Sonos, Inc. · NASDAQ:SONO
Sonos — Investor Day (March 2021)
74 slides from Sonos's investor day presentation, Mar 9, 2021
Slide 1: Investor Event
Investor Event March 9, 2021
Slide 2: Forward Looking Statements, Trademarks, Non-GAAP Measures
Forward Looking Statements This presentation contains forward-looking statements that involve risks and uncertainties. These forward-looking statements include statements regarding our outlook, including short-term and long-term expected revenue, gross margin and adjusted EBITDA growth, our long-ter
Slide 3: Patrick Spence, Chief Executive Officer
Patrick Spence Chief Executive Officer
Slide 4: Our Purpose: Inspire the world to listen better
Our Purpose Inspire the world to listen better
Slide 5: Our Ambition: Be the world's leading sound experience company
Our Ambition Be the world’s leading sound experience company
Slide 6: Our Ambition: Build an adaptable, admired, enduring company
Our Ambition Build an adaptable, admired, and enduring company where people can do their best work and everyone feels welcome and included
Slide 7: "Software Eats Audio"
“Software Eats Audio” 32M Products 11M Homes 3B Listening Registered Hours Note: Products registered and homes as of the end of FY2020, listening hours in Q1FY21
Slide 8: Trends Fueling Our Growth
Trends Fueling Our Growth #1 #2 #3 The Golden Age Homes Becoming The Great of Audio Movie Theaters Reshuffling
Slide 9: Our Opportunity: Homes
Our Opportunity: Homes PLUS Geographic Expansion 349M Households in Core Markets1 ~9% Current Penetration of Target $75K+ Households in Core Markets2 116M Affluent ($75k+2) Households 11M Sonos FY20 Households Source: Euromonitor 1. Core Markets include the United States, Canada, Australia, United Kin
Slide 10: Our Opportunity: Revenue
Our Opportunity: Revenue PLUS Audio content, services & business $89B Global Audio ~7%Current Penetration of Premium Home Audio Market $25B Global Home Audio $18B Premium Global Home Audio $1.3B Sonos FY20 Revenue Source: Futuresource CY2020, Premium defined as $100+ wireless speakers, $200+ soundbar
Slide 11: Our Experience
Our Experience Connected Easy Joyful Signature Curated Premium
Slide 12: Our Model
Our Model We are continuing to become more … while existing customers continue efficient in reaching new customers to expand their Sonos system Household Acquisition Cost Avg. Products Registered Years Since First Registration Notes: Household acquisition cost is calculated by dividing our sales and m
Slide 13: Lifetime Value & Household Acquisition Cost
Lifetime Value & Household Acquisition Cost Today: Potential as customers mature & we deliver on our roadmap: 2.9 Products per Household 4-6 Products per Household $270 LTV / HAC: ~2X ~$400 to ~$600 Implied LTV / HAC: ~3X to 4X
Slide 14: Our Aspiration: 100M+ Customers
Our Aspiration 100M+ Customers Using Our Products and Services
Slide 15: Our Strategic Initiatives
Our Strategic Expand our Brand Initiatives Expand our Offerings Drive Operational Excellence
Slide 16: Pete Pedersen, VP, Marketing
Pete Pedersen VP, Marketing
Slide 17: Meet the Culture Seeker
Meet the Culture Seeker Content Omnivores They are passionate about music, movies, podcasts, and other forms of entertainment. Value Quality They are willing to pay for better experiences and well-designed products that appeal to their evolved aesthetic tastes. Into Tech But Not Techies They expect
Slide 18: Meet the Culture Seeker
Meet the Culture Seeker Mean Age: 38 Discretionary Income: $75K 96% have a 70% 48% have college education are married children 71% own 45% live in a home urban areas
Slide 19: Our owners are passionate about Sonos
