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Published: 2023-11-15 16:08:42 ET
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EX-99.1 2 sono-ex99_1.htm EX-99.1 EX-99.1

Exhibit 99.1

img161172520_0.jpg 

Sonos Reports Fourth Quarter and Fiscal 2023 Results

 

Santa Barbara, CA – November 15, 2023 - Sonos, Inc. (Nasdaq: SONO) today reported fourth quarter and fiscal 2023 results.

 

Fiscal 2023 Financial Highlights (unaudited)

●
Revenue decreased 5.5% year-over-year to $1,655.3 million; on a constant-currency basis, revenue decreased 3.3% year-over-year
●
Gross margin decreased 220 basis points year-over-year to 43.3%
●
GAAP net loss of $10.3 million compared to net income of $67.4 million last year
○
GAAP diluted loss per share of $(0.08) compared to GAAP diluted earnings per share (EPS) of $0.49 last year
●
Non-GAAP net income1 of $121.4 million compared to $171.1 million last year
○
Non-GAAP diluted EPS1 of $0.92 compared to $1.24 last year
●
GAAP net loss margin of 0.6% compared to net income margin of 3.8% last year
●
Adjusted EBITDA1 of $153.9 million compared to $226.5 million last year
○
Adjusted EBITDA margin1 of 9.3% compared to 12.9% last year
●
Free cash flow of $50.1 million. Cash flows from operating activities of $100.4 million

 

Fourth Quarter 2023 Financial Highlights (unaudited)

●
Revenue decreased 3.5% year-over-year to $305.1 million; on a constant-currency basis, revenue decreased 5.1% year-over-year
●
Gross margin increased 270 basis points year-over-year to 42.0%
●
GAAP net loss of $31.2 million compared to $64.1 million last year
○
GAAP diluted loss per share of $(0.25) compared to GAAP diluted EPS of $0.50 last year
●
Non-GAAP net loss1 of $9.0 million compared to $38.3 million last year
○
Non-GAAP diluted loss per share1 of $(0.07) compared to $(0.30) last year
●
GAAP net loss margin of 10.2% compared to 20.3% last year
●
Adjusted EBITDA1 of $6.3 million compared to $(25.6) million last year
○
Adjusted EBITDA margin1 of 2.1% compared to (8.1)% last year
●
Free cash flow of $12.0 million. Cash flows from operating activities of $22.2 million
○
Inventories of $346.5 million, increased 16.2% from last quarter
○
Finished goods of $281.6 million, increased 17.3% from last quarter

 

Notes: 1 Non-GAAP net income (loss)/Non-GAAP diluted earnings (loss) per share, Adjusted EBITDA and Adjusted EBITDA margin 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.

 

Sonos CEO Patrick Spence commented, “While it was a challenging year in the categories in which we play, the strength of the Sonos brand and product portfolio enabled us to retain a strong market share position. We successfully raised the bar in the speaker category with the

 

 

introduction of our new Era products, and extended our leadership in the premium portable category with Move 2. And we delivered on our commitment to EBITDA margin in spite of the headwinds we faced.”

 

Mr. Spence continued, “As we enter Fiscal 2024, we are laser focused on execution and positioning our business to return to top and bottom line growth when conditions improve. While current market conditions remain challenging, this is the beginning of a multi-year product cycle where we expect to reap the rewards of our R&D investments. This cycle begins with our entry into a new multi-billion dollar category in the second half of the year that will complement our current offering, delight customers and drive immediate revenue. We are so excited about what we have to share with the world in Fiscal 2024 and beyond.”

 

 

Fiscal 2024 Outlook

 

 

Low end

Midpoint

High end

Revenue ($ million)

1,600

1,650

1,700

 

% y/y

-3%

0%

3%

 

% y/y - constant currency

-3%

0%

3%

 

 

 

 

 

Gross margin - GAAP

45.0%

45.5%

46.0%

 

Adjustments⁽¹⁾

0.4%

0.4%

0.4%

Gross margin - Non-GAAP⁽¹⁾

45.4%

45.9%

46.4%

 

 

 

 

 

Adjusted EBITDA ($ million)

150

165

180

 

Adjusted EBITDA margin

9.4%

10.0%

10.6%

 

Notes:
(1) Non-GAAP gross margin excludes approximately $7 million (0.4% of revenue) of stock-based compensation and amortization of intangible assets included in GAAP gross margin

