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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Sonos Inc | NASDAQ:SONO | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.105 | 0.67% | 15.795 | 15.79 | 15.80 | 15.85 | 15.64 | 15.81 | 187,368 | 15:46:24 |
Company reports solid first half, on-track to achieve Fiscal 2024 guidance
Sonos, Inc. (Nasdaq: SONO) today reported second quarter fiscal 2024 results.
“Thanks to the hard work of our team, and the strength of our brand and product portfolio, we delivered results that slightly exceeded our expectations in our second quarter despite the challenging environment,” Sonos CEO Patrick Spence commented. “Today marks the launch of our completely reimagined Sonos app, which is our most extensive app redesign ever. This is a major step in enabling our multi-year product cycle and sets us up well for the launch of our highly anticipated new product later this quarter.”
“Our Q2 results show our commitment to execution. With a solid first half behind us, we are well positioned to deliver on our Fiscal 2024 guidance,” said Sonos CFO Saori Casey.
Second Quarter Fiscal 2024 Financial Highlights (unaudited)
Notes: (1) Non-GAAP net loss/Non-GAAP diluted loss per share (EPS) and Adjusted EBITDA exclude stock-based compensation, legal and transaction related fees, amortization of intangibles, and restructuring and abandonment costs. See “Use of Non-GAAP Measures” and reconciliations to GAAP measures below.
Maintaining our Fiscal 2024 Outlook
Low end
Midpoint
High end
Revenue ($ million)
1,600
1,650
1,700
% y/y
-3%
0%
3%
% y/y - constant currency
-3%
0%
3%
Gross margin - GAAP
45.0%
45.5%
46.0%
Adjustments(1)
0.4%
0.4%
0.4%
Gross margin - Non-GAAP(1)
45.4%
45.9%
46.4%
Adjusted EBITDA ($ million)
150
165
180
Adjusted EBITDA margin
9.4%
10.0%
10.6%
Notes: (1) Non-GAAP gross margin excludes approximately $7 million (0.4% of revenue) of stock-based compensation and amortization of intangible assets included in GAAP gross margin
Supplemental Earnings Presentation
The company has posted a supplemental earnings presentation accompanying its second quarter fiscal 2024 results to the Earnings Reports section of its investor relations website at https://investors.sonos.com/reports-and-filings/default.aspx#section=earningsreports.
Conference Call, Webcast and Transcript
The company will host a webcast of its conference call and Q&A related to its second quarter fiscal 2024 results on May 7, 2024, at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time). Participants may access the live webcast in listen-only mode on the Sonos investor relations website at https://investors.sonos.com/news-and-events/default.aspx.
The conference call may also be accessed by dialing (888) 330-2454 with conference ID 8641747. Participants outside the U.S. can access the call by dialing (240) 789-2714 using the same conference ID.
An archived webcast of the conference call and a transcript of the company’s prepared remarks and Q&A session will also be available at https://investors.sonos.com/reports-and-filings/default.aspx#section=earningsreports following the call.
