Q3 revenue above high end of guidance range, Adjusted EBITDA at high end due to significant year over year expense declines

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

"Q3 was a solid step forward for Sonos," said Tom Conrad, Sonos Chief Executive Officer. "We're returning to our founding principles of craftsmanship, customer-first design, and innovation while advancing our vision of Sonos as a platform where hardware and software come together to deliver unique, seamless experiences. With a focused roadmap, a powerful brand, and a commitment to operational excellence, I'm confident we're making progress toward delivering long-term growth."

"Q3 was another quarter of solid execution, with revenue above the high end of our guidance, and Adjusted EBITDA at the high end of the range," commented Saori Casey, Sonos Chief Financial Officer. "This marks our fourth consecutive quarter of delivering on our top and bottom line guidance while navigating a complex environment marked by tariffs and an uncertain macroeconomic backdrop."

Third Quarter Fiscal 2025 Financial Highlights (unaudited)

Revenue of $344.8 million
GAAP gross margin of 43.4%, Non-GAAP gross margin of 44.7%
GAAP net loss of ($3.4) million, GAAP diluted loss per share (EPS) of ($0.03)
Non-GAAP net income¹ of $22.6 million, Non-GAAP diluted EPS¹ of $0.19
Adjusted EBITDA¹ of $36 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 other charges. See "Use of Non-GAAP Measures" and reconciliations to GAAP measures below.

Guidance

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

Supplemental Earnings Presentation

The company has posted a supplemental earnings presentation accompanying its Third 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 Third Quarter Fiscal 2025 results on August 6, 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						Nine Months Ended
	June 28, 2025			June 29, 2024			June 28, 2025			June 29, 2024
Revenue	$	344,764		$	397,146		$	1,155,376		$	1,262,676
Cost of revenue		195,040			205,505			650,637			676,320
Gross profit		149,724			191,641			504,739			586,356
Operating expenses
Research and development		59,750			74,223			218,011			233,780
Sales and marketing		62,576			71,643			213,430			217,428
General and administrative		30,327			33,186			89,357			113,825
Total operating expenses		152,653			179,052			520,798			565,033
Operating (loss) income		(2,929	)		12,589			(16,059	)		21,323
Other income (expense), net
Interest income		1,572			2,629			5,406			9,638
Interest expense		(117	)		(106	)		(336	)		(333	)
Other income (expense), net		661			(2,464	)		(5,176	)		4,507
Total other income (expense), net		2,116			59			(106	)		13,812
(Loss) income before provision for income taxes		(813	)		12,648			(16,165	)		35,135
Provision for income taxes		2,566			8,939			7,121			20,188
Net (loss) income	$	(3,379	)	$	3,709		$	(23,286	)	$	14,947

Net (loss) income per share:
Basic	$	(0.03	)	$	0.03		$	(0.19	)	$	0.12
Diluted	$	(0.03	)	$	0.03		$	(0.19	)	$	0.12

Weighted-average shares used in computing net (loss) income per share:
Basic		120,423,439			122,553,129			120,804,730			123,828,150
Diluted		120,423,439			127,245,459			120,804,730			127,886,368

Total comprehensive income (loss)
Net (loss) income		(3,379	)		3,709			(23,286	)		14,947
Change in foreign currency translation adjustment		3,496			681			3,036			(267	)
Net unrealized loss on marketable securities		(23	)		(6	)		(140	)		(32	)
Comprehensive income (loss)	$	94		$	4,384		$	(20,390	)	$	14,648

Consolidated Balance Sheets
(unaudited, in thousands, except par values)
	As of
	June 28, 2025			September 28, 2024
Assets
Current assets:
Cash and cash equivalents	$	201,273		$	169,732
Marketable securities		52,681			51,426
Accounts receivable, net		94,201			44,513
Inventories		115,427			231,505
Prepaids and other current assets		39,559			53,910
Total current assets		503,141			551,086
Property and equipment, net		80,726			102,148
Operating lease right-of-use assets		46,625			50,175
Goodwill		82,854			82,854
Intangible assets, net
In-process research and development		—			73,770
Other intangible assets		78,008			14,266
Deferred tax assets		10,012			10,314
Other noncurrent assets		33,036			31,699
Total assets	$	834,402		$	916,312

Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$	143,992		$	194,590
Accrued expenses		75,872			87,783
Accrued compensation		26,408			15,701
Deferred revenue, current		21,867			21,802
Other current liabilities		47,464			46,277
Total current liabilities		315,603			366,153
Operating lease liabilities, noncurrent		55,147			56,588
Deferred revenue, noncurrent		61,098			61,075
Deferred tax liabilities		512			60
Other noncurrent liabilities		2,736			3,816
Total liabilities		435,096			487,692

Commitments and contingencies
Stockholders' equity:
Common stock, $0.001 par value		122			123
Treasury stock		(16,322	)		(17,096	)
Additional paid-in capital		488,548			498,245
Accumulated deficit		(74,220	)		(50,934	)
Accumulated other comprehensive income (loss)		1,178			(1,718	)
Total stockholders' equity		399,306			428,620
Total liabilities and stockholders' equity	$	834,402		$	916,312

Consolidated Statements of Cash Flows
(unaudited, dollars in thousands)
	Nine Months Ended
	June 28, 2025			June 29, 2024
Cash flows from operating activities
Net (loss) income	$	(23,286	)	$	14,947
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Stock-based compensation expense		64,789			64,961
Depreciation and amortization		48,657			35,154
Provision for inventory obsolescence		9,242			2,005
Restructuring and other charges		6,323			266
Deferred income taxes		942			819
Other		2,432			2,973
Foreign currency transaction loss (gain)		572			(2,750	)
Changes in operating assets and liabilities:
Accounts receivable		(49,010	)		(64,218	)
Inventories		106,223			189,613
Other assets		11,616			(15,285	)
Accounts payable and accrued expenses		(55,341	)		(16,942	)
Accrued compensation		10,352			10,251
Deferred revenue		(1,033	)		1,685
Other liabilities		1,470			4,161
Net cash provided by operating activities		133,948			227,640
Cash flows from investing activities
Purchases of marketable securities		(43,949	)		(68,676	)
Purchases of property and equipment		(23,418	)		(39,477	)
Maturities of marketable securities		43,200			20,000
Net cash used in investing activities		(24,167	)		(88,153	)
Cash flows from financing activities
Payments for repurchase of common stock, including excise tax and commission		(60,602	)		(128,739	)
Payments for repurchase of common stock related to shares withheld for tax in connection with vesting of restricted stock units		(20,754	)		(20,757	)
Proceeds from exercise of stock options		2,653			16,312
Net cash used in financing activities		(78,703	)		(133,184	)
Effect of exchange rate changes on cash and cash equivalents		463			580
Net increase in cash and cash equivalents		31,541			6,883
Cash and cash equivalents
Beginning of period		169,732			220,231
End of period	$	201,273		$	227,114
Supplemental disclosure
Cash paid for interest	$	197		$	195
Cash paid for taxes, net of refunds	$	19,065		$	17,134
Cash paid for amounts included in the measurement of lease liabilities, net of tenant improvement reimbursements received	$	3,460		$	9,637
Supplemental disclosure of non-cash investing and financing activities
Purchases of property and equipment in accounts payable and accrued expenses	$	2,155		$	9,910
Right-of-use assets obtained in exchange for new operating lease liabilities	$	1,491		$	11,277
Excise tax on share repurchases, accrued but not paid	$	187		$	691

Reconciliation of GAAP to Non-GAAP Cost of Revenue and Gross Profit
(unaudited, in thousands, except percentages)
	Three Months Ended						Nine Months Ended
	June 28, 2025			June 29, 2024			June 28, 2025			June 29, 2024
Reconciliation of GAAP cost of revenue
GAAP cost of revenue	$	195,040		$	205,505		$	650,637		$	676,320
Stock-based compensation expense		1,633			655			4,588			1,995
Amortization of intangibles		3,278			973			9,752			2,918
Restructuring and other charges		(514	)		—			3,420			—
Non-GAAP cost of revenue	$	190,643		$	203,877		$	632,877		$	671,407

