Slide 1: Q4 & Fiscal Year 2023 Financial Results
Q4 & Fiscal Year 2023 Financial Results November 15, 2023
Slide 2: Forward Looking Statements
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 year ending September 28, 2024; our long-term outlook; our long-term focus, financial, growth,
Slide 3: FY23 Highlights
FY23 Highlights ● Revenue of $1.66B, -6% y/y (-3% constant currency) driven by partner channel inventory reductions, softer consumer demand in the second half of the year, FX and tough compares due to FY22 backorder fulfillment, partially offset by favorable product mix and the success of new product
Slide 4: Continued Product Innovation
Continued Product Innovation Era 100 - $249 MSRP Only marginally larger than its predecessor, Sonos One, Era 100 boasts a new design and faster processing power, with a next-generation acoustic architecture that delivers detailed stereo sound and more powerful bass Era 300 - $449 MSRP Era 300 delive
Slide 5: Expansion of our Brand
Expansion of our Brand Brand building efforts with partners, advocates and retailers drives awareness and purchase intent with customers at scale. Deepening connections with the Installed Solutions partners increases brand affinity among the community resulting in higher likelihood to recommend Sonos i
Slide 6: Responsible Innovation
Responsible Innovation Recognized as one of the best places to work for LGBTQ+ equality by the Human Rights Campaign Foundation. Publishing annual Listen Better Report in the coming weeks, highlighting the progress we’ve made on our sustainability and social impact work. In fiscal 2023, we advanced o
Slide 7: Fiscal 2023 Financial Summary
Fiscal 2023 Financial Summary NET REVENUE GROSS MARGIN FY23 revenue adversely FY23 gross margin was $1,655 affected by partner channel impacted by return to normal $1,717 $1,752 CC: -3% inventory reductions, softer 47.2% level of promotional activity 45.4% 43.3% Reported: -6% consumer demand in the v
Slide 8: Overview of Key Metrics
Overview of Key Metrics Fiscal year 2018 2019 2020 2021 2022 2023 ● Added 1.3 million new households, total ending Sonos households (M) 7.4 9.1 10.9 12.6 14.0 15.3 household base of 15.3 million, +9% y/y New HHs 1.7 1.8 1.7 1.4 1.3 ● Revenue per product sold increased +4% y/y to Products registered
Slide 9: Responsibly Investing to Drive Long Term Growth
Responsibly Investing to Drive Long Term Growth FY23 FY22 Y/Y Change ● Committed to managing operating expenses (OpEx) while R&D (GAAP) $ 301.0 $ 256.1 18% making targeted and responsible investment in product Less: Stock-based compensation expense 35.5 30.7 16% roadmap and category expansion to dri
Slide 10: Making Progress to Rightsize Inventories
Making Progress to Rightsize Inventories 4Q22 3Q23 4Q23 ● Entering the holidays with $108 million lower inventories compared to 4Q22 due to measures Finished goods $ 406,657 $ 240,117 $ 281,571 taken to more efficiently manage inventory % y/y 163% (7)% (31)% % q/q 57% (13)% 17% ○ Total inventories +16
Slide 11: Cash Flow & Balance Sheet Highlights
Cash Flow & Balance Sheet Highlights ● Cash and cash equivalents of $220M, no debt. YTD23 YTD22 Key contributors to y/y decrease in cash balance driven by: Cash flow from operations $ 100.4 $ (28.3) ○ $100M in share repurchase partially Capital expenditures $ (50.3) $ (46.2) offset by an improvement i
Slide 12: Q4 Highlights
Q4 Highlights ● Q4 revenue of $305.1M, -3.5% y/y (-5.1% constant currency) and -18% sequentially ● Launched Move 2, our new premium portable speaker with stereo sound, deeper base and 24-hour battery life (September) ○ Move 2 is rated 4.9 out of 5 stars on Sonos.com ● Q4 gross margin of 42.0%, +270
Slide 13: Q4 Financial Summary
Q4 Financial Summary Q4 Revenue ● Revenue -3.5% y/y, or -5.1% constant currency, to $305.1M $316.3 driven by: $305.1 ○ Demand softening across all regions, partially offset by full supply recovery on AMP in FY23 and by revenue Reported: -12.0% Reported: -3.5% generated by new product introductions. C
