SONO - Earnings call transcript Q2 2024

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Operator

Thank you for standing by. My name is Greg, and I will be your conference operator today. At this time, I would like to welcome everyone to the Sonos Second Quarter Fiscal 2024 Conference Call. [Operator Instructions]

I would now like to turn the call over to James Baglanis, Head of Investor Relations. floor. the have you James,

James Baglanis

and Good afternoon, Earnings me Quarter XXXX Saori Sonos are Eddie Strategy Lazarus. welcome Call. I'm to Casey; CFO, Conference Spence; with CEO, Second Legal James and Sonos Officer, Fiscal Patrick and Chief Baglanis, today and

joined early, recognition with collaboration those Heritage from Sonos music in sampling Asian today's API is Pacific Month. in who For Sweets is and curated hold a of American our Spices the call station, which at

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

discussion A our SEC. factors the under detailed with filings Factors fully caption is Risk the in these of risk

will call, non-GAAP During financial we this to refer measures. also certain

second to For press GAAP to website. refer reconciliation information release financials of the our measures, results please regarding portion regarding a non-GAAP posted XXXX of our non-GAAP and quarter our to Relations fiscal today's Investor

available reminder, the Investor our on Relations be conference and website, will a As transcript press release, presentation supplemental call investors.sonos.com. earnings

over have convenience, I'll Relations I presentation. of posted also the supplemental website, portions would certain we investor turn separately contains our presentation now Patrick. to for that our call which note an to Investor like to earnings

Patrick Spence

previously hello, half us fiscal set to we XXXX fiscal This of everyone. do to our and in guidance. outlined sets pleased I'm you, that we first to out nicely on performance did our year. deliver the up what Thank report James,

team, our heard the under and results product these so our you've testament strength ability is to a others remain previously, categories our pressure, brand. us our to of from and As our deliver portfolio

and our versus market continue year. are theater to audio streaming own home U.S. We last gain holding and share in

we've innovation. you in investments know, all As been healthy making

the to add life. Our investments products. remain to products we're want attracting second customers focused attracting more to customers new making is X stem Sonos, are we're the our to add Sonos how getting on X existing on and things directly their more to the and that customers new There first highlight from existing laser-focused and customers I investments is getting things:

yet. app. the is is our This redesign most first all-new and The Sonos re-architecture extensive app

to faster needs was that and decade innovations original would ago can and forward. over designed app great so We we deliver an new up, Sonos and a our Our different. app started easily add when the day, it build products allow architected with more customers' were a to from experience going very every our and customers move us features and categories new ground

new app and system to Our streaming creating screen, home unprecedented controls an win customizable bring experience. content services,

sets up and our raises and easier, for the categories our of listening music ability and expand again experiences. Best home to better. bar new the faster It app into all, redesigned is experience once

Our app said. is point have we of a always proof what

audio. We story software are of the eating

opportunity everything in the ahead and truly key from else our unlocking to us. Our market differentiates is software products the for

the of also reach brand to efforts audiences. and mark been the new a and a This the Sonos diversifying expanding X we will This on business. marketing from foothold that our into unveiling new Speaking away category, multibillion-dollar number give of of we categories further off in pay to from are weeks expect has QX multiyear a and beyond. investment, it in evolve in new is product. and which, the us second just X beginning launch newest front our play spades the we to will This

The third to a as ensure off a United March, attract our journey The new customers on that seller in we distribution great milestone the enter to in went particularly to partnership as is States. In we officially Sonos, we new a first-party expanding Amazon is start categories. live footprint. our is major and