@thehousethatjenbuilt_ Our owners Liverpool, UK @itslinamar London, UK are passionate about Sonos @nmbr4teen The Netherlands @pauvivas Berkeley, CA @thehousethatjenbuilt_ Liverpool, UK
Slide 20: They buy more Sonos
They buy mM O re So n os " oma Beaaeelernict Ln many, and | want more. Sonos @ @So' (lp Jennifer Fe @jen: wy) Great. My love for @Sonos is now exposed. So vulnerable. > @ Existing Owner Registrations Ml New Owner Registrations Y - captgadget ve had my Are, Gen ‘adhd _benefit The Sonos Move is S'eub
Slide 21: And tell their friends about Sonos
And tell their friends about Sonos WOM = Word of Mouth)
Slide 22: The Sonos Experience
The Sonos Experience
Slide 23: Now we're earning our place in culture
Now we’re earning our place in culture
Slide 24: Innovative brand partnerships to reach new audiences
Innovative brand partnerships to reach new audiences Disney & Sonos: The perfect union of premium sound and premium content Triggering major brand buzz through association with the cult-hit The Mandalorian Enriched by an integrated global brand campaign, including a Sonos Radio station curated by Th
Slide 25: The Results
The Results 12% uplift in web traffic 27% offer code redemption 735m paid media impressions globally Above benchmark engagement and sentiment across email, blog and owned social platforms (Instagram and Twitter) 118 editorial stories across 11 countries 130M+ earned impressions
Slide 26: And pushing beyond tech into lifestyle
And pushing beyond tech into lifestyle We are working with The North Face to create an integrated marketing partnership that reinforces the spirit of exploration and brings authenticity to Sonos’ place beyond the home. We are also leveraging our expanded product portfolio to broaden our reach beyond
Slide 27: Our network of influencers adds depth and authenticity
Our network of influencers adds depth and authenticity
Slide 28: Complementing our digital advertising strategy
Complementing our digital advertising strategy
Slide 29: Roam Creative
Roam Creative
Slide 30: Slide 30
Slide 31: Ultimately landing customers on sonos.com
Ultimately landing customers on sonos.com DTC Growth (FY20) 29% increase in qualified traffic 84% increase in revenue 48% increase in conversion rate
Slide 32: And at third-party retail partners
And at third-party retail partners Costco in North America ● 699 warehouses in US, CA and MX ● #2 TV retailer in US Yodobashi Camera in Japan ● Third largest CE retailer in Japan by revenue ($7B), but revenue by store is 12x the next competitor ● Launched in top 6 stores toward the end of 2020 ● Son
Slide 33: Where customers become owners, and the advocacy cycle starts again
Where customers become owners, and the advocacy cycle starts again
Slide 34: Ted Dworkin, SVP, Product Management & Customer Experience
Ted Dworkin SVP, Product Management & Customer Experience
Slide 35: Expanding Our Offerings
Expanding Our Offerings
Slide 36: Engaged, Loyal Customers
Engaged, Loyal Customers Daily usage Long-term engagement Loyalty 33% growth in audio Existing households represent Average home has content hours in FY20 41% new product registrations 2.9 products More than 1B app 92% of products registered sessions in last quarter since 2005 still active Note: Dat
Slide 37: The Sonos System
Sonos Syste a wks yz “i Die {a
Slide 38: A Strong Foundation
A Strong Foundation Wireless One Move Roam Five Ikea Symphonisk Ikea Symphonisk $199 $399 $169 $499 $99 $169 Home Theater Beam Arc $399 $799 Sub $699 Components and Architectural Amp Port Sonance Sonance Sonance $649 $449 $599 $599 $799
Slide 39: Category Leadership
