Sonos Reports Fourth Quarter and Fiscal 2024 Results Form 8 K

Sonos Reports Fourth Quarter and Fiscal 2024 Results

Santa Barbara, CA - November 13, 2024 - Sonos, Inc. (Nasdaq: SONO) today reported fourth quarter and fiscal 2024 results.

"Thanks to our team going all-in on our app recovery efforts, we made significant progress in bringing the quality of our software to a level that we're all proud of, which enabled us to launch our highly anticipated new products, Arc Ultra and Sub 4, in time for the holidays," Sonos CEO Patrick Spence commented. "Initial feedback on our new products has been very positive, which, along with the introduction of Ace earlier this year, makes our product lineup the strongest it's ever been. Sonos is still the best home audio system, and we're focused on using this industry-leading product lineup to acquire more customers and solidify our loyal customer base. The Sonos flywheel remains strong, as evidenced by the fact that the number of new products per home increased in Fiscal 2024. While the overall audio category continues to face headwinds, we are confident that we are well positioned to take more of it over time."

Fiscal 2024 Financial Highlights (unaudited)

●Revenue of $1,518.1 million

●GAAP gross margin of 45.4%

●GAAP net loss of $38.1 million, GAAP diluted earnings per share (EPS) of -$0.31

●Non-GAAP net income1 of $71.4 million, Non-GAAP diluted EPS1 of $0.56

●Adjusted EBITDA1 of $107.9 million

Fourth Quarter Fiscal 2024 Financial Highlights (unaudited)

●Revenue of $255.4 million

●GAAP gross margin of 40.3%

●GAAP net loss of $53.1 million, GAAP diluted earnings per share (EPS) of -$0.44

●Non-GAAP net loss1 of $22.1 million, Non-GAAP diluted EPS1 of -$0.18

●Adjusted EBITDA1 of -$22.6 million

Notes:
(1) Non-GAAP net income (loss)/Non-GAAP diluted earnings per share (EPS) and Adjusted EBITDA exclude stock-based compensation, legal and transaction related fees, amortization of intangibles, and restructuring and abandonment costs. See "Use of Non-GAAP Measures" and reconciliations to GAAP measures below.

Guidance

The company will provide guidance on its fourth quarter and Fiscal 2024 earnings call.

Supplemental Earnings Presentation

The company has posted a supplemental earnings presentation accompanying its fourth quarter and fiscal 2024 results to the Earnings Reports section of its investor relations website at https://investors.sonos.com/reports-and-filings/default.aspx#section=earningsreports. Additional detailed financial and business information regarding certain non-financial key metrics, new products, brand initiatives and our sustainability and social impact efforts is included in the supplemental earnings presentation.

Conference Call, Webcast and Transcript

The company will host a webcast of its conference call and Q&A related to its fourth quarter and fiscal 2024 results on November 13, 2024, at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time). Participants may access the live webcast in listen-only mode on the Sonos investor relations website at https://investors.sonos.com/news-and-events/default.aspx.

The conference call may also be accessed by dialing (888) 330-2454 with conference ID 8641747. Participants outside the U.S. can access the call by dialing (240) 789-2714 using the same conference ID.

An archived webcast of the conference call and a transcript of the company's prepared remarks and Q&A session will also be available at https://investors.sonos.com/reports-and-filings/default.aspx#section=earningsreports following the call.

Consolidated Statements of Operations and Comprehensive Loss
(unaudited, in thousands, except share and per share amounts)
		Three Months Ended		Twelve Months Ended
		September 28, 2024		September 30, 2023		September 28, 2024		September 30, 2023
Revenue		$ 255,380		$ 305,147		$ 1,518,056		$ 1,655,255
Cost of revenue		152,364		177,093		828,683		938,765
Gross profit		103,016		128,054		689,373		716,490
Operating expenses
Research and development		70,777		65,517		304,558		301,001
Sales and marketing		73,180		58,601		290,609		267,518
General and administrative		28,428		32,297		142,252		168,518
Total operating expenses		172,385		156,415		737,419		737,037
Operating loss		(69,369)		(28,361)		(48,046)		(20,547)
Other income (expense), net
Interest income		2,327		2,661		11,965		10,201
Interest expense		(108)		(149)		(441)		(733)
Other income (expense), net		4,864		(6,696)		9,371		15,473
Total other income (expense), net		7,083		(4,184)		20,895		24,941
(Loss) income before (benefit from) provision for income taxes		(62,286)		(32,545)		(27,151)		4,394
(Benefit from) provision for income taxes		(9,193)		(1,306)		10,995		14,668
Net loss		$ (53,093)		$ (31,239)		$ (38,146)		$ (10,274)
Net loss attributable to common stockholders:
Basic and diluted		$ (53,093)		$ (31,239)		$ (38,146)		$ (10,274)

