| --- | --- | --- | --- | --- | --- | --- | --- | --- | |-------|-------|-------------------|-------|-------|-------|-------------------------|-------|-------------------| | | | | | | | Q4 and Fiscal Year 2024 | | | | | | Financial Results | | | | | | | | | | | | | | | | November 13, 2024 | Forward Looking Statements This presentation contains forward-looking statements that involve risks and uncertainties. These forward-looking statements include statements regarding our outlook for the fiscal quarter endi ...

For the quarter ended September 2024, Sonos (SONO) reported revenue of $255.38 million, down 16.3% over the same period last year. EPS came in at -$0.18, compared to -$0.07 in the year-ago quarter.The reported revenue represents a surprise of +2.22% over the Zacks Consensus Estimate of $249.83 million. With the consensus EPS estimate being -$0.22, the EPS surprise was +18.18%.While investors scrutinize revenue and earnings changes year-over-year and how they compare with Wall Street expectations to determin ...

Core Viewpoint - Sonos is entering the headphone market with a new product priced at $449, aiming to expand its consumer technology offerings beyond home speakers [1] Earnings Preview - The company is expected to report a loss of ($0.41) per share on revenue of $252.67 million, with an unofficial Whisper number indicating a loss of ($0.43) per share [2] Historical Earnings Performance - Sonos has experienced fluctuating earnings over the years, with losses prior to 2020. The earnings per share (EPS) were as follows: ($0.18) in 2020, $1.55 in 2021, $1.24 in 2022, and $0.92 in 2023. The forecast for 2024 is a loss of ($0.28) per share, followed by a loss of ($0.27) per share in 2025 [3] Stock Valuation - The stock is currently trading significantly below its record high of $44.72 per share, with a price-to-earnings (P/E) ratio of 21, which is comparable to the S&P 500 [4] Technical Analysis - The stock has been in a long-term downtrend, with current efforts to stabilize and potentially reverse this trend. Market reactions to the upcoming earnings report will be critical, with bulls hoping for a gap up and bears anticipating a gap down [5] Company Profile - Sonos, Inc. designs, develops, manufactures, and sells audio products and services globally, offering a range of wireless, portable, and home theater speakers, as well as accessories through approximately 10,000 retail stores and e-commerce platforms [6] Company History - Originally known as Rincon Audio, Inc., the company rebranded to Sonos, Inc. in May 2004 and was incorporated in 2002, with its headquarters located in Santa Barbara, California [7] Market Reaction Importance - The market's reaction to earnings news is crucial for assessing the company's performance, emphasizing the need for investors to manage losses effectively [7]

Core Viewpoint - Sonos, Inc. (SONO) is expected to report a challenging fourth-quarter fiscal 2024, with anticipated revenue declines and increased losses due to app-related issues and delayed product launches [2][3][5]. Revenue Expectations - For Q4 fiscal 2024, SONO anticipates revenues between $240 million and $260 million, with a consensus estimate of $252.7 million, reflecting a 17.2% decrease from the previous year [2]. - Full-year revenues have been revised downward to a range of $1.503 billion to $1.523 billion from an earlier projection of $1.6 billion to $1.7 billion [5]. Earnings Projections - The consensus estimate for the bottom line is a loss of 22 cents, compared to a loss of 7 cents reported in the prior year [2]. - Adjusted EBITDA loss for Q4 is expected to be between $14 million and $37 million, with full-year adjusted EBITDA anticipated in the range of $93 million to $117 million, down from earlier expectations of $150 million to $180 million [4][6]. Margin Analysis - GAAP gross margin is projected to be between 40% and 42%, down sequentially, while non-GAAP gross margin is expected to be between 45.8% and 46.1% [4][7]. - The company is incurring $20-$30 million in expenses to address app issues and improve customer support, which is expected to impact margin performance [7]. Product Developments - Sonos has launched the Sonos Arc Ultra and Sonos Sub 4, priced at $999 and $799 respectively, which are expected to enhance product offerings and diversify revenue streams [10]. - The company is focusing on the premium over-the-ear headphone market, which is a $5 billion addressable market with double-digit growth annually [8][9]. Customer Trust Initiatives - Following an internal review of its app release, Sonos has made commitments to restore customer trust and improve product quality [11]. - A software update was released to enhance performance and restore previously missing features for users [12].

