Core Viewpoint - Sonos plans to raise prices on some products later this year due to new tariffs imposed by the U.S. government on imports from Vietnam and Malaysia, complicating its efforts to recover and grow in a challenging 2024 [1] Financial Performance - For the third fiscal quarter ending June 28, Sonos reported revenue of approximately $344.8 million, exceeding Wall Street's average expectation of $325 million [1] - Following the earnings report and the announcement of price increases, Sonos shares rose over 5% in after-hours trading [1] Leadership Changes - The earnings report is the first under the new CEO Tom Conrad, who was appointed in July after the resignation of former CEO Patrick Spence due to customer dissatisfaction with a problematic app update [2] Product Focus and Strategy - Sonos specializes in high-end wireless audio products, including multi-room Wi-Fi speakers, home theater systems, and portable smart speakers, leveraging its expertise in audio technology and user-friendly software [2][3] - The company is focusing on its core strengths by canceling the development of a streaming video player to concentrate on improving its audio products and software [6][7] Software and User Experience - Sonos has been working to rebuild customer trust after a flawed app update last year, with the new CEO emphasizing a return to user-centric design and innovation [3] - In the past 90 days, Sonos has launched seven major and nine minor software updates for its audio product line, indicating a commitment to improving user experience [7]

Core Insights - Sonos reported revenue of $344.76 million for the quarter ended June 2025, reflecting a year-over-year decline of 13.2% and an EPS of $0.19 compared to $0.23 a year ago [1] - The reported revenue exceeded the Zacks Consensus Estimate of $329.21 million, resulting in a surprise of +4.73%, while the EPS met the consensus estimate [1] Revenue Performance - Revenue from Sonos speakers was $253.67 million, surpassing the average estimate of $245.35 million, but showing a decline of -15.8% year-over-year [4] - Revenue from partner products and other revenue was $17.92 million, slightly below the average estimate of $18 million, with a year-over-year decline of -14.1% [4] - Revenue from Sonos system products was $73.18 million, exceeding the average estimate of $53.08 million, but still reflecting a -2.7% change compared to the previous year [4] Stock Performance - Sonos shares have returned +0.9% over the past month, outperforming the Zacks S&P 500 composite's +0.5% change [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating potential performance in line with the broader market in the near term [3]

Group 1: Earnings Performance - Sonos reported quarterly earnings of $0.19 per share, matching the Zacks Consensus Estimate, but down from $0.23 per share a year ago [1] - The company posted revenues of $344.76 million for the quarter ended June 2025, exceeding the Zacks Consensus Estimate by 4.73%, but down from $397.15 million year-over-year [2] - Over the last four quarters, Sonos has surpassed consensus EPS estimates two times and topped consensus revenue estimates four times [2][3] Group 2: Stock Performance and Outlook - Sonos shares have declined approximately 27.8% since the beginning of the year, contrasting with the S&P 500's gain of 7.1% [3] - The company's earnings outlook is crucial for investors, as it includes current consensus earnings expectations for upcoming quarters and any recent changes to these expectations [4] - The current consensus EPS estimate for the upcoming quarter is -$0.48 on revenues of $257.78 million, and -$0.80 on revenues of $1.38 billion for the current fiscal year [7] Group 3: Industry Context - The Audio Video Production industry, to which Sonos belongs, is currently ranked in the top 41% of over 250 Zacks industries, indicating a favorable industry outlook [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact Sonos's stock performance [5][6]

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements (unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) Sonos reported a net loss for the three and nine months ended June 28, 2025, a significant downturn from the net income in the prior year, driven by declining revenue and gross profit, while cash flow from operations decreased [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets decreased to $834.4 million as of June 28, 2025, primarily due to a significant reduction in inventories, with corresponding decreases in total liabilities and stockholders' equity Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 28, 2025 | September 28, 2024 | | :--- | :--- | :--- | | **Total Current Assets** | $503,141 | $551,086 | | Inventories | $115,427 | $231,505 | | **Total Assets** | **$834,402** | **$916,312** | | **Total Current Liabilities** | $315,603 | $366,153 | | **Total Liabilities** | **$435,096** | **$487,692** | | **Total Stockholders' Equity** | **$399,306** | **$428,620** | [Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20(Loss)) For Q3 2025, Sonos reported a **net loss of $3.4 million** on **revenue of $344.8 million**, a decline from the prior year's net income and revenue, with similar trends observed for the nine-month period Statement of Operations Summary (in thousands, except per share data) | Metric | Q3 2025 | Q3 2024 | Nine Months 2025 | Nine Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $344,764 | $397,146 | $1,155,376 | $1,262,676 | | Gross Profit | $149,724 | $191,641 | $504,739 | $586,356 | | Operating Income (Loss) | $(2,929) | $12,589 | $(16,059) | $21,323 | | Net Income (Loss) | $(3,379) | $3,709 | $(23,286) | $14,947 | | Diluted EPS | $(0.03) | $0.03 | $(0.19) | $0.12 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash provided by operating activities for the nine months ended June 28, 2025, decreased to $133.9 million, primarily due to lower net income, while cash was used for investing activities and common stock repurchases Cash Flow Summary for Nine Months Ended (in thousands) | Cash Flow Activity | June 28, 2025 | June 29, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $133,948 | $227,640 | | Net cash used in investing activities | $(24,167) | $(88,153) | | Net cash used in financing activities | $(78,703) | $(133,184) | | **Net increase in cash and cash equivalents** | **$31,541** | **$6,883** | - The decrease in operating cash flow was primarily driven by a **net loss of $23.3 million** in fiscal 2025 compared to a net income of $14.9 million in fiscal 2024, with a significant positive contribution from a **$106.2 million decrease in inventories**[18](index=18&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail accounting policies, revenue declines across all regions and product categories, ongoing patent litigation with Google, and significant restructuring charges from workforce reductions Revenue by Region for Nine Months Ended (in thousands) | Region | June 28, 2025 | June 29, 2024 | % Change | | :--- | :--- | :--- | :--- | | Americas | $731,041 | $827,238 | (11.6)% | | EMEA | $363,642 | $372,074 | (2.3)% | | APAC | $60,693 | $63,364 | (4.2)% | | **Total** | **$1,155,376** | **$1,262,676** | **(8.5)%** | Revenue by Product Category for Nine Months Ended (in thousands) | Product Category | June 28, 2025 | June 29, 2024 | % Change | | :--- | :--- | :--- | :--- | | Sonos speakers | $915,330 | $991,378 | (7.7)% | | Sonos system products | $183,993 | $209,013 | (12.0)% | | Partner products and other | $56,053 | $62,285 | (10.0)% | | **Total** | **$1,155,376** | **$1,262,676** | **(8.5)%** | - The company is involved in multiple patent infringement lawsuits with Google, where a jury awarded Sonos **$32.5 million** in one case, though the patents were later held unenforceable, and Google's asserted patents against Sonos have been found invalid, non-infringed, or withdrawn[57](index=57&type=chunk)[58](index=58&type=chunk) - Sonos initiated a cost transformation initiative, including a **6% workforce reduction** in August 2024 and a **12% workforce reduction** in February 2025, resulting in **$25.6 million** in total restructuring charges for the nine months ended June 28, 2025[82](index=82&type=chunk)[83](index=83&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes the 8.5% revenue decline to softer market demand and app rollout challenges, while a cost transformation initiative, including workforce reductions, is underway to improve efficiency and reduce operating expenses, maintaining adequate liquidity - The company launched new products, including the Arc Ultra soundbar in October 2024, and redesigned its Sonos app in May 2024 to enhance user experience and drive future innovation[91](index=91&type=chunk) - A cost transformation initiative, including workforce reductions of **6% in August 2024** and **12% in February 2025**, is expected to save approximately **$20 million** in the remainder of fiscal 2025[93](index=93&type=chunk)[94](index=94&type=chunk)[95](index=95&type=chunk) Key Metrics Comparison (in thousands, except percentages) | Metric | Nine Months 2025 | Nine Months 2024 | | :--- | :--- | :--- | | Total revenue | $1,155,376 | $1,262,676 | | Products sold | 3,696 | 4,135 | | Net income (loss) | $(23,286) | $14,947 | | Adjusted EBITDA | $125,936 | $130,506 | | Adjusted EBITDA margin | 10.9% | 10.3% | - Gross margin for the nine months ended June 28, 2025, decreased by **270 basis points** compared to the prior year, primarily due to reorganization efforts, unfavorable channel mix, and increased inventory write-downs[124](index=124&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=46&type=section&id=Item%203.%20Quantitative%20and%20qualitative%20disclosures%20about%20market%20risk) The company's primary market risk is foreign currency exposure from international sales, with a hypothetical 10% adverse change in exchange rates potentially impacting pre-tax income by $15.2 million - For the nine months ended June 28, 2025, the company recognized a foreign currency exchange **loss of $5.2 million**, compared to a gain of $4.2 million in the same period of 2024[160](index=160&type=chunk) - A hypothetical adverse change of **10% in foreign exchange rates** would have resulted in an adverse impact on loss before income taxes of approximately **$15.2 million** for the nine months ended June 28, 2025[160](index=160&type=chunk) [Controls and Procedures](index=46&type=section&id=Item%204.%20Controls%20and%20procedures) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 28, 2025, with no material changes to internal control over financial reporting during the quarter - The Interim Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were **effective** at a reasonable assurance level as of the end of the period[161](index=161&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls[162](index=162&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=49&type=section&id=Item%201.