DLB

Dolby Laboratories is one of the highest-quality business models available: an intellectual-property licensing franchise (Dolby Atmos, Dolby Vision, audio/imaging standards) that earns royalties whenever its technology is embedded in devices and content. The economics are exceptional — an 88.1% gross margin in FY2025 — and the moat is durable, anchored in entrenched industry standards and a deep patent portfolio (R&D of $262M sustains it). FY2025 revenue grew 5.9% to $1.35B and operating income rose 2.6% to $265M, with net income essentially flat at $255M (-2.6%). This is not a fast grower, but it is a steady, capital-light cash compounder.

The balance sheet and capital return are pristine. Dolby is effectively debt-free with liabilities/equity of just 0.23x, holds $702M of cash (+45.6%), and converts earnings to cash efficiently — operating cash flow jumped 44.3% to $472M against just $36.3M of capex. Management returns capital steadily, with a growing dividend ($127M, +10.5%) and buybacks ($125M). Equity grew 5.9% to $2.62B and retained earnings rose 5.6%, reflecting consistent, profitable operation.