Sonos Reports Third Quarter Fiscal 2022 Results
Sonos, Inc. (Nasdaq: SONO) reported its third-quarter fiscal 2022 results, revealing a 1.8% year-over-year revenue decline to $371.8 million, though revenue rose 2.2% in constant currency. Net loss was $0.6 million, reversing from a profit of $17.8 million in the prior year. Non-GAAP net income fell to $25.6 million from $38.7 million. Adjusted EBITDA decreased to $42.1 million with a margin of 11.3%. Revised fiscal 2022 revenue guidance is now $1.730 to $1.755 billion, down from $1.95 to $2.0 billion.
- Gross margin increased to 47.3%, up 30 basis points year-over-year.
- Sonos maintains a debt-free status and operates from a position of strength.
- GAAP net loss of $0.6 million contrasts sharply with a net income of $17.8 million last year.
- Fiscal 2022 revenue guidance reduced from $1.95 billion to $2.0 billion to $1.730 to $1.755 billion, indicating weak growth.
- Adjusted EBITDA guidance cut from $290 million to $310 million to $215 million to $230 million.
Third Quarter 2022 Financial Highlights (unaudited)
-
Revenue decreased
1.8% year-over-year to ; on a constant-currency basis, revenue increased approximately$371.8 million 2.2% year-over-year -
Gross margin increased 30 basis points year-over-year to
47.3% -
GAAP net loss of
compared to GAAP net income of$0.6 million last year; non-GAAP net income excluding stock-based compensation and legal and transaction related fees of$17.8 million compared to$25.6 million last year$38.7 million -
GAAP diluted earnings per share (EPS) of
compared to$0.00 last year; non-GAAP diluted EPS excluding stock-based compensation and legal and transaction related fees of$0.12 compared to$0.19 last year$0.27 -
Adjusted EBITDA of
compared to$42.1 million last year$46.7 million -
Adjusted EBITDA margin of
11.3% compared to12.3% last year -
Cash flows used in operating activities of
$6.7 million -
Free cash flow of
( $16.0) million
Sonos CEO
Spence continued, “Although we cannot predict when macroeconomic conditions will normalize, we remain confident that, when they do, we will return to double-digit revenue growth. We base this on our category leadership position, our flywheel of new and existing customer repurchases and robust product roadmap. We expect to weather the current environment while operating from a position of strength: we are profitable, we are debt free, and we have a huge market opportunity. We are tightly focused on expenses while prudently and deliberately investing in a number of products and initiatives in new and existing categories that we believe customers will love and will drive our long-term success.”
Sonos today separately announced that
Fiscal 2022 Outlook
-
Revenue in the range of
to$1.73 0 billion , representing growth of$1.75 5 billion1% to2% from fiscal 2021, or growth of4% to5% on a constant currency basis. This compares to a prior outlook range of to$1.95 billion , which represented growth of$2.0 billion 14% to16% from fiscal 2021 -
Gross margin in the range of
45.7% to45.9% , narrowed from previous gross margin range of45.5% to46.0% -
Adjusted EBITDA in the range of
to$215 million , representing a decline of$230 million 23% to17% from fiscal 2021. This compares to a prior outlook range of to$290 million , which represented growth of$310 million 4% to11% -
Adjusted EBITDA margin of
12.4% to13.1% , compared to prior outlook range of14.9% to15.5%
Fiscal 2024 Targets
-
Due to the uncertain and evolving macroeconomic backdrop, the timeline to achieve the Company’s previously issued targets of
revenue, 45$2.5 billion -47% gross margins and 15-18% Adjusted EBITDA margins is being extended beyond FY2024
Supplemental Earnings Presentation
The company has posted a supplemental earnings presentation accompanying its third quarter fiscal 2022 results to the Earnings Reports section of its investor relations website at https://investors.sonos.com/reports-and-filings/default.aspx#section=earningsreports.
Conference Call, Webcast and Transcript
The company will host a webcast of its conference call and Q&A related to its third quarter fiscal 2022 results on
The conference call may also be accessed by dialing (888) 330-2454 with conference ID 8641747. Participants outside the
An archived webcast of the conference call and a transcript of the company’s prepared remarks and Q&A session will also be available at https://investors.sonos.com/reports-and-filings/default.aspx#section=earningsreports following the call.