We with eye and to evaluate come. to customers the further look reaching towards continue new our forward footprint distribution providing to in updates an quarters

product some with quarter, And fourth, installed of we longest offers to time our this customers. by base our most experimented upgrade additional stimulating sales limited delivering loyal, in tenured

well how to our promotion better insights exploring expectations, targeted utilize of validating unique in ongoing harness and for always and customers. came our use are ahead of more data we investments experiences We better personalized the to data. deliver our our results can our systems The in

base and in It's it's what come. the new gives to our installed opportunity. a to business years success us scale both of tremendous product in what represents we're and confidence new existing products confidence in about revenue to into the a our category, launch ability this the in gives Selling us

opportunity to over sized product we've average For be the billion the to converting previously revenue. household in of multiproduct single example, households all $X

on to our Google. I litigation briefly touch with gears, Switching wanted

of control. in we to that foundational Google innovations. on laser-focused to Sonos Federal I damages infringed look this With last April, Sonos' to reiterate had the month, patents. can continue X we pursuing ruling we in forward be Just early Circuit want that for Google's what hand, affirmed misappropriation

some as are to this harvest customers. sell multiyear existing year. product We flywheel to and more for to flywheel benefits customers powered development that attract more we of to research onset new cycle It's the years, fuel we're Sonos the XX a our of the and past at has the excited investments add the our and

households expansion total the in only keeping ahead the recovery we accelerate We X% eventual of billion while the $XXX share years remains global come. in to will X% opportunity to have reacceleration. our as The fuel the check margin market expenses in our just our large, company growth to of categories positioning audio market. this core deliver The are further and of

households is customers business year, Each loyal base the and of new our installed time. enter our subsequent purchases by make continue acquisition to our driven who both that by over

will of here best improve at come. us yet to the ability Great disproportionate Our is to the happening here. ahead only a capture and Sonos are opportunity from of things share

turn to over it Saori through financials. take to our you now I'll

Saori Casey

Thank opportunity and growth everyone. thrilled I've profitable CFO a myself quarter the in road Since as the the Sonos map. you, be of part to joining the ago, Patrick. Hi, team. drive the long tremendous of to immersed product exciting and Sonos I term, business I'm see sustainable, ahead over for details

at to on our our Now expectations results. $XXX.X revenues of came in slightly million. ahead QX

that response product In particular, quarter. QX saw in that promotions to was targeted Our the referenced by great we driven revenue ran drive strong better-than-expected a to earlier. to the per we sales adoption Patrick Revenue upgrade customer some promotion up down in to year-over-year. half significantly product a XX% from sold by Digging $XXX XX% favorable was on This partially This resulted basis. year-over-year. offset revenue mix, increased million, promotional increase performance $XXX, our first brings regional activity. varied

and significantly performance a year-over-year, our macroeconomic APAC continued in deliver difficult our position EMEA in by whereas Sales Americas guidance. impacted XX% first puts and environment. on EMEA respectively. XX%, the categories in by to to good half full year us Revenue X% our APAC in declined be the Overall, declined both and

favorable the basis seasonal to promotional and costs line was due margin was product in gave our GAAP due points additional gross roughly from from lower up declined increase activity. XXX QX. offset component with to XX.X%, year-over-year mix, revenue and lower by sequentially we holiday The last the guidance margin quarter partially Gross year-over-year deleverage quarter. in

negative our in from gross first performance that will to of EBITDA margin brings QX and performance XX.X% target revenue gross our $XX.X to This representing underlying marketing and lower underpins last XX%. This year. to our we up half XXXX resilience ahead of and adjusted due higher-than-expected our million, fiscal margin guidance million, XX% the to a of spend. our half brings meet of the our XX.X%, was margins X.X%. EBITDA Adjusted half of Our first confidence first $XX demonstrates product

in with due in of into $XXX which seasonal expenses $XX spend. bills. primarily deployed million down to $XX some we cash, million marketing as We sequentially, short-duration and excess adjusted treasury net ended marketable the million Non-GAAP $XXX operating securities million quarter the of a quarter, decrease sales includes were cash

suppliers. was working by driven to our This to sourcing our payment to with cash primarily seasonality, a adopted focus managing in our flow million as typical first free last improvements, bringing terms cash was $XX negative resulting due million newly better compared on our in QX adjustments through year. $XXX capital of million Free well implementation of increase the from plans to $XXX inventory as half flow half first

keep as to shares repurchases to last of finally, balances and $XX an the million stock million through balance repurchases our year-to-date share period down Our up remaining we of our components. This year-over-year X% quarter. XX% outstanding of shareholders brings $XX.XX authorization. million, $XX million, goods quarter. $XXX of common from million share $XXX in and X.X% under million end check. QX current We at us average million in total $XX working leaving repurchased consists repurchases share. returned approximately to of $XXX our We're hard This per with price of $XXX inventory finished And was inventory

