Dolby Laboratories Inc (DLB) 2011 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome to the Dolby Laboratories conference call discussing first quarter fiscal 2011 financial results. During the presentation, all participants will be in a listen-only mode. Afterwards, you will be invited to participate in a question-and-answer session. (Operator Instructions)As a reminder, today's call is being recorded, Thursday, February 3, 2011. I would now like to turn the conference over to Alex Hughes, Senior Director of Investor Relations for Dolby Laboratories. Please go ahead, sir.

Thank you, Sarah. Good afternoon, welcome to Dolby Laboratories first quarter fiscal 2011 earnings conference call. Joining me today are Kevin Yeaman, Dolby Laboratories President and CEO, Murray Demo, Executive Vice President and Chief Financial Officer, and Ramsey Heidemann, Executive Vice President of Sales and Marketing.

On this conference call we will be making forward-looking statements that include projections of future operating results for fiscal year ending September 30, 2011, market trends for the industries in which we compete and our expectations and beliefs concerning how those trends will affect our operating results. The capabilities and market acceptance of our product and technologies and our strategic and operational plans and objectives. These statements are based on management's current expectations and assumptions that are subject to risks and uncertainties. Actual results may differ materially from those set forth in such statements.

Important factors such as macro economic conditions or PC market conditions could cause actual results to differ materially from those in the forward-looking statements. These factors are addressed in the earnings press release that we issued today and under the section captioned risk factors and elsewhere in our most recent annual report Form 10-K available at www.sec.gov or on our website at www.dolby.com under the investor sections. Dolby disclaims any obligation to update information contained in these forward looking statements whether as a result of new information, future events or otherwise.

During this call we will discuss GAAP and non-GAAP financial measures. Our reconciliation between the two is available in our earnings release and in the Dolby Laboratories Investor Relations data sheet on our Investor Relations section of our website. Call participants are advised the audio of this conference call is being broadcast live over the Internet. It is also being recorded for playback purposes. An archive of the call will be available on our website for approximately one year and is the property of Dolby. As for the structure this call, Murray will begin with a recap of Dolby's financial results and provide an updated outlook. Kevin will finish with a discussion of the business. So with that introduction behind us, I will now turn the call over to Murray.

Thanks, Alex. Good afternoon and thank you for joining the call.

I'd like to discuss Dolby's fiscal first quarter financial performance and our outlook for fiscal 2011. Revenue for the first quarter was $242.7 million, up 10% year-over-year and 7% sequentially. Licensing revenue for the first quarter was $188.2 million, up 14% year over year and 5% sequentially. The year-over-year increase was driven primarily by our consumer electronics, broadcast and PC markets.

Looking at licensing revenue by market for the first quarter of fiscal 2011, PC revenue increased 9% year-over-year on higher PC unit growth and declined 8% sequentially primarily due to lower revenue from ISVs. Broadcast revenue increased 12% year over year, primarily due to global TV unit growth and an increased TV attach rate in Europe. Broadcast revenue was flat sequentially as increases in TV were largely offset by declines in set-top box. Revenue from our consumer electronics market increased 17% year over year and 35% sequentially. The year-over-year and sequential increases were driven primarily by higher revenue from Blu-ray.

In addition, the sequential increase was also driven by higher DVD back royalties. Revenue from our other markets category, which includes mobile, gaming, automotive and via increased 21% year over year and 9% sequentially. The year-over-year increase was driven by automotive, gaming and via and the sequential increase was largely due to gaming. First quarter product revenues were $46 million, down 3% year over year due to the recognition of $14 million in deferred revenue in the first quarter of fiscal 2010 related to a change in revenue recognition accounting standards.

Sequentially, first quarter products revenue was up 14%, due to increased 3D and digital cinema shipments. First quarter services revenue was $8.5 million, up 9% year over year and down 7% sequentially. Turning to margins, GAAP gross margin was 88% in the first quarter and 88.8% on a non-GAAP basis. Our licensing gross margin was 97.9% in the first quarter on a GAAP basis and 98.6% on a non-GAAP basis. GAAP product gross margin was 51.8% in the first quarter and 53.1% on a non-GAAP basis. GAAP services gross margin was 65% and non-GAAP services gross margin was 65.4% in the first quarter.

