Sonos, Inc. (NASDAQ:SONO) today reported third quarter fiscal 2024 results.
"Thanks to Ace, our long-awaited entry into headphones, we reported year over year revenue growth and delivered results that slightly exceeded our expectations in our third quarter," Sonos CEO Patrick Spence commented. "This was overshadowed by the problems that our customers and partners experienced as a result of the rollout of our new app, which in turn has required us to reduce our Fiscal 2024 guidance. We have a clear action plan to address the issues caused by our app as quickly as possible. While our app setback is regrettable, it is one chapter in our over twenty years of delighting customers. I speak for everyone at Sonos when I say that our #1 priority is to make this right and ensure that the next chapter is even better than the previous ones."
Third Quarter Fiscal 2024 Financial Highlights (unaudited)
- Revenue of $397.1 million
- Gross margin of 48.3%
- GAAP net income of $3.7 million, GAAP diluted earnings per share (EPS) of $0.03
- Non-GAAP net income1 of $29.5 million, Non-GAAP diluted EPS1 of $0.23
- Adjusted EBITDA1 of $48.9 million
Notes:
(1) Non-GAAP net income/Non-GAAP diluted earnings 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.
Fiscal 2024 Outlook
The company will provide its Fiscal 2024 outlook on its third quarter fiscal 2024 earnings call.
Supplemental Earnings Presentation
Following the earnings call, the company will post a supplemental earnings presentation regarding its third 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 third quarter fiscal 2024 results on August 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 |
|
Nine Months Ended |
||||||||||||
|
|
June 29,
|
|
July 1,
|
|
June 29,
|
|
July 1,
|
||||||||
Revenue |
|
$ |
397,146 |
|
|
$ |
373,356 |
|
|
$ |
1,262,676 |
|
|
$ |
1,350,108 |
|
Cost of revenue |
|
|
205,505 |
|
|
|
201,594 |
|
|
|
676,320 |
|
|
|
761,672 |
|
Gross profit |
|
|
191,641 |
|
|
|
171,762 |
|
|
|
586,356 |
|
|
|
588,436 |
|
Operating expenses |
|
|
|
|
|
|
|
|
||||||||
Research and development |
|
|
74,223 |
|
|
|
77,758 |
|
|
|
233,780 |
|
|
|
235,484 |
|
Sales and marketing |
|
|
71,643 |
|
|
|
66,600 |
|
|
|
217,428 |
|
|
|
208,917 |
|
General and administrative |
|
|
33,186 |
|
|
|
48,665 |
|
|
|
113,825 |
|
|
|
136,219 |
|
Total operating expenses |
|
|
179,052 |
|
|
|
193,023 |
|
|
|
565,033 |
|
|
|
580,620 |
|
Operating income (loss) |
|
|
12,589 |
|
|
|
(21,261 |
) |
|
|
21,323 |
|
|
|
7,816 |
|
Other income, net |
|
|
|
|
|
|
|
|
||||||||
Interest income |
|
|
2,629 |
|
|
|
2,391 |
|
|
|
9,638 |
|
|
|
7,540 |
|
Interest expense |
|
|
(106 |
) |
|
|
(274 |
) |
|
