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Sonos Reports Third Quarter Fiscal 2024 Results

Sonos, Inc. (Nasdaq: SONO) today reported third quarter fiscal 2024 results.

“Thanks to Ace, our long-awaited entry into headphones, we reported year over year revenue growth and delivered results that slightly exceeded our expectations in our third quarter,” Sonos CEO Patrick Spence commented. “This was overshadowed by the problems that our customers and partners experienced as a result of the rollout of our new app, which in turn has required us to reduce our Fiscal 2024 guidance. We have a clear action plan to address the issues caused by our app as quickly as possible. While our app setback is regrettable, it is one chapter in our over twenty years of delighting customers. I speak for everyone at Sonos when I say that our #1 priority is to make this right and ensure that the next chapter is even better than the previous ones.”

Third Quarter Fiscal 2024 Financial Highlights (unaudited)

  • Revenue of $397.1 million
  • Gross margin of 48.3%
  • GAAP net income of $3.7 million, GAAP diluted earnings per share (EPS) of $0.03
  • Non-GAAP net income1 of $29.5 million, Non-GAAP diluted EPS1 of $0.23
  • Adjusted EBITDA1 of $48.9 million

Notes:

(1) Non-GAAP net income/Non-GAAP diluted earnings per share (EPS) and Adjusted EBITDA 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.

Fiscal 2024 Outlook

The company will provide its Fiscal 2024 outlook on its third quarter fiscal 2024 earnings call.

Supplemental Earnings Presentation

Following the earnings call, the company will post a supplemental earnings presentation regarding its third quarter fiscal 2024 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 2024 results on August 7, 2024, 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.

Consolidated Statements of Operations and Comprehensive (Loss) Income

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

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

June 29,

2024

 

July 1,

2023

 

June 29,

2024

 

July 1,

2023

Revenue

 

$

397,146

 

 

$

373,356

 

 

$

1,262,676

 

 

$

1,350,108

 

Cost of revenue

 

 

205,505

 

 

 

201,594

 

 

 

676,320

 

 

 

761,672

 

Gross profit

 

 

191,641

 

 

 

171,762

 

 

 

586,356

 

 

 

588,436

 

Operating expenses

 

 

 

 

 

 

 

 

Research and development

 

 

74,223

 

 

 

77,758

 

 

 

233,780

 

 

 

235,484

 

Sales and marketing

 

 

71,643

 

 

 

66,600

 

 

 

217,428

 

 

 

208,917

 

General and administrative

 

 

33,186

 

 

 

48,665

 

 

 

113,825

 

 

 

136,219

 

Total operating expenses

 

 

179,052

 

 

 

193,023

 

 

 

565,033

 

 

 

580,620

 

Operating income (loss)

 

 

12,589

 

 

 

(21,261

)

 

 

21,323

 

 

 

7,816

 

Other income, net

 

 

 

 

 

 

 

 

Interest income

 

 

2,629

 

 

 

2,391

 

 

 

9,638

 

 

 

7,540

 

Interest expense

 

 

(106

)

 

 

(274

)

 

 

(333

)

 

 

(585

)

Other (loss) income, net

 

 

(2,464

)

 

 

1,424

 

 

 

4,507

 

 

 

22,169

 

Total other income, net

 

 

59

 

 

 

3,541

 

 

 

13,812

 

 

 

29,124

 

Income (loss) before provision for income taxes

 

 

12,648

 

 

 

(17,720

)

 

 

35,135

 

 

 

36,940

 

Provision for income taxes

 

 

8,939

 

 

 

5,851

 

 

 

20,188

 

 

 

15,974

 

Net income (loss)

 

$

3,709

 

 

$

(23,571

)

 

$

14,947

 

 

$

20,966

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to common stockholders:

 

 

 

 

 

 

 

 

Basic and diluted

 

$

3,709

 

 

$

(23,571

)

 

$

14,947

 

 

$

20,966

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

Basic

 

$

0.03

 

 

$

(0.18

)

 

$

0.12

 

 

$

0.16

 

Diluted

 

$

0.03

 

 

$

(0.18

)

 

$

0.12

 

 

$

0.16

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

Basic

 

 

122,553,129

 

 

 

128,311,109

 

 

 

123,828,150

 

 

 

127,825,410

 

Diluted

 

 