First quarter GAAP operating expenses were $104.4 million, flat sequentially. Non-GAAP operating expenses were $91.5 million, up 3 percentage points sequentially. Total employee head count was 1,261, an increase of 17 employees from the previous quarter. The increase was primarily in sales and marketing and R&D. First quarter operating income was $109.2 million on a GAAP basis or 45% of revenue and $124.1 million on a non-GAAP basis or 51.1% of revenue. First quarter other income was $1.9 million on both a GAAP and a non-GAAP basis.

Turning to tax. Our effective tax rate for the first quarter was 21.9% on a GAAP basis and 32.3% on a non-GAAP basis. In the first quarter, our tax rate on both a GAAP and non-GAAP basis benefited from the reinstatement of the R&D tax credit. The GAAP tax rate also benefited from the reversal of a deferred tax liability of $11 million related to a prior year acquisition.

In each of the remaining three quarters of fiscal 2011, we expect our effective tax rate to be approximately 33% on both a GAAP and non-GAAP basis. First quarter GAAP net income was $86.4 million or $0.76 per diluted share, compared to $69.1 million or $0.59 per diluted share for the first quarter of 2010. First quarter non-GAAP net income was $85 million or $0.75 per diluted share, compared to $74.3 million or $0.64 per diluted share for the first quarter of 2010.

Moving over to the balance sheet. Dolby finished the first quarter with $1.072 billion in cash, cash equivalents and marketable securities. Cash flow from operations was $71 million in the first quarter. In the first quarter, we repurchased approximately 733,000 shares at a total cost of approximately $46 million or an average price of $62.72 per share.

Now, I'd like to turn to our fiscal 2011 outlook. For total revenue, we are now targeting $930 million to $970 million. Specifically for licensing, we are now targeting revenue of $750 million to $780 million, primarily due to lower ISV revenue and lower expectations for PC unit growth. Our outlook for licensing revenue is based on the following fiscal 2011 assumptions. In our PC market, we have seen PC unit growth of approximately 3% for calendar year quarter four, which we expect to impact our fiscal Q2. For fiscal 2011, we are now assuming PC shipments increase between 3% and 6% compared to our previous range of 9% to 11% growth.

Regarding ISV revenue, we now expect ISV revenue to decline approximately $25 million to $30 million in fiscal 2011 compared to our previous range of $10 million to $15 million. In our broadcast market, we continue to assume worldwide TV unit growth between 3% and 5%. In our consumer electronics market, we continue to target essentially flat to mid-single digit year-over-year revenue growth. We continue to assume that we receive royalties on approximately $30 million to $35 million Blu-ray units. While we expect Q2 to be our highest licensing revenue quarter of the year due to typical seasonality, we expect Q2 to be the lowest year-over-year licensing revenue growth rate quarter of the year.

Turning to products and services, we continue to target revenue of $180 million to $190 million. For gross margin, we continue a target of approximately 88% on a GAAP basis and 89% on a non-GAAP basis. Turning to operating expenses, we are now targeting approximately $406 million to $418 million on a GAAP basis and $355 million to $365 million on a non-GAAP basis. For other income, we are now targeting approximately $5 million to $6 million for fiscal 2011.

For tax, as I remarked earlier, we expect the tax rate for each of the remaining quarters in fiscal 2011 to be approximately 33% on both a GAAP and non-GAAP basis. Taking into consideration our actual tax rates for Q1, combined with our expected tax rates for the remainder of the year, we are now targeting a full year tax rate of approximately 30% on a GAAP basis and 33% on a non-GAAP basis. For diluted earnings per share, we are now targeting a range of $2.57 to $2.73 on a GAAP basis and $2.82 to $2.98 on a non-GAAP basis. We continue to target approximately 114 million diluted shares outstanding for fiscal 2011. And with that, I will turn the call over to Kevin.

Thanks, Murray. As Murray mentioned, recent signs of softness in our PC market have caused us to revise our fiscal 2011 targets. We believe our new targets appropriately reflect the current market environment. Beyond this, we believe we are well positioned for the growth of entertainment and consumer play back devices now taking place.

Some of you may have attended the consumer electronics show in early January where online content distribution was a major theme. Today I want to focus on what online content distribution means for us and why we believe we are well positioned to benefit from its current and continued growth. First, the establishment of online content distribution represents a significant opportunity for Dolby by increasing our total addressable market. In a world where accessing content is about simply being connected, more devices can become entertainment capable. We increasingly have the opportunity to improve the quality of experience across a much larger universe ever portable devices which includes net books, tablets and mobile phones.

