Raises Fiscal 2021 Outlook
Sonos, Inc. (Nasdaq: SONO) today reported record second quarter
fiscal 2021 results.
Second Quarter 2021 Financial Highlights (unaudited)
- GAAP net income (loss) increased to $17.2 million from ($52.3)
million last year; non-GAAP net income (loss) excluding stock-based
compensation, restructuring and legal and transaction related fees
increased to $44.6 million from ($37.2) million last year.
- GAAP diluted earnings per share (EPS) increased to $0.12 from
($0.48) last year; non-GAAP diluted earnings per share (EPS)
excluding stock-based compensation, restructuring, and legal and
transaction related fees increased to $0.31 from ($0.34) last
year.
- Adjusted EBITDA increased to $48.5 million from ($28.4) million
last year.
- Adjusted EBITDA margin increased to 14.6% from (16.2%) last
year.
- Gross margin increased 810 basis points to 49.8% from 41.7%
last year.
- Revenue increased 90% year-over-year to $332.9 million; on a
constant-currency basis, revenue increased approximately 83%
year-over-year.
Sonos CEO Patrick Spence commented, “We are thrilled to report
another record quarter at Sonos, as demand for our products
continues to exceed even our heightened expectations. The power of
our model is that customers can start with one product and expand
to more over time, and our customers continue to prove they do just
that. Based on our outstanding second quarter performance, the
continued strong demand for our products, and the power and
profitability of our unique business model, we are raising our
outlook for fiscal 2021 again.”
Mr. Spence continued, “Our increased fiscal 2021 revenue outlook
still assumes Sonos will account for only approximately 9% of the
total spend in the $18 billion premium home audio market1, and an
even smaller fraction of the broader $89 billion global audio
market2 we expect to expand into over the long-term. We are truly
just scratching the surface toward realizing our long-term
opportunity. The future is bright for Sonos.”
Mr. Spence concluded, “We remain focused on our key three
strategic initiatives - the expansion of our brand, the expansion
of our offerings, and driving operational excellence - and continue
to see a clear path toward achieving our fiscal 2024 targets of
$2.25 billion revenue, 45% to 47% gross margin, and 15% to 18%
adjusted EBITDA margin. We are extremely well positioned to deliver
significant free cash flow and increased shareholder value over the
long-term.”
Fiscal 2021 Outlook
- Adjusted EBITDA increased to a range of $225 million to $250
million representing growth in the range of 107% to 130%.
- This compares to our prior outlook of $195 million to $225
million, representing growth in the range of 80% to 107% and our
initial fiscal 2021 outlook provided at the start of the fiscal
year of $170 million to $205 million, representing growth in the
range of 57% to 89%.
- Adjusted EBITDA margin increased to a range of 13.8% to 14.9%,
representing a 560 to 670 basis point improvement year-over-year.
- This compares to our prior outlook range of 12.8% to 14.3%,
representing a 460 to 610 basis point improvement and our initial
fiscal 2021 outlook of 12% to 14%, representing a 380 to 580 basis
point improvement.
- Gross margin in the range of 46.0% to 46.5%, representing a 288
to 338 basis point improvement year-over-year.
- Our fiscal 2021 gross margin outlook reflects minimal impact
from ongoing tariffs and does not include the $27.5 million in
tariff refunds expected due to timing uncertainty.
- This is consistent with our prior guidance range of 46.0% to
46.5% and compares to our initial fiscal 2021 outlook of 45.3% to
45.8%.
- Revenue increased to a range of $1.625 billion to $1.675
billion, representing growth in the range of 23% to 26%
year-over-year (25% to 29% on a comparable basis excluding the 53rd
week in fiscal 2020).
- This compares to our prior guidance range of $1.525 billion to
$1.575 billion, representing growth in the range of 15% to 19% from
fiscal 2020 (17% to 21% excluding the 53rd week in fiscal 2020) and
our initial fiscal 2021 outlook of $1.44 billion to $1.5 billion,
or 9% to 13% growth (11% to 15% excluding the 53rd week in fiscal
2020).
1 “Premium” defined as $100+ wireless speakers, $200+ soundbars,
$300+ Hi-Fi systems, $250+ in-wall/in-ceiling speakers, $250+
bookshelf speakers (pairs), and all AV receivers, Floor standing
speakers, home theater speakers and home theater in a box products
and Hi-Fi separates. Source: Futuresource.
