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DOLBY LABORATORIES, INC. MANAGEMENT’S DISCIONAL AND ANALYSIS OF FINANCIAL SITUATION AND RESULTS OF OPERATIONS (Form 10-K)

The following discussion contains forward-looking statements that are subject to
risks and uncertainties. Actual results may differ materially from those
referred to herein due to a number of factors, including but not limited to key
challenges listed below and risks described in Part I, Item 1A, "Risk Factors"
and elsewhere in this Annual Report on Form 10-K. We disclaim any duty to update
any of the forward-looking statements after the date of this Annual Report on
Form 10-K to conform our prior statements to actual results.

Investors and others should note that we disseminate information to the public
about our company, our products, services and other matters through various
channels, including our website (www.dolby.com), our investor relations website
(http://investor.dolby.com), SEC filings, press releases, public conference
calls, and webcasts, in order to achieve broad, non-exclusionary distribution of
information to the public. We encourage investors and others to review the
information we make public through these channels, as such information could be
deemed to be material information.

Executive summary

COVID-19


The COVID-19 pandemic triggered worldwide shutdowns, supply chain constraints,
and other disruptions which in turn have negatively affected the global economy,
including consumer purchasing activity. It is unclear how demand for consumer
products that include our technologies may change in response to the ongoing
pandemic. The issues and circumstances relating to COVID-19 continue to change
and are difficult to predict. We continue to monitor the evolving situation and
the impact on our business.

The outbreak of COVID-19 has also affected many of our partners, resulting in
the disruption of consumer products' supply chains, shortages of certain
semiconductor components, and delays in shipments, product development, and
product launches. Consumer demand for products that include our technologies may
continue to be negatively impacted due to economic uncertainty resulting from
COVID-19. These factors may cause delays in the adoption of our technologies by
partners. Further, we may be negatively impacted by delays in transaction cycles
and our recoveries efforts due to ongoing global restrictions related to the
pandemic.

The cinema market has been, and we expect to continue to be, adversely impacted
by COVID-19. At various times, our exhibition partners and customers have had to
either partially or fully discontinue operations. Box office receipts at Dolby
Cinema sites and general demand for our cinema products and services by our
broader exhibition partners have been, and we expect to remain, lower than that
of pre-pandemic levels. Most cinema locations have been permitted to resume
operations, but many such locations are operating under restricted capacity.
Further, the spread of variants of SARS-CoV-2 may result in renewed government
responses. The situation is continuing to evolve, and we cannot predict how or
to what extent the cinema market, or other markets we target, may be impacted
during the course of the pandemic and long-term.

At Dolby, we continue to implement business strategies that support the health
and safety of our employees and enable business continuity. We have implemented
a flex work program that enables connection and effective work delivery in a
hybrid work environment. We enable our employees with the tools and
infrastructure they need to carry on our operations and progress the business
forward in a hybrid working environment. We expect COVID-19 will continue to
have an impact for the foreseeable future, with varying degrees of impact
depending on geographic location. The degree of impact on our business will
depend on several factors. Further discussion of the potential impacts of
COVID-19 on our business can be found in Part I, Item 1A "Risk Factors."

macroeconomic conditions


The current macroeconomic environment has negatively impacted many of our
licensees and that directly impacts our financial results. Our revenue has been
impacted by macroeconomic conditions, including but not limited to, rising
inflation, rising interest rates, COVID-19 related restrictions, supply chain
constraints, increased shipping costs, international conflicts, reduced
discretionary consumer spending, and reduced new product investment by our
customers caused by higher interest rates and lower demand. The future
implications of these macroeconomic conditions on our business, results of
operations and overall financial position remain uncertain. Across all of our
markets, these conditions may affect consumer demand for devices and services,
our partners' ability to manufacture devices, and the timing of adoption of our
technologies into new products by partners and licensees. Further
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A discussion of the potential effects of these macroeconomic impacts on our business can be found in Part I, Item 1A “Risk Factors”.

Expanding our leadership in audio and imaging experiences


We are focused on expanding our leadership in audio and imaging solutions for
premium entertainment content by increasing the number of Dolby experiences that
people can enjoy, which will drive revenue growth across the markets we serve.
We can increase our value proposition and create opportunities by broadening
Dolby technologies into new types of content, such as music, gaming, live
sports, and user-generated content. We are also beginning to make our audio and
imaging technologies available for content beyond premium entertainment through
Dolby.io, creating new revenue generating opportunities. Following is a
discussion of the key markets that we address and the various Dolby technologies
and solutions that serve these markets.

License


The majority of our licensing revenue is derived from the licensing of audio and
imaging technologies for premium entertainment playback. Our audio technologies
are primarily comprised of DD+, Dolby Atmos, AC-4, and our AAC and HE-AAC
technologies. Our imaging technologies are primarily comprised of Dolby Vision
and our AVC and HEVC technologies. Licensing revenue is primarily driven by the
adoption of our technologies on devices and the number of devices shipped by
licensees. DD+, AC-4, and our AAC and HE-AAC audio patents (collectively, our
"foundational audio technologies") have broad penetration across a diverse set
of devices and end markets. Our revenue from these technologies is primarily
driven by device shipments from licensees, and as such, is impacted by consumer
spending. Other factors, such as global supply constraints or device lifecycles,
may also impact revenue from these technologies. In the future, we expect
revenue from our foundational audio technologies to generally reflect market
trends in device shipments. The remaining portion of our licensing revenue is
derived from offerings such as Dolby Vision, Dolby Atmos, our imaging patents,
and Dolby Cinema. These offerings have not been in the market as long as our
foundational audio technologies, thus revenue growth is primarily driven by
increased adoption and the addition of new licensees.

