Sonos, Inc. (Nasdaq: SONO) today reported record third quarter
fiscal 2021 results.
Third Quarter 2021 Financial Highlights (unaudited)
- GAAP net income (loss) increased to $17.8 million from ($57.0)
million last year; non-GAAP net income (loss) excluding stock-based
compensation, restructuring and legal and transaction related fees
increased to $38.7 million from ($11.6) million last year.
- GAAP diluted earnings per share (EPS) increased to $0.12 from
($0.52) last year; non-GAAP diluted earnings per share (EPS)
excluding stock-based compensation, restructuring, and legal and
transaction related fees increased to $0.27 from ($0.11) last
year.
- Adjusted EBITDA increased to $46.7 million from ($2.7) million
last year.
- Adjusted EBITDA margin increased to 12.3% from (1.1%) last
year.
- Gross margin increased 300 basis points to 47.0% from 44.0%
last year.
- Revenue increased 52% year-over-year to $378.7 million; on a
constant-currency basis, revenue increased approximately 45%
year-over-year.
Sonos CEO Patrick Spence commented, “Our third quarter results
represent yet another record-shattering quarter at Sonos. We
believe that the strong demand for our products is unwavering and
underscores the uniqueness and power of our business model where
customers start with one product and expand with more over time.
Based on the strong demand for our products, the amazing execution
of our team, and the power and profitability of our business, we
are yet again raising our outlook for fiscal 2021.”
Mr. Spence continued, “Our future has never been brighter, as
there are three macro trends that position Sonos for continued
growth in the large and growing global audio market. First, the
'Golden Age of Audio' - as the leading premium home audio brand, we
are well positioned to capitalize on the continued increase in
audio content consumption and new audio formats that are emerging.
Second, 'Hollywood at Home' - with more video content going
direct-to-home, consumers are demanding a theater-like audio
experience in the home which Sonos is well positioned to provide.
Third, 'The Great Reshuffling' - the untethering of people from
their offices enabling flexibility on how and where to live will
drive continued investment in the home, a trend that our premium
brand, design and quality is well-suited to capitalize on.”
Mr. Spence concluded, “Long-term, we remain focused on our key
three strategic initiatives - the expansion of our brand, the
expansion of our offerings, and driving operational excellence. The
powerful momentum we are experiencing in our business, exceeding
even our own expectations from six months ago, puts us ahead of
schedule on reaching our fiscal 2024 financial targets. We are
extremely well positioned for the long-term and expect to deliver
significant free cash flow and increased shareholder value over
time as we continue on our quest to be the world’s leading sound
experience company.”
Fiscal 2021 Outlook
- Revenue increased to a range of $1.695 billion to $1.710
billion, representing growth in the range of 28% to 29%
year-over-year (30% to 31% on a comparable basis excluding the 53rd
week in fiscal 2020).
- This compares to our prior guidance range of $1.625 billion to
$1.675 billion and our initial fiscal 2021 outlook provided at the
start of the fiscal year of $1.44 billion to $1.5 billion.
- Adjusted EBITDA increased to a range of $270 million to $280
million representing growth in the range of 149% to 158%.
- This compares to our prior outlook of $225 million to $250
million and our initial fiscal 2021 outlook of $170 million to $205
million.
- Adjusted EBITDA margin increased to a range of 15.9% to 16.4%,
representing a 770 to 820 basis point improvement year-over-year.
- This compares to our prior outlook range of 13.8% to 14.9% and
our initial fiscal 2021 outlook of 12% to 14%.
- Gross margin increased to a range of 46.5% to 46.9%,
representing a 340 to 380 basis point improvement year-over-year.
- This compares to our prior guidance range of 46.0% to 46.5% and
our initial fiscal 2021 outlook of 45.3% to 45.8%.
- Our fiscal 2021 gross margin outlook includes tariff refunds of
$11 million and tariff expense of $9 million recognized through the
third quarter fiscal 2021. Minimal tariff expense and no further
tariff refunds are assumed for the fourth quarter given timing
uncertainty.
Supplemental Earnings Presentation
The Company has posted a supplemental earnings presentation
accompanying its third quarter fiscal 2021 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 2021 results on August
11, 2021 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 (833) 921-1637 with
conference ID 8063688. Participants outside the U.S. can access the
call by dialing (236) 714-2128 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.
