Slide 1: Q1 Fiscal Year 2023 Financial Results
Q1 Fiscal Year 2023 Financial Results February 8, 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 30, 2023; our long-term outlook; our long-term focus, financial, growth,
Slide 3: Q1 Highlights
Q1 Highlights ● Q1 revenue of $672.6M, +1% y/y (+7% constant currency) driven by increased volume due to promotional activity and improved product availability, partially offset by unfavorable foreign exchange (“FX”) ● In Q1 gained significant $ and unit market share in US, UK & DE home theater catego
Slide 4: Strong Revenue Growth While Investing in the Future
Strong Revenue Growth While Investing in the Future Q1 Revenue $672.6 ● Revenue +7% constant currency, or +1% reported to $664.5 $672.6M driven by: $645.6 ○ Higher volume resulting from higher promotional activity CC: +4% CC: +7% CC: +12% Reported: +3% Reported: +1% ○ Improved product supply Reporte
Slide 5: Gross Margins In-Line With Expectations
Gross Margins In-Line With Expectations Gross margin declined -540bps y/y driven by: ● Resumption of normal holiday promotion ● Higher component costs ● Unfavorable FX (estimated -300bps headwind y/y) ● Partially offset by lower air freight costs Remain on track to deliver FY23 gross margin within gu
Slide 6: Investing in the Future
Investing in the Future ● GAAP OpEx deleverage of 170 bps y/y: 1Q23 1Q22 Y/Y Change R&D (GAAP) 76.9 61.3 25% ○ Headcount growth partially offset by lower Less: Stock-based compensation expense 9.2 6.7 36% marketing expenses Less: Amortization of intangibles 0.5 1.1 (54)% ○ Stock-based compensation +1
Slide 7: Cash Flow & Balance Sheet Highlights
Cash Flow & Balance Sheet Highlights ● Cash and cash equivalents of $431.5M, no debt. 1Q23 1Q22 Y/Y Change Key contributors to q/q increase in cash balance Cash flow from operations $ 182.3 $ 179.9 1% driven by: ○ $148M decrease in inventories Capital expenditures $ 14.7 $ 6.4 131% % of revenue 2.2%
Slide 8: Normalization of Inventory Balances
Normalization of Inventory Balances ● As discussed on our 4Q22 call, we exited 1Q23 1Q22 4Q22 1Q23 with a more normal inventory position, with Finished goods 145,492 406,657 260,734 total inventory balances down -33% q/q % y/y 84% 163% 79% ○ Sequential decline in total inventories % q/q (6%) 57% (36
Slide 9: FY23 Outlook
FY23 Outlook 9
Slide 10: FY23 Outlook Unchanged: Investment in Product Roadmap & Category Expansion
FY23 Outlook Unchanged: Investment in Product Roadmap & Category Expansion for Long-Term Growth FY23 Outlook Key Assumptions FY22 Actuals Unchanged from 4Q22 ● Expect FX to be $79 million headwind to revenue, Revenue $1.752 billion $1.7 - 1.8 billion significant flowthrough to gross profit and Adjusted
Slide 11: The Sonos Story
The Sonos Story 11
Slide 12: Sonos at a Glance
Sonos at a Glance 2002 13 1,800+ 60 Founded Locations Employees Countries distributed 19 1 3,300+ $1.75B Products Service US Patents and Applications FY22 Revenue 12
Slide 13: Broad Product Portfolio Spanning Variety of Price Points
Broad Product Portfolio Spanning Variety of Price Points All-in-One Speakers One Move Roam Five IKEA SYMFONISK IKEA SYMFONISK IKEA SYMFONISK Picture IKEA SYMFONISK $219 $399 $179 $549 Bookshelf speaker Speaker lamp frame speaker Floor lamp speaker $119 $229 $249 $289 Home Theater Ray Beam Arc Sub Mi
Slide 14: 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 15: 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 15
Slide 16: … Yet We Remain the Leader
… Yet We Remain the Leader 1Q23 Top Ranked Models (by $ share) United States EMEA1 $200+ Home Theater2 $150+ All In One $200+ Home Theater2 $150+ All in One Brand Rank: #1 Brand Rank: #2 Brand Rank: #1 Brand Rank: #2 Top Products in Category Top Products in Category Top Products in Category Top Prod
Slide 17: Why the Sonos Ecosystem Wins
Why the Sonos Ecosystem Wins “Software Eats Audio” - we have invested over $1 billion into R&D over the last 5 years Hardware + Software + Services 130+ third-party apps Design Easy to use 2 voice providers Quality Reliable 2 first-party services Sound All works together (Sonos Radio & Durability Ric
