeing is slowdown in people wanting to adopt. Price is not the reason we're slowing down. It's just an environment where, you know, everybody's affected by this in some way, shape, or form, and that can affect the time it takes to get transaction cycles done. I mean, you know, as Robert said earlier, as you know, our licensing business is based on unit shipments. In general, where our revenue comes in, we estimate what shipped each quarter, and we true it up the next quarter. You know, to the extent that those engagements are delaying, more often than not, it means that we might be, you know, signing it fewer months before the first shipment than, you know, we might have. For some of these other things like past units or, you know, deciding, you know, on minimum commitment volumes, that is where I think there's just a lot of attention cycles as people look at how all of this affects their business. Some of those engagement cycles are taking longer. Okay, for Robert, what was the true-up in the quarter? The true-up in the quarter is about $3 million. To the positive side? To the positive, yes. Similar. Yeah. Similar to Q3. Yeah. Okay. Are you getting any pushback from customers around the notion of, you know, fixed minimum payment contracts in this environment? I don't think we've seen pervasive pushback on the notion of minimum volume commitments. I mean, you know, essentially, it's about being on those devices and how many are gonna ship. Whether they're doing minimum volume commitments tends to affect the timing of when it comes in, right? It's pretty rare that someone would ever commit to more than they are sure they can ship. I think that it's not a significant driver to what we've seen. You know, there are some that are, you know, thinking about what minimums they wanna commit to given the uncertainty they're facing. From a Dolby perspective, that's just a matter of the timing of when that comes in, right? I also wanna add, Steve, to your previous question. I think it's important to understand that in any environment, as it relates to Dolby, is we're building these ecosystems that, you know, it is entirely plausible that a category of revenue, you know, grows, you know, 20% one year and goes up to 30% the next year and is 20% again. The reason it can do that is because we're building these ecosystems like we're doing with music, where we have this increased volume of content and streaming services and a more valuable proposition to autos and other devices people use to enjoy music. The same could be said for our user-generated content ecosystem. As those develop, we gain a sense of confidence that we're gonna get on a significant percentage of devices. As they're developing, the timing of the revenue will have a lot to do with, you know, which partners we get first, which models they decide to do first, how quickly do they decide to go into their lineups. Again, we feel confident in the opportunity to double the size of those revenues over the next three to five years and are targeting 15%-25% per year. Okay. Great. That's helpful. Thank you. Thank you, Mr. Frankel. The next question is from Paul Chung with JP Morgan. Please proceed. Hi. Thanks for taking my question. Just to follow up on, you know, the revenue guidance for Q1 in the year, next year. Should we expect some, you know, large mobile quarter is maybe shifting into Q2? Is that the right way to kind of think about it? I mean, just some help on the shape of revenues for licensing for the year that gets you to that kind of low single-digit growth. You know, as Q1 has typically been your strongest for the past two years, fiscal years. Yeah. Hey, Paul. For mobile and a couple of these areas, you know, some of the Q1 declines are more pronounced at Q1 than Q1 for the full year. Yes, some of the deals, some of the transactions that we talked about earlier are more pushed out beyond Q1 than they were in the prior year. They were more heavily weighted in Q1 of last year. Okay. On, you know, Dolby.io, what's the contribution today in product sales? You know, is the contribution for 2023 kinda product guidance, is it included in there? The margin profile has rebounded quite strongly on products. You know, where do we go as we move through the year next year? What's the kinda IO contribution on margins to products? Yeah, let me try to take that in turn. Yes, revenue from Dolby.io is included in our product and services line. It is contributing and growing. It's not large enough to highlight for you as one of the major growth factors this year. As I said earlier, we're seeing greater engagement. We're involved in a lot of conversations that we think are, you know, where the future is going in terms of these really immersive virtual experiences. We're excited about that, and we could talk more about that. Let me get to the other part of your question, which is the margin improvement. Throughout the year, we, like many, were hit with some of the supply chain challenges as it relates to the manufacturing of our products. Obviously, products is not a large part of our business, but nonetheless, we were affected. That affected our margins as, you know, it could be, you know, the parts, it could be shipping them to where they need to be, all of that. The team, you know, was immediately on top of that and has come up with solutions which have resulted in the improvement in gross margins, which is, you know, closer to what we would target on an ongoing basis. Gotcha. Lastly, on cash flows, you know, it's a bit lighter than expected but still generating close to, you know, $300 million. What's the outlook for free cash as we think about 2023 and kinda conversion rates there? You know, you stepped up the buybacks here materially in the quarter and for fiscal year at half a billion. Including the dividend kind of exceeding free cash flow for this year, which is fine given your cash balance. You know, how do we think about the pace next year? Should we expect kind of the similar buybacks and dividends to kinda exceed free cash flow next year to kinda support shareholder returns here in a difficult environment? Thank you. Yeah. Hey, Paul. First, I'd just say that our cash flow from operations generally correlate well with our net income, and you should see that should continue over time. There of course will be quarterly fluctuations of working capital, timing of payments, timing of receipts, et cetera, but that's a pretty good benchmark to hold that against. As it relates to the buyback for 2023, you know, if you think about our policy has always been offsetting dilution from stock-based compensation. You know, we're fortunate to have a very strong balance sheet. We've got healthy cash flows, as you just noted. We look at our capital allocations, you know, regularly for optimization opportunities. You did see that we stepped it up in the second half of 2022. You know, going forward, we'll continue to look at our capital allocation portfolio between investing in the business and opportunities we see and return to shareholders, you know, based on the facts and circumstances at the time. For now, our intent is to at least offset dilution from stock-based compensation, and then we'll make