Reconciliation of GAAP gross profit
GAAP gross profit	$	149,724		$	191,641		$	504,739		$	586,356
Stock-based compensation expense		1,633			655			4,588			1,995
Amortization of intangibles		3,278			973			9,752			2,918
Restructuring and other charges		(514	)		—			3,420			—
Non-GAAP gross profit	$	154,121		$	193,269		$	522,499		$	591,269

GAAP gross margin		43.4	%		48.3	%		43.7	%		46.4	%
Non-GAAP gross margin		44.7	%		48.7	%		45.2	%		46.8	%

Reconciliation of Selected Non-GAAP Financial Measures
(unaudited, dollars in thousands)
	Three Months Ended					Nine Months Ended
	June 28, 2025			June 29, 2024		June 28, 2025			June 29, 2024
Research and Development (GAAP)	$	59,750		$	74,223	$	218,011		$	233,780
Stock-based compensation		7,944			9,735		29,280			29,133
Amortization of intangibles		20			496		216			1,488
Restructuring and other charges		(824	)		478		11,882			801
Research and Development (Non-GAAP)	$	52,610		$	63,514	$	176,633		$	202,358

Sales and Marketing (GAAP)	$	62,576		$	71,643	$	213,430		$	217,428
Stock-based compensation		3,466			4,510		13,078			13,297
Amortization of intangibles		-			-		-			-
Restructuring and other charges		1,038			185		3,831			297
Sales and Marketing (Non-GAAP)	$	58,072		$	66,948	$	196,521		$	203,834

General and Administrative (GAAP)		30,327			33,186		89,357			113,825
Stock-based compensation		6,309			7,030		17,843			20,536
Legal and transaction related costs		1,306			1,062		2,928			7,202
Amortization of intangibles		24			24		71			72
Restructuring and other charges		2,281			630		6,488			768
General and Administrative (Non-GAAP)	$	20,407		$	24,440	$	62,027		$	85,247

Total Operating Expenses (GAAP)	$	152,653		$	179,052	$	520,798		$	565,033
Stock-based compensation		17,719			21,275		60,201			62,966
Legal and transaction related costs		1,306			1,062		2,928			7,202
Amortization of intangibles		44			520		287			1,560
Restructuring and other charges		2,495			1,293		22,201			1,866
Operating Expenses (Non-GAAP)	$	131,089		$	154,902	$	435,181		$	491,439

Total Operating (Loss) Income (GAAP)	$	(2,929	)	$	12,589	$	(16,059	)	$	21,323
Stock-based compensation		19,352			21,930		64,789			64,961
Legal and transaction related costs		1,306			1,062		2,928			7,202
Amortization of intangibles		3,322			1,493		10,039			4,478
Restructuring and other charges		1,981			1,293		25,621			1,866
Operating Income (Non-GAAP)	$	23,032		$	38,367	$	87,318		$	99,830
Depreciation		12,557			10,539		38,618			30,676
Adjusted EBITDA (Non-GAAP)	$	35,589		$	48,906	$	125,936		$	130,506