 

Fiscal 2023 Company Highlights (unaudited)

Key Metrics:

●
Total households increased 9% to 15.3 million in Fiscal 2023
●
Existing households accounted for 44% of new product registrations in Fiscal 2023
●
Average number of registered products per household of 3.05 in Fiscal 2023 vs 2.98 last year
●
Direct-to-consumer (DTC) revenue was flat year-over-year and represented 24% of total revenue
●
Installer Solutions (IS) revenue decreased 7% year-over-year and represented 21% of total revenue

 

New Stock Repurchase Program

●
As announced in a separate release today, the company’s Board of Directors has authorized a new common stock repurchase program of up to $200 million.
●
Under its most recently completed repurchase program, the company repurchased $100 million in stock, representing 6.6 million shares at an average price of $15.25 per share,

 

 

enabling the company to return capital to shareholders and offset dilution from compensation plans

 

Continued Product Innovation

●
Era 100 - $249 MSRP. Only marginally larger than its predecessor, Sonos One, Era 100 boasts a new design and faster processing power, with a next-generation acoustic architecture that delivers detailed stereo sound and more powerful bass
●
Era 300 - $449 MSRP. Era 300 delivers an unprecedented spatial audio experience for a single all-in-one speaker. With support for Dolby Atmos, the breakthrough design features six drivers that create a three-dimensional soundstage and make listeners feel like they're inside their music and movies
●
Move 2 - $449 MSRP. The best-selling portable speaker has been revamped. Taking inspiration from the acoustic architecture developed for Era 100, Move 2 produces powerful stereo sound and up to 24 hours of battery life — more than twice that of the first generation — in an ultra durable and water-resistant design
●
Sub Mini - $429 MSRP. Building on the award-winning Sonos Sub, this wireless subwoofer delivers rich, balanced bass in a more compact and equally iconic design. When paired with recommended speakers, Sub Mini creates a more immersive sound experience
●
Sonos Pro - This new software as a service (SaaS) offering gives business owners the power to control Sonos across multiple locations. With this subscription-based solution, business owners get access to a web-based dashboard for remote monitoring and management, commercially-licensed music, and personalized support

 

Expansion of our Brand

●
Brand Partnerships - More than 30k consumers, industry and press visited the sound experience at the Dolby House during SXSW, March 2023
●
Advocacy - The Era Advocacy campaign enlisted more than 130 influencers, creating 350 pieces of bespoke content that resulted in more than 12M impressions and 10M views
●
Retail - Global impact retail partnerships delivered unique brand and product experiences for consumers amplified by local PR and advocate partnerships
●
Installer Solutions - The Sonos Professional experience at CEDIA Expo, the premier tradeshow summit for home technology integration professionals, saw over 3,500 integrators, distribution partners, and strategic partners visit the booth

 

Responsible Innovation

●
Recognized as one of the best places to work for LGBTQ+ equality by the Human Rights Campaign Foundation.
●
Publishing annual Listen Better Report in the coming weeks, highlighting the progress we’ve made on our sustainability and social impact work. In Fiscal 2023, we advanced our Climate Action Plan to become carbon neutral by 2030 and net zero by 2040. We also disclosed our Scope 1, 2, and 3 greenhouse gas emissions to the Carbon Disclosure Project (CDP).
●
We built sustainability into all three of our new marquee products: Era 100, Era 300, and Move 2. We also introduced Product Environmental Reports to enhance our

 

 

transparency. These reports provide detailed information about the materials and environmental footprint of each new product.
●
Won Best In Show at the 2023 Dieline Awards for our sustainable paper-based Ray and Sub Mini product packaging.
●
Launched partnership with 1% for the Planet to donate 1% of Certified Refurbished sales to high-impact nonprofits focused on environmental preservation and restoration.
●
Improved our ESG ratings from multiple rating agencies, including from Medium Risk to Low Risk by Sustainalytics.

