SONO - Earnings call transcript Q2 2019

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Operator

Good afternoon. My name is Kelly and I will be your conference operator today. At this time I would like to welcome everyone to the Sonos Fiscal Second Quarter 2019 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. [Operator Instructions] I would now like to turn the call over to Mike Groeninger, Sonos' VP of Corporate Finance. ahead. go Please

Mike Groeninger

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

For Assistant our shareholder comes playlist letter. the those was early, team. collaboration playlist QX created music the hold call celebrate with The Google the included joining to today's from in our

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

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

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

Patrick Spence

XX% constant revenue basis the year-over-year products like We're our loss our same QX and joining in evident for and XX% Beam, from narrowing XX% driver. in new ago. We've another revenue adjusted came quarter in less huge and fiscal new came from its million thanks Sonos, of a improvement our XXXX, million today. in our you from and to to currency growth, more It new revenue EBITDA, nowhere this $XX fruit. Mike, – all $X than a Architectural. was a than $X new quarter In great in is engine our for bearing million products Thanks, from making progress products. of of product QX and year year-over-year strong on our growth Amp XX% accelerated

We announced have first with our reception customers products to and recently great two from media. IKEA

point support So this the growth less this through That of those even we're with company any products beyond. remainder our than on and help reliant to category. further fiscal alone out driver will said, in it's XXXX that important new

new Our sell continues well existing to very into portfolio and existing customers.

to continues back apart more add set Sonos itself to customers come their home. as and

in has this our consistent XX last over While industry, years. the unprecedented been

I'd is evolve The other highlight growth the driver platform.

you'd and able week. a and wave to Google freedom think ecosystem. locked control be not your growth new in spur being into device, of One will Sonos. As Assistant States Sonos with of in interested able Beam available we're to making use this Google next to Assistant customers the choice Home a one that We Google if customers or Existing will download be United on you have

over Sonos time. continues to better get

strong in the balance understands ahead. our and past and forward years. industry two take advantage amazing to the find Lastly, part front for has I'm with an she sheet. our Brittany CFO, ones seven knowing years I'm when us She at she people of working the opportunities excited Sonos closely the pleasure Sonos, the Brittany on invested to new us and of Brittany to looking of have was today. I've that Bagley, in leveraging for was integral to here the had Board our opportunity served as with team new of KKR and

Giannetto, our here a over few little Of address for it helm got as Mike Brittany to the QX to specific words. at well two I'll turn so been former over questions. course a now CFO, for just we've she's help weeks,

Brittany Bagley

to Thank operating to the for working to you, I And incredibly of member me good full Patrick. profitable a so level from for I'm the to and sustainable team. an business be exciting be It's to It's growth. on in as wonderful here evolution be thrilled voice what strategy. personally see our a an plan Board a part for investor

As results. say the revenue adjusted EBITDA $XXX improvement XX% a giving year-over-year. margin is to gross record thank QX loss, to team quarter, you straightforward me a I of million, We in $X.X for which have a for this meaningful an generated and million nice

we We continuing we I to many to over continue improve top come. promise Patrick, With our deliver that, and I our questions. to to growth what line quarters to profile. and will strong forward Mike on look said do take do demonstrate to your profitability

Operator

the question Instructions] of from Rod Goldman [Operator ahead. go comes first line Your Sachs. from Please Hall

open. line Your is

Rod Hall

I that that. wanted sales. a as to and had follow-up look Glad I week think next wanted just see I European Assistant guess you Google and question. how had you having I you have And that had back see to that just Yes, we that rolling guys. commented maybe for expect affect I this sales said hi not the probably the I to European on circle know Patrick to forward. Thanks out And to affected then

Patrick Spence

Google Rod, saw Google absolutely the holiday Europe. it's That's lot across and of right. pickup from quarter products We Home a of strength Assistant Patrick here. in the the Yes,

Assistant introduction think to that about so, two for of things we're driver our as European you Google excited the And say a in We're Europe. expect be I'd business. we introduction, excited actually there's because and about the three

IKEA I will IKEA which closely is you've some I year be return us the a driver just in about But companies to at as in in is it think pretty one I later and think this that weakness a have that watching seen we heard And think would will we thing macroeconomic also and point. that Europe. is We everybody's help this that are growth and Europe. is do Europe one think so Google Assistant relevant flag the few from thing we

Rod Hall

related my follow-up Thanks, guide drove that is expected just guess to wanted margins margin Patrick. why just to full we just mostly is the MLCC And EBITDA can than and Brittany check pricing or And also what other wanted margins are there really maybe – in Okay. to if the margins. gross address the I strength the the changing. I I wonder, at in year level, were on isn’t there? dynamics stronger I that you that then XX.X%.