Reconciliation of Net (Loss) Income to Adjusted EBITDA
(unaudited, dollars in thousands except percentages)
	Three Months Ended						Nine Months Ended
	June 28, 2025			June 29, 2024			June 28, 2025			June 29, 2024
(In thousands, except percentages)
Net (loss) income	$	(3,379	)	$	3,709		$	(23,286	)	$	14,947
Add (deduct):
Depreciation and amortization		15,879			12,032			48,657			35,154
Stock-based compensation expense		19,352			21,930			64,789			64,961
Interest income		(1,572	)		(2,629	)		(5,406	)		(9,638	)
Interest expense		117			106			336			333
Other expense (income), net		(661	)		2,464			5,176			(4,507	)
Provision for income taxes		2,566			8,939			7,121			20,188
Legal and transaction related costs (1)		1,306			1,062			2,928			7,202
Restructuring and other charges (2)		1,981			1,293			25,621			1,866
Adjusted EBITDA	$	35,589		$	48,906		$	125,936		$	130,506
Revenue	$	344,764		$	397,146		$	1,155,376		$	1,262,676
Net (loss) income margin		(1.0	)%		0.9	%		(2.0	)%		1.2	%
Adjusted EBITDA margin		10.3	%		12.3	%		10.9	%		10.3	%
(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 nine months ended June 28, 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 Income
(unaudited, in thousands, except share and per share amounts)
	Three Months Ended					Nine Months Ended
	June 28, 2025			June 29, 2024		June 28, 2025			June 29, 2024
Reconciliation of GAAP net (loss) income
GAAP net (loss) income	$	(3,379	)	$	3,709	$	(23,286	)	$	14,947
Stock-based compensation expense		19,352			21,930		64,789			64,961
Legal and transaction related costs		1,306			1,062		2,928			7,202
Amortization of intangibles		3,322			1,493		10,039			4,478
Restructuring and other charges		1,981			1,293		25,621			1,866
Non-GAAP net income	$	22,582		$	29,487	$	80,091		$	93,454

Net (loss) income per share
GAAP net (loss) income per share, diluted	$	(0.03	)	$	0.03	$	(0.19	)	$	0.12
Non-GAAP net income per share, diluted	$	0.19		$	0.23	$	0.65		$	0.73

Shares used to calculate net (loss) income per share
Weighted-average shares GAAP, diluted		120,423,439			127,245,459		120,804,730			127,886,368
Weighted-average shares non-GAAP, diluted		121,510,933			127,245,459		123,003,812			127,886,368

Reconciliation of Cash Flows Provided by Operating Activities to Free Cash Flow
(unaudited, dollars in thousands)
	Three Months Ended						Nine Months Ended
	June 28, 2025			June 29, 2024			June 28, 2025			June 29, 2024
Cash flows provided by operating activities	$	37,441		$	63,483		$	133,948		$	227,640
Less: Purchases of property and equipment		(4,756	)		(23,214	)		(23,418	)		(39,477	)
Free cash flow	$	32,685		$	40,269		$	110,530		$	188,163

Revenue by Product Category
(unaudited, dollars in thousands)
	Three Months Ended				Nine Months Ended
	June 28, 2025		June 29, 2024		June 28, 2025		June 29, 2024
(In thousands)
Sonos speakers	$	253,669	$	301,105	$	915,330	$	991,378
Sonos system products		73,179		75,186		183,993		209,013
Partner products and other revenue		17,916		20,855		56,053		62,285
Total revenue	$	344,764	$	397,146	$	1,155,376	$	1,262,676

Revenue by Geographical Region
(unaudited, dollars in thousands)
	Three Months Ended				Nine Months Ended
	June 28, 2025		June 29, 2024		June 28, 2025		June 29, 2024
Americas	$	229,656	$	264,611	$	731,041	$	827,238
Europe, Middle East and Africa		97,245		110,902		363,642		372,074
Asia Pacific		17,863		21,633		60,693		63,364
Total revenue	$	344,764	$	397,146	$	1,155,376	$	1,262,676

Stock-based Compensation
(unaudited, dollars in thousands)
	Three Months Ended				Nine Months Ended
	June 28, 2025		June 29, 2024		June 28, 2025		June 29, 2024
(In thousands)
Cost of revenue	$	1,633	$	655	$	4,588	$	1,995
Research and development		7,944		9,735		29,816		29,133
Sales and marketing		3,568		4,510		13,227		13,297
General and administrative		7,639		7,030		21,733		20,536
Total stock-based compensation expense	$	20,784	$	21,930	$	69,364	$	64,961

Amortization of Intangibles
(unaudited, dollars in thousands)
	Three Months Ended				Nine Months Ended
	June 28, 2025		June 29, 2024		June 28, 2025		June 29, 2024
Cost of revenue	$	3,278	$	973	$	9,752	$	2,918
Research and development		20		496		216		1,488
Sales and marketing		-		-		-		-
General and administrative		24		24		71		72
Total amortization of intangibles	$	3,322	$	1,493	$	10,039	$	4,478

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 Third Quarter Fiscal 2025 Results