Q1 revenue near high-end of guidance range,
announced reduction in force
Sonos, Inc. (Nasdaq: SONO) today reported First Quarter Fiscal
2025 results.
“Yesterday we implemented important organizational changes that
mark the start of a new chapter of efficiency and growth for
Sonos,” said Tom Conrad, Sonos Interim CEO. “I see tremendous
opportunity in front of us. The team and I are hard at work
improving the core experience for our customers while designing the
next set of Sonos products and innovations. It’s an honor to show
up every day to do this work with the talented Sonos team.”
“Our Q1 results show our team’s commitment to execution as we
navigate a difficult environment,” commented Saori Casey, Sonos
Chief Financial Officer. “We continue to make great progress in our
transformation journey that will set us up well for the
future.”
First Quarter Fiscal 2025 Financial Highlights
(unaudited)
- Revenue of $551 million
- GAAP gross margin of 43.8%
- GAAP net income of $50.2 million, GAAP diluted earnings per
share (EPS) of $0.40
- Non-GAAP net income1 of $79.2 million, Non-GAAP diluted EPS1 of
$0.64
- Adjusted EBITDA1 of $91.2 million
Notes:
(1) Non-GAAP net income/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.
Reorganization and Reduction in Force
- The company announced a reorganization and reduction in force
involving approximately 12% of its employees in a Form 8-K filed
with the SEC on February 5, 2025
- The company estimates that it will incur approximately $15 to
$18 million of restructuring and related charges, substantially all
of which are related to employee severance and benefits costs. The
company expects to incur substantially all of the restructuring and
related charges in the second quarter of fiscal 2025
Guidance
The company will provide guidance on its First Quarter Fiscal
2025 earnings call.
Supplemental Earnings Presentation
The company has posted a supplemental earnings presentation
accompanying its First 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 First Quarter Fiscal 2025 results on
February 6, 2025, at 4:15 p.m. Eastern Time (1:15 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
(unaudited, in thousands, except share and
per share amounts)
Three Months Ended
December 28,
2024
December 30,
2023
Revenue
$
550,857
$
612,869
Cost of revenue
309,451
330,190
Gross profit
241,406
282,679
Operating expenses
Research and development
80,838
79,235
Sales and marketing
86,644
83,950
General and administrative
25,831
39,799
Total operating expenses
193,313
202,984
Operating income
48,093
79,695
Other income (expense), net
Interest income
1,861
3,075
Interest expense
(110
)
(105
)
Other (expense) income, net
(6,029
)
10,274
Total other (expense) income, net
(4,278
)
13,244
Income before (benefit from) provision for
income taxes
43,815
92,939
(Benefit from) provision for income
taxes
(6,422
)
11,992
Net income
$
50,237
$
80,947
Net income attributable to common
stockholders:
Basic and diluted
$
50,237
$
80,947
Net income per share attributable to
common stockholders:
Basic
$
0.41
$
0.65
Diluted
$
0.40
$
0.64
Weighted-average shares used in computing
net income per share attributable to common stockholders:
Basic
122,071,586
125,181,717
Diluted
124,731,619
126,742,153
Total comprehensive income
Net income
50,237
80,947
Change in foreign currency translation
adjustment
(1,116
)
(863
)
Net unrealized gain on marketable
securities
(84
)
—
Comprehensive income
$
49,037
$
80,084
Consolidated Balance Sheets
(unaudited, in thousands, except par
values)
As of
December 28,
2024
September 28,
2024
Assets
Current assets:
Cash and cash equivalents
$
279,955
$
169,732
Marketable securities
47,902
51,426
Accounts receivable, net
84,786
44,513
Inventories
140,892
231,505
Prepaids and other current assets
58,991
53,910
Total current assets
612,526
551,086
Property and equipment, net
95,028
102,148
Operating lease right-of-use assets
47,935
50,175
Goodwill
82,854
82,854
Intangible assets, net
In-process research and development
—
73,770
Other intangible assets
84,488
14,266
Deferred tax assets
9,654
10,314
Other noncurrent assets
31,120
31,699
Total assets
$
963,605
$
916,312
Liabilities and stockholders’
equity
Current liabilities:
Accounts payable
$
162,080
$
194,590
Accrued expenses
108,871
87,783
Accrued compensation
28,509
15,701
Deferred revenue, current
20,973
21,802
Other current liabilities
52,081
46,277
Total current liabilities
372,514
366,153
Operating lease liabilities,
noncurrent
56,786
56,588
Deferred revenue, noncurrent
61,245
61,075
Deferred tax liabilities
176
60
Other noncurrent liabilities
3,757
3,816
Total liabilities
494,478
487,692
Commitments and contingencies
Stockholders’ equity:
Common stock, $0.001 par value
125
123
Treasury stock
(48,504
)
(17,096
)
Additional paid-in capital
521,121
498,245
Accumulated deficit
(697
)
(50,934
)
Accumulated other comprehensive loss
(2,918
)
(1,718
)
Total stockholders’ equity
469,127
428,620
Total liabilities and stockholders’
equity
$
963,605
$
916,312
Consolidated Statements of Cash
Flows
(unaudited, dollars in thousands)
Three Months Ended
December 28,
2024
December 30,
2023
Cash flows from operating
activities
Net income
$
50,237
$
80,947
Adjustments to reconcile net income to net
cash provided by operating activities:
Stock-based compensation expense
25,334
19,358
Depreciation and amortization
17,611
11,878
Provision for inventory obsolescence
1,305
5,837
Restructuring and abandonment charges
—
260
Deferred income taxes
123
(45
)
Other
841
1,236
Foreign currency transaction loss
(gain)
2,129
(7,388
)
Changes in operating assets and
liabilities:
Accounts receivable
(41,374
)
(12,215
)
Inventories
89,308
167,641
Other assets
(6,437
)
(12,878
)
Accounts payable and accrued expenses
(5,940
)
(7,429
)
Accrued compensation
12,394
5,988
Deferred revenue
1,513
3,660
Other liabilities
9,129
18,551
Net cash provided by operating
activities
156,173
275,401
Cash flows from investing
activities
Purchases of marketable securities
(10,128
)
—
Purchases of property and equipment
(13,106
)
(6,077
)
Maturities of marketable securities
13,900
—
Net cash used in investing activities
(9,334
)
(6,077
)
Cash flows from financing
activities
Payments for repurchase of common stock,
including excise tax and commission
(27,165
)
(23,484
)
Payments for repurchase of common stock
related to shares withheld for tax in connection with vesting of
restricted stock units
(9,044
)
(3,745
)
Proceeds from exercise of stock
options
2,411
3,538
Net cash used in financing activities
(33,798
)
(23,691
)
Effect of exchange rate changes on cash
and cash equivalents
(2,818
)
1,478
Net increase in cash and cash
equivalents
110,223
247,111
Cash and cash equivalents
Beginning of period
169,732
220,231
End of period
$
279,955
$
467,342
Supplemental disclosure
Cash paid for interest
$
63
$
58
Cash paid for taxes, net of refunds
$
658
$
3,684
Cash paid for amounts included in the
measurement of lease liabilities, net of tenant improvement
reimbursements received
$
(2,531
)
$
2,601
Supplemental disclosure of non-cash
investing and financing activities
Purchases of property and equipment in
accounts payable and accrued expenses
$
3,693
$
6,141
Right-of-use assets obtained in exchange
for new operating lease liabilities
$
—
$
7,637
Excise tax on share repurchases, accrued
but not paid
$
668
$
—
Reconciliation of GAAP to Non-GAAP Cost
of Revenue and Gross Profit
(unaudited, in thousands, except
percentages)
Three Months Ended
December 28,
2024
December 30,
2023
Reconciliation of GAAP cost of
revenue
GAAP cost of revenue
$
309,451
$
330,190
Stock-based compensation expense
1,349
654
Amortization of intangibles
3,330
972
Non-GAAP cost of revenue
$
304,772
$
328,564
Reconciliation of GAAP gross
profit
GAAP gross profit
$
241,406
$
282,679
Stock-based compensation expense
1,349
654
Amortization of intangibles
3,330
972
Non-GAAP gross profit
$
246,085
$
284,305
GAAP gross margin
43.8
%
46.1
%
Non-GAAP gross margin
44.7
%
46.4
%
Reconciliation of Selected Non-GAAP
Financial Measures
(unaudited, dollars in thousands)
Three Months Ended
December 28,
2024
December 30,
2023
GAAP Research and Development
$
80,838
$
79,235
Stock-based compensation
13,315
8,979
Amortization of intangibles
178
496
Restructuring and abandonment costs
(60
)
323
Non-GAAP Research and
Development
$
67,405
$
69,437
GAAP Sales and Marketing
$
86,644
$
83,950
Stock-based compensation
5,632
3,815
Amortization of intangibles
-
-
Restructuring and abandonment costs
-
113
Non-GAAP Sales and Marketing
$
81,012
$
80,022
GAAP General and Administrative
25,831
39,799
Stock-based compensation
5,038
5,910
Legal and transaction related costs
195
3,743
Amortization of intangibles
23
24
Restructuring and abandonment costs
-
132
Non-GAAP General and
Administrative
$
20,575
$
29,990
GAAP Operating Expenses
$
193,313
$
202,984
Stock-based compensation
23,985
18,704
Legal and transaction related costs
195
3,743
Amortization of intangibles
201
520
Restructuring and abandonment costs
(60
)
568
Non-GAAP Operating Expenses
$
168,992
$
179,449
GAAP Operating Income
$
48,093
$
79,695
Stock-based compensation
25,334
19,358
Legal and transaction related costs
195
3,743
Amortization of intangibles
3,531
1,492
Restructuring and abandonment costs
(60
)
568
Non-GAAP Operating Income
$
77,093
$
104,856
Depreciation
14,080
10,386
Adjusted EBITDA (Non-GAAP)
$
91,173
$
115,242
Reconciliation of Net Income to
Adjusted EBITDA
(unaudited, dollars in thousands except
percentages)
Three Months Ended
December 28,
2024
December 30,
2023
(In thousands, except
percentages)
Net income
$
50,237
$
80,947
Add (deduct):
Depreciation and amortization
17,611
11,878
Stock-based compensation expense
25,334
19,358
Interest income
(1,861
)
(3,075
)
Interest expense
110
105
