Dolby Laboratories Inc (DLB) 2019 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Dolby Laboratories Conference Call discussing fiscal first quarter results. (Operator Instructions) As a reminder, this call is being recorded, Wednesday, January 30, 2019.

I would now like to turn the conference call over to Elena Carr, Director of Investor Relations for Dolby Laboratories. Please go ahead, Elena.

Good afternoon. Welcome to Dolby Laboratories' First Quarter 2019 Earnings Conference Call. Joining me today are Kevin Yeaman, Dolby Laboratories' President and CEO; and Lewis Chew, Executive Vice President and Chief Financial Officer.

As a reminder, today's discussion will include forward-looking statements. These statements are subject to risks and uncertainties that may cause actual results to differ materially from the statements made today. A discussion of some of these risks and uncertainties can be found in our earnings press release that we issued today under the section captioned Risk Factors as well as on our most recent Form 10-K.

Dolby assumes no obligation and does not intend to update any forward-looking statements made during this call as a result of new information or future events.

During today's call, we will discuss GAAP and non-GAAP financial measures. A reconciliation between the two is available in our earnings press release and in the Dolby Laboratories Investor Relations balanced sheet on the Investor Relations section of our website.

As for the content on today's call, Lewis will begin with a recap of our results and provide our outlook for 2019, and Kevin will finish with a discussion of the business.

So I will now turn it over to Lewis.

Okay. Good afternoon, everybody, and thank you for joining our first quarter call.

As a quick reminder from some comments I made last earnings call, last quarter, the new revenue accounting standard formally referred to as 606, i.e. ASC 606, became effective for us at the beginning of the year and we adopted that new standard using the full retrospective method, and that required us to recast prior year's revenue by applying these new rules retrospectively. So during my comments today, any comparisons I'll make to prior year revenue numbers are in reference to those 606 recasted numbers. And in the earnings release that we put out today, we included a table that shows FY '18 revenue as adjusted under 606 by quarter. So hopefully that will be helpful.

So here are the Q1 results. In the first quarter of FY '19, total revenue was $302 million. Within that licensing revenue was $260 million, which was in line with our expectations, while products and services was $42 million, which was a little above the projection we had for the quarter. Total revenue in Q1 of last year was $300 million, and that included a large recovery of more than $20 million in mobile licensing that did not repeat in this year's Q1.

So let's review the trends that we saw in licensing revenue in the end markets that we serve. First, Broadcast. Broadcast represented about 38% of total licensing in the first quarter. And revenues in this market were down about 2% sequentially, reflecting lower recoveries offset partially by seasonally higher TV revenue. Year-over-year, broadcast was down about 9% due to lower recoveries and timing of the revenue.

Consumer Electronics represented about 17% of total licensing in the first quarter. Licensing in this area increased sequentially by about 8% and year-over-year by about 16%. The sequential growth was driven by seasonally higher volume in sound bars, DMAs and home theater offset partially by lower recoveries. And year-over-year, we saw higher revenue from DMAs, sound bars and other products.

Mobile devices represented approximately 13% of total licensing in the first quarter. On a sequential basis, the percentage increase was quite large because this was an incident where the Q4 '18 mobile number was significantly reduced by the recast, which impacts this sequential trend. So if I set aside the impact from the recast, Mobile business in Q1 '19 was about comparable to Q4.

Year-over-year, Mobile was down about 40% or a little over 40% due primarily to the large recovery we got in Q1 last year that didn't repeat in this year's Q1.

PC represented about 9% of total licensing in the first quarter. PC was down sequentially by about 11%, and this was driven by lower ASP due to mix as well as lower recoveries. PC year-over-year increased by around 14%, whilst due primarily to timing of revenue under contracts.

Licensing and other markets represented about 23% of total licensing in the first quarter. They were up about 35% sequentially and about 37% year-over-year. And in both cases, the increase was driven by gaming higher recoveries in auto and higher revenue from Dolby Cinema. So that's licensing.

Products and services revenue was $42.1 million in Q1, and that compares to $25.9 million in Q4 and $29.4 million in last year's Q1. And the prior year numbers were not materially affected by the 606 recast. The growth in products and services was largely driven by Dolby Cinema arrangements that have fixed amounts, paid or committed upfront along with a percentage of box office over time. The upfront amounts are accounted for as product sales and any ongoing share of box office, the percentage share, will be accounted for as licensing revenue. And also in Q1, in products and services, we had growth in Cinema products and in Dolby Voice products.

