Dolby Laboratories, Inc. (DLB) Earnings Call Transcript & Summary

All right, beautiful. So why don't we get started here. My name is Erik Woodring. I lead the hardware coverage here at Morgan Stanley. I'm pleased to welcome Robert Park, CFO of Dolby Labs; and John Couling, SVP of Entertainment, to our conference. This is actually the first time I've hosted you guys, obviously, and so really helpful for me to understand the story, get the story out there. And so we'll dive into a bunch of different parts of the business. But just for background, Robert's been at Dolby as CFO for more than 2 years now. Prior to Dolby, he was at BlueJeans. He's held a variety of senior finance roles over time. John has been at Dolby for over 15 years. Obviously, again held a number of different roles. But gentlemen, thank you very much for joining us today.

Pleasure.

Before I begin, maybe just one last thing I need to mention that important disclosures can be found at the Morgan Stanley disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative.

Okay. So I think maybe the best place to start is just high level. I think most people have heard of Dolby, whether it's watching movies, understanding what Dolby Atmos is, even for Apple users listening to songs, spatial audio or Dolby Atmos. So -- but I don't know how many people actually know what Dolby does. And so can you maybe just walk through the history of the company, what solutions you sell? And maybe weave in what the underlying kind of core value proposition is at Dolby? What's in there?

Why don't I take a start on that. And so yes.

How long you been here?

Good morning, folks. Actually, it's a little more than 15 years, it's nearly 26. So that means -- how much time do we have? Because you could do a long time interviews, right? The company is 6 decades. So I'll maybe do a shorter version. So yes, I think a lot of people have heard of Dolby. Metrics tell us that. In fact, probably a lot of you have heard Dolby, as you say, within a movie theater, on your phone, on your television. What we do is we really innovate in the area of sight and sound. What we're trying to do is create these experiences together with content creators to really move the medium forward. So that might be music, that might be sports, that might be movies. And to create those in -- Dolby creates a more engaging immersive experience. Over the years, that hasn't changed. That is what we do. What perhaps has changed in that time is, asked a little bit about history is, the entertainment space and how we receive entertainment really changes dramatically over the years. We used to have analog and it moved to digital. We used to watch on broadcast over the air television, now we stream. We used to listen to CDs, now we stream to our headphones, in our phone or in our car. So the delivery and the style of entertainment has changed dramatically. And Dolby has really engaged in those transitions. And I think that's the best way to think about our history. We were there in the transition from analog to digital. We were there in the transition from broadcast to streaming. Providing technologies that really power those transitions that underpin the way that those transitions can happen from a sight or sound perspective and more recently, both. In order to set ourselves up really to deliver the value of these great creative arts and great music, movies, sports into as many people's homes or movie theaters as possible. And that's, I think, what we've always done and as the market changes, so we seek to continue to do that. In terms of our customers, it's very broad, as I say, it's all the way from the musician and the movie director, all the way through to the consumer electronics manufacturer, the automotive maker. And what we try to do across all those partners is deliver them a lot of value in those transitions and deliver them a lot of value in terms of improving their product. Might be their record, might be their mobile phone. And we believe in our model of being able to work with everybody that we can do that in quite a unique way.

Well -- and I'd like -- if there are three things you would take away from the Dolby is, one, it's a very durable company. It's been around almost 6 decades. It's always been the technological leader in the science of sight and sound. As John said, we've been through many technological shifts and economic cycles over the last 6 decades and come out stronger at the end of each one. The second thing is that we have a very hard-to-replicate business model with a very powerful entertainment ecosystem, we'll talk about a little bit more. With very strong financial fundamentals, pristine balance sheet, high gross margins and very healthy cash flows. And the third thing is we're getting into our most exciting phase yet with a lot of robust opportunities for growth.

Perfect. That's a great start. Maybe one additional question to build off of that is, how do we think about the competitive environment. Meaning we hear a lot about Dolby. I'm not sure if we hear about a competitor to Dolby necessarily. So how do we think about competition? And maybe in addition to that, kind of what is the competitive advantage or the technological advantage you have? Is it the defensibility of your IP? How do we think about kind of the place that you have in the market and the stability of that?