%20Legal%20proceedings) The company refers to Note 7 of the financial statements for details on its legal proceedings, believing no other current legal matters would materially adversely affect the business if determined unfavorably - Details regarding legal proceedings are provided in **Note 7** of the condensed consolidated financial statements[164](index=164&type=chunk) [Risk Factors](index=49&type=section&id=Item%201A.%20Risk%20factors) There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended September 28, 2024, and the Quarterly Report on Form 10-Q for the quarter ended March 29, 2025 - No material changes to the risk factors disclosed in the Annual Report and the previous Form 10-Q were reported[165](index=165&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=49&type=section&id=Item%202.%20Unregistered%20sales%20of%20equity%20securities%20and%20use%20of%20proceeds) On February 24, 2025, the Board authorized a new common stock repurchase program of up to $150.0 million, replacing the previous program, with no shares repurchased during the three months ended June 28, 2025 - A new **$150.0 million stock repurchase program** was authorized on February 24, 2025, replacing the 2023 program[167](index=167&type=chunk) Issuer Purchases of Equity Securities (Q3 2025) | Period | Total Shares Purchased | Average Price Paid per Share | Value of Shares Remaining for Purchase | | :--- | :--- | :--- | :--- | | Mar 30 - Apr 26 | 0 | $— | $150,000,000 | | Apr 27 - May 24 | 0 | $— | $150,000,000 | | May 25 - Jun 28 | 0 | $— | $150,000,000 | [Other Information](index=51&type=section&id=Item%205.%20Other%20information) There were no adoptions or terminations of Rule 10b5-1 trading plans or non-Rule 10b5-1 trading arrangements by directors or officers during the quarter - The company reported no activity related to Rule 10b5-1 trading plans[172](index=172&type=chunk) [Exhibit Index](index=52&type=section&id=Item%206.%20Exhibit%20index) This section lists all exhibits filed with the Form 10-Q, including CEO and CFO certifications and financial statements formatted in Inline XBRL - Exhibits filed include CEO and CFO certifications (Exhibits 31.1, 31.2, 32.1, 32.2) and financial data in Inline XBRL format (Exhibit 101)[173](index=173&type=chunk)

Financial Data and Key Metrics Changes - Revenue for Q3 was $345 million, exceeding guidance and reflecting a 13% year-over-year decline, which was better than the expected decline of 22% to 14% [16][19] - Adjusted EBITDA was positive $36 million, at the high end of guidance, driven by higher revenue and lower operating expenses [19][27] - GAAP gross margin was 43.7%, while non-GAAP gross margin was 45.2%, with tariff expenses impacting gross margin by 60 basis points [17][20] Business Line Data and Key Metrics Changes - Revenue decline was primarily driven by portable and component products, with ARC and ARC Ultra showing year-over-year growth [16][19] - Non-GAAP operating expenses decreased by 15% year-over-year, with significant reductions in research and development, general and administrative, and sales and marketing expenses [18][19] Market Data and Key Metrics Changes - The company noted that it has only captured a small fraction of the global market, indicating significant growth opportunities in both existing and key growth markets [11][28] - The home theater segment in the US showed dollar share gains, reflecting strong execution despite a challenging market environment [13][46] Company Strategy and Development Direction - The company is transitioning to a platform model, focusing on software upgrades that enhance the value of its hardware products [7][8] - There is a commitment to operational efficiency, with a goal to reduce annual operating expenses by over $100 million [10] - The company plans to raise prices on certain products due to tariff impacts, while also monitoring consumer behavior closely [14][24] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the cyclical challenges in the market but expressed optimism about future growth driven by increased content consumption and digital service subscriptions [45][46] - The company is focused on maintaining operational flexibility and liquidity amid tariff uncertainties and has paused share repurchase activities [20][22] Other Important Information - The company expects Q4 revenue to range from $260 million to $290 million, reflecting a year-over-year increase of 2% to 14% [22] - The balance sheet remains strong, with a net cash balance of $254 million and $100 million in undrawn revolving credit [20] Q&A Session Summary Question: Insights on new product introductions and software innovation - The CEO emphasized that the company aims to maintain a cadence of two new products per year while focusing on software reliability and experience improvements in the short term [31][34] Question: Cost reduction journey and future margin improvement - Management confirmed that efforts to optimize the cost structure are ongoing, with more potential for cost reductions to drive margin improvement [35] Question: Pricing strategy in light of tariffs - The CEO indicated that pricing changes are being evaluated based on product elasticity and demand, aiming to optimize gross profit dollars while monitoring competitive trends [39][40] Question: Market backdrop and future outlook - Management noted that the category remains cyclically challenged but expects a return to growth driven by increased content consumption and technological interaction [45][46] Question: Annualized run rate for non-GAAP operating expenses - Management stated that they are still working on optimizing the cost structure and expect to see the full impact of previous reductions in future fiscal years [48][50] Question: Leveraging AI for product enhancement - The CEO highlighted the potential of AI to enhance product experiences and operational efficiency, positioning the company for future growth [54][58]