Consolidated Statements of Operations and Comprehensive (Loss) Income
(unaudited, in thousands, except share and per share amounts)
Three Months Ended
Six Months Ended
March 30,
2024
April 1,
2023
March 30,
2024
April 1,
2023
Revenue
$
252,662
$
304,173
$
865,531
$
976,752
Cost of revenue
140,624
172,555
470,815
560,078
Gross profit
112,038
131,618
394,716
416,674
Operating expenses
Research and development
80,322
80,785
159,557
157,726
Sales and marketing
61,835
63,621
145,785
142,317
General and administrative
40,841
44,438
80,639
87,553
Total operating expenses
182,998
188,844
385,981
387,596
Operating (loss) income
(70,960
)
(57,226
)
8,735
29,078
Other income, net
Interest income
3,933
3,181
7,008
5,149
Interest expense
(122
)
(152
)
(227
)
(311
)
Other (loss) income, net
(3,303
)
(2,832
)
6,971
20,745
Total other income, net
508
197
13,752
25,583
(Loss) income before (benefit from) provision for income taxes
(70,452
)
(57,029
)
22,487
54,661
(Benefit from) provision for income taxes
(743
)
(26,377
)
11,249
10,124
Net (loss) income
$
(69,709
)
$
(30,652
)
$
11,238
$
44,537
Net (loss) income attributable to common stockholders:
Basic and diluted
$
(69,709
)
$
(30,652
)
$
11,238
$
44,537
Net (loss) income per share attributable to common stockholders:
Basic
$
(0.56
)
$
(0.24
)
$
0.09
$
0.35
Diluted
$
(0.56
)
$
(0.24
)
$
0.09
$
0.34
Weighted-average shares used in computing net (loss) income per share attributable to common stockholders:
Basic
123,749,605
127,952,875
124,465,661
127,582,560
Diluted
123,749,605
127,952,875
128,206,823
132,834,096
Total comprehensive (loss) income
Net (loss) income
(69,709
)
(30,652
)
11,238
44,537
Change in foreign currency translation adjustment
(85
)
4,542
(948
)
(2,684
)
Net unrealized loss on marketable securities
(26
)
—
(26
)
—
Comprehensive (loss) income
$
(69,820
)
$
(26,110
)
$
10,264
$
41,853
Consolidated Balance Sheets
(unaudited, in thousands, except par values)
As of
March 30,
2024
September 30,
2023
Assets
Current assets:
Cash and cash equivalents
$
245,962
$
220,231
Marketable securities
45,598
-
Accounts receivable, net
69,725
67,583
Inventories
179,545
346,521
Prepaids and other current assets
42,077
25,296
Total current assets
582,907
659,631
Property and equipment, net
88,236
87,075
Operating lease right-of-use assets
51,594
48,918
Goodwill
81,303
80,420
Intangible assets, net
In-process research and development
71,235
69,791
Other intangible assets
17,243
20,218
Deferred tax assets
1,638
1,659
Other noncurrent assets
31,459
34,529
Total assets
$
925,615
$
1,002,241
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable
$
121,497
$
187,981
Accrued expenses
72,241
89,717
Accrued compensation
38,470
22,079
Deferred revenue, current
20,692
20,188
Other current liabilities
50,317
34,253
Total current liabilities
303,217
354,218
Operating lease liabilities, noncurrent
51,984
54,956
Deferred revenue, noncurrent
62,616
60,650
Deferred tax liabilities
9,972
9,846
Other noncurrent liabilities
3,822
3,914
Total liabilities
431,611
483,584
Commitments and contingencies
Stockholders’ equity:
Common stock, $0.001 par value
128
130
Treasury stock
(77,996
)
(72,586
)
Additional paid-in capital
577,840
607,345
Accumulated deficit
(1,550
)
(12,788
)
Accumulated other comprehensive loss
(4,418
)
(3,444
)
Total stockholders’ equity
494,004
518,657
Total liabilities and stockholders’ equity
$
925,615
$
1,002,241
Consolidated Statements of Cash Flows
(unaudited, dollars in thousands)
Six Months Ended
March 30,
2024
April 1,
2023
Cash flows from operating activities
Net income
$
11,238
$
44,537
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
23,121
22,845
Restructuring and abandonment charges
266
4,846
Stock-based compensation expense
43,031
41,220
Provision for inventory obsolescence
5,293
10,059
Other
2,188
3,173
Deferred income taxes
(31
)
1,358
Foreign currency transaction gains
(3,441
)
(14,126
)
Changes in operating assets and liabilities:
Accounts receivable
(2,793
)
16,932
Inventories
161,683
118,032
Other assets
(15,169
)
5,481
Accounts payable and accrued expenses
(89,151
)
(186,194
)
Accrued compensation
16,040
6,108
Deferred revenue
1,857
(4,484
)
Other liabilities
10,025
(463
)
Net cash provided by operating activities
164,157
69,324