Second, online content distribution also increases the importance of our value proposition with the content community around delivering a premium playback experience. Today's content creator faces the difficult challenge of ensuring a quality experience across many different delivery platforms and services and devices. Consumers now receive entertainment in many different ways. Some go to the movie theater, others wait for Blu-ray or on-demand while others consume content online from portable devices such as laptops or mobile phones.

The consumer's experience from these separate platforms and devices is often inconsistent or in many cases significantly degraded from what the content creator originally intended. This situation creates an opportunity for Dolby to provide the tools and technologies that help content creators and distributors deliver the high quality experience they intended across all devices and platforms. Finally, online content distribution is leading to greater connectivity across various playback devices. Manufacturers are now making more advanced portable devices that are capable of connecting with each other and with one's existing home theater system. At CES, there were a number of smart phones and tablets that included an HDMI output, allowing consumers to not only watch media on them, but also power content from them.

Given our significant presence throughout the home theater ecosystem, we believe this level of connectivity is also a positive trend for Dolby. As manufacturers make portable devices compatible with the existing home theater ecosystem which contain our formats, our technologies become more important to these devices. As always, we remain focused on working across this entire ecosystem of content creators, content distributors and device manufacturers in order to drive the continued adoption of our formats and technologies. To achieve this, we are focused on providing the tools to artists and distributors, to encode online content in our multi-channel format and delivering to manufacturers a portfolio of playback technologies optimized for each family of portable device.

In our work with the content community, we have made great progress to date with many leading providers, such as NetFlix, Voodoo, Sonic, Apple and Amazon which use our multi-channel formats to deliver 5.1 surround sound to their customers. We have also made progress in other areas of the content community, such as music, where leading music providers including Rhapsody and Omniphone, have adopted our encoding tools to help content creators improve the quality of their service.

In our work with manufacturers, we continue to make progress driving the adoption of our multi-channel formats on handsets. For example, at CES, we demonstrated the Nokia N8 which is an advanced smart phone that will power an HD movie in full Dolby surround sound through an HDMI out simply by plugging into your home theater system. The Nokia E-7 will also be shipping with Dolby Digital Plus. Pantech has seven devices announced with Dolby Digital Plus with six shipping.

We also demonstrated Dolby Mobile and Dolby PCEE 4 which are technologies optimized to create an immersive experience from any audio source over a handset or PC. With PCEE and Dolby Mobile, manufacturers can deliver premium audio experience through PCs, tablets and handsets, overcoming the inconsistencies and degraded quality common to these platforms. To date, Dolby Mobile has been incorporated in over 60 handset models, including the new HDC Inspire smart phone.

PCEE is now on many consumer notebook models and recently Lenovo announced it would incorporate PCEE 4 into certain models of the Edge ThinkPad notebook series. We believe that PCEE 4 is a highly applicable technology for emerging PC form factors such as tablets, which are aimed at playing back higher quality media. In addition, we believe Dolby Digital Plus is a relevant technology for tablets and expect multiple tablet manufacturers to announce the adoption of Dolby Digital Plus throughout the year.

In summary, while we believe we continue to be well positioned across a range of devices and geographies, we are extending into a larger universe of portable devices. The growth of online delivery is leading to more ways for consumers to receive entertainment content at a greater variety of playback devices. This is raising new challenges for content creators and distributors who want to ensure a premium experience, but need to do it across a greater variety of platforms and devices. At CES, we addressed this challenge by demonstrating a portfolios technology that enabled content creators and distributors to deliver the highest quality experience no matter where or how content is consumed. With that, I will turn it over for questions.

Thank you. Ladies and gentlemen, at this time if you would like to ask a question, please press star one on your telephone. (Operator Instructions)We'll go first to John Vinh with Collins Stewart.

Hi. Thanks for taking my question. First question I had for you was on the revised third party guidance for PCs, is that a function of a lower PC tam or is that a function of a lower tax rate? I was wondering if you could comment on that.

Well, it's a result of both. We are seeing a lower PC tam than we expected and we saw -- we see Q2 probably coming in around 3%. But separate from that, we also see that, you know, we did expect and guide to the fact that OEMs would begin migrating some of their consumer notebook lines away from having the second decoder and the second media player. We're seeing that play out, but we're seeing it play out a couple of quarters earlier than we expected. And so relative to our initial expectations, it's affecting Q2 and Q3 more than we would have initially expected.

