Sonos, Inc. (Nasdaq: SONO) today reported third quarter fiscal
2024 results.
“Thanks to Ace, our long-awaited entry into headphones, we
reported year over year revenue growth and delivered results that
slightly exceeded our expectations in our third quarter,” Sonos CEO
Patrick Spence commented. “This was overshadowed by the problems
that our customers and partners experienced as a result of the
rollout of our new app, which in turn has required us to reduce our
Fiscal 2024 guidance. We have a clear action plan to address the
issues caused by our app as quickly as possible. While our app
setback is regrettable, it is one chapter in our over twenty years
of delighting customers. I speak for everyone at Sonos when I say
that our #1 priority is to make this right and ensure that the next
chapter is even better than the previous ones.”
Third Quarter Fiscal 2024 Financial Highlights
(unaudited)
- Revenue of $397.1 million
- Gross margin of 48.3%
- GAAP net income of $3.7 million, GAAP diluted earnings per
share (EPS) of $0.03
- Non-GAAP net income1 of $29.5 million, Non-GAAP diluted EPS1 of
$0.23
- Adjusted EBITDA1 of $48.9 million
Notes:
(1) Non-GAAP net income/Non-GAAP diluted earnings per share
(EPS) and Adjusted EBITDA exclude stock-based compensation, legal
and transaction related fees, amortization of intangibles, and
restructuring and abandonment costs. See “Use of Non-GAAP Measures”
and reconciliations to GAAP measures below.
Fiscal 2024 Outlook
The company will provide its Fiscal 2024 outlook on its third
quarter fiscal 2024 earnings call.
Supplemental Earnings Presentation
Following the earnings call, the company will post a
supplemental earnings presentation regarding its third quarter
fiscal 2024 results to the Earnings Reports section of its investor
relations website at
https://investors.sonos.com/reports-and-filings/default.aspx#section=earningsreports.
Conference Call, Webcast and Transcript
The company will host a webcast of its conference call and
Q&A related to its third quarter fiscal 2024 results on August
7, 2024, at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time).
Participants may access the live webcast in listen-only mode on the
Sonos investor relations website at
https://investors.sonos.com/news-and-events/default.aspx.
The conference call may also be accessed by dialing (888)
330-2454 with conference ID 8641747. Participants outside the U.S.
can access the call by dialing (240) 789-2714 using the same
conference ID.
An archived webcast of the conference call and a transcript of
the company’s prepared remarks and Q&A session will also be
available at
https://investors.sonos.com/reports-and-filings/default.aspx#section=earningsreports
following the call.
Consolidated Statements of Operations
and Comprehensive (Loss) Income
(unaudited, in thousands, except share and
per share amounts)
Three Months Ended
Nine Months Ended
June 29, 2024
July 1, 2023
June 29, 2024
July 1, 2023
Revenue
$
397,146
$
373,356
$
1,262,676
$
1,350,108
Cost of revenue
205,505
201,594
676,320
761,672
Gross profit
191,641
171,762
586,356
588,436
Operating expenses
Research and development
74,223
77,758
233,780
235,484
Sales and marketing
71,643
66,600
217,428
208,917
General and administrative
33,186
48,665
113,825
136,219
Total operating expenses
179,052
193,023
565,033
580,620
Operating income (loss)
12,589
(21,261
)
21,323
7,816
Other income, net
Interest income
2,629
2,391
9,638
7,540
Interest expense
(106
)
(274
)
(333
)
(585
)
Other (loss) income, net
(2,464
)
1,424
4,507
22,169
Total other income, net
59
3,541
13,812
29,124
Income (loss) before provision for income
taxes
12,648
(17,720
)
35,135
36,940
Provision for income taxes
8,939
5,851
20,188
15,974
Net income (loss)
$
3,709
$
(23,571
)
$
14,947
$
20,966
Net income (loss) attributable to common
stockholders:
Basic and diluted
$
3,709
$
(23,571
)
$
14,947
$
20,966
Net income (loss) per share attributable
to common stockholders:
Basic
$
0.03
$
(0.18
)
$
0.12
$
0.16
Diluted
$
0.03
$
(0.18
)
$
0.12
$
0.16
Weighted-average shares used in computing