Q3 2025 Financial Performance - Net revenue decreased by 13% year-over-year, impacted by the launch of Ace in Q3 2024 and challenging market conditions, offset partially by home theater strength[11] - GAAP gross margin declined by 490 bps year-over-year, primarily due to higher inventory reserves, reorganization efforts, and deleverage[11] - Non-GAAP gross margin decreased by 400 bps year-over-year, for the same reasons as GAAP gross margin[11] - Tariffs reduced Q3 2025 GAAP and Non-GAAP gross margin by 60 bps, equivalent to $2.1 million[11] - Adjusted EBITDA decreased by $13 million year-over-year due to lower revenue and gross profit, partially offset by lower expenses[12] - Free cash flow declined in Q3 2025 due to working capital changes, partially offset by lower capital expenditure and higher cash earnings[14] Inventory and Cash Flow - Inventories decreased by $39 million, a 25% year-over-year reduction, mainly driven by component inventory workdown[17] - Finished goods inventory decreased by $9 million, a 9% year-over-year decrease[17] - Component balance decreased by $30 million, a 58% year-over-year decrease[17] - Cash flow from operations was $37 million, a decrease of $26 million year-over-year from $64 million in Q3 2024[20] - Capital expenditures were $5 million, down $18 million year-over-year due to the launch of Ace in Q3 2024[20] - Free cash flow was $33 million, a decrease of $7 million year-over-year from $40 million in Q3 2024[20] Operating Expenses and Outlook - Non-GAAP Research and Development expenses were $53 million, down 17% year-over-year due to cost optimization efforts[21] - Non-GAAP Sales and Marketing expenses were $58 million, down 13% year-over-year driven by lower marketing investment[21] - Non-GAAP General and Administrative expenses were $20 million, down 16% year-over-year due to cost optimization efforts[21] - Non-GAAP Operating Expenses were $131 million, down 15% year-over-year, with normalized Non-GAAP Operating Expenses down 23% year-over-year[21] - The company expects Q4 2025 revenue to be between $260 million and $290 million, representing a growth of 2% to 14% year-over-year[26]

[Sonos Third Quarter Fiscal 2025 Results Overview](index=1&type=section&id=Sonos%20Third%20Quarter%20Fiscal%202025%20Results%20Overview) Sonos demonstrated strong performance in Q3 FY2025, with revenue exceeding the high end of guidance and Adjusted EBITDA reaching its upper limit, primarily driven by significant year-over-year expense reductions [Executive Summary and Highlights](index=1&type=section&id=1.1.%20Executive%20Summary%20and%20Highlights) Sonos reported strong Q3 FY2025 results, with revenue and Adjusted EBITDA at the high end of guidance, driven by significant year-over-year expense reductions - Q3 revenue exceeded the high end of guidance, and **Adjusted EBITDA** reached its upper limit, primarily due to **significant year-over-year expense reductions**[2](index=2&type=chunk)[3](index=3&type=chunk) Q3 FY2025 Financial Highlights (Unaudited): | Metric | Amount (million USD) | | :-------------------------- | :-------------- | | Revenue | 344.8 | | GAAP Gross Margin | 43.4% | | Non-GAAP Gross Margin | 44.7% | | GAAP Net Loss | (3.4) | | GAAP Diluted EPS | (0.03) | | Non-GAAP Net Income | 22.6 | | Non-GAAP Diluted EPS | 0.19 | | Adjusted EBITDA | 36 | [Management Commentary](index=1&type=section&id=1.2.%20Management%20Commentary) CEO Tom Conrad emphasized the company's return to craftsmanship, customer-centric design, and innovation, positioning Sonos as a platform for unique, seamless experiences and long-term growth - CEO Tom Conrad stated that Q3 was a solid step for Sonos, as the company returns to craftsmanship, customer-centric design, and innovation, advancing its vision as a platform combining hardware and software to deliver unique, seamless experiences, and is confident in achieving **long-term growth**[3](index=3&type=chunk) - CFO Saori Casey commented that Q3 was another quarter of solid execution, with both revenue and **Adjusted EBITDA** reaching the high end of guidance, marking the company's **fourth consecutive quarter** of achieving performance guidance amidst tariffs and an uncertain macroeconomic backdrop[3](index=3&type=chunk) [Conference Call and Webcast Information](index=2&type=section&id=1.3.%20Conference%20Call%20and%20Webcast%20Information) Sonos will host a conference call and webcast on August 6, 2025, at 4:30 PM ET to discuss Q3 FY2025 results, with recordings and transcripts available on the investor relations website - The conference call and webcast will be held on **August 6, 2025, at 4:30 PM ET (1:30 PM PT)**[8](index=8&type=chunk) - Participants can listen via the Sonos Investor Relations website webcast or by dialing **(888) 330-2454 (U.S.) / (240) 789-2714 (International)** using conference ID **8641747**[8](index=8&type=chunk)[9](index=9&type=chunk) - An archived webcast and transcript of the conference call will be available on the investor relations website after the event[9](index=9&type=chunk) [Consolidated Financial Statements](index=2&type=section&id=Consolidated%20Financial%20Statements) This section presents Sonos' consolidated statements of operations, balance sheets, and cash flows for the reported periods, providing a comprehensive view of its financial position and performance [Consolidated Statements of Operations and Comprehensive Income (Loss)](index=2&type=section&id=2.1.