And do you have a sense of why this is starting to accelerate and is there any sort of risk that a tax rate could come in even lower going forward?

Well, I think it's always difficult for us to predict the exact timing of when these models are going to roll out with the new footprint and so the plans of the OEMs are pretty consistent with what we previously expected, but it's always difficult for us to predict exactly when it will start rolling into the market. And so, you know, on an exit rate basis, we're expecting it to exit the year about where we expected, but it is happening earlier and we're beginning to see it in Q2.

Okay. And then just as a follow-up, I just wanted to ask you about tablets. You talked about the opportunities with PCEE. Can you talk about are there opportunities for other Dolby products on tablets, including Dolby Digital Plus and then, also, if you could just comment on kind of how do we think about pricing on these products on tablets versus PC notebooks? Thank you.

Well, we do see Dolby Digital Plus as a solution that's relevant to tablets and, in fact, we do expect multiple tablets to be announced with Dolby Digital Plus throughout the rest of this year. In addition to technologies like Dolby Mobile and PCEE, which significantly improved the play back experience whatever the source. We're not prepared to discuss pricing at this time. We're still, you know, rolling out our first design wins and so we'll have to save that for a later time.

Great. Thank you.

Next we'll hear from Steven Frankel from Dougherty.

Hi. Can you give us some background on where your tax rate is on the Chinese TV today and how you think that changes as the standards get deployed?

Sure. So in China, I think that in terms of digital TVs with digital tuners, it's still relatively low and we're -- as you know, we've been working throughout that industry, both with the broadcasters and the government and standard setting bodies to make sure that we're in a good position as that rolls out. That continues to progress very well. We're still making progress. We're in about 13 channels now. And so that's something that we expect to begin to make more progress on this year.

We see, as we said previously, we had -- we were on about just over 50% of worldwide television shipments last year. We see that rising 8 to 10 points. Part of that is China and part of China is still out in the future.

Okay. And the 60 hand sets that you talked about, what did that compare to a quarter ago with Dolby Mobile?

You know, I don't have that comparison right on the top of my head. So we'll see if we get it here soon or we'll get back to you.

Okay. That's all my questions for now. Thank you.

Moving on to Ingrid Chung with Goldman Sachs.

Thanks. Good afternoon. So I was wondering if you could speak to the lowered PC expectation for the full year. Do you think that's more due to overall consumer weakness or do you think there is any tablet cannibalization of notebooks?

Well, I think there's a lot of factors contributing to it. We've -- we know that the expectations for units shipped for PCs have come down this year. I don't think we have any objective evidence of the impact tablets are having on that. I think it's -- you know, there's varying opinions on that, but I guess the -- you know, the broader point is we see tablets as a big opportunity for us as well. You know, looking beyond just the PC Tam itself, there is a mix issue as well. The tam has been stronger in emerging markets than developed markets and I think it's pretty well known that Microsoft doesn't have as high of attach rate on its home premium products in these emerging markets as in the developed markets, so that has a follow-on impact to us. So that's what we're seeing with the PC units.

Okay. And just as a follow-up, I think you said on your last call that the Enterprise PC attach rate was 75% at the end of this fiscal year. I was wondering if you could speak to where you are now and are you still expecting to be at 75% at the end of the year?

You know, everything that we've seen and discussed with people is that, you know, businesses are -- most businesses are in the early to middle stages of their roll out of Windows 7. Most of the rest are probably finalizing their plans, so we think that it's on track for a pretty high percentage by the end of the year, yes.

Okay. And any -- can you give us an idea as to where you are now?

I don't have a -- a number on that, Ingrid. It's actually -- there's a lot of variables in how to measure that, so we don't have a precise number. But we do -- we are pretty confident that businesses are in the middle of their -- in their roll out.

Okay. Great. Thank you.

And from Deutsche Bank, we'll move on to Brian Thackray.

Yeah, thanks for the time. To follow up on the PC question around corporate Windows 7 and the overall magnitude. You've mentioned that the PC vertical grew 9% in your view, which I believe is in line with what, you know, Microsoft and others talked about it growing last -- you know, back in the September quarter. So I guess my question is, you know, is the benefit that you're seeing from the corporate Windows 7 attach rate fully offset by the lower ISV attach rate? Are those comparable, you know, and do you expect that to continue as you move throughout the rest of this year?

Well, certainly in our guidance, we see the dynamics with the ISVs detaching and the lower PC combined with the mix shift toward emerging markets offsetting that benefit and that's -- that's reflected in our guidance.

