Recent Quotes View Full List My Watchlist Create Watchlist Indicators DJI Nasdaq Composite SPX Gold Crude Oil EL&P Market Index Markets Stocks ETFs Tools Overview News Currencies International Treasuries Sonos Reports Second Quarter Fiscal 2024 Results By: Sonos via Business Wire May 07, 2024 at 16:05 PM EDT 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) Revenue of $252.7 million Gross margin of 44.3% GAAP net loss of ($69.7) million, GAAP diluted loss per share (EPS) of ($0.56) Non-GAAP net loss1 of ($42.1) million, Non-GAAP diluted EPS1 of ($0.34) Adjusted EBITDA1 of ($33.6) million Notes: (1) Non-GAAP net loss/Non-GAAP diluted loss per share (EPS) and Adjusted EBITDA exclude stock-based compensation, legal and transaction related fees, amortization of intangibles, and restructuring and abandonment costs. See “Use of Non-GAAP Measures” and reconciliations to GAAP measures below. Maintaining our Fiscal 2024 Outlook Low end Midpoint High end Revenue ($ 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/Contacts Investor Contact James Baglanis IR@sonos.com Press Contact Erin Pategas PR@sonos.com Data & News supplied by www.cloudquote.io Stock quotes supplied by Barchart Quotes delayed at least 20 minutes. By accessing this page, you agree to the following Privacy Policy and Terms and Conditions.
Sonos Reports Second Quarter Fiscal 2024 Results By: Sonos via Business Wire May 07, 2024 at 16:05 PM EDT 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) Revenue of $252.7 million Gross margin of 44.3% GAAP net loss of ($69.7) million, GAAP diluted loss per share (EPS) of ($0.56) Non-GAAP net loss1 of ($42.1) million, Non-GAAP diluted EPS1 of ($0.34) Adjusted EBITDA1 of ($33.6) million Notes: (1) Non-GAAP net loss/Non-GAAP diluted loss per share (EPS) and Adjusted EBITDA exclude stock-based compensation, legal and transaction related fees, amortization of intangibles, and restructuring and abandonment costs. See “Use of Non-GAAP Measures” and reconciliations to GAAP measures below. Maintaining our Fiscal 2024 Outlook Low end Midpoint High end Revenue ($ 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/Contacts Investor Contact James Baglanis IR@sonos.com Press Contact Erin Pategas PR@sonos.com
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) Revenue of $252.7 million Gross margin of 44.3% GAAP net loss of ($69.7) million, GAAP diluted loss per share (EPS) of ($0.56) Non-GAAP net loss1 of ($42.1) million, Non-GAAP diluted EPS1 of ($0.34) Adjusted EBITDA1 of ($33.6) million Notes: (1) Non-GAAP net loss/Non-GAAP diluted loss per share (EPS) and Adjusted EBITDA exclude stock-based compensation, legal and transaction related fees, amortization of intangibles, and restructuring and abandonment costs. See “Use of Non-GAAP Measures” and reconciliations to GAAP measures below. Maintaining our Fiscal 2024 Outlook Low end Midpoint High end Revenue ($ 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/