Sonos Reports Fourth Quarter and Fiscal 2024 Results

About this update from Sonos, Inc.

SANTA BARBARA, Calif. --(BUSINESS WIRE)-- Sonos, Inc. (Nasdaq: SONO) today reported fourth quarter and fiscal 2024 results. “Thanks to our team going all-in on our app recovery efforts, we made significant progress in bringing the quality of our software to a level that we’re all proud of, which enabled us to launch our highly anticipated new products, Arc Ultra and Sub 4, in time for the holidays,” Sonos CEO Patrick Spence commented. “Initial feedback on our new products has been very positive, which, along with the introduction of Ace earlier this year, makes our product lineup the strongest it’s ever been. Sonos is still the best home audio system, and we’re focused on using this industry-leading product lineup to acquire more customers and solidify our loyal customer base. The Sonos flywheel remains strong, as evidenced by the fact that the number of new products per home increased in Fiscal 2024. While the overall audio category continues to face headwinds, we are confident that we are well positioned to take more of it over time.” Fiscal 2024 Financial Highlights (unaudited) Revenue of $1,518.1 million GAAP gross margin of 45.4% GAAP net loss of $38.1 million , GAAP diluted earnings per share (EPS) of - $0.31 Non-GAAP net income1 of $71.4 million , Non-GAAP diluted EPS1 of $0.56 Adjusted EBITDA1 of $107.9 million Fourth Quarter Fiscal 2024 Financial Highlights (unaudited) Revenue of $255.4 million GAAP gross margin of 40.3% GAAP net loss of $53.1 million , GAAP diluted earnings per share (EPS) of - $0.44 Non-GAAP net loss1 of $22.1 million , Non-GAAP diluted EPS1 of - $0.18 Adjusted EBITDA1 of - $22.6 million Notes: (1) Non-GAAP net income (loss)/Non-GAAP diluted earnings per share (EPS) and Adjusted EBITDA exclude stock-based compensation, legal and transaction related fees, amortization of intangibles, and restructuring and abandonment costs. See “Use of Non-GAAP Measures” and reconciliations to GAAP measures below. Guidance The company will provide guidance on its fourth quarter and Fiscal 2024 earnings call. Supplemental Earnings Presentation The company has posted a supplemental earnings presentation accompanying its fourth quarter and fiscal 2024 results to the Earnings Reports section of its investor relations website at https://investors.sonos.com/reports-and-filings/default.aspx#section=earningsreports . Additional detailed financial and business information regarding certain non-financial key metrics, new products, brand initiatives and our sustainability and social impact efforts is included in the supplemental earnings presentation. Conference Call, Webcast and Transcript The company will host a webcast of its conference call and Q&A related to its fourth quarter and fiscal 2024 results on November 13, 2024 , at 5:00 p.m. Eastern Time ( 2:00 p.m. Pacific Time ). Participants may access the live webcast in listen-only mode on the Sonos investor relations website at https://investors.sonos.com/news-and-events/default.aspx . The conference call may also be accessed by dialing (888) 330-2454 with conference ID 8641747. Participants outside the U.S. can access the call by dialing (240) 789-2714 using the same conference ID. An archived webcast of the conference call and a transcript of the company’s prepared remarks and Q&A session will also be available at https://investors.sonos.com/reports-and-filings/default.aspx#section=earningsreports following the call. Consolidated Statements of Operations and Comprehensive Loss (unaudited, in thousands, except share and per share amounts) Three Months Ended Twelve Months Ended September 28 , 2024 September 30 , 2023 September 28 , 2024 September 30 , 2023 Revenue $ 255,380 $ 305,147 $ 1,518,056 $ 1,655,255 Cost of revenue 152,364 177,093 828,683 938,765 Gross profit 103,016 128,054 689,373 716,490 Operating expenses Research and development 70,777 65,517 304,558 301,001 Sales and marketing 73,180 58,601 290,609 267,518 General and administrative 28,428 32,297 142,252 168,518 Total operating expenses 172,385 156,415 737,419 737,037 Operating loss (69,369 ) (28,361 ) (48,046 ) (20,547 ) Other income (expense), net Interest income 2,327 2,661 11,965 10,201 Interest expense (108 ) (149 ) (441 ) (733 ) Other income (expense), net 4,864 (6,696 ) 9,371 15,473 Total other income (expense), net 7,083 (4,184 ) 20,895 24,941 (Loss) income before (benefit from) provision for income taxes (62,286 ) (32,545 ) (27,151 ) 4,394 (Benefit from) provision for income taxes (9,193 ) (1,306 ) 10,995 14,668 Net loss $ (53,093 ) $ (31,239 ) $ (38,146 ) $ (10,274 ) Net loss attributable to common stockholders: Basic and diluted $ (53,093 ) $ (31,239 ) $ (38,146 ) $ (10,274 ) Net loss per share attributable to common stockholders: Basic $ (0.44 ) $ (0.25 ) $ (0.31 ) $ (0.08 ) Diluted $ (0.44 ) $ (0.25 ) $ (0.31 ) $ (0.08 ) Weighted-average shares used in computing net loss per share attributable to common stockholders: Basic 121,389,519 127,335,311 123,218,532 127,702,885 Diluted 121,389,519 127,335,311 123,218,532 127,702,885 Total comprehensive loss Net loss (53,093 ) (31,239 ) (38,146 ) (10,274 ) Change in foreign currency translation adjustment 1,872 2,035 1,604 153 Net unrealized gain on marketable securities 154 — 122 — Comprehensive loss $ (51,067 ) $ (29,204 ) $ (36,420 ) $ (10,121 ) Consolidated Balance Sheets (unaudited, in thousands, except par values) As of September 28 , 2024 September 30 , 2023 Assets Current assets: Cash and cash equivalents $ 169,732 $ 220,231 Marketable securities 51,426 - Accounts receivable, net 44,513 67,583 Inventories 231,505 346,521 Prepaids and other current assets 53,910 25,296 Total current assets 551,086 659,631 Property and equipment, net 102,148 87,075 Operating lease right-of-use assets 50,175 48,918 Goodwill 82,854 80,420 Intangible assets, net In-process research and development 73,770 69,791 Other intangible assets 14,266 20,218 Deferred tax assets 10,314 1,659 Other noncurrent assets 31,699 34,529 Total assets $ 916,312 $ 1,002,241 Liabilities and stockholders’ equity Current liabilities: Accounts payable $ 194,590 $ 187,981 Accrued expenses 87,783 89,717 Accrued compensation 15,701 22,079 Deferred revenue, current 21,802 20,188 Other current liabilities 46,277 34,253 Total current liabilities 366,153 354,218 Operating lease liabilities, noncurrent 56,588 54,956 Deferred revenue, noncurrent 61,075 60,650 Deferred tax liabilities 60 9,846 Other noncurrent liabilities 3,816 3,914 Total liabilities 487,692 483,584 Commitments and contingencies Stockholders’ equity: Common stock, $0.001 par value 123 130 Treasury stock (17,096 ) (72,586 ) Additional paid-in capital 498,245 607,345 Accumulated deficit (50,934 ) (12,788 ) Accumulated other comprehensive loss (1,718 ) (3,444 ) Total stockholders’ equity 428,620 518,657 Total liabilities and stockholders’ equity $ 916,312 $ 1,002,241 Consolidated Statements of Cash Flows (unaudited, dollars in thousands) Twelve Months Ended September 28 , 2024 September 30 , 2023 Cash flows from operating activities Net loss $ (38,146 ) $ (10,274 ) Adjustments to reconcile net loss to net cash provided by operating activities: Stock-based compensation expense 84,294 76,857 Depreciation and amortization 52,378 48,969 Provision for inventory obsolescence 8,894 20,640 Restructuring and abandonment charges 2,204 5,533 Deferred income taxes (18,922 ) (583 ) Other 3,701 5,535 Foreign currency transaction gains (7,276 ) (7,335 ) Changes in operating assets and liabilities: Accounts receivable 23,044 32,120 Inventories 106,122 87,004 Other assets (28,775 ) 10,470 Accounts payable and accrued expenses (789 ) (162,345 ) Accrued compensation (6,775 ) (2,185 ) Deferred revenue 304 (4,576 ) Other liabilities 9,648 576 Net cash provided by operating activities 189,906 100,406 Cash flows from investing activities Purchases of marketable securities (90,495 ) — Purchases of property and equipment and intangible assets (55,247 ) (50,286 ) Maturities of marketable securities 40,500 — Net cash used in investing activities (105,242 ) (50,286 ) Cash flows from financing activities Payments for repurchase of common stock (129,018 ) (100,064 ) Payments for repurchase of common stock related to shares withheld for tax in connection with vesting of restricted stock units (25,344 ) (29,874 ) Proceeds from exercise of stock options 17,053 21,346 Net cash used in financing activities (137,309 ) (108,592 ) Effect of exchange rate changes on cash and cash equivalents 2,146 3,848 Net decrease in cash and cash equivalents (50,499 ) (54,624 ) Cash and cash equivalents Beginning of period 220,231 274,855 End of period $ 169,732 $ 220,231 Supplemental disclosure Cash paid for interest $ 256 $ 1,330 Cash paid for taxes, net of refunds $ 21,206 $ 9,522 Cash paid for amounts included in the measurement of lease liabilities $ 11,008 $ 14,218 Supplemental disclosure of non-cash investing and financing activities Purchases of property and equipment in accounts payable and accrued expenses $ 7,878 $ 2,784 Right-of-use assets obtained in exchange for new operating lease liabilities $ 11,492 $ 31,692 Excise tax on share repurchases, accrued but not paid $ 602 $ — Change in estimate of asset retirement obligations $ — $ 2,290 Reconciliation of GAAP to Non-GAAP Cost of Revenue and Gross Profit (unaudited, in thousands, except percentages) Three Months Ended Twelve Months Ended September 28 , 2024 September 30 , 2023 September 28 , 2024 September 30 , 2023 Reconciliation of GAAP cost of revenue GAAP cost of revenue $ 152,364 $ 177,093 $ 828,683 $ 938,765 Stock-based compensation expense 620 437 2,614 2,038 Amortization of intangibles 973 973 3,891 4,103 Non-GAAP cost of revenue $ 150,771 $ 175,683 $ 822,178 $ 932,624 Reconciliation of GAAP gross profit GAAP gross profit $ 103,016 $ 128,054 $ 689,373 $ 716,490 Stock-based compensation expense 620 437 2,614 2,038 Amortization of intangibles 973 973 3,891 4,103 Non-GAAP gross profit $ 104,609 $ 129,464 $ 695,878 $ 722,631 GAAP gross margin 40.3 % 42.0 % 45.4 % 43.3 % Non-GAAP gross margin 41.0 % 42.4 % 45.8 % 43.7 % Reconciliation of Selected Non-GAAP Financial Measures (unaudited, dollars in thousands) Three Months Ended Twelve Months Ended September 28 , 2024 September 30 , 2023 September 28 , 2024 September 30 , 2023 Research and Development (GAAP) $ 70,777 $ 65,517 $ 304,558 $ 301,001 Stock-based compensation 8,780 8,177 37,913 35,530 Amortization of intangibles 497 496 1,985 1,983 Restructuring and abandonment costs 4,942 188 5,743 6,556 Research and Development (Non-GAAP) $ 56,558 $ 56,656 $ 258,917 $ 256,932 Sales and Marketing (GAAP) $ 73,180 $ 58,601 $ 290,609 $ 267,518 Stock-based compensation 4,201 3,499 17,499 15,677 Amortization of intangibles - - - - Restructuring and abandonment costs 2,473 180 2,770 5,635 Sales and Marketing (Non-GAAP) $ 66,506 $ 54,922 $ 270,340 $ 246,206 General and Administrative (GAAP) 28,428 32,297 142,252 168,518 Stock-based compensation 5,732 5,195 26,268 23,612 Legal and transaction related costs 182 2,944 7,383 32,950 Amortization of intangibles 24 24 96 96 Restructuring and abandonment costs 2,571 106 3,340 3,458 Adjusted General and Administrative (Non-GAAP) $ 19,919 $ 24,028 $ 105,165 $ 108,402 Total Operating Expenses (GAAP) $ 172,385 $ 156,415 $ 737,419 $ 737,037 Stock-based compensation 18,713 16,871 81,680 74,819 Legal and transaction related costs 182 2,944 7,383 32,950 Amortization of intangibles 521 520 2,081 2,079 Restructuring and abandonment costs 9,986 474 11,853 15,649 Adjusted Operating Expenses (Non-GAAP) $ 142,983 $ 135,606 $ 634,422 $ 611,540 Total Operating Loss (GAAP) $ (69,369 ) $ (28,361 ) $ (48,046 ) $ (20,547 ) Stock-based compensation 19,333 17,308 84,294 76,857 Legal and transaction related costs 182 2,944 7,383 32,950 Amortization of intangibles 1,494 1,493 5,972 6,182 Restructuring and abandonment costs 9,986 474 11,853 15,649 Adjusted Operating (Loss) Income (Non-GAAP) $ (38,374 ) $ (6,142 ) $ 61,456 $ 111,091 Depreciation 15,730 12,422 46,406 42,787 Adjusted EBITDA (Non-GAAP) $ (22,644 ) $ 6,280 $ 107,862 $ 153,878 Reconciliation of Net Loss to Adjusted EBITDA (unaudited, dollars in thousands except percentages) Three Months Ended Twelve Months Ended September 28 , 2024 September 30 , 2023 September 28 , 2024 September 30 , 2023 (In thousands, except percentages) Net loss $ (53,093 ) $ (31,239 ) $ (38,146 ) $ (10,274 ) Add (deduct): Depreciation and amortization 17,224 13,915 52,378 48,969 