Cash flows from investing activities
Purchases of marketable securities
(45,280
)
—
Purchases of property and equipment
(16,263
)
(23,403
)
Net cash used in investing activities
(61,543
)
(23,403
)
Cash flows from financing activities
Payments for repurchase of common stock
(76,250
)
(30,054
)
Proceeds from exercise of stock options
11,905
17,584
Payments for repurchase of common stock related to shares withheld for tax in connection with vesting of restricted stock units
(13,242
)
(18,199
)
Net cash used in financing activities
(77,587
)
(30,669
)
Effect of exchange rate changes on cash and cash equivalents
704
4,766
Net increase in cash and cash equivalents
25,731
20,018
Cash and cash equivalents
Beginning of period
220,231
274,855
End of period
$
245,962
$
294,873
Supplemental disclosure
Cash paid for interest
$
134
$
330
Cash paid for taxes, net of refunds
$
12,247
$
6,399
Cash paid for amounts included in the measurement of lease liabilities
$
6,670
$
7,219
Supplemental disclosure of non-cash investing and financing activities
Purchases of property and equipment in accounts payable and accrued expenses
$
7,582
$
8,393
Right-of-use assets obtained in exchange for new operating lease liabilities
$
7,637
$
711
Reconciliation of GAAP to Non-GAAP Cost of Revenue and Gross Profit
(unaudited, in thousands, except percentages)
Three Months Ended
Six Months Ended
March 30,
2024
April 1,
2023
March 30,
2024
April 1,
2023
Reconciliation of GAAP cost of revenue
GAAP cost of revenue
$
140,624
$
172,555
$
470,815
$
560,078
Stock-based compensation expense
686
581
1,340
1,151
Amortization of intangibles
973
973
1,945
2,158
Non-GAAP cost of revenue
$
138,965
$
171,001
$
467,530
$
556,769
Reconciliation of GAAP gross profit
GAAP gross profit
$
112,038
$
131,618
$
394,716
$
416,674
Stock-based compensation expense
686
581
1,340
1,151
Amortization of intangibles
973
973
1,945
2,158
Non-GAAP gross profit
$
113,697
$
133,172
$
398,001
$
419,983
GAAP gross margin
44.3
%
43.3
%
45.6
%
42.7
%
Non-GAAP gross margin
45.0
%
43.8
%
46.0
%
43.0
%
Reconciliation of Selected Non-GAAP Financial Measures
(unaudited, dollars in thousands)
Three Months Ended
Six Months Ended
March 30,
2024
April 1,
2023
March 30,
2024
April 1,
2023
Research and Development (GAAP)
$
80,322
$
80,785
$
159,557
$
157,726
Stock-based compensation
10,419
9,565
19,398
18,716
Amortization of intangibles
496
495
992
990
Restructuring and abandonment costs
-
2,682
323
2,682
Research and Development (Non-GAAP)
$
69,407
$
68,043
$
138,844
$
135,338
Sales and Marketing (GAAP)
$
61,835
$
63,621
$
145,785
$
142,317
Stock-based compensation
4,972
4,475
8,787
8,588
Amortization of intangibles
-
-
-
-
Restructuring and abandonment costs
-
1,034
113
1,034
Sales and Marketing (Non-GAAP)
$
56,863
$
58,112
$
136,885
$
132,695
General and Administrative (GAAP)
40,841
44,438
80,639
87,553
Stock-based compensation
7,596
6,404
13,506
12,765
Legal and transaction related costs
2,395
9,018
6,140
15,307
Amortization of intangibles
24
24
48
48
Restructuring and abandonment costs
6
1,130
138
1,130
Adjusted General and Administrative (Non-GAAP)
$
30,820
$
27,862
$
60,807
$
58,303
Total Operating Expenses (GAAP)
$
182,998
$
188,844
$
385,981
$
387,596
Stock-based compensation
22,987
20,444
41,691
40,069
Legal and transaction related costs
2,395
9,018
6,140
15,307
Amortization of intangibles
520
519
1,040
1,038
Restructuring and abandonment costs
6
4,846
574
4,846
Adjusted Operating Expenses (Non-GAAP)
$
157,090
$
154,017
$
336,536
$
326,336
Total Operating (Loss) Income (GAAP)
$
(70,960
)
$
(57,226
)
$
8,735
$
29,078
Stock-based compensation
23,673
21,025
43,031
41,220
Legal and transaction related costs
2,395
9,018
6,140
15,307
Amortization of intangibles
1,493
1,492
2,985
3,196
Restructuring and abandonment costs
6
4,846
574
4,846
Adjusted Operating (Loss) Income (Non-GAAP)
$
(43,393
)
$
(20,845
)
$
61,465
$
93,647
Depreciation
9,750
10,221
20,136
19,649
Adjusted EBITDA (Non-GAAP)
$
(33,643
)
$
(10,624
)
$
81,601
$
113,296
Reconciliation of Net (Loss) Income to Adjusted EBITDA
(unaudited, dollars in thousands except percentages)
Three Months Ended
Six Months Ended
March 30,
2024
April 1,
2023
March 30,
2024
April 1,
2023
(In thousands, except percentages)
Net (loss) income
$
(69,709
)
$
(30,652
