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Sonos Reports Third Quarter Fiscal 2023 Results

Sonos, Inc. (Nasdaq: SONO) today reported third quarter fiscal 2023 results.

Third Quarter 2023 Financial Highlights (unaudited)

  • Revenue increased 0.4% year-over-year to $373.4 million; on a constant-currency basis, revenue increased 0.3% year-over-year
  • Gross margin decreased 130 basis points year-over-year to 46.0%
  • GAAP net loss of $23.6 million compared to $0.6 million last year
    • GAAP net loss margin of 6.3% compared to 0.2% last year
    • GAAP diluted loss per share (EPS) of $0.18 compared to $0.00 last year
  • Non-GAAP net income1 of $21.3 million compared to $26.5 million last year
    • Non-GAAP diluted EPS1 of $0.16 compared to $0.19 last year
  • Adjusted EBITDA of $34.3 million compared to $42.1 million last year
    • Adjusted EBITDA margin of 9.2% compared to 11.3% last year
  • Free cash flow of ($7.8) million. Cash flows from operating activities of $8.9 million
    • Inventories of $298.1 million, decreased 8.6% from last quarter
    • Finished goods of $240.1 million, decreased 12.5% from last quarter

Notes: 1 Non-GAAP net income/earnings per share (EPS) exclude stock-based compensation, legal and transaction related fees, amortization of intangibles, and restructuring and abandonment costs. See “Use of Non-GAAP Measures” and reconciliations to GAAP measures below.

Sonos CEO Patrick Spence commented, “We are pleased to report third quarter revenue of $373.4 million and Adjusted EBITDA of $34.3 million. Despite the challenging environment, we are winning in the market and I’m proud of our team’s execution as we outperform the competition. We remain on track to deliver against our fiscal 2023 guidance.”

Mr. Spence continued, “While we have not yet seen conditions in our categories return to normal, we remain focused on ensuring Sonos can emerge from this period in a position of strength: we are profitable, we are debt free, and we have a huge market opportunity. In mid-June we made the difficult decision to reduce our workforce by 7% in order to protect profitability and allow us to invest in our exciting product roadmap to drive future growth. Continuing to innovate is critical to achieving our long-term potential and I have the utmost confidence in our ability to do so.”

Revised Fiscal 2023 Outlook

  • Revenue in the range of $1.64 billion to $1.66 billion, representing a decline of 6% to 5% from fiscal 2022, or a decline of 4% to 3% on a constant currency basis. This compares to a prior outlook range of $1.625 billion to $1.675 billion, which represented a decline of 7% to 4% from fiscal 2022
  • Gross margin in the range of 44.0% to 44.2%, compared to prior outlook range of 44.3% to 44.8%
  • Adjusted EBITDA in the range of $148 million to $158 million, compared to prior outlook range of $138 million to $168 million
  • Adjusted EBITDA margin of 9.0% to 9.5%, compared to prior outlook range of 8.5% to 10%

Supplemental Earnings Presentation

The company has posted a supplemental earnings presentation accompanying its third quarter fiscal 2023 results to the Earnings Reports section of its investor relations website at https://investors.sonos.com/reports-and-filings/default.aspx#section=earningsreports.

Conference Call, Webcast and Transcript

The company will host a webcast of its conference call and Q&A related to its third quarter fiscal 2023 results on August 9, 2023, at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time). Participants may access the live webcast in listen-only mode on the Sonos investor relations website at https://investors.sonos.com/news-and-events/default.aspx.

The conference call may also be accessed by dialing (888) 330-2454 with conference ID 8641747. Participants outside the U.S. can access the call by dialing (240) 789-2714 using the same conference ID.

An archived webcast of the conference call and a transcript of the company’s prepared remarks and Q&A session will also be available at https://investors.sonos.com/reports-and-filings/default.aspx#section=earningsreports following the call.

Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income

(unaudited, in thousands, except share and per share amounts)

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

July 1,

2023

 

July 2,

2022

 

July 1,

2023

 

July 2,

2022

Revenue

 

$

373,356

 

 

$

371,783

 

 

$

1,350,108

 

 

$

1,436,046

 

Cost of revenue

 

 

201,594

 

 

 

195,935

 

 

 

761,672

 

 

 

763,779

 

Gross profit

 

 

171,762

 

 

 

175,848

 

 

 

588,436

 

 

 

672,267

 

Operating expenses

 

 

 

 

 

 

 

 

Research and development

 

 

77,758

 

 

 

62,522

 

 

 

235,484

 

 

 

188,798

 

Sales and marketing

 

 

66,600

 

 

 

63,993

 

 

 

208,917

 

 

 

207,684

 

General and administrative

 

 

48,665

 

 

 

42,373

 

 

 

136,219

 

 

 

126,189

 

Total operating expenses

 

 

193,023

 

 

 

168,888

 

 

 

580,620

 

 

 

522,671

 

Operating (loss) income

 

 

(21,261

)

 

 

6,960

 

 

 

7,816

 

 

 

149,596

 

Other income (expense), net

 

 

 

 

 

 

 

 

Interest income

 

 

2,391

 

 

 

429

 

 

 

7,540

 

 

 

585

 

Interest expense

 

 

(274

)

 

 

(196

)

 

 

(585

)

 

 

(384

)

Other income (expense), net

 

 

1,424

 

 

 

(9,858

)

 

 

22,169

 

 

 

(13,541

)

Total other income (expense), net

 

 

3,541

 

 

 

(9,625

)

 

 

29,124

 

 

 

(13,340

)

(Loss) income before provision for (benefit from) income taxes

 

 

(17,720

)

 

 

(2,665

)

 

 

36,940

 

 

 

136,256

 

Provision for (benefit from) income taxes

 

 

5,851

 

 

 

(2,068

)

 

 

15,974

 

 

 

4,805

 

Net (loss) income

 

$

(23,571

)

 

$

(597

)

 

$

20,966

 

 

$

131,451

 

 

 

 

 

 

 

 

 

 

Net (loss) income attributable to common stockholders:

 

 

 

 

 

 

 

 

Basic and diluted

 

$

(23,571

)

 

$

(597

)

 

$

20,966

 

 

$

131,451

 

 

 

 

 

 

 

 

 

 

Net (loss) income per share attributable to common stockholders:

 

 

 

 

 

 

 

 

Basic

 

$

(0.18

)

 

$

 

 

$

0.16

 

 

$

1.03

 

Diluted

 

$

(0.18

)

 

$

 

 

$

0.16

 

 

$

0.94

 

 

 

 

 

 

 

 

 

 

Weighted-average shares used in computing net (loss) income per share attributable to common stockholders:

 

 

 

 

 

 

 

 

Basic

 

 

128,311,109

 

 

 

127,884,400

 

 

 

127,825,410

 

 

 

127,886,487

 

Diluted

 

 

128,311,109

 

 

 

127,884,400

 

 

 

132,851,379

 

 

 

139,502,527

 

 

 

 

 

 

 

 

 

 

Total comprehensive (loss) income

 

 

 

 

 

 

 

 

Net (loss) income

 

 

(23,571

)

 

 

(597

)

 

 

20,966

 

 

 

131,451

 

Change in foreign currency translation adjustment

 

 

802

 

 

 

(1,711

)

 

 

(1,882

)

 

 

(1,971

)

Comprehensive (loss) income

 

$

(22,769

)

 

$

(2,308

)

 

$

19,084

 

 

$

129,480

 

Condensed Consolidated Balance Sheets

(unaudited, in thousands, except par values)

 

 

As of

 

 

July 1,

2023

 

October 1,

2022

Assets

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

268,286

 

 

$

274,855

 

Accounts receivable, net of allowances

 

 

114,658

 

 

 

101,206

 