So stepping back and recapping the overall revenue for the quarter. Q1 of last year was $300 million, and that included a large Mobile recovery of $20 million plus. We didn't have that in this year's Q1, but we grew Dolby Cinema, Consumer Electronics and gaming to more than offset that factor and finish this year's Q1 at $302 million.

So let's move on to margins and operating expenses.

Total gross margin in the first quarter was 87.2% on a GAAP basis and 87.8% on a non-GAAP basis. Products and services gross margin on a GAAP basis was 35.3% in the first quarter compared to 20.2% in Q4. And products and services gross margin on a non-GAAP basis was 37.8% in the first quarter compared to 23.8% in Q4.

Our operating expenses in the first quarter on a GAAP basis were $195.1 million compared to $196.8 million in the fourth quarter. Operating expenses on a non-GAAP basis were $173.4 million in Q1 compared to $178.6 million in the fourth quarter.

Operating income in the first quarter was $68.7 million on a GAAP basis or 22.7% of revenue compared to $94 million or 31.4% of revenue in Q1 of last year. Operating income on a non-GAAP basis in Q1 was $92 million or 30.4% of revenue compared to $114.4 million or 38.2% of revenue in Q1 of last year.

Income taxes on a GAAP basis was a benefit of $24.1 million, which includes $35 million of credits relating to U.S. tax reform. And the non-GAAP income tax rate in Q1 was 19.2%.

Net income on a GAAP basis in the first quarter was $98.2 million or $0.93 per diluted share compared to a loss of $53.3 million or $0.52 per diluted share in last year's Q1. And just to note that last year's Q1 net results did include a discrete tax charge of $138 million for U.S. tax reform. So net income on a non-GAAP basis in the first quarter was $78.7 million or $0.74 per diluted share, and that compares to $95.4 million or $0.90 per diluted share in Q1 of last year.

During the first quarter, we generated about $57 million in cash from operations and ended the quarter with over $1.1 billion in cash and investments. We bought back about 1.6 million shares of our common stock in Q1 and ended the quarter with $239 million of stock repurchase authorization still available.

We also announced today a cash dividend of $0.19 per share, which will be payable on February 21, 2019 to shareholders of record on February 12, 2019.

Now let me cover the outlook, starting with the full year. For our full year FY '19, we are maintaining the guidance ranges for both revenue and operating expense that we gave last quarter. We estimate that total revenue will range from $1,240,000,000 to $1,280,000,000. Within that total, we estimate that licensing will range from $1,080,000,000 to $1,120,000,000, while products and services are estimated to range from $150 million to $170 million for the year.

We've now completed our recap of last year's revenue under 606 and the FY '18 recasted revenue was $1,055,000,000. Now the final recasted revenue for FY '18 is lower than estimate I provided at the last call, and the primary reason for the differences between 605 and 606 revenue for FY '18 remains the same. Namely under 606, certain revenue was shifted to prior years in some cases as far back as 5 years due to some differences in accounting related to multiyear contracts.

So getting back to my discussion of the FY '19 forward outlook, incorporated into the revenue range for the year, that's FY '19, are the following factors. We estimate that Broadcast revenue will grow as we see our technologies incorporated into more TVs and set-top boxes.

In PC licensing, we'll continue to see downward pressure from ASPs due to mix, but some of that will be offset by more adoption of our newer technologies. Consumer Electronics is projected to grow modestly, driven by sound bars and DMAs. We expect Mobile revenues to increase, and we are seeing some organic growth helped by a further penetration. Also the year-over-year Mobile comparison is impacted by the recast.

We expect growth in other licensing from Dolby Cinema, gaming and Dolby Voice. And finally, in products and services, we anticipate a growth in Cinema products, Dolby Voice and Dolby Cinema. As it relates to Dolby Cinema, the product revenue growth is associated with those transactions that include element of fixed amounts paid or committed upfront, like I discussed earlier.

Gross margin for the year is projected to be around 87% plus or minus on a GAAP basis and about 88% plus or minus on a non-GAAP basis.

Operating expenses are projected to range from $786 million to $796 million on a GAAP basis and from $705 million to $715 million on a non-GAAP basis.

Other income is estimated to range from $21 million to $24 million for the year. And the effective income tax rate for the year on a GAAP basis is expected to range from 13% to 15%, reflecting adjustments recorded this year for revised estimates and new legislation pertaining to U.S. tax reform. And then the non-GAAP effective tax rate for the year is expected to range from 19% to 21%.

