Ladies and gentlemen, thank you for standing by. Welcome to the Dolby Laboratories Conference Call discussing Fiscal Second Quarter Results. During the presentation, all participants will be in a listen only mode. Afterwards, you'll be invited to participate in the question and answer session. Quarter.
As a reminder, this call is being recorded, quarter, Tuesday, May 4, 2021. I would now like to turn the conference over to Jason Dea, Senior Director of Finance and Investor Relations quarter for Dolby Laboratories. Please go ahead, Jason.
Good afternoon. Welcome to Dolby Laboratories' Q2 2021 earnings conference call. Joining me today quarter Kevin Yaman, Dolby Laboratories' President and CEO and Louis Chew, Executive Vice President and Chief Financial Officer. As a reminder, today's discussion will include forward looking statements, including our Q3 and second half fiscal twenty twenty one outlook and our assumptions underlying that outlook. These statements are subject to risks and uncertainties that may cause actual results to differ materially quarter.
In particular, the extent of the continued impact of COVID-nineteen on our business remains uncertain at this time. Quarter. Discussion of these and additional risks and uncertainties can be found in the earnings press release that we issued today under the section caption Forward Looking Statements as well as in the Risk Factors section of our most recent quarterly report on Form 10Q. Quarter. Quarter.
During today's call, we will discuss GAAP and non GAAP financial measures. Quarter. A reconciliation between the two is available in our earnings press release and in the Adobe Laboratories Investor Relations data sheet quarter on the Investor Relations section of our website. As for the content of today's call, Kevin will start with a discussion of the business, quarter. Kevin will follow with a recap of Dolby's financial results and provide our Q3 and second half fiscal twenty twenty one outlook.
So with that introduction behind us, I will now turn the call over to Kevin.
Thank you, Jason, and good afternoon, everyone. With another strong performance in licensing revenues this quarter, we are off to a solid start to our fiscal year. Our first half fiscal twenty twenty one revenues have grown about quarter and earnings have grown at an even higher rate. Our financial results reflect the strength of Dolby's business model quarter and the broad adoption of Dolby Technologies across the devices and services that consumers are seeking to enjoy their content. Quarter.
Before Louis takes you through the numbers, I wanted to highlight some of the areas of our progress and the recent examples of how Dolby is enabling a broader range of content. With a growing number of content experiences becoming Dolby experiences, we add to our value proposition for deeper adoption in existing device categories And we address the use cases for adoption in new device categories, which together drive our opportunities for growth. Quarter. With Dolby Atmos for music, we are enabling a significant step forward in how people can enjoy their favorite songs, quarter, which is creating new opportunities to expand the adoption of Dolby Atmos to a broader range of devices and services. Lucid Motors announced that they will be bringing the 1st automobile to market that will include Dolby Atmos.
Quarter. The Lucid Air will enable the Dolby Atmos for music experience for the car and is the first example of a significant opportunity to address the primary entertainment use case within automotive. Music is just one example of how we are creating more ways for quarter. We have strong engagement with top artists around the world quarter as more songs and albums are being made available in Dolby Atmos, including many recent Grammy nominated artists like Taylor Swift, quarter. This quarter Hungama, a top music streaming service in India quarter.
They joined Tidal, Amazon Music and Ongami, who are currently streaming music in Dolby Atmos. As we continue to build on the momentum for Dolby Atmos for Music, we see opportunities for more services to adopt Dolby Atmos quarter and to deepen our adoption across mobile, PCs, automotive and headphones. Gaming is another area where we see much of the opportunity ahead of us to bring Dolby Vision and Dolby Atmos to a growing number of experiences. Quarter. Microsoft Xbox will be the 1st gaming console to support the combined Dolby experience for games.
Quarter. Xbox gamers will have more ways to enjoy the Dolby experience with new gaming headsets released this quarter from Microsoft and Bang and Olufsen quarter. Lenovo recently launched a new mobile phone designed to support gaming content, the Legion Phone Dual 2 quarter that highlights support for Dolby Atmos. We also saw the 1st Esports event in Dolby Vision and Dolby Atmos this quarter. Quarter.
