Q2 revenue at high end of guidance range, Adjusted EBITDA above high end due to significant year over year expense declines

Sonos, Inc. (NASDAQ:SONO) today reported Second Quarter Fiscal 2025 results.

"We made significant progress in Q2 across our top initiatives," said Tom Conrad, Sonos Interim Chief Executive Officer. "We're firmly on track in restoring the reliability and responsiveness our customers expect, with nine major software updates delivered in the last 120 days and more on the way. We're actively navigating the evolving tariff landscape with operational discipline and flexibility and we're reinvigorating demand through strategic pricing on Era 100, one of our most popular gateway products. Even in a complex environment, we're operating with focus and confidence as we position Sonos for long-term success."

"We stayed disciplined and continued to execute well in Q2 as we delivered revenue at the high end of our guidance with Adjusted EBITDA that exceeded our expectations," commented Saori Casey, Sonos Chief Financial Officer. "We believe that our continued progress on our transformation efforts positions us well to navigate this uncertain macroeconomic environment."

Second Quarter Fiscal 2025 Financial Highlights (unaudited)

Revenue of $259.8 million
GAAP gross margin of 43.7%
GAAP net loss of ($70.1) million, GAAP diluted loss per share (EPS) of ($0.58)
Non-GAAP net loss¹ of ($21.7) million, Non-GAAP diluted EPS¹ of ($0.18)
Adjusted EBITDA¹ of ($0.8) million

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 other charges. See "Use of Non-GAAP Measures" and reconciliations to GAAP measures below.

Guidance

The company will provide guidance on its Second Quarter Fiscal 2025 earnings call.

Supplemental Earnings Presentation

The company has posted a supplemental earnings presentation accompanying its Second Quarter Fiscal 2025 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 2025 results on May 7, 2025, at 4:30 p.m. Eastern Time (1:30 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 Income (Loss)
(unaudited, in thousands, except share and per share amounts)

	Three Months Ended						Six Months Ended
	March 29, 2025			March 30, 2024			March 29, 2025			March 30, 2024
Revenue	$	259,756		$	252,662		$	810,613		$	865,531
Cost of revenue		146,147			140,624			455,597			470,815
Gross profit		113,609			112,038			355,016			394,716
Operating expenses
Research and development		77,423			80,322			158,261			159,557
Sales and marketing		64,210			61,835			150,854			145,785
General and administrative		33,200			40,841			59,032			80,639
Total operating expenses		174,833			182,998			368,147			385,981
Operating (loss) income		(61,224	)		(70,960	)		(13,131	)		8,735
Other income (expense), net
Interest income		1,973			3,933			3,834			7,008
Interest expense		(109	)		(122	)		(219	)		(227	)
Other income (expense), net		193			(3,303	)		(5,836	)		6,971
Total other income (expense), net		2,057			508			(2,221	)		13,752
(Loss) income before provision for (benefit from) income taxes		(59,167	)		(70,452	)		(15,352	)		22,487
Provision for (benefit from) income taxes		10,977			(743	)		4,555			11,249
Net (loss) income	$	(70,144	)	$	(69,709	)	$	(19,907	)	$	11,238

Net (loss) income per share:
Basic	$	(0.58	)	$	(0.56	)	$	(0.16	)	$	0.09
Diluted	$	(0.58	)	$	(0.56	)	$	(0.16	)	$	0.09

Weighted-average shares used in computing net (loss) income per share:
Basic		119,919,163			123,749,605			120,995,375			124,465,661
Diluted		119,919,163			123,749,605			120,995,375			128,206,823

Total comprehensive (loss) income
Net (loss) income		(70,144	)		(69,709	)		(19,907	)		11,238
Change in foreign currency translation adjustment		656			(85	)		(460	)		(948	)
Net unrealized loss on marketable securities		(33	)		(26	)		(117	)		(26	)
Comprehensive (loss) income	$	(69,521	)	$	(69,820	)	$	(20,484	)	$	10,264