And a follow-up on Blu-ray. I believe Sony lowered their guidance on Blu-ray units this morning. You know, are you seeing any accelerated shift towards their streaming devices, you know, happening in the marketplace, you know, as we kind of enter, you know, as NetFlix and whatnot becomes more prevalent around some of these streaming media players?

If that's -- if your question relates to the drop in Blu-ray shipments, we do believe that the Blu-ray platform is ideal for those type of streaming devices and, in fact, if anything we've seen those devices become more popular, the Blu-ray specifically become more popular because of the online connectivity and the streaming functionality such as the services that you mentioned, such as NetFlix, Voodoo, Curiosity and so on.

So from our vantage point, we see Blu-ray as a catalyst and a vehicle to get -- to get these services into the home at a much lower cost than having to upgrade your television, which would have a much higher cost just for the sake of bringing those services into the home. So for the time being, we still believe that Blu-ray not only for its own experience, but for streaming services and online services is the ideal vehicle. I can't really comment on the Sony numbers today.

Just to be clear, you're not seeing any weakness in the Blu-ray vertical from what you've seen thus far?

No, we have not.

Thank you.

And from Avondale Partners, we'll hear from Tom Kucera.

Thank you. First I wanted to follow-up on the ISV questions. First, is that still mainly concentrated around maybe low-end, value-oriented PCs that you're seeing the ISV revenues retreat or is it, you know, broadening in the market?

We don't really have skew specific information on the ISV. We do our spot checks in the stores, et cetera, just to see how that jives with the royalty reports we get. So I can't really tell you if this is specific to lower skews or higher skews. Overall, the -- as Kevin mentioned earlier, the trend is in line with our expectation and the way it's detaching, so we haven't really seen the detach be a surprise in the way it's been manifesting itself. But I don't have skew specific detach information.

Okay. And I was going to follow up on broadcast. I think Murray made a comment about set-top box revenues declining quarter on quarter and I'm wondering what's going on in that market?

You know, that's a variable all-time market. The set-top boxes, unlike the -- unlike the television market where we've been able to forecast at a much better rate, it's just -- it's been quite volatile and I cannot tell you that there's a very specific seasonality that we can point to in that area.

Okay. And lastly, I just wanted to ask quickly, was on buy backs, kind of higher than average overall buy back activity this quarter. Any -- in the past you communicated a strategy of not really trying to bring down your share count and I'm wondering if that's still kind of a long-term view or if you're adjusting that at all?

We've actually had a 733,000 shares we purchased this quarter, which is lower than what we've been running the last few quarters and we will, you know, continue to focus on an ongoing repurchase program. So we didn't -- we didn't purchase more. It was less this quarter.

All right. Thank you.

Daniel Ernst from Hudson Square Research has our next question.

Yes, thanks for taking the call. Two questions, if I might.First, can you talk about on the 3D cinema side what you're seeing now that we're in the post-Avatar world and we're facing a tough comp this quarter, what theaters are doing around the world in terms of continuing the deployment, what your current 3D backlog is of the projects you've been assigned versus things that you've been deployed and recognized, and related to that, what's the update on where you are with glass cost reduction? And then the second question is on the Android or rather the tablet opportunity broadway.

You know, obviously the mobile opportunity has been one that's been out there, it's big and has a lot of units in the world, but not all devices necessarily, you know, require the depth of entertainment experience that Dolby provides. But I would assume that in the tablet world, that's not the case, that if you've got a large screen, you're going to be watching video on it and people would want the full experience and so are you seeing potentially a better take rate for your services and technology in the tablet market than you really have in the phone and might we see a more accelerated ramp in design wins than we really saw in the phone market? Thanks.

So let me start with your 3D question. In 3D, we had very strong shipments this quarter, so what we're seeing is that the roll out of digital and 3D screens is, you know, going very strong. Most of our strength, of course, is internationally and that was the source of most of our strength. You asked about glass prices. We're now offering glasses as low as $5 a pair. So those have come down quite a bit and we think makes our solution attractive from a cost of ownership point of view.

On tablets, I would agree, I think the tablet is an excellent entertainment device. I think that we -- you know, having the traction we've had in portal devices like mobile hand sets, I think that we were prepared to make a difference in this market much earlier. So I would say that we're -- we have much more progress at this stage of the tablet introduction cycle than in, for instance, the net book cycle and we've got a lot of -- we expect to have a lot of tablets with our technologies. They are very compelling entertainment devices.