Condensed Consolidated Statements of
Operations and Comprehensive Income (Loss)
(unaudited, in thousands, except share and per share amounts)
Three Months Ended
Nine Months Ended
July 3, 2021
June 27, 2020
July 3, 2021
June 27, 2020
Revenue
$
378,672
$
249,310
$
1,357,204
$
986,491
Cost of revenue
200,811
139,519
714,142
576,071
Gross profit
177,861
109,791
643,062
410,420
Operating expenses Research and development
55,578
57,770
164,294
159,890
Sales and marketing
67,231
77,273
198,888
205,201
General and administrative
38,323
31,662
113,372
87,989
Total operating expenses
161,132
166,705
476,554
453,080
Operating income (loss)
16,729
(56,914
)
166,508
(42,660
)
Other income (expense), net Interest income
34
81
114
1,954
Interest expense
(77
)
(360
)
(525
)
(1,187
)
Other income, net
1,998
365
4,678
3,366
Total other income, net
1,955
86
4,267
4,133
Income (loss) before provision for (benefit from) income taxes
18,684
(56,828
)
170,775
(38,527
)
Provision for (benefit from) income taxes
858
152
3,436
(1
)
Net income (loss)
$
17,826
$
(56,980
)
$
167,339
$
(38,526
)
Net income (loss) attributable to common stockholders: Basic
$
17,826
$
(56,980
)
$
167,339
$
(38,526
)
Diluted
$
17,826
$
(56,980
)
$
167,339
$
(38,526
)
Net income (loss) per share attributable to common stockholders:
Basic
$
0.14
$
(0.52
)
$
1.38
$
(0.35
)
Diluted
$
0.12
$
(0.52
)
$
1.20
$
(0.35
)
Weighted-average shares used in computing net income (loss) per
share attributable to common stockholders: Basic
125,138,279
109,477,622
120,876,472
109,325,785
Diluted
144,181,632
109,477,622
139,293,775
109,325,785
Total comprehensive income (loss) Net income (loss)
$
17,826
$
(56,980
)
$
167,339
$
(38,526
)
Change in foreign currency translation adjustment
(784
)
219
262
(731
)
Comprehensive income (loss)
$
17,042
$
(56,761
)
$
167,601
$
(39,257
)
Condensed Consolidated Balance Sheets (unaudited, dollars in
thousands, except par values)
As of
July 3, 2021
October 3, 2020
Assets Current assets: Cash and cash equivalents
$
670,905
$
407,100
Restricted cash
-
191
Accounts receivable, net of allowances
70,329
54,935
Inventories
146,697
180,830
Prepaids and other current assets
23,763
17,321
Total current assets
911,694
660,377
Property and equipment, net
71,732
60,784
Operating lease right-of-use assets
36,595
42,342
Goodwill
15,545
15,545
Intangible assets, net
24,962
26,394
Deferred tax assets
1,747
1,800
Other noncurrent assets
21,823
8,809
Total assets
$
1,084,098
$
816,051
Liabilities and stockholders’ equity Current liabilities:
Accounts payable
$
198,495
$
250,328
Accrued expenses
77,006
45,049
Accrued compensation
66,041
44,517
Short-term debt
-
6,667
Deferred revenue, current
16,906
15,304
Other current liabilities
42,471
31,150
Total current liabilities
400,919
393,015
Operating lease liabilities, noncurrent
36,501
50,360
Long-term debt
-
18,251
Deferred revenue, noncurrent
53,480
47,085
Deferred tax liabilities
2,394
2,434
Other noncurrent liabilities
3,677
7,067
Total liabilities
496,971
518,212
Stockholders’ equity: Common stock, $0.001 par value
128
114
Treasury stock
(48,740
)
(20,886
)
Additional paid-in capital
698,520
548,993
Accumulated deficit
(61,153
)
(228,492
)
Accumulated other comprehensive loss
(1,628
)
(1,890
)
Total stockholders’ equity
587,127
297,839
Total liabilities and stockholders’ equity
$
1,084,098
$
816,051
Condensed Consolidated Statements of Cash Flows
(unaudited, dollars in thousands)
Nine Months Ended July
3, 2021 June 27, 2020 Cash flows from operating
activities Net income (loss)
$
167,339
$
(38,526
)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities Depreciation and amortization
