SONO - Earnings call transcript Q1 2019

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good afternoon. My name is Mike, and I will be your conference operator today. At this time, I would like to welcome everyone to Sonos Fiscal First Quarter 2019 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. you. Thank Instructions] [Operator turn Groeninger. over now Corporate VP Finance, Mike the will to call of I

begin conference. may You your

Mike Groeninger

Thank you. VP Good CEO, quarter And XXXX afternoon, me Patrick and welcome conference with Mike I'm to Spence; call. and Mike Giannetto. are Groeninger, today of CFO, Finance. earnings Corporate Sonos' Sonos' first

Black our whole group For shareholder playlist XX-track letter. today's from Month. Black Sonos QX resource music History by employee @ those celebrate joining call playlist the to The is comes early, included our created in

Before subject today's A statements forward-looking expectations I risk our materially any of differ everyone future the to representing risks I These results cause only filings our statements. and statements to like from would today factors should Patrick, and of SEC. could These Risk and fully hand it as date. under discussion our are over with not reflect forward-looking views to remind as uncertainties considered discussion actual the our material future events the that subsequent statements caption detailed of that financial Factors to performance. in is include views these reflected will in also regarding be

we adjusted margin. will to During this adjusted measures, including refer call, financial EBITDA non-GAAP also EBITDA and

first Spence. a our our over call of those quarter a our now portion fiscal measures, to Patrick For complete results Investor shareholder non-GAAP I'll of Relations regarding regarding XXXX and quantitative turn please today's to reconciliation information financial information letter refer the website. to the posted

Patrick Spence

most increasing in our Thanks sales growth. sustainable, long-term to Sonos' progress good made quarter and QX profitable towards efficiency good and history, in profitable everyone. record afternoon, thanks We of investments. joining. quarter our Mike, our Thanks, was the for goal this

million here. we now we QX in $XX X for record helping revenue million free million and homes we’re also share quarter achieved grew home the were a would that led theater gratifying highlight cash across are better, our XX% thing around EBITDA to achieved growth a margin, glad theater one works I If we and which And that it everyone adjusted at portfolio. XX% home world generated $XXX to and listen QX, success in flow. year-over-year adjusted is portfolio, the reaching Beam EBITDA the be the XX.X% year-over-year, Our way, the of milestone for over form

around the outside new with and solutions and home, and announced the we what Architectural, renewed products Sonos first products, to new some three price positions of positions new have to GfK. of Assistant two home according longevity new market our exciting in We've of our the XXXX Beam. a thanks market the positions bring with value means three things to These certainly the positions our theater is but a We've top installed share installer we is coming. four start, channel countries good products, off reinvigorating yesterday, top Sonos Google moves and the strong to share form products innovative and in commitment first like share value points. We’ll Sonos. portfolio We’ll to last of Germany the value market market and earned in which our NPD, factors, Playbar share products been new by our receptivity four least of of top Our U.S. eight community. according and dollar the to to demonstrate existing make not Sonance. products Amp a IKEA, like got coming UK powerful professional

the That's Sonos' all excited this the solutions net available customers world month. deliver to highest Amp highest our traditionally and Sonos scores. are why have served revenue new channel, around pre-installed household our per we promoter

attach clear designed specifically with collection the speakers a revenue. non- helps a but been opportunity. excited we've had Architectural the outdoor the speakers for Amp. Sonos component of a for now products missing deliver Sonos until of power decade, Sonos in-ceiling We us for This to to That’s and other use more experience speakers. are create customers and revenue also capture We've in-wall, best

Sonos in-wall will now February. the are at available end globally be and available in-ceiling preorder of Sonos for and

Sonos' outdoor available will in be April.

Company. Everyone all last It's for more to and with honor while was character seamless phase. that I'm Even the Sonos done and is of the been to Company joined a people. at agreed incredibly revenue set leave what strong next handful as now and us is we it pass go of behaviors $X a transition. a I'll you to in tremendous is excited we public Mike embodied retire. a has over been has on-board holds will to team we’re seven years are Mike and Sonos has saw building integrity. when ensure Mike. in ago As the and department leader enabled year. for letter, the Giannetto his And person Mike. the his controls until billion to has over has importantly, our Mike thankful finance replacement sure to on over of identify processes Sonos us, for an graciously incredible job my and a who only CFO, He shareholder stay done future he to has work sad planning for Mike and scale a values him a to in Mike