Slide 18: Our Innovation is Protected by a Deep and Growing Patent Portfolio
Our Innovation is Protected by a Deep and Growing Patent Portfolio Total Sonos U.S. Patents and Patent Applications (filed over time, cumulative) 18 Source: internal data
Slide 19: Open Platform Enables Freedom of Choice
Open Platform Enables Freedom of Choice 130+ Content Partners Home Automation & Voice Assistants Home Control Partners 19
Slide 20: 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 21: Large and Growing Install Base
Large and Growing Install Base Total Households 14.0 Existing Households Net New Households 1.4 12.6 CAGR 20% 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 21
Slide 22: Framing Our Long Term Opportunity: Households
Framing Our Long Term Opportunity: Households PLUS Geographic Expansion 350M Households in Core Markets1 ~9% Current penetration of total affluent households 158M Affluent ($75k+2) Households 14M Sonos FY22 Households Source: Euromonitor 2022 1. Core Markets include the United States, Canada, Australia,
Slide 23: Our Current Install Base Continues to Purchase Additional Sonos Products
Our Current 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 opp
Slide 24: 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 four current categories (all in one, home theater, components, and portables) FY18 FY19 FY20 FY21 FY22 FY23-to-date All in one Sonos One One SL Five Arc Beam (Gen 2) Home T
Slide 25: Framing Our Long Term Opportunity: Revenue
Framing Our Long Term Opportunity: Revenue PLUS Audio content, services & business $96B Global Audio ~2% Current penetration of $29B global audio market Global Home Audio $22B Premium Global Home Audio $1.75B Sonos FY22 Revenue Source: Futuresource CY2021, Premium defined as $100+ wireless speakers,
Slide 26: Where We Are & Where We Are Going
Where We Are & Where We Are Going FY23 Guidance Midpoint Long Term Financial Targets $1.75B $2.5B Revenue Revenue 45.5% 45-47% Gross Margin Gross Margin $162.5M $375-450M Adjusted EBITDA Adjusted EBITDA Note: FY23 Adjusted EBITDA target of $162.5 million represents 9.3% Adjusted EBITDA margin. Long
Slide 27: NEW: Diversified Channel Distribution
NEW: Diversified Channel Distribution Business mix is increasingly shifting toward higher margin channels like DTC and installer solutions (44% combined, +260bps y/y). ● Retail & Other (56% of revenue, -260 bps), -2% y/y 2018 2019 2020 2021 2022 ○ FY22 performance impacted by limited Retail and Other
Slide 28: Summary Financial Overview
Summary Financial Overview 2018 2019 2020 2021 2022 2023 - Guidance Midpoint Americas 603 678 756 981 1,044 % y/y 12% 11% 30% 7% EMEA 479 485 471 618 578 % y/y 1% (3%) 31% (7%) APAC 55 98 100 117 130 % y/y 78% 2% 18% 11% Total Revenue 1,137 1,261 1,326 1,717 1,752 1,750 % y/y 11% 5% 29% 2% 0% % y/y
Slide 29: Appendix
Appendix 29
Slide 30: Reconciliation of Operating Income to Adjusted EBITDA
Reconciliation of Operating Income to Adjusted EBITDA Three Months Ended December 31, January 1, 2022 2022 Operating Income (GAAP) $ 86,304 $ 132,594 Stock-based compensation 20,195 17,459 Legal and transaction related costs 6,289 3,873 Amortization of intangibles 1,704 1,310 Adjusted Operating Inco
Slide 31: Reconciliation of Net Income to Adjusted EBITDA
Reconciliation of Net Income to Adjusted EBITDA Three Months Ended December 31, January 1, 2022 2022 Net income $ 75,188 $ 123,481 Add (deduct): Depreciation and amortization 11,132 9,217 Stock-based compensation expense 20,195 17,459 Interest income (1,967) (33) Interest expense 158 98 Other (incom
Slide 32: Reconciliation of Cash Flows Provided by Operating Activities to Free Cash Flow
Reconciliation of Cash Flows Provided by Operating Activities to Free Cash Flow Three Months Ended December 31, January 1, 2022 2022 Cash flows provided by operating activities $ 182,286 $ 179,934 Less: Purchases of property and equipment, and intangible assets (14,689) (6,355) Free cash flow $ 167,59
Slide 33: SONOS
SONOS