So maybe I'll start there. So yes, there's always competition and strong competition and that's healthy. That's something I think helps drive us to make better solutions and serve our partners better. And I don't think that has changed in the past, and it's certainly there right now and something that we're always aware of. I think the thing -- I commented before, it's sort of unique to us is we're able to, through the years, build these relationships across a very broad set of the entertainment space. So I have partners and my team has partners that are making content, that are distributing that content, that are making the devices or the parts that go into those devices that you use to actually experience content. And that is quite a powerful ecosystem. If you go to the store to buy a TV, you buy it because you want to watch something. You might be a sports fan and you really want to be part of the game or you might be a movie buff and you want to see the latest movie. You're buying it because sound and pictures is going to fill your living room, your kitchen, your bedroom, wherever you're going to put it. And so that whole entertainment experience is the sum of those parts. It's the sum of what you create, it's is sum of how it gets to you, and it's the sum of what you're watching or experiencing or listening to it on. And Dolby has relationships in all of those places and that's fairly unique, pretty unique. And that allows us to create this, what we call virtuous cycle, virtuous circle of -- if the content is made in Dolby, the best way to experience that is with a device made in Dolby. If there were more devices in Dolby versus a content creator, of course, I want to make in Dolby because that's how the best experience is heard or seen. And so this broad ecosystem reinforces itself from the perspective of creating greater and greater value for each of its participants.

Perfect. And maybe the last big picture question is just when I think about these kind of different end markets, I kind of think about TAM and what that TAM might be growing. And so is there a way that you can kind of describe or size the market TAM for yourselves and penetration within that? And maybe, again, what that growth rate might look like over time?

Yes, it's a great question. So our TAM is consumer electronics. Think of the -- over 1 billion cellphones, smart mobile phones, PCs, TVs, soundbars, speakers, set-top boxes and 90 million autos sold annually. So that's kind of our market in terms of our TAM. If you break -- if you look at our licensing business, about 2/3 of that license business is based -- is made up of our foundational audio technologies. That's a technology that's been around a while that is deep and wide across a wide swath of consumer electronic devices. And that will tend to grow at the rate of consumer electronic growth over time, plus a few points, as we find more and more licensees. It's deep penetration. It's kind of going to grow with the market growth, slightly higher than that, probably low single digits is what we'd expect over time. Then the rest of our licensing businesses comes from Dolby Atmos, Dolby Vision and our imaging patent portfolio, which is much earlier in the adoption cycle or licensee cycle than our foundational audio technologies. And that growth is driven more by getting on more and more devices that are being shipped and penetration. We've got, for example, about -- we're on about 1/4 of 4K TVs today with Dolby Atmos and Dolby Vision. So there's a lot of headroom left. So that, we believe, will grow. We expect it to grow faster than the market, and we expect it to grow somewhere in the 15% to 25% CAGR rate in the medium term.

Okay. Very helpful. So let's talk more about licensing. I think maybe to break it down and be somewhat simple about it, what exactly are you licensing to your customers? And who are you licensing it to? To kind of help investors try to understand again more of this end market growth and kind of how you get there and the points of differentiation?

So maybe in terms of the second part there, who we license to? So we are delivering technologies to the whole of the consumer electronics supply chain. Particularly, we insert our technologies and work with the IT companies, software companies that build the core components that create the end device. And that helps the marketplace to be able to adopt quite quickly and simply in order to be able to make these technologies widely available. And then we deliver technologies in our brands, in our patent rights to the end manufacturer. So it might be your phone, your PC, your television, your soundbar, your car. That's where we would actually have the final technology delivery and also where the customer pays us for the technology as we send it. And I say the value that they're getting is that technology delivery, but then also the whole ecosystem of content and so forth that comes within that device. And so it is the end manufacturer that we think about from a profit perspective or revenue perspective.