%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20(Loss)) In Q3 FY2025, Sonos reported a GAAP net loss of $3.4 million, compared to a net income of $3.7 million in the prior year, primarily due to decreased revenue and gross profit despite reduced operating expenses Q3 FY2025 (Three Months) Operating Results (Unaudited, Unit: thousand USD): | Metric | June 28, 2025 | June 29, 2024 | YoY Change | | :-------------------------- | :------------------ | :------------------ | :-------- | | Revenue | 344,764 | 397,146 | -13.19% | | Cost of Sales | 195,040 | 205,505 | -5.19% | | Gross Profit | 149,724 | 191,641 | -21.87% | | Total Operating Expenses | 152,653 | 179,052 | -14.69% | | Operating (Loss) Income | (2,929) | 12,589 | Shifted to Loss | | Net (Loss) Income | (3,379) | 3,709 | Shifted to Loss | | Diluted (Loss) Earnings Per Share | (0.03) | 0.03 | Shifted to Loss | Q3 FY2025 (Nine Months) Operating Results (Unaudited, Unit: thousand USD): | Metric | June 28, 2025 | June 29, 2024 | YoY Change | | :-------------------------- | :------------------ | :------------------ | :-------- | | Revenue | 1,155,376 | 1,262,676 | -8.50% | | Cost of Sales | 650,637 | 676,320 | -3.79% | | Gross Profit | 504,739 | 586,356 | -13.92% | | Total Operating Expenses | 520,798 | 565,033 | -7.83% | | Operating (Loss) Income | (16,059) | 21,323 | Shifted to Loss | | Net (Loss) Income | (23,286) | 14,947 | Shifted to Loss | | Diluted (Loss) Earnings Per Share | (0.19) | 0.12 | Shifted to Loss | [Consolidated Balance Sheets](index=5&type=section&id=2.2.%20Consolidated%20Balance%20Sheets) As of June 28, 2025, Sonos' total assets decreased to $834.4 million from $916.3 million on September 28, 2024, primarily due to significant reductions in inventory and net property, plant, and equipment Consolidated Balance Sheets (Unaudited, Unit: thousand USD): | Metric | June 28, 2025 | September 28, 2024 | Change | | :-------------------------- | :------------------ | :------------------ | :------- | | Cash and Cash Equivalents | 201,273 | 169,732 | +18.58% | | Inventory | 115,427 | 231,505 | -50.14% | | Total Current Assets | 503,141 | 551,086 | -8.70% | | Net Property and Equipment | 80,726 | 102,148 | -20.97% | | Total Assets | 834,402 | 916,312 | -8.94% | | Total Current Liabilities | 315,603 | 366,153 | -13.79% | | Total Liabilities | 435,096 | 487,692 | -10.80% | | Total Stockholders' Equity | 399,306 | 428,620 | -6.84% | [Consolidated Statements of Cash Flows](index=7&type=section&id=2.3.%20Consolidated%20Statements%20of%20Cash%20Flows) For the nine months ended June 28, 2025, net cash provided by operating activities significantly decreased to $133.9 million from $227.6 million in the prior year, influenced by net loss and working capital changes Consolidated Statements of Cash Flows (Unaudited, Unit: thousand USD): | Metric | June 28, 2025 (Nine Months) | June 29, 2024 (Nine Months) | YoY Change | | :---------------------------------- | :--------------------------- | :--------------------------- | :-------- | | Net Cash from Operating Activities | 133,948 | 227,640 | -41.16% | | Net Cash from Investing Activities | (24,167) | (88,153) | +72.58% (Decreased Outflow) | | Net Cash from Financing Activities | (78,703) | (133,184) | +40.91% (Decreased Outflow) | | Net Increase in Cash and Cash Equivalents | 6,883 | 31,541 | -78.18% | | Cash and Cash Equivalents, End of Period | 201,273 | 227,114 | -11.47% | [Revenue Analysis](index=14&type=section&id=Revenue%20Analysis) This section provides a detailed breakdown of Sonos' revenue performance by product category and geographical region for the reported periods [Revenue by Product Category](index=14&type=section&id=3.1.%20Revenue%20by%20Product%20Category) In Q3 FY2025, Sonos speakers remained the largest revenue contributor but saw a 15.75% year-over-year decline, with Sonos system products and partner products also decreasing, leading to an overall revenue reduction Revenue by Product Category (Unaudited, Unit: thousand USD): | Product Category | June 28, 2025 (Three Months) | June 29, 2024 (Three Months) | YoY Change | | :------------------------ | :--------------------------- | :--------------------------- | :-------- | | Sonos Speakers | 253,669 | 301,105 | -15.75% | | Sonos System Products | 73,179 | 75,186 | -2.67% | | Partner Products and Other Revenue | 17,916 | 20,855 | -14.10% | | **Total Revenue** | **344,764** | **397,146** | **-13.19%** | Revenue by Product Category (Unaudited, Unit: thousand USD): | Product Category | June 28, 2025 (Nine Months) | June 29, 2024 (Nine Months) | YoY Change | | :------------------------ | :--------------------------- | :--------------------------- | :-------- | | Sonos Speakers | 915,330 | 991,378 | -7.67% | | Sonos System Products | 183,993 | 209,013 | -12.00% | | Partner Products and Other Revenue | 56,053 | 62,285 | -10.01% | | **Total Revenue** | **1,155,376** | **1,262,676** | **-8.50%** | [Revenue by Geographical Region](index=14&type=section&id=3.2.