Slide 1: Q3 Fiscal Year 2023 Financial Results
Q3 Fiscal Year 2023 Financial Results August 9, 2023
Slide 2: Forward Looking Statements; 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 for the fiscal year ending September 30, 2023; our long-term outlook; our long-term focus, financial, growth,
Slide 3: Q3 Highlights
Q3 Highlights ● Q3 revenue of $373.4M, +0.4% y/y (+0.3% constant currency) and +23% sequentially ○ Narrowing FY23 guidance range and maintaining midpoint for revenue and Adjusted EBITDA ● In Q3 gained $ and unit market share in US and EMEA (UK and DE) home theater category ● Impressive media and infl
Slide 4: Era Launch Success
Era Launch Success @finneas @KO 3.9M Followers 322k Followers Live post here. Live post here. “The Era 300 is nearly as perfect as any wireless speaker can be. The spatial audio performance is fantastic” -Forbes “Released earlier this year, the Era 300 is a huge leap forward as it renders truly immer
Slide 5: Q3 Financial Summary
Q3 Financial Summary Q3 Revenue ● Revenue +0.3% constant currency, or +0.4% reported to $378.7 $373.4M driven by: $371.8 $373.4 ○ Americas growth resulting from resilient consumer demand and strong performance of CC: +45.1% CC: +2.2% CC: +0.3% Reported: Reported: -1.8% Reported: +0.4% new product in
Slide 6: Resilient Underlying Gross Margin Performance Amidst CE Industry Compression
Resilient Underlying Gross Margin Performance Amidst CE Industry Compression Gross margin declined -130bps y/y driven by: ● Lack of typical promotional activity in prior year period ● Partially offset by favorable product mix and fewer spot component purchases ● FX approximately +10bps tailwind y/y 4
Slide 7: Responsibly Investing to Drive Long Term Growth
Responsibly Investing to Drive Long Term Growth 3Q23 3Q22 Y/Y Change R&D (GAAP) $ 77.8 $ 62.5 24% ● Committed to managing operating expenses (OpEx) while making targeted and responsible investment in Less: Stock-based compensation expense 8.6 7.9 10% product roadmap and category expansion to drive l
Slide 8: Cash Flow & Balance Sheet Highlights
Cash Flow & Balance Sheet Highlights ● Cash and cash equivalents of $268M, no debt. Key contributors to q/q decrease in cash balance driven by: ○ $31M increase in accounts receivable YTD23 YTD22 Y/Y Change ○ $18M decrease in accounts payable Cash flow from operations $ 78.2 $ 75.7 3.4% and accrued ex
Slide 9: Inventory Trends
Inventory Trends ● Total inventories -9% q/q from 2Q23 3Q22 2Q23 3Q23 ○ Finished goods inventory decreased Finished goods $ 259.0 $ 274.5 $ 240.1 by $34M q/q, -13% % y/y 95% 32% (7)% % q/q 24% 5% (13)% ○ Components balance remains Components $ 76.7 $ 51.8 $ 58.0 elevated relative to historical level
Slide 10: FY23 Outlook
FY23 Outlook 10
Slide 11: FY23 Outlook: Demonstrating Commitment to Profitability Amidst Macro Headwinds
FY23 Outlook: Demonstrating Commitment to Profitability Amidst Macro Headwinds Previous Revised Key Assumptions FY22 Actuals FY23 Outlook FY23 Outlook ● Midpoint of revenue and Adjusted EBITDA Revenue $1.752 billion $1.625 - 1.675 billion $1.64 - 1.66 billion unchanged from previous FY23 outlook % gr
Slide 12: The Sonos Story
The Sonos Story 12
Slide 13: Sonos at a Glance
Sonos at a Glance 2002 11 1,800+ 60 Founded Locations Employees Countries distributed 20 2 3,300+ $1.75B Products Services US Patents and Applications FY22 Revenue 13
Slide 14: Broad Product Portfolio Spanning Variety of Price Points
Broad Product Portfolio Spanning Variety of Price Points Portables All-in-One Speakers Roam Move Era 100 Era 300 Five IKEA SYMFONISK IKEA SYMFONISK IKEA SYMFONISK Picture IKEA SYMFONISK $179 $399 $249 $449 $549 Bookshelf speaker Speaker lamp frame speaker Floor lamp speaker $139 $249 $259 $299 Home
Slide 15: 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 16: 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 16
Slide 17: … Yet We Remain the Leader
… Yet We Remain the Leader 3Q23 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 18: 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 Sound Easy to use 2 voice providers Design Reliable 2 first-party services Quality All works together (Sonos Radio & Durability Ri
Slide 19: 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) 19 Source: internal data
Slide 20: Open Platform Enables Freedom of Choice
Open Platform Enables Freedom of Choice 130+ Content Partners Home Automation & Voice Assistants Home Control Partners 20
Slide 21: 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 22: 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 22
Slide 23: Framing Our Long Term Opportunity: Households
Framing Our Long Term Opportunity: Households PLUS Geographic Expansion 391M Households in Core Markets1 ~8% Current penetration of total affluent households 172M Affluent ($75k+2) Households 14M Sonos FY22 Households Source: Euromonitor 2023 1. Core Markets include the United States, Canada, Mexico, Au
Slide 24: 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 25: Launching 2+ Products Annually Drives Household Acquisition & Repurchase Activity
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-to-date Era 100 All in One Sonos One One SL Five Era 300 Arc
Slide 26: 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 27: Where We Are & Where We Are Going
Where We Are & Where We Are Going FY23 Guidance Midpoint Long Term Financial Targets $1,650M $2,500M Revenue Revenue 44.1% 45-47% Gross Margin Gross Margin $153M $375-450M Adjusted EBITDA Adjusted EBITDA Note: FY23 Adjusted EBITDA target of $153 million represents 9.3% Adjusted EBITDA margin. Long t
Slide 28: 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 Othe
Slide 29: Summary Financial Overview
Summary Financial Overview Guidance Midpoint 2018 2019 2020 2021 2022 2023 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 $1,650 % y/y 11%
Slide 30: Appendix
Appendix 30
Slide 31: Reconciliation of Operating (Loss) Income to Adjusted EBITDA
Reconciliation of Operating (Loss) Income to Adjusted EBITDA Three Months Ended Nine Months Ended July 1, July 2, July 1, July 2, 2023 2022 2023 2022 Operating (Loss) 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
Slide 32: Reconciliation of Net (Loss) Income to Adjusted EBITDA
Reconciliation of Net (Loss) Income to Adjusted EBITDA Three Months Ended Nine Months Ended July 1, July 2, July 1, July 2, 2023 2022 2023 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 2
Slide 33: Reconciliation of Cash Flows from Operating Activities to Free Cash Flow
Reconciliation of Cash Flows Provided by (Used in) Operating Activities to Free Cash Flow Three Months Ended Nine Months Ended July 1, July 2, July 1, July 2, 2023 2022 2023 2022 Cash flows provided by (used in) operating activities $ 8,887 $ (6,717) $ 78,211 $ 75,657 Less: Purchases of property and