Core Viewpoint - Sonos, Inc. is expected to report second-quarter fiscal 2025 results with anticipated revenues between $240 million and $265 million, reflecting a slight year-over-year increase, while the bottom line is projected to show an improved loss compared to the previous year [1][2]. Group 1: Financial Performance Expectations - The Zacks Consensus Estimate for revenues is $255.9 million, indicating a rise of 1.3% from the previous year [1]. - The consensus estimate for the bottom line is a loss of 18 cents, an improvement from a loss of 34 cents reported in the prior year [1]. - Sonos has beaten the Zacks Consensus Estimate in three of the last four quarters, with an average earnings surprise of 22.8% [2]. Group 2: Challenges Impacting Performance - The company's second-quarter performance is likely to be negatively affected by high promotional activity and restructuring efforts, including a workforce reduction impacting nearly 12% of employees, leading to expected charges of $15 million to $18 million [3]. - The rollout of Sonos' redesigned app faced issues, resulting in unforeseen bugs and prompting an investment of $6 million in app recovery, with additional projected charges of $4 million to $8 million for the second quarter [4]. - GAAP gross margin is expected to be between 42% and 44%, down year-over-year due to foreign exchange headwinds and amortization costs [5]. Group 3: Positive Factors Supporting Performance - Sonos' focus on product innovation, particularly the successful launch of Sonos Ace, is expected to support revenue despite challenges from the app redesign [6]. - The introduction of the Era 100 Pro has opened a new revenue stream in the light-commercial audio market, potentially contributing to overall growth [7]. - Ongoing expansion of direct-to-consumer initiatives and a growing international presence, especially in Asia, are likely to bolster second-quarter performance [7].

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Over the past year, few consumer brands have been as beleaguered as Sonos, Inc. (NASDAQ: SONO ). The home audio company has been routed after a disastrous app update left many older devices unusable, not only hurting sales in the short runWith combined experience of covering technology companies on Wall Street and working in Silicon Valley, and serving as an outside adviser to several seed-round startups, Gary Alexander has exposure to many of the themes shaping the industry today. He has been a regular con ...

Core Insights - Sonos, Inc. reported first-quarter fiscal 2025 non-GAAP earnings per share of 64 cents, down from 84 cents in the prior-year quarter, while GAAP earnings were 40 cents compared to 64 cents a year ago, exceeding the Zacks Consensus Estimate of 36 cents per share [1][2] Revenue Performance - Quarterly revenues decreased by 10.1% year over year to $550.9 million, within the company's guidance range of $480 million to $560 million, attributed to weaker demand and challenges from the 2024 app rollout [2] - Revenue from Sonos speakers was $467.1 million, down 7.1% year over year, surpassing the consensus estimate of $427 million [4] - System products revenue fell 28.7% year over year to $60.3 million, below the consensus estimate of $77 million [4] - Partner products and other revenues totaled $23.4 million, down 7.3% year over year, slightly above the consensus estimate of $22.9 million [4] - Region-wise, revenues from the Americas declined 17.3% to $324.6 million, while Europe, the Middle East, and Africa saw a 3% increase to $197.6 million, and Asia Pacific revenues rose 0.2% to $28.7 million [5] Margin and Expense Analysis - Non-GAAP gross profit was $246.1 million, down 13.4% year over year, with a non-GAAP gross margin contraction of 170 basis points to 44.7% [6] - Adjusted operating expenses were $193.3 million, down from $203 million in the prior-year quarter, while non-GAAP adjusted operating expenses were $169 million compared to $179.4 million a year ago [7] Cash Flow and Liquidity - Sonos generated $156.2 million in cash from operations, with a free cash outflow of $143.1 million, improved from $269.3 million in the previous year [9] - As of December 28, 2024, cash and cash equivalents were $280 million, up from $169.7 million as of September 28, 2024 [10] - The company returned $27 million to shareholders through stock repurchases in the fiscal first quarter, with $44 million remaining under the current buyback authorization [10] Future Guidance - Management expects second-quarter fiscal 2025 revenues to range between $240 million and $265 million, with GAAP gross margin anticipated between 42% and 44% and non-GAAP gross margin between 44% and 45.8% [11]