Consolidated Balance Sheets
(unaudited, in thousands, except par values)

	As of
	March 29, 2025			September 28, 2024
Assets
Current assets:
Cash and cash equivalents	$	173,158		$	169,732
Marketable securities		50,349			51,426
Accounts receivable, net		40,430			44,513
Inventories		138,421			231,505
Prepaids and other current assets		50,666			53,910
Total current assets		453,024			551,086
Property and equipment, net		86,035			102,148
Operating lease right-of-use assets		48,011			50,175
Goodwill		82,854			82,854
Intangible assets, net
In-process research and development		—			73,770
Other intangible assets		81,311			14,266
Deferred tax assets		9,197			10,314
Other noncurrent assets		31,746			31,699
Total assets	$	792,178		$	916,312

Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$	117,946		$	194,590
Accrued expenses		73,531			87,783
Accrued compensation		26,113			15,701
Deferred revenue, current		21,214			21,802
Other current liabilities		50,786			46,277
Total current liabilities		289,590			366,153
Operating lease liabilities, noncurrent		56,442			56,588
Deferred revenue, noncurrent		60,276			61,075
Deferred tax liabilities		311			60
Other noncurrent liabilities		2,700			3,816
Total liabilities		409,319			487,692

Commitments and contingencies
Stockholders' equity:
Common stock, $0.001 par value		124			123
Treasury stock		(51,934	)		(17,096	)
Additional paid-in capital		507,805			498,245
Accumulated deficit		(70,841	)		(50,934	)
Accumulated other comprehensive loss		(2,295	)		(1,718	)
Total stockholders' equity		382,859			428,620
Total liabilities and stockholders' equity	$	792,178		$	916,312

Consolidated Statements of Cash Flows
(unaudited, dollars in thousands)

	Six Months Ended
	March 29, 2025			March 30, 2024
Cash flows from operating activities
Net (loss) income	$	(19,907	)	$	11,238
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Stock-based compensation expense		45,436			43,031
Depreciation and amortization		32,778			23,121
Provision for inventory obsolescence		(143	)		5,293
Restructuring and other charges		4,889			266
Deferred income taxes		997			(31	)
Other		1,528			2,188
Foreign currency transaction gain		(72	)		(3,441	)
Changes in operating assets and liabilities:
Accounts receivable		4,702			(2,793	)
Inventories		92,615			161,683
Other assets		1,328			(15,169	)
Accounts payable and accrued expenses		(83,634	)		(89,151	)
Accrued compensation		10,456			16,040
Deferred revenue		(257	)		1,857
Other liabilities		5,791			10,025
Net cash provided by operating activities		96,507			164,157
Cash flows from investing activities
Purchases of marketable securities		(25,900	)		(45,280	)
Purchases of property and equipment		(18,662	)		(16,263	)
Maturities of marketable securities		27,400			—
Net cash used in investing activities		(17,162	)		(61,543	)
Cash flows from financing activities
Payments for repurchase of common stock, including excise tax and commission		(60,602	)		(76,250	)
Payments for repurchase of common stock related to shares withheld for tax in connection with vesting of restricted stock units		(16,246	)		(13,242	)
Proceeds from exercise of stock options		2,654			11,905
Net cash used in financing activities		(74,194	)		(77,587	)
Effect of exchange rate changes on cash and cash equivalents		(1,725	)		704
Net increase in cash and cash equivalents		3,426			25,731
Cash and cash equivalents
Beginning of period		169,732			220,231
End of period	$	173,158		$	245,962
Supplemental disclosure
Cash paid for interest	$	126		$	134
Cash paid for taxes, net of refunds	$	16,493		$	12,247
Cash paid for amounts included in the measurement of lease liabilities, net of tenant improvement reimbursements received	$	1,149		$	6,670
Supplemental disclosure of non-cash investing and financing activities
Purchases of property and equipment in accounts payable and accrued expenses	$	1,311		$	7,582
Right-of-use assets obtained in exchange for new operating lease liabilities	$	1,491		$	7,637
Excise tax on share repurchases, accrued but not paid	$	264		$	361