Inventories

 

 

298,146

 

 

 

454,288

 

Prepaids and other current assets

 

 

26,995

 

 

 

37,042

 

Total current assets

 

 

708,085

 

 

 

867,391

 

Property and equipment, net

 

 

94,154

 

 

 

86,168

 

Operating lease right-of-use assets

 

 

51,041

 

 

 

28,329

 

Goodwill

 

 

81,779

 

 

 

77,300

 

Intangible assets, net

 

 

 

 

In-process research and development

 

 

72,013

 

 

 

64,680

 

Other intangible assets

 

 

21,725

 

 

 

26,384

 

Deferred tax assets

 

 

1,437

 

 

 

1,508

 

Other noncurrent assets

 

 

34,989

 

 

 

36,628

 

Total assets

 

$

1,065,223

 

 

$

1,188,388

 

 

 

 

 

 

Liabilities and stockholders’ equity

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable

 

$

148,898

 

 

$

335,758

 

Accrued expenses

 

 

91,911

 

 

 

109,290

 

Accrued compensation

 

 

45,067

 

 

 

23,624

 

Deferred revenue, current

 

 

20,028

 

 

 

27,318

 

Other current liabilities

 

 

38,600

 

 

 

39,649

 

Total current liabilities

 

 

344,504

 

 

 

535,639

 

Operating lease liabilities, noncurrent

 

 

53,266

 

 

 

25,596

 

Deferred revenue, noncurrent

 

 

62,237

 

 

 

56,152

 

Deferred tax liabilities

 

 

12,066

 

 

 

9,642

 

Other noncurrent liabilities

 

 

2,940

 

 

 

846

 

Total liabilities

 

 

475,013

 

 

 

627,875

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

Stockholders’ equity:

 

 

 

 

Common stock, $0.001 par value

 

 

130

 

 

 

130

 

Treasury stock

 

 

(32,352

)

 

 

(50,896

)

Additional paid-in capital

 

 

609,460

 

 

 

617,390

 

Retained earnings (accumulated deficit)

 

 

18,451

 

 

 

(2,514

)

Accumulated other comprehensive loss

 

 

(5,479

)

 

 

(3,597

)

Total stockholders’ equity

 

 

590,210

 

 

 

560,513

 

Total liabilities and stockholders’ equity

 

$

1,065,223

 

 

$

1,188,388

 

Condensed Consolidated Statements of Cash Flows

(unaudited, in thousands)

 

 

Nine Months Ended

 

 

July 1,

2023

 

July 2,

2022

Cash flows from operating activities

 

 

 

 

Net income

 

$

20,966

 

 

$

131,451

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

Depreciation and amortization

 

 

35,054

 

 

 

27,699

 

Restructuring and abandonment charges

 

 

5,125

 

 

 

 

Stock-based compensation expense

 

 

59,549

 

 

 

57,463

 

Other

 

 

19,234

 

 

 

8,656

 

Deferred income taxes

 

 

1,569

 

 

 

(1,238

)

Foreign currency transaction (gains) losses

 

 

(12,698

)

 

 

4,437

 

Changes in operating assets and liabilities:

 

 

 

 

Accounts receivable

 

 

(13,934

)

 

 

(28,476

)

Inventories

 

 

141,054

 

 

 

(158,129

)

Other assets

 

 

9,375

 

 

 

(1,587

)

Accounts payable and accrued expenses

 

 

(204,012

)

 

 

97,421

 

Accrued compensation

 

 

20,640

 

 

 

(49,769

)

Deferred revenue

 

 

(4,093

)

 

 

(10,958

)

Other liabilities

 

 

382

 

 

 

(1,313

)

Net cash provided by operating activities

 

 

78,211

 

 

 

75,657

 

Cash flows from investing activities

 

 

 

 

Purchases of property and equipment, and intangible assets

 

 

(40,085

)

 

 

(24,946

)

Cash paid for acquisitions, net of acquired cash

 