 

Supplemental Earnings Presentation

 

The company has posted a supplemental earnings presentation accompanying its fourth quarter and fiscal 2023 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 fourth quarter and fiscal 2023 results on November 15, 2023, 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) Income

(unaudited, in thousands, except share and per share amounts)

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Twelve Months Ended

 

 

September 30,

2023

 

October 1,

2022

 

September 30,

2023

 

October 1,

2022

Revenue

 

$ 305,147

 

$ 316,290

 

$ 1,655,255

 

$ 1,752,336

Cost of revenue

 

177,093

 

192,191

 

938,765

 

955,969

Gross profit

 

128,054

 

124,099

 

716,490

 

796,367

Operating expenses

 

 

 

 

 

 

 

 

Research and development

 

65,517

 

67,274

 

301,001

 

256,073

Sales and marketing

 

58,601

 

72,649

 

267,518

 

280,333

General and administrative

 

32,297

 

44,240

 

168,518

 

170,429

Total operating expenses

 

156,415

 

184,163

 

737,037

 

706,835

Operating (loss) income

 

(28,361)

 

(60,064)

 

(20,547)

 

89,532

Other income (expense), net

 

 

 

 

 

 

 

 

Interest income

 

2,661

 

1,070

 

10,201

 

1,655

Interest expense

 

(149)

 

(168)

 

(733)

 

(552)

Other (expense) income, net

 

(6,696)

 

(8,364)

 

15,473

 

(21,905)

Total other (expense) income, net

 

(4,184)

 

(7,462)

 

24,941

 

(20,802)

(Loss) income before (benefit from) provision for income taxes

 

(32,545)

 

(67,526)

 

4,394

 

68,730

(Benefit from) provision for income taxes

 

(1,306)

 

(3,459)

 

14,668

 

1,347

Net (loss) income

 

$ (31,239)

 

$ (64,067)

 

$ (10,274)

 

$ 67,383

 

 

 

 

 

 

 

 

 

Net (loss) income attributable to common stockholders:

 

 

 

 

 

 

 

 

Basic and diluted

 

$ (31,239)

 

$ (64,067)

 

$ (10,274)

 

$ 67,383

 

 

 

 

 

 

 

 

 

Net (loss) income per share attributable to common stockholders:

 

 

 

 

 

 

 

 

Basic

 

$ (0.25)

 

$ (0.50)

 

$ (0.08)

 

$ 0.53

Diluted

 

$ (0.25)

 

$ (0.50)

 

$ (0.08)

 

$ 0.49

 

 

 

 

 

 

 

 

 

Weighted-average shares used in computing net (loss) income per share attributable to common stockholders:

 

 

 

 

 

 

 

 

Basic

 

127,335,311

 

127,104,659

 

127,702,885

 

127,691,030

 

 

Diluted

 

127,335,311

 

127,104,659

 

127,702,885

 

137,762,078

 

 

 

 

 

 

 

 

 

Total comprehensive (loss) income

 

 

 

 

 

 

 

 

Net (loss) income

 

(31,239)

 

(64,067)

 

(10,274)

 

67,383

Change in foreign currency translation adjustment

 

2,035

 

(249)

 

153

 

(2,221)

Comprehensive (loss) income

 

$ (29,204)

 

$ (64,316)

 

$ (10,121)

 

$ 65,162

 

Consolidated Balance Sheets

(unaudited, in thousands, except par values)

 

 

As of

 

 

September 30,

2023

 

October 1,

2022

Assets

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$ 220,231

 

$ 274,855

Accounts receivable, net of allowances

 

67,583

 

101,206

Inventories

 

346,521

 

454,288

Prepaids and other current assets

 

25,296

 

37,042

Total current assets

 

659,631

 

867,391

Property and equipment, net

 

87,075

 

86,168

Operating lease right-of-use assets

 

48,918

 

28,329

Goodwill

 

80,420

 

77,300

Intangible assets, net

 

 

 

 

In-process research and development

 

69,791

 

64,680

Other intangible assets

 

20,218

 

26,384

Deferred tax assets

 

1,659

 

1,508

Other noncurrent assets

 

34,529

 

36,628

Total assets

 

$ 1,002,241

 

$ 1,188,388

 

 

 

 

 

Liabilities and stockholders’ equity

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable

 

$ 187,981

 

$ 335,758

Accrued expenses

 

89,717

 

109,290

Accrued compensation

 

22,079

 

23,624

Deferred revenue, current

 

20,188

 

27,318

Other current liabilities

 

34,253

 

39,649

Total current liabilities

 

354,218

 

535,639

Operating lease liabilities, noncurrent

 

54,956

 

25,596

Deferred revenue, noncurrent

 

60,650

 

56,152

Deferred tax liabilities

 