Sonos, Inc. (NASDAQ:SONO) Q1 2025 Earnings Call February 6, 2025 4:15 PM ET Company Participants James Baglanis - Head, Investor Relations Tom Conrad - Interim Chief Executive Officer Saori Casey - Chief Financial Officer Eddie Lazarus - Chief Legal and Strategy Officer Conference Call Participants Steve Frankel - Rosenblatt Logan Katzman - Raymond James Erik Woodring - Morgan Stanley Alex Fuhrman - Craig Hallum Brent Thill - Jefferies Operator Thank you for standing by. My name is Jale, and I will be your ...

Financial Data and Key Metrics Changes - Q1 revenue was $551 million, down 10% year-over-year, which was better than the guidance of a decline between 22% and 9% [14][21] - GAAP gross margin was 43.8%, up 80 basis points from the high end of guidance, driven by better cost and product mix [15] - Non-GAAP gross margin was 44.7% [16] - Adjusted EBITDA was $91.2 million, representing a margin of 16.6%, above the high end of guidance due to higher gross margin and lower operating expenses [19] - Q1 free cash flow was $143 million, down from $269 million year-over-year due to lower revenue and unique factors impacting last year's free cash flow [19][20] Business Line Data and Key Metrics Changes - Stronger than expected demand for the new soundbar, ARC ULTRA, contributed to achieving the highest ever quarterly market share in U.S. Home theater on a dollar basis [14] - The portable category faced significant challenges due to market conditions and was particularly noted as cyclically challenged and highly promotional [14] Market Data and Key Metrics Changes - The company ended the quarter with $328 million in net cash, including $41 million in marketable securities [19] - Inventory balance decreased by 19% year-over-year to $141 million, primarily due to lower component balances [20] Company Strategy and Development Direction - The company is focused on improving the core experience and operational efficiency while capitalizing on market opportunities [7][12] - A significant reorganization was executed, reducing the workforce by about 200 employees to streamline operations and enhance efficiency [10][66] - The company aims to maintain a leaner structure while continuing to innovate and deliver new products [35][36] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the need for significant improvement in the core experience and emphasized the importance of aligning expenses with revenue [6][9] - The company expects Q2 revenue to be in the range of $240 million to $265 million, indicating a year-over-year change of negative 5% to positive 5% [21][22] - Management is committed to scrutinizing all expenses to ensure investments yield the highest returns [61] Other Important Information - The company is undergoing a transformation journey aimed at reducing operational costs while improving efficiency [25][60] - The Board is conducting a search for a permanent CEO, with the interim CEO also being a candidate [12] Q&A Session Summary Question: What drove the unconventional timing of the earnings release? - The interim CEO explained that the timing was a delicate matter due to organizational changes and aimed to minimize uncertainty for investors [28][29] Question: What are the top changes the company needs to make going forward? - The interim CEO highlighted the need for a more efficient structure, rightsizing the expense base, and improving the core customer experience [30] Question: Where does the app stand today? - The interim CEO noted that while progress has been made, there is still significant work to do to meet expectations for the app's performance and reliability [31][32] Question: How are channel inventories today? - The CFO confirmed that channel inventory ended at a comfortable level at the end of Q1 [34] Question: Any changes to capital allocation? - The CFO reiterated the focus on capital allocation strategy and confirmed the resumption of share buybacks [36] Question: Can you elaborate on the organizational changes? - The interim CEO explained that the previous structure had redundancies, and the new functional organization allows for more flexibility and efficiency [42][46] Question: How does the current organization compare to the past? - The interim CEO indicated that the current software organization is larger than the hardware organization, reflecting a shift in focus [55] Question: What is the outlook for operating expenses? - The CFO mentioned ongoing efforts to optimize costs beyond headcount reductions, focusing on overall efficiency [60]