2 Source: Futuresource.
Supplemental Earnings Presentation
The Company has posted a supplemental earnings presentation
accompanying its second quarter fiscal 2021 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 2021 results on May
12, 2021 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 (833) 921-1637 with
conference ID 6483115. Participants outside the U.S. can access the
call by dialing (236) 714-2128 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.
Condensed Consolidated Statements of
Operations and Comprehensive Income (Loss)
(unaudited, in thousands, except share and per share amounts)
Three Months Ended
Six Months Ended
April 3, 2021
March 28, 2020
April 3, 2021
March 28, 2020
Revenue
$
332,949
$
175,098
$
978,532
$
737,181
Cost of revenue
167,173
102,089
513,331
436,552
Gross profit
165,776
73,009
465,201
300,629
Operating expenses Research and development
56,370
49,593
108,717
102,120
Sales and marketing
57,205
50,504
131,658
127,928
General and administrative
39,806
26,119
75,047
56,327
Total operating expenses
153,381
126,216
315,422
286,375
Operating income (loss)
12,395
(53,207
)
149,779
14,254
Other income (expense), net Interest income
44
874
80
1,873
Interest expense
(182
)
(374
)
(448
)
(827
)
Other income (expense), net
(1,578
)
(1,423
)
2,680
3,001
Total other income (expense), net
(1,716
)
(923
)
2,312
4,047
Income (loss) before provision for (benefit from) income taxes
10,679
(54,130
)
152,091
18,301
Provision for (benefit from) income taxes
(6,542
)
(1,810
)
2,578
(153
)
Net income (loss)
$
17,221
$
(52,320
)
$
149,513
$
18,454
Net income (loss) attributable to common stockholders: Basic
$
17,221
$
(52,320
)
$
149,513
$
18,454
Diluted
$
17,221
$
(52,320
)
$
149,513
$
18,454
Net income (loss) per share attributable to common stockholders:
Basic
$
0.14
$
(0.48
)
$
1.26
$
0.17
Diluted
$
0.12
$
(0.48
)
$
1.09
$
0.16
Weighted-average shares used in computing net income (loss) per
share attributable to common stockholders: Basic
121,880,615
109,515,049
118,745,569
109,249,866
Diluted
143,055,546
109,515,049
136,849,846
117,819,569
Total comprehensive income (loss) Net income (loss)
$
17,221
$
(52,320
)
$
149,513
$
18,454
Change in foreign currency translation adjustment
199
(431
)
1,046
(950
)
Comprehensive income (loss)
$
17,420
$
(52,751
)
$
150,559
$
17,504
Condensed Consolidated Balance Sheets (unaudited, dollars in
thousands, except par values)
As of
April 3, 2021
October 3, 2020
Assets Current assets: Cash and cash equivalents
$ 638,927
$ 407,100
Restricted cash
192
191
Accounts receivable, net of allowances
69,690
54,935
Inventories
139,581
180,830
Prepaids and other current assets
31,763
17,321
Total current assets
880,153
660,377
Property and equipment, net
65,509
60,784
Operating lease right-of-use assets
39,061
42,342
Goodwill
15,545
15,545
Intangible assets, net
25,434
26,394
Deferred tax assets
1,984
1,800
Other noncurrent assets
20,600
8,809
Total assets
$ 1,048,286
$ 816,051
Liabilities and stockholders’ equity Current liabilities:
Accounts payable
$ 203,585
$ 250,328
Accrued expenses
61,659
45,049
Accrued compensation
46,665
44,517
Short-term debt
-
6,667
Deferred revenue, current
18,392
15,304
Other current liabilities
40,770
31,150
Total current liabilities
371,071
393,015
Operating lease liabilities, noncurrent
39,361
50,360
Long-term debt
-
18,251
Deferred revenue, noncurrent
52,497
47,085
Deferred tax liabilities
2,394
2,434
Other noncurrent liabilities
3,695
7,067
Total liabilities
469,018
518,212
Stockholders’ equity: Common stock, $0.001 par value
126
114
Treasury stock
(26,023)
(20,886)
Additional paid-in capital
684,988
548,993
Accumulated deficit
(78,979)
(228,492)
Accumulated other comprehensive loss
(844)
(1,890)
Total stockholders’ equity
579,268
297,839
Total liabilities and stockholders’ equity
$ 1,048,286
$ 816,051