127,245,459

 

 

 

128,311,109

 

 

 

127,886,368

 

 

 

132,851,379

 

 

 

 

 

 

 

 

 

 

Total comprehensive income (loss)

 

 

 

 

 

 

 

 

Net income (loss)

 

 

3,709

 

 

 

(23,571

)

 

 

14,947

 

 

 

20,966

 

Change in foreign currency translation adjustment

 

 

681

 

 

 

802

 

 

 

(267

)

 

 

(1,882

)

Net unrealized loss on marketable securities

 

 

(6

)

 

 

 

 

 

(32

)

 

 

 

Comprehensive income (loss)

 

$

4,384

 

 

$

(22,769

)

 

$

14,648

 

 

$

19,084

 

Consolidated Balance Sheets

(unaudited, in thousands, except par values)

 

 

As of

 

 

June 29,

2024

 

September 30,

2023

Assets

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

227,114

 

 

$

220,231

 

Marketable securities

 

 

49,515

 

 

 

-

 

Accounts receivable, net

 

 

131,581

 

 

 

67,583

 

Inventories

 

 

154,903

 

 

 

346,521

 

Prepaids and other current assets

 

 

41,343

 

 

 

25,296

 

Total current assets

 

 

604,456

 

 

 

659,631

 

Property and equipment, net

 

 

103,123

 

 

 

87,075

 

Operating lease right-of-use assets

 

 

53,030

 

 

 

48,918

 

Goodwill

 

 

80,980

 

 

 

80,420

 

Intangible assets, net

 

 

 

 

In-process research and development

 

 

70,706

 

 

 

69,791

 

Other intangible assets

 

 

15,748

 

 

 

20,218

 

Deferred tax assets

 

 

1,640

 

 

 

1,659

 

Other noncurrent assets

 

 

31,422

 

 

 

34,529

 

Total assets

 

$

961,105

 

 

$

1,002,241

 

 

 

 

 

 

Liabilities and stockholders’ equity

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable

 

$

179,327

 

 

$

187,981

 

Accrued expenses

 

 

88,958

 

 

 

89,717

 

Accrued compensation

 

 

33,059

 

 

 

22,079

 

Deferred revenue, current

 

 

20,796

 

 

 

20,188

 

Other current liabilities

 

 

44,741

 

 

 

34,253

 

Total current liabilities

 

 

366,881

 

 

 

354,218

 

Operating lease liabilities, noncurrent

 

 

53,050

 

 

 

54,956

 

Deferred revenue, noncurrent

 

 

62,190

 

 

 

60,650

 

Deferred tax liabilities

 

 

10,735

 

 

 

9,846

 

Other noncurrent liabilities

 

 

3,858

 

 

 

3,914

 

Total liabilities

 

 

496,714

 

 

 

483,584

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

Stockholders’ equity:

 

 

 

 

Common stock, $0.001 par value

 

 

126

 

 

 

130

 

Treasury stock

 

 

(72,323

)

 

 

(72,586

)

Additional paid-in capital

 

 

538,172

 

 

 

607,345

 

Retained earnings (accumulated deficit)

 

 

2,159

 

 

 

(12,788

)

Accumulated other comprehensive loss

 

 

(3,743

)

 

 

(3,444

)

Total stockholders’ equity

 

 

464,391

 

 

 

518,657

 

Total liabilities and stockholders’ equity

 

$

961,105

 

 

$

1,002,241

 

Consolidated Statements of Cash Flows

(unaudited, dollars in thousands)

 

 

Nine Months Ended

 

 

June 29,

2024

 

July 1,

2023

Cash flows from operating activities

 

 

 

 

Net income

 

$

14,947

 

 

$

20,966

 

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

 

 

 

 

Stock-based compensation expense

 

 

64,961

 

 

 

59,549

 

Depreciation and amortization

 

 

35,154

 

 

 

35,054

 

Provision for inventory obsolescence

 

 

2,005

 

 

 

14,964

 

Restructuring and abandonment charges

 

 

266

 

 

 

5,125

 

Deferred income taxes

 

 

819

 

 

 

1,569

 

Other

 

 

2,973

 

 

 

4,270

 

Foreign currency transaction gains

 

 

(2,750

)

 

 

(12,698

)

Changes in operating assets and liabilities:

 

 

 

 