 

 

 

 

(126,416

)

Net cash used in investing activities

 

 

(40,085

)

 

 

(151,362

)

Cash flows from financing activities

 

 

 

 

Payments for debt issuance costs

 

 

 

 

 

(929

)

Payments for repurchase of common stock

 

 

(45,063

)

 

 

(117,093

)

Proceeds from exercise of common stock options

 

 

20,042

 

 

 

37,257

 

Payments for repurchase of common stock related to shares withheld for tax in connection with vesting of stock awards

 

 

(23,914

)

 

 

(33,412

)

Net cash used in financing activities

 

 

(48,935

)

 

 

(114,177

)

Effect of exchange rate changes on cash and cash equivalents

 

 

4,240

 

 

 

(10,493

)

Net decrease in cash and cash equivalents

 

 

(6,569

)

 

 

(200,375

)

Cash and cash equivalents

 

 

 

 

Beginning of period

 

 

274,855

 

 

 

640,101

 

End of period

 

$

268,286

 

 

$

439,726

 

Supplemental disclosure

 

 

 

 

Cash paid for interest

 

$

780

 

 

$

223

 

Cash paid for taxes, net of refunds

 

$

5,217

 

 

$

8,862

 

Cash paid for amounts included in the measurement of lease liabilities

 

$

10,599

 

 

$

11,185

 

Supplemental disclosure of non-cash investing and financing activities

 

 

 

 

Purchases of property and equipment in accounts payable and accrued expenses

 

$

7,129

 

 

$

10,937

 

Right-of-use assets obtained in exchange for new operating lease liabilities

 

$

31,547

 

 

$

2,141

 

Change in estimate of asset retirement obligations

 

$

2,185

 

 

$

 

Reconciliation of Selected Non-GAAP Financial Measures

(unaudited, dollars in thousands)

 

 

Three Months Ended

 

Nine Months Ended

 

 

July 1,

2023

 

July 2,

2022

 

July 1,

2023

 

July 2,

2022

Research and Development (GAAP)

 

$

77,758

 

 

$

62,522

 

$

235,484

 

$

188,798

Stock-based compensation

 

 

8,637

 

 

 

7,858

 

 

27,353

 

 

22,687

Amortization of intangibles

 

 

496

 

 

 

641

 

 

1,487

 

 

2,449

Restructuring and abandonment costs

 

 

3,686

 

 

 

-

 

 

6,368

 

 

-

Research and Development (Non-GAAP)

 

$

64,939

 

 

$

54,023

 

$

200,276

 

$

163,662

 

 

 

 

 

 

 

 

 

Sales and Marketing (GAAP)

 

$

66,600

 

 

$

63,993

 

$

208,917

 

$

207,684

Stock-based compensation

 

 

3,590

 

 

 

3,826

 

 

12,178

 

 

11,650

Restructuring and abandonment costs

 

 

4,422

 

 

 

-

 

 

5,455

 

 

-

Sales and Marketing (Non-GAAP)

 

$

58,588

 

 

$

60,167

 

$

191,284

 

$

196,034

 

 

 

 

 

 

 

 

 

General and Administrative (GAAP)

 

 

48,665

 

 

 

42,373

 

 

136,219

 

 

126,189

Stock-based compensation

 

 

5,652

 

 

 

6,647

 

 

18,417

 

 

21,973

Legal and transaction related costs

 

 

14,699

 

 

 

7,459

 

 

30,006

 

 

17,344

Amortization of intangibles

 

 

24

 

 

 

24

 

 

72

 

 

72

Restructuring and abandonment costs

 

 

2,220

 

 

 

-

 

 

3,352

 

 

-

Adjusted General and Administrative (Non-GAAP)

 

$

26,070

 

 

$

28,243

 

$

84,372

 

$

86,800

 

 

 

 

 

 

 

 

 

Total Operating Expenses (GAAP)

 

$

193,023

 