Let's move on to second quarter outlook. For Q2 of FY '19, we anticipate that total revenue will range from $325 million to $345 million. Within that, we estimate that licensing will range from $295 million to $305 million, while products and services is projected to range from $30 million to $40 million.

Q2 gross margin on a GAAP basis is estimated to be around 88%. And the non-GAAP gross margin is estimated to be around 89%, plus or minus.

Operating expenses in Q2 are projected to range from $206 million to $210 million on a GAAP basis and from $186 million to $190 million on a non-GAAP basis. Other income is projected to be around $5 million for the quarter.

And regarding the effective tax rate, on a GAAP basis, we anticipated in Q2 we will record a discrete tax expense of $18 million to $22 million to account for revision of U.S. tax reform that was just enacted into law earlier this month. And because of this, our GAAP tax rate in Q2 is estimated to range from 38% to 42%. Our non-GAAP effective tax rate for Q2 is projected to range from 19% to 21%.

So based on the combination of factors I just covered, we estimate that Q2 diluted earnings per share will range from $0.48 to $0.54 on a GAAP basis and from $0.81 to $0.87 on a non-GAAP basis.

So now, I would like to hand it over to Kevin. Kevin?

Thank you, Lewis, and good afternoon, everyone. We're off to a strong start to 2019. We're just back from CES, where Dolby Vision and Dolby Atmos were once again on display across the show floor. Before diving in, it's worth reflecting our journey. Three years ago, Dolby Vision was introduced at CES with LG and VIZIO TVs, while Dolby Atmos was just moving beyond AVRs to sound bars. In 2017 at CES, Sony announced support for Dolby Vision, and our first combined Dolby Vision and Dolby Atmos experience was launched by LG. Last year, we saw the adoption of these experiences on an increasing range of device types and content services.

This year, Dolby Vision and Dolby Atmos have become robust ecosystems with increasing momentum across a broad range of content and devices. New announcements included Panasonic's first TV with Dolby Vision and Dolby Atmos. They joined 8 other partners that have embraced the combined experience for TVs, including LG, Sony and TCL. Dell announced its first Dolby Vision PC. And Lenovo expanded its support for the combined Dolby Vision and Dolby Atmos experience further into its line of PCs.

Also at CES, we demonstrated our solutions for Mobile, including iPhone supported Dolby Vision as well as Samsung and Huawei smartphones with Dolby Atmos. In the home entertainment space, we showcased Apple 4K TV as well as the Amazon 4K Fire TV, both of which supports the combined Dolby Vision and Dolby Atmos experience. The number of sound bars supporting Dolby Atmos continues to grow and are available on a broad range of price points. And Xbox, which is the first gaming console with the combined experience is now in market. We expect the first pay-TV set-top boxes with Dolby Vision and Dolby Atmos in market later this year.

Partners such as iTunes, Netflix, Amazon, Rakuten, Tencent and iQiyi are streaming an increasing amount of content in Dolby Vision and Dolby Atmos. For example, as related to Dolby Vision, iTunes currently has over 400 movies and Netflix has over 500 hours of content. We are also bringing the Dolby Vision and Dolby Atmos experience to more forms of content, including live sports. Some examples of major live sporting events broadcasted in Dolby Atmos this year were Premier League Soccer in Europe and the Winter Olympics. We also had a number of trials in Dolby Vision. And this quarter marked the first live professional sports broadcast in North America in Dolby Atmos as DIRECTV began broadcasting select NBA games in November. We have a robust ecosystem with a broad base of content and consumer products. And even with this strong presence, most of the opportunity is still ahead of us.

Let's turn to Dolby Cinema. We currently have more than 20 exhibitor partners with about 200 screens open and another 200 committed. This quarter, Tahoe Cinemas in China announced plans to open 10 Dolby Cinema screens. This adds to our growing presence in the Chinese market where we now have 8 Dolby Cinema partners, including Wanda, Jinyi and CGV. We're excited that the first Dolby Cinema opened in the U.K. at ODEON Leicester Square, which is one of the most iconic venues in Europe and a frequent home to movie premieres. Also this quarter, the first Dolby Cinema in Japan opened with T-Joy. There are now over 200 titles, which have been released or announced in Dolby Vision and Dolby Atmos, including the top 15 box office leaders in 2018.