|
(333 |
) |
|
|
(585 |
) |
Other (loss) income, net |
|
|
(2,464 |
) |
|
|
1,424 |
|
|
|
4,507 |
|
|
|
22,169 |
|
Total other income, net |
|
|
59 |
|
|
|
3,541 |
|
|
|
13,812 |
|
|
|
29,124 |
|
Income (loss) before provision for income taxes |
|
|
12,648 |
|
|
|
(17,720 |
) |
|
|
35,135 |
|
|
|
36,940 |
|
Provision for income taxes |
|
|
8,939 |
|
|
|
5,851 |
|
|
|
20,188 |
|
|
|
15,974 |
|
Net income (loss) |
|
$ |
3,709 |
|
|
$ |
(23,571 |
) |
|
$ |
14,947 |
|
|
$ |
20,966 |
|
|
|
|
|
|
|
|
|
|
||||||||
Net income (loss) attributable to common stockholders: |
|
|
|
|
|
|
|
|
||||||||
Basic and diluted |
|
$ |
3,709 |
|
|
$ |
(23,571 |
) |
|
$ |
14,947 |
|
|
$ |
20,966 |
|
|
|
|
|
|
|
|
|
|
||||||||
Net income (loss) per share attributable to common stockholders: |
|
|
|
|
|
|
|
|
||||||||
Basic |
|
$ |
0.03 |
|
|
$ |
(0.18 |
) |
|
$ |
0.12 |
|
|
$ |
0.16 |
|
Diluted |
|
$ |
0.03 |
|
|
$ |
(0.18 |
) |
|
$ |
0.12 |
|
|
$ |
0.16 |
|
|
|
|
|
|
|
|
|
|
||||||||
Weighted-average shares used in computing net income (loss) per share attributable to common stockholders: |
|
|
|
|
|
|
|
|
||||||||
Basic |
|
|
122,553,129 |
|
|
|
128,311,109 |
|
|
|
123,828,150 |
|
|
|
127,825,410 |
|
Diluted |
|
|
127,245,459 |
|
|
|
128,311,109 |
|
|
|
127,886,368 |
|
|
|
132,851,379 |
|
|
|
|
|
|
|
|
|
|
||||||||
Total comprehensive income (loss) |
|
|
|
|
|
|
|
|
||||||||
Net income (loss) |
|
|
3,709 |
|
|
|
(23,571 |
) |
|
|
14,947 |
|
|
|
20,966 |
|
Change in foreign currency translation adjustment |
|
|
681 |
|
|
|
802 |
|
|
|
(267 |
) |
|
|
(1,882 |
) |
Net unrealized loss on marketable securities |
|
|
(6 |
) |
|
|
— |
|
|
|
(32 |
) |
|
|
— |
|
Comprehensive income (loss) |
|
$ |
4,384 |
|
|
$ |
(22,769 |
) |
|
$ |
14,648 |
|
|
$ |
19,084 |
|
Consolidated Balance Sheets |
||||||||
(unaudited, in thousands, except par values) |
||||||||
|
|
As of |
||||||
|
|
June 29,
|
|
September 30,
|
||||
Assets |
|
|
|
|
||||
Current assets: |
|
|
|
|
||||
Cash and cash equivalents |
|
$ |
227,114 |
|
|
$ |
220,231 |
|
Marketable securities |
|
|
49,515 |
|
|
|
- |
|
Accounts receivable, net |
|
|
131,581 |
|
|
|
67,583 |
|
Inventories |
|
|
154,903 |
|
|
|
346,521 |
|
Prepaids and other current assets |
|
|
41,343 |
|
|
|
25,296 |
|
Total current assets |
|
|
604,456 |
|
|
|
659,631 |
|
Property and equipment, net |
|
|
103,123 |
|
|
|
87,075 |
|
Operating lease right-of-use assets |
|
|
53,030 |
|
|
|
48,918 |
|
Goodwill |
|
|
80,980 |
|
|
|
80,420 |
|
Intangible assets, net |
|
|
|
|
||||
In-process research and development |
|
|
70,706 |
|
|
|
69,791 |
|
Other intangible assets |
|
|
15,748 |
|
|
|
20,218 |
|
Deferred tax assets |
|
|
1,640 |
|
|
