SONO - Earnings call transcript Q4 2024

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Operator

Thank you for standing by, and welcome to the Sonos Fourth Quarter 2024 Conference Call. [Operator Instructions] I'd now like to turn the call over to James Baglanis Head of Investor Relations and Treasury.

You may begin.

James Baglanis

Good afternoon, and welcome to Sonos' Fourth Quarter and Fiscal 2024 Earnings Conference Call. I am James Baglanis, and with me today are Sonos CEO, Patrick Spence; CFO, Saori Casey; and Chief Legal and Strategy Officer, Eddie Lazarus.

the Sonos today's Radio joined from music who holiday-inspired our station, those call hold early, is For Thankful.

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

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

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

press the reminder, Patrick. available Relations release, on investors.sonos.com. Investor earnings now our guidance presentation, the to and will conference our a As website, will I be call including over call turn transcript supplemental

Patrick Spence

Thank you, James, and hello, everyone.

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successfully believe continue our recovery the plan. on million $XX to our million to right We of execute investment planned to is $XX level required total app

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key this app will The right our is their more We're and customers about we our there on and flywheel, products will efforts not making focused done. Sonos be progress Saori existing and new rest life. customers have making we more be to our until growth. good enable customers we and is product focus on work more add and to recovery about already beyond. our experiences next recap, are great with partners, strong talk to all to have portfolio, efforts of of integral some to are will the reach XXXX last a again. and incredible while we and in products raving fueling add shortly. To focusing Sonos that ensuring of millions which We products the be our experience year transformational fiscal announced cost our success to customers our to in our us will this on the forward, initiatives Going phase our

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Saori Casey

us our Thank you, Patrick. of app team's Ace, the dedication a to over-the-ear was everyone. headphones premium new resilience Fiscal our challenging enabled on but strengthen and the with Sonos, proud launch to launch for which further entry portfolio. XXXX Hi, into and year great products of I'm recovery, our our

sustainable, These efforts help growth the over build drive long also make term. initiatives. to progress will We to momentum transformational our profitable on started

revenues results. our expectations. in billion, revised Turning with line $X.XX XXXX to the were Fiscal

call, As APAC EMEA the declined by our referenced associated last X% launch our respectively, to revenue affected declined year-over-year, in the we $XXX earnings XX%. X% Revenue adversely in with app at Americas million. and whereas challenges estimate least

was million app includes well capital approximately by driven $XXX securities million, flow was was lower year-over-year. basis million, million improvements management, EMEA of component sales, focus the including excess includes investments. by sales. DTC puts result lower net partly XXXX. in spend to to was driven basis, channel revenue and impacted $XX Solutions our ended declining and driven income. Free to impacting net down We of working expense This base offset The fiscal $XXX we from significantly gross a of higher by bonus. XX% million decline lower This higher of year There FY a increase results cash implementation inventory significant difficult environment. On of XX% lower in and suppliers. higher and Installed sourcing Our XXX number X% figure retail $X revenue primarily costs an was despite XX% declined year, at newly and up was revenue, combined. offset macroeconomic to of was cash, also resulting flat $XXX.X GAAP short-duration gross expansion. of sales EBITDA with activity. Non-GAAP marketable increase our margin takes launch 'XX million X.X%. expenses better be were promotional offset XX% was by a This other of $XXX operating Treasury was managing adjusted cash adopted as of year-over-year. of Adjusted on from which payment $XX marketing by came million was the were hold partially plans by in our fiscal related XXXX. as recovery adjustments Ace margin some This points representing as by expenses, and XX.X%, better margin with our continue the our the inventory and X% year-over-year of through bills. terms

inventory with a down balance increased basis, inventory million, the XX%. sequentially seasonality Our as holidays. build ahead $XXX of we inventory consistent our period-end past On year-over-year is balance the to