Financial Performance - Total revenue for the three months ended December 28, 2024, was $550.857 million, a decrease of $62.012 million or 10.1% compared to $612.869 million for the same period in 2023[106] - The number of products sold decreased by 12.3% to 1,850 thousand units for the three months ended December 28, 2024, down from 2,109 thousand units in the same period in 2023[108] - Sonos speakers revenue represented 84.8% of total revenue, decreasing by 7.1% to $467.142 million, while Sonos system products revenue decreased by 28.7% to $60.274 million[107] - Net income for the three months ended December 28, 2024, was $50.237 million, resulting in a net income margin of 9.1%, compared to $80.947 million and a margin of 13.2% for the same period in 2023[97] - Adjusted EBITDA for the three months ended December 28, 2024, was $91.173 million, down from $115.242 million in the same period in 2023, reflecting a decrease in Adjusted EBITDA margin from 18.8% to 16.6%[103] Revenue Breakdown - Revenue from the Americas decreased by 17.3% to $324.583 million, while EMEA revenue increased by 3.0% to $197.612 million for the three months ended December 28, 2024[109] Cost and Expenses - Cost of revenue decreased by $20.7 million, or 6.3%, for the three months ended December 28, 2024, compared to the same period in 2023, primarily due to a decrease in products sold and product costs[113] - Gross profit declined by $41.3 million, or 14.6%, with a gross margin of 43.8% for the three months ended December 28, 2024, down from 46.1% in the prior year[110] - Research and development expenses increased by $1.6 million, or 2.0%, totaling $80.8 million, driven by stock-based compensation expenses[118] - Sales and marketing expenses rose by $2.7 million, or 3.2%, totaling $86.6 million, primarily due to increased advertising and marketing activities[120] - General and administrative expenses decreased by $14.0 million, or 35.1%, totaling $25.8 million, mainly due to lower personnel and facilities costs following the restructuring plan[123] Restructuring and Innovation - The company initiated a restructuring plan affecting approximately 6% of its employees to reduce costs, with most costs incurred in the fourth quarter of fiscal 2024[103] - The Sonos app underwent a significant redesign in May 2024 to enhance user experience and drive innovation[94] - The company continues to focus on technological innovation, as evidenced by its growing global patent portfolio[94] Cash Flow and Investments - Net cash provided by operating activities for the three months ended December 28, 2024, was $156.2 million, down from $275.4 million in the same period of 2023, reflecting a decrease of 43.3%[134] - Cash used in investing activities totaled $9.3 million, primarily due to purchases of marketable securities of $10.1 million and property and equipment of $13.1 million, partially offset by $13.9 million from maturities of marketable securities[135] - Cash used in financing activities was $33.8 million, mainly for repurchases of common stock amounting to $27.2 million and $9.0 million related to tax withholdings on stock awards[136] - The net increase in cash and cash equivalents for the three months ended December 28, 2024, was $110.2 million, significantly lower than the $247.1 million increase in the same period of 2023[133] Foreign Currency Exposure - The company recognized a foreign currency exchange loss of $6.0 million for the three months ended December 28, 2024, compared to a gain of $10.1 million in the same period of 2023[142] - A hypothetical adverse change of 10% in foreign currency exchange rates would have resulted in an adverse impact of approximately $9.3 million on income before taxes for the three months ended December 28, 2024[142] - The company has not entered into any material foreign exchange contracts or derivatives to hedge foreign currency exposures, increasing its risk from exchange rate fluctuations[141] - The company’s international sales are primarily denominated in foreign currencies, exposing it to risks from currency fluctuations, particularly with the euro and British pound[140] Tax and Interest - Interest income decreased by $1.2 million, or 39.5%, to $1.9 million, attributed to lower cash balances[124] - Other income (expense), net, shifted from an income of $10.3 million in 2023 to an expense of $6.0 million in 2024, reflecting significant foreign currency exchange losses[125] - The provision for income taxes changed from an expense of $12.0 million in 2023 to a benefit of $6.4 million in 2024, a decrease of $18.4 million or 153.6%[126] Cash Position - As of December 28, 2024, the company had cash and cash equivalents of $280.0 million, including $143.3 million held by foreign subsidiaries[128] - The company has a Revolving Credit Agreement allowing borrowing up to $100 million, with no outstanding borrowings as of December 28, 2024[130] - The net income contributing to operating cash flow was $50.2 million, with non-cash adjustments of $47.3 million and a favorable impact from changes in operating assets and liabilities of $58.6 million[134] - The decrease in inventories contributed $89.3 million to cash flow, indicating improved inventory management[134]