Mike Giannetto

We MLCC. a and come and specifically exposure really reduce ourselves of kind the headwind and really good the team didn't that been able definitely first comes price terms the thought through of take and Mike. work actually even continuing shortages. Rod. premiums. from down we down around did I'll MLCC we've bit that in and Hey It's margin. operations quite months the for job, on narrowing saw chain some specifically our the We’ve around to it The now benefit excellent shortages on supply some QX part to in to component talked work about of team of gross that the from of some a

Rod Hall

Great.

you that. leave to mean by Thanks out, Didn't thanks. Mike, the Okay, way. for

Mike Giannetto

Rod problem, No

Brittany Bagley

that your quarter. sure are on we happen going doesn't EBITDA our On question not forward, this We'll guidance. make changing

the have to for investments Google some going forward road both some have also you the of the initiatives. that we thing half to is the launch remember second support to make map product but think I

will see of so second the we the And in some investment half year.

Just keep that in mind.

Rod Hall

Brittany. Thanks, Okay.

Operator

go ahead. Stanley. Please question line Katy Huberty of comes from the Morgan from next Your

Your is line open.

Katy Huberty

Thank you, good afternoon.

what other going Just to in the the back in front do Japan countries significant you have segments, of that how drive you growth? is geo ramp could and going

Patrick Spence

Yes, I'll here. Patrick Katy, that. it's take

want equation at and part a we've a this point, a It place of is different So, build to from experience countries strength it done few the at growing times Japan having obviously and along but of is point and well. this quality. across this still small coming we

we're partnership's we're going international so allow high-end kind that the power acts to of IKEA which us terms and number of head we're about of number building And interest. pick of of both interesting and pretty we infrastructure in means efforts our up together as if deliberately terms now and the way our we with say online thinking bit will And to a in into we to a else before. screen, it going should of the would support countries then we into that us customer care a is countries how seeing a I of that where a really it where come few a start to of haven't Sonos right new but good on gives retailers. give take a slow that – us way IKEA I'm and approach a also most will, will obviously, with some you have the hey, it's invest? way ideas countries really liking a indicator us And countries other We the are see

of of been think great that's I benefit the IKEA partnership. added a kind

the And about so, fiscal go into think help countries watching shape pretty as other and closely beyond. force that'll be we and we we'll full that 'XX

Katy Huberty

we the seasonal redesign a year as years, by gross then as should at that last I margins If XXX layer think how of and in margin we about this basis up June. the top think And points of the the we Sonos then about some Thanks. about look benefit modeling or Okay. quarter. redesign? from think sequentially on on gross June the impacting One follow-up gross XXX are the Should couple as uptick margins,

Mike Giannetto

few Okay, a Mike. Katy, There it's things there. are in

Sonos we years. about line cost product a pretty describe down One, future much been the quarters in so Sonos is we – launch strategy we our with the cost and on did in It's as in XX% One. a which we has it and did First and down or redesign cost BAM reduction

though. So There's on going going a that's good, definitely other that's benefit dynamics forward.

mix the seen We also in QX. shifts and different products quarter we've that have in

an on necessarily seen say what we've So I based history. uptick QX from it's in wouldn't

IKEA Sonos in One the back to half well. and Company play be that's other some to the so start lower which than has will our gross something consider margin, into help coming too. will overall there will mix as average year, of ramp then

Katy Huberty

on you. quarter. the Thank Congrats

Patrick Spence

you. Thank

Operator

comes Tindle Your James. go the from Adam next question line ahead. from Please of Raymond

open. ahead. is James, Raymond Tindle please from go Adam line Your

open. is line Your

Please Your next Tom question Forte ahead. from go Davidson. the from D. comes of A. line

open. Your is line

Tom Forte

question. you my thank for taking Hi,

with selling perception a you. your you and growth biggest against platform how your an relationship on compete how on customer you and talk also can Amazon. Thank with then leverage have Amazon we the little as bit relationship stock, so about since also it's and your Amazon, So, retail Alexa you AWS both