The availability of content in Dolby formats is an important part of creating
the ecosystems that drive adoption of our technologies within a wide range of
devices. Our audio and imaging technologies have a strong presence within movie
and episodic content through adoption across content creators and streaming
services. The availability of content on these platforms has driven strong
adoption in devices such as TVs, STBs, and speaker devices. Our audio and
imaging technologies are also widely available through many forms of
distribution, including broadcast TV, streaming, and optical disc playback.

Major streaming partners and services such as Netflix, Disney+, Apple TV+,
Amazon, HBO Max, and Paramount+ continue to enable content in Dolby Vision and
Dolby Atmos. These streaming services launch local content in Dolby formats
internationally. As we see an increase in new local content, we increase our
value proposition for adoption of Dolby Vision and Dolby Atmos across devices in
all market segments.

We have also enabled a broader range of content, such as music, gaming, live
sports, and user-generated content. In music, in fiscal 2022, Dolby Atmos music
became available on Tencent Music's QQ Music streaming service in China and on
Melon, a streaming service in South Korea. In gaming, in fiscal 2022, Xbox's
Halo Infinite was released in both Dolby Vision and Dolby Atmos, and popular
mobile game PUBG Mobile was made available to play in Dolby Atmos in some
markets. In addition, Moong Labs announced the launch of its popular mobile game
"Epic Cricket - Big League" in Dolby Atmos for Android smartphone. In live
sports, the 2022 UEFA Champions League was broadcast in Dolby Vision and Dolby
Atmos in some markets, and the 2023 UEFA Champions League will again be
broadcast in Dolby Vision and Dolby Atmos. In addition, during fiscal 2022, the
French Open and the German Supercup final match was broadcast in Dolby Atmos.

We have worked with industry leaders to enhance these forms of content through
the use of our technologies, creating additional value for the adoption of Dolby
within devices such as mobile, PC, gaming consoles, and automotive.

Here are the highlights from fiscal 2022 and the key challenges related to audio and imaging licensing by market.

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Broadcasting


Highlights: We have an established global presence with respect to our DD+ and
HE-AAC audio technologies in broadcast services and devices. We have expanded
our offerings in the broadcast market through technologies such as Dolby Atmos
and AC-4, Dolby Vision, as well as AVC and HEVC imaging technologies which we
license through patent pools.

We work with many TV OEMs and strategic partners to enable and promote Dolby
Vision and Dolby Atmos experiences within their TV lineups. Many such partners
have continued to expand their support of the combined Dolby Vision and Dolby
Atmos experience. For example, in fiscal 2022, LG launched new TVs that support
Dolby Vision, Dolby Vision IQ, and Dolby Atmos, and Samsung launched new TVs
that support Dolby Atmos. Also in fiscal 2022, Hisense launched their ULED TVs
that support Dolby Vision IQ and Dolby Atmos, and launched their laser TV
projector that supports Dolby Vision and Dolby Atmos, while TCL launched new TVs
with Dolby Vision, Dolby Vision IQ, and Dolby Atmos. We are also seeing more STB
providers adopting Dolby Vision in their devices.

Key Challenges: Our pursuit of new licensees and further adoption of our
technologies by existing licensees may be impacted by a number of factors. We
must continue to present compelling reasons for consumers to demand our audio
and imaging technologies, including ensuring that there is a breadth of
available content in our formats and such content is being widely distributed.
To the extent that OEMs do not incorporate our technologies in current and
future products, our revenue could be impacted. Further, in certain countries,
such as China, we face difficulties enforcing our contractual and IP rights,
including instances in which our licensees fail to accurately report the
shipment of products using our technologies. Additionally, we face geopolitical
challenges including changes in diplomatic and trade relationships, trade
protection measures, and import or export licensing requirements.

cell phone


Highlights: We continue to focus on adoption of our technologies across major
mobile ecosystems, including Apple and Android. HE-AAC and HEVC are widely
adopted audio and video technologies across mobile devices, and we offer these
technologies through our patent licensing programs. We also continue to focus on
expanding adoption of our DD+, AC-4, Dolby Atmos, and Dolby Vision technologies
in the mobile market.

The breadth of mobile devices supporting Dolby technologies continues to
increase globally. In fiscal 2022, Xiaomi launched or announced a number of new
smartphones supporting Dolby Vision and Dolby Atmos, including the new 12S
series, the first Android phone capable of recording video in Dolby Vision.
Additionally, in fiscal 2022, OnePlus launched new Ace Pro smartphones that
support Dolby Atmos. For tablets, in fiscal 2022, ASUS released a new tablet
that supports Dolby Vision and Dolby Atmos, and Vivo launched the Vivo Pad,
which is the first Vivo product with Dolby Vision and Dolby Atmos.

Key Challenges: Growth in this market is dependent on several factors. Due to
short product life cycles, mobile device OEMs can readily add or remove certain
of our technologies from their devices. Our success depends on our ability to
address the rapid pace of change in mobile devices, and we must continuously
collaborate with mobile device OEMs to incorporate our technologies. The mobile
market is heavily concentrated, so we rely on a small number of partnerships
with key participants in this market. If we are unable to maintain these key
relationships, we may experience a decline in mobile devices incorporating our
technologies. To the extent that OEMs do not incorporate our technologies in
current and future products, our revenue could be impacted. We must also
continue to support the development and distribution of Dolby-enabled content
via various ecosystems. Additionally, we face geopolitical challenges including
changes in diplomatic and trade relationships, trade protection measures, and
import or export licensing requirements.