Core Viewpoint - Sonos (SONO) is expected to report a quarterly loss of $0.22 per share, reflecting a significant decline of 214.3% year-over-year, alongside anticipated revenues of $252.67 million, which represents a decrease of 17.2% compared to the previous year [1] Group 1: Earnings Estimates - Analysts have maintained the consensus EPS estimate for the quarter over the last 30 days, indicating a reevaluation of initial estimates by analysts covering the stock [1][2] - The correlation between earnings estimate revisions and short-term stock price performance is highlighted as a critical factor for investors [2] Group 2: Revenue Projections - Revenue from Sonos speakers is projected to be $171.83 million, indicating a decline of 23.1% from the year-ago quarter [4] - Revenue from partner products and other revenue is estimated at $19.86 million, showing a slight increase of 1.8% from the prior-year quarter [4] - Revenue from Sonos system products is expected to be $60.55 million, reflecting a decrease of 2.8% from the previous year [5] Group 3: Stock Performance - Over the past month, Sonos shares have increased by 13.5%, outperforming the Zacks S&P 500 composite, which rose by 4.9% [5] - Sonos currently holds a Zacks Rank 3 (Hold), suggesting that its performance may align with the overall market in the near future [5]

Sonos, Inc. (SONO) has made seven new commitments based on an internal review of its May app release, ensuring it continues to deliver the best wireless audio systems and that customers enjoy the quality for which the brand is known. Many of these efforts are already in progress, with additional measures set to be rolled out over the rest of the year. The company introduced an extensive redesign for its Sonos app to improve streaming in May 2024. However, the launch didn't go as planned, as some bugs were n ...

Core Viewpoint - Sonos reported a positive earnings performance for Q3 fiscal 2024, with earnings per share exceeding estimates, but faces challenges ahead due to app rollout issues impacting future revenue and product launches [2][9]. Financial Performance - Non-GAAP earnings per share for Q3 fiscal 2024 were 23 cents, up from 16 cents in the prior-year quarter, while GAAP earnings were 3 cents compared to a loss of 18 cents a year ago [2]. - Quarterly revenues increased by 6% year over year to $397.1 million, driven by the launch of the Sonos Ace Bluetooth headphone, surpassing the Zacks Consensus Estimate by 1% [3]. - Revenue breakdown: - Sonos speakers: $301.1 million, up 3.9% year over year - Sonos system products: $75.2 million, up 17.1% year over year - Partner products and others: $20.9 million, up 7.5% year over year [5]. Operational Efficiency - Non-GAAP gross profit was $193.3 million, reflecting an 11.6% year-over-year increase, with gross margin expanding by 230 basis points to 48.7% due to improved inventory management [6]. - Total operating expenses decreased to $179 million from $193 million in the prior year, attributed to lower research and development and administrative costs [6]. Cash Flow and Liquidity - For Q3, Sonos used $63.5 million in cash from operations, with a free cash outflow of $40.3 million. Cash and cash equivalents decreased to $227.1 million from $291.6 million as of the previous quarter [8]. - The company returned $52.5 million to shareholders through stock repurchases, with $71 million remaining under the current buyback authorization [8]. Guidance and Outlook - The company revised its Q4 fiscal 2024 revenue expectations to between $240 million and $260 million due to app-related challenges, which also delayed two major product launches [9][10]. - Full-year revenue is projected to be between $1.503 billion and $1.523 billion, with GAAP gross profit expected to range from $682 million to $696 million, indicating a gross margin of 45.4% to 45.7% [11]. Market Position - Sonos holds a Zacks Rank 3 (Hold), indicating an expectation of in-line returns in the coming months [14]. - The company has a strong Growth Score of A and a Momentum Score of A, with an aggregate VGM Score of A, placing it in the top 40% for investment strategy [13].

Core Insights - Sonos, Inc. has launched a limited edition of Sonos Ace headphones in collaboration with Sporty & Rich, priced at $449, available exclusively on the Sporty & Rich website and their NYC flagship store [1][2] Product Details - The Sonos Ace x Sporty & Rich Limited Edition headphones feature signature Sonos Ace sound, including lossless and spatial audio, Active Noise Cancellation, and Aware Mode for environmental awareness [3] - The design includes metal accents, matte finishes, and a soft vegan leather interior for comfort, with unique features such as a Sporty & Rich logo and custom green touches [3][4] - The green accents reference Sporty & Rich's "verde" color and the tradition of tennis played on grass courts, with packaging resembling tote bags used by tennis players [4] Market Context - The launch of Sonos Ace headphones coincides with the tenniscore trend, where major tennis tournaments have become cultural events, attracting celebrities and influencers [2] - Sonos aims to enhance marketing efforts for its latest headphones through this collaboration with Sporty & Rich [4] Financial Performance - In Q3 fiscal 2024, Sonos reported revenues of $397.1 million, a 6% increase year-over-year, largely attributed to the Sonos Ace launch [6] - Despite the revenue growth, the company has lowered its sales guidance due to setbacks from a new app rollout, which has delayed two major product releases planned for Q4 [6] - Sonos currently holds a Zacks Rank 3 (Hold), with shares down 16.9% over the past year, contrasting with a 5.1% growth in the sub-industry [6]