Condensed Consolidated Statements of Cash Flows (unaudited,
dollars in thousands)
Six Months Ended
April 3, 2021
March 28, 2020
Cash flows from operating activities Net income
$
149,513
$
18,454
Adjustments to reconcile net income to net cash provided by
operating activities Depreciation and amortization
16,725
18,831
Stock-based compensation expense
31,207
26,598
Other
344
2,989
Deferred income taxes
(146
)
74
Foreign currency transaction gain
(1,047
)
(420
)
Changes in operating assets and liabilities: Accounts receivable,
net
(13,260
)
63,344
Inventories
39,631
106,245
Other assets
(21,982
)
(9,690
)
Accounts payable and accrued expenses
(36,485
)
(191,070
)
Accrued compensation
2,087
(14,443
)
Deferred revenue
8,374
3,729
Other liabilities
992
10,727
Net cash provided by operating activities
175,953
35,368
Cash flows from investing activities Purchases of property
and equipment, intangible and other assets
(19,927
)
(25,800
)
Cash paid for acquisition, net of acquired cash
-
(36,289
)
Net cash used in investing activities
(19,927
)
(62,089
)
Cash flows from financing activities Repayments of
borrowings
(25,000
)
(3,333
)
Payments for repurchase of common stock
(682
)
(33,216
)
Proceeds from exercise of common stock options
119,166
12,585
Payments for repurchase of common stock related to shares withheld
for tax in connection with vesting of restricted stock units
(18,821
)
(4,596
)
Net cash provided by (used in) financing activities
74,663
(28,560
)
Effect of exchange rate changes on cash, cash equivalents and
restricted cash
1,139
(107
)
Net increase (decrease) in cash, cash equivalents and restricted
cash
231,828
(55,388
)
Cash, cash equivalents and restricted cash Beginning of
period
407,291
338,820
End of period
$
639,119
$
283,432
Supplemental disclosure Cash paid for interest
$
357
$
851
Cash paid for taxes, net of refunds
$
3,255
$
1,025
Cash paid for amounts included in the measurement of lease
liabilities
$
11,683
$
7,346
Supplemental disclosure of non-cash investing and financing
activities Purchases of property and equipment in accounts
payable and accrued expenses
$
8,910
$
3,270
Right-of-use assets obtained in exchange for new operating lease
liabilities
$
1,622
$
75,642
Reconciliation of Net Income (Loss) to Adjusted EBITDA
(unaudited, dollars in thousands)
Three Months Ended
Six Months Ended
April 3, 2021
March 28, 2020
April 3, 2021
March 28, 2020
Net income (loss)
$
17,221
$
(52,320
)
$
149,513
$
18,454
Add (deduct): Depreciation and amortization
8,742
9,726
16,725
18,831
Stock-based compensation expense
16,363
13,394
31,207
26,598
Interest income
(44
)
(874
)
(80
)
(1,873
)
Interest expense
182
374
448
827
Other (income) expense, net
1,578
1,423
(2,680
)
(3,001
)
Provision for (benefit from) income taxes
(6,542
)
(1,810
)
2,578
(153
)
Restructuring and related expenses (1)
-
-
(2,611
)
-
Legal and transaction related costs (2)
11,013
1,705
19,679
5,153
Adjusted EBITDA
$
48,513
$
(28,382
)
$
214,779
$
64,836
Revenue
$
332,949
$
175,098
$
978,532
$
737,181
Adjusted EBITDA margin
14.6
%
(16.2
)%
21.9
%
8.8
%
(1) Restructuring and related expenses for the six months ended
April 3, 2021 includes a gain of $2.8 million, related to our
negotiation for the early termination of a facility lease that was
part of the 2020 restructuring plan. The gain represents the
difference between the related operating lease liability and
previously accrued restructuring expenses versus the early
termination payment. For a description of the 2020 restructuring
plan, see “Restructuring and Related Costs” below.
(2) Legal and transaction related costs consist of expenses
related to our intellectual property ("IP") litigation against
Alphabet Inc. and Google LLC as well as legal and transaction costs
associated with our acquisition activity, which we do not consider
representative of our underlying operating performance.