Electronics consumers


Highlights: We have an established presence in the home entertainment market
across devices such as AVRs, soundbars, wireless and smart speakers, DMAs, and
Blu-Ray players, through the inclusion of our DD+ technology, and increasingly
through the inclusion of Dolby Atmos and Dolby Vision. AAC and HE-AAC
technologies also have broad adoption through our patent licensing programs. We
continue to focus on expanding the availability of Dolby technologies to new
devices. In fiscal 2022, Samsung, Hisense, Prism+, and Bose all launched new
soundbar models that support Dolby Atmos.

Key challenges: We must continue to provide consumers with compelling reasons to demand our technologies wherever they enjoy entertainment content, while promoting creativity and broad availability

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content in our formats. To the extent OEMs do not integrate our technologies into current and future products, our revenue could be affected. In addition, we face geopolitical challenges including changes in diplomatic and trade relations, trade protection measures, and import or export licensing requirements.

personal computers


Highlights: DD+ continues to enhance audio playback in both Mac and Windows
operating systems, including native support in their respective Safari and
Microsoft Edge browsers. Dolby's presence in these browsers enables us to reach
more users through various types of content, including streaming video
entertainment. A number of PCs from partners such as Apple, Lenovo, Dell,
Samsung, and ASUS also support Dolby Vision and/or Dolby Atmos, with continued
expansion of applications through music, streaming, and gaming. In addition, in
fiscal 2022, Dell and ASUS released their latest laptop models that now support
Dolby Vision and Dolby Atmos.

Key Challenges: PC revenue from audio technologies such as DD+ has been impacted
by a decline in the portion of PCs that have optical disc functionality in
recent years, which has resulted in a decline in our ASPs, and we expect this
decline in ASPs to continue. We must continuously collaborate and maintain our
key partnerships with PC manufacturers to incorporate our technologies, and we
must continue to support the development and distribution of Dolby content via
various ecosystems. Additionally, we face geopolitical challenges including
changes in diplomatic and trade relationships, trade protection measures, and
import or export licensing requirements.

other markets


Highlights: DD+ is incorporated in the Xbox and PlayStation gaming consoles that
support gaming content and streaming for movie and television content. The Xbox
Series X and Series S gaming consoles support Dolby Vision and Dolby Atmos for
streaming and gaming content. Additionally, our technologies continue to be
incorporated into the latest headphones by various OEMs. In fiscal 2022, Cosmic
Byte, Alienware, and Zebronics launched headsets that support Dolby Atmos.

We also generate revenue from the automotive industry primarily through disc
playback devices as well as other elements of the entertainment system, and more
recently through the adoption of Dolby Atmos Music. In fiscal 2022,
Mercedes-Benz announced they would be adopting Dolby Atmos in their
Mercedes-Maybach models, the EQS and EQS SUV, as well as the EQE and the S-Class
with support for Dolby Atmos Music provided by Apple Music. Also in fiscal 2022,
Chinese electric car manufacturers NIO, Li Auto, and XPENG launched multiple car
models that support Dolby Atmos. Recently, Polestar and Lotus announced that
their latest models will be the first of their car models to support Dolby
Atmos.

Key Challenges: Consumer demand for devices in the gaming industry is impacted
by anticipation of console refresh cycles. In addition, the gaming console
market has competition from mobile devices and gaming PCs, which have faster
refresh cycles and appeal to a broader consumer base. Also, automotive revenue
has been negatively impacted by a decline in the portion of cars that have
optical disc playback in recent years. In addition, recent shortages of certain
semiconductor components could result in lower implementation of our
technologies in vehicles by automotive manufacturers. If OEMs do not incorporate
our technologies in current and future products, our revenue will face downward
pressure. Additionally, we face geopolitical challenges including changes in
diplomatic and trade relationships, trade protection measures, and import or
export licensing requirements.

In addition to licensing revenue derived from the licensing of audio and imaging
technologies into the markets discussed above, we offer our audio and imaging
technologies to create Dolby experiences through Dolby Cinema.

Dolby cinema


Highlights: We continue to expand our global presence for Dolby Cinema, with
over 280 open Dolby Cinema sites located in the U.S. and internationally,
subject to capacity restrictions per local regulations. The breadth of motion
pictures for Dolby Cinema continues to grow with over 400 theatrical titles in
Dolby Vision and Dolby Atmos having been announced or released from all of the
major studios as of the end of fiscal 2022.

Key Challenges: While the premium large format market for the movie industry has grown, Dolby Cinema is rivaling other offerings out there. Our success depends on our partners and their success,

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and our ability to differentiate our offering, deploy new sites in accordance
with plans, and attract and retain a global viewing audience. In addition, the
success of our Dolby Cinema offering is tied to global box office performance
generally. COVID-19 has had a significant effect on theatrical exhibition, which
could impact the financial viability of our key partners. The response to
COVID-19 including the closure of cinemas in China and government-imposed
restrictions has had a negative impact on our cinema-related revenue and
consumer demand, although consumer demand for the cinema has improved recently.
It is uncertain whether consumer demand for the cinema will return to previous
levels.

PRODUCTS AND SERVICES

A majority of our products and services revenue is derived from the sale of
audio and imaging products for the cinema, television, broadcast, communication,
and entertainment industries. Revenue from our developer platform, Dolby.io, is
also included in products and services.

Cinema products and services


Highlights: To help enable the playback of content in Dolby formats, we offer a
range of servers, which include the IMS3000 (an integrated imaging and audio
server with Dolby Atmos), and audio processors, such as the CP950, to cinema
exhibitors globally. Dolby Atmos has been adopted broadly across studios,
content creators, post-production facilities, and exhibitors. As of the end of
fiscal 2022, there are over 7,000 Dolby Atmos screens installed or committed and
over 2,200 Dolby Atmos theatrical titles have been announced or released.

We also offer a variety of other cinema products, such as the Dolby Multichannel
Amplifier and our high-power flexible line of speakers. These products allow us
to offer exhibitors a more complete Dolby Atmos solution that is often more cost
effective than other commercially available options.