Accounts receivable

 

 

(64,218

)

 

 

(13,934

)

Inventories

 

 

189,613

 

 

 

141,054

 

Other assets

 

 

(15,285

)

 

 

9,375

 

Accounts payable and accrued expenses

 

 

(16,942

)

 

 

(204,012

)

Accrued compensation

 

 

10,251

 

 

 

20,640

 

Deferred revenue

 

 

1,685

 

 

 

(4,093

)

Other liabilities

 

 

4,161

 

 

 

382

 

Net cash provided by operating activities

 

 

227,640

 

 

 

78,211

 

Cash flows from investing activities

 

 

 

 

Purchases of marketable securities

 

 

(68,676

)

 

 

 

Purchases of property and equipment

 

 

(39,477

)

 

 

(40,085

)

Maturities of marketable securities

 

 

20,000

 

 

 

 

Net cash used in investing activities

 

 

(88,153

)

 

 

(40,085

)

Cash flows from financing activities

 

 

 

 

Payments for repurchase of common stock

 

 

(128,739

)

 

 

(45,063

)

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

 

 

(20,757

)

 

 

(23,914

)

Proceeds from exercise of stock options

 

 

16,312

 

 

 

20,042

 

Net cash used in financing activities

 

 

(133,184

)

 

 

(48,935

)

Effect of exchange rate changes on cash and cash equivalents

 

 

580

 

 

 

4,240

 

Net increase in cash and cash equivalents

 

 

6,883

 

 

 

(6,569

)

Cash and cash equivalents

 

 

 

 

Beginning of period

 

 

220,231

 

 

 

274,855

 

End of period

 

$

227,114

 

 

$

268,286

 

Supplemental disclosure

 

 

 

 

Cash paid for interest

 

$

195

 

 

$

780

 

Cash paid for taxes, net of refunds

 

$

17,134

 

 

$

5,217

 

Cash paid for amounts included in the measurement of lease liabilities

 

$

9,637

 

 

$

10,599

 

Supplemental disclosure of non-cash investing and financing activities

 

 

 

 

Purchases of property and equipment in accounts payable and accrued expenses

 

$

9,910

 

 

$

7,129

 

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

 

$

11,277

 

 

$

31,547

 

Change in estimate of asset retirement obligations

 

$

 

 

$

2,185

 

Reconciliation of GAAP to Non-GAAP Cost of Revenue and Gross Profit

(unaudited, in thousands, except percentages)

 

 

Three Months Ended

 

Nine Months Ended

 

 

June 29,

2024

 

July 1,

2023

 

June 29,

2024

 

July 1,

2023

Reconciliation of GAAP cost of revenue

 

 

 

 

 

 

 

 

GAAP cost of revenue

 

$

205,505

 

 

$

201,594

 

 

$

676,320

 

 

$

761,672

 

Stock-based compensation expense

 

 

655

 

 

 

450

 

 

 

1,995

 

 

 

1,601

 

Amortization of intangibles

 

 

973

 

 

 

973

 

 

 

2,918

 

 

 

3,131

 

Non-GAAP cost of revenue

 

$

203,877

 

 

$

200,171

 

 

$

671,407

 

 

$

756,940

 

 

 

 

 

 

 

 

 

 

Reconciliation of GAAP gross profit

 

 

 

 

 

 

 

 

GAAP gross profit

 

$

191,641

 

 

$

171,762

 

 

$

586,356

 

 

$

588,436

 

Stock-based compensation expense

 

 

655

 

 

 

450

 

 

 

1,995

 

 

 

1,601

 

Amortization of intangibles

 

 

973

 

 

 

973

 

 

 

2,918

 

 

 

3,131

 

Non-GAAP gross profit

 

$

193,269

 

 

$

173,185

 

 

$

591,269

 

 

$

593,168

 

 

 

 

 

 

 

 

 

 

GAAP gross margin

 

 

48.3

%

 

 

46.0

%

 

 

46.4

%

 

 

43.6

%

Non-GAAP gross margin

 

 

48.7

%

 

 

46.4

%

 

 

46.8

%

 

 

43.9

%

Reconciliation of Selected Non-GAAP Financial Measures

(unaudited, dollars in thousands)

 

 

Three Months Ended

 

Nine Months Ended

 

 

June 29,

2024

 

