Ladies and gentlemen, thank you for standing by. Welcome to the Dolby Laboratories conference call discussing fiscal first quarter 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, this call is being recorded, Thursday, January 23, 2014. I would now like to turn the conference call over to Elena Carr, Director of Corporate Finance and Investor Relations, for Dolby Laboratories. Please go ahead.

Good afternoon. Welcome to Dolby Laboratories First Quarter Fiscal 2014 Earnings Conference Call. Joining me today are Kevin Yeaman, Dolby Laboratories' President and CEO; and Lewis Chew, Executive Vice President and Chief Financial Officer. On this call, we will be making forward-looking statements that include projections of future operating results for our fiscal year ending September 26, 2014. We'll also talk about the market trends and developments for the industries in which we compete and our expectations and beliefs concerning how these trends and developments will affect our operating results. Our statements will also incorporate projections on the capabilities and market acceptance of our products and technologies, expectations relating to licensing arrangements and our strategic and operational plans and objectives. These statements are based on management's current expectations and assumptions and are subject to risks and uncertainties. Actual results may differ materially from those set forth in such statements. Important factors, such as general economic, PC, broadcast, consumer electronic, mobile and cinema 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 10-K available on our website, www.dolby.com, under the Investor Relations section, as well as www.sec.gov. 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'll discuss GAAP and non-GAAP financial measures. A reconciliation between the two is available in our earnings release and at the Dolby Laboratories Investor Relations Data Sheet on the Investor Relations section of our website. As for the content of this call, Lewis will begin with a recap of Dolby's financial results and provide our fiscal 2014 outlook. Kevin will then finish with a discussion of the business. So with that introduction behind me, I now turn the call over to Lewis.

Thanks, Elena, and good afternoon, everyone. As Elena said, today I'll cover our financial results for the first quarter of fiscal 2014 and I'll provide an outlook for the second quarter. I'll also update the outlook for the full fiscal year at the end of the comments. So let me begin by discussing our revenue trend. In the first quarter just completed, total Company revenue was $231.3 million, and within that, licensing revenue was $205.7 million, which was up by $14.6 million sequentially from Q4 and up slightly from the $204.9 million of licensing revenue in last year's first quarter. Additional details of licensing revenue by end market are as follows. Broadcast represented about 36% of total licensing in the quarter. Revenues in this category increased about 4% sequentially and about 8% year-over-year. In both comparisons, we saw higher revenue from TVs and set-top boxes due to a combination of higher set-top box TAM and higher amounts for back payments. The Q4 to Q1 sequential trend also benefited from seasonality. Attach rates remained relatively consistent. PC revenues represented about 21% of total licensing in Q1. They were up about 9% sequentially and down about 27% compared to last year's first quarter. The sequential improvement benefited from higher TAM units which we would attribute mainly to back-to-school seasonality. The year-over-year decrease in Q1 was significantly below market, similar to what we experienced in Q4. I mentioned in last quarter's earnings call that there would likely be two more quarters of Dolby specific headwinds in our year-over-year PC comparisons due to our transition from Windows 7 to the Windows 8 business model, and Q1 was the first of those two. Consumer electronic revenues in Q1 comprised about 19% of total licensing. They were higher by about 24% sequentially and by about 10%…

Thank you, Lewis. Good afternoon, everyone. We had a strong first quarter and I'm pleased with the continued growth in our mobile and broadcast businesses. Additionally, we have made progress in bringing new technology to the market, including our enhanced imaging technologies and Dolby Voice. I'd like to update you today on our progress in some key areas. First, I'll talk about mobile. As Lewis mentioned, we saw strong year-over-year growth of over 40%. As we've discussed before, our strong position in smartphones is at the high-end of the market where the growth trends are slowing. To build upon this position, we are focused on expanding the adoption of our technologies on the high-end and extending that to mid-tier smartphones and tablets. It is clear that more and more of these devices across all tiers of the market are accessing online content and this trend is accelerating. Dolby's audio solution enhances the user experience on mobile devices and makes online content even more engaging. An important part of our strategy is to increase the usage and number of streaming services that provide content in Dolby. Our technologies are deployed in five of the seven most used over-the-top services in the United States. During the quarter, we have seen the continued global expansion of Dolby Digital Plus in over-the-top services. In Japan, Amazon Instant Video began streaming in Dolby to the Kindle Fire HDX, and [Antena 3] (ph) in Spain is now streaming to Windows devices in our format. Additionally, several over-the-top services were launched during the quarter that stream in Dolby to connected TVs including Maxdome in Germany, HBO Go in the Nordics, and Play in Russia. Another source of online content is UltraViolet. UltraViolet is a cloud based system which allows customers to download and stream movies and TV…