Reconciliation of GAAP to Non-GAAP Cost of Revenue and Gross Profit
(unaudited, in thousands, except percentages)

	Three Months Ended						Six Months Ended
	March 29, 2025			March 30, 2024			March 29, 2025			March 30, 2024
Reconciliation of GAAP cost of revenue
GAAP cost of revenue	$	146,147		$	140,624		$	455,597		$	470,815
Stock-based compensation expense		1,606			686			2,955			1,340
Amortization of intangibles		3,144			973			6,474			1,945
Restructuring and other charges		3,935			—			3,935			—
Non-GAAP cost of revenue	$	137,462		$	138,965		$	442,233		$	467,530

Reconciliation of GAAP gross profit
GAAP gross profit	$	113,609		$	112,038		$	355,016		$	394,716
Stock-based compensation expense		1,606			686			2,955			1,340
Amortization of intangibles		3,144			973			6,474			1,945
Restructuring and other charges		3,935			—			3,935			—
Non-GAAP gross profit	$	122,294		$	113,697		$	368,380		$	398,001

GAAP gross margin		43.7	%		44.3	%		43.8	%		45.6	%
Non-GAAP gross margin		47.1	%		45.0	%		45.4	%		46.0	%

Reconciliation of Selected Non-GAAP Financial Measures
(unaudited, dollars in thousands)

	Three Months Ended						Six Months Ended
	March 29, 2025			March 30, 2024			March 29, 2025			March 30, 2024
Research and Development (GAAP)	$	77,423		$	80,322		$	158,261		$	159,557
Stock-based compensation		8,021			10,419			21,336			19,398
Amortization of intangibles		18			496			196			992
Restructuring and other charges		12,766			-			12,706			323
Research and Development (Non-GAAP)	$	56,618		$	69,407		$	124,023		$	138,844

Sales and Marketing (GAAP)	$	64,210		$	61,835		$	150,854		$	145,785
Stock-based compensation		3,980			4,972			9,612			8,787
Amortization of intangibles		-			-			-			-
Restructuring and other charges		2,792			-			2,792			113
Sales and Marketing (Non-GAAP)	$	57,438		$	56,863		$	138,450		$	136,885

General and Administrative (GAAP)		33,200			40,841			59,032			80,639
Stock-based compensation		6,495			7,596			11,533			13,506
Legal and transaction related costs		1,429			2,395			1,624			6,140
Amortization of intangibles		24			24			47			48
Restructuring and other charges		4,207			6			4,207			138
General and Administrative (Non-GAAP)	$	21,045		$	30,820		$	41,621		$	60,807

Total Operating Expenses (GAAP)	$	174,833		$	182,998		$	368,147		$	385,981
Stock-based compensation		18,496			22,987			42,481			41,691
Legal and transaction related costs		1,429			2,395			1,624			6,140
Amortization of intangibles		42			520			243			1,040
Restructuring and other charges		19,765			6			19,705			574
Operating Expenses (Non-GAAP)	$	135,101		$	157,090		$	304,094		$	336,536

Total Operating (Loss) Income (GAAP)	$	(61,224	)	$	(70,960	)	$	(13,131	)	$	8,735
Stock-based compensation		20,102			23,673			45,436			43,031
Legal and transaction related costs		1,429			2,395			1,624			6,140
Amortization of intangibles		3,186			1,493			6,717			2,985
Restructuring and other charges		23,700			6			23,640			574
Operating (Loss) Income (Non-GAAP)	$	(12,807	)	$	(43,393	)	$	64,286		$	61,465
Depreciation		11,981			9,750			26,061			20,136
Adjusted EBITDA (Non-GAAP)	$	(826	)	$	(33,643	)	$	90,347		$	81,601