net income (loss) per share attributable to common
stockholders:
Basic
122,553,129
128,311,109
123,828,150
127,825,410
Diluted
127,245,459
128,311,109
127,886,368
132,851,379
Total comprehensive income (loss)
Net income (loss)
3,709
(23,571
)
14,947
20,966
Change in foreign currency translation
adjustment
681
802
(267
)
(1,882
)
Net unrealized loss on marketable
securities
(6
)
—
(32
)
—
Comprehensive income (loss)
$
4,384
$
(22,769
)
$
14,648
$
19,084
Consolidated Balance Sheets
(unaudited, in thousands, except par
values)
As of
June 29, 2024
September 30,
2023
Assets
Current assets:
Cash and cash equivalents
$
227,114
$
220,231
Marketable securities
49,515
-
Accounts receivable, net
131,581
67,583
Inventories
154,903
346,521
Prepaids and other current assets
41,343
25,296
Total current assets
604,456
659,631
Property and equipment, net
103,123
87,075
Operating lease right-of-use assets
53,030
48,918
Goodwill
80,980
80,420
Intangible assets, net
In-process research and development
70,706
69,791
Other intangible assets
15,748
20,218
Deferred tax assets
1,640
1,659
Other noncurrent assets
31,422
34,529
Total assets
$
961,105
$
1,002,241
Liabilities and stockholders’
equity
Current liabilities:
Accounts payable
$
179,327
$
187,981
Accrued expenses
88,958
89,717
Accrued compensation
33,059
22,079
Deferred revenue, current
20,796
20,188
Other current liabilities
44,741
34,253
Total current liabilities
366,881
354,218
Operating lease liabilities,
noncurrent
53,050
54,956
Deferred revenue, noncurrent
62,190
60,650
Deferred tax liabilities
10,735
9,846
Other noncurrent liabilities
3,858
3,914
Total liabilities
496,714
483,584
Commitments and contingencies
Stockholders’ equity:
Common stock, $0.001 par value
126
130
Treasury stock
(72,323
)
(72,586
)
Additional paid-in capital
538,172
607,345
Retained earnings (accumulated
deficit)
2,159
(12,788
)
Accumulated other comprehensive loss
(3,743
)
(3,444
)
Total stockholders’ equity
464,391
518,657
Total liabilities and stockholders’
equity
$
961,105
$
1,002,241
Consolidated Statements of Cash
Flows
(unaudited, dollars in thousands)
Nine Months Ended
June 29, 2024
July 1, 2023
Cash flows from operating
activities
Net income
$
14,947
$
20,966
Adjustments to reconcile net income to net
cash provided by operating activities:
Stock-based compensation expense
64,961
59,549
Depreciation and amortization
35,154
35,054
Provision for inventory obsolescence
2,005
14,964
Restructuring and abandonment charges
266
5,125
Deferred income taxes
819
1,569
Other
2,973
4,270
Foreign currency transaction gains
(2,750
)
(12,698
)
Changes in operating assets and
liabilities:
Accounts receivable
(64,218
)
(13,934
)
Inventories
189,613
141,054
Other assets
(15,285
)
9,375
Accounts payable and accrued expenses
(16,942
)
(204,012
)
Accrued compensation
10,251
20,640
Deferred revenue
1,685
(4,093
)
Other liabilities
4,161
382
Net cash provided by operating
activities
227,640
78,211
Cash flows from investing
activities
Purchases of marketable securities
(68,676
)
—
Purchases of property and equipment
(39,477
)
(40,085
)
Maturities of marketable securities
20,000
—
Net cash used in investing activities
(88,153
)
(40,085
)
Cash flows from financing
activities
Payments for repurchase of common
stock
(128,739
)
(45,063
)
Payments for repurchase of common stock
related to shares withheld for tax in connection with vesting of
restricted stock units
(20,757
)
(23,914
)
Proceeds from exercise of stock
options
16,312
20,042
Net cash used in financing activities
(133,184
)
(48,935
)
Effect of exchange rate changes on cash
and cash equivalents
580
4,240
Net increase in cash and cash
equivalents
6,883
(6,569
)
Cash and cash equivalents
Beginning of period
220,231
274,855
End of period
$
227,114
$
268,286
Supplemental disclosure
Cash paid for interest
$
195
$
780
Cash paid for taxes, net of refunds
$
17,134
$
5,217
Cash paid for amounts included in the
measurement of lease liabilities
$
9,637
$
10,599
Supplemental disclosure of non-cash
investing and financing activities
Purchases of property and equipment in