(Operator Instructions) To be fair to all participants, we ask that you limit yourself to one question and a follow-up question until all participants have had a chance in the first round. If time allows, we will then come back to answer any remaining questions. Your first question comes from Mike Olson with Piper Jaffray.

I was just wondering if you could provide some of the specifics on the number for back payments in CE, maybe how that compare to your expectations and how would you describe how maybe CE performed versus your expectations outside of those back payments?

Sure, Mike. This is Lewis Chew, just to be clear because there's frankly more than one Lewis in the room. As you know, we don't typically break out sub-segments of our revenue but there is no doubt that back payments did move the needle for us, but if I make a broad statement, the CE activity was pretty much on par with what we expected without that. So there's no big surprises, but obviously for us, the whole suite of revenue we get is important, so I wouldn't want to overlook that.

I agree and I understand. Then, as far as the market share for kind of non-iOS smartphones and tablets, is there any sort of ballpark number that you could provide there?

Is it like an Android number you're looking for or…?

Yes.

Yes, we're still – as far as our attach to Android devices, including all tiers, we're still in the low to mid 20% attach rate, and our focus is continuing to drive that higher, both by increasing our attach at the high-end and also providing value across all tiers where immersive entertainment content is one of the highest used cases for these devices.

Okay. And then lastly on Dolby Vision, could you just talk about what the business model around that is, is it like a per device royalty as usual for Dolby, and just what like the sales process is like and how you are kind of convincing TV manufacturers on ROI?

Sure, yes. It starts, as often things start with Dolby, is we're very closely engaged with the creative community who are always looking for how they can push the envelope to better engage you in their story, and that's the real – that's where we start and we're getting really positive feedback in that regard about what this can do for the quality of motion pictures, television, et cetera. And then we're working through the whole chain as we always do. So we're working through the distribution chain, we're engaging with content providers, content aggregators, and then as we said, we have two manufacturers already planning to ship TVs by the end of the year. So, it's very much – in many ways, it is very much like our traditional model. We're looking to up-level the quality of the experience, build an ecosystem around that, and provide end-to-end tools required to deliver it, and yes, we see that being a royalty based model.

Thank you and our next question comes from Ralph Schackart with William Blair.

First question is around mobile, grew 40% in Q1, I think it grew 35% Q1 last year and starting to show some acceleration. Kevin, you made a comment on the call that you're seeing sort of deep penetration at the high-end tier and you're trying to expand to the mid-tier. Just trying to square those comments in light of the acceleration with the numbers.

Today, most of our penetration is still at the high end, but we're engaged to continue to expand that, both there and at the mid-tier. So, most of the growth you're seeing is the – there is still growth at the high-end even if it's not at the rates we maybe were seeing a year, a year and a half ago, but we're also continuing to work to expand our presence there.

Great. Then the next one for Lewis. Lewis, can you sort of help us understand the upside in the quarter around I believe about 20 million or so, and then the full year guide that was boosted by about 10 million? I'm just trying to understand how much of that is conservative vis-a-vis sort of the back payments that may have come in during the quarter.

You're not suggesting that we gave mediocre guidance, are you Ralph?

Just trying to understand the numbers, Lewis, that's all.

Okay. I think there was a number of things going on. One is, I want to step back from the details in that question and acknowledge that, hey, we had a good start to the year and we did raise guidance for the year and we feel pretty good about it. In Mike's question, he asked about back payments on CE, and things like that you don't necessarily model to be repeating every quarter. You'll also notice in the details in the numbers that we did have actually higher revenues even in products and services. Some of those things can come from timing. So net-net, we feel like it was a good start to the quarter, we did raise for the year and we've got three more quarters to go and let's stay posted on that, right. Obviously, we're very focused as you know on getting the Company back to total Company growth type numbers and this was a great way to start the year to do that.