 

$

168,888

 

$

580,620

 

$

522,671

Stock-based compensation

 

 

17,879

 

 

 

18,331

 

 

57,948

 

 

56,310

Legal and transaction related costs

 

 

14,699

 

 

 

7,459

 

 

30,006

 

 

17,344

Amortization of intangibles

 

 

520

 

 

 

665

 

 

1,559

 

 

2,521

Restructuring and abandonment costs

 

 

10,328

 

 

 

-

 

 

15,175

 

 

-

Adjusted Operating Expenses (Non-GAAP)

 

$

149,597

 

 

$

142,433

 

$

475,932

 

$

446,496

 

 

 

 

 

 

 

 

 

Total Operating Income (GAAP)

 

$

(21,261

)

 

$

6,960

 

$

7,816

 

$

149,596

Stock-based compensation

 

 

18,329

 

 

 

18,779

 

 

59,549

 

 

57,463

Legal and transaction related costs

 

 

14,699

 

 

 

7,459

 

 

30,006

 

 

17,344

Amortization of intangibles

 

 

1,493

 

 

 

878

 

 

4,690

 

 

3,162

Restructuring and abandonment costs

 

 

10,328

 

 

 

-

 

 

15,175

 

 

-

Adjusted Operating Income (Non-GAAP)

 

$

23,588

 

 

$

34,076

 

$

117,236

 

$

227,565

Depreciation

 

 

10,716

 

 

 

8,029

 

 

30,364

 

 

24,537

Adjusted EBITDA (Non-GAAP)

 

$

34,304

 

 

$

42,105

 

$

147,600

 

$

252,102

Reconciliation of Net (Loss) Income to Adjusted EBITDA

(unaudited, dollars in thousands except percentages)

 

 

Three Months Ended

 

Nine Months Ended

 

 

July 1,

2023

 

July 2,

2022

 

July 1,

2023

 

July 2,

2022

(In thousands, except percentages)

 

 

 

 

 

 

 

 

Net (loss) income

 

$

(23,571

)

 

$

(597

)

 

$

20,966

 

 

$

131,451

 

Add (deduct):

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

12,209

 

 

 

8,907

 

 

 

35,054

 

 

 

27,699

 

Stock-based compensation expense

 

 

18,329

 

 

 

18,779

 

 

 

59,549

 

 

 

57,463

 

Interest income

 

 

(2,391

)

 

 

(429

)

 

 

(7,540

)

 

 

(585

)

Interest expense

 

 

274

 

 

 

196

 

 

 

585

 

 

 

384

 

Other (income) expense, net

 

 

(1,424

)

 

 

9,858

 

 

 

(22,169

)

 

 

13,541

 

Provision for (benefit from) income taxes

 

 

5,851

 

 

 

(2,068

)

 

 

15,974

 

 

 

4,805

 

Legal and transaction related costs (1)

 

 

14,699

 

 

 

7,459

 

 

 

30,006

 

 

 

17,344

 

Restructuring and abandonment costs (2)

 

 

10,328

 

 

 

-

 

 

 

15,175

 

 

 

-

 

Adjusted EBITDA

 

$

34,304

 

 

$

42,105

 

 

$

147,600

 

 

$

252,102

 

Revenue

 

$

373,356

 

 

$

371,783

 

 

$

1,350,108

 

 

$

1,436,046

 

Net (loss) income margin

 

 

(6.3

)%

 

 

(0.2

)%

 

 

1.6

%

 

 

9.2

%

Adjusted EBITDA margin

 

 

9.2

%

 

 

11.3

%

 

 

10.9

%

 

 

17.6

%

(1) Legal and transaction-related costs consist of expenses related to our intellectual property ("IP") litigation against Alphabet and Google, as well as legal and transaction costs associated with our acquisition activity, which we do not consider representative of our underlying operating performance.