%20Revenue%20by%20Geographical%20Region) In Q3 FY2025, revenue declined year-over-year across all geographical regions, with the Americas experiencing the largest decrease, followed by EMEA and Asia Pacific Revenue by Geographical Region (Unaudited, Unit: thousand USD): | Region | June 28, 2025 (Three Months) | June 29, 2024 (Three Months) | YoY Change | | :-------------------------- | :--------------------------- | :--------------------------- | :-------- | | Americas | 229,656 | 264,611 | -13.21% | | Europe, Middle East, and Africa | 97,245 | 110,902 | -12.31% | | Asia Pacific | 17,863 | 21,633 | -17.43% | | **Total Revenue** | **344,764** | **397,146** | **-13.19%** | Revenue by Geographical Region (Unaudited, Unit: thousand USD): | Region | June 28, 2025 (Nine Months) | June 29, 2024 (Nine Months) | YoY Change | | :-------------------------- | :--------------------------- | :--------------------------- | :-------- | | Americas | 731,041 | 827,238 | -11.63% | | Europe, Middle East, and Africa | 363,642 | 372,074 | -2.27% | | Asia Pacific | 60,693 | 63,364 | -4.22% | | **Total Revenue** | **1,155,376** | **1,262,676** | **-8.50%** | [Non-GAAP Financial Measures and Reconciliations](index=8&type=section&id=Non-GAAP%20Financial%20Measures%20and%20Reconciliations) This section provides reconciliations of GAAP to non-GAAP financial measures, including gross profit, operating expenses, net income, and Adjusted EBITDA, offering a clearer view of underlying operational performance [Reconciliation of GAAP to Non-GAAP Gross Profit](index=8&type=section&id=4.1.%20Reconciliation%20of%20GAAP%20to%20Non-GAAP%20Gross%20Profit) In Q3 FY2025, Sonos' non-GAAP gross margin was 44.7%, higher than the GAAP gross margin of 43.4%, primarily due to the exclusion of stock-based compensation, intangible asset amortization, and restructuring charges Reconciliation of GAAP to Non-GAAP Gross Profit (Unaudited, Unit: thousand USD): | Metric | June 28, 2025 (Three Months) | June 29, 2024 (Three Months) | YoY Change | | :-------------------- | :--------------------------- | :--------------------------- | :-------- | | GAAP Gross Profit | 149,724 | 191,641 | -21.87% | | Non-GAAP Gross Profit | 154,121 | 193,269 | -20.25% | | GAAP Gross Margin | 43.4% | 48.3% | -4.9 pp | | Non-GAAP Gross Margin | 44.7% | 48.7% | -4.0 pp | Reconciliation of GAAP to Non-GAAP Gross Profit (Unaudited, Unit: thousand USD): | Metric | June 28, 2025 (Nine Months) | June 29, 2024 (Nine Months) | YoY Change | | :-------------------- | :--------------------------- | :--------------------------- | :-------- | | GAAP Gross Profit | 504,739 | 586,356 | -13.92% | | Non-GAAP Gross Profit | 522,499 | 591,269 | -11.63% | | GAAP Gross Margin | 43.7% | 46.4% | -2.7 pp | | Non-GAAP Gross Margin | 45.2% | 46.8% | -1.6 pp | [Reconciliation of Selected Non-GAAP Operating Expenses](index=10&type=section&id=4.2.%20Reconciliation%20of%20Selected%20Non-GAAP%20Operating%20Expenses) Sonos' non-GAAP operating expenses, including R&D, sales and marketing, and G&A, decreased year-over-year in Q3 FY2025 and the nine months ended, primarily due to reduced stock-based compensation, amortization, and restructuring charges Selected Non-GAAP Operating Expenses (Unaudited, Unit: thousand USD): | Expense Category | June 28, 2025 (Three Months) | June 29, 2024 (Three Months) | YoY Change | | :----------------------- | :--------------------------- | :--------------------------- | :-------- | | Research and Development (Non-GAAP) | 52,610 | 63,514 | -17.17% | | Sales and Marketing (Non-GAAP) | 58,072 | 66,948 | -13.26% | | General and Administrative (Non-GAAP) | 20,407 | 24,440 | -16.42% | | Total Operating Expenses (Non-GAAP) | 131,089 | 154,902 | -15.37% | | Operating Income (Non-GAAP) | 23,032 | 38,367 | -39.98% | Selected Non-GAAP Operating Expenses (Unaudited, Unit: thousand USD): | Expense Category | June 28, 2025 (Nine Months) | June 29, 2024 (Nine Months) | YoY Change | | :----------------------- | :--------------------------- | :--------------------------- | :-------- | | Research and Development (Non-GAAP) | 176,633 | 202,358 | -12.69% | | Sales and Marketing (Non-GAAP) | 196,521 | 203,834 | -3.59% | | General and Administrative (Non-GAAP) | 62,027 | 85,247 | -27.24% | | Total Operating Expenses (Non-GAAP) | 435,181 | 491,439 | -11.45% | | Operating Income (Non-GAAP) | 87,318 | 99,830 | -12.53% | [Reconciliation of Net (Loss) Income to Adjusted EBITDA](index=11&type=section&id=4.3.%20Reconciliation%20of%20Net%20(Loss)%20Income%20to%20Adjusted%20EBITDA) Adjusted EBITDA for Q3 FY2025 was $35.6 million, down from $48.9 million in Q3 FY2024, while the Adjusted EBITDA margin for the nine months ended June 28, 2025, increased to 10.9% from 10.3%, reflecting the impact of various non-GAAP adjustments Reconciliation of Net (Loss) Income to Adjusted EBITDA (Unaudited, Unit: thousand USD): | Metric | June 28, 2025 (Three Months) | June 29, 2024 (Three Months) | YoY Change | | :-------------------- | :--------------------------- | :--------------------------- | :-------- | | Net (Loss) Income | (3,379) | 3,709 | Shifted to Loss | | Adjusted EBITDA | 35,589 | 48,906 | -27.23% | | Adjusted EBITDA Margin | 10.3% | 12.3% | -2.0 pp | Reconciliation of Net (Loss) Income to Adjusted EBITDA (Unaudited, Unit: thousand USD): | Metric | June 28, 2025 (Nine Months) | June 29, 2024 (Nine Months) | YoY Change | | :-------------------- | :--------------------------- | :--------------------------- | :-------- | | Net (Loss) Income | (23,286) | 14,947 | Shifted to Loss | | Adjusted EBITDA | 125,936 | 130,506 | -3.49% | | Adjusted EBITDA Margin | 10.9% | 10.3% | +0.6 pp | - On February 5, 2025, the company initiated a **restructuring plan** involving **12% of its workforce** to reduce its cost base; restructuring and other charges primarily reflect cost transformation initiatives (including the 2025 restructuring plan and product roadmap rationalization) and non-recurring CEO transition costs related to equity award modifications[19](index=19&type=chunk) [Reconciliation of GAAP Net (Loss) Income to Non-GAAP Net Income](index=12&type=section&id=4.4.