accounts payable and accrued expenses
$
9,910
$
7,129
Right-of-use assets obtained in exchange
for new operating lease liabilities
$
11,277
$
31,547
Change in estimate of asset retirement
obligations
$
—
$
2,185
Reconciliation of GAAP to Non-GAAP Cost
of Revenue and Gross Profit
(unaudited, in thousands, except
percentages)
Three Months Ended
Nine Months Ended
June 29, 2024
July 1, 2023
June 29, 2024
July 1, 2023
Reconciliation of GAAP cost of
revenue
GAAP cost of revenue
$
205,505
$
201,594
$
676,320
$
761,672
Stock-based compensation expense
655
450
1,995
1,601
Amortization of intangibles
973
973
2,918
3,131
Non-GAAP cost of revenue
$
203,877
$
200,171
$
671,407
$
756,940
Reconciliation of GAAP gross
profit
GAAP gross profit
$
191,641
$
171,762
$
586,356
$
588,436
Stock-based compensation expense
655
450
1,995
1,601
Amortization of intangibles
973
973
2,918
3,131
Non-GAAP gross profit
$
193,269
$
173,185
$
591,269
$
593,168
GAAP gross margin
48.3
%
46.0
%
46.4
%
43.6
%
Non-GAAP gross margin
48.7
%
46.4
%
46.8
%
43.9
%
Reconciliation of Selected Non-GAAP
Financial Measures
(unaudited, dollars in thousands)
Three Months Ended
Nine Months Ended
June 29, 2024
July 1, 2023
June 29, 2024
July 1, 2023
Research and Development (GAAP)
$
74,223
$
77,758
$
233,780
$
235,484
Stock-based compensation
9,735
8,637
29,133
27,353
Amortization of intangibles
496
496
1,488
1,487
Restructuring and abandonment costs
478
3,686
801
6,368
Research and Development
(Non-GAAP)
$
63,514
$
64,939
$
202,358
$
200,276
Sales and Marketing (GAAP)
$
71,643
$
66,600
$
217,428
$
208,917
Stock-based compensation
4,510
3,590
13,297
12,178
Amortization of intangibles
-
-
-
-
Restructuring and abandonment costs
185
4,422
297
5,455
Sales and Marketing (Non-GAAP)
$
66,948
$
58,588
$
203,834
$
191,284
General and Administrative
(GAAP)
33,186
48,665
113,825
136,219
Stock-based compensation
7,030
5,652
20,536
18,417
Legal and transaction related costs
1,062
14,699
7,202
30,006
Amortization of intangibles
24
24
72
72
Restructuring and abandonment costs
630
2,220
768
3,352
Adjusted General and Administrative
(Non-GAAP)
$
24,440
$
26,070
$
85,247
$
84,372
Total Operating Expenses (GAAP)
$
179,052
$
193,023
$
565,033
$
580,620
Stock-based compensation
21,275
17,879
62,966
57,948
Legal and transaction related costs
1,062
14,699
7,202
30,006
Amortization of intangibles
520
520
1,560
1,559
Restructuring and abandonment costs
1,293
10,328
1,866
15,175
Adjusted Operating Expenses
(Non-GAAP)
$
154,902
$
149,597
$
491,439
$
475,932
Total Operating (Loss) Income
(GAAP)
$
12,589
$
(21,261
)
$
21,323
$
7,816
Stock-based compensation
21,930
18,329
64,961
59,549
Legal and transaction related costs
1,062
14,699
7,202
30,006
Amortization of intangibles
1,493
1,493
4,478
4,690
Restructuring and abandonment costs
1,293
10,328
1,866
15,175
Adjusted Operating Income
(Non-GAAP)
$
38,367
$
23,588
$
99,830
$
117,236
Depreciation
10,539
10,716
30,676
30,364
Adjusted EBITDA (Non-GAAP)
$
48,906
$
34,304
$
130,506
$
147,600
Reconciliation of Net Income (Loss) to
Adjusted EBITDA
(unaudited, dollars in thousands except
percentages)
Three Months Ended
Nine Months Ended
June 29, 2024
July 1, 2023
June 29, 2024
July 1, 2023
(In thousands, except
percentages)
Net income (loss)
$
3,709
$
(23,571
)
$
14,947
$
20,966
Add (deduct):
Depreciation and amortization
12,032
12,209
35,154
35,054
Stock-based compensation expense
21,930
18,329
64,961
59,549
Interest income
(2,629
)
(2,391
)
(9,638
)
(7,540
)
Interest expense
106
274
333
585
Other expense (income), net
2,464
(1,424
)
(4,507
)
(22,169
)
Provision for income taxes
8,939
5,851
20,188
15,974
Legal and transaction related costs
(1)
1,062
14,699
7,202
30,006
Restructuring and abandonment costs
(2)
1,293
10,328
1,866
15,175
Adjusted EBITDA
$
48,906
$
34,304
$
130,506
$
147,600
Revenue
$
397,146
$
373,356
$
1,262,676
$
1,350,108
Net income (loss) margin
0.9
%
(6.3
)%
1.2
%
1.6
%
Adjusted EBITDA margin
12.3
%
9.2
%
10.3
%
10.9
%
(1) Legal and transaction-related costs
consist of expenses related to our intellectual property ("IP")