Our inventory consists of and finished million of goods $XX components. of $XXX million

current We share $XXX million are have our $XX shareholders under keep to in $XXX million repurchases, to through fiscal million hard remaining XXXX, we repurchase check. In working and authorization. we inventories returned of

million reported allocation was delayed our app While products, paused $XXX our were a capital of remain app our repurchases in reflects recovery QX prerequisite key $X QX. our before recap pillar which of investments. executing QX share revenues to we guidance. million, shareholders a which to on framework. I'll recovery, turning to quickly results Returning capital launch

$XXX the we last of XX.X% Excluding recovery million $XXX came EBITDA quarter. our was QX ended adjusted midpoint or at to negative million, range operating $X adjusted lower the sequential close investments in guidance right were margin $XXX the by driven of gross high XX%. primarily GAAP million of expenses up quarter to end our excluding million includes range in this, million. was decline The which of was app $XX investments, $XX.X of reported bonus. QX app non-GAAP the QX XX% approximately guidance recovery XX.X% to at which million. from

Excluding ended of close we investments, EBITDA guidance reduced app of negative by million, high to our recovery which our negative $X adjusted we estimate the million to end up million. $XX $XX

Turning to provide we would like the moment guidance, making to are changes I to a we how our take to discuss guidance.

and nimbly reflective over the few also drive growth. to uncertain our collective to on categories while able long-term approach our the investments be sustainable market past lessons of experience years. learned to focusing to transformation need dynamics is We our initiative adapt new to of optimize Our

result, earnings As we on guidance will calls. focus quarterly a on providing our

and leaner factors, our to weakness partially new is growth. These from our our proactive including headwinds We X. primarily inventory is offset expect revenue recovery, sequential the to Ultra by decline on of related to challenges for On increase channel end due than last QX to This and efforts launch in year, year-over-year headwinds the in basis, Sequential call Sub of of a increase Arc minus to Ultra sales. guidance and and past of $XXX versus X higher Arc XX% $XXX to lineup headwinds a a to QX generation XXX%. in X% overall our the which categories, points having million, our number to our million in in our year-over-year X QX are ongoing seasonality, app a revenue range products reflects Ace from minus Sub bit XX% of like market, X.

X% improvement minus decline for our XX% level decline year-over-year Excluding an headwinds inventory the minus sales, calls QX. from the from channel in adjustments, midpoint in

sequentially from leverage gross of amortization the basis with of technology. the GAAP that offset associated up that the now using QX operating we points Arc approximately Mayht to from by begun gross revenue, XX margin product higher driven selling XX% note guidance margin by QX, in have assets mix. Please expect partially XX%, Ultra our includes range We headwinds year-over-year intangible

we expect a to As higher approximately XX result, gross GAAP margin. be margin XX QX QX gross non-GAAP our to our bps than

million. reduced in in million to QX our to we million make range of to $XX investments quarter. to has Please $XX expect recovery be guidance that million EBITDA been app $XX note adjusted adjusted by of the $X EBITDA We expect the

our QX recovery assumes Our which approximately to guidance includes non-GAAP investments. operating million, app $XXX adjusted expenses be

mentioned, of million the of to expect million to incurred As we during efforts. QX continue $XX the the made app we rest million a far outline Inclusive focused our invest incurred Patrick million outlined expect $X remainder to the XXXX. Last wanted be fiscal had remainder be to on 'XX $XX and in of thus working in we QX, progress where and recovery in mentioned and million we we on some $XX to initiative. $X quarter, to XXXX. will cost fiscal begun we I into I transformational we discuss

part As functions We're nimble. to force drive us simplify in we G&A continue taken multiple step, be enable X% structures, building more was various a actions and to work. also The have operating should and to our we'll across in reduction organizational initiative we which this offshore announced first efficiency. flatten of August capabilities our

marketing R&D drive progress our season to on and efficiencies and we will effectiveness. transformation As and operating expand efforts activities, to recovery to and our we app make sales holiday continue

lower Sierra As already the the to service cost our of serve to delivered. while doing AI of improving partnering example customers with an in quality something we're

growth With long I'd to plans through our to the to will the over on you progress year. turn improve the term for We we our as profitability continue call questions. that, like for and update