continue be repurchasing be market to our expect stock. to in strategy and We active in balanced the allocation our capital

recap. in 'XX, our for previous quickly Turning will confident We to guidance FY our I remain outlook. which

billion, year-over-year We billion at expect roughly $X.X midpoint. our revenue in $X.X the the range of to flat

assumes our guidance in from generate products category revenue a million of expect this year. new we our As will of the previously the that large products $XXX over noted, multibillion-dollar portion new

gross range XX%, to of to XX.X% of of stock-based revenue. the We margin margins XX.X% the cost approximately GAAP in GAAP of non-GAAP of included in amortization to and XX% compensation range million gross $X intangibles expect in the with due

of be $XXX X.X% margin the to to expected to million, in is a XX.X%. EBITDA of representing range $XXX Adjusted million

last providing significantly our As to free XXXX, formal continue conversion for expect flow we fiscal previously cash flow to we're though free discussed, not in year. versus cash guidance improve

QX. to Turning

$XXX product. We our in to a million expect sizable revenue million, of grow launch new to anticipated our year-over-year from includes the which $XXX of highly contribution range the

increase to cost leverage primarily QX. from a GAAP in margin higher gross expect to to We to XX%, sequentially XX% fixed revenue due

laser-focused to a to are solid the to expected in operating be first to of half a in $XX Non-GAAP $XXX With in million the million, in resulting million in million. $XX we're range $XXX EBITDA position good range books, margin the We're of accelerating expenses guidance. adjusted like fiscal deliver I'd in the expansion. our managing our XXXX half growth call expenses to on With year, questions. the while on of tightly execution second to revenue for turn the our that, over and drive

Operator

from Instructions] our line looks Steve [Operator with question Rosenblatt. first of It the comes like Frankel

Steven Frankel

installed the quarter. the from details direct happened learnings promotion on I presence what couple new do Maybe could forward to early Amazon? give that. us give you a us on any going during the that around the of on start base more like initiatives some feedback And and might you with

Patrick Spence

Yes. here. very Steve. to Thanks, deliver is is I that pleased Patrick started, going with focused there, we on, we're customers, new able new going how It's even important we're going something find very given on mentioned, some our and On to forward that categories but getting that we more of been into. we've think be just something as start Amazon, the

plan So overall positioning our I think that's for been helpful ourselves growth. in of terms and

then base, you this single allow average, us one we the player us a the opportunity. of a continue if this $X more as homes even And in -- multiproduct is the to invest systems to well, after billion for And to on we the know installed the and more. can to go over get the large time, tools that, opportunity opportunity that's is

very And about the there. we're excited so opportunities

help tap we're particularly feel helps think through well I getting really positioned, as channel products base, tap into existing to which well, our direct-to-consumer as of I coming that particularly we into into going the because well, to they're we new that about are think really play as too. our like some as

So excited both. about

help continue knows, that to think focus only about going new everyone find homes with both, real can other total have get we working other on -- we in of that to ones we're those we're working because as I trying partners of of homes we on there's us and address. lots opportunity X% think into again, we're to the can and in

name the is homes new finding so game. the of And

Steven Frankel

geographically give then of inventories. And that some can one last well. how some And you question, differ Great. may insight characterization as if us channel

Saori Casey

Yes.

channel comfortable ended with we're into inventory, don't call, level. comfortable geographic break with usually we channel or it we the on We where a the down On further very ended. the details but

Operator

And our of from next line Morgan question with Erik comes Stanley. the Woodring

Erik Woodring

understand fiscal companies the in months. product So that a last of and I because flagging real help clearly, Patrick, caution what banking demand see you maybe we over us environment. you maybe launch first, you've most spending learned at consumer kind XQ. consumer say pretty And X still the Can significant about

been Your unwavering. this outlook for product has new

us spending maybe remain be negative, What's and some maybe maybe of see help you confidence we So the us, maybe not it as driving can especially you to characterize just consumer could outlook, connect how color macro dots? with kind but the I'm sure the that some deteriorate? would it, of unchanged, share relates to helpful. as