Net loss per share attributable to common stockholders:
Basic		$ (0.44)		$ (0.25)		$ (0.31)		$ (0.08)
Diluted		$ (0.44)		$ (0.25)		$ (0.31)		$ (0.08)
Weighted-average shares used in computing net loss per share attributable to common stockholders:
Basic		121,389,519		127,335,311		123,218,532		127,702,885
Diluted		121,389,519		127,335,311		123,218,532		127,702,885
Total comprehensive loss
Net loss		(53,093)		(31,239)		(38,146)		(10,274)
Change in foreign currency translation adjustment		1,872		2,035		1,604		153
Net unrealized gain on marketable securities		154		-		122		-
Comprehensive loss		$ (51,067)		$ (29,204)		$ (36,420)		$ (10,121)

Consolidated Balance Sheets
(unaudited, in thousands, except par values)
		As of
		September 28, 2024		September 30, 2023
Assets
Current assets:
Cash and cash equivalents		$ 169,732		$ 220,231
Marketable securities		51,426		-
Accounts receivable, net		44,513		67,583
Inventories		231,505		346,521
Prepaids and other current assets		53,910		25,296
Total current assets		551,086		659,631
Property and equipment, net		102,148		87,075
Operating lease right-of-use assets		50,175		48,918
Goodwill		82,854		80,420
Intangible assets, net
In-process research and development		73,770		69,791
Other intangible assets		14,266		20,218
Deferred tax assets		10,314		1,659
Other noncurrent assets		31,699		34,529
Total assets		$ 916,312		$ 1,002,241
Liabilities and stockholders' equity
Current liabilities:
Accounts payable		$ 194,590		$ 187,981
Accrued expenses		87,783		89,717
Accrued compensation		15,701		22,079
Deferred revenue, current		21,802		20,188
Other current liabilities		46,277		34,253
Total current liabilities		366,153		354,218

Operating lease liabilities, noncurrent		56,588		54,956
Deferred revenue, noncurrent		61,075		60,650
Deferred tax liabilities		60		9,846
Other noncurrent liabilities		3,816		3,914
Total liabilities		487,692		483,584
Commitments and contingencies
Stockholders' equity:
Common stock, $0.001 par value		123		130
Treasury stock		(17,096)		(72,586)
Additional paid-in capital		498,245		607,345
Accumulated deficit		(50,934)		(12,788)
Accumulated other comprehensive loss		(1,718)		(3,444)
Total stockholders' equity		428,620		518,657
Total liabilities and stockholders' equity		$ 916,312		$ 1,002,241

Consolidated Statements of Cash Flows
(unaudited, dollars in thousands)
		Twelve Months Ended
		September 28, 2024		September 30, 2023
Cash flows from operating activities
Net loss		$ (38,146)		$ (10,274)
Adjustments to reconcile net loss to net cash provided by operating activities:
Stock-based compensation expense		84,294		76,857
Depreciation and amortization		52,378		48,969
Provision for inventory obsolescence		8,894		20,640
Restructuring and abandonment charges		2,204		5,533
Deferred income taxes		(18,922)		(583)
Other		3,701		5,535
Foreign currency transaction gains		(7,276)		(7,335)
Changes in operating assets and liabilities:
Accounts receivable		23,044		32,120
Inventories		106,122		87,004
Other assets		(28,775)		10,470
Accounts payable and accrued expenses		(789)		(162,345)
Accrued compensation		(6,775)		(2,185)
Deferred revenue		304		(4,576)
Other liabilities		9,648		576
Net cash provided by operating activities		189,906		100,406
Cash flows from investing activities
Purchases of marketable securities		(90,495)		-
Purchases of property and equipment and intangible assets		(55,247)		(50,286)
Maturities of marketable securities		40,500		-
Net cash used in investing activities		(105,242)		(50,286)