Operator

comes question the first Rosenblatt. from Frankel from Your Steve Instructions] line of [Operator

Steven Frankel

other start to X about think several app relative a tied we'll versus new Patrick, fact number last to households, than should was the that the with you how factors? How years. million was market overall lower which added maybe environment we that or much the

Patrick Spence

Yes. Thanks, Steve.

of app is it, we think some it think in on challenges but there downswing, I of is which cyclical you be year, lean really nailed based pace But which there. in towards as slower kind as is the I important would the and the what of saw I really one a cyclical I the would more this things X see registrations households we've we've seen seen this. years was And percentage a of that what that existing the to at over gone of we've was pleased past XX%. through

years, with continued saw household. that's and products expansion past So we of per consistent

think the environments thing we're And that note I think important So more our existing loyalty some from and point. at we see one cyclical a and of repurchase kind to I continue those will good change in to challenged customers. is of

Steven Frankel

early launch. base the in so primarily And still Ace and But about whether new out an you the I was it Ace turned or far can know kind it's app installed us tell kneecapped on obviously what product? households of to has be bringing

Patrick Spence

Yes.

I we're so to about the Ace be continues received far, So customers good feeling it is. so and well by think reviewers, where and product

think As Buy along be I I is season, others, with X mix think this existing for, it. and And we go its chose point, I as theater seeing this which district mentioned, exciting. featured to we're a new through between at Best in holiday it

audio our Arc to on swap, we've we along I TV with harder have this opportunity especially through the lot brought app think of that Ray with Beam and push it recovery and now Arc as we kind even existing Ultra. go a of to

another will see some great part from of the build important momentum is is that time, of it products, So is it portfolio. over and we've time from everything but think we an with X seen product, all a this our make our see I take that we'll you and reviews when

Steven Frankel

so Again, would the to Sonos majority -- purchases are we purchasers today, say date? customers of not

Patrick Spence

to that's with mix be typical big, the in I And we're purchasing important with cycle be that will it. product. headphone a holiday mindful terms of And period. to think kind out period a of what because want It's turn seeing the in we're I mix. big a an it's Today, how see early people

Steven Frankel

this make kind that how installers, good more with And relationship X think you is what's on now detail involved And of program channel? question. more Okay. do your quick there? for Any

Patrick Spence

Yes.

were year, So APIs Installed that of introduction myself big of the CEDIA And Era there. we and had I the did the entire that is the ton as and event there. We the of some a Pro think very leadership excited team well partners. XXX this which Solutions at we're our as support by for

And so wanted to we support them.

And is we so them the in install, what of place time terms it had taking amount in given helps have that that. was some challenges put with basically done the to of we of a program app around setup

so through And put place a in we've program that. support to them

we it going successful in us. comeback think think I on by through with trail it. dealers was and I and And they're supporting are the our standing

Operator

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

Brent Thill

just can happen you I'll the a ensuring with another again. made put doesn't to changes you've everyone sense up a question. of safety this around And software Maybe give follow

Patrick Spence

Yes.

made. So -- we that I'm mentioned, and made we've put pleased as #X the one, I we with this the priority quarter progress our for

old when than metrics ensuring software the been better think on itself, system, like and up about app to now reliable setting connectivity. are our adding new products your our even So you compared they've when things

on we continue to far. work updates XX So so We've that. got

But I think in are have catches to sure of making our made tech metrics we've customers to products so the terms quality customers and degree up introducing seeing that the second existing then setting that of system it making I sure have is around in year is that speak think rigorous down we about we think doing. commitments have as also feel if the well really test pretty the awry. big up. key. have add more changes We're are far. And they making gradually comes and ombudsperson, that people sure existing through ultimate some can sure I buy. And going We're so we're the had And to making our see something continue I that that progress we we quality what well. outlined customers good part the I has the the focus. And it, rallied is team as

And so are shoots I green think there there.