Other expense (income), net
6,029
(10,274
)
(Benefit from) provision for income
taxes
(6,422
)
11,992
Legal and transaction related costs
(1)
195
3,743
Restructuring and abandonment costs
(2)
(60
)
568
Adjusted EBITDA
$
91,173
$
115,242
Revenue
$
550,857
$
612,869
Net income margin
9.1
%
13.2
%
Adjusted EBITDA margin
16.6
%
18.8
%
(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 August 14, 2024, we initiated a
restructuring plan to reduce our cost base involving approximately
6% of our employees (the "2024 restructuring plan"). Substantially
all restructuring related costs were incurred in the fourth quarter
of fiscal 2024. In the first quarter of fiscal 2025, we recorded a
gain resulting from the impact of remaining restructuring costs
that were lower than our estimated liability. The gain was
recognized as a credit in research and development expenses on the
condensed consolidated statements of operations and comprehensive
income. For fiscal 2024, restructuring and abandonment costs also
include nominal remaining costs incurred related to the
restructuring plan incurred on June 14, 2023.
Reconciliation of GAAP Net Income to
Non-GAAP Net Income
(unaudited, in thousands, except share and
per share amounts)
Three Months Ended
December 28,
2024
December 30,
2023
Reconciliation of GAAP net
income
GAAP net income
$
50,237
$
80,947
Stock-based compensation expense
25,334
19,358
Legal and transaction related costs
195
3,743
Amortization of intangibles
3,531
1,492
Restructuring and abandonment costs
(60
)
568
Non-GAAP net income
$
79,237
$
106,108
Net income per share
GAAP net income per share, diluted
$
0.40
$
0.64
Non-GAAP net income per share, diluted
$
0.64
$
0.84
Shares used to calculate net income per
share
Weighted-average shares GAAP, diluted
124,731,619
126,742,153
Weighted-average shares non-GAAP,
diluted
124,731,619
126,742,153
Reconciliation of Cash Flows Provided
by Operating Activities to Free Cash Flow
(unaudited, dollars in thousands)
Three Months Ended
December 28,
2024
December 30,
2023
Cash flows provided by operating
activities
$
156,173
$
275,401
Less: Purchases of property and
equipment
(13,106
)
(6,077
)
Free cash flow
$
143,067
$
269,324
Revenue by Product Category
(unaudited, dollars in thousands)
Three Months Ended
December 28,
2024
December 30,
2023
(In thousands)
Sonos speakers
$
467,142
$
503,011
Sonos system products
60,274
84,562
Partner products and other revenue
23,441
25,296
Total revenue
$
550,857
$
612,869
Revenue by Geographical Region
(unaudited, dollars in thousands)
Three Months Ended
December 28,
2024
December 30,
2023
Americas
$
324,583
$
392,439
Europe, Middle East and Africa
197,612
191,817
Asia Pacific
28,662
28,613
Total revenue
$
550,857
$
612,869
Stock-based Compensation
(unaudited, dollars in thousands)
Three Months Ended
December 28,
2024
December 30,
2023
(In thousands)
Cost of revenue
$
1,349
$
654
Research and development
13,315
8,979
Sales and marketing
5,632
3,815
General and administrative
5,038
5,910
Total stock-based compensation expense
$
25,334
$
19,358
Amortization of Intangibles
(unaudited, dollars in thousands)
Three Months Ended
December 28,
2024
December 30,
2023
Cost of revenue
$
3,330
$
972
Research and development
178
496
Sales and marketing
-
-
General and administrative
23
24
Total amortization of intangibles
$
3,531
$
1,492
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 excluding stock-based compensation, legal and transaction
related fees, amortization of intangibles, and restructuring and
abandonment costs and diluted earnings 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 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 excluding stock-based compensation,
legal and transaction related fees, amortization of intangibles and
restructuring and abandonment costs as net income less stock-based
compensation, legal and transaction related fees, amortization of
intangibles and restructuring and abandonment costs. We calculate
non-GAAP diluted earnings per share excluding stock-based
compensation, legal and transaction related fees, amortization of
intangibles and restructuring and abandonment costs as net income
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, market growth and our market share, our ability to expand
our footprint with existing customers, our operating model and cost
structure, our expectations with respect to restructuring and
related charges and the timing and amounts of such charges, 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 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 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.
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version on businesswire.com: https://www.businesswire.com/news/home/20250206441704/en/
Investor Contact James Baglanis IR@sonos.com
Press Contact Erin Pategas PR@sonos.com
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