Cash flows from financing activities
Payments for repurchase of common stock		(129,018)		(100,064)
Payments for repurchase of common stock related to shares withheld for tax in connection with vesting of restricted stock units		(25,344)		(29,874)
Proceeds from exercise of stock options		17,053		21,346
Net cash used in financing activities		(137,309)		(108,592)
Effect of exchange rate changes on cash and cash equivalents		2,146		3,848
Net decrease in cash and cash equivalents		(50,499)		(54,624)
Cash and cash equivalents
Beginning of period		220,231		274,855
End of period		$ 169,732		$ 220,231
Supplemental disclosure
Cash paid for interest		$ 256		$ 1,330
Cash paid for taxes, net of refunds		$ 21,206		$ 9,522
Cash paid for amounts included in the measurement of lease liabilities		$ 11,008		$ 14,218
Supplemental disclosure of non-cash investing and financing activities
Purchases of property and equipment in accounts payable and accrued expenses		$ 7,878		$ 2,784
Right-of-use assets obtained in exchange for new operating lease liabilities		$ 11,492		$ 31,692
Excise tax on share repurchases, accrued but not paid		$ 602		$ -
Change in estimate of asset retirement obligations		$ -		$ 2,290

Reconciliation of GAAP to Non-GAAP Cost of Revenue and Gross Profit
(unaudited, in thousands, except percentages)
		Three Months Ended		Twelve Months Ended
		September 28, 2024		September 30, 2023		September 28, 2024		September 30, 2023
Reconciliation of GAAP cost of revenue
GAAP cost of revenue		$ 152,364		$ 177,093		$ 828,683		$ 938,765
Stock-based compensation expense		620		437		2,614		2,038
Amortization of intangibles		973		973		3,891		4,103
Non-GAAP cost of revenue		$ 150,771		$ 175,683		$ 822,178		$ 932,624
Reconciliation of GAAP gross profit
GAAP gross profit		$ 103,016		$ 128,054		$ 689,373		$ 716,490
Stock-based compensation expense		620		437		2,614		2,038
Amortization of intangibles		973		973		3,891		4,103
Non-GAAP gross profit		$ 104,609		$ 129,464		$ 695,878		$ 722,631
GAAP gross margin		40.3%		42.0%		45.4%		43.3%
Non-GAAP gross margin		41.0%		42.4%		45.8%		43.7%

Reconciliation of Selected Non-GAAP Financial Measures
(unaudited, dollars in thousands)
		Three Months Ended		Twelve Months Ended
		September 28, 2024		September 30, 2023		September 28, 2024		September 30, 2023
Research and Development (GAAP)		$ 70,777		$ 65,517		$ 304,558		$ 301,001
Stock-based compensation		8,780		8,177		37,913		35,530
Amortization of intangibles		497		496		1,985		1,983
Restructuring and abandonment costs		4,942		188		5,743		6,556
Research and Development (Non-GAAP)		$ 56,558		$ 56,656		$ 258,917		$ 256,932
Sales and Marketing (GAAP)		$ 73,180		$ 58,601		$ 290,609		$ 267,518
Stock-based compensation		4,201		3,499		17,499		15,677
Amortization of intangibles		-		-		-		-
Restructuring and abandonment costs		2,473		180		2,770		5,635
Sales and Marketing (Non-GAAP)		$ 66,506		$ 54,922		$ 270,340		$ 246,206
General and Administrative (GAAP)		28,428		32,297		142,252		168,518
Stock-based compensation		5,732		5,195		26,268		23,612
Legal and transaction related costs		182		2,944		7,383		32,950
Amortization of intangibles		24		24		96		96
Restructuring and abandonment costs		2,571		106		3,340		3,458
Adjusted General and Administrative (Non-GAAP)		$ 19,919		$ 24,028		$ 105,165		$ 108,402
Total Operating Expenses (GAAP)		$ 172,385		$ 156,415		$ 737,419		$ 737,037
Stock-based compensation		18,713		16,871		81,680		74,819
Legal and transaction related costs		182		2,944		7,383		32,950
Amortization of intangibles		521		520		2,081		2,079
Restructuring and abandonment costs		9,986		474		11,853		15,649
Adjusted Operating Expenses (Non-GAAP)		$ 142,983		$ 135,606		$ 634,422		$ 611,540
Total Operating Loss (GAAP)		$ (69,369)		$ (28,361)		$ (48,046)		$ (20,547)
Stock-based compensation		19,333		17,308		84,294		76,857
Legal and transaction related costs		182		2,944		7,383		32,950
Amortization of intangibles		1,494		1,493		5,972		6,182
Restructuring and abandonment costs		9,986		474		11,853		15,649
Adjusted Operating (Loss) Income (Non-GAAP)		$ (38,374)		$ (6,142)		$ 61,456		$ 111,091
Depreciation		15,730		12,422		46,406		42,787
Adjusted EBITDA (Non-GAAP)		$ (22,644)		$ 6,280		$ 107,862		$ 153,878