Slide 14: Line of Sight to Material Gross Margin Recovery in FY24
Line of Sight to Material Gross Margin Recovery in FY24 Q4 Gross margin increased +270bps y/y driven by: ● Fewer spot component purchases, price increases, FX tailwind (110 bps), and lower component costs ● Partially offset by timing of recognition of contra-revenue related to select channel fill ahea
Slide 15: Responsibly Investing to Drive Long Term Growth
Responsibly Investing to Drive Long Term Growth ● Committed to managing operating expenses (OpEx) while making targeted and responsible investment in 4Q23 4Q22 Y/Y Change product roadmap and category expansion to drive long R&D (GAAP) $ 65.5 $ 67.3 (3)% term growth Less: Stock-based compensation exp
Slide 16: FY24 Outlook
FY24 Outlook 16
Slide 17: FY24 Outlook: Balancing Investment to Drive Margin Expansion
FY24 Outlook: Balancing Investment to Drive Margin Expansion FY23 Actuals FY24 Outlook Key Assumptions Revenue $1.655 billion $1.6 to 1.7 billion % (decline) / growth (6%) (3%) to 3% ● Midpoint of guidance implies ○ Revenue of $1.65 billion (flattish y/y) constant currency (3%) (3%) to 3% ○ GAAP Gros
Slide 18: The Sonos Story
The Sonos Story 18
Slide 19: Sonos at a Glance
Sonos at a Glance 2002 10 1,800+ 60 Founded Locations Employees Countries distributed 20 2 3,300+ $1.66B Products Services US Patents and Applications FY23 Revenue 19
Slide 20: Broad Product Portfolio Spanning Variety of Price Points
Broad Product Portfolio Spanning Variety of Price Points Portables All-in-One Speakers Roam Move 2 Era 100 Era 300 Five IKEA SYMFONISK IKEA SYMFONISK IKEA SYMFONISK Picture IKEA SYMFONISK $179 $449 $249 $449 $549 Bookshelf speaker Speaker lamp frame speaker Floor lamp speaker $139 $249 $259 $299 Hom
Slide 21: Market Position
Market Position Premium Sonos is differentiated by our unique combination of an open content and control platform with high-quality, premium hardware that spans a variety of form factors, use cases, and price points. No other company has created an interoperable suite of products serving customers in
Slide 22: Sonos Innovation Is Widely Adopted
Sonos Innovation Is Widely Adopted Sonos Sonos releases digital founded June music system in 2002 February 2005 Sonos Apple HomePod demos at D2 June 2004 Google Home Amazon Echo Denon Heos Lenbrook Bluesound Jan Jan Jan Jan Jan Jan Jan Jan Jan 2018 Present 2002 2004 2006 2008 2010 2012 2014 2016 22
Slide 23: … Yet We Remain the Leader
… Yet We Remain the Leader FY23 Top Ranked Models (by $ share) United States EMEA1 $200+ Home Theater2 $150+ Streaming Audio $200+ Home Theater2 $150+ Streaming Audio Brand Rank: #1 Brand Rank: #2 Brand Rank: #1 Brand Rank: #2 Top Products in Category Top Products in Category Top Products in Categor
Slide 24: Why the Sonos Ecosystem Wins
Why the Sonos Ecosystem Wins “Software Eats Audio” - We have invested over $1.2 billion into R&D over the last 5 years Hardware + Software + Services 130+ third-party apps Sound Easy to use 2 voice providers Design Reliable 2 first-party services Quality All works together (Sonos Radio & Durability R
Slide 25: Our Innovation Is Protected by a Robust and Growing Patent Portfolio
Our Innovation Is Protected by a Robust and Growing Patent Portfolio Total Sonos U.S. Patents and Patent Applications (filed over time, cumulative) 25 Source: internal data
Slide 26: Open Platform Enables Freedom of Choice
Open Platform Enables Freedom of Choice 130+ Content Partners Home Automation & Voice Assistants Home Control Partners 26
Slide 27: Key Drivers of Long Term Growth
Key Drivers of Long Term Growth “The Sonos Flywheel” New households enter the Sonos ecosystem, and existing households purchase additional products at a steady rate. Driven by Continue to raise the bar in Enter new product New business initiatives 1 2 3 Expand geographic reach 4 existing product cat
Slide 28: Large and Growing Install Base
Large and Growing Install Base 15.3 Total Households Existing Households Net New Households 14.0 1.3 12.6 1.4 R CAG 19% 10.9 1.7 1.8 9.1 7.4 1.7 5.9 1.5 4.6 1.3 1.2 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 28