July 1,

2023

 

June 29,

2024

 

July 1,

2023

Research and Development (GAAP)

 

$

74,223

 

 

$

77,758

 

 

$

233,780

 

 

$

235,484

 

Stock-based compensation

 

 

9,735

 

 

 

8,637

 

 

 

29,133

 

 

 

27,353

 

Amortization of intangibles

 

 

496

 

 

 

496

 

 

 

1,488

 

 

 

1,487

 

Restructuring and abandonment costs

 

 

478

 

 

 

3,686

 

 

 

801

 

 

 

6,368

 

Research and Development (Non-GAAP)

 

$

63,514

 

 

$

64,939

 

 

$

202,358

 

 

$

200,276

 

 

 

 

 

 

 

 

 

 

Sales and Marketing (GAAP)

 

$

71,643

 

 

$

66,600

 

 

$

217,428

 

 

$

208,917

 

Stock-based compensation

 

 

4,510

 

 

 

3,590

 

 

 

13,297

 

 

 

12,178

 

Amortization of intangibles

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Restructuring and abandonment costs

 

 

185

 

 

 

4,422

 

 

 

297

 

 

 

5,455

 

Sales and Marketing (Non-GAAP)

 

$

66,948

 

 

$

58,588

 

 

$

203,834

 

 

$

191,284

 

 

 

 

 

 

 

 

 

 

General and Administrative (GAAP)

 

 

33,186

 

 

 

48,665

 

 

 

113,825

 

 

 

136,219

 

Stock-based compensation

 

 

7,030

 

 

 

5,652

 

 

 

20,536

 

 

 

18,417

 

Legal and transaction related costs

 

 

1,062

 

 

 

14,699

 

 

 

7,202

 

 

 

30,006

 

Amortization of intangibles

 

 

24

 

 

 

24

 

 

 

72

 

 

 

72

 

Restructuring and abandonment costs

 

 

630

 

 

 

2,220

 

 

 

768

 

 

 

3,352

 

Adjusted General and Administrative (Non-GAAP)

 

$

24,440

 

 

$

26,070

 

 

$

85,247

 

 

$

84,372

 

 

 

 

 

 

 

 

 

 

Total Operating Expenses (GAAP)

 

$

179,052

 

 

$

193,023

 

 

$

565,033

 

 

$

580,620

 

Stock-based compensation

 

 

21,275

 

 

 

17,879

 

 

 

62,966

 

 

 

57,948

 

Legal and transaction related costs

 

 

1,062

 

 

 

14,699

 

 

 

7,202

 

 

 

30,006

 

Amortization of intangibles

 

 

520

 

 

 

520

 

 

 

1,560

 

 

 

1,559

 

Restructuring and abandonment costs

 

 

1,293

 

 

 

10,328

 

 

 

1,866

 

 

 

15,175

 

Adjusted Operating Expenses (Non-GAAP)

 

$

154,902

 

 

$

149,597

 

 

$

491,439

 

 

$

475,932

 

 

 

 

 

 

 

 

 

 

Total Operating (Loss) Income (GAAP)

 

$

12,589

 

 

$

(21,261

)

 

$

21,323

 

 

$

7,816

 

Stock-based compensation

 

 

21,930

 

 

 

18,329

 

 

 

64,961

 

 

 

59,549

 

Legal and transaction related costs

 

 

1,062

 

 

 

14,699

 

 

 

7,202

 

 

 

30,006

 

Amortization of intangibles

 

 

1,493

 

 

 

1,493

 

 

 

4,478

 

 

 

4,690

 

Restructuring and abandonment costs

 

 

1,293

 

 

 

10,328

 

 

 

1,866

 

 

 

15,175

 

Adjusted Operating Income (Non-GAAP)

 

$

38,367

 

 

$

23,588

 

 

$

99,830

 

 

$

117,236

 

Depreciation

 

 

10,539

 

 

 

10,716

 

 

 

30,676

 

 

 

30,364

 

Adjusted EBITDA (Non-GAAP)

 

$

48,906

 

$

34,304

 

 

$

130,506

 

$

147,600

Reconciliation of Net Income (Loss) to Adjusted EBITDA

 

 

 

 

(unaudited, dollars in thousands except percentages)

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

June 29,

2024

 

July 1,

2023

 

June 29,

2024

 