Reconciliation of Net Loss to Adjusted EBITDA
(unaudited, dollars in thousands except percentages)
		Three Months Ended		Twelve Months Ended
		September 28, 2024		September 30, 2023		September 28, 2024		September 30, 2023
(In thousands, except percentages)
Net loss		$ (53,093)		$ (31,239)		$ (38,146)		$ (10,274)
Add (deduct):
Depreciation and amortization		17,224		13,915		52,378		48,969
Stock-based compensation expense		19,333		17,308		84,294		76,857

Interest income		(2,327)		(2,661)		(11,965)		(10,201)
Interest expense		108		149		441		733
Other expense (income), net		(4,864)		6,696		(9,371)		(15,473)
(Benefit from) provision for income taxes		(9,193)		(1,306)		10,995		14,668
Legal and transaction related costs (1)		182		2,944		7,383		32,950
Restructuring and abandonment costs (2)		9,986		474		11,853		15,649
Adjusted EBITDA		$ (22,644)		$ 6,280		$ 107,862		$ 153,878
Revenue		$ 255,380		$ 305,147		$ 1,518,056		$ 1,655,255
Net loss margin		(20.8)%		(10.2)%		(2.5)%		(0.6)%
Adjusted EBITDA margin		(8.9)%		2.1%		7.1%		9.3%
(1) Legal and transaction-related costs consist of expenses related to our intellectual property ("IP") litigation against Alphabet and Google, as well as legal and transaction costs associated with our acquisition activity, which we do not consider representative of our underlying operating performance.
(2) Restructuring and abandonment costs relate to the restructuring plan we initiated on August 14, 2024 to reduce our cost base, including a reduction in force involving approximately 6% of our employees, and nominal remaining costs incurred related to the restructuring plan initiated on June 14, 2023.

Reconciliation of GAAP Net Loss to Non-GAAP Net (Loss) Income
(unaudited, in thousands, except share and per share amounts)
		Three Months Ended		Twelve Months Ended
		September 28, 2024		September 30, 2023		September 28, 2024		September 30, 2023
Reconciliation of GAAP net loss
GAAP net loss		$ (53,093)		$ (31,239)		$ (38,146)		$ (10,274)
Stock-based compensation expense		19,333		17,308		84,294		76,857
Legal and transaction related costs		182		2,944		7,383		32,950
Amortization of intangibles		1,494		1,493		5,972		6,182
Restructuring and abandonment costs		9,986		474		11,853		15,649
Non-GAAP net (loss) income		$ (22,098)		$ (9,020)		$ 71,356		$ 121,364
Reconciliation of net loss per share
GAAP net loss per share, diluted		$ (0.44)		$ (0.25)		$ (0.31)		$ (0.08)
Non-GAAP adjustments to net loss per share		0.26		0.18		0.87		1.00
Non-GAAP net (loss) income per share, diluted		$ (0.18)		$ (0.07)		$ 0.56		$ 0.92
Weighted-average shares used in GAAP per share calculation, diluted		121,389,519		127,335,311		123,218,532		127,702,885
Weighted-average shares used in non-GAAP per share calculation, diluted		121,389,519		127,335,311		126,783,859		131,947,092
Note: Certain figures may not sum due to rounding