|
1,659 |
|
Other noncurrent assets |
|
|
31,422 |
|
|
|
34,529 |
|
Total assets |
|
$ |
961,105 |
|
|
$ |
1,002,241 |
|
|
|
|
|
|
||||
Liabilities and stockholders' equity |
|
|
|
|
||||
Current liabilities: |
|
|
|
|
||||
Accounts payable |
|
$ |
179,327 |
|
|
$ |
187,981 |
|
Accrued expenses |
|
|
88,958 |
|
|
|
89,717 |
|
Accrued compensation |
|
|
33,059 |
|
|
|
22,079 |
|
Deferred revenue, current |
|
|
20,796 |
|
|
|
20,188 |
|
Other current liabilities |
|
|
44,741 |
|
|
|
34,253 |
|
Total current liabilities |
|
|
366,881 |
|
|
|
354,218 |
|
Operating lease liabilities, noncurrent |
|
|
53,050 |
|
|
|
54,956 |
|
Deferred revenue, noncurrent |
|
|
62,190 |
|
|
|
60,650 |
|
Deferred tax liabilities |
|
|
10,735 |
|
|
|
9,846 |
|
Other noncurrent liabilities |
|
|
3,858 |
|
|
|
3,914 |
|
Total liabilities |
|
|
496,714 |
|
|
|
483,584 |
|
|
|
|
|
|
||||
Commitments and contingencies |
|
|
|
|
||||
Stockholders' equity: |
|
|
|
|
||||
Common stock, $0.001 par value |
|
|
126 |
|
|
|
130 |
|
Treasury stock |
|
|
(72,323 |
) |
|
|
(72,586 |
) |
Additional paid-in capital |
|
|
538,172 |
|
|
|
607,345 |
|
Retained earnings (accumulated deficit) |
|
|
2,159 |
|
|
|
(12,788 |
) |
Accumulated other comprehensive loss |
|
|
(3,743 |
) |
|
|
(3,444 |
) |
Total stockholders' equity |
|
|
464,391 |
|
|
|
518,657 |
|
Total liabilities and stockholders' equity |
|
$ |
961,105 |
|
|
$ |
1,002,241 |
|
Consolidated Statements of Cash Flows |
||||||||
(unaudited, dollars in thousands) |
||||||||
|
|
Nine Months Ended |
||||||
|
|
June 29,
|
|
July 1,
|
||||
Cash flows from operating activities |
|
|
|
|
||||
Net income |
|
$ |
14,947 |
|
|
$ |
20,966 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
||||
Stock-based compensation expense |
|
|
64,961 |
|
|
|
59,549 |
|
Depreciation and amortization |
|
|
35,154 |
|
|
|
35,054 |
|
Provision for inventory obsolescence |
|
|
2,005 |
|
|
|
14,964 |
|
Restructuring and abandonment charges |
|
|
266 |
|
|
|
5,125 |
|
Deferred income taxes |
|
|
819 |
|
|
|
1,569 |
|
Other |
|
|
2,973 |
|
|
|
4,270 |
|
Foreign currency transaction gains |
|
|
(2,750 |
) |
|
|
(12,698 |
) |
Changes in operating assets and liabilities: |
|
|
|
|
||||
Accounts receivable |
|
|
(64,218 |
) |
|
|
(13,934 |
) |
Inventories |
|
|
189,613 |
|
|
|
141,054 |
|
Other assets |
|
|
(15,285 |
) |
|
|
9,375 |
|
Accounts payable and accrued expenses |
|
|
(16,942 |
) |
|
|
(204,012 |
) |
Accrued compensation |
|
|
10,251 |
|
|
|
20,640 |
|
Deferred revenue |
|
|
1,685 |
|
|
|
(4,093 |
) |
Other liabilities |
|
|
4,161 |
|
|
|
382 |
|
Net cash provided by operating activities |
|
|
227,640 |
|
|
|
78,211 |
|
