Sonos Reports Second Quarter Fiscal 2025 Results

About this update from Sonos, Inc.

Q2 revenue at high end of guidance range, Adjusted EBITDA above high end due to significant year over year expense declines SANTA BARBARA, Calif. --(BUSINESS WIRE)-- Sonos, Inc. (Nasdaq: SONO) today reported Second Quarter Fiscal 2025 results. “We made significant progress in Q2 across our top initiatives,” said Tom Conrad , Sonos Interim Chief Executive Officer. “We’re firmly on track in restoring the reliability and responsiveness our customers expect, with nine major software updates delivered in the last 120 days and more on the way. We’re actively navigating the evolving tariff landscape with operational discipline and flexibility and we're reinvigorating demand through strategic pricing on Era 100, one of our most popular gateway products. Even in a complex environment, we’re operating with focus and confidence as we position Sonos for long-term success.” “We stayed disciplined and continued to execute well in Q2 as we delivered revenue at the high end of our guidance with Adjusted EBITDA that exceeded our expectations,” commented Saori Casey , Sonos Chief Financial Officer. “We believe that our continued progress on our transformation efforts positions us well to navigate this uncertain macroeconomic environment.” Second Quarter Fiscal 2025 Financial Highlights (unaudited) Revenue of $259.8 million GAAP gross margin of 43.7% GAAP net loss of ($70.1) million , GAAP diluted loss per share (EPS) of ( $0.58 ) Non-GAAP net loss1 of ($21.7) million , Non-GAAP diluted EPS1 of ( $0.18 ) Adjusted EBITDA1 of ($0.8) million Notes: (1) Non-GAAP net loss/Non-GAAP diluted loss per share (EPS) and Adjusted EBITDA exclude stock-based compensation, legal and transaction related fees, amortization of intangibles, and restructuring and other charges. See “Use of Non-GAAP Measures” and reconciliations to GAAP measures below. Guidance The company will provide guidance on its Second Quarter Fiscal 2025 earnings call. Supplemental Earnings Presentation The company has posted a supplemental earnings presentation accompanying its Second Quarter Fiscal 2025 results to the Earnings Reports section of its investor relations website at https://investors.sonos.com/reports-and-filings/default.aspx#section=earningsreports . Conference Call, Webcast and Transcript The company will host a webcast of its conference call and Q&A related to its Second Quarter Fiscal 2025 results on May 7, 2025 , at 4:30 p.m. Eastern Time ( 1:30 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 Income (Loss) (unaudited, in thousands, except share and per share amounts) Three Months Ended Six Months Ended March 29 , 2025 March 30 , 2024 March 29 , 2025 March 30 , 2024 Revenue $ 259,756 $ 252,662 $ 810,613 $ 865,531 Cost of revenue 146,147 140,624 455,597 470,815 Gross profit 113,609 112,038 355,016 394,716 Operating expenses Research and development 77,423 80,322 158,261 159,557 Sales and marketing 64,210 61,835 150,854 145,785 General and administrative 33,200 40,841 59,032 80,639 Total operating expenses 174,833 182,998 368,147 385,981 Operating (loss) income (61,224 ) (70,960 ) (13,131 ) 8,735 Other income (expense), net Interest income 1,973 3,933 3,834 7,008 Interest expense (109 ) (122 ) (219 ) (227 ) Other income (expense), net 193 (3,303 ) (5,836 ) 6,971 Total other income (expense), net 2,057 508 (2,221 ) 13,752 (Loss) income before provision for (benefit from) income taxes (59,167 ) (70,452 ) (15,352 ) 22,487 Provision for (benefit from) income taxes 10,977 (743 ) 4,555 11,249 Net (loss) income $ (70,144 ) $ (69,709 ) $ (19,907 ) $ 11,238 Net (loss) income per share: Basic $ (0.58 ) $ (0.56 ) $ (0.16 ) $ 0.09 Diluted $ (0.58 ) $ (0.56 ) $ (0.16 ) $ 0.09 Weighted-average shares used