As part of Blizzard Entertainment's BlizzCon line, we enabled an event that showcased Overwatch matches to be viewed in the combined Dolby experience quarter through PCs and gaming consoles. Esports gives us unique opportunities to engage gamers by bringing Dolby Vision and Dolby Atmos to the experiences that they are passionate about. As we grow the number of Dolby experiences within games, we add to our existing value proposition quarter and drive more reasons for adoption on gaming consoles, PCs and mobile phones. By expanding our presence in music and gaming, we address 2 of the primary use cases on a mobile device. At the same time, we see more ways for Dolby to enable the highest quality experiences across more of the content enjoyed on mobile devices.
Over the past few quarters, we've highlighted how we are enabling new experiences in mobile, like being able to record in Dolby Vision quarter. This quarter, quarter. Earshot, a leading podcast service in India became the 1st podcast app to support Dolby Atmos. Quarter. They will be making Dolby Atmos content available across different genres of podcasts and in multiple languages.
As we continue to expand the relevance of Dolby Vision and Dolby Atmos across a broader range of content, we address more of the use cases for mobile devices, driving the reasons for deeper adoption with our partners. This quarter, Xiaomi launched their first mobile phones that support Dolby Vision and Dolby Atmos. Quarter. This adds to the growing number of partners that support the Dolby experience within mobile, which is highlighted by the quarter Apple iPhone 12 lineup that features the combined Dolby Vision and Dolby Atmos experience. In addition, Samsung, OPPO and Sony quarter.
We continue to highlight Dolby Atmos with the recent launch of their latest flagship models. All of this progress adds to our strong position within movie and TV content, which continues to drive more device adoption within the living room. This quarter, Samsung released their Q7 soundbar highlighting support for Dolby Atmos. Within TVs, quarter. Our partners around the world, including Xiaomi, Shanghai, and Skyworks released new models that support the combined experience.
In addition to supporting Dolby Atmos, TCL and Hisense also highlighted support for Dolby Vision IQ within their recent TV launches. Quarter. With this momentum, we still see a significant opportunity ahead to reach higher levels of adoption with Dolby Vision and Dolby Atmos in the living room, quarter, similar to the broad presence of our core audio technologies. The adoption of Dolby Vision and Dolby Atmos on devices is driven by a consistent flow of new titles that are being enabled in the combined Dolby quarter results that are being enabled in the combined Dolby experience. Our streaming partners like Netflix, Disney Plus quarter.
Apple TV plus and HBO Max continue to make a broad range of titles available in Dolby and the combined experience is consistently highlighted quarter. Let me shift to cinema. And as consumers begin to return to the movies, quarter. They are seeking out premium experiences and Dolby Cinema is the best way to enjoy a movie. We now have about 90% of our Dolby Cinemas quarter.
Our engagement with exhibitor partners remains strong as we recently added a new Dolby Cinema partner in China And we also had 4 new Dolby Cinema locations opened during the quarter. We also see initial signs of strong box office performance from titles like Godzilla versus Kong and successful local content in China, including Detective Chinatown 3 and Hi Mom that were all available in Dolby Cinema. We look ahead to anticipated titles later this year, including Top Gun: Maverick, A Quiet Place 2 and Black Widow that will all be available in Dolby Cinema. During the last year, we have started to bring the Dolby magic quarter that powers the best movie, TV and music experiences to a much broader range of content and interactions with Dolby. Io, our developer platform.
Our focus is on deepening our engagement with the developer community, growing the number of developers on the platform and building our engagement with our APIs. Just last week, we completed an integration with box.comanddolby. Io. Companies that use Box quarter. Can now enable their users to easily improve the quality of their audio directly from where their files are stored within Box powered by Dolby Media APIs.
Quarter. We are excited to bring unique solutions to Box's broad range of customers and the opportunity to drive more people to engage with dolby. Io. Quarter. Our interactivity APIs are supporting a wide range of use cases and we see new customers across multiple industries from online learning to enabling influencers to connect with fans or even in one case supporting an application that enables live streaming for medical teams.