litigation against Alphabet and Google, as well as legal and
transaction costs associated with our acquisition activity, which
we do not consider representative of our underlying operating
performance.
(2) Restructuring and abandonment costs
for the three and nine months ended June 29, 2024, and July 1,
2023, are primarily related to our restructuring plan initiated on
June 14, 2023, and also costs incurred in March 2023 related to the
abandonment of portions of our office spaces.
Reconciliation of GAAP Net Income
(Loss) to Non-GAAP Net Income
(unaudited, in thousands, except share and
per share amounts)
Three Months Ended
Nine Months Ended
June 29, 2024
July 1, 2023
June 29, 2024
July 1, 2023
Reconciliation of GAAP net income
(loss)
GAAP net income (loss)
$
3,709
$
(23,571
)
$
14,947
$
20,966
Stock-based compensation expense
21,930
18,329
64,961
59,549
Legal and transaction related costs
1,062
14,699
7,202
30,006
Amortization of intangibles
1,493
1,493
4,478
4,690
Restructuring and abandonment costs
1,293
10,328
1,866
15,175
Non-GAAP net income
$
29,487
$
21,278
$
93,454
$
130,386
Reconciliation of net income (loss) per
share
GAAP net income (loss) per share,
diluted
$
0.03
$
(0.18
)
$
0.12
$
0.16
Non-GAAP adjustments to net income (loss)
per share
0.20
0.34
0.61
0.82
Non-GAAP net income per share, diluted
$
0.23
$
0.16
$
0.73
$
0.98
Weighted-average shares used in GAAP per
share calculation, diluted
127,245,459
128,311,109
127,886,368
132,851,379
Weighted-average shares used in non-GAAP
per share calculation, diluted
127,245,459
132,885,945
127,886,368
132,851,379
Reconciliation of Cash Flows Provided
by Operating Activities to Free Cash Flow
(unaudited, dollars in thousands)
Three Months Ended
Nine Months Ended
June 29, 2024
July 1, 2023
June 29, 2024
July 1, 2023
Cash flows provided by operating
activities
$
63,483
$
8,887
$
227,640
$
78,211
Less: Purchases of property and
equipment
(23,214
)
(16,682
)
(39,477
)
(40,085
)
Free cash flow
$
40,269
$
(7,795
)
$
188,163
$
38,126
Revenue by Product Category
(unaudited, dollars in thousands)
Three Months Ended
Nine Months Ended
June 29, 2024
July 1, 2023
June 29, 2024
July 1, 2023
(In thousands)
Sonos speakers
$
301,105
$
289,740
$
991,378
$
1,070,117
Sonos system products
75,186
64,224
209,013
222,748
Partner products and other revenue
20,855
19,392
62,285
57,243
Total revenue
$
397,146
$
373,356
$
1,262,676
$
1,350,108
Revenue by Geographical Region
(unaudited, dollars in thousands)
Three Months Ended
Nine Months Ended
June 29, 2024
July 1, 2023
June 29, 2024
July 1, 2023
Americas
$
264,611
$
251,616
$
827,238
$
844,714
Europe, Middle East and Africa
110,902
105,312
372,074
434,806
Asia Pacific
21,633
16,428
63,364
70,588
Total revenue
$
397,146
$
373,356
$
1,262,676
$
1,350,108
Stock-based Compensation
(unaudited, dollars in thousands)
Three Months Ended
Nine Months Ended
June 29, 2024
July 1, 2023
June 29, 2024
July 1, 2023
(In thousands)
Cost of revenue
$
655
$
450
$
1,995
$
1,601
Research and development
9,735
8,637
29,133
27,353
Sales and marketing
4,510
3,590
13,297
12,178
General and administrative
7,030
5,652
20,536
18,417
Total stock-based compensation expense
$
21,930
$
18,329
$
64,961
$
59,549
Amortization of Intangibles
(unaudited, dollars in thousands)
Three Months Ended
Nine Months Ended
June 29, 2024
July 1, 2023
June 29, 2024
July 1, 2023
Cost of revenue
$
973
$
973
$
2,918
$
3,131
Research and development
496
496
1,488
1,487
Sales and marketing
-
-
-
-
General and administrative
24
24
72
72
Total amortization of intangibles
$
1,493
$
1,493
$
4,478
$
4,690
Use of Non-GAAP Measures
We have provided in this press release financial information
that has not been prepared in accordance with generally accepted
accounting principles (“U.S. GAAP”), including adjusted EBITDA,
adjusted EBITDA margin, free cash flow, non-GAAP gross margin, net
income (loss) excluding stock-based compensation, legal and
transaction related fees, amortization of intangibles, and
restructuring and abandonment costs and diluted earnings (loss) per