Key Challenges: Demand for our cinema products is dependent upon our partners
and their success in the market, industry and economic cycles, box office
performance, and our ability to develop and introduce new technologies, further
our relationships with content creators, and promote new cinematic audio and
imaging experiences. A significant portion of our growth opportunity lies in
international markets, such as China, which are subject to economic risks as
well as geopolitical risks. Additionally, weakness in general economic
conditions due to inflation, recession, pandemic or other worsening economic
conditions could have a negative impact on our cinema-related revenue due to
reduced consumer discretionary spending. We may also be faced with pricing
pressures or competing technologies, which would affect our revenue. We have
also experienced supply chain shortages and increased shipping costs that have
created challenges to maintain the sufficient supply of cinema products to meet
the demand in the market.

Additionally, the effects of COVID-19 such as the closure of cinemas and public
health mandates have had a negative impact on Dolby Cinema attendance. As demand
continues to recover, supply chain constraints may impact our ability to provide
cinema products and services to our customers. COVID-19 has also negatively
impacted the financial health of our cinema customers and partners. We continue
to closely monitor the ongoing impact of these conditions.

Developer platform services


Highlights: We are focused on bringing our expertise in media and communications
to a broader range of content and digital experiences. For example, we are
increasing our engagement with new customers across different industries through
our developer platform, Dolby.io, that enables developers to access our
technologies through APIs. The current offerings include audio and video APIs
for building high-quality communications, media, and streaming solutions.
Following the initial launch of Dolby.io in fiscal 2020, we have seen an
expansion of the use cases for the platform. Examples include virtual live
performances, online and hybrid events, social audio, premium education, gaming,
sports, and content creation and production. Dolby.io provides tools to help
developers create immersive experiences through apps and services with high
quality audio and video, spatialized sound, and deliver live-streamed content
with low latency.

Key Challenges: Dolby.io is an early stage business, and it is uncertain when or
if it will be a material revenue driver. Our success in this market will depend
on the number of developers we are able to attract and retain, the volume of
usage of the service, and our ability to monetize our services. In addition, the
development and maintenance needed to provide a reliable and scalable platform
may require us to develop new skills internally for our current employees or
hire external specialized talent. Although the market for online experiences has
been growing, Dolby's API technologies compete with other offerings.
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Accounting policies and significant estimates


Our consolidated financial statements and accompanying notes are prepared in
accordance with U.S. GAAP, pursuant to SEC rules and regulations. The
preparation of these financial statements requires us to establish accounting
policies and make certain estimates and assumptions that affect the reported
amounts of assets and liabilities, revenue and expenses. The SEC considers an
accounting policy and estimate to be critical if it is both important to a
company's financial condition or results of operations and requires significant
judgment by management in its application. On a regular basis, we evaluate our
assumptions, judgments, and estimates, and historically, actual results have not
differed significantly from them. If actual results or events differ materially
from our judgments and estimates, our reported financial condition and results
of operation for future periods could be materially affected. We have reviewed
the selection and development of the critical accounting policies and estimates
discussed below with the Audit Committee of our Board of Directors.

Revenue check


We derive our revenue primarily from the licensing of our technologies and
patents. In determining how revenue should be recognized, a five-step process is
used, which requires judgment and estimates within the revenue recognition
process. Generally, revenue is recognized upon transfer of control of promised
products, services or IP rights to customers in an amount that reflects the
consideration that we expect to receive in exchange for those products, services
or licensing of the IP rights. The primary judgments include estimating
sales-based revenue in advance of receiving statements from our licensees,
estimating variable consideration, identifying the performance obligations in
the contract, and determining whether the performance obligations are distinct,
and allocating consideration accordingly.

Most of our licensing arrangements are structured as sales-based whereby we are
paid a unit-based royalty. The unit-based sales data that triggers the royalty
obligation is generally reported to us in the quarter after triggering the
royalty obligation. We apply the royalty exception to these arrangements, which
requires that we recognize sales-based royalties at the later of when the sales
occur based on our estimates or the completion of our performance obligations.
Our estimates of royalty-based revenue take into consideration the macroeconomic
effect of global events, such as inflation, COVID-19, or other economic
conditions, which may impact supply chain activities as well as demand for
shipments. These estimates also involve the use of historical data and judgment
for several key attributes including industry estimates of expected shipments,
the percentage of markets using our technologies, and average sale prices.
Generally, our estimates represent the current period's shipments for which we
expect our licensees to submit royalty statements in the following quarter. Upon
receipt of royalty statements from the licensees with the actual reporting of
sales-based royalties that we previously estimated, we record a favorable or
unfavorable adjustment based on the difference, if any, between estimated and
actual sales.

We also enter into fixed and guaranteed licensing fees arrangements, which
require the licensee to pay a fixed, non-refundable fee. In these cases, control
is transferred and the transaction price - the amount we expect to be entitled
to in exchange for the license right - is recognized upon the later of contract
execution or the effective date. Transaction price is determined at contract
execution and, to the extent variable consideration applies, is updated each
subsequent reporting period until the completion of the contract. We evaluate
whether other distinct performance obligations exist, such as PCS, and determine
the stand-alone selling price based on the actual selling prices made to
customers. If the performance obligation is not sold separately, we estimate the
stand-alone selling price. We do so by considering market conditions such as
competitor pricing strategies, customer specific information and industry
technology lifecycles, internal conditions such as cost and pricing practices,
or applying the residual approach method when the selling price of the good,
most commonly a license, is highly variable or uncertain. In addition, we
evaluate whether a significant financing component exists when we recognize
revenue in advance of customer payments that occur over time and extend beyond
one year. In general, if the payment arrangements extend beyond the first year
of the contract, we treat a portion of the payments as a financing component.
The discount rate used for each arrangement reflects the rate that would be used
in a separate financing transaction between us and the licensee at contract
inception and takes into account the credit characteristics of the licensee and
market interest rates as of the date of the agreement. If we assess the
financing component to be significant to the contract, the amount of fixed fee
revenue recognized at the beginning of the license term will be reduced by the
calculated financing component. The portion related to the financing component
is recorded as interest income, and is not material to our consolidated
financial statements.