Mike Giannetto

way. something passion big the I’m while. years the new Good along out I’ve love show bring you, great [technical for thinking rush. internally words. difficulty] decision at in Sonos been it's for the music a and grateful last the seven CFO on great the with of CFO, The kind been in no building the will future who business talented to to Thank incredibly a decided filled corporate for friends XX afternoon, special place years the and and help for transition. have retire here it's retire as remarkable; I’ve confident the with sound world, truly I’ll a help finance a accomplished, people After experiences. I colleagues I've in for and and everyone. many Patrick about met and be a

to issued So, letter outlook to comment now back today. described shareholder financial as earlier we I on in our our fiscal for at business want hand. XXXX,

We are in the reaffirming outlook we letter back in November. provided initially QX shareholder FYXX our

outlook adjusted profitable Our ranges, growth these the and sustainable to highlights deliver we focus revenue and on EBITDA metrics growth. are

to in greater to at XX% growing expect we September least billion billion As or XXXX grow $X.XXX $X.XX year financial our targets XX, a year-over-year. full EBITDA range the XXXX, of XX% while XX% growth are ending by by adjusted fiscal to than reminder, year-after-year, revenue long-term the annual revenue XX%.For

growth In We than in or reduced would the the range have short-term, expect of inventory toward QX. million higher very liked, we year-over-year. annual velocity sell-through channel adjusted the $XX million created of heading levels to EBITDA into XX% our end XXXX, XX% $XX QX to

also in adjusted and impact expected visibility for not IKEA channel QX. while We alter revenue QX combination up inventory initially our revenue to late product EBITDA QX, We manufacturing and IKEA. revenue now that are up into manufacturing or have unchanged. outlook. will questions. it schedule firmed production our This the open with revenue, does With have we’ll begin QX our and launch product of expected but and full-year schedule We into shifting volumes

Operator

from comes [Operator Hall first Sachs. Rod Your question from Instructions] Goldman

Rod Hall

quarter. just kind EBITDA the demand about did by the It this of in start it at end were QX. to asking wanted I the by sounds off sounds like guidance. inventory have right you you probably like And of surprised

the So, And if gives confidence. a that I wonder you follow-up. then, holding what just have I on comment you why could you're EBITDA guidance,

Mike Giannetto

a Sure, finished a bit We strong Yes ,we sell-through and finished our Rodd. bottom December, line This but the strong real from of and performance end as revenue QX Mike. did I some in said, you see is see turn velocity at in top -- terms standpoint. down for little we it. had

So, look the with EBITDA as the we of we revenue range well the quite range. as rest as feel confident the year, to

strategies -- with sales that good the certainly going about we the seeing and came We within we a profit And year. performance that leverage, our market standpoint, QX up seeing it forward. strong. expect kind feel are of see we’re and throughout gross can you margin expenses, from We’re in very actually operating to the the see driving work, efficiencies

feel very we So, have. with confident the range we

Rod Hall

congratulations, Thanks And and then or Okay. on to something by -- way, which. the on that, not I'm sure for moving retirement Mike. else,

that The second had you to there. a question give this I us and was? Europe deterioration out how quarter you us Is called for any big guys weakness some demand of there size idea could contributor late was way Europe,

Patrick Spence

in category. last North voice-enabled few to of we've there is has in I if money kind first interesting a you It over a the huge speakers because seen time into what uptick where point the a trend America and periods was we've Europe, for poured holiday the will. happening ton Really, of would smart in seen that been

what first so, period category, voice well it’s came any which of us, so, bodes the across like too And the in think a saw Europe precursor holiday of bounce both. to weakness back seen as is news timeframe Europe I the think saw both in America end in quarter. We we've around to America. getting I this we good going the of and kind for in the the January we North a -- given North But,

good feeling we're about So, we've seen lately. pretty what

Operator

from comes from Anderson Yuuji Morgan question Stanley. Your next

Yuuji Anderson

a clarity product here. higher level where color you on across couple board, little Could channel the on this Is to there? inventories related it you're more just Just give just a on inventories? is the the Europe? seeing bit us Any channel the

Mike Giannetto

XX U.S. some It issue, just the It's as the channel some in the we would board. some or across not quarter we about in the sense excess than the to to has XX you inventory fine, channels of a excess. in well. are see channels enter we target, To magnitude. of not higher kind as European some days I it's just about of is level, think the terms mean, give

enough stock, So, it's solid it as a large And it's wanted call as is over out. start. we Patrick off January to to a not pretty but mentioned,

to starting come or some we're see come sell-through excess and down. registrations inventory through of So, higher that the

Yuuji Anderson

be -- year versus to maybe what describe had this last much have draw year? would what help helpful, Perhaps down could you could how you to you you

Mike Giannetto

Yes.