share excluding stock-based compensation, legal and transaction
related fees, amortization of intangibles and restructuring and
abandonment costs. These non-GAAP financial measures are not based
on any standardized methodology prescribed by U.S. GAAP and are not
necessarily comparable to similarly titled measures presented by
other companies. We use these non-GAAP financial measures to
evaluate our operating performance and trends and make planning
decisions. We believe that these non-GAAP financial measures help
identify underlying trends in our business that could otherwise be
masked by the effect of the expenses and other items that we
exclude in these non-GAAP financial measures. Accordingly, we
believe that these non-GAAP financial measures provide useful
information to investors and others in understanding and evaluating
our operating results, enhancing the overall understanding of our
past performance and future prospects and allowing for greater
transparency with respect to a key financial metric used by our
management in its financial and operational decision-making.
Non-GAAP financial measures should not be considered in isolation
of, or as an alternative to, measures prepared in accordance with
U.S. GAAP. Investors are encouraged to review the reconciliation of
these financial measures to their nearest U.S. GAAP financial
equivalents provided in the financial statement tables above. We
define Adjusted EBITDA as net income (loss) adjusted to exclude the
impact of depreciation and amortization, stock-based compensation
expense, interest income, interest expense, other income, income
taxes, restructuring and abandonment costs, legal and transaction
related fees and other items that we do not consider representative
of our underlying operating performance. We define Adjusted EBITDA
margin as Adjusted EBITDA divided by revenue. We define free cash
flow as net cash from operations less purchases of property and
equipment. We define non-GAAP gross margin as GAAP gross margin,
excluding stock-based compensation and amortization of intangible
assets. We calculate non-GAAP net income (loss) excluding
stock-based compensation, legal and transaction related fees,
amortization of intangibles and restructuring and abandonment costs
as net income (loss) less stock-based compensation, legal and
transaction related fees, amortization of intangibles and
restructuring and abandonment costs. We calculate non-GAAP diluted
earnings (loss) per share excluding stock-based compensation, legal
and transaction related fees, amortization of intangibles and
restructuring and abandonment costs as net income (loss) less
stock-based compensation, legal and transaction related fees,
amortization of intangibles and restructuring and abandonment costs
divided by our number of shares at fiscal year end. We do not
provide a reconciliation of forward-looking non-GAAP financial
measures to their comparable GAAP financial measures because we
cannot do so without unreasonable effort due to unavailability of
information needed to calculate reconciling items and due to the
variability, complexity and limited visibility of the adjusting
items that would be excluded from the non-GAAP financial measures
in future periods. When planning, forecasting and analyzing future
periods, we do so primarily on a non-GAAP basis without preparing a
GAAP analysis as that would require estimates for items such as
stock-based compensation, which is inherently difficult to predict
with reasonable accuracy. Stock-based compensation expense is
difficult to estimate because it depends on our future hiring and
retention needs, as well as the future fair market value of our
common stock, all of which are difficult to predict and subject to
constant change. In addition, for purposes of setting annual
guidance, it would be difficult to quantify stock-based
compensation expense for the year with reasonable accuracy in the
current quarter. As a result, we do not believe that a GAAP
reconciliation would provide meaningful supplemental information
about our outlook.