Beyond Dolby Atmos, Dolby Vision and Dolby Cinema, we continue to acquire our innovations across the many ways in which people experience entertainment and communications. Recent examples include Dolby Voice Room, which includes an integrated video solution to go along with the Dolby Conference Phone. We see a solid uptake of Dolby Voice Room in our first full quarter of sales, and we're encouraged by the growth in the pipeline. More recently, we launched Dolby Dimension, which is the first wireless headphone optimized for entertainment in home for all the people to more immersive experiences in situations where they were otherwise making compromises and we are happy to see the initial response. It is currently available on Amazon as well the dolby.com website.

So to wrap up, and finish what we had start of the year. We are seeing growing momentum for Dolby Atmos, Dolby Vision and Dolby Cinema. We have a healthy pipeline of innovation, which will enable us to elevate a broad range of audiovisual and communication experiences as we are doing most recently with Dolby Voice Room and Dolby Dimension, all of this gives us confidence that we will continue to deliver revenue and earnings growth.

I look forward to updating you next quarter, and with that, I'll turn it over to Q&A.

(Operator Instructions) And we will take our first question from Steven Frankel with Dougherty.

Kevin, maybe we can start by talking about the Panasonic and TP Vision decision to add Dolby Vision. What should we takeaway from that, especially in terms of the, "format" war between HDR10+ and Dolby Vision?

Well, I think that, Steve, as I said in my prepared remarks, we see a very robust ecosystem for Dolby Vision, a broad adoption across TV, other devices, content, and I would say that at CES our team collectively every year takes over 400 meetings. And what I consistently heard from my teams this year that there was a notable shift in conversations from the what and why, the evangelizing why one ought to have Dolby Vision or Dolby Atmos, and a notable shift towards the how and when. And so I think that in terms of the Dolby Vision and Dolby Atmos being established -- ecosystems established value propositions, we feel really good about where we are. And Panasonic and TP Vision are just another couple of examples of people who have come on board.

Again, there has been some concern in the media about the Chinese economy. It seems like you have a new announcement here with an exhibitor in China. What's your business like in China? And have you seen any headwinds from what's going on there?

I think one area that we talked about in prior quarters and that we consider coming in the years, we did start to see some slower activity on the Cinema product side. On the other hand, in terms of our partnerships and plans as it relates to Dolby Cinema, Dolby Vision and Dolby Atmos, we haven't detected any major changes in the tone of the conversation and peoples plans. Now having said that, we are well aware of all the news in the market and we have looked very closely at all of these data points, including announcements of other companies that have a significant presence in China, many of whom are customers and partners of ours, information from analysts, industry and financial, et cetera. So we looked at all that. And certainly, it's clear that there could be some softness in China this year, and that's something that we very much consider as we built our guidance range and ultimately held our guidance the same. An important consideration there on the other side the equation is that we do see strength in -- particularly, in our consumer imaging licensing programs in Dolby Vision and our patent licensing programs. And so when we weighed all that together, that's what led to feeling good about our outlook for the year and maintaining our guidance range.

Great. And Lewis, maybe you can help me understand the new seasonality when it comes to Mobile. Your large once-a-year customer that pays, is it correct that it now is going to be in the March quarter rather than the traditional June quarter payment?

In general, our seasonality does shift to the previous quarter. And so yes, to the extent that I'm not going to comment about any particular customer, under 605 that we had things happening, let's say, in our Q3, for the most part those types of ongoing licensing revenue streams would shift to the previous quarter, yes.

Okay. And on Dolby Voice, it's been a while, it seems like it's on a slow build, but building. Is there anything that you can do to maybe light a fire to that business and step it up some? Or is this just one of those businesses that's going to roll out kind of slow and steady as opposed to step function like Vision did?

Well, I think it did grow nicely year-over-year. I think it's fair to characterize it as it's been a steady build, and it's always our goal to get to an inflection point. And I think one of the things we have done is released the Dolby Voice Room product, which we think addresses the huddle room market and the desire for an integrated solution that solves both the video and audio conference needs, so you get the value of -- all the value that comes along with Dolby Voice with additional innovation and an integrated video experience. So that was one step towards what we think is necessary to get to an inflection point. That did contribute to the growth of Dolby Voice this quarter. And I think to get to that next point, we have to both make sure that we are a natural part of the sales motion with the people that we're partnered with. And yes, we have a number of programs and initiatives in place to make sure that we're as aligned as we can be with them. And then, of course, we're always in pursuit of additional partnerships and channels to get the Dolby Voice Room experience to market.