Quarter. As we look ahead, we also see opportunities where real time interaction come together with recorded media quarter. We can uniquely provide comprehensive solutions by embedding both our interactivity and media APIs. Quarter. With a growing number of new experiences being enabled by Adobe.
Io, we are learning from our engagement with developers quarter and evolving our offerings to best support the use cases where we see significant opportunities to bring higher quality media quarter and best in class real time interactions. So to wrap up, we have grown momentum in enabling Dolby Vision and Dolby Atmos quarter's experiences in more forms of content like music and gaming. As we enable our technologies to address a broader range of content, quarter. We build upon our strong position within movies and TV and create more reasons for adoption across devices and services. Quarter.
With dolby. Io, our technologies are beginning to address a much larger world of content experiences and interactions. All of this gives us confidence in our ability to drive revenue and earnings growth into the future. And with that, I'm going to hand it over to Lewis to take us through the financials.
Okay. Thank you, Kevin. Good afternoon, everybody, and of course, may the 4th be with you. As Kevin said, our financial results were very solid this quarter, revenue and earnings both coming in higher than we previously quarter. So let me go through a few details for everyone.
2nd quarter revenue of $320,000,000 was above our guidance range of $280,000,000 to $310,000,000 as the volumes that we had were higher than expected in several of our end markets. And then we also benefited from a true up of about $15,000,000 in the quarter for Q1 shipments reported that were above our estimate.
On a
year over year basis, 2nd quarter revenue was down from last year's $352,000,000 due to lower recoveries quarter and lower revenue from cinema related business, partially offset by higher adoption of Dolby Technologies
and
quarter. On a sequential basis, total revenue was down quarter due to lower recoveries and lower seasonality and both of these were anticipated when we gave our guidance at the beginning of the quarter. So the Q2 revenue was comprised of $304,000,000 in licensing and $16,000,000 in products and services. Quarter. So let's go through the trends in licensing revenue by end market, starting with broadcast.
Broadcast represented about 35 percent of total licensing in the 2nd quarter. Broadcast revenues decreased by about 19% year over year and that was driven by lower recoveries, offset partially by higher market volume along with higher adoption of Dolby. On a sequential basis, broadcast decreased by about quarter, due primarily to lower seasonality along with lower recoveries. Mobile represented quarter. We have a number of quarter.
This was due to a shift in timing of certain contracts and that was offset partially by higher adoption of our technologies. On a sequential basis, mobile was down about 38% due primarily to lower recoveries and timing of revenue under contracts. PC represented about 17% of total licensing in the 2nd quarter. PC was higher than last year by about 12% quarter due to higher market volume along with increased adoption of Dolby Vision and Dolby Atmos and that was offset partially by declining ASP because of mix of our disc quarter versus non disc units. Sequentially, PC was up by about 56% driven by timing of revenue under contracts quarter, along with seasonally higher activity from patent programs.
Consumer Electronics represented about 16% of total licensing in Q2. On a year over year basis, consumer electronics was lower by about 2% due to a shift in timing of certain contracts, quarter, offset partially by higher volume in devices like sound bars and DMAs as well as higher adoption of Dolby Vision and Dolby Atmos. On a sequential basis, CE decreased by about 7% due mainly to lower seasonality and timing of revenue under contracts. Other markets represented about 10% of total licensing in the 2nd quarter. They were up about 14% year over year, driven by higher revenue from gaming and automotive and that was offset partially by lower Dolby Cinema revenues.
On a sequential basis, other markets decreased by about 22%, driven by lower seasonality in gaming and lower admin fees from Via. Quarter. Beyond licensing, our products and services revenue was $16,000,000 in Q2 compared to $16,900,000 in Q1 quarter and $23,000,000 in last year's Q2 and the year over year decrease was attributable to lower demand in the cinema industry because of the pandemic. So now I'd like to discuss Q2 margins and operating expenses. Total gross margin in the 2nd quarter quarter was 89.9 percent on a GAAP basis and 90.5 percent on a non GAAP basis.