Okay. Perfect. So you guys mentioned Dolby Atmos, Dolby Vision, obviously, a faster growing business than the traditional kind of foundational audio licensing business. Can you maybe just describe exactly what Dolby Atmos and Dolby Vision are? Like why is it differentiated? Why is it growing so fast? Why is it so exciting for you guys today?

Yes. So happy to do that because that's my world and so thank you for that. So what Dolby Atmos does is, technically, it changes the way the audio is created from simple channels, you might have a stereo or 5.1 to something quite different, which is objects. And that allows an incredible amount of creative freedom in terms of the way that you make soundtrack, a song or a sports broadcast or a game, any of those examples. It creates a level of fidelity, clarity, detail within the experience. And so from a consumer perspective, you're in the game, you're in the emotion of the song. From a creative perspective, it's like I'm a painter and you just put on all these additional colors. You just gave me so much more to work with, I can create an experience that is far more immersive, far more compelling, far more emotional than what you'd had before. What that does is just create higher value content. And of course, for the consumer, something that's just much more immersive and enjoyable. What Dolby Vision does, Dolby Vision takes video, and it again expands that pallet, literally more colors in the case of Dolby Vision. And also more dynamic range in order to create, again, these experiences that are richer, that have clarity, make greater detail and deliver that through to the home consumer. So your 4K television has a better picture quality with Dolby Vision. With your Dolby Atmos phone, you can listen to music in this immersive way and have a much greater, richer experience, consequently. And the key to any of these technologies for us is we deliver value to the whole of the entertainment chain. This is something that's exciting for a creative, they can work in Dolby Vision and Dolby Atmos and create something that's -- for them is a better piece of art or better broadcast. For the distributor, you're creating something of higher value. So your content is of higher value. For the device maker, again, it's a way to show the consumer, "Hey, this is a better quality phone. This is a better quality PC. This is you, as a user, are going to get a better experience." And so these technologies have components that affect all the different parts of that partner ecosystem.

And I was just going to say, I've to give you an example of -- we had a car manufacturer come in and the engineers -- the audio engineers for this very large car manufacturer in Europe came in and he was telling me why they're adopting Dolby Atmos in the car. It's because they, as scientists in the art of audio, hit a ceiling to what they could do with the music, what they could do with the sound inside the cars. This is a luxury car. And then Dolby Atmos help them break through it mathematically, scientifically. Anybody can make sound and music louder. That's not the point. It's the transparency of the music coming through you. How you want to hear the chorus, the lead singer, the cellos, and how you can put those in objects, almost unlimited around the car. And regardless of, well, certain amount of speakers, but you can make that sound, as they called it, more transparent. And once you've demoed a Dolby Atmos car, your car will sound flat after that. So go buy a Mercedes-Maybach, as soon as you're done here.

Well, I'll get right to it. So there's a lot more than that. A lot more affordable.

And just again kind of like putting numbers to the game, you talked about kind of that 15% to 25% CAGR for Dolby Vision, Dolby Atmos. What kind of gets you there? Is that mostly a penetration game? Is there a pricing aspect to that? What's kind of the factors underpinning that growth?

So the factors that, that's going to be more driven by more attach rates. So a higher penetration going into those cars and electronic devices overtime. So the relentless pursuit of getting more design wins, getting the design wins to turn into manufacturing and finally going off and being shipped. So it is increasing that attach rate. And the Dolby approach as -- many times has been, and we started the premium at the very highest ends. The Mercedes S-Class and the Maybachs, but they're slowly pushing it down to their other lineups. And that's the same way we do with 4K TVs. We start at the higher end, but as you can see, with TCL and Hisense, they're pushing it down to all their 4K TVs. And so that's our approach to increase penetration. It's called the land and expand, and that's the way we're growing Dolby Atmos and Dolby Vision.

Okay. Perfect. You touched on -- right, we touched on automotive. It's been a focus for you guys, obviously, within that licensing business. I think you have 13 auto OEM agreements. Maybe my question is what inning are we in for this opportunity? Again, as consumers, we see a lot of Dolby in our consumer electronics, like we talked about in our TVs and things that we listen to and things that we look at on our phone, where are we on the auto ramp? Like what inning is implementation...