Yeah. Just to add to that, the mobile efforts that we have had has acted as a beach head for us and really a foundation for us to jump into the tablet market. A lot of the technology, the ports and the software, development that was done on the mobile space, directly applicable to the tablet, which is why, as you've heard Kevin earlier allude to in the script, we are seeing a much faster ramp up in the tablet than we did see in the early days of mobile, which is yielding this multiple design wins in the tablet coming up over the current year.

Great. And the server -- on the 3D side, where is your current count for installed or shipped in the quarter?

To date we have 7,200 3D systems shipped and that's about 30% of the market share.

Great. Thank you.

Next we'll hear from Andy Hargreaves from Pacific Crest.

Thanks. Just wondering on the expectation for accelerated licensing growth in the second half? Is there a specific segment that is driving that?

I think the -- I think the biggest growth drivers are broadcast and, you know, in terms of Q3 and Q4 specifically, I think it's -- one of the factors is that we expect PC to be lower in Q2. So I think as you move into Q3 and Q4, it's across all categories.

Okay. And then on the DVD growth expectation, you didn't change that, but there's a back royalty payment in Q1. Does that imply an expectation for lower DVD shipments going forward or is that just kind of you guys being conservative?

Well, we wanted to communicate the $4.5 million in back royalty payments so that as you look at your models going forward, you'll understand our Q1 results. Q2 is obviously seasonally strong as we see some benefit from that, but as you go into the third and fourth quarter, then we would expect to see it soften.

Okay. And then just on Dolby Mobile on those hand sets that you guys are on, have you guys seen material revenue from that yet or is most of that still in front of you?

Most of our revenue from mobile today is from the incorporation of our HE-AAC technology and so we see most of the revenue from the design wins in mobile and our ability to continue to expand it throughout additional product lines and hand sets is in front of us.

Okay. Thank you.

Once again, ladies and gentlemen, star one if you have a question or comment today. From Wedbush securities, we'll go to Kerry Rice.

Thanks. Quick question on the broadcast. It seems for digital television it's slowed down in kind of the mature markets, North America and western Europe. And you've highlighted that you've had some good success in China. Are there other markets that you're seeing growing pretty rapidly for you outside the mature markets?

We have a lot of activity in other markets as it relates to establishing the digital broadcast standard and getting early adopters on air. So, for instance, you know, we announced over the summer our first win with -- in India with Airtel. We're having a lot of success there with the satellite operators as they roll out their digital broadcast services and, you know, we're in early discussions about other forms of distribution for digital broadcast.

Okay. And just kind of one follow-up unrelated to that, is you -- have you guys thought or, you know, uses of cash, I know you generally have -- you know, you have the share repurchase buy back in place. It's not really to bring down shares, but is there anything interesting or areas that you may like to build out that you would think about doing acquisitions in specific areas?

Well, as we look forward, we see our big growth areas as being continuing to penetrate, you know, entertainment devices that are -- that are getting most of their content online and over mobile networks. We see opportunities in imaging and other adjacent markets. So those are the areas where we -- where we look at opportunities from time to time and, of course, opportunities do arise from time to time. So those are always a possibility. In the meantime, we'll continue to update our plans on use of cash periodically.

Okay. Thank you.

And next we'll hear from David Joyce with Miller, Tabak & Company.

If you could just provide a little more color on the 3 D markets on the cinema side, with the strong shipments. Are they from new countries or from countries where we've already had some exposure? And if you could provide some more color on how much of the product sales is coming from the 3D cinema solutions. And then secondarily on the 3D TV side, it's been a nation market not coming on too strongly yet. What's your exposure on those products?

We have a pretty broad presence of relationships in the cinema industry around the world, so our cinema -- our 3D sales are very much concentrated outside of North America. Apart from that it's across a pretty broad distribution of countries. In terms of consumer 3 D, our efforts have been around introducing a format for the full resolution display, transmission and display of consumer 3D. And, you know, we're engaged in the market today. The standard is to broadcast consumer 3D in [hapres] and we're working with the industry to bring a full resolution to market and we are progressing pretty well with that.

All right. Thank you.

And at this time there are no further questions. I'll turn the conference back over to management for any closing or additional comments.

All right. Well, thank you for joining us today. And we will see many of you throughout the quarter. Thank you.

That does conclude today's conference. We thank you for your participation.