Products and services gross margin Products and services gross margin on a GAAP basis was minus $345,000 in Q2 compared to minus $5,500,000 in the first quarter. Products and services gross margin on a non GAAP basis was a positive $1,100,000 in Q2 compared to a negative $3,900,000 in the Q1. As I mentioned when I gave guidance, we took steps to reduce the cost structure in manufacturing and that's helping our product gross margins return to positive territory. Operating expenses in the second quarter on a GAAP basis quarter were $204,000,000 compared to $189,800,000 in Q1. The annual salary increases quarter and Q1 operating expenses benefited from a gain on sale of our facility in quarter.
Operating expenses in the 2nd quarter on a non GAAP basis were $178,400,000 quarter compared to $167,100,000 in the Q1. Non GAAP operating expenses were pretty much in line with the guidance that we gave. Operating income in the Q2 was $83,200,000 on a GAAP basis or 26 percent of revenue compared to $105,900,000 quarter or 30.1 percent of revenue in Q2 of last year. Operating income in the 2nd quarter on a non GAAP basis quarter was $110,900,000 or 34.7 percent of revenue compared to $129,000,000 or 36.7 percent of revenue quarter. Income tax in Q2 was 10.6 quarter 2018.
Net income on a GAAP basis in the 2nd quarter was $76,200,000 or quarter $0.73 per diluted share and that compares to $88,500,000 or $0.86 per diluted share in last year's Q2. And net income on a non GAAP basis in the 2nd quarter was $94,800,000 or $0.91 per diluted share. Quarter that compares to $106,600,000 or $1.04 per diluted share in Q2 of last year. For both GAAP and non GAAP, net income in the second quarter was above The guidance that we gave now is due to the revenue coming in higher than what we had expected. Quarter.
During the Q2, we generated about $83,000,000 in cash from operations, which compares to the $66,000,000 generated in last year's 2nd And we ended the Q2 this year with about $1,200,000,000 in cash and investments. During the second quarter. We bought back about 760,000 shares of our common stock and ended the quarter with about $76,000,000 of stock repurchase authorization still quarter. We also announced today a cash dividend of $0.22 per share. The dividend will be payable on May 25, quarter 2020 1 to shareholders of record on May 17, 2021.
So now let's talk about the forward outlook. Quarter. 3 months ago, when I went through the outlook for Q2, I said then based on a variety of factors and assumptions quarter. Now with Q2 behind us, quarter. Our updated scenario is for second half revenue ranging from $560,000,000 to $600,000,000 quarter.
From $260,000,000 to $290,000,000 Within that, licensing could range from $250,000,000 to $275,000,000 While products and services revenue could range from $13,000,000 to $18,000,000 In terms of the assumptions we've made about market conditions, Industry analyst reports indicate that PC TAMs in the second half could be higher on a year over year basis. However, for TVs and other consumer devices, industry reports continue to indicate that TAMs could be down in the second half quarter because of an uptick in demand that happened last year in the middle of the pandemic, but might not repeat this year. At the same time, quarter. We are expecting organic growth in the second half and that's on a year over year basis, driven by broader adoption of our Dolby Technologies quarter and we also anticipate higher revenue from our cinema related businesses in the second half as that industry quarter. So let me move on to the rest of the P and L outlook for Q3.
Q3 gross margin on a GAAP basis is estimated to range from 88% to 89% quarter and the non GAAP gross margin is estimated to range from 89% to 90%. Within that, quarter. Products and services gross margin is estimated to range from about breakeven to $1,000,000 positive on a GAAP basis quarter and from $1,000,000 to $2,000,000 positive on a non GAAP basis. Operating expenses in Q3 quarter. Q3 on a GAAP basis are estimated to range from $210,000,000 to $220,000,000 and operating expenses in Q3 on a non GAAP basis quarter.