Reconciliation of Net (Loss) Income to Adjusted EBITDA
(unaudited, dollars in thousands except percentages)

	Three Months Ended						Six Months Ended
	March 29, 2025			March 30, 2024			March 29, 2025			March 30, 2024
(In thousands, except percentages)
Net (loss) income	$	(70,144	)	$	(69,709	)	$	(19,907	)	$	11,238
Add (deduct):
Depreciation and amortization		15,167			11,243			32,778			23,121
Stock-based compensation expense		20,102			23,673			45,436			43,031
Interest income		(1,973	)		(3,933	)		(3,834	)		(7,008	)
Interest expense		109			122			219			227
Other expense (income), net		(193	)		3,303			5,836			(6,971	)
Provision for (benefit from) income taxes		10,977			(743	)		4,555			11,249
Legal and transaction related costs (1)		1,429			2,395			1,624			6,140
Restructuring and other charges (2)		23,700			6			23,640			574
Adjusted EBITDA	$	(826	)	$	(33,643	)	$	90,347		$	81,601
Revenue	$	259,756		$	252,662		$	810,613		$	865,531
Net (loss) income margin		(27.0	)%		(27.6	)%		(2.5	)%		1.3	%
Adjusted EBITDA margin		(0.3	)%		(13.3	)%		11.1	%		9.4	%
(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) On February 5, 2025, we initiated a restructuring plan to reduce our cost base involving 12% of our employees (the "2025 restructuring plan"). Restructuring and other charges for the three and six months ended March 29, 2025, primarily reflect costs associated with our cost transformation initiative including the 2025 restructuring plan and rationalization of our product roadmap, as well as non-recurring CEO transition costs related to modifications to equity awards.

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 29, 2025			March 30, 2024			March 29, 2025			March 30, 2024
Reconciliation of GAAP net (loss) income
GAAP net (loss) income	$	(70,144	)	$	(69,709	)	$	(19,907	)	$	11,238
Stock-based compensation expense		20,102			23,673			45,436			43,031
Legal and transaction related costs		1,429			2,395			1,624			6,140
Amortization of intangibles		3,186			1,493			6,717			2,985
Restructuring and other charges		23,700			6			23,640			574
Non-GAAP net (loss) income	$	(21,727	)	$	(42,142	)	$	57,510		$	63,968

Net (loss) income per share
GAAP net (loss) income per share, diluted	$	(0.58	)	$	(0.56	)	$	(0.16	)	$	0.09
Non-GAAP net (loss) income per share, diluted	$	(0.18	)	$	(0.34	)	$	0.46		$	0.50

Shares used to calculate net (loss) income per share
Weighted-average shares GAAP, diluted		119,919,163			123,749,605			120,995,375			128,206,823
Weighted-average shares non-GAAP, diluted		119,919,163			123,749,605			123,750,251			128,206,823

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 29, 2025			March 30, 2024			March 29, 2025			March 30, 2024
Cash flows (used in) provided by operating activities	$	(59,666	)	$	(111,244	)	$	96,507		$	164,157
Less: Purchases of property and equipment		(5,556	)		(10,186	)		(18,662	)		(16,263	)
Free cash flow	$	(65,222	)	$	(121,430	)	$	77,845		$	147,894

Revenue by Product Category
(unaudited, dollars in thousands)
	Three Months Ended				Six Months Ended
	March 29, 2025		March 30, 2024		March 29, 2025		March 30, 2024
(In thousands)
Sonos speakers	$	194,519	$	187,262	$	661,661	$	690,273
Sonos system products		50,540		49,265		110,814		133,826
Partner products and other revenue		14,697		16,135		38,138		41,432
Total revenue	$	259,756	$	252,662	$	810,613	$	865,531

Revenue by Geographical Region
(unaudited, dollars in thousands)