Brent Thill

are continuation you the the line guide guess And EBITDA leverage push speak to on decent. the getting think line. was then of commitment bottom maybe levers Okay. when where to ultimately focus, bottom what you're about I continue most to the line the to EBITDA and

Saori Casey

that to improving efficiencies example, we on focus our the And app restructuring we get lot this holidays, can some reduction time this in as through in feel we about that of of have and around earnings transformation. answer service earnings at force. through the line. of can into was a getting that the talked culminated now right as little part profit and at had well efforts the the -- we possible we operating end the bottom for G&A, expand R&D ROI Brent, AI dollars of adoption the of focus are to the started to biggest our marketing That's effort Saori. intend in the efficient announcement call. number and effective of customer as, to discussion more the transformation. that about as the that we our is the flow question. is more initiatives the can I We And for I underway. And as be had But that make able last I we the a can through sure there's and share a as put that narratives bit and that control efficiency of best to other actions underway There's partially sales we in recovery examples August talking that. taken

efforts. this share as definitely app we're we're of what initiatives our today the top through one on So focused soon that to able that's get as recovery as we

Operator

the from Morgan question Woodring Your Erik of line next comes from Stanley.

Erik Woodring

follow-ups. efficiency can measures there, And a expect do just just And I in necessarily term, at will maybe or but step on if you in bit at to translate the that on per believe the with you few this how that is products Maybe still not have elaborate long-term just can embedded near Patrick, focus what And touch does you do performance? alluding internally? on, changing back, then efficiency you're we financial launch a to better like you year change X all? new least to,

Patrick Spence

at I continue every products thanks. Erik, do think Yes, year. launch to new we'll least X

means that and going that of the the choosing and the possible products making at impact impact marketplace it in the just way. doing trends think them probably I and that we're have the to the things to biggest are in the looking we're looking opportunities smartest at doing sure build,

of think we And to what's so what do it's all where few a we forward work in best the Saori going resonating the you a that kind we've learn this can sure building effective in to was areas return, we learned, and the that And of take product doing every make strengths we what way able now the think ways giving -- I as have. opportunities examples been other do to in I And where already of more customers, company. launch, best with going of get with the are, we on well. kind that of terms the we're

on we have But so that, come that in more go of on we're front. front. hypothesis allow of in to of the how making. more to to effective So think I those come and things be terms that a come together update go that through you terms as to lots we all us We'll more investments

Erik Woodring

terms fair. of tough demand mosaic to that the hearing on then about able season extent you're super backdrop. you very I super have How from the Can inventory? you're and how incrementally November? the shifted that's term macro helpful. you be like Okay, work realize broad channel to the and And Just might a if kind retailers the you maybe through of could in more the demand just put a quarter, you're linearity after down quarter elaborate maybe together that would in of then demand just in into near What things little data still be how changing holiday expectations? of I have X just over that And that. kind

Patrick Spence

Yes.

prepared with said know and at to you as in Cyber challenged promotional of of have is kind And Best I huge as remarks, we quarter part the about surprised, discounts. a important, the I we've the remains now of the had environment. is of worked looking Erik, say, the we that right conversations one is had of think chance for events it well, And be have a seen where the well. And as I'd audio when now. be think lot Friday, that, and consumer terms people periods and Black retail been throughout to the in are through I right you won't this comes year, Buy promotions that, Monday

ourselves over positioned. through it's period. of how And a so as got ultimately, well we go we matter this, We've very perform that

current Buy other done current One lineup. being experience, of that and the understand be in will the that we've Costco, ambassadors to and people the product Sonos, is Best things help experience able

holiday than there's later be not underway period. So Christmas of of and will make Monday But to kind shopping promotions a people And got lot a everything this more successful saw and sure to a the same Sonos. I holiday of in can it's we we've to think pressure year, I do season. period going that that specific think last a this I usual an between season. And which can to even Friday, as kind of before -- year, expect of in think we through. course, the shorter But Cyber Black terms we adds industry, discount-oriented