Our estimated range from $185,000,000 to $195,000,000 Now the increase in operating expenses quarter Q2 to Q3 is being driven mainly by our marketing programs that from a timing standpoint have more of their activities taking place in the second half this year, which also means that at this point, Q4 expenses could be at least as much as what we spend in Q3. Quarter. I'd like to point out that for the year as a whole, the marketing expenses at the high end of our OpEx range would be similar to what they were last year, just timed differently. We'll give you an update on this when we report our Q3 results. So let's finish up the Q3 outlook.
Quarter. Other income is projected to range from $1,000,000 to $2,000,000 for the 3rd quarter and that's $1,000,000 to $2,000,000 for the 3rd quarter. And our effective tax rate for Q3 quarter is projected to range from 20% to 21% on both the GAAP and non GAAP basis. Based on a combination of the factors I just covered, we estimate quarter. The Q3 diluted earnings per share could range from $0.15 to $0.30 on a GAAP basis and from $0.37 quarter to $0.52 on a non GAAP basis.
So with that, I'll kick it back over to Mr. Yaman. All right. Thank you,
Louis. I promised you I would wait until you got to your remarks to acknowledge our other news for the day. Quarter.
Thank you for doing that.
Yes, as I'm sure most of you or all of you saw, we also announced quarter. Today that Lewis has made a decision to retire later this year. And I want to acknowledge the impact Lewis has quarter. Over the last 9 years, Lewis has played an integral role in building our strong financial position, navigating new business models quarter and just overall supporting the expansion of Dolby experiences. Can't thank Louis enough for everything he's done for Dolby.
He's built a very strong team. He's mentored countless employees both within and beyond the finance organization. Quarter. And Louis is going to be working closely with me to ensure a smooth transition as we work to identify our next CFO. Quarter.
So we've still got Louis. We're going to enjoy that for now. And we'll be happy to quarter. Louis will have more time to focus on his family and of course, Louis, we will wish you all the best.
So, hey, Kevin, is it true that when I first told you, you said good riddance?
I think you might have misinterpreted that. Quarter. Well,
yes, it's a wistful moment, but thank you. Thank you to yourself and the Board, quarter. Investors for most of all for putting up with my bad humor. I can't believe now that they actually have books out there called dad jokes because I think all my jokes quarter. But it has definitely been a privilege to serve as the company's CFO and A lot of great memories.
And since we're all about the experience, I can definitely say that I've had my own unique Dolby experience here. So I look forward to A smooth transition as we move on to the next phase. Company is in great shape, great promise ahead. So I will happily watch from the sidelines.
All right. Well, Louis, I haven't heard anyone disagree with you yet when you talk about the quality of consumer. Quarter. And we are going to make sure and get the most out of your remaining transition time. And with that, I'm sure our audience is eager to get the questions.
We've got a lot of ground. Quarter. And so let's turn it over to Q and A.
All right.
Thank you, ladies and gentlemen. Quarter. Quarter. Please be sure to identify yourself and your firm at the outset. To be clear quarter.
Quarter 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. Your first question comes from the line of Ralph Schackart with William Blair. Your line is open.
Quarter. A couple if I could. Just first on Dolby. Io, Kevin, I know you get this question often, but just now that you've had another quarter to quarter. Just any sense of kind of framing the opportunity for investors?
And then maybe also too just in terms of the price, Obviously, you have some pricing on the website. Just curious sort of what the receptivity has been on that sort of pricing plan, if it's priced effectively and efficiently and just kind of Maybe what are some of the hurdles from, I guess, gaining more use cases and customers going forward?
Quarter. Sure, Ralph. Thanks for the question. Well, look, in terms of the opportunity, we're quarter. We think there's a significant opportunity and the things to focus on really as it relates to our opportunity is quarter.
The increasing demand for real time interactivity and doing that in a high quarter. And we feel like we bring a lot of expertise to bear in addressing that, as well as just the amount of quarter. Media content that is being created and consumed every day in the cloud. And we think we can do a lot to help people quarter. We are excited about quarter.
Our announcement with Box or our partnership with Box, I should say, it said to partner with them. This is going to enable There are customers that enable Adobe integration to have their users able to improve their content easily right where they store their content. And quarter. We've seen a lot of interest in the media and entertainment space. Box has a very large presence in media and entertainment.
