SONOS(US:SONO)2025-08-06 21:31PART I. FINANCIAL INFORMATION Item 1. Financial Statements (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 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) 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 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 inventories18 Notes to Condensed Consolidated Financial Statements 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 withdrawn5758 - 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, 20258283 Management's Discussion and Analysis of Financial Condition and Results of Operations 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 innovation91 - 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 2025939495 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-downs124 Quantitative and Qualitative Disclosures About Market Risk 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 2024160 - 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, 2025160 Controls and Procedures 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 period161 - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls162 PART II. OTHER INFORMATION Legal Proceedings 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 statements164 Risk Factors 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 reported165 Unregistered Sales of Equity Securities and Use of Proceeds 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 program167 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 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 plans172 Exhibit Index 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