Category Leadership FY 2020 Consistently Ranked Top 3 Models $200+ Home Theater Category $100+ Wireless Speaker Category (by dollars - US, UK, DE) (by dollars - US, UK, DE) Sonos Beam Sonos One Sonos Sub Sonos Move Sonos Playbar Sonos One SL Source: Based on data from NPD for US, GfK UK and DE
Slide 40: Top Choice Among Installers
Top Choice Among Installers 88% Top 100 Custom Installers Preferred Audio Brand Survey 20% 16% 12% 13% Source: CE Pro
Slide 41: Open Platform Enables Choices
Open Platform Enables Choices 130+ Content Partners Home Automation & Voice Assistants Home Control Partners
Slide 42: Our Experience
Our Experience Connected Easy Joyful Signature Curated Premium
Slide 43: The Opportunity: Revenue
The Opportunity: Revenue PLUS Audio content, services & business $89B Global Audio ~7%Current Penetration of Premium Home Audio Market $25B Global Home Audio $18B Premium Global Home Audio $1.3B Sonos FY20 Revenue Source: Futuresource CY2020, Premium defined as $100+ wireless speakers, $200+ soundbar
Slide 44: The Hardware Opportunity
The Hardware Opportunity
Slide 45: The Consumer Services Opportunity
The Consumer Services Opportunity 500K paid subscribers
Slide 46: The Business Opportunity
The Business Opportunity Retail Leisure Wellness Healthcare Hospitality Enterprise
Slide 47: Eddie Lazarus, Chief Legal Officer
Eddie Lazarus Chief Legal Officer
Slide 48: Initial Disruption
Initial Disruption Before Sonos Sonos Vision Patented Sonos Platform
Slide 49: Ongoing Disruption
Ongoing Disruption
Slide 50: Protecting Our Inventive Disruption
Protecting Our Inventive Disruption Total Sonos U.S. Patents and Patent Applications (filed over time, cumulative)
Slide 51: Sonos Innovation Widely Adopted
Sonos Innovation Widely Adopted Sonos Sonos releases digital Founded June music system in 2002 February 2005 Apple HomePod Sonos Demos at CES 2004 Amazon Echo Google Denon Heos Bluesound Jan Jan Jan Jan Jan Jan Jan Jan Jan 2002 2004 2006 2008 2010 2012 2014 2016 2018
Slide 52: Protecting Our Inventions
Protecting-Our Inventions — 1 iI =r =
Slide 53: Brittany Bagley, Chief Financial Officer
Brittany Bagley Chief Financial Officer
Slide 54: Why We Win
Why We Win Hardware + Software + Services 130+ 3rd Party Apps Design Easy to Use 2 Voice Providers Quality Reliable 1st Party Services Sound All Works Together (Sonos Radio & Sonos Voice) = = = Looks & Sounds System Open Platform Great, Lasts & Choice
Slide 55: Large and Growing Household Base
Powerful Business Model: Large and Growing Household Base Total Households Existing Households Net New Households R CAG 24%
Slide 56: Our Customers Continue to Repurchase Over Time
Powerful Business Model: Our Customers Continue to Repurchase Over Time % of Registrations By Start Year FY2015 & Prior FY2016 FY2017 FY2018 FY2019 FY2020 % of Registrations to NP 38% 37% 37% 41% Existing Households NP = not provided % of registrations by start year represents the new registrations
Slide 57: Our System Expands, Start with One and Buy More
Powerful Business Model: Our System Expands, Start with One and Buy More 2.9 Products across all HH 39% Own 1 Product 61% Own 4.1 Products on Average Note: Percentages as of the end of FY2020
Slide 58: Adjusted EBITDA Expansion
Proven Track Record: Adjusted EBITDA Expansion Reaching prior adjusted EBITDA target ahead of expectations Adj EBITDA Excl. Tariffs Midpoint of Prior Long Term Adj EBITDA Margin Target FCF (% of (31%) 54% (7%) 110% 119% Adj EBITDA)¹ 1. Includes tariffs. Adjusted EBITDA margin excludes tariffs. Adjusted
Slide 59: Gross Margin Expansion
Proven Track Record: Gross Margin Expansion Industry-leading gross margins Gross Margin excl. tariffs Midpoint of Prior Long Term Gross Margin Target Gross Margin excluding tariffs is a non-GAAP measure. See appendix for reconciliation of GAAP to non-GAAP measures. We do not provide a reconciliation o