So quarter. This is going to allow them to improve their audio much more easily and with a broad range of content. So we're excited about that. And across the board, we're focused on continuing to get more developers signing up, more developers quarter. Engaged with our APIs.
And yes, the pricing, as you point out, is on the website. And yes, so far, quarter. I would say, things are going well as far as that goes.
Great. And then just in terms of cities and states Talking about reopening and capacity constraints eased. Just curious what you're seeing on the cinema side or hearing from exhibitors quarter. And what's contemplated in the guide for cinema for the balance of fiscal 2021?
Quarter. Yes. So I'll start with the high level. Louis, I don't know if you might want to chime in more specifically on the guidance. But quarter.
Ralph, it still is, I mean, as you point out, it's still city by city, country by country. But in general, we've seen quarter. Continued certainly signs of opening up here in the U. S. I think Europe is beginning to get Right back in the right direction.
In Asia, they've been they're more open. What we've seen is that there have been some Very successful releases. I mentioned a few of them in my prepared remarks. But what I would also say is that the box office Has skewed more heavily toward the premium experiences. And so we continue to believe that when people do go back to the movies, quarter.
They're going to want to experience it in the best possible way. So we think the premium experience is where the action is going to be and that's where of course we're always focused. Quarter. So, yes, we do expect obviously there's with all the appropriate qualifications around uncertainty, quarter. We do see things the way we see it right now, we see things continuing to improve throughout the rest of this year,
quarter. And just last, Louis, just want to wish you congratulations on retirement. This call certainly won't be the same with quarter. I'll be on it and hopefully you've reserved a Lucid to enjoy in retirement.
Yes. I quarter. With the pandemic thing, Ralph, I wish I could see the demo. Why should you see the demo is almost ironic, is really hear the demo, quarter. See the car and the demo because from the people who I've heard, who have experienced it, I've heard it's nothing short of phenomenal.
And I believe that there's no reason for them to So yes, I think it'll be nice going forward to see some of these cool things evolve anyway. Thank you.
Quarter. Congrats, Ken. And that's all the questions. Thank you.
Yes. Thanks.
Your next question comes from the line of Steven Frankel call with Colliers. Your line is open.
Good afternoon. Louis, in the back half, are there any material quarter. Changes in timing shifts between Q3 and Q4 versus last year. I know we had a couple of those in the front half.
Quarter. Yes, this year, I think the back half is a little bit more calm. So I would say as a high level, answer no. I think we had more of quarter. That complexity in the first half of this year.
I think we now that we've given you guidance for Q3 and I've given you a fairly tight framework for revenue in Q4, we don't have as
quarter. And Kevin, I'm looking for a little more detail quarter. On the Box relationship, is this like quarter. Are you integrated directly in Box or so that I can just kind of check a box quarter. And get the product or do I have to separately come to Dolby and sign up and once I sign up, it's easy to use within Box?
Quarter. Yes. Thanks, Steve. You sign up with Box. So what happens is if Box quarter.
Has included us as one of their partner integrations. And any IT administrator can sign up with Box quarter. We work directly with Fox to enable their users to access the Dolby's audio enhancement APIs. And at that point then quarter. So the users, the payments running through the enterprise.
And at that point, it's quarter. Pretty much as simple as selecting a file and pressing the Dolby button and it comes back with the Dolby enhanced audio content.
Okay.
Quarter. That's pretty good. What have you found is the most effective channel for recruiting developers so far with IL?
Quarter. Since we launched Dolby. Io, we've been in virtual mode, but we have been quarter. Participating in an increasing number of events, whether that's South by Southwest or university hackathons and getting people engaged quarter. And then looking for that to spread by word-of-mouth amongst developers.
Quarter. Obviously, some of our wins have drawn attention, which brings more people in to explore. And I think as we look forward, I think there are there will be quarter. Increased opportunities to based on the other great things that are going on around Dolby to find ways to authentically connect with developers and get more people coming to learn what we can do for them because as I said earlier, quarter. There is a massive amount of content, an increasing number of minutes of interactivity.