For additional information, see Note 3 “Recognition of Revenue” to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K.

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The impact of new accounting standards that have not yet been adopted


For information on recent accounting standards that have not been adopted yet
and the impact of these standards on our consolidated financial statements,
refer to Note 2 "Summary of Significant Accounting Policies" to our consolidated
financial statements in this Annual Report on Form 10-K.

operations results


For each line item included on our consolidated statements of operations
described and analyzed below, the significant factors identified as the leading
drivers contributing to the overall fluctuation are presented in descending
order of their impact on the overall change (from an absolute value
perspective). This discussion and analysis highlights comparisons of material
changes in the consolidated financial statements for the years ended
September 30, 2022 and September 24, 2021. For the discussion and analysis
highlighting comparisons of material changes in the consolidated financial
statements for the years ended September 24, 2021 and September 25, 2020, refer
to Part II, Item 7 "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included in our Annual Report on Form 10-K for the
year ended September 24, 2021, which is incorporated herein by reference. Note
that adjustments related to previously under-reported sales-based royalties as
well as unlicensed settlement activity, are collectively referred to as
"recoveries." Amounts displayed, except percentages, are in thousands.

revenue and gross margin

License


Licensing revenue consists of fees earned from licensing our technologies to
customers who incorporate them into their products and services to enable and
enhance audio and imaging capabilities. The technologies that we license are
either internally developed, acquired, or licensed from third parties. A
significant portion of our licensing revenue pertains to customer-shipment
royalties that we recognize based on estimates of our licensees' shipments. To
the extent that shipment data reported by licensees differs from estimates we
made and recorded, we recognize an adjustment to revenue for such difference in
the period we receive the reported shipment data.

Our license cost mainly consists of amortization of certain intangible assets purchased and intangible assets acquired in business combinations, depreciation, third party equity obligations, and patent pool fees.

                                                            Fiscal Year Ended                                    Change
                                                                                     September 30,         September 24,
Licensing                                                                                2022                  2021                              $              %
Revenue                                                                               $1,164,533            $1,214,147                       $(49,614)         (4)%
Percentage of total revenue                                                               93%                   95%
Cost of licensing                                                                       61,597                55,421                           6,176           11%
Gross margin                                                                           1,102,936             1,158,726                       (55,790)          (5)%
Gross margin percentage                                                                   95%                   95%


                                                              Fiscal Year Ended
Licensing Revenue By Market                              September 30, 2022                      September 24, 2021
Broadcast                                                                      $   433,992                 37  %       $   475,648           39  %
Mobile                                                                             238,735                 21  %           261,232           22  %
CE                                                                                 186,285                 16  %           181,944           15  %
PC                                                                                 151,079                 13  %           141,919           12  %
Other                                                                              154,442                 13  %           153,404           12  %
Total licensing revenue                                                        $ 1,164,533                100  %       $ 1,214,147          100  %


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Factor                                   Licensing Revenue                                          Gross Margin
                           Lower foundational audio revenue due to lower TV unit
Broadcast           â      shipments globally and lower recoveries, partially offset
                           by higher adoption of Dolby Vision and Dolby Atmos
                           technologies in TVs and STBs
                           Lower revenue due to timing, including recoveries,
Mobile              â      partially offset by higher adoption of Dolby Vision and
                           Dolby Atmos technologies and new licensees in our imaging
                           patent programs
                           Higher adoption of Dolby Vision and Dolby Atmos
PC                  á      technologies and new licensees in our imaging patent          ßà      No significant fluctuations
                           programs, and higher recoveries, partially offset by lower
                           unit shipments
CE                  á      Higher adoption of Dolby Atmos and Dolby Vision across
                           devices, partially offset by lower unit shipments


                           Higher Dolby Cinema revenue due to more screens being open
Other              ßà      and strong box office performance in fiscal 2022,
                           partially offset by lower gaming and automotive revenue


Products and Services

Products revenue is generated from the sale of audio and imaging hardware and
software products for the cinema, television, broadcast and entertainment
industries. Also included in products revenue are amounts relating to certain
Dolby Cinema arrangements that are considered sales-type leases that involve
fixed or minimum fees. Cost of products includes materials, labor, manufacturing
overhead, amortization of certain intangible assets, and certain third party
royalty obligations.

Services revenue consists of fees charged to support theatrical and television
production for cinema exhibition, broadcast, and home entertainment, including
equipment training and maintenance, mixing room alignment, equalization, as well
as audio, color, and light image calibration. Services revenue also includes PCS
for products sold and equipment installed at Dolby Cinema theaters operated by
exhibitor partners and support for the implementation of our technologies into
products manufactured by our licensees. Also included in services revenue are
amounts generated through our Dolby.io developer platform. Cost of services
consists of personnel and personnel-related costs for providing our professional
services, software maintenance and support, external consultants, and other
direct expenses incurred on behalf of customers.
                                                               Fiscal Year Ended                                    Change
                                                                                        September 30,         September 24,
Products and Services                                                                       2022                  2021                             $              %
Revenue                                                                                    $89,260               $67,109                        $22,151          33%
Percentage of total revenue                                                                  7%                    5%
Cost of products and services                                                              79,763                74,604                          5,159            7%
Gross margin                                                                                9,497                (7,495)                        16,992          (227)%
Gross margin percentage                                                                      11%                  (11)%