in computing net (loss) income per share: Basic 119,919,163 123,749,605 120,995,375 124,465,661 Diluted 119,919,163 123,749,605 120,995,375 128,206,823 Total comprehensive (loss) income Net (loss) income (70,144 ) (69,709 ) (19,907 ) 11,238 Change in foreign currency translation adjustment 656 (85 ) (460 ) (948 ) Net unrealized loss on marketable securities (33 ) (26 ) (117 ) (26 ) Comprehensive (loss) income $ (69,521 ) $ (69,820 ) $ (20,484 ) $ 10,264 Consolidated Balance Sheets (unaudited, in thousands, except par values) As of March 29 , 2025 September 28 , 2024 Assets Current assets: Cash and cash equivalents $ 173,158 $ 169,732 Marketable securities 50,349 51,426 Accounts receivable, net 40,430 44,513 Inventories 138,421 231,505 Prepaids and other current assets 50,666 53,910 Total current assets 453,024 551,086 Property and equipment, net 86,035 102,148 Operating lease right-of-use assets 48,011 50,175 Goodwill 82,854 82,854 Intangible assets, net In-process research and development — 73,770 Other intangible assets 81,311 14,266 Deferred tax assets 9,197 10,314 Other noncurrent assets 31,746 31,699 Total assets $ 792,178 $ 916,312 Liabilities and stockholders’ equity Current liabilities: Accounts payable $ 117,946 $ 194,590 Accrued expenses 73,531 87,783 Accrued compensation 26,113 15,701 Deferred revenue, current 21,214 21,802 Other current liabilities 50,786 46,277 Total current liabilities 289,590 366,153 Operating lease liabilities, noncurrent 56,442 56,588 Deferred revenue, noncurrent 60,276 61,075 Deferred tax liabilities 311 60 Other noncurrent liabilities 2,700 3,816 Total liabilities 409,319 487,692 Commitments and contingencies Stockholders’ equity: Common stock, $0.001 par value 124 123 Treasury stock (51,934 ) (17,096 ) Additional paid-in capital 507,805 498,245 Accumulated deficit (70,841 ) (50,934 ) Accumulated other comprehensive loss (2,295 ) (1,718 ) Total stockholders’ equity 382,859 428,620 Total liabilities and stockholders’ equity $ 792,178 $ 916,312 Consolidated Statements of Cash Flows (unaudited, dollars in thousands) Six Months Ended March 29 , 2025 March 30 , 2024 Cash flows from operating activities Net (loss) income $ (19,907 ) $ 11,238 Adjustments to reconcile net (loss) income to net cash provided by operating activities: Stock-based compensation expense 45,436 43,031 Depreciation and amortization 32,778 23,121 Provision for inventory obsolescence (143 ) 5,293 Restructuring and other charges 4,889 266 Deferred income taxes 997 (31 ) Other 1,528 2,188 Foreign currency transaction gain (72 ) (3,441 ) Changes in operating assets and liabilities: Accounts receivable 4,702 (2,793 ) Inventories 92,615 161,683 Other assets 1,328 (15,169 ) Accounts payable and accrued expenses (83,634 ) (89,151 ) Accrued compensation 10,456 16,040 Deferred revenue (257 ) 1,857 Other liabilities 5,791 10,025 Net cash provided by operating activities 96,507 164,157 Cash flows from investing activities Purchases of marketable securities (25,900 ) (45,280 ) Purchases of property and equipment (18,662 ) (16,263 ) Maturities of marketable securities 27,400 — Net cash used in investing activities (17,162 ) (61,543 ) Cash flows from financing activities Payments for repurchase of common stock, including excise tax and commission (60,602 ) (76,250 ) Payments for repurchase of common stock related to shares withheld for tax in connection with vesting of restricted stock units (16,246 ) (13,242 ) Proceeds from exercise of stock options 2,654 11,905 Net cash used in financing activities (74,194 ) (77,587 ) Effect of exchange rate changes on cash and cash equivalents (1,725 ) 704 Net increase in cash and cash equivalents 3,426 25,731 Cash and cash equivalents Beginning of period 169,732 220,231 End of period $ 173,158 $ 245,962 