Stock-based compensation expense 19,333 17,308 84,294 76,857 Interest income (2,327 ) (2,661 ) (11,965 ) (10,201 ) Interest expense 108 149 441 733 Other expense (income), net (4,864 ) 6,696 (9,371 ) (15,473 ) (Benefit from) provision for income taxes (9,193 ) (1,306 ) 10,995 14,668 Legal and transaction related costs (1) 182 2,944 7,383 32,950 Restructuring and abandonment costs (2) 9,986 474 11,853 15,649 Adjusted EBITDA $ (22,644 ) $ 6,280 $ 107,862 $ 153,878 Revenue $ 255,380 $ 305,147 $ 1,518,056 $ 1,655,255 Net loss margin (20.8 )% (10.2 )% (2.5 )% (0.6 )% Adjusted EBITDA margin (8.9 )% 2.1 % 7.1 % 9.3 % (1) Legal and transaction-related costs consist of expenses related to our intellectual property ("IP") litigation against Alphabet and Google , as well as legal and transaction costs associated with our acquisition activity, which we do not consider representative of our underlying operating performance. (2) Restructuring and abandonment costs relate to the restructuring plan we initiated on August 14, 2024 to reduce our cost base, including a reduction in force involving approximately 6% of our employees, and nominal remaining costs incurred related to the restructuring plan initiated on June 14, 2023 . Reconciliation of GAAP Net Loss to Non-GAAP Net (Loss) Income (unaudited, in thousands, except share and per share amounts) Three Months Ended Twelve Months Ended September 28 , 2024 September 30 , 2023 September 28 , 2024 September 30 , 2023 Reconciliation of GAAP net loss GAAP net loss $ (53,093 ) $ (31,239 ) $ (38,146 ) $ (10,274 ) Stock-based compensation expense 19,333 17,308 84,294 76,857 Legal and transaction related costs 182 2,944 7,383 32,950 Amortization of intangibles 1,494 1,493 5,972 6,182 Restructuring and abandonment costs 9,986 474 11,853 15,649 Non-GAAP net (loss) income $ (22,098 ) $ (9,020 ) $ 71,356 $ 121,364 Reconciliation of net loss per share GAAP net loss per share, diluted $ (0.44 ) $ (0.25 ) $ (0.31 ) $ (0.08 ) Non-GAAP adjustments to net loss per share 0.26 0.18 0.87 1.00 Non-GAAP net (loss) income per share, diluted $ (0.18 ) $ (0.07 ) $ 0.56 $ 0.92 Weighted-average shares used in GAAP per share calculation, diluted 121,389,519 127,335,311 123,218,532 127,702,885 Weighted-average shares used in non-GAAP per share calculation, diluted 121,389,519 127,335,311 126,783,859 131,947,092 Note: Certain figures may not sum due to rounding Reconciliation of Cash Flows (Used in) Provided by Operating Activities to Free Cash Flow (unaudited, dollars in thousands) Three Months Ended Twelve Months Ended September 28 , 2024 September 30 , 2023 September 28 , 2024 September 30 , 2023 Cash flows (used in) provided by operating activities $ (37,734 ) $ 22,195 $ 189,906 $ 100,406 Less: Purchases of property and equipment (15,770 ) (10,201 ) (55,247 ) (50,286 ) Free cash flow $ (53,504 ) $ 11,994 $ 134,659 $ 50,120 Revenue by Product Category (unaudited, dollars in thousands) Three Months Ended Twelve Months Ended September 28 , 2024 September 30 , 2023 September 28 , 2024 September 30 , 2023 (In thousands) Sonos speakers $ 178,226 $ 223,323 $ 1,169,604 $ 1,293,440 Sonos system products 58,731 62,316 267,744 285,064 Partner products and other revenue 18,423 19,508 80,708 76,751 Total revenue $ 255,380 $ 305,147 $ 1,518,056 $ 1,655,255 Revenue by Geographical Region (unaudited, dollars in thousands) Three Months Ended Twelve Months Ended September 28 , 2 024 September 30 , 2023 September 28 , 2024 September 30 , 2023 Americas $ 177,533 $ 203,531 $ 1,004,770 $ 1,048,245 Europe , Middle East and Africa 58,353 83,374 430,428 518,179 Asia Pacific 19,494 18,242 82,858 88,831 Total revenue $ 255,380 $ 305,147 $ 1,518,056 $ 1,655,255 Stock-based Compensation (unaudited, dollars in thousands) Three Months Ended Twelve Months Ended September 28 , 2024 September 30 , 2023 September 28 , 2024 September 30 , 2023 (In thousands) Cost of revenue $ 620 $ 437 $ 2,614 $ 2,038 Research and development 8,780 8,177 37,913 35,530 Sales and marketing 4,201 3,499 17,499 15,677 General and administrative 5,732 5,195 26,268 23,612 Total stock-based compensation expense $ 19,333 $ 17,308 $ 84,294 $ 76,857 Amortization of Intangibles (unaudited, dollars in thousands) Three Months Ended Twelve Months Ended September 28 , 2024 September 30 , 2023 September 28 , 2024 September 30 , 2023 Cost of revenue $ 973 $ 973 $ 3,891 $ 4,103 Research and development 497 496 1,985 1,983 Sales and marketing - - - - General and administrative 24 24 96 96 Total amortization of intangibles $ 1,494 $ 1,493 $ 5,972 $ 6,182 Use of Non-GAAP Measures We have provided in this press release financial information that has not been prepared in accordance with generally accepted accounting principles (“U.S. GAAP”), including adjusted EBITDA, adjusted EBITDA margin, free cash flow, non-GAAP gross margin, net income (loss) excluding stock-based compensation, legal and transaction related fees, amortization of intangibles, and restructuring and abandonment costs and diluted earnings (loss) per share excluding stock-based compensation, legal and transaction related fees, amortization of intangibles and restructuring and abandonment costs. These non-GAAP financial measures are not based on any standardized methodology prescribed by U.S. GAAP and are not necessarily comparable to similarly titled measures presented by other companies. 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 identify underlying trends in our business that could otherwise be masked by the effect of the expenses and other items that we exclude in these non-GAAP financial measures. Accordingly, we believe that these non-GAAP financial measures provide useful information to investors and others in understanding and evaluating our operating results, enhancing the overall understanding of our past performance and future prospects and allowing for greater transparency with respect to a key financial metric used by our management in its financial and operational decision-making. Non-GAAP financial measures should not be considered in isolation of, or as an alternative to, measures prepared in accordance with U.S. GAAP. Investors are encouraged to review the reconciliation of these financial measures to their nearest U.S. GAAP financial equivalents provided in the financial statement tables above. We define Adjusted EBITDA as net income (loss) adjusted to exclude the impact of depreciation and amortization, stock-based compensation expense, interest income, interest expense, other income, income taxes, restructuring and abandonment costs, legal and transaction related fees and other items that we do not consider representative of our underlying operating performance. We define Adjusted EBITDA margin as Adjusted EBITDA divided by revenue. We define free cash flow as net cash from operations less purchases of property and equipment. We define non-GAAP gross margin as GAAP gross margin, excluding stock-based compensation and amortization of intangible assets. We calculate non-GAAP net income (loss) excluding stock-based compensation, legal and transaction related fees, amortization of intangibles and restructuring and abandonment costs as net income (loss) less stock-based compensation, legal and transaction related fees, amortization of intangibles and restructuring and abandonment costs. We calculate non-GAAP diluted earnings (loss) per share excluding stock-based compensation, legal and transaction related fees, amortization of intangibles and restructuring and abandonment costs as net income (loss) less stock-based compensation, legal and transaction related fees, amortization of intangibles and restructuring and abandonment costs divided by our number of shares at fiscal year end. We do not provide a reconciliation of forward-looking non-GAAP financial measures to their comparable GAAP financial measures because we cannot do so without unreasonable effort due to unavailability of information needed to calculate reconciling items and due to the variability, complexity and limited visibility of the adjusting items that would be excluded from the non-GAAP financial measures in future periods. When planning, forecasting and analyzing future periods, we do so primarily on a non-GAAP basis without preparing a GAAP analysis as that would require estimates for items such as stock-based compensation, which is inherently difficult