%20Reconciliation%20of%20GAAP%20Net%20(Loss)%20Income%20to%20Non-GAAP%20Net%20Income) Sonos' Q3 FY2025 non-GAAP net income was $22.6 million, significantly higher than the GAAP net loss of $3.4 million, with non-GAAP diluted EPS at $0.19, reflecting adjustments for stock-based compensation, legal and transaction-related fees, intangible asset amortization, and restructuring charges Reconciliation of GAAP Net (Loss) Income to Non-GAAP Net Income (Unaudited, Unit: thousand USD): | Metric | June 28, 2025 (Three Months) | June 29, 2024 (Three Months) | YoY Change | | :-------------------------- | :--------------------------- | :--------------------------- | :-------- | | GAAP Net (Loss) Income | (3,379) | 3,709 | Shifted to Loss | | Non-GAAP Net Income | 22,582 | 29,487 | -23.42% | | GAAP Diluted (Loss) Earnings Per Share | (0.03) | 0.03 | Shifted to Loss | | Non-GAAP Diluted Earnings Per Share | 0.19 | 0.23 | -17.39% | Reconciliation of GAAP Net (Loss) Income to Non-GAAP Net Income (Unaudited, Unit: thousand USD): | Metric | June 28, 2025 (Nine Months) | June 29, 2024 (Nine Months) | YoY Change | | :-------------------------- | :--------------------------- | :--------------------------- | :-------- | | GAAP Net (Loss) Income | (23,286) | 14,947 | Shifted to Loss | | Non-GAAP Net Income | 80,091 | 93,454 | -14.30% | | GAAP Diluted (Loss) Earnings Per Share | (0.19) | 0.12 | Shifted to Loss | | Non-GAAP Diluted Earnings Per Share | 0.65 | 0.73 | -10.96% | [Free Cash Flow](index=14&type=section&id=4.5.%20Free%20Cash%20Flow) For the nine months ended June 28, 2025, free cash flow decreased to $110.5 million from $188.2 million in the prior year, primarily due to reduced cash flow from operating activities Free Cash Flow (Unaudited, Unit: thousand USD): | Metric | June 28, 2025 (Nine Months) | June 29, 2024 (Nine Months) | YoY Change | | :---------------------------------- | :--------------------------- | :--------------------------- | :-------- | | Cash Flow from Operating Activities | 133,948 | 227,640 | -41.16% | | Less: Purchases of Property and Equipment | (23,418) | (39,477) | +40.68% (Decreased Outflow) | | **Free Cash Flow** | **110,530** | **188,163** | **-41.26%** | [Stock-based Compensation and Amortization of Intangibles](index=16&type=section&id=4.6.%20Stock-based%20Compensation%20and%20Amortization%20of%20Intangibles) Total stock-based compensation expense for Q3 FY2025 slightly decreased year-over-year, while total amortization of intangible assets significantly increased from $1.5 million in Q3 FY2024 to $3.3 million in Q3 FY2025 Total Stock-based Compensation Expense (Unaudited, Unit: thousand USD): | Period | June 28, 2025 | June 29, 2024 | YoY Change | | :-------------------- | :------------------ | :------------------ | :-------- | | Three Months | 20,784 | 21,930 | -5.22% | | Nine Months | 69,364 | 64,961 | +6.78% | Total Amortization of Intangible Assets (Unaudited, Unit: thousand USD): | Period | June 28, 2025 | June 29, 2024 | YoY Change | | :-------------------- | :------------------ | :------------------ | :-------- | | Three Months | 3,322 | 1,493 | +122.50% | | Nine Months | 10,039 | 4,478 | +124.20% | [Use of Non-GAAP Measures Explanation](index=16&type=section&id=4.7.%20Use%20of%20Non-GAAP%20Measures%20Explanation) Sonos provides non-GAAP financial measures like Adjusted EBITDA, free cash flow, and non-GAAP gross margin/net income to offer additional insights into operational performance by excluding items not representative of core operations - The company uses non-GAAP financial measures to assess operating performance and trends, and to make planning decisions, identifying underlying business trends that might be obscured by certain expenses and items[23](index=23&type=chunk) - Items excluded from non-GAAP financial measures include **stock-based compensation expense**, **legal and transaction-related fees**, **amortization of intangible assets**, and **restructuring and other charges**[23](index=23&type=chunk)[24](index=24&type=chunk) - The company does not provide a reconciliation of forward-looking non-GAAP financial measures to GAAP financial measures because the information needed to calculate reconciling items is unavailable, and the variability, complexity, and limited visibility of adjusting items in future periods make it difficult to reasonably predict with accuracy[24](index=24&type=chunk) [Additional Information](index=18&type=section&id=Additional%20Information) This section includes forward-looking statements, information about Sonos, and investor and press contact details [Forward-Looking Statements](index=18&type=section&id=5.1.%20Forward-Looking%20Statements) This press release contains forward-looking statements regarding Sonos' long-term outlook, strategy, market growth, operating model, and macroeconomic environment, which involve risks and uncertainties that could cause actual results to differ materially - Forward-looking statements cover **long-term outlook**, financial, growth, and business strategies and opportunities, ability to expand existing customers, market growth and share, operating model and cost structure (including transformation efforts), app recovery efforts and related software updates, tariffs and ability to mitigate them, macroeconomic environment, and other factors affecting volatility in financial results[25](index=25&type=chunk) - Risks and uncertainties include difficulties and impacts of implementing operating model and cost structure improvements; restructuring and related charges potentially