9,846

 

9,642

 

 

Other noncurrent liabilities

 

3,914

 

846

Total liabilities

 

483,584

 

627,875

 

 

 

 

 

Commitments and contingencies

 

 

 

 

Stockholders’ equity:

 

 

 

 

Common stock, $0.001 par value

 

130

 

130

Treasury stock

 

(72,586)

 

(50,896)

Additional paid-in capital

 

607,345

 

617,390

Retained earnings (accumulated deficit)

 

(12,788)

 

(2,514)

Accumulated other comprehensive loss

 

(3,444)

 

(3,597)

Total stockholders’ equity

 

518,657

 

560,513

Total liabilities and stockholders’ equity

 

$ 1,002,241

 

$ 1,188,388

 

Consolidated Statements of Cash Flows

(unaudited, dollars in thousands)

 

 

Twelve Months Ended

 

 

September 30,

2023

 

October 1,

2022

Cash flows from operating activities

 

 

 

 

Net (loss) income

 

$ (10,274)

 

$ 67,383

Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:

 

 

 

 

Depreciation and amortization

 

48,969

 

38,504

Restructuring and abandonment charges

 

5,533

 

—

Stock-based compensation expense

 

76,857

 

75,640

Provision for inventory obsolescence

 

20,640

 

6,276

Other

 

5,535

 

4,705

Deferred income taxes

 

(583)

 

(1,508)

Foreign currency transaction (gain) loss

 

(7,335)

 

10,775

Changes in operating assets and liabilities:

 

 

 

 

Accounts receivable, net

 

32,120

 

(5,513)

Inventories

 

87,004

 

(277,489)

Other assets

 

10,470

 

(16,604)

Accounts payable and accrued expenses

 

(162,345)

 

129,686

Accrued compensation

 

(2,185)

 

(52,904)

Deferred revenue

 

(4,576)

 

(1,667)

Other liabilities

 

576

 

(5,544)

Net cash provided by (used in) operating activities

 

100,406

 

(28,260)

Cash flows from investing activities

 

 

 

 

Purchases of property and equipment, intangible and other assets

 

(50,286)

 

(46,216)

Cash paid for acquisitions, net of acquired cash

 

—

 

(126,416)

 

 

Net cash used in investing activities

 

(50,286)

 

(172,632)

Cash flows from financing activities

 

 

 

 

Payments for debt issuance costs

 

—

 

(929)

Proceeds from exercise of stock options

 

21,346

 

40,443

Payments for repurchase of common stock

 

(100,064)

 

(150,121)

Payments for repurchase of common stock related to shares withheld for tax in connection with vesting of restricted stock units

 

(29,874)

 

(39,653)

Net cash provided by (used in) financing activities

 

(108,592)

 

(150,260)

Effect of exchange rate changes on cash and cash equivalents

 

3,848

 

(14,094)

Net increase (decrease) in cash and cash equivalents

 

(54,624)

 

(365,246)

Cash and cash equivalents

 

 

 

 

Beginning of period

 

274,855

 

640,101

End of period

 

$ 220,231

 

$ 274,855

Supplemental disclosure

 

 

 

 

Cash paid for interest

 

$ 1,330

 

$ 344

Cash paid for taxes, net of refunds

 

$ 9,522

 

$ 9,306

Cash paid for amounts included in the measurement of lease liabilities

 

$ 14,218

 

$ 14,636

Supplemental disclosure of non-cash investing and financing activities

 

 

 

 

Purchases of property and equipment in accounts payable and accrued expenses

 

$ 2,784

 

$ 9,112

Right-of-use assets obtained in exchange for new operating lease liabilities

 

$ 31,692

 

$ 5,054

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 30,

2023

 

October 1,

2022

 

September 30,

2023

 

October 1,

2022

Reconciliation of GAAP cost of revenue

 

 

 

 

 

 

 

 

GAAP cost of revenue

 

$ 177,093

 

$ 192,191

 

$ 938,765

 

$ 955,969

Stock-based compensation expense

 

437

 

467

 

2,038

 

1,620

Amortization of intangibles

 

973

 

1,510

 

4,103

 

2,149

Non-GAAP cost of revenue

 

$ 175,683

 

$ 190,214

 

$ 932,624

 

$ 952,200

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of GAAP gross profit

 

 

 

 

 

 

 

 

GAAP gross profit

 

