Increases Midpoint of Fiscal 2022 Outlook and
Remains On Track to Achieve Fiscal 2024 Targets
Sonos, Inc. (Nasdaq: SONO) today reported first quarter fiscal
2022 results.
First Quarter 2022 Financial Highlights (unaudited)
- Revenue increased 3% year-over-year to $664.5 million; on a
constant-currency basis, revenue increased approximately 3.5%
year-over-year
- Gross margin increased 140 basis points to 47.8%
- GAAP net income of $123.5 million compared to $132.3 million
last year; non-GAAP net income excluding stock-based compensation,
restructuring, and legal and transaction related fees of $144.8
million compared to $153.2 million last year
- GAAP diluted earnings per share (EPS) of $0.87 compared to
$1.01 last year; non-GAAP diluted EPS excluding stock-based
compensation, restructuring, and legal and transaction related fees
of $1.02 compared to $1.17 last year
- Adjusted EBITDA of $163.1 million compared to $166.3 million
last year
- Adjusted EBITDA margin of 24.6% compared to 25.8% last
year
- Cash flows from operating activities of $179.9 million
- Free cash flow of $173.6 million
Fiscal 2022 Outlook
- Revenue in the range of $1.95 billion to $2.0 billion,
representing growth in the range of 14% to 16% from fiscal
2021
- Gross margin in the range of 46% to 47%. Our fiscal 2022 gross
margin outlook includes minimal net tariff impact
- Adjusted EBITDA in the range of $290 million to $325 million,
representing growth in the range of 4% to 17%
- Adjusted EBITDA margin in the range of 14.9% to 16.2%
Fiscal 2024 Targets
- Revenue of approximately $2.5 billion in fiscal 2024,
representing a 13% CAGR based on the midpoint of the company’s
fiscal 2022 guidance. This revenue target is ahead of the company’s
prior fiscal 2024 target of $2.25 billion communicated at its March
2021 investor event
- Gross margin in the range of 45% to 47%, consistent with the
range communicated at its March 2021 investor event
- Adjusted EBITDA margin in the range of 15% to 18%, consistent
with the range communicated at its March 2021 investor event
Sonos CEO Patrick Spence commented, “We are pleased to report
that Sonos had another excellent quarter, with record-setting
revenue of $664.5 million and a strong adjusted EBITDA margin of
24.6% even as we continued to invest in our business. Importantly,
we believe that we would have sold much more but for chip shortages
that constrained our supply, as demand was, and continues to be,
strong. Our operations team has developed considerable resiliency
and we are well-positioned to deliver on our fiscal 2022 outlook,
so we have increased the midpoint of our guidance to reflect
this.”
“Longer term, the opportunity for Sonos is tremendous. Our
flywheel of new household generation and existing customer
repurchase remains a powerful driver of growth. We have a terrific
product roadmap ahead to delight existing customers and attract new
ones. At a mere 2% market share of the $89 billion1 global audio
market, with a brand that is gaining momentum every day, we believe
we are well positioned to seize the future and deliver significant
shareholder value over the long-term,” concluded Mr. Spence.
1 Source: Futuresource, March 2021.
Supplemental Earnings Presentation
The company has posted a supplemental earnings presentation
accompanying its first 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 first quarter fiscal 2022 results on
February 9, 2022, at 5:00 p.m. Eastern Time (2:00 p.m. Pacific
Time). Participants may access the live webcast in listen-only mode
on the Sonos investor relations website at
https://investors.sonos.com/news-and-events/default.aspx.
The conference call may also be accessed by dialing (888)
330-2454 with conference ID 1804222. Participants outside the U.S.
can access the call by dialing (240) 789-2714 using the same
conference ID.