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) |
||||||||||||||||
(unaudited, in thousands, except share and per share amounts) |
||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
|
Three Months Ended |
|
Nine Months Ended |
|||||||||||||
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|||||||||
Revenue |
$ |
371,783 |
|
|
$ |
378,672 |
|
|
$ |
1,436,046 |
|
|
$ |
1,357,204 |
|
|
Cost of revenue |
|
195,935 |
|
|
|
200,811 |
|
|
|
763,779 |
|
|
|
714,142 |
|
|
Gross profit |
|
175,848 |
|
|
|
177,861 |
|
|
|
672,267 |
|
|
|
643,062 |
|
|
Operating expenses |
|
|
|
|
|
|
|
|||||||||
Research and development |
|
62,522 |
|
|
|
55,578 |
|
|
|
188,798 |
|
|
|
164,294 |
|
|
Sales and marketing |
|
63,993 |
|
|
|
67,231 |
|
|
|
207,684 |
|
|
|
198,888 |
|
|
General and administrative |
|
42,373 |
|
|
|
38,323 |
|
|
|
126,189 |
|
|
|
113,372 |
|
|
Total operating expenses |
|
168,888 |
|
|
|
161,132 |
|
|
|
522,671 |
|
|
|
476,554 |
|
|
Operating income |
|
6,960 |
|
|
|
16,729 |
|
|
|
149,596 |
|
|
|
166,508 |
|
|
Other income (expense), net |
|
|
|
|
|
|
|
|||||||||
Interest income |
|
429 |
|
|
|
34 |
|
|
|
585 |
|
|
|
114 |
|
|
Interest expense |
|
(196 |
) |
|
|
(77 |
) |
|
|
(384 |
) |
|
|
(525 |
) |
|
Other income (expense), net |
|
(9,858 |
) |
|
|
1,998 |
|
|
|
(13,541 |
) |
|
|
4,678 |
|
|
Total other income (expense), net |
|
(9,625 |
) |
|
|
1,955 |
|
|
|
(13,340 |
) |
|
|
4,267 |
|
|
Income (loss) before provision for (benefit from) income taxes |
|
(2,665 |
) |
|
|
18,684 |
|
|
|
136,256 |
|
|
|
170,775 |
|
|
Provision for (benefit from) income taxes |
|
(2,068 |
) |
|
|
858 |
|
|
|
4,805 |
|
|
|
3,436 |
|
|
Net income (loss) |
$ |
(597 |
) |
|
$ |
17,826 |
|
|
$ |
131,451 |
|
|
$ |
167,339 |
|
|
|
|
|
|
|
|
|
|
|||||||||
Net income (loss) attributable to common stockholders: |
|
|
|
|
|
|
|
|||||||||
Basic and diluted |
$ |
(597 |
) |
|
$ |
17,826 |
|
|
$ |
131,451 |
|
|
$ |
167,339 |
|
|
|
|
|
|
|
|
|
|
|||||||||
Net income (loss) per share attributable to common stockholders: |
|
|
|
|
|
|
|
|||||||||
Basic |
$ |
0.00 |
|
|
$ |
0.14 |
|
|
$ |
1.03 |
|
|
$ |
1.38 |
|
|
Diluted |
$ |
0.00 |
|
|
$ |
0.12 |
|
|
$ |
0.94 |
|
|
$ |
1.20 |
|
|
|
|
|
|
|
|
|
|
|||||||||
Weighted-average shares used in computing net income (loss) per share attributable to common stockholders: |
|
|
|
|
|
|
|
|||||||||
Basic |
|
127,884,400 |
|
|
|
125,138,279 |
|
|
|
127,886,487 |
|
|
|
120,876,472 |
|
|
Diluted |
|
127,884,400 |
|
|
|
144,181,632 |
|
|
|
139,502,527 |
|
|
|
139,293,775 |
|
|
|
|
|
|
|
|
|
|
|||||||||
Total comprehensive income (loss) |
|
|
|
|
|
|
|
|||||||||
Net income (loss) |
|
(597 |
) |
|
|
17,826 |
|
|
|
131,451 |
|
|
|
167,339 |
|
|
Change in foreign currency translation adjustment |
|
(1,711 |
) |
|
|
(784 |
) |
|
|
(1,971 |
) |
|
|
262 |
|
|
Comprehensive income (loss) |
$ |
(2,308 |
) |
|
$ |
17,042 |
|
|
$ |
129,480 |
|
|
$ |
167,601 |
|
Condensed Consolidated Balance Sheets |
||||||||
(unaudited, dollars in thousands, except par values) |
||||||||
|
|
As of |
||||||
|
|
2022 |
|
2021 |
||||
Assets |
|
|
|
|
||||
Current assets: |
|
|
|
|
||||
Cash and cash equivalents |
|
$ |
439,726 |
|
|
$ |
640,101 |
|
Accounts receivable, net of allowances |
|
|
124,884 |
|
|
|
100,779 |
|
Inventories |
|
|
335,730 |
|
|
|
185,130 |
|
Prepaids and other current assets |
|