And you're thinking baseball...

Yes. It's amazing. I guess, cricket is inning too, right?

We're fairly early in that cycle, I guess, I'm trying to map baseball. Maybe it's sort of early in the second, I would say.

Top of the second.

Yes, top of the second -- there you go. Thank you. Yes, it's a -- I'm learning. Yes, I would -- let's say top of the second, I think that's about right, right? We have those early wins. We have a pipeline behind that. We have cars coming to market. It's an industry that's starting to move more quickly. I think historically, automotive has been a very low transition industry. I think that has changed. The market is moving much more quickly and it's more competitive. For example, our China customers move very quickly. And so we see a lot of opportunity in that pipeline to continue to expand. As Robert said, the cars you get today from a luxury maker like Mercedes. But we can see that this experience applies to a very wide range of automobile and the music in your car, podcast in your car. Our partners tell us there are people who, they'll drive home, they'll sit outside and they will finish listening to the thing they were listening to. They -- they're using their cars, stationary parked outside their apartment, parked outside their house. So it's one of the best entertainment environments that they have and one that's there. It's a unique experience, right? The car is your private space and you choose to share it because you do. So we -- I'm sorry, but you sing songs with your kids on the way to school or it's your decompression space after the commute home. And it's this unique environment where entertainment is becoming just more and more important. That's what we hear. And so our pipeline, we believe will reflect that.

Okay. And then maybe last question on licensing before we turn to the remaining part of your business. And then, again, kind of what's going on right now in the market is just help us think through the margin profile of this licensing business. Is this a relatively flat margin business or is there an opportunity to expand margins in this business? If so, how?

Margins are high.

Yes. It's harder, I know.

It's not a bad thing to have. In today's market to have a 90% gross margin, 90-plus gross margins and even higher for our licensing business. Yes, there should be leverage in the model as we continue to grow, particularly, as we -- in G&A and other areas where we should see scale over time. And when you've seen what we've done over the last -- if you look at the history of the last few quarters for Dolby, we're not afraid to streamline the organization. We've made some changes over the last few quarters. And as a result, you can see a 1 to 2 percentage point margin expansion, and actually a reduction in operating expenses year-over-year. And we're going to continue to do that. We continue to look at being more efficient and effective in meeting our top line goals, and I don't think we ever stopped doing that.

Okay. Perfect. Yes, I just want to touch on kind of the remaining 10% of your business, which is the products and services. And just help the audience understand kind of what do you sell in this category? What are your primary customers? How do we think about the growth rate of that business?

Yes. So the primary customers in that space are movie theaters, exhibitors. So we actually manufacture partners and the hardware that goes into a movie theater, particularly for the sound aspect and some of the playback equipment. And again, that's a small part of Dolby's business overall. But the movie theater is an important part of how we not just work with the industry overall, but also how we can present our experience to the consumer. We've talked a lot about what these experiences are, but you have to actually be part of it, right? If you -- Robert said, sit in that car, it's amazing. You sit in that movie theater, it's amazing. And that's the way we think we can really reach a lot of consumers and help build the brand and it helps also a lot of our story more broadly. So yes, that's where the products are in.

Okay. Perfect. So maybe if we turn to, I guess, now that we have an understanding of what you guys do. Let's talk about kind of the current trends in the market and business. So as a consumer hardware analyst, I would talk about demand being fairly uneven these days. It's a very challenging market, especially as it came -- kind of came off of that COVID peak.

Yes, I think we see dynamic.

Yes, yes, I use dynamic.

I actually like that. That's a glass half full. I hear too many people on my side, call it uneven, which -- so it's a dynamic market today. Macros, still some uncertainty. Maybe can you guys just talk about some of the demand trends that you're seeing in the market broadly sitting from the position that you guys come at the market from?

