Slide 1: Q2 Fiscal Year 2023 Financial Results
Q2 Fiscal Year 2023 Financial Results May 10, 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: Q2 Highlights
Q2 Highlights ● Q2 revenue of $304.2M, -24% y/y (-22% constant currency) slightly ahead of guidance for -25% to -30% y/y ● In Q2 gained $ and unit market share in US and EMEA (UK, DE and Nordics) home theater category ● Ushered in the next generation of industry leading smart speakers with the launc
Slide 4: Q2 Financial Summary
Q2 Financial Summary Q2 Revenue ● Revenue -22% constant currency, or -24% reported to $399.8 $332.9 $304.2M driven by: $304.2 ○ Unfavorable comparison resulting from backlog fulfillment and timing of channel fill in 2Q22 CC: +22.8% CC: +83.5% Reported: +20% CC: -22% ○ Softer consumer demand Reported:
Slide 5: Resilient Underlying Gross Margin Performance Amidst CE Industry Compression
Resilient Underlying Gross Margin Performance Amidst CE Industry Compression Gross margin declined -150bps y/y driven by: ● Unfavorable product mix shift resulting from home theater weakness ● Inventory reserve build related to discontinued products and excess components ● Unfavorable FX (approximat
Slide 6: Responsibly Investing to Drive Long Term Growth
Responsibly Investing to Drive Long Term Growth 2Q23 2Q22 Y/Y Change R&D (GAAP) $80.8 $64.9 24% ● Committed to reducing operating expenses while making Less: Stock-based compensation expense 9.6 8.1 18% targeted and responsible investment in product roadmap Less: Amortization of intangibles 0.5 0.7
Slide 7: Cash Flow & Balance Sheet Highlights
Cash Flow & Balance Sheet Highlights ● Cash and cash equivalents of $294.9M, no debt. YTD23 YTD22 Y/Y Change Key contributors to q/q decrease in cash balance driven by: Cash flow from operations $ 69.3 $ 82.4 (15.8)% ○ $120M decrease in accounts payable and accrued expenses Capital expenditures $ 23.
Slide 8: Inventory Trends
Inventory Trends 2Q22 1Q23 2Q23 ● Total inventories +7% q/q from 1Q23 Finished goods $208.5 $260.7 $274.5 ○ Finished goods inventory increased by % y/y 58% 79% 32% $14M q/q, +5% % q/q 43% (36)% 5% ○ Components balance remains elevated relative to historical levels Components $55.9 $45.3 $51.8 due to
Slide 9: FY23 Outlook
FY23 Outlook 9
Slide 10: FY23 Outlook: Demonstrating Commitment to Profitability Amidst Macro Headwinds
FY23 Outlook: Demonstrating Commitment to Profitability Amidst Macro Headwinds FY22 Actuals Previous FY23 Outlook Revised FY23 Outlook Key Assumptions ● Revised guidance assumes $52 million of operating Revenue $1.752 billion $1.7 - 1.8 billion $1.625 - 1.675 billion expense reduction, while still ma
Slide 11: The Sonos Story
The Sonos Story 11
Slide 12: 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 12
Slide 13: 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 $186 $169 $299 Home
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 2Q23 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 Sound Easy to use 2 voice providers Design Reliable 2 first-party services Quality All works together (Sonos Radio & Durability Ri
Slide 18: 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) 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 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 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 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 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 $1,650M $2,500M Revenue Revenue 44.6% 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 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 Othe
Slide 28: 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 29: Appendix
Appendix 29
Slide 30: Reconciliation of Operating Income (Loss) to Adjusted EBITDA
Reconciliation of Operating Income (Loss) to Adjusted EBITDA Three Months Ended Six Months Ended April 1, 2023 April 2, 2022 April 1, 2023 April 2, 2022 Operating Income (Loss) (GAAP) $ (57,226) $ 10,042 $ 29,078 $ 142,635 Stock-based compensation 21,025 21,225 41,220 38,684 Legal and transaction re
Slide 31: Reconciliation of Net Income (Loss) to Adjusted EBITDA
Reconciliation of Net Income (Loss) to Adjusted EBITDA Three Months Ended Six Months Ended April 1, 2023 April 2, 2022 April 1, 2023 April 2, 2022 Net income (loss) $ (30,652) $ 8,566 $ 44,537 $ 132,047 Add (deduct): Depreciation and amortization 11,713 9,575 22,845 18,792 Stock-based compensation e
Slide 32: 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 Six Months Ended April 1, 2023 April 2, 2022 April 1, 2023 April 2, 2022 Cash flows provided by (used in) operating activities $ (112,962) $ (97,562) $ 69,324 $ 82,374 Less: Purchases of prope
Slide 33: SONOS
SONOS