|
23,124 |
|
|
|
31,504 |
|
Total current assets |
|
|
923,464 |
|
|
|
957,514 |
|
Property and equipment, net |
|
|
75,862 |
|
|
|
71,341 |
|
Operating lease right-of-use assets |
|
|
28,093 |
|
|
|
33,841 |
|
|
|
|
79,824 |
|
|
|
15,545 |
|
Intangible assets, net |
|
|
96,936 |
|
|
|
24,450 |
|
Deferred tax assets |
|
|
1,804 |
|
|
|
10,028 |
|
Other noncurrent assets |
|
|
37,247 |
|
|
|
26,085 |
|
Total assets |
|
$ |
1,243,230 |
|
|
$ |
1,138,804 |
|
Liabilities and stockholders’ equity |
|
|
|
|
||||
Current liabilities: |
|
|
|
|
||||
Accounts payable |
|
$ |
308,032 |
|
|
$ |
214,996 |
|
Accrued expenses |
|
|
107,993 |
|
|
|
108,029 |
|
Accrued compensation |
|
|
27,250 |
|
|
|
77,695 |
|
Deferred revenue, current |
|
|
18,334 |
|
|
|
35,866 |
|
Other current liabilities |
|
|
43,611 |
|
|
|
39,544 |
|
Total current liabilities |
|
|
505,220 |
|
|
|
476,130 |
|
Operating lease liabilities, noncurrent |
|
|
26,118 |
|
|
|
33,960 |
|
Deferred revenue, noncurrent |
|
|
57,487 |
|
|
|
53,632 |
|
Deferred tax liabilities |
|
|
10,789 |
|
|
|
2,394 |
|
Other noncurrent liabilities |
|
|
880 |
|
|
|
3,646 |
|
Total liabilities |
|
|
600,494 |
|
|
|
569,762 |
|
Stockholders’ equity: |
|
|
|
|
||||
Common stock, |
|
|
131 |
|
|
|
129 |
|
|
|
|
(65,050 |
) |
|
|
(50,276 |
) |
Additional paid-in capital |
|
|
649,449 |
|
|
|
690,462 |
|
Retained earnings (accumulated deficit) |
|
|
61,553 |
|
|
|
(69,897 |
) |
Accumulated other comprehensive loss |
|
|
(3,347 |
) |
|
|
(1,376 |
) |
Total stockholders’ equity |
|
|
642,736 |
|
|
|
569,042 |
|
Total liabilities and stockholders’ equity |
|
$ |
1,243,230 |
|
|
$ |
1,138,804 |
|
Condensed Consolidated Statements of Cash Flows |
||||||||
(unaudited, dollars in thousands) |
||||||||
|
|
Nine Months Ended |
||||||
|
|
2022 |
|
2021 |
||||
Cash flows from operating activities |
|
|
|
|
||||
Net income |
|
$ |
131,451 |
|
|
$ |
167,339 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
||||
Depreciation and amortization |
|
|
27,699 |
|
|
|
25,789 |
|
Impairment and abandonment |
|
|
62 |
|
|
|
2,789 |
|
Stock-based compensation expense |
|
|
57,463 |
|
|
|
46,755 |
|
Other |
|
|
8,594 |
|
|
|
1,253 |
|
Deferred income taxes |
|
|
(1,238 |
) |
|
|
95 |
|
Foreign currency transaction (gain) loss |
|
|
4,437 |
|
|
|
(2,226 |
) |
Changes in operating assets and liabilities: |
|
|
|
|
||||
Accounts receivable, net |
|
|
(28,476 |
) |
|
|
(13,846 |
) |
Inventories |
|
|
(158,129 |
) |
|
|
32,333 |
|
Other assets |
|
|
(1,587 |
) |
|
|
(17,730 |
) |
Accounts payable and accrued expenses |
|
|
97,421 |
|
|
|
(27,169 |
) |
Accrued compensation |
|
|
(49,769 |
) |
|
|
21,501 |
|
Deferred revenue |
|
|
(10,958 |
) |
|
|
7,715 |
|
Other liabilities |
|
|
(1,313 |
) |
|
|
2,143 |
|
Net cash provided by operating activities |
|
|
75,657 |
|
|
|
246,741 |
|
Cash flows from investing activities |
|
|
|
|
||||
Purchases of property and equipment, intangible and other assets |
|
|
(24,946 |
) |
|
|
(34,792 |
) |
Cash paid for acquisitions, net of acquired cash |
|
|
(126,416 |
) |
|
|
— |
|
Net cash used in investing activities |
|
|
(151,362 |
) |
|
|
(34,792 |
) |
Cash flows from financing activities |
|
|
|
|
||||
Payments for debt issuance costs |
|
|
(929 |
) |
|
|
— |
|
Payments of borrowings |
|
|
— |
|
|
|
(25,000 |
) |
Payments for repurchase of common stock |