Erik Woodring

of EBITDA December the you the us and ranges just helpful. guiding realize I to remainder high years, obviously some revenue on both than and then for quarter, might of help the end of just versus guidance app understand year? And ranges very what totally, guidance obviously, to it given but given those backdrop? could the end the for us the help annually, seasonality for adjusted that the of Saori, you past understand shift And are And year comments look Any Maybe low me. different maybe totally Okay, you elaborate a you high-level efforts, bit this how macro make then about those ongoing the gets of the for wide. think in can that's us fairly last aren't than ranges. some X, just

Saori Casey

Yes. Erik. Thanks,

also So that stabilized X-quarter to cycle yet. the on, as to overall the Patrick decline we wanted of part hasn't a move dynamics why of quite lot is category mentioned, reason going about a there's

hopefully Monday Black our holiday lineup Ace the normal widened point, but able see we this quarter. range to we'll have why reason And that to than quarter. nimble, outcome, that how wider holiday wider be quarter, will that we to guidance adapt we in our product to did is goes. wanted good a we To of new that. Cyber So be and to assess that's part Friday, had be the able guide as be And have it because to a quarter

of be are efforts. this the seeing out of for Black year on so inventory Friday, also where expect certainly to this the Sub QX the there result see ourselves one to quarter wider in out we for see how of have perform Arc place watching we of to also X, just another really As general rest a proactively being also to setting Cyber QX to Ultra through a recovery in lean important could up other trying most call and reducing about mentioned the the quarter. And range the is continue launched we decline. But that's factor quarter And a where of be rest the from the our headwind feel We we of we that, year. reason category app we coming Monday that why the do and good a are outcome. we're as turns

so today. And factor guidance is comprehended that provided that's that our we in another

Operator

Fuhrman Your from Alex Capital Group. Craig-Hallum next comes from the question of line

Alex Fuhrman

a households or been have X It sense years QX guys with in with like curious Can started track adding million release, 'XX, it's which number new looks you that some the lower an provide like but about of added looks from it X the year than impressive been you've you in last full the is what metrics on fiscal number that. before I'm issues app? before or in XX to that line give you to us would the if be years so. of prior have what to was tracking that you

Patrick Spence

more some the year category that cyclical challenges we've in this the as update we end well that put been the it year. certainly around We color of Alex, years, have don't that, of couple well, what the with on to give misstep And seen overall. at in We last And year. is kind would throughout pressure challenged of the seen you've the app. what believe is from the category I that say, always number. the any with in -- right, attributed of we a But would that have as it's consistent

give I a number kind of what that's you as now. perspective on So that would right

Alex Fuhrman

that help really Okay, ask I Patrick, service I to then could issues. customers you're that's think mentioned helpful. And customer are the if here you working through app with X more, bolstering

you look is measure? you this that's towards up I as long-term mean, that curious of be something beefed Or a as this something Just temporary think is forward? going going growth. to

Patrick Spence

A little of Alex. both,

it in we've support, the have So terms been unique would which you'll support kind of, to do beefing working way. closely and we on with that we've called are able continue. really customer things leveraging out, of weekend I say, AI like of a been up future Sierra AI that, and -- we making how us Saori been, in we've something as is sure see And

figure in more do that how time well. And be out a efficiently to so I puts more over and think position as to able we'll where effectively us it

about an excited way. better delivering customer pretty service and I'm even efficient So in doing it

help example better has of both which this kind to is great think more been of drive efficiency the service, worlds. I and of So a best innovation

Operator

from comes of the Raymond question next James. Mark from line Cash Your

Mark Cash

Mark Adam. This for is on

Patrick, out you in lowering the of permanently the pretty in launch. prepared Ace you discounting mentioned your remarks, upbeat prices So headphone But sound coming market. competitors and

market driving wonder what's longer term. can confidence So I just dig kind of into if you in headphone the