Okay, thank you.

Thank you. We'll take our next question from Steven Frankel with Dougherty. Steven Frankel - Dougherty & Co.: Let me try a different tact on Ralph's question. The outperformance in the quarter, kind of roughly how much of that was from back payments and how much of that was from parts of the business that outperformed relative to your expectation?

How about I give you this point. There was a chunk of the outperformance this quarter that was back payments and products and services, and it's probably fair to say that we didn't just multiply that out by four, and our outlook for licensing for the rest of the year is at least as good, if not better, than we were at the beginning of last quarter. Steven Frankel - Dougherty & Co.: Okay, and it still doesn't quite get me what I want but maybe we'll attack this afterwards one-on-one. So, you talked about going after the middle tier and the Android market. Can you do that under the current product portfolio and pricing structure or do you envision pitching some subset of your offering that you can sell-in much cheaper on these lower priced devices or are you just going to cut prices to grab market share?

I think that it's really just about – we've been focused for the last couple of years and it's built up we think a strong position making up 15% of our revenue this quarter, articulating the value proposition on the high-end, and so we're now finding that proposition and going to make the case that there's value to providing this across more mobile devices. And in the process of doing that, we'll work out the best way to work with each of the providers, and I suppose in that regard any of the options you mentioned are conceivably on the table but the main thing is pointing out the value proposition to extending this further and we think that there's growth opportunity there. Steven Frankel - Dougherty & Co.: And lastly on Vision, if it's an end-to-end offering, what types of content will we first see encoded to take advantage of Vision? Is this going to be something that shows up on Blu-ray first or over-the-top or broadcast?

Yes, I think I'm probably going to have to give you a stay-tuned on that. I will say that over-the-top is interesting in that it doesn't have – the infrastructure requirements are more flexible. So that could be a first pass to market, but all the – we're engaged across all of those delivery mechanisms right now. And I think what we're excited about, and certainly I'm sure you were at and a number of you on the call were at CES, and everywhere you look, people are looking to kind of find the next wow factor in TV, and what we heard over and over again and even what you'll find in some of the press that was written about Dolby Vision is that it does have a wow factor. So, in terms of first pass to market, we continue to look at all of them. I would say that over-the-top appears to be the one where you could get out more quickly, given the infrastructure requirements of the other channels. Steven Frankel - Dougherty & Co.: Great, thank you.

Thank you. We'll take our next question from Jim Goss with Barrington Research.

Couple of questions. First, one of the articles coming out of one of the magazines at CES had a headline of 'Smartphone Suppliers Seek Differentiation, Niches', making the point that part of the business is maturing somewhat and differentiation would be very valuable to make a mark, but nowhere in the article did it address audio quality, it was really games and geo-location and kids' phones and some other things like that. I'm wondering if you are seeing some of the same type of resistance you might have once seen with DVDs even where instead of choosing a better audio quality, that choose sort of gimmicks or whatever to fill the space that they felt will sell the product better rather than addressing what's really valuable in it, or are you getting maybe better penetration in tablets than in smartphones as you pursue mobile devices? And then a separate question would be, related to Windows 8, are you noticing the ambivalence of herd toward Windows 8 such that it might wind up like moving into the next version before you even get significant penetration in that area, and that's it?

So, how many questions was that, Lewis?