Core Insights - Sonos reported better-than-expected fiscal first-quarter earnings, with shares rising 4.5% following the announcement [1] - Despite beating revenue estimates, the company is facing declining sales and has announced a 12% workforce reduction as part of a restructuring effort [1][3] Financial Performance - Revenue for the quarter decreased by 9% to $550.9 million, surpassing the consensus estimate of $519.5 million [2] - Gross margin fell to 43.8% from 46.1%, and operating income dropped from $79.7 million to $48 million [2] - Adjusted earnings per share were $0.64, down from $0.84 a year ago, but exceeded the consensus estimate of $0.30 [2] Restructuring Efforts - The company plans to reduce its workforce by 12%, incurring estimated charges of $15 million to $18 million in the current quarter [3] - CEO Tom Conrad indicated the need for a flatter organizational structure to improve collaboration and decision-making [4] Future Outlook - While no specific guidance was provided, management appears focused on returning to revenue and profit growth [4] - The potential for stock appreciation exists if the company can successfully navigate its turnaround efforts [5]

Core Insights - Sonos reported mixed results for Q1 FY 2025, with adjusted EPS of $0.64 and revenue of $551 million, both exceeding analyst expectations but down from the previous year [2][4] - The company is undergoing a restructuring process, including a planned 12% workforce reduction to enhance efficiency and align costs with growth ambitions [3][9] Financial Performance - Adjusted EPS decreased by 23.8% year-over-year from $0.84 to $0.64 [4] - Revenue fell by 10.1% year-over-year from $613 million to $551 million [4] - Adjusted EBITDA declined by 21% from $115.2 million to $91.2 million [4][7] - Free cash flow dropped significantly by 47% from $269.3 million to $143.1 million [4][7] - Adjusted gross margin decreased by 1.7 percentage points from 46.4% to 44.7% [4] Regional Performance - Revenue in the Americas contracted sharply from $392.4 million to $324.6 million, reflecting geopolitical and economic pressures [8] - In contrast, revenue in Europe, the Middle East, and Africa slightly increased from $191.8 million to $197.6 million [8] Strategic Focus - Sonos aims to expand its product portfolio and stimulate repeat purchases among its loyal customer base [6] - Partnerships with tech giants like Apple and Alphabet enhance the company's ecosystem and customer access to diverse content [6] - The company is committed to ongoing research and development to drive innovation and customer satisfaction [5][12] Future Outlook - Management has indicated that continued efficiency improvements and product innovation are central to the company's outlook [10] - Future possibilities include strategic product launches and new market entries, with a focus on monitoring the restructuring process and potential rebounds in key regions [11]

Sonos (SONO) reported $550.86 million in revenue for the quarter ended December 2024, representing a year-over-year decline of 10.1%. EPS of $0.64 for the same period compares to $0.84 a year ago.The reported revenue represents a surprise of +4.91% over the Zacks Consensus Estimate of $525.06 million. With the consensus EPS estimate being $0.36, the EPS surprise was +77.78%.While investors closely watch year-over-year changes in headline numbers -- revenue and earnings -- and how they compare to Wall Street ...