Patrick Spence

You we bet, And being in of I it's Erik. I last characterized say have for the pretty of been more a year the think have for categories, -- And categories maybe months I'd weak our overall. a X same. kind if challenged do last while. our wonder had categories been

control. really a as it's it's huge I portfolio we've testament our through team, any -- we so of us and stronger makes that half we on anything successfully. the or weaker really think able the the what the seeing our go focus been that execute not And can we're so across first product continue I And state any believe brand it. to And think we getting to to

learnings obviously, so understanding And take that. from that, from we

the sure a It's we're other we've category is thing into. one. done lot understand new make of the to a think I work going large we

We we a believe gives So us as that unique perspective confidence. bring well.

partners, might category. conversations it's with you know had As we we've lots growing of also imagine, channel a and

year-over-year. because categories So is than it's other now from right our different in growing a it perspective, little the we're

plus the all combined, us to intact. those for our guidance so things really fiscal to first is keep execute what confidence half the ability gives our across And XXXX

Erik Woodring

bit this this to operating year kind we much rate you, heavy sure is as spend of of that a this investments think on lot And really in us year. forward how then bit expenses do look obviously, much run of or the How Great. you, But great you a potentially help versus Saori. see. repeat going that would to need is of beyond again for doesn't is Can as that, I'm not just understand if look this be lifting forward is year, this a helpful. for you we investment-wise call Patrick, about just what of that and maybe some of or some I pull it which beyond would

Saori Casey

FY our investment 'XX in Certainly, Erik. confirmed. we've Thanks, our embedded what approach is guidance that guidance range, the

optimizing optimize for profit We over as at growth the are time, to future long making continuing well. term to same the invest the for sure that growth we're

in continue at more that be embedded the we is But and we time, control. guidance, new will as stay realized it go market, monitor we So to and the continue can continues we to launches on control challenging, the product what we we market. and we our to market the pulse as same share will need the through to

Operator

question line James. next Norrison Our Raymond from comes with of the Jake

Jake Norrison

focus this Could able you previous speak getting just promotional double-click to the pull? wanted but level, be is days, weren't on new that on early just that it's customers. the to levers just here maybe to new like in and successful one and gaining partnerships you'd compare contrast the as Obviously, start I IKEA Perfect. high to homes.

Patrick Spence

Yes.

not and long-term more it's structural promo-related. So oriented. This is

portfolio to talking really fit they're So who building the if for partner, and it today's future. and reaching any with who we're we're and add to about going that does they're the is assessing channel one how product

much that tap address XX% can do in And of but believe we we aren't so in how into the terms this in yet. of strategic is more homes identifying nature else we

see. continue really the you've that our seen, guiding what's distribution we'll expanded to push and that's so for And

Jake Norrison

Okay. one deeper could the Great. then color you for hoping And I me. international last just dive I'm a there. little appreciate on trends.

market Of weakness. share audio can you broader seen your segment the But course, maybe those in just the we've regions? versus speak to

Patrick Spence

Yes.

other relative players is very one this to So there. want because the we we're watch doing how know we to that are closely

what mentioned, even down EMEA at. point. APAC into Similarly, looking biggest in last seeing hold is market which Australia, year-over-year we're and as home which are we then down as or year-over-year, the share year well I though audio, at gain significantly the our anniversarying in negative theater U.S. to, well across those fact, year-over-year, is we're As streaming continue and this

holding like. are where feel we those so And ones we own, our are

And think opposed as of at look from when so everything of Sonos in up anything you're can terms very at point, we this to I well results unique. the seeing our see what's broadly. And we relative hold think across to continue more the they're in representative industry to the what industry geographies, I you happening

Operator

question our with [Operator Alex Craig-Hallum. line Instructions] next And Fuhrman from the of comes