(2) On June 14, 2023, the Company initiated a restructuring plan to reduce its cost base (the “2023 restructuring plan”). The 2023 restructuring plan included a reduction in force involving approximately 7% of its employees, further reducing the Company’s real estate footprint, and re-evaluating certain program spend. Total pre-tax restructuring and abandonment costs under the 2023 restructuring plan were $11.4 million, substantially all of which were incurred in the third quarter of fiscal 2023, with nominal amounts to be incurred through the first quarter of fiscal 2024. Total restructuring and abandonment costs for the nine months ended July 1, 2023, include $4.8 million non-recurring lease abandonment charges that were incurred in March 2023, when the Company abandoned portions of its office spaces for the remainder of their respective lease terms in support of operational efficiencies.

 

Reconciliation of GAAP Net (Loss) Income to Non-GAAP Net Income

(unaudited, in thousands, except share and per share amounts)

 

 

Three Months Ended

 

Nine Months Ended

 

 

July 1,

2023

 

July 2,

2022

 

July 1,

2023

 

July 2,

2022

Reconciliation of GAAP net (loss) income

 

 

 

 

 

 

 

 

GAAP net (loss) income

 

$

(23,571

)

 

$

(597

)

 

$

20,966

 

$

131,451

Stock-based compensation expense

 

 

18,329

 

 

 

18,779

 

 

 

59,549

 

 

57,463

Legal and transaction related costs

 

 

14,699

 

 

 

7,459

 

 

 

30,006

 

 

17,344

Amortization of intangibles

 

 

1,493

 

 

 

878

 

 

 

4,690

 

 

3,162

Restructuring and abandonment costs

 

 

10,328

 

 

 

-

 

 

 

15,175

 

 

-

Non-GAAP net income

 

$

21,278

 

 

$

26,519

 

 

$

130,386

 

$

209,420

 

 

 

 

 

 

 

 

 

Reconciliation of net (loss) income per share

 

 

 

 

 

 

 

 

GAAP net (loss) income per share, diluted

 

$

(0.18

)

 

$

-

 

 

$

0.16

 

$

0.94

Non-GAAP adjustments to net (loss) income per share

 

 

0.34

 

 

 

0.19

 

 

 

0.82

 

 

0.56

Non-GAAP net income per share, diluted

 

$

0.16

 

 

$

0.19

 

 

$

0.98

 

$

1.50

Weighted-average shares used in GAAP and non-GAAP per share calculation, diluted

 

 

132,885,945

 

 

 

136,542,565

 

 

 

132,851,379

 

 

139,502,527

Note: Certain figures may not sum due to rounding

 

 

 

 

 

 

 

 

Reconciliation of Cash Flows Provided by (Used in) Operating Activities to Free Cash Flow

(unaudited, dollars in thousands)

 

 

Three Months Ended

 

Nine Months Ended

 

 

July 1,

2023

 

July 2,

2022

 

July 1,

2023

 

July 2,

2022

Cash flows provided by (used in) operating activities

 

$

8,887

 

 

$

(6,717

)

 

$

78,211

 

 

$

75,657

 

Less: Purchases of property and equipment, and intangible assets

 

 

(16,682

)

 

 

(9,281

)

 

 

(40,085

)

 

 

(24,946

)

Free cash flow

 

$

(7,795

)

 

$

(15,998

)

 

$

38,126

 

 

$

50,711

 

Revenue by Product Category

(unaudited, dollars in thousands)

 

 

Three Months Ended

 

Nine Months Ended

 

 

July 1,

2023

 

July 2,

2022

 

July 1,

2023

 

July 2,

2022

(In thousands)

 

 

 

 

 

 

 

 

Sonos speakers

 

$

289,740

 

$

314,205

 

$

1,070,117

 

$

1,133,825

Sonos system products

 

 

64,224

 

 

38,363

 

 

222,748

 

 

234,328

Partner products and other revenue

 

 

19,392

 

 

19,215

 

 

57,243

 

 

67,893

Total revenue

 