Slide 60: Consistent Revenue Growth
Proven Track Record: Consistent Revenue Growth On track for 16th consecutive year of revenue growth Prior Long Term Revenue CAGR Target 2016-2021 CAGR
Slide 61: Continued Revenue Growth
Growth Drivers: Continued Revenue Growth ● Accelerated new product introductions ● Continued expansion of our offerings ● Market penetration ● Growing faster than our $25B market ● Adding new households and benefitting from existing household repurchases ● FY20 and FY21 have large new household cohort
Slide 62: Driving Operational Excellence
Growth Drivers: Driving Operational Excellence ● Diversified manufacturing ● Supply chain efficiencies ● Efficient sales and marketing leverage ● Ongoing investment in R&D to support new product roadmap ● Supporting other investments to scale the business
Slide 63: Strong Balance Sheet
Growth Drivers: Strong Balance Sheet ● $653mm net cash¹ as of Q1 2021 ● Invest in the Business ● Organically invest to drive profitable growth ● Pursue M&A to support our roadmap, innovation and accelerate growth strategy ● Return cash to shareholders via share repurchases executed $50M repurchase in
Slide 64: Our FY 2024 Financial Targets
Our FY 2024 Financial Targets Revenue Gross Margin Adjusted EBITDA Margin $2.25B 45-47% 15-18%
Slide 65: Expanding Profitability Through Continued Operational Excellence
Growth Drivers: Expanding Profitability Through Continued Operational Excellence ● Continued expansion of our offerings ● Maintain industry-leading gross margins, including supporting our ongoing direct-to-consumer channel initiatives ● New households, with attractive household acquisition costs, and
Slide 66: Our Strategic Initiatives
Our Strategic Expand Our Brand Initiatives Expand Our Offerings Drive Operational Excellence
Slide 67: SONOS
SONOS
Slide 68: Appendix
Appendix SONOS
Slide 69: Non-GAAP Measures
Non-GAAP Measures We have provided in this presentation financial information that has not been prepared in accordance with GAAP. 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
Slide 70: Reconciliation of Net Income (Loss) to Adjusted EBITDA
Reconciliation of Net Income (Loss) to Adjusted EBITDA FY20 FY19 FY18 FY17 FY16 Net loss (20,115) (4,766) (15,604) (14,217) (38,214) Add (deduct): Depreciation and amortization 36,426 36,415 39,358 35,014 34,323 Stock-based compensation expense 57,610 46,575 38,645 36,550 25,963 Interest income (1,9
Slide 71: Reconciliation of Cash Flows Provided by Operating Activities to Free Cash Flow
Reconciliation of Cash Flows Provided by Operating Activities to Free Cash Flow FY20 FY19 FY18 FY17 FY16 Cash flows provided by operating activities $ 161,986 $ 120,636 $ 30,570 $ 63,960 $ 43,294 Less: purchases of property and equipment and intangible assets (33,035) (23,222) (35,747) (33,553) (52,5
Slide 72: Gross Profit and Margin Excluding the Impact of Tariffs
Gross Profit and Margin Excluding the Impact of Tariffs FY20 FY19 FY18 FY17 FY16 Revenue $ 1,326,328 $ 1,260,823 $ 1,137,008 $ 992,526 $ 901,284 Reported gross profit 571,956 527,343 489,308 456,065 403,399 Add/deduct: Net tariff impact 32,342 1,371 - - - Adjusted gross profit $ 604,298 $ 528,714 $ 489,3
Slide 73: Prior Long Term Targets vs. Current Long Term Targets
Prior Long Term Targets vs. Current Long Term Targets Prior1 Current2 Revenue Target 10% CAGR $2.25B Gross Margin 42%-44% 45%-47% Adj. EBITDA Margin 13%-15% 15%-18% 1 Long-term targets provided in 2018 in conjunction with Sonos initial public offering. 2 Outlook for Fiscal Year 2024. Note: Adjusted E
Slide 74: SONOS
SONOS