Patrick Spence

Yes, I'll sure that. Patrick, take Tom, it's

Amazon, long-term have our started sure. for AWS deep around with we them and So partnership with a with work

and those on possible, a for over Amazon the long are assistant that. the Google actually over talked Amazon desirable use they Bloom of most partner there. ahead invested on work us we see we millions with in been this we on of had you something homes and get platform. clearly around a I'd want who well, cloud have the to to Alexa part of their just have So Amazon.com products on time, industry another to relationship beyond Steve Amazon been can where Music team that we've established we've is products Lynch both well their Amazon as of really expanded it's that by. as over put of week. retailer so their having companies Music, support to voice regardless for And are voice strategic Dave the to the earth really we has of say the anybody assistants have our as And assistants last years has with built strong number intent, And but a couple motivated a us relationship and many else as these and that's and had Google years

great relationship Google, Dave we this. are as as go and are with well said. one, continue they Apple through I to And They week, a you very talked closely with last to Amazon so, we Amazon. as we so have multi-faceted, work

is of of think any help to And at we that the that that freedom because choice. we the we'll customers, we give want any expect advantage these do services what day of out customers companies so, and right, are end bringing of to continue take certainly

to that customers of Google, to you service Apple, want able it's And or Sonos whether so, we comes it. regardless name who present the to Amazon from be

Tom Forte

Great. much question. so you for my taking Thank

Operator

from Sheerin Your from ahead. of next go comes question the Matt line Stifel. Please

Your line open. is

Kurt Swartz

on Kurt good for Hi, afternoon. taking This is my Matt Thanks Sheerin. Swartz question. for

sort launches if these launches other seasonality of off, to product have material you going First just any could color wondering offer may as IKEA impact any forward. any up coming and product whether on

Brittany Bagley

Yes.

that would So I is keep say year, in mind launching this August. IKEA in for

our good already really have and baked this annual it's year and we into guidance visibility our for forecast. annual So

we might expect So this it's it's and certainly doing. anything once can wouldn't look we how about I launched little and going like a then have talk differently year forward what visibility that into

Kurt Swartz

then any guess, a Understood. out wondering additional follow-up, just products And wondering forward. incorporate display last a more in perhaps if you've that going an asked about that rolling that still really may I there? too any pipeline, considering there's to product time. consideration seriously were know update if I the looking at given you you was it, But time haven't at just that something a been

Patrick Spence

the Kurt, marketplace, looking, for sure. happening always what's of We're at in kind

XX% kind of months about speakers, of market been or so. there's Strategy think displays six last something been think Analytics the power I saying over display has smart smart I the from

this in initially of the pick way we seen So way, voice continue picked some the kind to we'll that up along have watch those as up smart our it or products space. of things. soundbar same and did Haven't

like market at data portal seem doesn't the to still have is we've been any see feel the the think we I traction much that about, out, from able jury of Facebook as got to this point. So

those iOS obviously television the marketplace, does how as see our you and we right, I'd greater, displays, still make that with Home launch the connect and is to we'll existing this Nest the strategy a like produce could for devices same week, sound So in that but well to point, AirPlay Hub do this easily at say as well. so have

watch will we continue to So for sure.

Kurt Swartz

Understood. very for the Thank much you time.

Operator

comes Please the question from next Brent ahead. go Jefferies. from Your line of Thill

open. is line Your

John Streppa

is for Hi, Brent. on the this Streppa question. Thanks for John

You've of seen line sales digital. and very pivoted more kind as towards marketing you nice leveraging the

Google rollout could you your about Assistant little and go-to-market with if Sonance. strategy curious the the IKEA and Just partnerships a bit highlight with

Patrick Spence

with team. some push some we've Yes. Google We activities, well and changes that's up line launch leverage as forward seen. you've much the the to do really lined effectiveness fall feeling so they in about the we're – made the great very got consolidation from We've both that levels digital but some of the some in as moving kind outdoor seen activities of digital good of with those been and the we push we have that on to kind Assistant, around activities great of

I that IKEA is obviously So in benefits way pushing one as products stores. that, is of X.X big, that we of shoppers big year think their the a about they on think we through relationship billion get co-developed. the And a

really will about. see we're environment they homelike that to Sonos is in which get So really, excited a something

the will way be going about good of reflective if we think of so getting will. to feel And it's marketing where then and – is we sales to you so, we thing kind pretty fiscal that we forward, this think continue for we we and we're where – going year. think XXXX to the think sales And are and the we landed marketing right leverage is