)
$
11,238
$
44,537
Add (deduct):
Depreciation and amortization
11,243
11,713
23,121
22,845
Stock-based compensation expense
23,673
21,025
43,031
41,220
Interest income
(3,933
)
(3,181
)
(7,008
)
(5,149
)
Interest expense
122
152
227
311
Other expense (income), net
3,303
2,832
(6,971
)
(20,745
)
(Benefit from) provision for income taxes
(743
)
(26,377
)
11,249
10,124
Legal and transaction related costs (1)
2,395
9,018
6,140
15,307
Restructuring and abandonment costs (2)
6
4,846
574
4,846
Adjusted EBITDA
$
(33,643
)
$
(10,624
)
$
81,601
$
113,296
Revenue
$
252,662
$
304,173
$
865,531
$
976,752
Net (loss) income margin
(27.6
)%
(10.1
)%
1.3
%
4.6
%
Adjusted EBITDA margin
(13.3
)%
(3.5
)%
9.4
%
11.6
%
(1) Legal and transaction-related costs consist of expenses related to our intellectual property ("IP") litigation against Alphabet and Google, as well as legal and transaction costs associated with our acquisition activity, which we do not consider representative of our underlying operating performance.
(2) Restructuring and abandonment costs for the three and six months ended March 30, 2024 are related to our restructuring plan initiated on June 14, 2023 (the “2023 restructuring plan"). Restructuring and abandonment costs for the three and six months ended April 1, 2023 consist of costs incurred in March 2023 related to abandonment of portions of our office spaces for the remainder of their respective lease terms in support of operational efficiencies. Lease abandonment costs include the impact of the write-off of the associated operating lease right-of-use assets, as well as accelerated depreciation of the related leasehold improvements.
Reconciliation of GAAP Net (Loss) Income to Non-GAAP Net (Loss) Income
(unaudited, in thousands, except share and per share amounts)
Three Months Ended
Six Months Ended
March 30,
2024
April 1,
2023
March 30,
2024
April 1,
2023
Reconciliation of GAAP net (loss) income
GAAP net (loss) income
$
(69,709
)
$
(30,652
)
$
11,238
$
44,537
Stock-based compensation expense
23,673
21,025
43,031
41,220
Legal and transaction related costs
2,395
9,018
6,140
15,307
Amortization of intangibles
1,493
1,492
2,985
3,196
Restructuring and abandonment costs
6
4,846
574
4,846
Non-GAAP net (loss) income
$
(42,142
)
$
5,729
$
63,968
$
109,106
Reconciliation of net (loss) income per share
GAAP net (loss) income per share, diluted
$
(0.56
)
$
(0.24
)
$
0.09
$
0.34
Non-GAAP adjustments to net (loss) income per share
0.22
0.28
0.41
0.49
Non-GAAP net (loss) income per share, diluted
$
(0.34
)
$
0.04
$
0.50
$
0.82
Weighted-average shares used in GAAP per share calculation, diluted
123,749,605
127,952,875
128,206,823
132,834,096
Weighted-average shares used in non-GAAP per share calculation, diluted
123,749,605
134,165,207
128,206,823
132,834,096
Note: Certain figures may not sum due to rounding
Reconciliation of Cash Flows (Used in) Provided by Operating Activities to Free Cash Flow
(unaudited, dollars in thousands)
Three Months Ended
Six Months Ended
March 30,
2024
April 1,
2023
March 30,
2024
April 1,
2023
Cash flows (used in) provided by operating activities
$
(111,244
)
$
(112,962
)
$
164,157
$
69,324
Less: Purchases of property and equipment
(10,186
)
(8,714
)
(16,263
)
(23,403
)
Free cash flow
$
(121,430
)
$
(121,676
)
$
147,894
$
45,921
Revenue by Product Category
(unaudited, dollars in thousands)
Three Months Ended
Six Months Ended
March 30,
2024
April 1,
2023
March 30,
2024
April 1,
2023
(In thousands)
Sonos speakers
$
187,262
$
241,180
$
690,273
$
780,377
Sonos system products
49,265
44,091
133,826
158,525
Partner products and other revenue
16,135
18,902
41,432
37,850
Total revenue
$
252,662
$
304,173
$
865,531
$
976,752
Revenue by Geographical Region
(unaudited, dollars in thousands)
Three Months Ended
Six Months Ended
March 30,
2024
April 1,
2023
March 30,
2024
April 1,
2023
Americas
$
170,187
$
196,533
$
562,627
$
593,097
Europe, Middle East and Africa
69,356
89,054
261,173
329,494
Asia Pacific
13,119
18,586
41,731
54,161
Total revenue
$
252,662
$
304,173
$
865,531
$
976,752
Stock-based Compensation
(unaudited, dollars in thousands)
Three Months Ended
Six Months Ended
March 30,
2024
April 1,
2023
March 30,
2024
April 1,
2023
(In thousands)
Cost of revenue
$
686
$
581
$
1,340
$
1,151