Slide 29: Framing Our Long Term Opportunity: Households
Framing Our Long Term Opportunity: Households PLUS Geographic Expansion 391M Households in Core Markets1 ~9% Current penetration of total affluent households 172M Affluent ($75k+2) Households 15M Sonos FY23 Households Source: Euromonitor 2023 1. Core Markets include the United States, Canada, Mexico, Au
Slide 30: Our Install Base Continues to Purchase Additional Sonos Products
Our Install Base Continues to Purchase Additional Sonos Products A significant portion of our annual product registrations come from our existing households (HHs), many of which start with just one product. Lifetime value of customers grows as products per HH increases Incremental revenue opportunity
Slide 31: Average Registrations per Customer
NEW: A Detailed Look at Customer Behavior and Install Base Monetization Over Time Consistent repurchase behavior across larger cohorts and greater monetization of products sold underscores our conviction to deliver our long term financial targets Cohorts behave similarly over time, regardless of when
Slide 32: Launching 2+ Products Annually Drives Household Acquisition & Repurchase
Launching 2+ Products Annually Drives Household Acquisition & Repurchase Activity We continue to launch new products across our five current categories (all in one, home theater, components, portables and Pro) FY18 FY19 FY20 FY21 FY22 FY23 Era 100 All in One Sonos One One SL Five Era 300 Arc Beam (Ge
Slide 33: Framing Our Long Term Opportunity: Revenue
Framing Our Long Term Opportunity: Revenue PLUS Audio content, services & business $100B Global Audio ~2% Current penetration of $30B global audio market Global Home Audio $22B Premium Global Home Audio $1.66B Sonos FY23 Revenue Source: Futuresource CY2022, Premium defined as $100+ wireless speakers,
Slide 34: Where We Are & Where We Are Going
Where We Are & Where We Are Going FY24 Guidance Midpoint Long Term Financial Targets $1,650M $2,500M Revenue Revenue 45.5% 45-47% GAAP Gross Margin GAAP Gross Margin $165M $375-450M Adjusted EBITDA Adjusted EBITDA Note: FY24 Adjusted EBITDA target of $165 million represents 10.0% Adjusted EBITDA mar
Slide 35: Diversified Channel Distribution
Diversified Channel Distribution Challenges in the retail environment and changes in consumer shopping patterns have resulted in business mix shifts into higher-margin channels, like DTC and Installer Solutions. (45% combined, +90 bps y/y) 2018 2019 2020 2021 2022 2023 ● Fiscal 2023 y/y comparisons i
Slide 36: Summary Financial Overview
Summary Financial Overview 2024 - Guidance 2018 2019 2020 2021 2022 2023 Midpoint Americas 603 678 756 981 1,044 1,048 % y/y 12% 11% 30% 6% 0% EMEA 479 485 471 618 578 518 % y/y 1% (3%) 31% (7%) (10%) APAC 55 98 100 117 130 89 % y/y 78% 2% 18% 11% (32%) Total Revenue 1,137 1,261 1,326 1,717 1,752 1,
Slide 37: Appendix
Appendix 37
Slide 38: Reconciliation of Operating (Loss) Income to Adjusted EBITDA
Reconciliation of Operating (Loss) Income to Adjusted EBITDA Three Months Ended Twelve Months Ended September 30, October 1, September 30, October 1, 2023 2022 2023 2022 Operating (Loss) Income (GAAP) $ (28,361) $ (60,064) $ (20,547) $ 89,532 Stock-based compensation 17,308 18,177 76,857 75,640 Lega
Slide 39: Reconciliation of Net (Loss) Income to Adjusted EBITDA
Reconciliation of Net (Loss) Income to Adjusted EBITDA Three Months Ended Twelve Months Ended September 30, October 1, September 30, October 1, 2023 2022 2023 2022 (In thousands, except percentages) Net (loss) income $ (31,239) $ (64,067) $ (10,274) $ 67,383 Add (deduct): Depreciation and amortizati
Slide 40: Reconciliation of Operating Cash Flows to Free Cash Flow
Reconciliation of Cash Flows Provided by (Used in) Operating Activities to Free Cash Flow Three Months Ended Twelve Months Ended September 30, October 1, September 30, October 1, 2023 2022 2023 2022 Cash flows provided by (used in) operating activities $ 22,195 $ (103,917) $ 100,406 $ (28,260) Less: