Sonos, Inc. (Nasdaq: SONO) today reported third quarter fiscal 2023 results.
Third Quarter 2023 Financial Highlights (unaudited)
- Revenue increased 0.4% year-over-year to $373.4 million; on a constant-currency basis, revenue increased 0.3% year-over-year
- Gross margin decreased 130 basis points year-over-year to 46.0%
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GAAP net loss of $23.6 million compared to $0.6 million last year
- GAAP net loss margin of 6.3% compared to 0.2% last year
- GAAP diluted loss per share (EPS) of $0.18 compared to $0.00 last year
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Non-GAAP net income1 of $21.3 million compared to $26.5 million last year
- Non-GAAP diluted EPS1 of $0.16 compared to $0.19 last year
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Adjusted EBITDA of $34.3 million compared to $42.1 million last year
- Adjusted EBITDA margin of 9.2% compared to 11.3% last year
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Free cash flow of ($7.8) million. Cash flows from operating activities of $8.9 million
- Inventories of $298.1 million, decreased 8.6% from last quarter
- Finished goods of $240.1 million, decreased 12.5% from last quarter
Notes: 1 Non-GAAP net income/earnings per share (EPS) 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, “We are pleased to report third quarter revenue of $373.4 million and Adjusted EBITDA of $34.3 million. Despite the challenging environment, we are winning in the market and I’m proud of our team’s execution as we outperform the competition. We remain on track to deliver against our fiscal 2023 guidance.”
Mr. Spence continued, “While we have not yet seen conditions in our categories return to normal, we remain focused on ensuring Sonos can emerge from this period in a position of strength: we are profitable, we are debt free, and we have a huge market opportunity. In mid-June we made the difficult decision to reduce our workforce by 7% in order to protect profitability and allow us to invest in our exciting product roadmap to drive future growth. Continuing to innovate is critical to achieving our long-term potential and I have the utmost confidence in our ability to do so.”
Revised Fiscal 2023 Outlook
- Revenue in the range of $1.64 billion to $1.66 billion, representing a decline of 6% to 5% from fiscal 2022, or a decline of 4% to 3% on a constant currency basis. This compares to a prior outlook range of $1.625 billion to $1.675 billion, which represented a decline of 7% to 4% from fiscal 2022
- Gross margin in the range of 44.0% to 44.2%, compared to prior outlook range of 44.3% to 44.8%
- Adjusted EBITDA in the range of $148 million to $158 million, compared to prior outlook range of $138 million to $168 million
- Adjusted EBITDA margin of 9.0% to 9.5%, compared to prior outlook range of 8.5% to 10%
Supplemental Earnings Presentation
The company has posted a supplemental earnings presentation accompanying its third quarter 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 third quarter fiscal 2023 results on August 9, 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.
Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income | ||||||||||||||||
(unaudited, in thousands, except share and per share amounts) | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
July 1, 2023 | July 2, 2022 | July 1, 2023 | July 2, 2022 | |||||||||||||
Revenue | $ | 373,356 | $ | 371,783 | $ | 1,350,108 | $ | 1,436,046 | ||||||||
Cost of revenue | 201,594 | 195,935 | 761,672 | 763,779 | ||||||||||||
Gross profit | 171,762 | 175,848 | 588,436 | 672,267 | ||||||||||||
Operating expenses | ||||||||||||||||
Research and development | 77,758 | 62,522 | 235,484 | 188,798 | ||||||||||||
Sales and marketing | 66,600 | 63,993 | 208,917 | 207,684 | ||||||||||||
General and administrative | 48,665 | 42,373 | 136,219 | 126,189 | ||||||||||||
Total operating expenses | 193,023 | 168,888 | 580,620 | 522,671 | ||||||||||||
Operating (loss) income | (21,261 | ) | 6,960 | 7,816 | 149,596 | |||||||||||
Other income (expense), net | ||||||||||||||||
Interest income | 2,391 | 429 | 7,540 | 585 | ||||||||||||
Interest expense | (274 | ) | (196 | ) | (585 | ) | (384 | ) | ||||||||
Other income (expense), net | 1,424 | (9,858 | ) | 22,169 | (13,541 | ) | ||||||||||
Total other income (expense), net | 3,541 | (9,625 | ) | 29,124 | (13,340 | ) | ||||||||||
(Loss) income before provision for (benefit from) income taxes | (17,720 | ) | (2,665 | ) | 36,940 | 136,256 | ||||||||||
Provision for (benefit from) income taxes | 5,851 | (2,068 | ) | 15,974 | 4,805 | |||||||||||
Net (loss) income | $ | (23,571 | ) | $ | (597 | ) | $ | 20,966 | $ | 131,451 | ||||||
Net (loss) income attributable to common stockholders: | ||||||||||||||||
Basic and diluted | $ | (23,571 | ) | $ | (597 | ) | $ | 20,966 | $ | 131,451 | ||||||
Net (loss) income per share attributable to common stockholders: | ||||||||||||||||
Basic | $ | (0.18 | ) | $ | — | $ | 0.16 | $ | 1.03 | |||||||
Diluted | $ | (0.18 | ) | $ | — | $ | 0.16 | $ | 0.94 | |||||||
Weighted-average shares used in computing net (loss) income per share attributable to common stockholders: | ||||||||||||||||
Basic | 128,311,109 | 127,884,400 | 127,825,410 | 127,886,487 | ||||||||||||
Diluted | 128,311,109 | 127,884,400 | 132,851,379 | 139,502,527 | ||||||||||||
Total comprehensive (loss) income | ||||||||||||||||
Net (loss) income | (23,571 | ) | (597 | ) | 20,966 | 131,451 | ||||||||||
Change in foreign currency translation adjustment | 802 | (1,711 | ) | (1,882 | ) | (1,971 | ) | |||||||||
Comprehensive (loss) income | $ | (22,769 | ) | $ | (2,308 | ) | $ | 19,084 | $ | 129,480 | ||||||
Condensed Consolidated Balance Sheets | ||||||||
(unaudited, in thousands, except par values) | ||||||||
As of | ||||||||
July 1, 2023 | October 1, 2022 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 268,286 | $ | 274,855 | ||||
Accounts receivable, net of allowances | 114,658 | 101,206 | ||||||
Inventories | 298,146 | 454,288 | ||||||
Prepaids and other current assets | 26,995 | 37,042 | ||||||
Total current assets | 708,085 | 867,391 | ||||||
Property and equipment, net | 94,154 | 86,168 | ||||||
Operating lease right-of-use assets | 51,041 | 28,329 | ||||||
Goodwill | 81,779 | 77,300 | ||||||
Intangible assets, net | ||||||||
In-process research and development | 72,013 | 64,680 | ||||||
Other intangible assets | 21,725 | 26,384 | ||||||
Deferred tax assets | 1,437 | 1,508 | ||||||
Other noncurrent assets | 34,989 | < | ||||||