Reconciliation of Cash Flows Provided by Operating Activities to
Free Cash Flow (unaudited, dollars in thousands)
Six Months Ended
April 3, 2021
March 28, 2020
Cash flows provided by operating activities
$175,953
$35,368
Less: Purchases of property and equipment, intangible and other
assets
(19,927)
(25,800)
Free cash flow
$ 156,026
$ 9,568
Revenue by Product Category (unaudited, dollars in
thousands)
Three Months Ended
Six Months Ended
April 3, 2021
March 28, 2020
April 3, 2021
March 28, 2020
Sonos speakers
$ 267,534
$ 116,367
$ 795,050
$ 583,044
Sonos system products
52,062
47,202
149,820
108,723
Partner products and other revenue
13,353
11,529
33,662
45,414
Total revenue
$ 332,949
$ 175,098
$ 978,532
$ 737,181
Revenue by Geographical Region (unaudited,
dollars in thousands)
Three Months Ended
Six Months Ended
April 3, 2021
March 28, 2020
April 3, 2021
March 28, 2020
Americas
$ 193,938
$ 101,964
$ 561,177
$ 405,158
Europe, Middle East and Africa ("EMEA")
114,306
57,252
354,313
269,990
Asia Pacific ("APAC")
24,705
15,882
63,042
62,033
Total revenue
$ 332,949
$ 175,098
$ 978,532
$ 737,181
Stock-based Compensation (unaudited, dollars in thousands)
Three Months Ended
Six Months Ended
April 3, 2021
March 28, 2020
April 3, 2021
March 28, 2020
Cost of revenue
$ 261
$ 278
$ 474
$ 561
Research and development
6,683
5,427
12,942
10,543
Sales and marketing
3,632
3,407
7,040
6,948
General and administrative
5,787
4,282
10,751
8,546
Total stock-based compensation expense
$ 16,363
$ 13,394
$ 31,207
$ 26,598
Restructuring and Related Costs (1) (unaudited, dollars in
thousands)
Three Months Ended
Six Months Ended
April 3, 2021
April 3, 2021
Research and development
$
-
$
25
Sales and marketing
-
(2,636
)
Total restructuring and related costs
$
-
$
(2,611
)
(1) On June 23, 2020, we initiated a restructuring plan as part
of our efforts to reduce operating expenses and preserve liquidity
due to the uncertainty and challenges stemming from the COVID-19
pandemic. As part of the 2020 restructuring plan, we eliminated
approximately 12% of our global headcount and closed our New York
retail store and six satellite offices. We believe these
initiatives will better align our resources to provide further
operating flexibility and more efficiently position our business
for our long-term strategy. Activities under the 2020 restructuring
plan were substantially completed in the first quarter of fiscal
2021. In the first quarter of fiscal 2021, we negotiated the early
termination of a facility lease that was part of the 2020
restructuring and recorded a gain of $2.8 million, representing the
difference between the related operating lease liability and
previously accrued restructuring expenses versus the early
termination payment. The gain was recognized as a credit in sales
and marketing expenses on the condensed consolidated statements of
operations and comprehensive income.
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, net income excluding
stock-based compensation, restructuring, and legal and transaction
related fees, and diluted earnings per share (EPS) excluding
stock-based compensation, restructuring, and legal and transaction
related fees. 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 adjusted to exclude the impact
of depreciation, stock-based compensation expense, interest income,
interest expense, other income (expense), income taxes 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 and
intangible assets. We calculate non-GAAP net income excluding
stock-based compensation, restructuring and legal and transaction
related fees as net income less stock-based compensation,
restructuring fees and legal and transaction related fees. We
calculate non-GAAP diluted earnings per share (EPS) excluding
stock-based compensation, restructuring, and legal and transaction
related fees as net income less stock-based compensation,
restructuring costs and legal and transaction related fees 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 outlook for the fiscal year ended
October 2, 2021, our long-term focus, financial, growth and
business strategies and opportunities, growth metrics and targets,
our business model, new products, services and partnerships,
profitability and gross margins, our direct-to-consumer efforts,
our market share, 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 the duration and
impact of the COVID-19 pandemic and related mitigation efforts on
our industry and our supply chain; supply chain challenges,
including shipping and logistics challenges and significant limits
on component supplies; changes in general economic or market
conditions that could affect consumer income and overall consumer
spending; 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 meet and accurately
forecast product demand and manage any product availability delays;
and the other risk factors set forth under the caption “Risk
Factors” in our Quarterly Report on Form 10-Q for the quarter ended
January 2, 2021 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.
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version on businesswire.com: https://www.businesswire.com/news/home/20210512005928/en/
Investor Contact Cammeron McLaughlin IR@sonos.com
Press Contact Tom Lodge PR@sonos.com
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