July 1,

2023

(In thousands, except percentages)

 

 

 

 

 

 

 

 

Net income (loss)

 

$

3,709

 

 

$

(23,571

)

 

$

14,947

 

 

$

20,966

 

Add (deduct):

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

12,032

 

 

 

12,209

 

 

 

35,154

 

 

 

35,054

 

Stock-based compensation expense

 

 

21,930

 

 

 

18,329

 

 

 

64,961

 

 

 

59,549

 

Interest income

 

 

(2,629

)

 

 

(2,391

)

 

 

(9,638

)

 

 

(7,540

)

Interest expense

 

 

106

 

 

 

274

 

 

 

333

 

 

 

585

 

Other expense (income), net

 

 

2,464

 

 

 

(1,424

)

 

 

(4,507

)

 

 

(22,169

)

Provision for income taxes

 

 

8,939

 

 

 

5,851

 

 

 

20,188

 

 

 

15,974

 

Legal and transaction related costs (1)

 

 

1,062

 

 

 

14,699

 

 

 

7,202

 

 

 

30,006

 

Restructuring and abandonment costs (2)

 

 

1,293

 

 

 

10,328

 

 

 

1,866

 

 

 

15,175

 

Adjusted EBITDA

 

$

48,906

 

 

$

34,304

 

 

$

130,506

 

 

$

147,600

 

Revenue

 

$

397,146

 

 

$

373,356

 

 

$

1,262,676

 

 

$

1,350,108

 

Net income (loss) margin

 

 

0.9

%

 

 

(6.3

)%

 

 

1.2

%

 

 

1.6

%

Adjusted EBITDA margin

 

 

12.3

%

 

 

9.2

%

 

 

10.3

%

 

 

10.9

%

(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) Restructuring and abandonment costs for the three and nine months ended June 29, 2024, and July 1, 2023, are primarily related to our restructuring plan initiated on June 14, 2023, and also costs incurred in March 2023 related to the abandonment of portions of our office spaces.

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

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

 

 

Three Months Ended

 

Nine Months Ended

 

 

June 29,

2024

 

July 1,

2023

 

June 29,

2024

 

July 1,

2023

Reconciliation of GAAP net income (loss)

 

 

 

 

 

 

 

 

GAAP net income (loss)

 

$

3,709

 

$

(23,571

)

 

$

14,947

 

$

20,966

Stock-based compensation expense

 

 

21,930

 

 

18,329

 

 

 

64,961

 

 

59,549

Legal and transaction related costs

 

 

1,062

 

 

14,699

 

 

 

7,202

 

 

30,006

Amortization of intangibles

 

 

1,493

 

 

1,493

 

 

 

4,478

 

 

4,690

Restructuring and abandonment costs

 

 

1,293

 

 

10,328

 

 

 

1,866

 

 

15,175

Non-GAAP net income

 

$

29,487

 

$

21,278

 

 

$

93,454

 

$

130,386

 

 

 

 

 

 

 

 

 

Reconciliation of net income (loss) per share

 

 

 

 

 

 

 

 

GAAP net income (loss) per share, diluted

 

$

0.03

 

$

(0.18

)

 

$

0.12

 

$

0.16

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

 

 

0.20

 

 

0.34

 

 

 

0.61

 

 

0.82

Non-GAAP net income per share, diluted

 

$

0.23

 

$

0.16

 

 

$

0.73

 

$

0.98

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

 

 

127,245,459

 

 

128,311,109

 

 

 

127,886,368

 

 

132,851,379

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

 

 

127,245,459

 

 

132,885,945

 

 

 

127,886,368

 

 

132,851,379

Reconciliation of Cash Flows Provided by Operating Activities to Free Cash Flow

(unaudited, dollars in thousands)

 

 

Three Months Ended

 

Nine Months Ended

 

 

June 29,

2024

 

July 1,

2023

 

June 29,

2024

 

July 1,

2023

Cash flows provided by operating activities

 

$

63,483

 

 

$

8,887

 

 

$

227,640

 

 

$

78,211

 

Less: Purchases of property and equipment

 

 

(23,214

)

 

 

(16,682

)

 

 

(39,477

)

 

 

(40,085

)

Free cash flow

 

$

40,269

 

 

$

(7,795

)

 

$

188,163

 

 