Core Viewpoint - Sonos has faced significant challenges in fiscal Q3, including a guidance cut due to app glitches, leading to a nearly 30% decline in share price year-to-date. Despite these issues, the company is expected to benefit from long-term growth opportunities, particularly in the premium headphone market with its new product, Ace [3][4][12]. Financial Performance - Sonos reported Q3 revenue of $397.1 million, a 7% year-over-year increase, surpassing Wall Street expectations of $391.2 million. This marks a recovery from a 17% revenue decline in Q2 [6]. - The company anticipates Q4 revenue between $240 million and $260 million, representing an 18% year-over-year decline, significantly lower than previous expectations of over $390 million [4][6]. Product Launch and Market Position - The Ace headphones, priced starting at $449, have received positive customer reviews, with ratings of 4.6 out of 5 stars on sonos.com and 4.5 on Best Buy. The product is seen as a strong entry into the $5 billion premium over-the-ear headphone market, which is growing at double digits annually [8][9]. - Despite the app issues, the Ace headphones are reported to be off to a good start, contributing to Sonos' revenue growth in Q3, although initial sales may be influenced by inventory filling for channel partners [7][9]. Margin and Valuation - Sonos achieved a gross margin of 48.7% in Q3, up 230 basis points year-over-year, exceeding the company's long-term target of 45-47% [9][10]. - The company's enterprise value is approximately $1.17 billion after accounting for $276.6 million in cash, with a current market cap of $1.45 billion. Sonos trades at an attractive 11.1x EV/FY24 adjusted EBITDA based on updated guidance [4][12]. Long-term Outlook - The company is expected to face adjusted EBITDA losses in Q4 due to product investments aimed at resolving app issues, estimated at $20-$30 million. However, these are viewed as transitory factors, with potential for margin expansion and revenue growth in the future [11][12].

Financial Data and Key Metrics Changes - Q3 revenues were $397 million, up 6% year-over-year, driven by the introduction of the Ace headphones [15] - Year-to-date revenue reached $1.2627 billion, down 6.5% year-over-year [15] - GAAP gross margin was 48.3%, up 230 basis points year-over-year, primarily due to improved inventory management [16] - Year-to-date gross margin increased to 46.4%, up from 43.6% in the previous year [16] - Free cash flow in Q3 was $40.3 million, bringing year-to-date free cash flow to $188 million compared to $38 million in the same period last year [17] Business Line Data and Key Metrics Changes - The launch of the Ace headphones marked a significant entry into the premium over-the-ear headphone market, which is a $5 billion addressable market growing by double digits annually [12] - Customer reviews for Ace were positive, with ratings of 4.6 out of 5 stars on sonos.com and 4.5 on Best Buy [12] Market Data and Key Metrics Changes - The company is navigating a cyclical downswing in existing categories while entering a growing market with the Ace headphones [12] - The premium headphone category is expected to provide diversification of revenue streams [12] Company Strategy and Development Direction - The company is focused on addressing issues with the new app, which has negatively impacted customer experience and sales [4][8] - A commitment to delivering at least two new products annually remains, although the launch of two major products has been delayed until app issues are resolved [8][19] - The company is investing $20 million to $30 million in fixing the app and supporting customers, which is expected to impact revenue and operating expenses [11][21] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that the app rollout has fallen short, impacting customer satisfaction and sales [4][40] - The company remains confident in its long-term potential within the $100 billion audio market, aiming to capture a larger share [25] - The focus is on regaining customer trust and ensuring future product launches are successful [25][40] Other Important Information - The company ended Q3 with $277 million in net cash, including $50 million in marketable securities [16] - Inventory levels were down 48% year-over-year, indicating effective inventory management [18] Q&A Session Summary Question: Status of the two delayed products - The two products were ready to ship in Q4, but the company prioritized addressing app issues first [23] Question: Long-term vision for the app and monetization - The company aims to capture more of the audio market and believes the app redesign is essential for future growth [25] Question: Impact of app issues on revenue reduction - The revenue reduction is primarily due to lower sales across the portfolio and the delay of new products [27] Question: Channel inventory status - Channel inventory is higher than desired, but this is accounted for in the Q4 guidance [28] Question: Potential reputational damage from app issues - The company is focused on addressing current pain points and believes future product launches will help regain customer trust [35] Question: Clarification on $20 million to $30 million costs - These costs are not included in the Q4 guidance and will primarily impact Q1 [38]