Cash flows from investing activities |
|
|
|
|
||||
Purchases of marketable securities |
|
|
(68,676 |
) |
|
|
— |
|
Purchases of property and equipment |
|
|
(39,477 |
) |
|
|
(40,085 |
) |
Maturities of marketable securities |
|
|
20,000 |
|
|
|
— |
|
Net cash used in investing activities |
|
|
(88,153 |
) |
|
|
(40,085 |
) |
Cash flows from financing activities |
|
|
|
|
||||
Payments for repurchase of common stock |
|
|
(128,739 |
) |
|
|
(45,063 |
) |
Payments for repurchase of common stock related to shares withheld for tax in connection with vesting of restricted stock units |
|
|
(20,757 |
) |
|
|
(23,914 |
) |
Proceeds from exercise of stock options |
|
|
16,312 |
|
|
|
20,042 |
|
Net cash used in financing activities |
|
|
(133,184 |
) |
|
|
(48,935 |
) |
Effect of exchange rate changes on cash and cash equivalents |
|
|
580 |
|
|
|
4,240 |
|
Net increase in cash and cash equivalents |
|
|
6,883 |
|
|
|
(6,569 |
) |
Cash and cash equivalents |
|
|
|
|
||||
Beginning of period |
|
|
220,231 |
|
|
|
274,855 |
|
End of period |
|
$ |
227,114 |
|
|
$ |
268,286 |
|
Supplemental disclosure |
|
|
|
|
||||
Cash paid for interest |
|
$ |
195 |
|
|
$ |
780 |
|
Cash paid for taxes, net of refunds |
|
$ |
17,134 |
|
|
$ |
5,217 |
|
Cash paid for amounts included in the measurement of lease liabilities |
|
$ |
9,637 |
|
|
$ |
10,599 |
|
Supplemental disclosure of non-cash investing and financing activities |
|
|
|
|
||||
Purchases of property and equipment in accounts payable and accrued expenses |
|
$ |
9,910 |
|
|
$ |
7,129 |
|
Right-of-use assets obtained in exchange for new operating lease liabilities |
|
$ |
11,277 |
|
|
$ |
31,547 |
|
Change in estimate of asset retirement obligations |
|
$ |
— |
|
|
$ |
2,185 |
|
Reconciliation of GAAP to Non-GAAP Cost of Revenue and Gross Profit |
||||||||||||||||
(unaudited, in thousands, except percentages) |
||||||||||||||||
|
|
Three Months Ended |
|
Nine Months Ended |
||||||||||||
|
|
June 29,
|
|
July 1,
|
|
June 29,
|
|
July 1,
|
||||||||
Reconciliation of GAAP cost of revenue |
|
|
|
|
|
|
|
|
||||||||
GAAP cost of revenue |
|
$ |
205,505 |
|
|
$ |
201,594 |
|
|
$ |
676,320 |
|
|
$ |
761,672 |
|
Stock-based compensation expense |
|
|
655 |
|
|
|
450 |
|
|
|
1,995 |
|
|
|
1,601 |
|
Amortization of intangibles |
|
|
973 |
|
|
|
973 |
|
|
|
2,918 |
|
|
|
3,131 |
|
Non-GAAP cost of revenue |
|
$ |
203,877 |
|
|
$ |
200,171 |
|
|
$ |
671,407 |
|
|
$ |
756,940 |
|
|
|
|
|
|
|
|
|
|
||||||||
Reconciliation of GAAP gross profit |
|
|
|
|
|
|
|
|
||||||||
GAAP gross profit |
|
$ |
191,641 |
|
|
$ |
171,762 |
|
|
$ |
586,356 |
|
|
$ |
588,436 |
|
Stock-based compensation expense |
|
|
655 |
|
|
|