John Streppa

a Thanks. exiting you first quarter, And Great. heading housekeeping maybe then one. inventory the highlighted the into quarter just elevated second. Last channel

how Just played the quarter you and stand curious Thank heading kind out you. third. how of into that the throughout

Mike Giannetto

Mike. it This quite Actually well. Yes. played is out

and it good February call continued registrations terms sell-through quarter. of I in the the think that pretty January in we looked mentioned throughout

good from channel we're standpoint, So, really a shape. inventory in

good we're would've we're mentioned the shape. but of have and – higher all than we're We weeks thrilled that's a December, so we at end liked of couple in

John Streppa

Great. Thank you.

Mike Giannetto

You're welcome.

Operator

comes Raymond from line ahead. Please from the of Your question James. next Tindle Adam go

is open. line Your

Adam Tindle

good and afternoon. Okay, thanks

that, calls. about bouncing between just Sorry

an the you Brittany, I what bridge you've markets the public got side. as I'll with are softball guess, the from that most a So view by you is and about coming to Sonos help private do penalty think for a interesting that myself. do can start misperceived things the what gap?

Brittany Bagley

everyone Look, think I too. if know we and don't a a business recognizes but it's consumer understand great difficult that that's question. electronics rightly can that that I a be softball,

we to And that is so actually consistent, that really I'm prove to of be we're I good job the do we prove that what think help out can how can Company it, what from and kind that that Sonos of perspective really execute, consumer and can we electronics company. long-term a you out targets we can a a of for have we a all that hit is laid the different

we and we're said of what that's really So over what to hit. that. to quarter-after-quarter try the And to on recognize side has go gotten come it's and me show you the of excited all demonstrate hit of team us what and this we going to that just part be table and

Adam Tindle

of right. vein launch year on if look to are the All at assume kind Well, the XX% we guidance. being achieved that but XXXX. a basis, ever. in touch low want a up successful in Beam sequential normally sort year launches double-digit full to full ex year trends that that is And If you it need one take in Playbase like last was we revenue most of something seasonal number. of that sequential seasonality maybe That on uplift then the just QX we revenue the QX product of with

into So a in to what we’ll Beam-like the and the that I why that tomorrow year full will year that be finish guidance. is underlies the guidance question get probably revenue this and such guess, confidence successful hope launch bake

Brittany Bagley

Yes.

said hit to the rather revenue than guidance year do, XX-plus percent promise which really it – course can second our am the half the of Patrick think I'll take and we talk Mike about jump we can that quarters I second tie about the And So full we into of growth. designed year. the I half as Look of we’ve what in. of and and as that is was year our individual think guidance, to going

so look we feel are deliver about hit we And about that talking to on half couple our our the of that things that. good year, really second of at as we ability Remember haven't call the the financials a yet. this

Google Patrick traction some good how optimistic little in we launched has So, bit yet. a talked are that that about hasn't Europe.

Our are visibility have build QX August. And their Those have on in with launch architectural door. as yet. IKEA speakers really we the Sonance to hit out they good just in not

reconfirm the are those as year. are So looking at we number that for guidance pieces the we that

Adam Tindle

the Okay. role. Thanks new and congrats on

Brittany Bagley

you. Thank

Operator

questions. the concludes that And

Patrick Spence

time Mike years this a Mike seven tremendous thank right, everybody's as the helping He to done the call $XXX finance Thanks a All Giannetto earnings to million is critical in last he'll and took a thank for $X again moment team over you. take job last scale over like playing small And today. has I'd us and built a billion. role revenue join. from to a all today. thin. and to in He's year be it strong strong of and Sonos to that have able friend and IPO successfully position a and team been and me we great the a built colleague Mike that finance will into testament And that we're through today. that, great last financial forever for It's I he we're facilities a and grateful. a team to thick

So Mike. thank you,

Mike Giannetto

Thank you.

Patrick Spence

Google to putting one We in Thanks hope you we'll to shareholder the some some the time also soon. Assistant of this fun and mark we together to you had We the playlist take included on talk Sonos. introduction enjoy letter.

Operator

concludes today's This call. conference

may You disconnect. now

Sonos (SONO) 9 May 192019 Q2 Earnings call transcript