channel sell-through was of terms days -- if we days, we’re as what XX now, inventory, XX January continues. think come I ended we're But as drawdown it's in year-over-year seeing to and inventories seeing the the December. that's in now, and down we're similar seeing think as solid you that of again, terms the

Operator

Your Raymond James. comes from question next Tindle Adam from

Adam Tindle

been there's talked you've roadmap you seen hardware software number I be rumors since just most portable the about Bluetooth shareholder and outside been the talked Patrick, the home, long-term speakers, Sonos. believing about enablement. to you you've to a Obviously, in start, letter, wanted at of headphones, from compelling

want many you you Just know and maybe to on want platform the prioritize the then to if to opportunities the maybe how the outside whole? the brand roadmap. And leverage also air clear

Patrick Spence

is or when we're details I about what clearing going we’re any have in think, But products through are I’m we there to we be pretty planned. go when excited this. the thoughtful air as excited, share for because we not ready

categories around and wireless System, I experience of we way cloud how the think in, build is size it we lot we bring does that is and we think, Sonos strong of it are there how And we the today. category in play big expertise in category already help have, a on how about does the a -- connectivity services what is don’t in do. that we of terms opportunity, sound, expertise design can so our the lot of terms that

categories, on can we so, with innovator we’re new perspective we're looking going considering as that make something and the really -- it. we’re do these If enter sure bring bring innovation it a at table. can to count if to we the new all And you and category, an of

think two us And three so, next products to from that that and it's over about you size, combined category we’ll years. the that something see with the the we guide

Adam Tindle

got flow, the had you you've a to a excess. you've sustainability And Maybe Maybe balance uses follow-up then, think, cash clean, how just net got of cash. of is the think right just business? you've capital what’s allocation, about positive me lot potential run cash the think cash of level in sheet over cash? generation, strong million the $XXX I about as on quite help

Mike Giannetto

flow the for of terms we ongoing. for flow, and strong cash year expect to cash very can see you have and quarter In free positive be the

forward. and So, you we cash will plan be guidance for XXXX, ‘XX at about EBITDA going if talked and so to look CapEx, our be for we flow free it

cash so. solid terms standpoint In some we as to from on working few it potential more but another do around to look of M&A, reasons, balance is position raised for the is capital a one us sheet, we capital give just

if But we will at to closing do, are specific. and we We as trying about, talking the up are just That's would not is market, good anything to products. with technology already something we was there as come could Pat speed look there of consider doing. roadmap that we some make we and in something terms use look of [indiscernible] it out at some is what

So, that's to thinking help growth about the the the are point in way it this we drive business. at

Adam Tindle

Okay.

have a QX, know of had I by to clarification. -- the mean, Just Why that about I know on last nice could margin the a QX the wanted really quite in one quite a better to you have inventory. into XX lot of there. days got room XX heavily promote bit, had situation inventory I on envelop bit just you more think back entering wiggle math. you to a talked beat not excess I because of based gross

Mike Giannetto

The We participate period. I’m promotional did level good quarter which beyond. and around did. We is we sure the Black Friday feel just which saw that you about promotion a of holiday ended is in

it CD the appropriate the of because premium period Super appropriate certainly just States we as ended. buying. a think in and we use promotion is in We’re promotion it's United We Bowl brand and increased we time [ph] did just is

detached have the with other products. we So,

of with that gave those comfortable quarter… and for results -- our what level promotion the feel what we and So, us

Operator

question next comes from with Brent Your Thill Jefferies.

Brent Thill

since the you come. been this from that Patrick, think existed when you’ve you year tailwinds XX,XXX your just the about maybe running see that haven't

a talk If are that some thing on had the There Spotify seeing, could haven't new There's you're tailwind to was your overall obviously that that radar there. podcasting this about other companies. follow-up. I morning seen. And a you anything buying are I you're new seeing quick category guess you maybe things a one

Patrick Spence

from is I’ve first the our this bit call out think, a I’m the North I Sonos stepping [indiscernible]. to holiday and this what last thing in notion America the Google step Beam And and and Amazon quarter business premium products -- by saw Sonos. we talked at year, several little being would of I very the about encouraged hundred dollar in people I products up holiday stones to is what like and period starting

for to that’s great more as think job get and voice tailwind is a them that. that's the comfortable is with I Sonos So, people to assistance, natural them, get do step-up our point