|
|
(117,093 |
) |
|
|
(21,729 |
) |
Proceeds from exercise of common stock options |
|
|
37,257 |
|
|
|
131,536 |
|
Payments for repurchase of common stock related to shares withheld for tax in connection with vesting of restricted stock units |
|
|
(33,412 |
) |
|
|
(34,877 |
) |
Net cash provided by (used in) financing activities |
|
|
(114,177 |
) |
|
|
49,930 |
|
Effect of exchange rate changes on cash, cash equivalents and restricted cash |
|
|
(10,493 |
) |
|
|
1,735 |
|
Net increase (decrease) in cash, cash equivalents and restricted cash |
|
|
(200,375 |
) |
|
|
263,614 |
|
Cash, cash equivalents and restricted cash |
|
|
|
|
||||
Beginning of period |
|
|
640,101 |
|
|
|
407,291 |
|
End of period |
|
$ |
439,726 |
|
|
$ |
670,905 |
|
Supplemental disclosure |
|
|
|
|
||||
Cash paid for interest |
|
$ |
223 |
|
|
$ |
434 |
|
Cash paid for taxes, net of refunds |
|
$ |
8,862 |
|
|
$ |
3,773 |
|
Cash paid for amounts included in the measurement of lease liabilities |
|
$ |
11,185 |
|
|
$ |
15,078 |
|
Supplemental disclosure of non-cash investing and financing activities |
|
|
|
|
||||
Purchases of property and equipment in accounts payable and accrued expenses |
|
$ |
10,937 |
|
|
$ |
9,046 |
|
Right-of-use assets obtained in exchange for new operating lease liabilities |
|
$ |
2,141 |
|
|
$ |
1,622 |
|
Reconciliation of Net Income (Loss) to Adjusted EBITDA |
||||||||||||||||
(unaudited, dollars in thousands except percentages) |
||||||||||||||||
|
|
Three Months Ended |
|
Nine Months Ended |
||||||||||||
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
||||||||
Net income (loss) |
|
$ |
(597 |
) |
|
$ |
17,826 |
|
|
$ |
131,451 |
|
|
$ |
167,339 |
|
Add (deduct): |
|
|
|
|
|
|
|
|
||||||||
Depreciation and amortization |
|
|
8,907 |
|
|
|
9,065 |
|
|
|
27,699 |
|
|
|
25,789 |
|
Stock-based compensation expense |
|
|
18,779 |
|
|
|
15,547 |
|
|
|
57,463 |
|
|
|
46,755 |
|
Interest income |
|
|
(429 |
) |
|
|
(34 |
) |
|
|
(585 |
) |
|
|
(114 |
) |
Interest expense |
|
|
196 |
|
|
|
77 |
|
|
|
384 |
|
|
|
525 |
|
Other income (expense), net |
|
|
9,858 |
|
|
|
(1,998 |
) |
|
|
13,541 |
|
|
|
(4,678 |
) |
Provision for (benefit from) income taxes |
|
|
(2,068 |
) |
|
|
858 |
|
|
|
4,805 |
|
|
|
3,436 |
|
Restructuring and related expenses(1) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(2,611 |
) |
Legal and transaction related costs(2) |
|
|
7,459 |
|
|
|
5,351 |
|
|
|
17,344 |
|
|
|
25,030 |
|
Adjusted EBITDA |
|
$ |
42,105 |
|
|
$ |
46,692 |
|
|
$ |
252,102 |
|
|
$ |
261,471 |
|
Revenue |
|
$ |
371,783 |
|
|
$ |
378,672 |
|
|
$ |
1,436,046 |
|
|
$ |
1,357,204 |
|
Adjusted EBITDA margin |
|
|
11.3 |
% |
|
|
12.3 |
% |
|
|
17.6 |
% |
|
|
19.3 |
% |
|
|
|
|
|
|
|
|
|
||||||||
(1) Restructuring and related expenses for the nine months ended |
||||||||||||||||
(2) Legal and transaction related costs consist of expenses related to our intellectual property litigation against Alphabet Inc. and
|
Reconciliation of Cash Flows Provided by (Used in) Operating Activities to Free Cash Flow |
||||||||||||||||
(unaudited, dollars in thousands) |
||||||||||||||||
|
|
Three Months Ended |
|
Nine Months Ended |
||||||||||||
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
||||||||
Cash flows provided by (used in) operating activities |
|
$ |
(6,717 |
) |
|
$ |
70,786 |
|
|
$ |