Yes, we're seeing -- coming into Q1, and we thought coming into the year is kind of device sales are kind of sluggish. They're kind of soft still. And as a result, you're seeing the impact on our foundational audio revenue, which is 2/3 of our licensing revenue. It's a dynamic and inconsistent environment today. Where we do see growth is in other markets, particularly auto, we have -- obviously, you can see the trends we see in auto. And PCs are going to benefit from slightly higher units from a very low '23 as well as increased adoption with our imaging licensing technology and recovery. So those are kind of the markets. And then we see slight declines in broadcasts, which are TVs and set-top boxes, mobile phones and consumer electronics, in general. So device sales are kind of sluggish even this year, and that's what we kind of saw coming into the year.

Okay. And can you talk bigger picture? What's -- so you guided fiscal '24 kind of flat revenue growth. What is the -- also kind of like macro dynamics underpinning that guide? I mean how are you guys thinking about the world over the next 12 months?

Yes. Maybe I'll comment and Robert, the -- yes. I think one thing about, say, you say uneven dynamic, I mean, they're just two halves of them. The same thing for the consumer electronics market. There's definitely this uneven. And so what it does is it causes partners to be a little more thoughtful, cautious or slower in ultimately bringing out new products, making decisions on products and just overall sort of time to bring things to market. And I think that affects us from the perspective of just how fast we can grow some of our technologies or ultimately how fast new things are coming in. And that's, I think, just the state of the market. And I think you characterized it well with uneven. And that we do see.

And I'd say it's dynamic. I would use inconsistent. That's how I talk to my kids. And -- but what's not inconsistent is the demand for immersive experiences. That has -- is not inconsistent. Demand is there. It's very high. Our partners are engaged. It's taking a little longer to get deals done just because they're distracted to the same things you're seeing and your portfolio companies are also seeing. But eventually, it's not a product market fit, it's the timing. And so getting the Dolby Atmos and Dolby Vision technology in there, it's just a matter of time, and things are just in this market taking a little bit longer. But the insatiable appetite for content is still there. That's not inconsistent. And we make that content more immersive and better, and that's what we do.

So that's a great point, and I want to talk to that, which is longer term outside of the market because, obviously, the market will go through cycle as it always does. What gets you back to that goal of double-digit top line growth? Again, what -- the things that you guys can control, what do you need to do to get back to that point?

So a couple of things need to happen to get back to double-digit growth is, first, we need a little bit of stability in the marketplace. We need device shipments to stabilize, get back to low single digits, which will drive about 2/3 of our licensing revenue back to positive from what it is the negative today. And then continue our relentless pursuit of increasing adoption and penetration with the Dolby Atmos and imaging technologies. And doing that and growing that 15% to 25% CAGR over the medium term will get us to that high double -- high-single digit, low-double digit range and John here can talk about how we're getting there. The 3 areas where we see the most growth opportunity for Dolby Atlas and Dolby Vision is music. You can see the progress we've made in music. We're on 90% of the Billboard 100 artists are recording in Dolby Atmos. And Dolby Atmos in the car, in other places, the living room and TV, bringing movies and TV shows to the living room. And mobile, particularly mobile vision capture -- Dolby Vision Capture, ability to capture videos and Dolby Vision is key to our...

Yes, we have -- it sort of speaks to how the innovation works, right? We bring Dolby Vision into the television that's used for movie creation or high-end production. But now you can actually shoot that yourself on your cellphone, right? We have -- that's in your iPhone is, you can record in Dolby Vision. And we have other partners and other -- cellphone manufacturers in Android that are building that in. So that's another opportunity that expands the technology and expands the use of the technology and then gives us the place to drive adoption.

Okay. Can you talk maybe about the mix of your business geographically in terms of, are there any trends that you'd call out for, what's happening in the U.S. versus what's happening internationally? Whether that comes to growth rates or adoption or interest in the usage of Dolby Vision, Dolby Atmos...