25,789
27,692
Impairment and abandonment charges
2,789
14,047
Stock-based compensation expense
46,755
41,638
Other
1,253
4,371
Deferred income taxes
95
(176
)
Foreign currency transaction gain
(2,226
)
(1,491
)
Changes in operating assets and liabilities: Accounts receivable,
net
(13,846
)
53,418
Inventories
32,333
129,623
Other assets
(17,730
)
(4,400
)
Accounts payable and accrued expenses
(27,169
)
(162,137
)
Accrued compensation
21,501
8,038
Deferred revenue
7,715
3,506
Other liabilities
2,143
7,548
Net cash provided by operating activities
246,741
83,151
Cash flows from investing activities Purchases of property
and equipment, intangible and other assets
(34,792
)
(29,905
)
Cash paid for acquisition, net of acquired cash
-
(36,289
)
Net cash used in investing activities
(34,792
)
(66,194
)
Cash flows from financing activities Repayments of
borrowings
(25,000
)
(5,000
)
Payments for repurchase of common stock
(21,729
)
(33,216
)
Proceeds from exercise of common stock options
131,536
17,708
Payments for repurchase of common stock related to shares withheld
for tax in connection with vesting of restricted stock units
(34,877
)
(6,603
)
Net cash provided by (used in) financing activities
49,930
(27,111
)
Effect of exchange rate changes on cash, cash equivalents and
restricted cash
1,735
639
Net increase (decrease) in cash, cash equivalents and restricted
cash
263,614
(9,515
)
Cash, cash equivalents and restricted cash Beginning of
period
407,291
338,820
End of period
$
670,905
$
329,305
Supplemental disclosure Cash paid for interest
$
434
$
1,318
Cash paid for taxes, net of refunds
$
3,773
$
1,153
Cash paid for amounts included in the measurement of lease
liabilities
$
15,078
$
11,689
Supplemental disclosure of non-cash investing and financing
activities Purchases of property and equipment in accounts
payable and accrued expenses
$
9,046
$
3,055
Right-of-use assets obtained in exchange for new operating lease
liabilities
$
1,622
$
75,913
Reconciliation of Net Income (Loss) to Adjusted EBITDA
(unaudited, dollars in thousands)
Three Months Ended
Nine Months Ended
July 3, 2021
June 27, 2020
July 3, 2021
June 27, 2020
Net income (loss)
$
17,826
$
(56,980
)
$
167,339
$
(38,526
)
Add (deduct): Depreciation and amortization
9,065
8,861
25,789
27,692
Stock-based compensation expense
15,547
15,041
46,755
41,638
Interest income
(34
)
(81
)
(114
)
(1,954
)
Interest expense
77
360
525
1,187
Other (income) expense, net
(1,998
)
(365
)
(4,678
)
(3,366
)
Provision for (benefit from) income taxes
858
152
3,436
(1
)
Restructuring and related expenses (1)
-
26,160
(2,611
)
26,160
Legal and transaction related costs (2)
5,351
4,132
25,030
9,285
Adjusted EBITDA
$
46,692
$
(2,720
)
$
261,471
$
62,115
Revenue
$
378,672
$
249,310
$
1,357,204
$
986,491
Adjusted EBITDA margin
12.3
%
(1.1
)%
19.3
%
6.3
%
(1) Restructuring and related expenses for the nine months ended
July 3, 2021 includes a gain of $2.8 million, related to our
negotiation for the early termination of a facility lease that was
part of the 2020 restructuring plan. The gain represents the
difference between the related operating lease liability and
previously accrued restructuring expenses versus the early
termination payment. For a description of the 2020 restructuring
plan, see “Restructuring and Related Costs” below.
(2) Legal and transaction related costs consist of expenses
related to our intellectual property ("IP") litigation against
Alphabet Inc. and Google LLC as well as legal and transaction costs
associated with our acquisition activity, which we do not consider
representative of our underlying operating performance.