$

373,356

 

$

371,783

 

$

1,350,108

 

$

1,436,046

Revenue by Geographical Region

(unaudited, dollars in thousands)

 

 

Three Months Ended

 

Nine Months Ended

 

 

July 1,

2023

 

July 2,

2022

 

July 1,

2023

 

July 2,

2022

Americas

 

$

251,616

 

$

232,421

 

$

844,714

 

$

844,099

Europe, Middle East and Africa

 

 

105,312

 

 

112,684

 

 

434,806

 

 

486,473

Asia Pacific

 

 

16,428

 

 

26,678

 

 

70,588

 

 

105,474

Total revenue

 

$

373,356

 

$

371,783

 

$

1,350,108

 

$

1,436,046

Stock-based Compensation

(unaudited, dollars in thousands)

 

 

Three Months Ended

 

Nine Months Ended

 

 

July 1,

2023

 

July 2,

2022

 

July 1,

2023

 

July 2,

2022

(In thousands)

 

 

 

 

 

 

 

 

Cost of revenue

 

$

450

 

$

448

 

$

1,601

 

$

1,153

Research and development

 

 

8,637

 

 

7,858

 

 

27,353

 

 

22,687

Sales and marketing

 

 

3,590

 

 

3,826

 

 

12,178

 

 

11,650

General and administrative

 

 

5,652

 

 

6,647

 

 

18,417

 

 

21,973

Total stock-based compensation expense

 

$

18,329

 

$

18,779

 

$

59,549

 

$

57,463

Amortization of Intangibles

(unaudited, dollars in thousands)

 

 

Three Months Ended

 

Nine Months Ended

 

 

July 1,

2023

 

July 2,

2022

 

July 1,

2023

 

July 2,

2022

Cost of revenue

 

$

973

 

$

213

 

$

3,131

 

$

641

Research and development

 

 

496

 

 

641

 

 

1,487

 

 

2,449

Sales and marketing

 

 

-

 

 

-

 

 

-

 

 

-

General and administrative

 

 

24

 

 

24

 

 

72

 

 

72

Total amortization of intangibles

 

$

1,493

 

$

878

 

$

4,690

 

$

3,162

Use of Non-GAAP Measures

We have provided in this press release financial information that has not been prepared in accordance with generally accepted accounting principles (“U.S. GAAP”), including adjusted EBITDA, adjusted EBITDA margin, free cash flow, net income excluding stock-based compensation, legal and transaction related fees, amortization of intangibles, and restructuring and abandonment costs and diluted earnings per share excluding stock-based compensation, legal and transaction related fees, amortization of intangibles and restructuring and abandonment costs. These non-GAAP financial measures are not based on any standardized methodology prescribed by U.S. GAAP and are not necessarily comparable to similarly titled measures presented by other companies. We use these non-GAAP financial measures to evaluate our operating performance and trends and make planning decisions. We believe that these non-GAAP financial measures help identify underlying trends in our business that could otherwise be masked by the effect of the expenses and other items that we exclude in these non-GAAP financial measures. Accordingly, we believe that these non-GAAP financial measures provide useful information to investors and others in understanding and evaluating our operating results, enhancing the overall understanding of our past performance and future prospects and allowing for greater transparency with respect to a key financial metric used by our management in its financial and operational decision-making. Non-GAAP financial measures should not be considered in isolation of, or as an alternative to, measures prepared in accordance with U.S. GAAP. Investors are encouraged to review the reconciliation of these financial measures to their nearest U.S. GAAP financial equivalents provided in the financial statement tables above. We define adjusted EBITDA as net income (loss) adjusted to exclude the impact of depreciation and amortization, stock-based compensation expense, interest income, interest expense, other income (expense), income taxes, restructuring and abandonment costs and other items that we do not consider representative of our underlying operating performance. We define adjusted EBITDA margin as adjusted EBITDA divided by revenue. We define free cash flow as net cash from operations less purchases of property and equipment and intangible and other assets. We calculate non-GAAP net income excluding stock-based compensation, legal and transaction related fees, amortization of intangibles and restructuring and abandonment costs as net income (loss) less stock-based compensation, legal and transaction related fees, amortization of intangibles and restructuring and abandonment costs. We calculate non-GAAP diluted earnings per share excluding stock-based compensation, legal and transaction related fees, amortization of intangibles and restructuring and abandonment costs as net income less stock-based compensation, legal and transaction related fees, amortization of intangibles and restructuring and abandonment costs divided by our number of shares at fiscal year end. We calculate constant currency growth percentages by translating our current period financial results using the prior period average currency exchange rates and comparing these amounts to our prior period reported results. We do not provide a reconciliation of forward-looking non-GAAP financial measures to their comparable GAAP financial measures because we cannot do so without unreasonable effort due to unavailability of information needed to calculate reconciling items and due to the variability, complexity and limited visibility of the adjusting items that would be excluded from the non-GAAP financial measures in future periods. When planning, forecasting and analyzing future periods, we do so primarily on a non-GAAP basis without preparing a GAAP analysis as that would require estimates for items such as stock-based compensation, which is inherently difficult to predict with reasonable accuracy. Stock-based compensation expense is difficult to estimate because it depends on our future hiring and retention needs, as well as the future fair market value of our common stock, all of which are difficult to predict and subject to constant change. In addition, for purposes of setting annual guidance, it would be difficult to quantify stock-based compensation expense for the year with reasonable accuracy in the current quarter. As a result, we do not believe that a GAAP reconciliation would provide meaningful supplemental information about our outlook.