$ 128,054

 

$ 124,099

 

$ 716,490

 

$ 796,367

Stock-based compensation expense

 

437

 

467

 

2,038

 

1,620

Amortization of intangibles

 

973

 

1,510

 

4,103

 

2,149

Non-GAAP gross profit

 

$ 129,464

 

$ 126,076

 

$ 722,631

 

$ 800,136

 

 

 

 

 

 

 

 

 

GAAP gross margin

 

42.0%

 

39.2%

 

43.3%

 

45.4%

Non-GAAP gross margin

 

42.4%

 

39.9%

 

43.7%

 

45.7%

 

Reconciliation of Selected Non-GAAP Financial Measures

(unaudited, dollars in thousands)

 

 

Three Months Ended

 

Twelve Months Ended

 

 

September 30,

2023

 

October 1,

2022

 

September 30,

2023

 

October 1,

2022

Research and Development (GAAP)

 

$ 65,517

 

$ 67,274

 

$ 301,001

 

$ 256,073

Stock-based compensation

 

8,177

 

8,037

 

35,530

 

30,724

Amortization of intangibles

 

496

 

512

 

1,983

 

2,961

Restructuring and abandonment costs

 

188

 

-

 

6,556

 

-

Research and Development (Non-GAAP)

 

$ 56,656

 

$ 58,725

 

$ 256,932

 

$ 222,388

 

 

 

 

 

 

 

 

 

Sales and Marketing (GAAP)

 

$ 58,601

 

$ 72,649

 

$ 267,518

 

$ 280,333

Stock-based compensation

 

3,499

 

3,685

 

15,677

 

15,335

Amortization of intangibles

 

-

 

-

 

-

 

-

Restructuring and abandonment costs

 

180

 

-

 

5,635

 

-

Sales and Marketing (Non-GAAP)

 

$ 54,922

 

$ 68,964

 

$ 246,206

 

$ 264,998

 

 

 

 

 

 

 

 

 

General and Administrative (GAAP)

 

32,297

 

44,240

 

168,518

 

170,429

Stock-based compensation

 

5,195

 

5,988

 

23,612

 

27,961

Legal and transaction related costs

 

2,944

 

5,529

 

32,950

 

22,873

Amortization of intangibles

 

24

 

24

 

96

 

96

Restructuring and abandonment costs

 

106

 

-

 

3,458

 

-

Adjusted General and Administrative (Non-GAAP)

 

$ 24,028

 

$ 32,699

 

$ 108,402

 

$ 119,499

 

 

 

 

 

 

 

 

 

 

 

Total Operating Expenses (GAAP)

 

$ 156,415

 

$ 184,163

 

$ 737,037

 

$ 706,835

Stock-based compensation

 

16,871

 

17,710

 

74,819

 

74,020

Legal and transaction related costs

 

2,944

 

5,529

 

32,950

 

22,873

Amortization of intangibles

 

520

 

536

 

2,079

 

3,057

Restructuring and abandonment costs

 

474

 

-

 

15,649

 

-

Adjusted Operating Expenses (Non-GAAP)

 

$ 135,606

 

$ 160,388

 

$ 611,540

 

$ 606,885

 

 

 

 

 

 

 

 

 

Total Operating Income (GAAP)

 

$ (28,361)

 

$ (60,064)

 

$ (20,547)

 

$ 89,532

Stock-based compensation

 

17,308

 

18,177

 

76,857

 

75,640

Legal and transaction related costs

 

2,944

 

5,529

 

32,950

 

22,873

Amortization of intangibles

 

1,493

 

2,046

 

6,182

 

5,206

Restructuring and abandonment costs

 

474

 

-

 

15,649

 

-

Adjusted Operating Income (Non-GAAP)

 

$ (6,142)

 

$ (34,312)

 

$ 111,091

 

$ 193,251

Depreciation

 

12,422

 

8,759

 

42,787

 

33,298

Adjusted EBITDA (Non-GAAP)

 

$ 6,280

 

$ (25,553)

 

$ 153,878

 

$ 226,549

 

Reconciliation of Net (Loss) Income to Adjusted EBITDA

(unaudited, dollars in thousands except percentages)

 

 

Three Months Ended

 

Twelve Months Ended

 

 

September 30,

2023

 

October 1,

2022

 

September 30,

2023

 