450 |
|
|
|
1,995 |
|
|
|
1,601 |
|
Amortization of intangibles |
|
|
973 |
|
|
|
973 |
|
|
|
2,918 |
|
|
|
3,131 |
|
Non-GAAP gross profit |
|
$ |
193,269 |
|
|
$ |
173,185 |
|
|
$ |
591,269 |
|
|
$ |
593,168 |
|
|
|
|
|
|
|
|
|
|
||||||||
GAAP gross margin |
|
|
48.3 |
% |
|
|
46.0 |
% |
|
|
46.4 |
% |
|
|
43.6 |
% |
Non-GAAP gross margin |
|
|
48.7 |
% |
|
|
46.4 |
% |
|
|
46.8 |
% |
|
|
43.9 |
% |
Reconciliation of Selected Non-GAAP Financial Measures |
||||||||||||||||
(unaudited, dollars in thousands) |
||||||||||||||||
|
|
Three Months Ended |
|
Nine Months Ended |
||||||||||||
|
|
June 29,
|
|
July 1,
|
|
June 29,
|
|
July 1,
|
||||||||
Research and Development (GAAP) |
|
$ |
74,223 |
|
|
$ |
77,758 |
|
|
$ |
233,780 |
|
|
$ |
235,484 |
|
Stock-based compensation |
|
|
9,735 |
|
|
|
8,637 |
|
|
|
29,133 |
|
|
|
27,353 |
|
Amortization of intangibles |
|
|
496 |
|
|
|
496 |
|
|
|
1,488 |
|
|
|
1,487 |
|
Restructuring and abandonment costs |
|
|
478 |
|
|
|
3,686 |
|
|
|
801 |
|
|
|
6,368 |
|
Research and Development (Non-GAAP) |
|
$ |
63,514 |
|
|
$ |
64,939 |
|
|
$ |
202,358 |
|
|
$ |
200,276 |
|
|
|
|
|
|
|
|
|
|
||||||||
Sales and Marketing (GAAP) |
|
$ |
71,643 |
|
|
$ |
66,600 |
|
|
$ |
217,428 |
|
|
$ |
208,917 |
|
Stock-based compensation |
|
|
4,510 |
|
|
|
3,590 |
|
|
|
13,297 |
|
|
|
12,178 |
|
Amortization of intangibles |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Restructuring and abandonment costs |
|
|
185 |
|
|
|
4,422 |
|
|
|
297 |
|
|
|
5,455 |
|
Sales and Marketing (Non-GAAP) |
|
$ |
66,948 |
|
|
$ |
58,588 |
|
|
$ |
203,834 |
|
|
$ |
191,284 |
|
|
|
|
|
|
|
|
|
|
||||||||
General and Administrative (GAAP) |
|
|
33,186 |
|
|
|
48,665 |
|
|
|
113,825 |
|
|
|
136,219 |
|
Stock-based compensation |
|
|
7,030 |
|
|
|
5,652 |
|
|
|
20,536 |
|
|
|
18,417 |
|
Legal and transaction related costs |
|
|
1,062 |
|
|
|
14,699 |
|
|
|
7,202 |
|
|
|
30,006 |
|
Amortization of intangibles |
|
|
24 |
|
|
|
24 |
|
|
|
72 |
|
|
|
72 |
|
Restructuring and abandonment costs |
|
|
630 |
|
|
|
2,220 |
|
|
|
768 |
|
|
|
3,352 |
|
Adjusted General and Administrative (Non-GAAP) |
|
$ |
24,440 |
|
|
$ |
26,070 |
|
|
$ |
85,247 |
|
|
$ |
84,372 |
|
|
|
|
|
|
|
|
|
|
||||||||
Total Operating Expenses (GAAP) |
|
$ |
179,052 |
|
|
$ |
193,023 |
|
|
$ |
565,033 |
|
|
$ |
580,620 |
|
Stock-based compensation |
|
|
21,275 |
|
|
|
17,879 |
|
|
|
62,966 |
|
|
|
57,948 |
|
Legal and transaction related costs |
|
|
1,062 |
|
|
|
14,699 |
|
|
|
7,202 |
|
|
|
30,006 |
|
Amortization of intangibles |
|
|
520 |
|
|
|
520 |
|
|
|
1,560 |
|
|
|
1,559 |
|
Restructuring and abandonment costs |
|
|
1,293 |
|
|
|
10,328 |
|
|
|
1,866 |