And should we expect additional reseller partners as we go through the year?

Well, I think as within nearby areas, I would say that we think we can add value to a wide range of partners, and you can certainly assume that we're pursuit of additional partnerships and we'll keep you posted.

And then based on your question, I think now their new slogan is going to be, baby, come on light my fire. That's already strong.

We will now take our next question from Ralph Schackart with William Blair.

This is Eric in for Ralph. So with the accounting change, how soon do the licensing customers provide you with the previous quarter's shipment counts? So right now, for example, about a month into Q2, any other true-ups, you should consider into of the Q2 guidance? And if not as a ballpark, I'm just trying to get a sense of the magnitude of these true-ups?

Sure. The typical pattern would be that our customers will report our Q1 shipments to us throughout the course of Q2. And so we, in fact, won't know that true-up until the quarter is done. So at this point, I can't comment on a true-up. Our estimated revenue we booked for Q1 try to contemplate most accurate number we can come up with. But the true-up is really going to be whatever is the difference between that estimate and actual, which we will only know when we get the reports.

And then just a follow-up, last quarter, you said that new products revenue for this year was on pace to about same rate as last year. I think that was about 65% or 67%. Is that still the case? And if there is any upside to that estimate where do you think that would come from?

Yes. So that references our consumer imaging licensing programs, including Dolby Vision and our patent programs, Dolby Cinema and Dolby Voice. And we said that we expected that it would grow -- we thought it will grow at least the same way as last year, which you remember correctly was 65%. I think that there's obviously, a range of outcomes. I think that any of those individual programs there are scenarios where they could contribute to the upside to the 65%. One of the things I said earlier as we're contemplating guidance for Q1 specifically, is consumer imaging licensing programs is an area where we have seen some strength that we considered into -- as we formulated guidance in the context of all that's going on in the market.

It's fair to say Kevin that we are absolutely comfortable with that same statement.

That's correct.

Our next question will come from Eric Wold with B. Riley.

A couple of questions. I guess, one around Vision, and clearly content creators are speaking with their decision to focus on Vision, and that's also helped you drive the decision with the product manufacturers to enter in the licenses. Is the trends you're seeing and discussions you're having with both parties, is this an environment we're going to have both HDR 10 and Dolby Vision in the market a number of years, do you think it won't make sense to have both? And then two, where do you ultimately think penetration rates for Vision and Atmos across SKU counts pick the end market you want or the product can be in the coming years? How high you think it can ultimately get?

So to the first point, I mean, our approach to the market has been that there will be Dolby Vision and that there will also be support for HDR 10. And in fact, we offer them implementation, which -- both to make that easy for our customers. And as to your second question, like you said, what are we -- we are really pleased with our adoption so broadly across both playback and content. That is primarily still concentrated at the high end, whether you're talking about TVs or PCs or a category, we're still mostly concentrated in the high end and that's been a great start for us and it's been a great contributor to revenue growth. But over the longer term, we think that this expectation for the highest quality content is going to spread broadly across these categories, and our goal is to grow with it to make sure that when everybody -- whenever someone is experiencing UHD and 4K, they are also getting the benefit of -- Dolby Vision and Dolby Atmos.

And then last question on Mobile. You mentioned in the comments around guidance, you said Mobile increases, and obviously Mobile is being, I guess, the growth rates for this year is benefiting from the recasting last year. Can you give us a sense of kind of what an apples-to-apples growth rate for Mobile would be in this year's guidance? And then any kind of level of that, that you consider minimum guarantees, or I won't say fixed, minimum guarantee levels versus something that would be 100% unit based?

Sure. There is a lot in there. So maybe I'll do a little bit of level setting for the whole audience. What Eric's referring to is that, in the 606 recast, one of the things I tried to highlight in my prepared comments, but I took a lot more deliberation a quarter ago was mentioning that in some cases under 605, revenue that could not ever have been recognized upfront was actually required to be recognized upfront under 606. So when we did the recast, you see revenue moving out 1 year into prior years, and in some cases as far back as 5 years. And so, as you pointed out, Eric, some of these things are affecting the comparisons year-over-year.