higher or not occurring within expected timelines; ability to accurately forecast product demand and effectively manage inventory levels; ability to timely release redesigned app software updates and address related customer commitments; ability to maintain, enhance, and protect brand image; impact of global economic, market, and political events (including tariffs, global trade tensions, ongoing inflationary pressures, high interest rates, and foreign exchange rate fluctuations); changes in consumer income and overall consumer spending; ability to successfully introduce new products and services and maintain or expand existing product success; efforts to expand direct-to-consumer channels; market competition and market share; relationships with channel, distribution, and technology partners; ability to meet product demand and manage product supply delays; supply chain challenges; ability to protect brand and intellectual property; use of artificial intelligence; and other risk factors identified in the company's filings with the U.S. Securities and Exchange Commission (SEC)[25](index=25&type=chunk) - All forward-looking statements reflect views only as of the date of this press release, and the company assumes no obligation and expressly disclaims any obligation to update forward-looking statements due to new information or future events[26](index=26&type=chunk) [About Sonos](index=19&type=section&id=5.2.%20About%20Sonos) Sonos (NASDAQ: SONO) is a leading sound experience brand and inventor of multi-room wireless home audio, known for unparalleled sound quality, thoughtful design, ease of use, and an open platform that provides access to favorite content - **Sonos (Nasdaq: SONO)** is one of the world's leading sound experience brands and the inventor of multi-room wireless home audio[27](index=27&type=chunk) - Sonos is known for delivering an **unparalleled sound experience**, thoughtful home design aesthetics, ease of use, and an open platform that makes all audio content accessible[27](index=27&type=chunk) - Sonos is headquartered in **Santa Barbara, California**[27](index=27&type=chunk) [Investor and Press Contacts](index=19&type=section&id=5.3.%20Investor%20and%20Press%20Contacts) Sonos provides contact information for its investor relations and media departments for inquiries - Investor Contact: James Baglanis, Email: **IR@sonos.com**[28](index=28&type=chunk) - Press Contact: Erin Pategas, Email: **PR@sonos.com**[28](index=28&type=chunk)

Company Overview - Sonos' FY24 revenue reached $1.52 billion[9] - The company boasts a strong patent portfolio with over 4,300 US patents and applications[9] - The average number of Sonos products per household in FY24 was 3.08[9] - Existing households account for 44% of product registrations[9] Market Position and Strategy - Sonos differentiates itself through an open content and control platform combined with premium hardware[12] - The company is focused on expanding its ecosystem by attracting new households and encouraging existing customers to purchase additional products[27] - Sonos is targeting a total addressable market (TAM) of $27 billion, encompassing premium global home audio and over-the-ear (OTE) headphones[48] Customer Behavior and Monetization - There are 16 million Sonos households in FY24[9] - The company identifies an incremental revenue opportunity exceeding $6 billion by increasing product adoption among existing single-product households[38] - Approximately 34% of customers repurchase within three years[41] Financial Performance - The GAAP gross margin for FY24 was 45%[9] - In FY24, Retail & Other accounted for 55% of revenue, DTC 23%, and Installer Solutions 22%[50]

Core Viewpoint - Sonos, Inc. is expected to report a decline in year-over-year revenues for Q3 fiscal 2025, despite a sequential increase due to seasonal factors, with challenges stemming from product category pressures and external economic conditions [2][4][6]. Financial Performance Expectations - Sonos anticipates Q3 revenues between $310 million and $340 million, representing a sequential increase of 19–31% but a year-over-year decline of 14–22% [2]. - The consensus estimate for earnings is set at 9 cents per share, down from 23 cents in the prior-year quarter, with a trailing four-quarter average earnings surprise of 29.3% [3][10]. - GAAP gross margin is expected to be between 43% and 45%, while non-GAAP gross margin is projected at 45.2% to 47% [7][10]. Challenges Impacting Performance - Sonos faces multiple headwinds, including cyclically pressured product categories, particularly in the portables segment, and uncertain demand trends [4]. - Supply chain disruptions, regulatory pressures, and financial market volatility are likely to have negatively impacted margins and competitive positioning [5][6]. - Tariff-related expenses are projected to increase, with actual cash outlay expected to rise significantly in the upcoming quarters [5]. Strategic Initiatives - The launch of high-margin products like Sonos Ace and Era 100 Pro is anticipated to help mitigate some of the margin and demand pressures [8][10][12]. - Sonos is focusing on product innovation and maintaining a cadence of two hardware launches per year to drive long-term growth [12]. - Expansion of direct-to-consumer initiatives and a growing international presence, particularly in Asia, are expected to support overall performance [13].

Sonos named interim leader Tom Conrad as its next chief executive officer, expressing confidence in the turnaround effort he’s pursuing https://t.co/wirAMV5AYW ...