SONOS(SONO) - 2025 Q3 - Quarterly Results

Sonos Third Quarter Fiscal 2025 Results Overview 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 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][3] 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 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] - 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] Conference Call and Webcast Information 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] - 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][9] - An archived webcast and transcript of the conference call will be available on the investor relations website after the event[9] Consolidated Financial Statements 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) 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 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 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 This section provides a detailed breakdown of Sonos' revenue performance by product category and geographical region for the reported periods Revenue by Product Category 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 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 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 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 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 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] Reconciliation of GAAP Net (Loss) Income to Non-GAAP Net Income 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 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 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 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] - 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][24] - 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] Additional Information This section includes forward-looking statements, information about Sonos, and investor and press contact details Forward-Looking Statements 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] - 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] - 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] About Sonos 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] - 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] - Sonos is headquartered in Santa Barbara, California[27] Investor and Press Contacts Sonos provides contact information for its investor relations and media departments for inquiries - Investor Contact: James Baglanis, Email: IR@sonos.com[28] - Press Contact: Erin Pategas, Email: PR@sonos.com[28]