Patrick Spence

had people it's that products reception have product have that a sure product over I've of And network I not the the over from once many actually it to and product, people Mark, it, ultimately, does it. my well think with people from from have seen I'm bought it, proactive bought who that used another have so good about people the been time. when own we've time that we reviewed texts Yes, our e-mails have it. the there's

with now. But very a it's Best think over seen feature I the as like I competitive of swap, is through Buy has district, help good of environment customers, the theater system existing puts which think a us I want they So right part holiday think period fact our position. tie-ins it our really so And right? the a flywheel. way as And with the we part also something important that audio that to in I more to our have a unique drive to

give that So we've things me the around those optimism what and are confidence done.

Mark Cash

to the that. of from fewer Okay. headphones you Maybe $XXX the app, we on say look selling that at impact If in be $XXX a follow-up can million how much million would the attributable period?

Patrick Spence

Mark. a commented bit No. the being $XXX the by million breaking app terms not that We product, we're had in of down but impact

Mark Cash

X Okay. And just then more.

Pro earlier, interesting. really Era highlighted You XXX

I about ask to so efforts. just And diversification want

You Sonos and Pro Radio. have Sonos

sort might So those of when could and incremental those? we how are about you tracking talk get on disclosures

Patrick Spence

a their of see Those experiment of about makes going sense. and what's kind to with what are talked like before, terms we're -- in we've of lot nascent pretty things

now that and And product little sold different successful thinking a a in about sense. so we I product little terms more be that power of bit a think through Era traditional of version we've a bit will XXX of made professional channel Pro hardware is the a and have in

good And so the that we is X this a have of X demand. understanding

there, I still lot understand you a excitement learn and services to think it. nascent lot businesses CEDIA efforts was customers from well. other are of ones a at ones about But are referenced as there around the that

Operator

from Jefferies. from of Thill comes [Operator line Brent Instructions] Your question the next

Brent Thill

capital on are when if could have Just harder on out this? you or really the perspective. program. quick? your want -- Maybe authorization just get think us to believe I temporary buyback. in. how issues that that buyback do be about still buyback the temporary is that should that we this Is you flushed just they'll left give things and allocation and not you shy these understand to lean why a you'd from sometimes Typically, opportunity question believe tough, in best typically lean the I the is Why

Saori Casey

lend still that can Thank why some while plan that are was QX. -- not ongoing app we have, recovery in the at of were able was that push And exercising. underway, -- Yes, And while Board, app quarter certain Arc not those part that have QX is do. But out from to we beginning recovery so thought process. the was to to million still us, into given million by on our the And paused We our Sub dependency that to underway, we we still had to our capital launches subsequently in were Ultra specifically efforts launch framework the definitely allocation plan of was continue authorization do behind to now we was $XX it which we reason our that pause you, certain. we for Brent. that planning left last have approved ability it the X to That allocation capital quarter. prudent we And we volatility was to of a to QX, that, that that's $XXX we left. quarter. the and stick on

Operator

to will Officer, our now Patrick final the I concludes question-and-answer Spence, for over some turn Executive Chief call session. remarks. that And closing back

Patrick Spence

To Rob. things. close, X I'd highlight Thanks,

First, on our on recovery efforts comeback are and app good the we've trail. progress made

increased Our us, customers the in have stuck by products home per with fact year as evidenced XXXX. the fiscal that

highly, we've to continue driving made a X X Ultra that most are we're EBITDA product recently we the past had. And committed Ace. with deliver customers investments that Sub new direct and we to now rate have lineup with and of before growth. over love in and we've strongest Arc finally, These and the innovation products the ever years, Secondly, result

from do way and we be to effective you've we've heard more begun the As efficient. things transforming Saori,

I growth quarter. to talking and to profitability to update you and joining long progress forward continue improve through on next Thank you you as we will plans the us to We today, look year. term again the for our for

Operator

This you participation. concludes today's your conference Thank for call.

disconnect. now may You

Sonos (SONO) 13 Nov 242024 Q4 Earnings call transcript