Research and development
10,419
9,565
19,398
18,716
Sales and marketing
4,972
4,475
8,787
8,588
General and administrative
7,596
6,404
13,506
12,765
Total stock-based compensation expense
$
23,673
$
21,025
$
43,031
$
41,220
Amortization of Intangibles
(unaudited, dollars in thousands)
Three Months Ended
Six Months Ended
March 30,
2024
April 1,
2023
March 30,
2024
April 1,
2023
Cost of revenue
$
973
$
973
$
1,945
$
2,158
Research and development
496
495
992
990
Sales and marketing
-
-
-
-
General and administrative
24
24
48
48
Total amortization of intangibles
$
1,493
$
1,492
$
2,985
$
3,196
Use of Non-GAAP Measures
We have provided in this press release financial information that has not been prepared in accordance with generally accepted accounting principles (“U.S. GAAP”), including adjusted EBITDA, adjusted EBITDA margin, free cash flow, non-GAAP gross margin, net income (loss) excluding stock-based compensation, legal and transaction related fees, amortization of intangibles, and restructuring and abandonment costs and diluted earnings (loss) per share excluding stock-based compensation, legal and transaction related fees, amortization of intangibles and restructuring and abandonment costs. These non-GAAP financial measures are not based on any standardized methodology prescribed by U.S. GAAP and are not necessarily comparable to similarly titled measures presented by other companies. We use these non-GAAP financial measures to evaluate our operating performance and trends and make planning decisions. We believe that these non-GAAP financial measures help identify underlying trends in our business that could otherwise be masked by the effect of the expenses and other items that we exclude in these non-GAAP financial measures. Accordingly, we believe that these non-GAAP financial measures provide useful information to investors and others in understanding and evaluating our operating results, enhancing the overall understanding of our past performance and future prospects and allowing for greater transparency with respect to a key financial metric used by our management in its financial and operational decision-making. Non-GAAP financial measures should not be considered in isolation of, or as an alternative to, measures prepared in accordance with U.S. GAAP. Investors are encouraged to review the reconciliation of these financial measures to their nearest U.S. GAAP financial equivalents provided in the financial statement tables above. We define Adjusted EBITDA as net income (loss) adjusted to exclude the impact of depreciation and amortization, stock-based compensation expense, interest income, interest expense, other income, income taxes, restructuring and abandonment costs, legal and transaction related fees and other items that we do not consider representative of our underlying operating performance. We define Adjusted EBITDA margin as Adjusted EBITDA divided by revenue. We define free cash flow as net cash from operations less purchases of property and equipment. We define non-GAAP gross margin as GAAP gross margin, excluding stock-based compensation and amortization of intangible assets. We calculate non-GAAP net income (loss) excluding stock-based compensation, legal and transaction related fees, amortization of intangibles and restructuring and abandonment costs as net income (loss) less stock-based compensation, legal and transaction related fees, amortization of intangibles and restructuring and abandonment costs. We calculate non-GAAP diluted earnings (loss) per share excluding stock-based compensation, legal and transaction related fees, amortization of intangibles and restructuring and abandonment costs as net income (loss) less stock-based compensation, legal and transaction related fees, amortization of intangibles and restructuring and abandonment costs divided by our number of shares at fiscal year end. We do not provide a reconciliation of forward-looking non-GAAP financial measures to their comparable GAAP financial measures because we cannot do so without unreasonable effort due to unavailability of information needed to calculate reconciling items and due to the variability, complexity and limited visibility of the adjusting items that would be excluded from the non-GAAP