$

38,126

 

Revenue by Product Category

(unaudited, dollars in thousands)

 

 

Three Months Ended

 

Nine Months Ended

 

 

June 29,

2024

 

July 1,

2023

 

June 29,

2024

 

July 1,

2023

(In thousands)

 

 

 

 

 

 

 

 

Sonos speakers

 

$

301,105

 

$

289,740

 

$

991,378

 

$

1,070,117

Sonos system products

 

 

75,186

 

 

64,224

 

 

209,013

 

 

222,748

Partner products and other revenue

 

 

20,855

 

 

19,392

 

 

62,285

 

 

57,243

Total revenue

 

$

397,146

 

$

373,356

 

$

1,262,676

 

$

1,350,108

Revenue by Geographical Region

(unaudited, dollars in thousands)

 

 

Three Months Ended

 

Nine Months Ended

 

 

June 29,

2024

 

July 1,

2023

 

June 29,

2024

 

July 1,

2023

Americas

 

$

264,611

 

$

251,616

 

$

827,238

 

$

844,714

Europe, Middle East and Africa

 

 

110,902

 

 

105,312

 

 

372,074

 

 

434,806

Asia Pacific

 

 

21,633

 

 

16,428

 

 

63,364

 

 

70,588

Total revenue

 

$

397,146

 

$

373,356

 

$

1,262,676

 

$

1,350,108

Stock-based Compensation

(unaudited, dollars in thousands)

 

 

Three Months Ended

 

Nine Months Ended

 

 

June 29,

2024

 

July 1,

2023

 

June 29,

2024

 

July 1,

2023

(In thousands)

 

 

 

 

 

 

 

 

Cost of revenue

 

$

655

 

$

450

 

$

1,995

 

$

1,601

Research and development

 

 

9,735

 

 

8,637

 

 

29,133

 

 

27,353

Sales and marketing

 

 

4,510

 

 

3,590

 

 

13,297

 

 

12,178

General and administrative

 

 

7,030

 

 

5,652

 

 

20,536

 

 

18,417

Total stock-based compensation expense

 

$

21,930

 

$

18,329

 

$

64,961

 

$

59,549

Amortization of Intangibles

(unaudited, dollars in thousands)

 

 

Three Months Ended

 

Nine Months Ended

 

 

June 29,

2024

 

July 1,

2023

 

June 29,

2024

 

July 1,

2023

Cost of revenue

 

$

973

 

$

973

 

$

2,918

 

$

3,131

Research and development

 

 

496

 

 

496

 

 

1,488

 

 

1,487

Sales and marketing

 

 

-

 

 

-

 

 

-

 

 

-

General and administrative

 

 

24

 

 

24

 

 

72

 

 

72

Total amortization of intangibles

 

$

1,493

 

$

1,493

 

$

4,478

 

$

4,690

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, non-GAAP gross margin, net income (loss) excluding stock-based compensation, legal and transaction related fees, amortization of intangibles, and restructuring and abandonment costs and diluted earnings (loss) 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, income taxes, restructuring and abandonment costs, legal and transaction related fees 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. We define non-GAAP gross margin as GAAP gross margin, excluding stock-based compensation and amortization of intangible assets. We calculate non-GAAP net income (loss) 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 (loss) per share 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 divided by our number of shares at fiscal year end. 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 28, 2024, our long-term outlook, financial, growth and business strategies and opportunities, growth targets, our product cycle and roadmap, our new Sonos app and our action plan to address issues caused by our new app, profitability and gross margins, 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: our ability to accurately forecast product demand and effectively forecast and manage owned and channel inventory levels; our ability to introduce software updates to fix bugs, improve the customer experience and add back certain features to our new app on a timely basis and otherwise deliver on our action plan to address issues caused by our new app; our ability to maintain, enhance and protect our brand image; the impact of global economic, market and political events, including continued inflationary pressures, high interest rates and, in certain markets, foreign currency exchange rate fluctuations; changes in consumer income and overall consumer spending as a result of economic or political uncertainty or conditions; 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 compete in the market and maintain or expand market share; our ability to meet product demand and manage any product availability delays; supply chain challenges, including shipping and logistics challenges and component supply-related challenges; our ability to protect our brand and intellectual property; and the other risk factors set forth under the caption “Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended March 30, 2024 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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