|
|
|
15,175 |
|
Adjusted Operating Expenses (Non-GAAP) |
|
$ |
154,902 |
|
|
$ |
149,597 |
|
|
$ |
491,439 |
|
|
$ |
475,932 |
|
|
|
|
|
|
|
|
|
|
||||||||
Total Operating (Loss) Income (GAAP) |
|
$ |
12,589 |
|
|
$ |
(21,261 |
) |
|
$ |
21,323 |
|
|
$ |
7,816 |
|
Stock-based compensation |
|
|
21,930 |
|
|
|
18,329 |
|
|
|
64,961 |
|
|
|
59,549 |
|
Legal and transaction related costs |
|
|
1,062 |
|
|
|
14,699 |
|
|
|
7,202 |
|
|
|
30,006 |
|
Amortization of intangibles |
|
|
1,493 |
|
|
|
1,493 |
|
|
|
4,478 |
|
|
|
4,690 |
|
Restructuring and abandonment costs |
|
|
1,293 |
|
|
|
10,328 |
|
|
|
1,866 |
|
|
|
15,175 |
|
Adjusted Operating Income (Non-GAAP) |
|
$ |
38,367 |
|
|
$ |
23,588 |
|
|
$ |
99,830 |
|
|
$ |
117,236 |
|
Depreciation |
|
|
10,539 |
|
|
|
10,716 |
|
|
|
30,676 |
|
|
|
30,364 |
|
Adjusted EBITDA (Non-GAAP) |
|
$ |
48,906 |
|
$ |
34,304 |
|
|
$ |
130,506 |
|
$ |
147,600 |
|||
Reconciliation of Net Income (Loss) to Adjusted EBITDA |
|
|
|
|
||||||||||||
(unaudited, dollars in thousands except percentages) |
|
|
|
|
||||||||||||
|
|
Three Months Ended |
|
Nine Months Ended |
||||||||||||
|
|
June 29,
|
|
July 1,
|
|
June 29,
|
|
July 1,
|
||||||||
(In thousands, except percentages) |
|
|
|
|
|
|
|
|
||||||||
Net income (loss) |
|
$ |
3,709 |
|
|
$ |
(23,571 |
) |
|
$ |
14,947 |
|
|
$ |
20,966 |
|
Add (deduct): |
|
|
|
|
|
|
|
|
||||||||
Depreciation and amortization |
|
|
12,032 |
|
|
|
12,209 |
|
|
|
35,154 |
|
|
|
35,054 |
|
Stock-based compensation expense |
|
|
21,930 |
|
|
|
18,329 |
|
|
|
64,961 |
|
|
|
59,549 |
|
Interest income |
|
|
(2,629 |
) |
|
|
(2,391 |
) |
|
|
(9,638 |
) |
|
|
(7,540 |
) |
Interest expense |
|
|
106 |
|
|
|
274 |
|
|
|
333 |
|
|
|
585 |
|
Other expense (income), net |
|
|
2,464 |
|
|
|
(1,424 |
) |
|
|
(4,507 |
) |
|
|
(22,169 |
) |
Provision for income taxes |
|
|
8,939 |
|
|
|
5,851 |
|
|
|
20,188 |
|
|
|
15,974 |
|
Legal and transaction related costs (1) |
|
|
1,062 |
|
|
|
14,699 |
|
|
|
7,202 |
|
|
|
30,006 |
|
Restructuring and abandonment costs (2) |
|
|
1,293 |
|
|
|
10,328 |
|
|
|
1,866 |
|
|
|
15,175 |
|
Adjusted EBITDA |
|
$ |
48,906 |
|
|
$ |
34,304 |
|
|
$ |
130,506 |
|
|
$ |
147,600 |
|
Revenue |
|
$ |
397,146 |
|
|
$ |
373,356 |
|
|
$ |
1,262,676 |
|
|
$ |
1,350,108 |
|
Net income (loss) margin |
|
|
0.9 |
% |
|
|
(6.3 |
)% |
|
|
1.2 |
% |
|
|
1.6 |
% |
Adjusted EBITDA margin |
|
|
12.3 |
% |
|
|
9.2 |
% |
|
|
10.3 |
% |
|
|
10.9 |
% |
(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 nine months ended June 29, 2024, and July 1, 2023, are primarily related to our restructuring plan initiated on June 14, 2023, and also costs incurred in March 2023 related to the abandonment of portions of our office spaces. |