Factor                             Products and Services Revenue                                     Gross Margin
                                   Increased demand for cinema equipment as the              Higher gross margin primarily due to
Products                 á         exhibitor market continues to recover following     á     higher products revenue
                                   COVID-19-related shutdowns
                                                                                             Lower gross margin due to increased
                                   Higher services revenue primarily due to revenue          warranty expense on Dolby Cinema
Services                 á         from our cloud initiatives such as Dolby.io,        â     equipment, higher contractor expenses,
                                   cinema production services, partially offset by           and higher computer equipment and web
                                   lower Dolby Voice hardware services                       hosting fees for our cloud
                                                                                             initiatives, offset by higher revenue


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Operating Expenses

Research and Development

R&D expenses consist primarily of employee compensation and benefits expenses,
stock-based compensation, contractor and contract labor costs, depreciation and
amortization, facilities costs, costs for outside materials, and information
technology expenses.

                                                                Fiscal Year Ended                                    Change
                                                                                         September 30,         September 24,
                                                                                             2022                  2021                            $            %
Research and development                                                                   $261,174              $253,640                        $7,534         3%
Percentage of total revenue                                                                   21%                   20%


Category                                                         Key Drivers
                                          Lower costs of $10.5 million due to our annual bonus program,
Compensation & Benefits             â     partially offset by higher

Payroll calculation due to the extra week

                                          in the current fiscal year
Stock-based Compensation            á     Higher costs of $7.0 million due to increased fair value of RSUs
Systems, Telecommunications and     á     Higher costs of $4.1 million primarily due to higher cloud hosting
Computer Equipment                        costs


Sales and Marketing

S&M expenses consist primarily of employee compensation and benefits expenses,
stock-based compensation, marketing and promotional expenses for events such as
trade shows and conferences, marketing campaigns, travel-related expenses,
consulting fees, facilities costs, depreciation and amortization, information
technology expenses, and legal costs associated with the protection of our IP.
                                                               Fiscal Year Ended                                    Change
                                                                                        September 30,         September 24,
                                                                                            2022                  2021                             $            %
Sales and marketing                                                                       $358,716              $332,671                        $26,045         8%
Percentage of total revenue                                                                  29%                   26%


Category                                                       Key Drivers
Legal, Professional, &                Higher costs of $13.1 million primarily due to legal support for
Consulting                      á     patents and licensee audits, and 

higher consulting expenses for

                                      increased development of digital 

Marketing software

                                      Higher costs of $6.0 million 

This was mainly due to an increase in the fair value of inventory-based compensation – RSUs, which was offset by lower costs of $1.4 million Because of the fewer outstanding

                                      unearned options
Travel                          á     Higher costs of $4.5 million for 

Company travel increased as a result

                                      of fewer COVID-19 travel restrictions
                                      Lower costs of $7.6 million primarily 

Due to our annual bonus program, compensation and benefits are partially offset by higher costs $7.1 million for higher salaries

                                      expense primarily due to increased 

The number of employees and the extra week in

                                      current fiscal year


General and Administrative

G&A expenses consist primarily of employee compensation and benefits expenses,
stock-based compensation, depreciation, facilities and information technology
costs, as well as professional fees and other costs associated with external
consulting and contract labor.
                                                                   Fiscal Year Ended                                    Change
                                                                                            September 30,         September 24,
                                                                                                2022                  2021                             $             %
General and administrative                                                                    $275,315              $224,161                        $51,154         23%
Percentage of total revenue                                                                      22%                   17%


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On August 7, 2019, Intertrust Technologies ("Intertrust") filed complaints
against each of our customers AMC Entertainment Holdings, Inc., Cinemark
Holdings, Inc., and Regal Entertainment Group in the U.S. District Court for the
Eastern District of Texas, alleging that the use of systems including certain
cinema products, which were supplied under commercial agreements that we
acquired as a part of an acquisition in 2014, infringed various Intertrust
patents, and seeking damages based on the revenues of the defendants. We
recorded $34.4 million in fiscal 2022 within G&A expenses, reflecting a
settlement payment and an immaterial accrual. We believe that these amounts
fully resolve all claims relating to Intertrust's patent assertions.

Category                                                           Key 

drivers

Other miscellaneous expenses á higher costs $34.4 million relating to a legal solution

                                           matter discussed above
Credit Loss Expense                  á     Higher credit loss expense of 

$8.4 million Primarily due to aging

                                           license receivable balances
                                           Lower costs of $6.3 million primarily due to our annual bonus
Compensation & Benefits              â     program, partially offset by 

higher costs $5.9 million up

                                           salaries expense primarily due 

To increase the number of additional employees

                                           week in the current fiscal year


Gain on Sale of Assets
                                     Fiscal Year Ended                Change
                               September 30,   September 24,
                                   2022            2021              $       %
Gain on sale of assets              $-           $(13,871)        $13,871   100%
Percentage of total revenue         -%             (1)%


In fiscal 2021, we finalized the sale of a property, which included land and a
building, resulting in a gain of $13.9 million, which was recorded to gain on
sale of assets on the consolidated statements of operations. Refer to "Net
(Income)/Loss Attributable to Controlling Interest" section below for more
information.