But another thing that I said last quarter that I'll reiterate this quarter that in FY '19, we don't anticipate a significant change in upfront revenue compared to what we have been doing under 605. So under 605, we ran a business where our revenue sought to emulate or closely align with our customers shipment behavior and demand. And so our FY '19 numbers as just sort of a broader statement is not -- our FY '19 guidance is not assuming or benefiting from some assumption with the uptick and upfront in revenue because of 606. I think broadly, that's across everything, including Mobile and this is really as it pertains to licensing setting aside a product sale, product sale is recognized when you have the sale, of course.

And then within Mobile. Mobile, if you look at the Mobile percentages and if you have any chance to look at our press release, even our recasted mobile number for last year was 16% of revenue. And I'll remind the audience that just a few years ago that number was 10%. So we have shown steady growth in Mobile. We expect growth this year. The hard part of your question to answer is some sort of magical comparison that sets aside this recast issue. Like I said, setting aside the recast issue, we do expect Mobile to grow, but it's hard for me to give you some sort of quantified number. Overall, the company's growth rate is healthy this year, no matter whether you look at it from a 605 or 606 basis. And in Mobile, the growth we get will come from not necessarily just relying on the market to grow, but we are seeing more adoption or penetration through both our direct licensing programs and patent licensing programs. So I think Mobile is still a good story for us.

We will now take our next question from Jim Goss with Barrington Research.

First, I'd like to ask some on Vision and Atmos, as you pointed over the quarters, in a number of categories both in products and services. Is there any way to estimate what the overall impact in sizes and the whole business? Or is it too intertwined to really break out? I know it can't be broken out neatly, but is there any thoughts that you'd make on score?

Yes. A couple of comments. And first of all, I'm happy to confirm that in fact Dolby Cinema is growing at a nice pace. And you can see the non -- per se non financial data every quarter. You can see Kevin talks about the number of screens growing. So we're now up to 200 screens. So both quarter-on-quarter and year-over-year we're seeing growth. Typically or historically, the company we've broken things out when they get to 10% of revenue, I'll be happy when we get to that point. We haven't broken it out so far. I will say though that, I pointed out in my prepared comments that in the growth in products and services this quarter that was healthily driven by these blended deals on Dolby Cinema that involve some upfront amounts. But within our licensing, we don't have it broken out, so I can appreciate you want to that. We'll look to predict that out as we get to the point of what our historical practice has been.

Okay. Actually, my next question was going to be in gaming, and Consumer Electronics at 23%. I'm assuming that, that's the one that's pushing the envelope, so that you might be able to just try to breaking it out at some stage. But even when we get to that, it's still intertwined in Broadcast and PC and some of the others I would imagine?

Yes, I think if your question Jim is, are we looking to break out some line item called Vision revenue. That's not our current expectation, because Dolby Vision is a very important and fundamental platform that we have that goes into lots of devices. So today, we try to talk about our revenues in terms of breaking out more by end market than by "technology."

Okay. And I know, in Cinema business per se, within the theatrical space, AMC is your only partner -- only major partner you got in the U.S. that is necessarily inclined to coordinate with you. Are you seeing more uptick in some of the smaller players that there will be something due to company, AMC, even if it's not one of the majors partnering with you the way they're doing?

Well, I think, as we've talked about in the past, we're very excited about our relation with AMC. They've taken us over 100 screens. They've been growing very quickly, and so it's given us a fantastic footprint in the United States. And so as I said in previous discussions, our focus has been on opening up other markets. And so to that end, opening our first of, what we believe, will be many screens in the U.K. is a real highlight for us this quarter especially ODEON Leicester Square, which really is one of the most iconic location. They just renovated it. They put significant effort into that. So it's absolutely stunning. And then we also opened our first Dolby Cinema in Japan. So in general, the more the program develops, the stronger the value proposition is that we have to sell generally because we have more content, a proven value proposition and our focus is going to continue to be expanding in North America. We can do that very swiftly with AMC and opening up these additional markets.

Okay. And are the payments related to Vision and Atmos and devices based on numbers of devices or the value of the devices at the moment?

In general, our licensing business practice are tied to customers unit volumes. That's our general practice.

Okay. That's made it that way too. And the finally in the videoconferencing area, what is your competition and you talked about maybe that's the way that Voice would grow kind of that previous question, and this I think you're talking about today the Dolby Voice and Room, I think. Is that -- that does seem like a way to breakthrough a little bit unless you are bucking up against the market that already exists and you have to sort of cover your way into it. How would you characterize that opportunity?