Reconciliation of Cash Flows Provided by Operating Activities to
Free Cash Flow (unaudited, dollars in thousands)
Nine Months Ended
July 3, 2021
June 27, 2020
Cash flows provided by operating activities
$
246,741
$
83,151
Less: Purchases of property and equipment, intangible and other
assets
(34,792
)
(29,905
)
Free cash flow
$
211,949
$
53,246
Revenue by Product Category (unaudited, dollars in
thousands)
Three Months Ended Nine Months
Ended July 3, 2021 June 27, 2020 July 3,
2021 June 27, 2020 Sonos speakers
$
310,233
$
196,895
$
1,105,283
$
779,939
Sonos system products
47,621
42,164
197,442
150,887
Partner products and other revenue
20,818
10,251
54,479
55,665
Total revenue
$
378,672
$
249,310
$
1,357,204
$
986,491
Revenue by Geographical Region (unaudited,
dollars in thousands)
Three Months Ended Nine Months
Ended July 3, 2021 June 27, 2020 July 3,
2021 June 27, 2020 Americas
$
223,720
$
151,167
$
784,898
$
556,325
Europe, Middle East and Africa ("EMEA")
126,228
83,818
480,541
353,807
Asia Pacific ("APAC")
28,724
14,325
91,765
76,359
Total revenue
$
378,672
$
249,310
$
1,357,204
$
986,491
Stock-based Compensation (unaudited, dollars in thousands)
Three Months Ended Nine Months Ended July 3,
2021 June 27, 2020 July 3, 2021 June 27,
2020 Cost of revenue
$
248
$
306
$
723
$
866
Research and development
6,125
6,154
19,067
16,697
Sales and marketing
3,277
3,710
10,317
10,658
General and administrative
5,897
4,871
16,648
13,417
Total stock-based compensation expense
$
15,547
$
15,041
$
46,755
$
41,638
Restructuring and Related Costs (1) (unaudited, dollars in
thousands)
Three Months Ended Nine Months Ended
July 3, 2021 June 27, 2020 July 3, 2021
June 27, 2020 Research and development
$
-
$
4,949
$
25
$
4,949
Sales and marketing
-
19,788
(2,636
)
19,788
General and administrative
$
-
$
1,423
$
-
$
1,423
Total restructuring and related costs
$
-
$
26,160
$
(2,611
)
$
26,160
(1) On June 23, 2020, we initiated a restructuring plan as part
of our efforts to reduce operating expenses and preserve liquidity
due to the uncertainty and challenges stemming from the COVID-19
pandemic. As part of the 2020 restructuring plan, we eliminated
approximately 12% of our global headcount and closed our New York
retail store and six satellite offices. We believe these
initiatives will better align our resources to provide further
operating flexibility and more efficiently position our business
for our long-term strategy. Activities under the 2020 restructuring
plan were substantially completed in the first quarter of fiscal
2021. In the first quarter of fiscal 2021, we negotiated the early
termination of a facility lease that was part of the 2020
restructuring and recorded a gain of $2.8 million, representing the
difference between the related operating lease liability and
previously accrued restructuring expenses versus the early
termination payment. The gain was recognized as a credit in sales
and marketing expenses on the condensed consolidated statements of
operations and comprehensive income.
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, net income (loss) excluding
stock-based compensation, restructuring, and legal and transaction
related fees, and diluted earnings per share (EPS) excluding
stock-based compensation, restructuring, and legal and transaction
related fees. 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, stock-based compensation expense, interest
income, interest expense, other income (expense), income taxes 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
and intangible assets. We calculate non-GAAP net income (loss)
excluding stock-based compensation, restructuring and legal and
transaction related fees as net income (loss) less stock-based
compensation, restructuring fees and legal and transaction related
fees. We calculate non-GAAP diluted earnings per share (EPS)
excluding stock-based compensation, restructuring, and legal and
transaction related fees as net income (loss) less stock-based
compensation, restructuring costs and legal and transaction related
fees divided by our number of shares at fiscal year end. We
calculate constant currency growth percentages by translating our
prior period financial results using the current period average
currency exchange rates and comparing these amounts to our current
period reported results. 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 ended
October 2, 2021, our fiscal 2024 targets, our long-term focus,
financial, growth and business strategies and opportunities, growth
metrics and targets, our business model, new products, services and
partnerships, profitability and gross margins, our
direct-to-consumer efforts, our market share, 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 the duration and impact of the
COVID-19 pandemic and related mitigation efforts on our industry
and our supply chain; supply chain challenges, including shipping
and logistics challenges and significant limits on component
supplies; changes in general economic or market conditions that
could affect consumer income and overall consumer spending; 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 meet and accurately forecast product demand and manage
any product availability delays; and the other risk factors set
forth under the caption “Risk Factors” in our Quarterly Report on
Form 10-Q for the quarter ended April 3, 2021 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/20210811005721/en/
Investor Contact Cammeron McLaughlin IR@sonos.com
Press Contact Tom Lodge PR@sonos.com
Sonos (NASDAQ:SONO)
Historical Stock Chart
From Sep 2024 to Oct 2024
Sonos (NASDAQ:SONO)
Historical Stock Chart
From Oct 2023 to Oct 2024