Restructuring fees


Restructuring charges recorded as operating expenses in our consolidated
statements of operations represent costs associated with separate individual
restructuring plans implemented in various fiscal periods. The extent of our
costs arising as a result of these actions, including fluctuations in related
balances between fiscal periods, is based on the nature of activities under the
various plans.
                                                            Fiscal Year Ended                 Change
                                                                                              September 30,         September 24,
                                                                                                  2022                  2021                        $           %
Restructuring charges                                                                            $10,623               $10,240                     $383         4%
Percentage of total revenue                                                                        1%                    1%


Restructuring charges was flat due to the restructuring events in fiscal 2022
and the restructuring events in fiscal 2021, to align resources with a revised
business strategy and outlook, and to support our higher priority focus areas.
For additional information on our Restructuring programs, see Note 13
"Restructuring" to our consolidated financial statements.

Other income/expenses


Other income/expense primarily consists of interest income earned on cash and
investments and the net gains or losses from foreign currency transactions,
derivative instruments, our proportionate share of net income or losses from our
equity method investment, and sales of marketable securities from our investment
portfolio.
                                                                     Fiscal Year Ended                                    Change
                                                                                              September 30,         September 24,
Other income/(expense)                                                                            2022                  2021                             $               %
Interest income                                                                                  $6,568                $3,493                          $3,075           88%
Interest expense                                                                                  (394)                 (479)                            85            (18)%
Other income, net                                                                                 2,500                 7,108                         (4,608)          (65)%
Total                                                                                            $8,674                $10,122                        $(1,448)         (14)%


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Category                                                        Key Drivers
Interest Income                   á     Higher yields on current year 

Investment balances due to increase

                                        interest rates
Other Income                      â     Lower income primarily due to 

Lower returns on our SERP balances with

                                        the current year


Income Taxes

Our effective tax rate is based on our fiscal year results and is affected by
several factors. These reflect the current statutory rates in our domestic and
foreign jurisdictions, the relative income earned in our foreign jurisdictions,
and nonrecurring items such as changes to our unrecognized tax benefits that may
occur in but are not necessarily consistent between periods. For additional
information related to effective tax rates, see Note 12 "Income Taxes" to our
consolidated financial statements.
                                        Fiscal Year Ended
                                                September 30,    September 24,
                                                    2022             2021
Provision for income taxes                        $(31,381)        $(36,689)
Effective tax rate                                   15%              10%


Factor                                                          Impact On Effective Tax Rate
Stock-based Compensation                     á         Lower benefit related to the settlement of stock-based awards.
Foreign Operations                           á         Lower benefit from earned income in lower tax jurisdictions.
Research and Development                     â         Higher benefit from 

Research and development tax credits.

Net (income)/loss attributable to the controlling interest

                                                                  Fiscal Year Ended                           Change
                                                          September 30,       September 24,
                                                              2022                2021                    $            %

Net (income)/loss attributable to the controlling interest $189

     $(7,596)                $7,785       (102)%
Percentage of total revenue                                    -%           

(1)%



In fiscal 2021, we finalized the sale of a property, which included land and
building, and as a result, we recognized a gain of $13.9 million to gain on sale
of assets on the consolidated statements of operations. The property was 51%
owned by the controlling interest, and therefore 51% of the gain on sale of
assets has been attributed to the controlling interest.

Liquidity, capital resources and financial conditions


Our principal sources of liquidity are cash, cash equivalents, and investments,
as well as cash flows from operations. We believe that these sources will be
sufficient to satisfy our currently anticipated cash requirements through at
least the next twelve months.

From September 30, 2022We had cash and cash equivalents $620.1 million, which mainly consists of cash and highly liquid money market funds. In addition, we have had short and long term investments from $291.7 millionwhich mainly consists of corporate bonds, government bonds, municipal debt securities, certificates of deposit, commercial paper, and we Securities Agency.

The following table presents selected financial information as of September 30, 2022 And the September 24, 2021 (thousands):

                                              September 30,       September 24,
                                                   2022                2021
Cash and cash equivalents                    $      620,127      $    1,225,380
Short-term investments                              189,213              38,839
Long-term investments                               102,514              62,819
Accounts receivable, net                            243,593             232,609
Accounts payable and accrued liabilities            244,408             280,507
Working capital                                   1,033,376           1,444,781


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Capital expenditures and uses of capital


Our capital expenditures consist of purchases of land, building, building
fixtures, laboratory equipment, office equipment, computer hardware and
software, leasehold improvements, and production and test equipment.
Additionally, included in capital expenditures are amounts associated with Dolby
Cinema locations. We continue to invest in S&M and R&D to promote the overall
growth of our business and technological innovation.

We retain sufficient cash holdings to support our operations and we also
purchase investment grade securities diversified among security types,
industries, and issuers. We have used cash generated from our operations to fund
a variety of activities related to our business in addition to our ongoing
operations, including business expansion and growth, acquisitions, and
repurchases of our Class A common stock. We have historically generated
significant cash from operations. However, these cash flows and the value of our
investment portfolio could be affected by various risks and uncertainties, as
described in Part I, Item 1A "Risk Factors."

shareholder return


We have returned cash to stockholders through both repurchases of Class A common
stock under our repurchase program initiated in fiscal 2010 and our quarterly
dividend program initiated in fiscal 2015. Refer to Note 9 "Stockholders' Equity
and Stock-Based Compensation" to our consolidated financial statements for a
summary of dividend payments made under the program during fiscal 2022 and
additional information regarding our stock repurchase program.

Stock repurchase program. Our share repurchase program was approved in fiscal 2010, and since then we’ve completed approx $2.6 billion of share repurchases under the programme.


The Inflation Reduction Act and CHIPS and Science Act were signed into law in
August 2022. The Inflation
Reduction Act introduced a one percent non-deductible excise tax on certain
public company stock buybacks made
after December 31, 2022. We are currently analyzing the impact of the excise tax
on our future operations.

Quarterly Dividend Program. During fiscal 2015, we initiated a recurring
quarterly cash dividend program for our stockholders. For fiscal 2022, quarterly
dividends of $0.25 per share were paid on our Class A and Class B common stock
to eligible stockholders of record.