Yes. I mean, we started a few years back in the more traditional audio conferencing space, and that's populated by all the players that you are used to seeing in conference rooms in your travel. As we shifted to the huddle room, you'll see a lot of the same players targeting that space, but it's much more open playing field because the customers are looking for solutions like Dolby Voice Room, which haven't been available in the past, and people are investing a lot more in huddle rooms within their spaces. And so they're looking for new equipment, and so we're much less inclined to be selling against we have something that works and it's not fully depreciated and more likely to be selling with our partners into we need something for these rooms that we haven't had in the past. And then, of course, that's all with the Dolby difference -- the Dolby Voice experience, we think that we can bring to light better than anybody and the differentiating features on the video experience as well.

(Operator Instructions) We'll take our next question from Paul Chung with JP Morgan.

So just on Broadcast, you mentioned, you expect modest growth this year. First, just want to confirm, this is from your recast numbers? And I'm getting to around 390-ish. And then you mentioned set-top boxes releases later this year. But orders -- where do you see from the customers that gives you some more confidence for growth in Broadcast this year?

I'll take the first half of that. But certainly, yes, for the audience and for yourself, all of the comments I made in the call, unless I specifically said otherwise, are versus 606, that makes it easy. So yes, when I talk about growth, it's against the 606 number. In terms of where we see some of the strength, let Kevin talk a little about that.

Yes. I'd say the primary driver is -- are the adoption of our new technologies, including Dolby Vision and Dolby Atmos, our consumer imaging programs more broadly. Broadcast is probably where we have -- it is where we have the largest additional footprint because we started with consumer licensing primarily in the TV area. We're now seeing growth in the set-top box area as well as other device categories. But it's primarily driven by adoption of additional Dolby experiences.

Okay. Great. Thanks. And second question just on, from 606 account change, I assume your cash flow seasonality stay the same? Can you confirm?

Yes. The cash flow that we presented historically is largely unaffected by the 606 recast. Going forward, our cash flow pattern shouldn't change dramatically as a result of 606. Remember, 606 is very much an accounting-driven standard, not so much change in the way we do business per se, which ultimately manifests itself in what you're asking about which is the cash flow.

Right. And then lastly just one number that's weird in the recast that I saw is the Mobile with 1% of licensing in Q4. Is that correct? And is it safe to assume that for 4Q this year, we should see a much higher revenue number there?

Yes. Now is probably not a good time to make a joke with regard to decimal. Yes, that number is correct. And we anticipate that will come. The first thing I would highlight is you swoop up to high level for the full year. As I said earlier and anticipation of people looking at that table. Mobile for the year, even as recast for the full year, was 16% of revenue and that compares, like I said, to it was probably 10% 3 or 4 years ago. In terms of Q4, we had some negative adjustments in that Q4 that amplified revenue that was shifting to our prior year. It's a small number of instances where we may have contract to get modified for normal business purposes. And under 606, there in the context of the recast, we may have some situations where you have revenue that's recorded as a positive in a prior year and as a negative in the subsequent year in the context of recast and some of that fell into -- affected the whole recast, but some of that fell into Q4 in Mobile in particular and that's what affecting that number. But obviously, we don't believe that 1% per se is reflective of our true business presence in Mobile, because we see actually an expanding number of people using this. So going forward, I don't think we see quarters where that 1% will repeat itself. It really is sort of an artifact of the mechanics of the 606 recast.

Okay. Thanks. And then last question is on your share repurchase was pretty material in 1Q. How should we think about the cadence of buybacks throughout the rest of the year?

Sure. I think at a high level, both Kevin and I have committed to having a multipronged strategy of returning cash to shareholders, but also reinvesting in the business, and we do all those. And over the last year, one of the offshoots of tax reforms is that, more of the cash that's used to be restricted to be used overseas is now available. So what you saw this quarter was -- we had an approval. We came into the quarter with over $300 million of approval. So we took advantage of that to buyback stock, return cash to shareholders. And we ended the quarter with still $1.1 billion, which we feel is more than adequate to run the company. So I think we don't ever project buybacks going forward, but obviously, you can always look at recent quarter and read wherever you want to.

And this concludes today's question-and-answer session. I'd now like to turn the call back over to Kevin for any additional or closing remarks.

Great. Thank you all for joining. And we look forward to keeping you updated on our progress.

This concludes today's conference. Thank you for your participation. You may now disconnect.