||||||||||||||||
Reconciliation of GAAP Net Income (Loss) to Non-GAAP Net Income |
|||||||||||||
(unaudited, in thousands, except share and per share amounts) |
|||||||||||||
|
|
Three Months Ended |
|
Nine Months Ended |
|||||||||
|
|
June 29,
|
|
July 1,
|
|
June 29,
|
|
July 1,
|
|||||
Reconciliation of GAAP net income (loss) |
|
|
|
|
|
|
|
|
|||||
GAAP net income (loss) |
|
$ |
3,709 |
|
$ |
(23,571 |
) |
|
$ |
14,947 |
|
$ |
20,966 |
Stock-based compensation expense |
|
|
21,930 |
|
|
18,329 |
|
|
|
64,961 |
|
|
59,549 |
Legal and transaction related costs |
|
|
1,062 |
|
|
14,699 |
|
|
|
7,202 |
|
|
30,006 |
Amortization of intangibles |
|
|
1,493 |
|
|
1,493 |
|
|
|
4,478 |
|
|
4,690 |
Restructuring and abandonment costs |
|
|
1,293 |
|
|
10,328 |
|
|
|
1,866 |
|
|
15,175 |
Non-GAAP net income |
|
$ |
29,487 |
|
$ |
21,278 |
|
|
$ |
93,454 |
|
$ |
130,386 |
|
|
|
|
|
|
|
|
|
|||||
Reconciliation of net income (loss) per share |
|
|
|
|
|
|
|
|
|||||
GAAP net income (loss) per share, diluted |
|
$ |
0.03 |
|
$ |
(0.18 |
) |
|
$ |
0.12 |
|
$ |
0.16 |
Non-GAAP adjustments to net income (loss) per share |
|
|
0.20 |
|
|
0.34 |
|
|
|
0.61 |
|
|
0.82 |
Non-GAAP net income per share, diluted |
|
$ |
0.23 |
|
$ |
0.16 |
|
|
$ |
0.73 |
|
$ |
0.98 |
Weighted-average shares used in GAAP per share calculation, diluted |
|
|
127,245,459 |
|
|
128,311,109 |
|
|
|
127,886,368 |
|
|
132,851,379 |
Weighted-average shares used in non-GAAP per share calculation, diluted |
|
|
127,245,459 |
|
|
132,885,945 |
|
|
|
127,886,368 |
|
|
132,851,379 |
Reconciliation of Cash Flows Provided by Operating Activities to Free Cash Flow |
||||||||||||||||
(unaudited, dollars in thousands) |
||||||||||||||||
|
|
Three Months Ended |
|
Nine Months Ended |
||||||||||||
|
|
June 29,
|
|
July 1,
|
|
June 29,
|
|
July 1,
|
||||||||
Cash flows provided by operating activities |
|
$ |
63,483 |
|
|
$ |
8,887 |
|
|
$ |
227,640 |
|
|
$ |
78,211 |
|
Less: Purchases of property and equipment |
|
|
(23,214 |
) |
|
|
(16,682 |
) |
|
|
(39,477 |
) |
|
|
(40,085 |
) |
Free cash flow |
|
$ |
40,269 |
|
|
$ |
(7,795 |
) |
|
$ |
188,163 |
|
|
$ |
38,126 |
|
Revenue by Product Category |
||||||||||||
(unaudited, dollars in thousands) |
||||||||||||
|
|
Three Months Ended |
|
Nine Months Ended |
||||||||
|
|
June 29,
|
|
July 1,
|
|
June 29,
|
|
July 1,
|
||||
(In thousands) |
|
|
|
|
|
|
|
|
||||
Sonos speakers |
|
$ |
301,105 |
|
$ |
289,740 |
|
$ |
991,378 |
|
$ |
1,070,117 |
Sonos system products |
|
|
75,186 |
|
|
64,224 |
|
|
209,013 |
|
|
222,748 |
Partner products and other revenue |
|
|
20,855 |
|
|
19,392 |
