Audio and surround sound equipment provider Dolby Laboratories Inc. (DLB) reported Wednesday a decline in profit for the first quarter, reflecting both an increase in operating expenses and the absence of a gain from amended patent licensing agreement present last year. The company also raised its fiscal year 2010 revenue and earnings per share guidance above the analysts estimates.
The San Francisco, California-based company's first quarter GAAP net income came down to $69.1 million or $0.59 per share from $78.1 million or $0.68 per share in the prior year period. On a non-GAAP basis, first quarter net income rose to $74.3 million or $0.64 per share from $70.3 million or $0.61 per share in last year quarter.
On average, 15 analysts polled by Thomson Reuters expected the company to report earnings of $0.49 per share for the first quarter. Analysts' estimates typically exclude special items.
For the first quarter, Dolby's total revenue was $221.2 million, up from $180.3 million in the year-ago quarter. Wall Street analysts expected revenues of $181.08 million for the quarter.
The absence of a gain of $20.04 million from amended patent licensing agreement present for the year earlier period and a rise in total operating expenses to $81.25 million from $70.01 million contributed significantly to the drop in first quarter net income.
Dolby's non-GAAP measures exclude expenses related to stock-based compensation, the amortization of intangibles from business combinations, restructuring charges, a gain from an amended patent licensing agreement, and the related tax impact of these items.
Further, the company noted that its adoption of new accounting standards resulted in incremental product sales revenue of $17.6 million for the recent first quarter. The accounting change also had a net impact of approximately $4.4 million or $0.04 per share on both a GAAP and non-GAAP basis for the first quarter, the company added.
Commenting on the company's first quarter performance, Kevin Yeaman, President and Chief Executive Officer said, "We experienced increased global adoption of our next-generation audio format, Dolby Digital Plus, experienced strong demand for our cinema 3D systems and, in January, saw a leading set-top-box manufacturer adopt Dolby Volume in certain models."
On segmental basis, the company's major source of revenues, licensing revenue rose to $154.06 million from $165.77 million a year earlier. Product sales revenues surged significantly to $47.66 million from $17.95 million a year earlier.
Looking forward to the fiscal year 2010, Dolby now expects earnings per share in the range of $1.96 to $2.08 on a GAAP basis and $2.21 to $2.32 on a non-GAAP basis. The company had earlier expected GAAP earnings of $1.85 to $1.96 per share, and non-GAAP earnings of $2.07 to $2.20 per share. Street analysts currently expect Dolby to report earnings of $1.99 per share for the full year.
The company also revised its revenue guidance upwards in the range of $780 million to $810 million, compared to its previous forecast in the range of $720 million and $750 million. Wall Street analysts expect revenues of $747.26 million.
Wednesday, DLB closed at $50.03, down $0.57 or 1.13% on a volume of 0.86 million shares on the NYSE. In after hours, the shares rose $1.82 or 3.64% to trade at $51.85%. In the past 52 weeks, the stock trended in a broad range of $24.90 - $51.61, with a three-month average volume of 0.40 million shares.
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