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
(unaudited, in thousands, except share and
per share amounts)
Three Months Ended
January 1, 2022
January 2, 2021
Revenue
$
664,481
$
645,584
Cost of revenue
347,096
346,159
Gross profit
317,385
299,425
Operating expenses
Research and development
61,330
52,346
Sales and marketing
83,736
74,453
General and administrative
39,725
35,242
Total operating expenses
184,791
162,041
Operating income
132,594
137,384
Other income (expense), net
Interest income
33
36
Interest expense
(98
)
(265
)
Other income (expense), net
(1,402
)
4,257
Total other income (expense), net
(1,467
)
4,028
Income before provision for income
taxes
131,127
141,412
Provision for income taxes
7,646
9,120
Net income
$
123,481
$
132,292
Net income attributable to common
stockholders:
Basic
$
123,481
$
132,292
Diluted
$
123,481
$
132,292
Net income per share attributable to
common stockholders:
Basic
$
0.97
$
1.14
Diluted
$
0.87
$
1.01
Weighted-average shares used in computing
net income per share attributable to common stockholders:
Basic
127,662,826
115,610,523
Diluted
142,322,448
130,644,147
Total comprehensive income
Net income
$
123,481
$
132,292
Change in foreign currency translation
adjustment
(360
)
847
Comprehensive income
$
123,121
$
133,139
Condensed Consolidated Balance
Sheets
(unaudited, dollars in thousands, except
par values)
As of
January 1, 2022
October 2, 2021
Assets
Current assets:
Cash and cash equivalents
$
754,417
$
640,101
Accounts receivable, net of allowances
178,257
100,779
Inventories
205,162
185,130
Prepaids and other current assets
22,532
31,504
Total current assets
1,160,368
957,514
Property and equipment, net
68,996
71,341
Operating lease right-of-use assets
33,776
33,841
Goodwill
37,726
15,545
Intangible assets, net
29,862
24,450
Deferred tax assets
9,892
10,028
Other noncurrent assets
32,123
26,085
Total assets
$
1,372,743
$
1,138,804
Liabilities and stockholders’
equity
Current liabilities:
Accounts payable
$
341,343
$
214,996
Accrued expenses
164,501
108,029
Accrued compensation
28,430
77,695
Deferred revenue, current
17,817
35,866
Other current liabilities
47,171
39,544
Total current liabilities
599,262
476,130
Operating lease liabilities,
noncurrent
32,814
33,960
Deferred revenue, noncurrent
57,761
53,632
Deferred tax liabilities
2,394
2,394
Other noncurrent liabilities
905
3,646
Total liabilities
693,136
569,762
Stockholders’ equity:
Common stock, $0.001 par value
130
129
Treasury stock
(54,875
)
(50,276
)
Additional paid-in capital
682,504
690,462
Retained earnings (accumulated
deficit)
53,584
(69,897
)
Accumulated other comprehensive loss
(1,736
)
(1,376
)
Total stockholders’ equity
679,607
569,042
Total liabilities and stockholders’
equity
$
1,372,743
$
1,138,804
Condensed Consolidated Statements of
Cash Flows
(unaudited, dollars in thousands)
Three Months Ended
January 1, 2022
January 2, 2021
Cash flows from operating
activities
Net income
$
123,481
$
132,292
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
9,217
7,982
Stock-based compensation expense
17,459
14,844
Other
1,139
(1,050
)
Deferred income taxes
14
12
Foreign currency transaction (gain)
loss
494
(1,633
)
Changes in operating assets and
liabilities:
Accounts receivable, net
(79,000
)
(56,650
)
Inventories
(21,800
)
93,495
Other assets
4,086
(7,330
)
Accounts payable and accrued expenses
185,127
33,271
Accrued compensation
(49,094
)
(15,481
)
Deferred revenue
(13,510
)
5,633
Other liabilities
2,321
9,128
Net cash provided by operating
activities
179,934
214,513
Cash flows from investing
activities
Purchases of property and equipment,
intangible and other assets
(6,355
)
(11,333
)
Cash paid for acquisitions, net of
acquired cash
(27,101
)
—
Net cash used in investing activities
(33,456
)
(11,333
)
Cash flows from financing
activities
Payments for debt issuance costs
(929
)
—
Payments for repurchase of common
stock
(31,365
)
—
Proceeds from exercise of common stock
options
13,232
69,505
Payments for repurchase of common stock
related to shares withheld for tax in connection with vesting of
restricted stock units
(11,882
)
(5,118
)
Net cash provided by (used in) financing
activities
(30,944
)
64,387
Effect of exchange rate changes on cash,
cash equivalents and restricted cash
(1,218
)
3,174
Net increase in cash, cash equivalents and
restricted cash
114,316
270,741
Cash, cash equivalents and restricted
cash
Beginning of period
640,101
407,291
End of period
$
754,417
$
678,032
Supplemental disclosure