Reconciliation of Cash Flows (Used in) Provided by Operating Activities to Free Cash Flow
(unaudited, dollars in thousands)
		Three Months Ended		Twelve Months Ended
		September 28, 2024		September 30, 2023		September 28, 2024		September 30, 2023
Cash flows (used in) provided by operating activities		$ (37,734)		$ 22,195		$ 189,906		$ 100,406
Less: Purchases of property and equipment		(15,770)		(10,201)		(55,247)		(50,286)
Free cash flow		$ (53,504)		$ 11,994		$ 134,659		$ 50,120

Revenue by Product Category
(unaudited, dollars in thousands)
		Three Months Ended		Twelve Months Ended
		September 28, 2024		September 30, 2023		September 28, 2024		September 30, 2023
(In thousands)
Sonos speakers		$ 178,226		$ 223,323		$ 1,169,604		$ 1,293,440
Sonos system products		58,731		62,316		267,744		285,064
Partner products and other revenue		18,423		19,508		80,708		76,751
Total revenue		$ 255,380		$ 305,147		$ 1,518,056		$ 1,655,255

Revenue by Geographical Region
(unaudited, dollars in thousands)
		Three Months Ended		Twelve Months Ended
		September 28, 2024		September 30, 2023		September 28, 2024		September 30, 2023
Americas		$ 177,533		$ 203,531		$ 1,004,770		$ 1,048,245
Europe, Middle East and Africa		58,353		83,374		430,428		518,179
Asia Pacific		19,494		18,242		82,858		88,831
Total revenue		$ 255,380		$ 305,147		$ 1,518,056		$ 1,655,255

Stock-based Compensation
(unaudited, dollars in thousands)
	Three Months Ended		Twelve Months Ended
		September 28, 2024		September 30, 2023		September 28, 2024		September 30, 2023
(In thousands)
Cost of revenue		$ 620		$ 437		$ 2,614		$ 2,038
Research and development		8,780		8,177		37,913		35,530
Sales and marketing		4,201		3,499		17,499		15,677
General and administrative		5,732		5,195		26,268		23,612
Total stock-based compensation expense		$ 19,333		$ 17,308		$ 84,294		$ 76,857

Amortization of Intangibles
(unaudited, dollars in thousands)
		Three Months Ended		Twelve Months Ended
		September 28, 2024		September 30, 2023		September 28, 2024		September 30, 2023
Cost of revenue		$ 973		$ 973		$ 3,891		$ 4,103
Research and development		497		496		1,985		1,983
Sales and marketing		-		-		-		-
General and administrative		24		24		96		96
Total amortization of intangibles		$ 1,494		$ 1,493		$ 5,972		$ 6,182

Use of Non-GAAP Measures

We have provided in this press release financial information that has not been prepared in accordance with generally accepted accounting principles ("U.S. GAAP"), including adjusted EBITDA, adjusted EBITDA margin, free cash flow, non-GAAP gross margin, net income (loss) excluding stock-based compensation, legal and transaction related fees, amortization of intangibles, and restructuring and abandonment costs and diluted earnings (loss) per share excluding stock-based compensation, legal and transaction related fees, amortization of intangibles and restructuring and abandonment costs. These non-GAAP financial measures are not based on any standardized methodology prescribed by U.S. GAAP and are not necessarily comparable to similarly titled measures presented by other companies. We use these non-GAAP financial measures to evaluate our operating performance and trends and make planning decisions. We believe that these non-GAAP financial measures help identify underlying trends in our business that could otherwise be masked by the effect of the expenses and other items that we exclude in these non-GAAP financial measures. Accordingly, we believe that these non-GAAP financial measures provide useful information to investors and others in understanding and evaluating our operating results, enhancing the overall understanding of our past performance and future prospects and allowing for greater transparency with respect to a key financial metric used by our management in its financial and operational decision-making. Non-GAAP financial measures should not be considered in isolation of, or as an alternative to, measures prepared in accordance with U.S. GAAP. Investors are encouraged to review the reconciliation of these financial measures to their nearest U.S. GAAP financial equivalents provided in the financial statement tables above. We define Adjusted EBITDA as net income (loss) adjusted to exclude the impact of depreciation and amortization, stock-based compensation expense, interest income, interest expense, other income, income taxes, restructuring and abandonment costs, legal and transaction related fees and other items that we do not consider representative of our underlying operating performance. We define Adjusted EBITDA margin as Adjusted EBITDA divided by revenue. We define free cash flow as net cash from operations less purchases of property and equipment. We define non-GAAP gross margin as GAAP gross margin, excluding stock-based compensation and amortization of intangible assets. We calculate non-GAAP net income (loss) excluding stock-based compensation, legal and transaction related fees, amortization of intangibles and restructuring and abandonment costs as net income (loss) less stock-based compensation, legal and transaction related fees, amortization of intangibles and restructuring and abandonment costs. We calculate non-GAAP diluted earnings (loss) per share excluding stock-based compensation, legal and transaction related fees, amortization of intangibles and restructuring and abandonment costs as net income (loss) less stock-based compensation, legal and transaction related fees, amortization of intangibles and restructuring and abandonment costs divided by our number of shares at fiscal year end. We do not provide a reconciliation of forward-looking non-GAAP financial measures to their comparable GAAP financial measures because we cannot do so without unreasonable effort due to unavailability of information needed to calculate reconciling items and due to the variability, complexity and limited visibility of the adjusting items that would be excluded from the non-GAAP financial measures in future periods. When planning, forecasting