financial measures in future periods. When planning, forecasting and analyzing future periods, we do so primarily on a non-GAAP basis without preparing a GAAP analysis as that would require estimates for items such as stock-based compensation, which is inherently difficult to predict with reasonable accuracy. Stock-based compensation expense is difficult to estimate because it depends on our future hiring and retention needs, as well as the future fair market value of our common stock, all of which are difficult to predict and subject to constant change. In addition, for purposes of setting annual guidance, it would be difficult to quantify stock-based compensation expense for the year with reasonable accuracy in the current quarter. As a result, we do not believe that a GAAP reconciliation would provide meaningful supplemental information about our outlook.
Forward Looking Statements
This press release contains forward-looking statements that involve risks and uncertainties. These forward-looking statements include statements regarding our outlook for the fiscal year ending September 28, 2024, our long-term outlook, financial, growth and business strategies and opportunities, growth targets, our product cycle and roadmap, including our anticipated new product launch and the timing thereof, our investments in R&D, profitability and gross margins, the macroeconomic environment, and other factors affecting variability in our financial results. These forward-looking statements are only predictions and may differ materially from actual results due to a variety of factors, including, but not limited to: our ability to accurately forecast product demand and effectively forecast and manage owned and channel inventory levels; the impact of global economic, market and political events, including continued inflationary pressures, rising interest rates and, in certain markets, foreign currency exchange rate fluctuations; changes in consumer income and overall consumer spending as a result of economic or political uncertainty or conditions; changes in consumer spending patterns; our ability to successfully introduce new products and services and maintain or expand the success of our existing products; the success of our efforts to expand our direct-to-consumer channel; the success of our financial, growth and business strategies; our ability to compete in the market and maintain or expand market share; our ability to meet product demand and manage any product availability delays; supply chain challenges, including shipping and logistics challenges and component supply-related challenges; our ability to protect our brand and intellectual property; and the other risk factors set forth under the caption “Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended December 30, 2023 and our other filings filed with the Securities and Exchange Commission (the “SEC”), copies of which are available free of charge at the SEC’s website at www.sec.gov or upon request from our investor relations department. All forward-looking statements herein reflect our opinions only as of the date of this press release, and we undertake no obligation, and expressly disclaim any obligation, to update forward-looking statements herein in light of new information or future events. Sonos and Sonos product names are trademarks or registered trademarks of Sonos, Inc. All other product names and services may be trademarks or service marks of their respective owners.
About Sonos
Sonos (Nasdaq: SONO) is one of the world’s leading sound experience brands. As the inventor of multi-room wireless home audio, Sonos’ innovation helps the world listen better by giving people access to the content they love and allowing them to control it however they choose. Known for delivering an unparalleled sound experience, thoughtful home design aesthetic, simplicity of use and an open platform, Sonos makes the breadth of audio content available to anyone. Sonos is headquartered in Santa Barbara, California. Learn more at www.sonos.com.
View source version on businesswire.com: https://www.businesswire.com/news/home/20240507745282/en/
Investor Contact James Baglanis IR@sonos.com
Press Contact Erin Pategas PR@sonos.com
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