	Three Months Ended				Six Months Ended
	March 29, 2025		March 30, 2024		March 29, 2025		March 30, 2024
Americas	$	176,802	$	170,187	$	501,385	$	562,627
Europe, Middle East and Africa		68,785		69,356		266,397		261,173
Asia Pacific		14,169		13,119		42,831		41,731
Total revenue	$	259,756	$	252,662	$	810,613	$	865,531

Stock-based Compensation
(unaudited, dollars in thousands)

	Three Months Ended				Six Months Ended
	March 29, 2025		March 30, 2024		March 29, 2025		March 30, 2024
(In thousands)
Cost of revenue	$	1,606	$	686	$	2,955	$	1,340
Research and development		8,557		10,419		21,872		19,398
Sales and marketing		4,027		4,972		9,659		8,787
General and administrative		9,055		7,596		14,093		13,506
Total stock-based compensation expense	$	23,245	$	23,673	$	48,579	$	43,031

Amortization of Intangibles
(unaudited, dollars in thousands)

	Three Months Ended				Six Months Ended
	March 29, 2025		March 30, 2024		March 29, 2025		March 30, 2024
Cost of revenue	$	3,144	$	973	$	6,474	$	1,945
Research and development		18		496		196		992
Sales and marketing		-		-		-		-
General and administrative		24		24		47		48
Total amortization of intangibles	$	3,186	$	1,493	$	6,717	$	2,985

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 (loss) income excluding stock-based compensation, legal and transaction related fees, amortization of intangibles, and restructuring and other charges and diluted earnings per share excluding stock-based compensation, legal and transaction related fees, amortization of intangibles and restructuring and other charges. 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 (loss) income adjusted to exclude the impact of depreciation and amortization, stock-based compensation expense, interest income, interest expense, other income, income taxes, restructuring and other charges, 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, amortization of intangible assets and restructuring and other changes. We calculate non-GAAP net (loss) income excluding stock-based compensation, legal and transaction related fees, amortization of intangibles and restructuring and other charges as net income less stock-based compensation, legal and transaction related fees, amortization of intangibles and restructuring and other charges. We calculate non-GAAP diluted earnings per share excluding stock-based compensation, legal and transaction related fees, amortization of intangibles and restructuring and other charges as net income less stock-based compensation, legal and transaction related fees, amortization of intangibles and restructuring and other charges 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 long-term outlook, financial, growth and business strategies and opportunities, our ability to expand our footprint with existing customers, market growth and our market share, our operating model and cost structure including our transformation efforts, our app recovery efforts and related software updates, tariffs and our ability to mitigate the effects of any tariffs, the macroeconomic environment and our ability to weather it, 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: difficulties in and effect of implementing improvements to our operating model and cost structure; the risk that restructuring and related charges may be greater than anticipated or not occur in the expected time frame; local law requirements in various jurisdictions regarding elimination of positions; our ability to accurately forecast product demand and effectively forecast and manage owned and channel inventory levels; our ability to introduce software updates to our redesigned app on a timely basis and otherwise deliver on our action plan to address issues caused by our redesigned app and related customer commitments; our ability to maintain, enhance and protect our brand image; the impact of global economic, market and political events, including tariffs, global trade tensions, continued inflationary pressures, high 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, including tariffs; 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 maintain relationships with our channel, distribution and technology partners; 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; our use of artificial intelligence; and the other risk factors identified in our filings with the Securities and Exchange Commission (the "SEC"), including our most recent Annual Report on Form 10-K and subsequent filings. Copies of our SEC filings are available free of charge at the SEC's website at www.sec.gov, on our investor relations website at https://investors.sonos.com/reports-and-filings/default.aspx 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.

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Investor Contact

James Baglanis

IR@sonos.com

Press Contact

Erin Pategas

PR@sonos.com

Sonos Reports Second Quarter Fiscal 2025 Results