October 1,

2022

(In thousands, except percentages)

 

 

 

 

 

 

 

 

Net (loss) income

 

$ (31,239)

 

$ (64,067)

 

$ (10,274)

 

$ 67,383

Add (deduct):

 

 

 

 

 

 

 

 

Depreciation and amortization

 

13,915

 

10,805

 

48,969

 

38,504

Stock-based compensation expense

 

17,308

 

18,177

 

76,857

 

75,640

Interest income

 

(2,661)

 

(1,070)

 

(10,201)

 

(1,655)

Interest expense

 

149

 

168

 

733

 

552

Other (income) expense, net

 

6,696

 

8,364

 

(15,473)

 

21,905

(Benefit from) provision for income taxes

 

(1,306)

 

(3,459)

 

14,668

 

1,347

Legal and transaction related costs (1)

 

2,944

 

5,529

 

32,950

 

22,873

 

 

Restructuring and abandonment costs (2)

 

474

 

-

 

15,649

 

-

Adjusted EBITDA

 

$ 6,280

 

$ (25,553)

 

$ 153,878

 

$ 226,549

Revenue

 

$ 305,147

 

$ 316,290

 

$ 1,655,255

 

$ 1,752,336

Net (loss) income margin

 

(10.2)%

 

(20.3)%

 

(0.6)%

 

3.8%

Adjusted EBITDA margin

 

2.1%

 

(8.1)%

 

9.3%

 

12.9%

(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 June 14, 2023, the Company initiated a restructuring plan to reduce its cost base (the “2023 restructuring plan”). The 2023 restructuring plan included a reduction in force involving approximately 7% of its employees, further reducing the Company’s real estate footprint, and re-evaluating certain program spend. Total pre-tax restructuring and abandonment costs under the 2023 restructuring plan were $11.4 million, substantially all of which were incurred in the third quarter of fiscal 2023, with nominal amounts to be incurred through the first quarter of fiscal 2024. Total restructuring and abandonment costs for the twelve months ended September 30, 2023, include $4.8 million non-recurring lease abandonment charges that were incurred in March 2023, when the Company abandoned portions of its office spaces for the remainder of their respective lease terms in support of operational efficiencies.

 

Reconciliation of GAAP Net (Loss) Income to Non-GAAP Net Income

(unaudited, in thousands, except share and per share amounts)

 

 

Three Months Ended

 

Twelve Months Ended

 

 

September 30,

2023

 

October 1,

2022

 

September 30,

2023

 

October 1,

2022

Reconciliation of GAAP net (loss) income

 

 

 

 

 

 

 

 

GAAP net (loss) income

 

$ (31,239)

 

$ (64,067)

 

$ (10,274)

 

$ 67,383

Stock-based compensation expense

 

17,308

 

18,177

 

76,857

 

75,640

Legal and transaction related costs

 

2,944

 

5,529

 

32,950

 

22,873

Amortization of intangibles

 

1,493

 

2,046

 

6,182

 

5,206

Restructuring and abandonment costs

 

474

 

-

 

15,649

 

-

Non-GAAP net (loss) income

 

$ (9,020)

 

$ (38,315)

 

$ 121,364

 

$ 171,102

 

 

 

 

 

 

 

 

 

Reconciliation of net (loss) income per share

 

 

 

 

 

 

 

 

GAAP net (loss) income per share, diluted

 

$ (0.25)

 

$ (0.50)

 

$ (0.08)

 

$ 0.49

Non-GAAP adjustments to net (loss) income per share

 

0.18

 

0.20

 

1.00

 

0.75

 

 

Non-GAAP net (loss) income per share, diluted

 

$ (0.07)

 

$ (0.30)

 

$ 0.92

 

$ 1.24

Weighted-average shares used in GAAP per share calculation, diluted

 

127,335,311

 

127,104,659

 

127,702,885

 

137,762,078

Weighted-average shares used in non-GAAP per share calculation, diluted

 

127,335,311

 

127,104,659

 

131,947,092

 

137,762,078

Note: Certain figures may not sum due to rounding

 

 

 

 

 

 

 

 

 

Reconciliation of Cash Flows Provided by (Used in) Operating Activities to Free Cash Flow

(unaudited, dollars in thousands)

 

 

Three Months Ended

 

Twelve Months Ended

 

 

September 30,

2023

 

October 1,

2022

 