Cash paid for interest
$
23
$
166
Cash paid for taxes, net of refunds
$
413
$
2,672
Cash paid for amounts included in the
measurement of lease liabilities
$
3,410
$
8,102
Supplemental disclosure of non-cash
investing and financing activities
Purchases of property and equipment in
accounts payable and accrued expenses
$
5,499
$
7,814
Right-of-use assets obtained in exchange
for new operating lease liabilities
$
2,246
$
1,509
Reconciliation of Net Income to
Adjusted EBITDA
(unaudited, dollars in thousands)
Three Months Ended
January 1, 2022
January 2, 2021
Net income
$
123,481
$
132,292
Add (deduct):
Depreciation and amortization
9,217
7,982
Stock-based compensation expense
17,459
14,844
Interest income
(33
)
(36
)
Interest expense
98
265
Other (income) expense, net
1,402
(4,257
)
Provision for income taxes
7,646
9,120
Restructuring and related expenses (1)
—
(2,611
)
Legal and transaction related costs
(2)
3,873
8,666
Adjusted EBITDA
$
163,143
$
166,265
Revenue
$
664,481
$
645,584
Adjusted EBITDA margin
24.6
%
25.8
%
(1) Restructuring and related expenses for
the three months ended January 2, 2021, include a gain of $2.8
million, related to our negotiation for the early termination of a
facility lease that was part of the 2020 restructuring plan (as
defined below). The gain represents the difference between the
related operating lease liability and previously accrued
restructuring expenses versus the early termination payment. For a
description of the 2020 restructuring plan, see “Restructuring and
Related Costs” below.
(2) Legal and transaction related costs
consist of expenses related to our intellectual property ("IP")
litigation against Alphabet Inc. and Google LLC as well as legal
and transaction costs associated with our acquisition activity,
which we do not consider representative of our underlying operating
performance.
Reconciliation of Cash Flows Provided by Operating Activities to
Free Cash Flow
(unaudited, dollars in thousands)
Three Months Ended
January 1, 2022
January 2, 2021
Cash flows provided by operating
activities
$
179,934
$
214,513
Less: Purchases of property and equipment,
intangible and other assets
(6,355
)
(11,333
)
Free cash flow
$
173,579
$
203,180
Revenue by Product Category
(unaudited, dollars in thousands)
Three Months Ended
January 1, 2022
January 2, 2021
Sonos speakers
$
501,886
$
527,516
Sonos system products
134,745
97,759
Partner products and other revenue
27,850
20,309
Total revenue
$
664,481
$
645,584
Revenue by Geographical Region
(unaudited, dollars in thousands)
Three Months Ended
January 1, 2022
January 2, 2021
Americas
$
373,813
$
367,239
Europe, Middle East and Africa
("EMEA")
245,482
240,007
Asia Pacific ("APAC")
45,186
38,338
Total revenue
$
664,481
$
645,584
Stock-based Compensation
(unaudited, dollars in thousands)
Three Months Ended
January 1, 2022
January 2, 2021
Cost of revenue
$
328
$
214
Research and development
6,738
6,258
Sales and marketing
3,647
3,408
General and administrative
6,746
4,964
Total stock-based compensation expense
$
17,459
$
14,844
Restructuring and Related Costs
(1)
(unaudited, dollars in thousands)
Three Months Ended
January 1, 2022
January 2, 2021
Research and development
$
—
$
25
Sales and marketing
—
(2,636
)
General and administrative
—
—
Total restructuring and related costs
$
—
$
(2,611
)
(1) On June 23, 2020, we initiated a
restructuring plan as part of our efforts to reduce operating
expenses and preserve liquidity due to the uncertainty and
challenges stemming from the COVID-19 pandemic (the “2020
restructuring plan”). As part of the 2020 restructuring plan, we
eliminated approximately 12% of our global headcount and closed our
New York retail store and six satellite offices. We believe these
initiatives better aligned our resources to provide further
operating flexibility and more efficiently position our business
for our long-term strategy. Activities under the 2020 restructuring
plan were substantially completed in the first quarter of fiscal
2021. In the first quarter of fiscal 2021, we negotiated the early
termination of a facility lease that was part of the 2020
restructuring and recorded a gain of $2.8 million, representing the
difference between the related operating lease liability and
previously accrued restructuring expenses versus the early
termination payment. The gain was recognized as a credit in sales
and marketing expenses on the condensed consolidated statements of
operations and comprehensive income.