Supplemental disclosure Cash paid for interest $ 126 $ 134 Cash paid for taxes, net of refunds $ 16,493 $ 12,247 Cash paid for amounts included in the measurement of lease liabilities, net of tenant improvement reimbursements received $ 1,149 $ 6,670 Supplemental disclosure of non-cash investing and financing activities Purchases of property and equipment in accounts payable and accrued expenses $ 1,311 $ 7,582 Right-of-use assets obtained in exchange for new operating lease liabilities $ 1,491 $ 7,637 Excise tax on share repurchases, accrued but not paid $ 264 $ 361 Reconciliation of GAAP to Non-GAAP Cost of Revenue and Gross Profit (unaudited, in thousands, except percentages) Three Months Ended Six Months Ended March 29 , 2025 March 30 , 2024 March 29 , 2025 March 30 , 2024 Reconciliation of GAAP cost of revenue GAAP cost of revenue $ 146,147 $ 140,624 $ 455,597 $ 470,815 Stock-based compensation expense 1,606 686 2,955 1,340 Amortization of intangibles 3,144 973 6,474 1,945 Restructuring and other charges 3,935 — 3,935 — Non-GAAP cost of revenue $ 137,462 $ 138,965 $ 442,233 $ 467,530 Reconciliation of GAAP gross profit GAAP gross profit $ 113,609 $ 112,038 $ 355,016 $ 394,716 Stock-based compensation expense 1,606 686 2,955 1,340 Amortization of intangibles 3,144 973 6,474 1,945 Restructuring and other charges 3,935 — 3,935 — Non-GAAP gross profit $ 122,294 $ 113,697 $ 368,380 $ 398,001 GAAP gross margin 43.7 % 44.3 % 43.8 % 45.6 % Non-GAAP gross margin 47.1 % 45.0 % 45.4 % 46.0 % Reconciliation of Selected Non-GAAP Financial Measures (unaudited, dollars in thousands) Three Months Ended Six Months Ended March 29 , 2025 March 30 , 2024 March 29 , 2025 March 30 , 2024 Research and Development (GAAP) $ 77,423 $ 80,322 $ 158,261 $ 159,557 Stock-based compensation 8,021 10,419 21,336 19,398 Amortization of intangibles 18 496 196 992 Restructuring and other charges 12,766 - 12,706 323 Research and Development (Non-GAAP) $ 56,618 $ 69,407 $ 124,023 $ 138,844 Sales and Marketing (GAAP) $ 64,210 $ 61,835 $ 150,854 $ 145,785 Stock-based compensation 3,980 4,972 9,612 8,787 Amortization of intangibles - - - - Restructuring and other charges 2,792 - 2,792 113 Sales and Marketing (Non-GAAP) $ 57,438 $ 56,863 $ 138,450 $ 136,885 General and Administrative (GAAP) 33,200 40,841 59,032 80,639 Stock-based compensation 6,495 7,596 11,533 13,506 Legal and transaction related costs 1,429 2,395 1,624 6,140 Amortization of intangibles 24 24 47 48 Restructuring and other charges 4,207 6 4,207 138 General and Administrative (Non-GAAP) $ 21,045 $ 30,820 $ 41,621 $ 60,807 Total Operating Expenses (GAAP) $ 174,833 $ 182,998 $ 368,147 $ 385,981 Stock-based compensation 18,496 22,987 42,481 41,691 Legal and transaction related costs 1,429 2,395 1,624 6,140 Amortization of intangibles 42 520 243 1,040 Restructuring and other charges 19,765 6 19,705 574 Operating Expenses (Non-GAAP) $ 135,101 $ 157,090 $ 304,094 $ 336,536 Total Operating (Loss) Income (GAAP) $ (61,224 ) $ (70,960 ) $ (13,131 ) $ 8,735 Stock-based compensation 20,102 23,673 45,436 43,031 Legal and transaction related costs 1,429 2,395 1,624 6,140 Amortization of intangibles 3,186 1,493 6,717 2,985 Restructuring and other charges 23,700 6 23,640 574 Operating (Loss) Income (Non-GAAP) $ (12,807 ) $ (43,393 ) $ 64,286 $ 61,465 Depreciation 11,981 9,750 26,061 20,136 Adjusted EBITDA (Non-GAAP) $ (826 ) $ (33,643 ) $ 90,347 $ 81,601 Reconciliation of Net (Loss) Income to Adjusted EBITDA (unaudited, dollars in thousands except percentages) Three Months Ended Six Months Ended March 29 , 2025 March 30 , 2024 March 29 , 2025 March 30 , 2024 (In thousands, except percentages) Net (loss) income $ (70,144 ) $ (69,709 ) $ (19,907 ) $ 11,238 Add (deduct): Depreciation and amortization 15,167 11,243 32,778 