Forward Looking Statements

This press release contains forward-looking statements that involve risks and uncertainties. These forward-looking statements include statements regarding our outlook for the fiscal year ending September 30, 2023, our long-term outlook, our long-term focus, financial, growth and business strategies and opportunities, growth metrics and targets, our business model, new products and services, our product roadmap, profitability and gross margins, market growth and our market share, the macroeconomic environment and our ability to weather it, and other factors affecting variability in our financial results. These forward-looking statements are only predictions and may differ materially from actual results due to a variety of factors, including, but not limited to the duration and impact of the COVID-19 pandemic and related mitigation efforts on our industry and our supply chain; supply chain challenges, including shipping and logistics challenges and component supply-related challenges; our ability to accurately forecast product demand and effectively forecast and manage owned and channel inventory levels; the impact of global economic, market and political events, including broad economic uncertainty, foreign currency exchange fluctuations and inflation; changes in consumer income and overall consumer spending as a result of economic or political uncertainty; changes in consumer spending patterns; our ability to successfully introduce new products and services and maintain or expand the success of our existing products; the success of our efforts to expand our direct-to-consumer channel; the success of our financial, growth and business strategies; our ability to meet product demand and manage any product availability delays; and the other risk factors set forth under the caption “Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended April 1, 2023 and our other filings filed with the Securities and Exchange Commission (the “SEC”), copies of which are available free of charge at the SEC’s website at www.sec.gov or upon request from our investor relations department. All forward-looking statements herein reflect our opinions only as of the date of this press release, and we undertake no obligation, and expressly disclaim any obligation, to update forward-looking statements herein in light of new information or future events. Sonos and Sonos product names are trademarks or registered trademarks of Sonos, Inc. All other product names and services may be trademarks or service marks of their respective owners.

About Sonos

Sonos (Nasdaq: SONO) is one of the world’s leading sound experience brands. As the inventor of multi-room wireless home audio, Sonos’ innovation helps the world listen better by giving people access to the content they love and allowing them to control it however they choose. Known for delivering an unparalleled sound experience, thoughtful home design aesthetic, simplicity of use and an open platform, Sonos makes the breadth of audio content available to anyone. Sonos is headquartered in Santa Barbara, California. Learn more at www.sonos.com.

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