Good morning ladies and gentlemen, thank you for standing by. Welcome to the Dolby Laboratories Conference Call discussing Fiscal Second Quarter Results. [Operator Instructions]. As a reminder, this call is being recorded Tuesday, April 21, 2015. I would now like to turn the conference over to Elena Carr, Director of Corporate Finance and Investor Relations for Dolby Laboratories. Please go ahead, Elena.

Good afternoon. Welcome to the Dolby Laboratories' second quarter 2015 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 in our most recent report on Form 10-Q. Dolby assumes no obligation and does not intend to update any forward-looking statements made during this call as of the result of new information or future events. During today's call, we'll 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 data sheet on the Investor Relations section of our Web site. As for the content of this call, Lewis will begin with a recap of Dolby's financial results and provide our fiscal 2015 outlook and Kevin will finish with a discussion of the business. So with that introduction behind us, I will now turn the call over to Lewis.

Thanks Elena, good afternoon everyone, thanks for joining our call. Let's get right to the numbers. Our second quarter revenue was $271.9 million and within that total licensing was $243.3 million and products and services were $28.6 million. Like to make a quick comment on the comparison of licensing revenue year-over-year, last year in Q2 total licensing was $258.6 million but that included a one-time back payment settlement of $24.7 million, so if I exclude that notable item from the comparison then our total licensing would be 4% higher than last year's Q2. The breakout of this year's Q2 licensing by major market is as follows, broadcast represented about 42% of total licensing in the second quarter. Revenues in this market were up sequentially by about 14% mainly due to seasonality and year-over-year Q2 broadcast licensing was down about 15% due to last year's notable back payment that I mentioned a minute ago, so excluding that item from the comparison broadcast licensing was up about 8% over last year driven by higher unit volume in TVs and set top boxes. PC revenues represented about 17% of our total licensing in the second quarter. They were up by about 14% sequentially as one of our large customers reported higher units than we had projected for this quarter due mainly to timing. Year-over-year PC licensing was down about 2%. Consumer electronic revenues in Q2 were about 15% of total licensing, they were up about 22% sequentially driven by seasonality and year-over-year consumer electronics increased by about 8% due to higher back payment and higher volume in certain products such as sound bars offset partially by lower revenue from Blue Ray and DVD. Mobile devices represented about 11% of licensing revenue in Q2, they were down about 19% sequentially and about 14% year-over-year.…

Thank you Lewis and good afternoon everyone. We had a solid quarter with strong performance in broadcast, and with mobile coming in right about where we expected. Today I'd like to spend a few minutes updating you on progress we've made on our new initiatives, which played important role in our plan to deliver long-term, sustainable growth. I'll start with Dolby Cinema which brings Dolby Vision and Dolby Atmos together to deliver the ultimate movie going experience. I'm excited to say that we've announced two key Dolby Cinema partners this quarter, AMC Theatres and the Walt Disney Studios. Let me start with AMC, we announced that we'll be partnering with AMC to deploy Dolby Cinema at AMC Prime across the United States with four sites up and running by May and up to 10 sites by the end of the summer. The first sites will be installed at some of the highest grossing complexes in the country and will result in a fantastic platform to extend the Dolby Cinema program. Over time we are looking to work together to deploy a 100 Dolby Cinema at AMC Prime sites. Of course every great cinematic experience needs a great content. We are thrilled that Disney and Pixar are the first studios to announce their commitment to create Dolby Vision theatrical titles for release in Dolby Cinema locations. These include Tomorrow Land, Inside Out and the Jungle Book with Tomorrow Land being released next month. Dolby Vision combined with Dolby Atmos pulls movie goers more deeply into the story through breathtaking sound and captivating images. We're excited to be working with AMC and Disney to deliver the total cinema experience. I'm pleased that Dolby Cinema is off to a strong start and I look forward to keeping you up to date on our…

Thank you ladies and gentlemen. [Operator Instructions]. And your first question comes from Steven Frankel with Dougherty.

I was hoping to get a little more detail on cinema and perhaps you could start with how many titles do you think you'll have in Dolby Cinema in calendar '16?

In calendar '16?

Yes.

So we did talk about 10 by the end of the summer, right, and we're working to get over time a 100 with AMC, we haven't disclosed the number for 2016 but look I think going from deploying 10 between now and the end of the summer gives you a sense for the pace at which we're able to do this even at an early stage and we're a 100% focused on making the four that we're targeting in May and the 10 by the end of the summer, a spectacular experience because if we do that then I'm confident that there's going to be demand and we're going to be able to roll these out and address a broader audience.

Right, Kevin my question was on the content side, how many films do you think you'll have next year. When you don't have a film can the exhibitor put whatever they want unprocessed in their Dolby Cinema?