Yes, maybe a little context and you can probably talk to the numbers. So we are, from a go-to-market, from a customer partner perspective, very broad across the globe. Content is something that's actually quite different around the world. We joked about baseball earlier and cricket, right? And Sports is very different. Soccer is football in other places. And so if you want to create these content experiences that really matter to a market, you have to do that in the market. You have to drive the content that matters, whether it's the shows or the music or whatever that might be. So we do have a footprint of partners and therefore, support and sales and so forth around the world to actually support that and drive that. And likewise, a lot of our OEM partners that are consumer electronics manufacturers, they operate in this global market, too. So to be able to work with them across the world is really important. And ultimately, allows us to expand our business at that regional level as well as sort of a single headquarters level. And maybe you can talk about the other...

Yes. Dolby is truly a global company. About 1/3 of our revenue is domestic and 2/3 of our revenue is based on international. And what we're seeing is we've seen progress and a lot of adoption in Asia, particularly in China, the car and TVs, et cetera. And the U.S. and Europe are typically more mature businesses for us.

Okay. Perfect. Robert, you mentioned earlier talking about being more efficient, making some changes over the last few quarters. Can you maybe just double-click into that and talk about how in '24 and beyond the focus on efficiency, what exactly that means, how that improves kind of the value proposition of this business overall going forward?

Yes. It's ruthlessly prioritizing and making sure we're redeploying our resources to the highest impact areas, and we don't do that in one big swoop. We do that as we go. As we see an opportunity, we will make a change. And you've seen our ability to do that. And we never stop trying to be more streamlined or more efficient and effective in meeting our top line goals, and we'll continue to do that. And I'll just say that we expect to grow earnings faster than revenue over time. So there is leverage in our model.

Right. Okay. Can you talk about as we think of kind of the expansion and penetration of Dolby, whether that's vision or sound. Are there any barriers that we need to consider to your ability to do that, again, whether it's signing on new partners, more geographic expansion. Again, if we take away kind of the growth rates of the market. But anything to consider on that front?

I mean I think you're talking in a way about like the adoption cycle, right? So for us to have adoption in the market, obviously, the first thing is we've got to be present. We've got to have the technologies ready, and we've got to bring value to those different participants. And then there's some very practical things, right? If you want to build a consumer electronics device, you need to have the technology available and the components that you buy. So one of the things that we focus on is to make sure that there's adoption within chip partners or software partners who build the components that ultimately then make that end consumer electronics or the car or whatever it might be. So that's an area of focus for us to enable that supply chain so that it's easy for manufacturers to adopt. So if they're in a particular region or a particular model line and they feel like, okay, now is the time for us to move to Dolby. The content is ready, the market is ready, the competitive environment says, "Hey, now it's time to move." That the pieces are available for them. And it takes a little bit of time for that to develop, and we're further through that in some markets because they are more mature than perhaps in other markets, and that's an area of focus for us. And then what you see is we would potentially with a customer, they might announce their first product, probably their higher-end products, and then they would move to further down their model line as they build the value and will ultimately build that story for their customers. And each of the different markets works at different paces. So TVs come out sort of roughly once a year, probably sort of a little bit faster, 6 to 9 months in some cases. Cars a little bit longer, although they're now getting faster in a much more dynamic market and from a speed of adoption perspective. And so the things that at least I look forward in our business is we're looking for those points of proof of value, right, where, hey, here's a new service that launches in a market, because that creates that value for the whole ecosystem and therefore, that value for the consumer or here's some high-profile content. It might be a big sports event, for example, because that's one of the things that causes people to go and upgrade their equipment. Or as you said, a particular OEM win and then how we expand that within that portfolio. So all different ways of understanding how that adoption cycle is working.

How do you guys -- when I hear you, I think about innovation, you use the term immersion a lot, which I think is important as we think about new technologies that continue to come out it becomes more and more about immersive experiences. How do you guys, as Dolby, think about the future of innovation when it comes to sound and film and imaging and vision. And again, maybe my question simplistically is kind of like what's next? What always is coming down the pipeline for you guys as you think about these shifts in technology?