adjustments as needed. You did see that we did increase the dividend 8% going forward as well. We've gotta balance that allocation between return to shareholders and investing in our business for growth. Great. Thank you. Thank you, Mr. Chung. The last question is from James Goss with Barrington Research. Please proceed. All right. Thank you. I do like the fact you've focused on the foundational technologies. That does give a good perspective on core business plus the growth elements. I am curious, though, over time, do you recategorize certain of what are currently growth elements into foundational? For example, 10 years into it, does Atmos become Dolby Digital Plus as sort of a foundational, and then you're moving on to other things? How should we think of the mix of revenues, you know, as the growth elements take over from the foundational elements or what are currently foundational elements? Yeah. Great question, Jim. You know, I would start by saying that. We are never done at Dolby inventing what it means to have a Dolby experience. We're always looking for, you know, the next great Dolby experience, and we're always looking for ways to bring it to more content, more experiences, the content that people, you know, most engage with. You know, clearly, I've said for the midterm, we expect Dolby Atmos, Dolby Vision, and imaging patents to be in that growth mode, and we see that opportunity to double them over that period of time, growing 15%-25% annually. Yeah, I have on occasion thought, what am I gonna do when we're on, you know, such a high percentage of devices with those experiences. Yeah, maybe there'd be shifts. By then, of course, we would expect of ourselves to have the next set of great Dolby experiences that we're talking about. Okay. Since you're sort of creating the categories, it's early to decide how you're going to define them over time then, I gather. Well, again, the basis for this foundational versus Dolby Vision, Dolby Atmos, and imaging patents is to help you understand the growth drivers. Our audio codecs and our audio patents are so pervasive across so many consumer devices and so essential to the entertainment content ecosystem that it is more, you know, much more sensitive to the macro environment and what's going on with consumer devices. That's why we set that apart from Dolby Atmos, Dolby Vision, imaging patents, which aren't immune to the macroeconomic environment, but are much more about getting on more of those devices that are shipping, getting more licensees on board. Okay. The hardware side of the TV business has been very competitive. I know VIZIO has focused on a couple of, sort of a loss leader units that have been growing more rapidly. I'm wondering if is that phenomenon, which I'm sure they're not the only one doing that sort of thing, coming out to be a help to you in terms of growing the, you know, the Atmos and Vision type of products or royalty revenue stream? Yeah. Well, you know, coming back to a comment I made a few minutes ago, with each of these ecosystems, I would look at the movies and TV content ecosystem for Dolby Vision, Atmos as, you know, one that we have, you know, a lot of scale with in terms of content and distribution. Music and auto is really coming along with three of the top five streaming services, an increasing amount of content. User-generated content with mobile devices, there's pattern recognition here because this is really our business model for a long time around ecosystems. New experiences, new technologies for, you know, getting the contents to people. Fundamentally, we are about understanding what the creatives or the content creators, what's gonna help them tell a better story, bring out more emotion in your content, and then making sure that you can get that everywhere you like to get that content on every device you like to enjoy it on. When we get to a certain point in building an ecosystem, we develop a lot of confidence that we can significantly increase our adoption in those areas. At that point, the rate of growth has a lot to do with, you know, when partners come on board, which models do they start with, how far they go in the lineups. I'm relating that to your point because, yeah, VIZIO, along with Sony, those are examples of customers have taken us deep into their lineups. Look, there are different strategies. You know, some are reacting by looking for share and focusing across their lineup. Some are gonna focus even more on premium. You know, over time, of course, our goal is to bring the Dolby Atmos and Dolby Vision experience to everybody. When you're, you know, in the mode that we're in with Atmos, Vision, and imaging, the growth, you know, where we are in that range, and where we're growing even here has a lot to do with, you know, which models we're getting on first, when those are launching and shipping, and which ones turn out to be the top sellers. Okay. One last one. I was wondering over what period of time you feel the Dolby.io revenues and profitability will become significant and would be more likely to pay attention to them in terms of its significance. Yeah. Fair question. I mean, we're in this because we think it's a really significant opportunity for us. I mean, it significantly expands the types of experiences. It expands not only our available market, but the types of customers and companies we have the opportunity to do business with. You know, like I said, we're of course generating revenues today, and it's growing, and we are gonna break that out when we get to, you know, a certain, you know, size and scale. I don't think I'm gonna predict exactly when that will be. I am excited about, you know, both the progress we're making with the use cases we have in market today, like real-time streaming and interactivity, and also these discussions where we believe we're finding ourselves in, you know, the heart of these discussions around what it's gonna mean in the future to have a truly immersive experience. You know, again, we made some really good progress. One thing I was excited about was we made some progress with our plug-ins with, the Unreal Engine is the environment that a lot of these worlds are built on. In March, we made available a plug-in for this real-time streaming, which means that if you're building a virtual event, you could in real-time, ultra-low latency, stream in whatever you wanna stream in to this virtual environment, a concert, a sporting event, a movie. You can capture what you're doing in the virtual world and stream it to the outside world. This quarter, we added a plug-in. It's in open beta, so it's a plug-in for adding into that interactivity. That means now you can be streaming that same concert, but the audience will be able to have that fully engaging experience where they're hearing, you know, great quality music from the performance, but they can also hear the ambient noise. They can talk to one another. The plug-ins just make it much easier for developers to build those experience and bring them to life and get them into the world. All right. Thanks so very much. Thank you, Mr. Goss. That concludes today's conference call. Thank you for your participation. You may now disconnect your lines.