75,657 |
|
|
$ |
246,741 |
|
Less: Purchases of property and equipment, intangible and other assets |
|
|
(9,281 |
) |
|
|
(14,865 |
) |
|
|
(24,946 |
) |
|
|
(34,792 |
) |
Free cash flow |
|
$ |
(15,998 |
) |
|
$ |
55,921 |
|
|
$ |
50,711 |
|
|
$ |
211,949 |
|
Revenue by Product Category |
||||||||||||
(unaudited, dollars in thousands) |
||||||||||||
|
|
Three Months Ended |
|
Nine Months Ended |
||||||||
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
||||
Sonos speakers |
|
$ |
314,205 |
|
$ |
310,233 |
|
$ |
1,133,825 |
|
$ |
1,105,283 |
Sonos system products |
|
|
38,363 |
|
|
47,621 |
|
|
234,328 |
|
|
197,442 |
Partner products and other revenue |
|
|
19,215 |
|
|
20,818 |
|
|
67,893 |
|
|
54,479 |
Total revenue |
|
$ |
371,783 |
|
$ |
378,672 |
|
$ |
1,436,046 |
|
$ |
1,357,204 |
Revenue by |
||||||||||||
(unaudited, dollars in thousands) |
||||||||||||
|
|
Three Months Ended |
|
Nine Months Ended |
||||||||
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
||||
|
|
$ |
232,421 |
|
$ |
223,720 |
|
$ |
844,099 |
|
$ |
784,898 |
|
|
|
112,684 |
|
|
126,228 |
|
|
486,473 |
|
|
480,541 |
|
|
|
26,678 |
|
|
28,724 |
|
|
105,474 |
|
|
91,765 |
Total revenue |
|
$ |
371,783 |
|
$ |
378,672 |
|
$ |
1,436,046 |
|
$ |
1,357,204 |
Stock-based Compensation |
||||||||||||
(unaudited, dollars in thousands) |
||||||||||||
|
|
Three Months Ended |
|
Nine Months Ended |
||||||||
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
||||
Cost of revenue |
|
$ |
448 |
|
$ |
248 |
|
$ |
1,153 |
|
$ |
723 |
Research and development |
|
|
7,858 |
|
|
6,125 |
|
|
22,687 |
|
|
19,067 |
Sales and marketing |
|
|
3,826 |
|
|
3,277 |
|
|
11,650 |
|
|
10,317 |
General and administrative |
|
|
6,647 |
|
|
5,897 |
|
|
21,973 |
|
|
16,648 |
Total stock-based compensation expense |
|
$ |
18,779 |
|
$ |
15,547 |
|
$ |
57,463 |
|
$ |
46,755 |
Use of Non-GAAP Measures
We have provided in this press release financial information that has not been prepared in accordance with generally accepted accounting principles (“U.S. GAAP”), including adjusted EBITDA, adjusted EBITDA margin, free cash flow, net income excluding stock-based compensation and legal and transaction related fees, and diluted earnings per share (EPS) excluding stock-based compensation and legal and transaction related fees. These non-GAAP financial measures are not based on any standardized methodology prescribed by
Forward Looking Statements
This press release contains forward-looking statements that involve risks and uncertainties. These forward-looking statements include statements regarding our outlook for the fiscal year ending
About Sonos
Sonos (Nasdaq: SONO) is one of the world’s leading sound experience brands. As the inventor of multi-room wireless home audio, Sonos’ innovation helps the world listen better by giving people access to the content they love and allowing them to control it however they choose. Known for delivering an unparalleled sound experience, thoughtful home design aesthetic, simplicity of use and an open platform, Sonos makes the breadth of audio content available to anyone. Sonos is headquartered in
View source version on businesswire.com: https://www.businesswire.com/news/home/20220810005624/en/
Investor Contact
IR@sonos.com
Press Contact
PR@sonos.com
Source: Sonos
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