Yes. I mean, research and continuous innovation is important to us, obviously. I mean, as Robert said, we've been around quite a while, and we've innovated through big industry transitions. We've innovated within those transitions. And that's something that obviously we continue to want to do and work to do. And I think we have a unique perspective on that innovation because of this broad set of relationships that we have. And we can understand what might be happening in the hardware environment that creates new capability. But we also are connected with these creatives. And one of the unique things about real creative people is they always have new ideas. I mean I've been at Dolby 25, 26 years. And at no point have I met an artist who said, "Yes, I'm out of ideas. I got no more stories. I've got no more songs like I'm totally satisfied with everything that I've done." No, not at all, right? They're endlessly creative and they're always like, I would love to be able to do this. Why can't I do this? And what can you create that lets me do that? I need a button for that or experience for that or -- and so that is this rich source of ideas that we were able to look at and go, okay, I can see that and I can see what's happening in the hardware environment that might make that happen. And let's go build the technology that puts all of that together. And there are spaces today where people are innovating, obviously, a lot of work right now in like a manual displays. It's clearly an area with a lot of momentum. There's a lot of innovation happening in the automobile space or innovation in your camera, in your phone. So the market is not short of ideas and I say, I think for us, uniquely, it's a sort of a blend of both the art and the science.

Okay. Perfect. If we pivot just a bit, Robert, I'm going to turn it to you. And if we just talk about kind of big picture, capital allocation priorities, where do those stand today? How to think about that moving forward? And if you can just kind of weave in the philosophy on M&A, how that plays into capital allocation broadly?

Sure. I'll start with the capital allocation. So we look at our capital allocation quarterly between investing in the business and return to shareholders through buyback and dividends. And our policy and our intent has been on buyback is to at least offset the impact of stock-based compensation, and we have been doing that. This year, we also increased the dividend. We've been doing the dividend, an increasing dividend, I think, for the past 10 years. And if you look in the last decade, I think we've returned almost $4 billion back to shareholders in terms of either buyback and/or dividends, and we'll continue to do that. In terms of -- we continue to look at that quarterly. M&A, we don't do a lot of M&A. We'll do some M&A. Typically, they're around -- for our foundational businesses, accretive businesses that help diversify and strengthen our technology portfolio. And we may do smaller deals to help our growth business is more product-oriented or ways to accelerate growth in some of our growth areas. But we have an active pipeline, which are very discerning about what we do.

Got it. Cool. So maybe give you the remaining time. Last question is, as you sit here today, what's the message you want to tell everyone in terms of what do you think is most underappreciated and/or most exciting about this company and the path forward? If we take away again the market and just think about what Dolby Vision is doing in terms of innovation, what's most underappreciated? What gets you most excited about?

Maybe I'll do the excitement and -- sorry about that. From an exciting perspective, it's -- I think Robert touched on it, right? That the consumer's interest in storytelling, in experiences, in being closer to the action and being closer to the artist, that continues to be an incredibly powerful thing that we see across the market all over the world. And so being in a position to actually provide technologies and work with companies that serve that is incredibly exciting and being at the forefront of those experiences, it's exciting both when you work with people in that space, and then when you see consumers get that experience. And that gives us a lot of confidence in, ultimately, we're doing something that has real value.

What excites him is different what excites me. I'd say, it's money. So I would say our business model may be underappreciated by people, how durable and powerful ecosystem is. $1.3 billion in revenue, 90-plus percent gross margins, 30-plus percent operating margins, very healthy cash flows and a pristine balance sheet with no debt. Those are very nice things for CFOs to look at. And -- but it's the opportunities for growth and innovation. I wasn't kidding when I said it's an insatiable appetite there for content and immersive experiences. That is not ending. And innovation is changing. The car has been around 100 years, but innovation over the last 10 years has been exponential. And we're part of that innovation going on into the car, mobile phone, TVs. And Dolby has always been pushing the envelope in terms of being a technology leader in those changes. So that's very exciting to me, along with the financial fundamentals.

Cool. Well, that's it for the interest of time. John, Robert, thank you very much for coming.

Thank you.

And thank you, guys.

Thank you.

Much appreciated.

Go see Dune: Two in a Dolby theater. A little plug, sorry. We need some box office.

Thank you, guys.