Cash flow analysis


For the following comparative analysis performed for each of the sections of the
statement of cash flows, the significant factors identified as the leading
drivers contributing to the fluctuation are presented in descending order of
their impact relative to the overall change (in thousands).

Operating Activities
                                                     Fiscal Year Ended
                                              September 30,    September 24,
                                                   2022             2021

Net cash generated from operating activities $318,576 $447,753

Net cash from operating activities decreased $129.2 million In fiscal year 2022 compared to fiscal year 2021, mainly due to the following: Factor

                                                      Impact On Cash 

Float

                                             Lower revenue, higher costs associated with the resolution of a
Net Income                          â        legal matter discussed in 

Note 15 to the consolidated financial statements

                                             statements, and higher S&M 

expenses

                                             Decrease due to lower accounts payable and accrued liabilities
Working Capital                     â        and higher inventories, 

Partially offset by lower accounts

                                             receivable and contract assets


Investing Activities
                                                  Fiscal Year Ended
                                           September 30,    September 24,
                                                2022             2021

Net cash used in investing activities $(295,935) $(44,905)

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The net cash used in investing activities was $251.0 million Higher in FY 2022 compared to FY 2021, mainly due to the following factors:

Impact on cash flows

                                               â        Higher outflows for the purchase of marketable investment
Purchase of Investments                                 securities, and 

Other investments

                                               á        Higher inflows 

From the sale and entitlement of marketable investment proceeds from the investments

                               securities

                                               â        Higher outflows for the acquisition of Millicast, Inc.
Business Combinations                                   ("Millicast") 

Completed in fiscal year 2022

                                               â        Lower inflows for the sale of property in the prior year that was
Sale of Assets                                          51% owned by the controlling interest


Financing Activities
                                                  Fiscal Year Ended
                                           September 30,    September 24,
                                                2022             2021

Net cash used in financing activities $(610,558) $(252,515)



Net cash used in financing activities was $358.0 million higher in fiscal 2022
compared to fiscal 2021, primarily due to the following:
Factor                                                     Impact On Cash Flows
Share Repurchases                  â        Higher outflows from increases in common stock repurchases
Common Stock Issuance              â        Lower inflows from employee stock option exercises
                                            Higher outflows for the payment of our quarterly cash dividend to
Dividend Payments                  â        common stockholders primarily 

result a $0.03 per share

                                            increase compared to the prior fiscal year
Distribution to Controlling                 Lower outflows for distributions to controlling interest due to
Interest                           á        the sale of property that was 51% owned by the controlling
                                            interest in fiscal 2021, that did not recur in fiscal 2022

Obligations and contractual obligations

The following table presents a summary of our commitments and contractual obligations as of September 30, 2022 (thousands):

                                                                  Payments Due By Fiscal Period
                                                                 2 - 3       4 - 5     More Than
                                                    1 Year       Years       Years      5 Years       Total
Naming rights                                     $ 12,474    $ 25,920    $ 22,006    $  44,316    $ 104,716
Operating leases, including imputed interest        15,995      21,626      10,595       12,240       60,456
Purchase obligations                                28,228       9,695         252            -       38,175
Donation commitments                                 1,797         232         202          417        2,648
Total                                             $ 58,494    $ 57,473    $ 33,055    $  56,973    $ 205,995

Naming rights. We are party to naming rights agreements for certain facilities, the most important of which are naming rights and related benefits with respect to Dolby Theatre in Hollywood, CaliforniaOscars® website. The term of the agreement is 20 years, during which we will make payments on a semi-annual basis through fiscal year 2032. For additional details regarding our naming rights obligations, see Note 14 “Commitments and contingent liabilities” in our consolidated financial statements.


Operating Leases.  Operating lease payments represent our commitments for future
minimum rent made under non-cancelable leases for office space, including those
payable to our principal stockholder and portions attributable to the
controlling interests in our wholly owned subsidiaries. For additional details
regarding our leases, see Note 7 "Leases" to our consolidated financial
statements.

Purchase Obligations.   Purchase obligations primarily consist of our
non-cancelable commitments made under agreements to purchase goods and services
related to Dolby Cinema and for purposes that include information technology and
telecommunications, marketing and professional services, and manufacturing and
other R&D activities.

Donation Commitments.   Our donation commitments relate to non-cancelable
obligations that consist of maintenance services and installation of imaging and
audio products in exchange for various marketing, branding, and publicity
benefits. For additional details regarding our donation commitments, see Note 14
"Commitments and Contingencies" to our consolidated financial statements.
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Unrecognized Tax Benefits.  As of September 30, 2022, we had an accrued
liability for unrecognized tax benefits without interest, penalties, and related
deferred tax assets, totaling $69.7 million. We are unable to estimate when any
cash settlement with a taxing authority might occur and, therefore, have not
reflected these anticipated future outflows in the table above.

compensation terms


We are party to certain contractual agreements under which we have agreed to
provide indemnification of varying scope and duration to the other party
relating to our licensed IP. Since the terms and conditions of the
indemnification clauses do not explicitly specify our obligations, we are unable
to reasonably estimate the maximum potential exposure for which we could be
liable. In addition, we have entered into indemnification agreements with our
officers, directors, and certain employees, and our certificate of incorporation
and bylaws contain similar indemnification obligations. For additional details
regarding indemnification clauses within our contractual agreements, see Note 14
"Commitments and Contingencies" to our consolidated financial statements.

In fiscal 2022, there have been no material changes in either our off-balance
sheet financing arrangements or contractual obligations outside the ordinary
course of business, and we did not enter into any off-balance sheet arrangements
that are expected to have a material effect on Dolby's liquidity or the
availability of capital resources.

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