Sonic You one, and everything for what a moving I called Sonic. out call ago, other year the to moving something audio, the is called think we really the out ironically which internet move on we which to internet the is

some seen year. last had to so, do we that the I with And of audible think you huge what that. the and There companies that And area. of to today added of are Sonos a Spotify we is introduced or every watch And room audible a other thing me Alexa, more that [ph] to it engagement. people whether or what customers and we've time it's new, air is and something engage always data great adding XX% testament explosion join saw in buying podcast, We've to from platform and explosion about listing hours. we because podcast another year-over-year is is gets thinking play

and book a I for So, this whole podcast growing ultimately. explosion Sonic audio think of tailwind us huge is everything with

is I good think good what's music for what’s for general, audio good so, the industry, in Sonos. And for it

Brent Thill

up, is a that new that track products. follow changed? to deliver still for came shooting meaningful to that cadence couple is or is here of not of go to just products, for But, And on specifics into your

Patrick Spence

I yes, think Absolutely so No. right. right, that's -- absolutely

Operator

Instructions] comes Stifel. [Operator The next Sheerin question from from Matt

Matt Sheerin

like sort there demand. it's products? broad-based regarding or terms of relative year another issue sounds the about, different inventory to of end when issue the you like quarter in of the talked a at issues It products or inventory December, parts seems Just of time was a mismatch you this mismatch the more it saw the a of was than product it ago, to issue sounds it in like

Mike Giannetto

what a are We we course counts, play and for. of same. have peaks the search the I as November Yes. it retailer seeing, business. we is which Matt, When And mismatch. strong, is our a Sonos' strong, the quarter, October we've call as wouldn’t through just broader was in base. gone saw the in we It’s of that were And planned hit some normally, we to December

it's broader So, it -- a different few products. is across I mean was based

it But in planned So, slower it -- we mismatch. just what a is for. I wouldn’t a it little than was December call

Matt Sheerin

And was of quarter. so year, we But specific year not guidance there I last bit were sequentially, giving you work down little worse this appreciate kind your Okay. talking because down magnitude Last for than you inventory just or or an in are time a are the that about seasonal? XX% something March channels. --

Mike Giannetto

Yes.

focused through way we will a would obviously of how XX QX inventory, looking on was XX in revenue think of compare obvious. I So, to XX about potential. business, XX I I February. kind the comments something Matt last of of which back would the -- go that's January in shareholder and there to wouldn’t to it, to just my on days be terms the year, that seasonality days What is the in is excess at in terms was the I -- I working that's is say that

Matt Sheerin

it an relationship. of also idea you you program be the in kind Could of give ramps, significant. expectations further sounds potential reason the fairly why us size that that in sort could to program of another like of the it but some out And revenue of the pushed just lastly on out year, IKEA

Patrick Spence

-- really really I'm more here. about it’s Matt relationship we the just recently. together spent Yes. I'm excited time Patrick

opens very parties we're want a be I is the what that. lot it, There see putting up around to to points But to way going committed to new of to listeners family. we about a with get that. expectation are really we of great want It’s see well. think very form but new around But, big both think it. start -- And it price Sonos to We countries, opportunities. all excited to obviously into as things. this new to some factors, reception, the new want we plan tradition prudent -- already want too out, being do build an also into are some get to our we launch these about the market

excited But, to see customers’ in launch relationship the keep about great there. I’m on come. in I'm a super and it more homes excited arrive it the provide and spot we’ll from color and products and see So, building that is

Matt Sheerin

in And didn't have the I I you letter just the it. quick number, versus America… last your that or have breakdown geographic or question. Do housekeeping you that did revenue may see North missed give

Mike Giannetto

standpoint, XX.X% growth constant about grew currency, EMEA Americas about the our and constant is From X.X% currency. Yes.

Operator

this There at I are over back to turn the call time. questions will further no presenters. the

Patrick Spence

Mike. a XXXX Thanks, start. just that to off I’d good In reiterate closing, is

about for We’re year we what the excited ahead. have planned

to base that our ever strong have thanks to customer that’s now opportunity, no software, capabilities the there looking hardware, and We’re we shortage over and people into and future loyal in X thanks cloud, million further is homes. our before than here, the and wireless amazing of

Mike our of Thanks to for resource look Sonos and been work @ some broader or backgrounds you important and culture. forward Sonos call the and of History to again attention with resource community honor employee of open to live Sonos' work. letter. end forms to I without course, Black at and joining support again educate which are wouldn’t soon. am are for we playlist each draw Black day I the groups our mentioned Month share we do the today, other these of a with group. crafted communities the part be at shareholder beginning. it interest speaking at But proud in Of support and It's in us and Employee by employees groups Sonos every the the music. noted a your want

Operator

concludes This call. today's conference

You may disconnect. now

Sonos (SONO) 6 Feb 192019 Q1 Earnings call transcript