Just two. I grouped…

Was that two? [indiscernible]. So let me start with your first. Yes, I think that – I didn't read the particular article you're looking at, but what we've seen is an increasing understanding that the quality of the entertainment experience is now as important as the convenience of being able to get to the content, and we're seeing that consistently across audio and video, and whereas three years ago, we were making the initial case to these providers that audio quality could be substantially improved. I think we've made that value proposition, and so it's still an area where people can differentiate and there's also kind of an understanding that this is something you have to consider. So, I can't speak to that article but we're seeing a lot of people that are really looking to continue to move forward in terms of the fundamental quality of these devices, even as yet people obviously are really focused on mobile gaming and other apps and those are all areas that we've got to develop our program, where we're working with other forms of content in addition to movies and TV shows that are traditionally enhanced in Dolby technologies. I think on Windows, I think Microsoft's call started five minutes ago, so they probably have a good projection on that, but from our perspective, the PC market and Microsoft being a very large percentage of that for our business, is playing out about as we expected, and if anything, they're stabilizing a little bit. We've kind of gotten a little too used to having a set of industry estimates that come down each quarter, we've seen that stabilize, so that we feel good about, and of course we're really excited to have Dolby technology available across all those Windows 8 devices, in particular for online playback, and to be able to work with development community to expand the types of content and use cases for people to have a high quality experience.

All right, thanks.

Thank you, and at this time we do have one question remaining in our queue. (Operator Instructions) We'll take our next question from Andrew Hargreaves with Pacific Crest Securities.

With respect to kind of mid-tier mobile move, I apologise if I just missed it, did you just say, you're engaged with vendors about this already, and if so, are there phones that you think we'll see this year sort of in the mid-tier?

We're certainly in discussions with the companies that we work with about expanding the audio quality and immersive experience deeper into their lineup, including the mid-tier, and yes, we'd certainly like to see us beginning to see more of a noticeable presence in those tiers in the coming year.

Do you guys think that the revenue opportunity is proportionate with the unit opportunity there relative to the high-end?

I think it's one of the most important indicators of the revenue opportunity. I think it's a big – I think that if I back up, I mean the number of mobile devices is so considerable that we're confident it's a big market with additional growth if we continue to expand our presence in the high-end and into the mid-tier. And importantly, it's also – as we have worked over the years to become a part of this mobile ecosystem and to have worked with all the parties to come together to make for that convenient high-quality content available to you on your smartphone or tablet, that becomes a really attractive area for us to bring some of our new offerings to market, and in the future we could see some of our new offerings coming to those kind of devices and use cases very early in the release cycle.

Okay, and if I can squeeze one more on Dolby Vision, is this an extension – if I remember, it was at BrightSide and Dolby Contrast a few years ago, and if so, I guess what's different about the go-to-market this time versus – or about the market environment this time versus a few years ago?

Sure. So the technology you're recalling was a technology that one would license to make a display, and that's a great way, it's still today a great way to make a bright high-contrast display. One of the big questions at the time was, where am I going to get the content to really take advantage of all this horsepower, and in fact we saw that on both sides of the industry. You've got content creators who are capturing much more dynamic range and much more color range than they are able to put through the distribution pipes, and you've got TVs that are pushing levels of brightness that they just can't get content to really take advantage of. And so, we learned a lot from our work in enhancing the brightness of the display and went back doing what I think we've always done, and again, that started with working with the creators to find a way to take advantage of the dynamic range and the colorings that they were already capturing, and importantly, developing the format which would serve the needs of everyone in between that content creator and the display manufacturer to be able to create that wow factor on the television itself. And so, whereas that was a royalty for technology that would be used to make a display, this is now an end-to-end format with the tools for production and the ability to code that format and optimize it for display. Now, I do want to point out, importantly, it does not depend on the type of display that we continue to license, that original technology. This can apply to any type of display, it's not dependent on resolution, and so you should think of this as something that is compatible with the vast majority of the things you see at CES that people are looking to differentiate on and we think brings a real wow factor on top of any of those great innovations.

Okay, thank you very much.

This is Lewis. I'll track on, since Andy didn't asked the question, I'll come back since two of the questions we got, one from Ralph and one from Steve, was about the first quarter versus the rest of the year. I'll give you sort of a rough breakdown just so everyone has it. The first thing I'll point out is that products and services exceeded our expectation by 5 plus million, and you look at the rest of these, which was licensing, I'll say roughly that was driven almost evenly split between back payment type activities and the other half from what I'd call normal business.

Okay, do we have any other questions, operator?

It appears we have no further questions at this time.

Okay, great. Thank you for joining us and we look forward to following up with you again very soon.

And again, this does conclude today's Dolby Laboratories conference call discussing fiscal first quarter results. We thank you again for your participation.