September 30,

2023

 

October 1,

2022

Cash flows provided by (used in) operating activities

 

$ 22,195

 

$ (103,917)

 

$ 100,406

 

$ (28,260)

Less: Purchases of property and equipment, and intangible assets

 

(10,201)

 

(21,269)

 

(50,286)

 

(46,216)

Free cash flow

 

$ 11,994

 

$ (125,186)

 

$ 50,120

 

$ (74,476)

 

Revenue by Product Category

(unaudited, dollars in thousands)

 

 

Three Months Ended

 

Twelve Months Ended

 

 

September 30,

2023

 

October 1,

2022

 

September 30,

2023

 

October 1,

2022

(In thousands)

 

 

 

 

 

 

 

 

Sonos speakers

 

$ 223,323

 

$ 235,091

 

$ 1,293,440

 

$ 1,368,916

Sonos system products

 

62,316

 

62,782

 

285,064

 

297,110

Partner products and other revenue

 

19,508

 

18,417

 

76,751

 

86,310

Total revenue

 

$ 305,147

 

$ 316,290

 

$ 1,655,255

 

$ 1,752,336

 

Revenue by Geographical Region

(unaudited, dollars in thousands)

 

 

Three Months Ended

 

Twelve Months Ended

 

 

September 30,

2023

 

October 1,

2022

 

September 30,

2023

 

October 1,

2022

Americas

 

$ 203,531

 

$ 199,686

 

$ 1,048,245

 

$ 1,044,113

 

 

Europe, Middle East and Africa

 

83,374

 

91,438

 

518,179

 

578,034

Asia Pacific

 

18,242

 

25,166

 

88,831

 

130,189

Total revenue

 

$ 305,147

 

$ 316,290

 

$ 1,655,255

 

$ 1,752,336

 

Stock-based Compensation

(unaudited, dollars in thousands)

 

 

Three Months Ended

 

Twelve Months Ended

 

 

September 30,

2023

 

October 1,

2022

 

September 30,

2023

 

October 1,

2022

(In thousands)

 

 

 

 

 

 

 

 

Cost of revenue

 

$ 437

 

$ 467

 

$ 2,038

 

$ 1,620

Research and development

 

8,177

 

8,037

 

35,530

 

30,724

Sales and marketing

 

3,499

 

3,685

 

15,677

 

15,335

General and administrative

 

5,195

 

5,988

 

23,612

 

27,961

Total stock-based compensation expense

 

$ 17,308

 

$ 18,177

 

$ 76,857

 

$ 75,640

 

Amortization of Intangibles

(unaudited, dollars in thousands)

 

 

Three Months Ended

 

Twelve Months Ended

 

 

September 30,

2023

 

October 1,

2022

 

September 30,

2023

 

October 1,

2022

Cost of revenue

 

$ 973

 

$ 1,510

 

$ 4,103

 

$ 2,149

Research and development

 

496

 

512

 

1,983

 

2,961

Sales and marketing

 

-

 

-

 

-

 

-

General and administrative

 

24

 

24

 

96

 

96

Total amortization of intangibles

 

$ 1,493

 

$ 2,046

 

$ 6,182

 

$ 5,206

 

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, free cash flow conversion, 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 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 (expense), income taxes, restructuring and abandonment costs 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 and other assets. We define free cash flow conversion as free cash flow as a percentage of Adjusted EBITDA. 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 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 calculate constant currency growth percentages by translating our current period financial results using the prior period average currency exchange rates and comparing these amounts to our prior period reported results. 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 ending September 28, 2024, our long-term outlook, our long-term focus, financial, growth and business strategies and opportunities, growth metrics and targets, our business model, new products, product categories and services, our product cycle and roadmap, our investments in R&D, profitability and gross margins, market growth and our market share, 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: our ability to accurately forecast product demand and effectively forecast and manage owned and channel inventory levels; the impact of global economic, market and political events, including the potential for an extended global recession, continued inflationary pressures, rising 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 meet product demand and manage any product availability delays; supply chain challenges, including shipping and logistics challenges and component supply-related challenges; the resurgence of the COVID-19 pandemic and the other risk factors set forth under the caption “Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended July 1, 2023 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.

 

Investor Contact

James Baglanis
IR@sonos.com

 

Press Contact

Erin Pategas

PR@sonos.com

 

 

 

Source: Sonos