23,121 Stock-based compensation expense 20,102 23,673 45,436 43,031 Interest income (1,973 ) (3,933 ) (3,834 ) (7,008 ) Interest expense 109 122 219 227 Other expense (income), net (193 ) 3,303 5,836 (6,971 ) Provision for (benefit from) income taxes 10,977 (743 ) 4,555 11,249 Legal and transaction related costs (1) 1,429 2,395 1,624 6,140 Restructuring and other charges (2) 23,700 6 23,640 574 Adjusted EBITDA $ (826 ) $ (33,643 ) $ 90,347 $ 81,601 Revenue $ 259,756 $ 252,662 $ 810,613 $ 865,531 Net (loss) income margin (27.0 )% (27.6 )% (2.5 )% 1.3 % Adjusted EBITDA margin (0.3 )% (13.3 )% 11.1 % 9.4 % (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) On February 5, 2025 , we initiated a restructuring plan to reduce our cost base involving 12% of our employees (the "2025 restructuring plan"). Restructuring and other charges for the three and six months ended March 29, 2025 , primarily reflect costs associated with our cost transformation initiative including the 2025 restructuring plan and rationalization of our product roadmap, as well as non-recurring CEO transition costs related to modifications to equity awards. Reconciliation of GAAP Net (Loss) Income to Non-GAAP Net (Loss) Income (unaudited, in thousands, except share and per share amounts) Three Months Ended Six Months Ended March 29 , 2025 March 30 , 2024 March 29 , 2025 March 30 , 2024 Reconciliation of GAAP net (loss) income GAAP net (loss) income $ (70,144 ) $ (69,709 ) $ (19,907 ) $ 11,238 Stock-based compensation expense 20,102 23,673 45,436 43,031 Legal and transaction related costs 1,429 2,395 1,624 6,140 Amortization of intangibles 3,186 1,493 6,717 2,985 Restructuring and other charges 23,700 6 23,640 574 Non-GAAP net (loss) income $ (21,727 ) $ (42,142 ) $ 57,510 $ 63,968 Net (loss) income per share GAAP net (loss) income per share, diluted $ (0.58 ) $ (0.56 ) $ (0.16 ) $ 0.09 Non-GAAP net (loss) income per share, diluted $ (0.18 ) $ (0.34 ) $ 0.46 $ 0.50 Shares used to calculate net (loss) income per share Weighted-average shares GAAP, diluted 119,919,163 123,749,605 120,995,375 128,206,823 Weighted-average shares non-GAAP, diluted 119,919,163 123,749,605 123,750,251 128,206,823 Reconciliation of Cash Flows (Used in) Provided by Operating Activities to Free Cash Flow (unaudited, dollars in thousands) Three Months Ended Six Months Ended March 29 , 2025 March 30 , 2024 March 29 , 2025 March 30 , 2024 Cash flows (used in) provided by operating activities $ (59,666 ) $ (111,244 ) $ 96,507 $ 164,157 Less: Purchases of property and equipment (5,556 ) (10,186 ) (18,662 ) (16,263 ) Free cash flow $ (65,222 ) $ (121,430 ) $ 77,845 $ 147,894 Revenue by Product Category (unaudited, dollars in thousands) Three Months Ended Six Months Ended March 29 , 2025 March 30 , 2024 March 29 , 2025 March 30 , 2024 (In thousands) Sonos speakers $ 194,519 $ 187,262 $ 661,661 $ 690,273 Sonos system products 50,540 49,265 110,814 133,826 Partner products and other revenue 14,697 16,135 38,138 41,432 Total revenue $ 259,756 $ 252,662 $ 810,613 $ 865,531 Revenue by Geographical Region (unaudited, dollars in thousands) Three Months Ended Six Months Ended March 29 , 2025 March 30 , 2024 March 29 , 2025 March 30 , 2024 Americas $ 176,802 $ 170,187 $ 501,385 $ 562,627 Europe , Middle East and Africa 68,785 69,356 266,397 261,173 Asia Pacific 14,169 13,119 42,831 41,731 Total revenue $ 259,756 $ 252,662 $ 810,613 $ 865,531 Stock-based Compensation (unaudited, dollars in thousands) Three Months Ended Six Months Ended March 29 , 2025 March 30 , 2024 March 29 , 2025 March 30 , 2024 (In thousands) Cost of revenue $ 1,606 $ 686 $ 2,955 $ 1,340 Research and development 8,557 10,419 21,872 19,398 Sales and marketing 4,027 4,972 9,659 8,787 General and administrative 9,055 7,596 14,093 13,506 