and analyzing future periods, we do so primarily on a non-GAAP basis without preparing a GAAP analysis as that would require estimates for items such as stock-based compensation, which is inherently difficult to predict with reasonable accuracy. Stock-based compensation expense is difficult to estimate because it depends on our future hiring and retention needs, as well as the future fair market value of our common stock, all of which are difficult to predict and subject to constant change. In addition, for purposes of setting annual guidance, it would be difficult to quantify stock-based compensation expense for the year with reasonable accuracy in the current quarter. As a result, we do not believe that a GAAP reconciliation would provide meaningful supplemental information about our outlook.

Forward Looking Statements

This press release contains forward-looking statements that involve risks and uncertainties. These forward-looking statements include statements regarding our long-term outlook, financial, growth and business strategies and opportunities, our product roadmap, our action plan to address issues caused by our new app, market growth and our market share, our ability to expand our footprint with existing customers and other factors affecting variability in our financial results. These forward-looking statements are only predictions and may differ materially from actual results due to a variety of factors, including, but not limited to: our ability to accurately forecast product demand and effectively forecast and manage owned and channel inventory levels; our ability to introduce software updates to our new app on a timely basis and otherwise deliver on our action plan to address issues caused by our new app and related customer commitments; our ability to maintain, enhance and protect our brand image; the impact of global economic, market and political events, including continued inflationary pressures, high interest rates and, in certain markets, foreign currency exchange rate fluctuations; changes in consumer income and overall consumer spending as a result of economic or political uncertainty or conditions; changes in consumer spending patterns; our ability to successfully introduce new products and services and maintain or expand the success of our existing products; the success of our efforts to expand our direct-to-consumer channel; the success of our financial, growth and business strategies; our ability to compete in the market and maintain or expand market share; our ability to meet product demand and manage any product availability delays; supply chain challenges, including shipping and logistics challenges and component supply-related challenges; our ability to protect our brand and intellectual property; and the other risk factors set forth under the caption "Risk Factors" in our Quarterly Report on Form 10-Q for the quarter ended June 29, 2024 and our other filings filed with the Securities and Exchange Commission (the "SEC"), copies of which are available free of charge at the SEC's website at www.sec.gov or upon request from our investor relations department. All forward-looking statements herein reflect our opinions only as of the date of this press release, and we undertake no obligation, and expressly disclaim any obligation, to update forward-looking statements herein in light of new information or future events. Sonos and Sonos product names are trademarks or registered trademarks of Sonos, Inc. All other product names and services may be trademarks or service marks of their respective owners.

About Sonos

Sonos (Nasdaq: SONO) is one of the world's leading sound experience brands. As the inventor of multi-room wireless home audio, Sonos' innovation helps the world listen better by giving people access to the content they love and allowing them to control it however they choose. Known for delivering an unparalleled sound experience, thoughtful home design aesthetic, simplicity of use and an open platform, Sonos makes the breadth of audio content available to anyone. Sonos is headquartered in Santa Barbara, California. Learn more at www.sonos.com.

Investor Contact

James Baglanis
[email protected]

Press Contact

Erin Pategas

[email protected]

Source: Sonos