Forward Looking Statements
This press release contains forward-looking statements that
involve risks and uncertainties. These forward-looking statements
include statements regarding our outlook for the fiscal year ending
September 28, 2024, our long-term outlook, financial, growth and
business strategies and opportunities, growth targets, our product
cycle and roadmap, our new Sonos app and our action plan to address
issues caused by our new app, profitability and gross margins, and
other factors affecting variability in our financial results. These
forward-looking statements are only predictions and may differ
materially from actual results due to a variety of factors,
including, but not limited to: our ability to accurately forecast
product demand and effectively forecast and manage owned and
channel inventory levels; our ability to introduce software updates
to fix bugs, improve the customer experience and add back certain
features to our new app on a timely basis and otherwise deliver on
our action plan to address issues caused by our new app; our
ability to maintain, enhance and protect our brand image; the
impact of global economic, market and political events, including
continued inflationary pressures, high interest rates and, in
certain markets, foreign currency exchange rate fluctuations;
changes in consumer income and overall consumer spending as a
result of economic or political uncertainty or conditions; changes
in consumer spending patterns; our ability to successfully
introduce new products and services and maintain or expand the
success of our existing products; the success of our efforts to
expand our direct-to-consumer channel; the success of our
financial, growth and business strategies; our ability to compete
in the market and maintain or expand market share; our ability to
meet product demand and manage any product availability delays;
supply chain challenges, including shipping and logistics
challenges and component supply-related challenges; our ability to
protect our brand and intellectual property; and the other risk
factors set forth under the caption “Risk Factors” in our Quarterly
Report on Form 10-Q for the quarter ended March 30, 2024 and our
other filings filed with the Securities and Exchange Commission
(the “SEC”), copies of which are available free of charge at the
SEC’s website at www.sec.gov or upon request from our investor
relations department. All forward-looking statements herein reflect
our opinions only as of the date of this press release, and we
undertake no obligation, and expressly disclaim any obligation, to
update forward-looking statements herein in light of new
information or future events. Sonos and Sonos product names are
trademarks or registered trademarks of Sonos, Inc. All other
product names and services may be trademarks or service marks of
their respective owners.
About Sonos
Sonos (Nasdaq: SONO) is one of the world’s leading sound
experience brands. As the inventor of multi-room wireless home
audio, Sonos’ innovation helps the world listen better by giving
people access to the content they love and allowing them to control
it however they choose. Known for delivering an unparalleled sound
experience, thoughtful home design aesthetic, simplicity of use and
an open platform, Sonos makes the breadth of audio content
available to anyone. Sonos is headquartered in Santa Barbara,
California. Learn more at www.sonos.com.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240807407271/en/
Investor Contact James Baglanis IR@sonos.com
Press Contact Erin Pategas PR@sonos.com
Sonos (NASDAQ:SONO)
Historical Stock Chart
From Jul 2024 to Aug 2024
Sonos (NASDAQ:SONO)
Historical Stock Chart
From Aug 2023 to Aug 2024