Quarter. And what we're confident about is that we can improve the quality of those like nobody else. Quarter.
Great. And then on Vision, any update on progress with live
I'm pausing Steve because I don't know that I'm As current on that, but we continue to be engaged across a number of opportunities to get larger scale. To date, it's largely been quarter. Many event specific kind of broadcast, but especially now that We're starting to come out the other side of the pandemic so that you get more live events, which is often the first kind of protocol for that kind of thing. Quarter. And some of the restrictions being lifted is one of the dynamics around both Atmos and Vision In new events, was just that in the beginning it requires a few more people and everybody wanted to minimize the number of quarter.
So we continue to have a number of private and public kind of event streaming in Envision and or Atmos. And we definitely see some of that activity beginning to pick up again.
Thank you. And I'll echo Ralph's quarter.
Thank you, Steve. Been great working with you.
Quarter. Your next question comes from the line of Paul Chung with JPMorgan. Your line is open.
Hi, thanks
for taking my questions. So just another follow-up on Box. So quarter. So how do we size the opportunity here just taking their audio file base and the growth rates that you're seeing or Uploads were up 50%. What if we assume kind of 100% usage of quarter.
Adobe kind of media processing API and how big is that and how to size that? And then quarter. What about on the video side? I didn't see Vision mentioned there any potential for Vision there as well?
Quarter. So as it relates to the first part of your question, it's early days. We're just out of the gate here with the Box integration. But again, we're very excited about it quarter because of the opportunity to work with Fox and their substantial presence in quarter. Media and Entertainment.
I mean we've had a lot of interest in that space. To give you quarter. Some hypothetical examples of how someone might want to employ our media APIs in that world is you could imagine A production company that has people doing voiceovers around the world with varied degrees of quality that can all be quarter run through our APIs to get a high level of quality. It could be podcasters or newscasters are doing quarter. Interviews using their phone outside.
You could employ Dolby to clean that up and there are endless examples because it can apply to a lot of different content. Quarter. But we're right out of the gate. So, we're going to be partnering closely with Fox quarter to show their customers what we can do so that they can begin enabling that and getting usage. Quarter.
And I think I'm sorry, can you remind me the second part
of your question?
Video.
Oh, vision.
Okay.
Yes. So, yes, right now, quarter. The interactivity is, of course, audio and video. Our media APIs are focused on audio enhancement that quarter. You can be sure that across our portfolio of APIs, as we look at our roadmap, we
quarter. Okay, great. And the use case makes quarter. Great sense. Any other use cases can you share that would fit well with this business?
Or is there a use case for gaming apps quarter. And time spent there or even live streaming audio or video or not even live?
Quarter. In the broadest sense, I'm going to say yes and yes as it relates to potential applications. To give you a couple of examples, quarter. We had an announcement recently, I think it was last week or rather a customer of ours had an announcement. Quarter.
Display is a social media company which allows their creative community to share in revenue from advertising And they have taken advantage of dolby. Io to enable those creators to interact directly with their fans. So that's kind of a very social live Example of what can be done. We're also looking at all forms of virtual events. We're working with a company by the name of Home Jam, which also connects artists with fans for live virtual quarter.
Concerts and also kind of special experiences. So those are some of the more examples of what we're doing. But again, it's Where people are looking to have greater real time interactivity and high quality and improve the quality of their video content across the board. Quarter.
Got you. And then last question for Louis and I will miss the dad jokes, but I'll give you a free cash flow question. Quarter. You had a pretty strong performance in the first half, kind of relative to previous years. Should we quarter.
Is that kind of the second half to be kind of higher than the first half similar to how you've seen over the past couple of years? Quarter. How do we think about kind of seasonality, given revenue guide is slightly lower in the second half versus first half? Thanks.
Yes. Quarter. Probably the safe since I didn't give a projection for cash flow because probably the biggest swing factor is things like collection of receivables as opposed to the core business. I would say that your question is spot on in the sense that now that we've lapped 606 and left that 1st year in our rearview quarter. You can see that our cash flows are now much more highly correlated to our earnings.