|
|
62,285 |
|
|
57,243 |
Total revenue |
|
$ |
397,146 |
|
$ |
373,356 |
|
$ |
1,262,676 |
|
$ |
1,350,108 |
Revenue by Geographical Region |
||||||||||||
(unaudited, dollars in thousands) |
||||||||||||
|
|
Three Months Ended |
|
Nine Months Ended |
||||||||
|
|
June 29,
|
|
July 1,
|
|
June 29,
|
|
July 1,
|
||||
Americas |
|
$ |
264,611 |
|
$ |
251,616 |
|
$ |
827,238 |
|
$ |
844,714 |
Europe, Middle East and Africa |
|
|
110,902 |
|
|
105,312 |
|
|
372,074 |
|
|
434,806 |
Asia Pacific |
|
|
21,633 |
|
|
16,428 |
|
|
63,364 |
|
|
70,588 |
Total revenue |
|
$ |
397,146 |
|
$ |
373,356 |
|
$ |
1,262,676 |
|
$ |
1,350,108 |
Stock-based Compensation |
||||||||||||
(unaudited, dollars in thousands) |
||||||||||||
|
|
Three Months Ended |
|
Nine Months Ended |
||||||||
|
|
June 29,
|
|
July 1,
|
|
June 29,
|
|
July 1,
|
||||
(In thousands) |
|
|
|
|
|
|
|
|
||||
Cost of revenue |
|
$ |
655 |
|
$ |
450 |
|
$ |
1,995 |
|
$ |
1,601 |
Research and development |
|
|
9,735 |
|
|
8,637 |
|
|
29,133 |
|
|
27,353 |
Sales and marketing |
|
|
4,510 |
|
|
3,590 |
|
|
13,297 |
|
|
12,178 |
General and administrative |
|
|
7,030 |
|
|
5,652 |
|
|
20,536 |
|
|
18,417 |
Total stock-based compensation expense |
|
$ |
21,930 |
|
$ |
18,329 |
|
$ |
64,961 |
|
$ |
59,549 |
Amortization of Intangibles |
||||||||||||
(unaudited, dollars in thousands) |
||||||||||||
|
|
Three Months Ended |
|
Nine Months Ended |
||||||||
|
|
June 29,
|
|
July 1,
|
|
June 29,
|
|
July 1,
|
||||
Cost of revenue |
|
$ |
973 |
|
$ |
973 |
|
$ |
2,918 |
|
$ |
3,131 |
Research and development |
|
|
496 |
|
|
496 |
|
|
1,488 |
|
|
1,487 |
Sales and marketing |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
General and administrative |
|
|
24 |
|
|
24 |
|
|
72 |
|
|
72 |
Total amortization of intangibles |
|
$ |
1,493 |
|
$ |
1,493 |
|
$ |
4,478 |
|
$ |
4,690 |
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, our new Sonos app and our action plan to address issues caused by our new app, profitability and gross margins, 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; our ability to introduce software updates to fix bugs, improve the customer experience and add back certain features to our new app on a timely basis and otherwise deliver on our action plan to address issues caused by our new app; our ability to maintain, enhance and protect our brand image; the impact of global economic, market and political events, including 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; 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 March 30, 2024 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.
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