Total stock-based compensation expense $ 23,245 $ 23,673 $ 48,579 $ 43,031 Amortization of Intangibles (unaudited, dollars in thousands) Three Months Ended Six Months Ended March 29 , 2025 March 30 , 2024 March 29 , 2025 March 30 , 2024 Cost of revenue $ 3,144 $ 973 $ 6,474 $ 1,945 Research and development 18 496 196 992 Sales and marketing - - - - General and administrative 24 24 47 48 Total amortization of intangibles $ 3,186 $ 1,493 $ 6,717 $ 2,985 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 (loss) income excluding stock-based compensation, legal and transaction related fees, amortization of intangibles, and restructuring and other charges and diluted earnings per share excluding stock-based compensation, legal and transaction related fees, amortization of intangibles and restructuring and other charges. 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 (loss) income adjusted to exclude the impact of depreciation and amortization, stock-based compensation expense, interest income, interest expense, other income, income taxes, restructuring and other charges, 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, amortization of intangible assets and restructuring and other changes. We calculate non-GAAP net (loss) income excluding stock-based compensation, legal and transaction related fees, amortization of intangibles and restructuring and other charges as net income less stock-based compensation, legal and transaction related fees, amortization of intangibles and restructuring and other charges. We calculate non-GAAP diluted earnings per share excluding stock-based compensation, legal and transaction related fees, amortization of intangibles and restructuring and other charges as net income less stock-based compensation, legal and transaction related fees, amortization of intangibles and restructuring and other charges 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 ability to expand our footprint with existing customers, market growth and our market share, our operating model and cost structure including our transformation efforts, our app recovery efforts and related software updates, tariffs and our ability to mitigate the effects of any tariffs, the macroeconomic environment and our ability to weather it, 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: difficulties in and effect of implementing improvements to our operating model and cost structure; the risk that restructuring and related charges may be greater than anticipated or not occur in the expected time frame; local law requirements in various jurisdictions regarding elimination of positions; 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 redesigned app on a timely basis and otherwise deliver on our action plan to address issues caused by our redesigned 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 tariffs, global trade tensions, 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, including tariffs; 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 maintain relationships with our channel, distribution and technology partners; 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; our use of artificial intelligence; and the other risk factors identified in our filings with the Securities and Exchange Commission (the “SEC”), including our most recent Annual Report on Form 10-K and subsequent filings. Copies of our SEC filings are available free of charge at the SEC’s website at www.sec.gov , on our investor relations website at https://investors.sonos.com/reports-and-filings/default.aspx 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/20250507833892/en/ Investor Contact James Baglanis [email protected] Press Contact Erin Pategas [email protected] Source: Sonos

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