So I'd say going forward without Paul necessarily picking on any one quarter, quarter. As our revenue and earnings grow, I firmly believe that you'll see that translated into equivalent amount of Cash flow as well because we're now all normalized on the whole 606 extra quarter of balance sheet on there because of the estimated revenue and all that. So that's quarter. You're starting to see these quarters where the cash flow from operations is highly linked to what's the pattern in our
quarter.
Your next question comes on the line of Jim Kohn with Barrington Research. Your line is open.
Thanks. Dolby is traditionally In terms of maybe a several year lead time from technology introduction to when it begins to contribute meaningfully, I think over the past couple of years, we've seen Atmos and Vision do that. Is IO The current version of that or are there other things in mind like music that you think of in those terms? And on a related basis with The pricing is obviously going to be a different type of pricing than the traditional Do you think of it in terms of creating contributions in a different way that might match up with the type of pricing you've had or might have been even better when the usage gets more robust. How would you prior question about framing out the opportunity, I'd like to know a little bit more about that as well.
Quarter. Sure. So thanks, Jim. To take your last question first, again, the way to think about it is what quarter. What we're looking to do is hour as many minutes of interactivity as possible and to improve as quarter.
Enhance the quality of as many media minutes of content as possible because the way we earn revenue This all starts from our long held belief that the decades experience that we have doing the best in audiovideo quality. The IP that we have and the know how that we have quarter. Can be applied beyond the realms of premium entertainment, movies and TV, gaming, music and apply to quarter. All the ways, all the apps and services that we're using every day. So that's what we see as the opportunity.
And to your point quarter. On kind of cycle times, yes, bringing up an ecosystem like bringing Dolby Vision to life for the first time or Dolby Atmos to life for the first time. You've experienced a couple of times with us, the kind of length of time it takes to bring up the 1st content partner, the 1st device partner and build from there. Quarter. I would say that the subsequent cycles might be somewhat shorter than that initial cycle.
In other words, applying it to quarter. But in the world of adobe. Io, that holds the promise of being a much kind of faster quarter experiment and learn cycle time. So, it enables us to put new capabilities quarter. On the developer platform with a goal of learning quickly how developers are responding to it, what more they like to see quarter and how we can apply our know how, our experience and in some cases IP that we already have.
In some cases it will spawn new innovation
quarter. Okay. And one other area in the Dolby Cinema. AMC has been your primary partner in the United States. It's had a number of It's focused on recently.
I was wondering if there's room for another partner in the U. S. Or if you're pretty much quarter. Tied to that AMC being the 1 and only partner in terms of Dolby Cinema here. Quarter.
And then in markets outside the U. S, the other way you can grow is to develop new partners in those markets as well. I wonder if you could give any
quarter. Yes. Clearly, this has been a difficult We've come through a pretty difficult time for the industry. So 1st and foremost, they've been focused on keeping up The implications of the pandemic, but at the same time, we have remained very much engaged with our partners. I mentioned in my prepared remarks that we did add a partner in China.
And we added about 4 new screens. Obviously, quarter. That was tempered by the pandemic, but there's still like I said, I think that when people come back, we're already seeing that the box office quarter has been skewing pretty notably more toward premium experiences than pre pandemic quarter. And that's consistent with our thesis that when people do come back, they're going to want to experience it in the best possible way.
Okay. And aside from the one in China, that's pretty much where you are at this stage, but quarter. That could be another opportunity.
Yes, that's the only partner we had at this quarter. Although we have multiple as you know, we have multiple partners
quarter. I wish you well and whatever your next venture is.
Thanks, Jim. Appreciate it. Quarter. Thank
you. There are no further questions at this time. I would like to turn the conference
quarter. Great. Well, thank you everybody for joining us. Quarter. We very much appreciate the questions.
And of course, we look forward to keeping you updated on our progress.
Quarter. This concludes today's conference call. You may now disconnect.