to predict with reasonable accuracy. Stock-based compensation expense is difficult to estimate because it depends on our future hiring and retention needs, as well as the future fair market value of our common stock, all of which are difficult to predict and subject to constant change. In addition, for purposes of setting annual guidance, it would be difficult to quantify stock-based compensation expense for the year with reasonable accuracy in the current quarter. As a result, we do not believe that a GAAP reconciliation would provide meaningful supplemental information about our outlook. Forward Looking Statements This press release contains forward-looking statements that involve risks and uncertainties. These forward-looking statements include statements regarding our long-term outlook, financial, growth and business strategies and opportunities, our product roadmap, our action plan to address issues caused by our new app, market growth and our market share, our ability to expand our footprint with existing customers and other factors affecting variability in our financial results. These forward-looking statements are only predictions and may differ materially from actual results due to a variety of factors, including, but not limited to: our ability to accurately forecast product demand and effectively forecast and manage owned and channel inventory levels; our ability to introduce software updates to our new app on a timely basis and otherwise deliver on our action plan to address issues caused by our new app and related customer commitments; our ability to maintain, enhance and protect our brand image; the impact of global economic, market and political events, including continued inflationary pressures, high interest rates and, in certain markets, foreign currency exchange rate fluctuations; changes in consumer income and overall consumer spending as a result of economic or political uncertainty or conditions; changes in consumer spending patterns; our ability to successfully introduce new products and services and maintain or expand the success of our existing products; the success of our efforts to expand our direct-to-consumer channel; the success of our financial, growth and business strategies; our ability to compete in the market and maintain or expand market share; our ability to meet product demand and manage any product availability delays; supply chain challenges, including shipping and logistics challenges and component supply-related challenges; our ability to protect our brand and intellectual property; and the other risk factors set forth under the caption “Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended June 29, 2024 and our other filings filed with the Securities and Exchange Commission (the “SEC”), copies of which are available free of charge at the SEC’s website at www.sec.gov or upon request from our investor relations department. All forward-looking statements herein reflect our opinions only as of the date of this press release, and we undertake no obligation, and expressly disclaim any obligation, to update forward-looking statements herein in light of new information or future events. Sonos and Sonos product names are trademarks or registered trademarks of Sonos, Inc. All other product names and services may be trademarks or service marks of their respective owners. About Sonos Sonos (Nasdaq: SONO) is one of the world’s leading sound experience brands. As the inventor of multi-room wireless home audio, Sonos’ innovation helps the world listen better by giving people access to the content they love and allowing them to control it however they choose. Known for delivering an unparalleled sound experience, thoughtful home design aesthetic, simplicity of use and an open platform, Sonos makes the breadth of audio content available to anyone. Sonos is headquartered in Santa Barbara, California . Learn more at www.sonos.com . View source version on businesswire.com : https://www.businesswire.com/news/home/20241113080292/en/ Investor Contact James Baglanis [email protected] Press Contact Erin Pategas [email protected] Source: Sonos

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