Right, so right now we have the first three titles, obviously our goal is to have a healthy slate of titles in Dolby Vision and Dolby Atmos, that allow for a regular rotation of films through the top screen, that’s our goal ultimately. In the meantime yes we do envision allowing the exhibitors to have the flexibility to bring titles to screens.

And then let me sneak in one last follow up which is, what capital expenditures [indiscernible].

Steve, this is Lewis, it's still early but we figured somebody would want to get some gauge so for the first four theaters which are the ones that are really on the slate right now we anticipate that that'll be somewhere in the neighborhood of a $3 million to $4 million investment by us to get those rolling and over time we'll keep you posted on how that progresses because obviously those are the first four.

Our next question from Ralph Schakart with William Blair.

Kevin I was wondering if maybe you could give us a little bit of perspective on some of the recent R&D ramp and spend and then I think historically you've talked about at some point the R&D will moderate and we should see more commercial wins and or more products, sustained longer term revenue growth, are you thinking perhaps maybe 2015 might be sort of the ramp or the peak year for R&D spend and maybe some of sales and marketing continues to support those efforts into 2016 but maybe if you could give us some perspective on those dynamics.

Sure, so, we're pleased that we are seeing a number of those early wins that we talked about looking for as we look to move these businesses to scale, with wins that we just talked about in Dolby Cinema with AMC and Disney, with Vizio for Dolby Vision, great progress in Dolby Atmos, and as it relates to the spending directly let me start by addressing total operating expenses. The peak actually was really three, four years back when we were increasing OpEx at a rate of about just around 15% annually, we brought it down to 10% last year, this year we are looking at something single-digits and that includes having brought on the Doremi acquisition which was virtually the entire year of spending from there, so we have been in total bringing those expenses down and within that we are regularly allocating resources based on which projects are getting traction in the market and allocating between research and development, sales and marketing as the market really leads us to do. So, we believe we have begun to moderate, we have in fact moderated the rate of growth we're very conscious that the spend levels, obviously the reason we're doing this, we stated this, is because we believe that in addition to the growth we have in front of us in the core business in areas like broadcast and mobile we look to these new initiatives to be an important cornerstone of how we return to long-term sustainable growth. You know this year I said we will see, we are seeing some revenues as you know from Dolby Voice, we'll be seeing some revenue from Dolby Cinema, what I would like, what I believe is that across this portfolio of initiatives that we have in play right now with Dolby Cinema, Dolby Vision, Dolby Voice, the combination of these new initiatives will be, we expect, I expect them to be a factor in our growth rate for 2016.

We'll take our next question from Mike Olson of Piper Jaffray.

Just following on kind of your last comment there Kevin, if you look at Atmos, Vision, Cinema or Voice, not to make you kind of rank your initiative, but which do you feel has kind of the potential to have the most material impact to revenue most quickly. In other words I guess what would you suggest we should be focusing most on these various initiatives as far as, as you just mentioned potential revenue impact in 2016.

Yes, I do, I get asked this internally as well and I do refuse to pick my favorite child, I'm excited about each of these initiatives, I think the answer to your question has a lot to do with all of them have the potential at this point for hitting revenue growth curve and it all comes down to making sure that these first experiences for our customers in the case of Dolby Cinema as we bring the four screens up for Tomorrow Land, as we get to the 10 by the end of the summer, Inside Out comes into play, we are -- if we have what we believe we can do which is really spectacular experience then that's what will drive the pace of adoption and the pace of revenue growth, we absolutely believe that that we have a real opportunity here to build a sustainable profitable business. With Dolby Voice, the pipeline is building really nicely and we're seeing the pipeline shift toward much larger enterprises and so the key for revenue growth and the pace of revenue growth there is going to be all about the adoption cycle, as you know these are large enterprise accounts and adoption cycles it is time for us to sink our teeth into some of those larger accounts with BT and get the adoption going and that's what I think will determine the pace of adoption there, and you know as it relates to Dolby Vision, obviously the big milestones they have the first announced television with Dolby Vision, I think that also has a lot to do with the broader market, the good news is HDR is clearly on everybody's agenda, we were very early to recognize that, we've been in the game for five -- seven years really.…

If I can sneak in one other quick one, is there anything you can say about how Dolby's technology may or may not be incorporated in the upcoming release of Windows 10?

No, I don't think, as usual we're just not in a position to announce things that aren’t ours to announce.

[Operator Instructions]. We'll now go to Steven Frankel with Dougherty.

Kevin, think I'll follow up on [indiscernible] comment, if you're at 50 customers today what would that have been in the last quarter.

Well so first of all 50 customers signed up right, they're in various stages of deployment, or preparing for deployment and I think the number, I think the last number we gave was a couple of quarters ago and it was around 20.

Is in the 20.

I don't think we have any other questions. So, well, thank you all for joining us today and as always we look forward to keeping you up to date throughout the quarter and when we speak again next quarter, thank you.