Alex Fuhrman

from that's market high done been presumably Just it of like housing business many can see are what And some a us little what we size wondering an coming the the to for products if velocity. taking what roughly have little brand, seems at to about you X a housing Can who back of bit. be your demand to to uptick it's they're do when how as activity, you buying, some was into years kind was explain come you type point to if you maybe be customer are? future? It the slump ready products their same in multiyear is steps ago in a a they profile, the buying housing about might in more level, now a and talk first bit today us your there lot

Patrick Spence

Yes. Thanks, Alex.

again theme been of kind on the control. can we we've -- working the in think of what focusing I actually

new we quarter and as in products had on starting we the QX, of highest one bundles, well. our recall areas multiple that of proportion with You'll focused homes was in big

to put of because customers an we can being that right make drive it packages sure easy into, tapped are -- season, is we try through we, think kind only for to trends. think that them think make for then the of holiday can the about if can we the some we those many anything, we there together showed as as if haven't buy customers so and And we've our degree, and I are bucking so ability I to we right, shown homes, X%

pressure. overall, obviously, under remain categories our Now

would there. I something that we us, think ultimately, think to your housing a tailwind is point, for is naturally that's

prepare you where you focusing times think as And you the so as invest, how you execute, on creative times in by possible. and the good getting challenging to I invest for better how and trying be

up coming So with to base. installed looking bundles do promotions how we at our

of marketing All new we're doing we're the doing aspects product things our today, that and the of across a doing we're brand new kind the team, product. innovation that for

I these of tailwinds well get think, we some things, the if from as or if us housing, will. All greatly will you categories benefit

pay And doing tailwinds this see we're the when so off back of all pick up. categories will challenging we activities and the period the in come

So all we I navigate successfully and we're and as also these going do to we we're carefully, think times manage things appropriately many but obviously, our challenging we've outlined doing we'll sure make to can the business watch right times. so profitably

Operator

And of Brent line the comes our Jefferies. with question from next Thill

Brent Thill

X and you'd What kind be? over? Patrick, you you the to wave magic that help things things are back that get you want wave the or What could of think you'd environment get are really the wand X where the it. to wand can

Patrick Spence

people our great amazing, thing. would be into That's so mean, us. a category, their from would biggest today wherever I the products great be tailwinds be shifting investing investments for to question. audio in That That's thing a think they happen Brent. I

to Alex's expect housing to think benefiting be that like from. one I is certainly we point,

we're not we're tap we're on that be new that because focused be underlying there do into make So -- But tapping where no And countries finding it. into do that on we wands, And further how we new to sure right, opportunity. too focus homes channels, yet. would to installed would base, again, those much. to we we're billion not not tap that we're that magic can instead, how going something that and in $X going are just that

Sonos all like expanding and with things friends find of enjoy existing and product to innovation we're pipeline tell products families and as then our deal their so our of distribution, them how we putting more And installed base our where efforts. ways kind well and for

Brent Thill

that this, to that put like that I you on premium sorry, within And missed we some in. what on the how working. harder? -- how And Or that of your forward? I pricing going should if But you want that just about thread? do you to using it do of know need to think you was you is pull given product, some that lean that don't that? seemed extent are Or promotional

Saori Casey

Yes.

Clearly, We not more look profitable just very promotion at drive revenue. profit is continue thoughtfully. to our dollars, to goal -- for

certain become make markets competitive, very on bottom to business highly profit the to sure continuing certainly, grow the our promotional So are to and pulse dynamic the keep we're and very line. has -- of we can

Operator

no All It there are questions. appears right. Instructions] [Operator further

the So floor for remarks. I hand Patrick, CEO, will closing back now Patrick yours. to is it Spence,

Patrick Spence

Thank in I things X want to just quick you. closing. hit

did to half guidance. out position to in we set year, first what on the First, the fiscal puts this of great XXXX deliver our in and fiscal a do us we

new world growing. new there's exciting We that look into product speaking takes forward the soon. quarter. Second, is in more your time course, Take cusp the launch Thanks multibillion-dollar today, a on of forward of again us excited with we that we the care. next lot with sharing and category this And are pipeline about. an to you that a to for we're look

Operator

you, all Patrick, you thank for and joining. Thank

You now may disconnect.

Sonos (SONO) 7 May 242024 Q2 Earnings call transcript