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 (loss) excluding
stock-based compensation, restructuring, and legal and transaction
related fees, and diluted earnings per share (EPS) excluding
stock-based compensation, restructuring, and legal and transaction
related fees. These non-GAAP financial measures are not based on
any standardized methodology prescribed by U.S. GAAP and are not
necessarily comparable to similarly titled measures presented by
other companies. We use these non-GAAP financial measures to
evaluate our operating performance and trends and make planning
decisions. We believe that these non-GAAP financial measures help
identify underlying trends in our business that could otherwise be
masked by the effect of the expenses and other items that we
exclude in these non-GAAP financial measures. Accordingly, we
believe that these non-GAAP financial measures provide useful
information to investors and others in understanding and evaluating
our operating results, enhancing the overall understanding of our
past performance and future prospects, and allowing for greater
transparency with respect to a key financial metric used by our
management in its financial and operational decision-making.
Non-GAAP financial measures should not be considered in isolation
of, or as an alternative to, measures prepared in accordance with
U.S. GAAP. Investors are encouraged to review the reconciliation of
these financial measures to their nearest U.S. GAAP financial
equivalents provided in the financial statement tables above. We
define adjusted EBITDA as net income (loss) adjusted to exclude the
impact of depreciation, stock-based compensation expense, interest
income, interest expense, other income (expense), income taxes and
other items that we do not consider representative of our
underlying operating performance. We define adjusted EBITDA margin
as adjusted EBITDA divided by revenue. We define free cash flow as
net cash from operations less purchases of property and equipment
and intangible assets. We calculate non-GAAP net income (loss)
excluding stock-based compensation, restructuring, and legal and
transaction related fees as net income (loss) less stock-based
compensation, restructuring fees and legal and transaction related
fees. We calculate non-GAAP diluted EPS excluding stock-based
compensation, restructuring, and legal and transaction related fees
as net income less stock-based compensation, restructuring costs
and legal and transaction related fees divided by our number of
shares at fiscal year end. We calculate constant currency growth
percentages by translating our prior period financial results using
the current period average currency exchange rates and comparing
these amounts to our current period reported results. We do not
provide a reconciliation of forward-looking non-GAAP financial
measures to their comparable GAAP financial measures because we
cannot do so without unreasonable effort due to unavailability of
information needed to calculate reconciling items and due to the
variability, complexity and limited visibility of the adjusting
items that would be excluded from the non-GAAP financial measures
in future periods. When planning, forecasting and analyzing future
periods, we do so primarily on a non-GAAP basis without preparing a
GAAP analysis as that would require estimates for items such as
stock-based compensation, which is inherently difficult to predict
with reasonable accuracy. Stock-based compensation expense is
difficult to estimate because it depends on our future hiring and
retention needs, as well as the future fair market value of our
common stock, all of which are difficult to predict and subject to
constant change. In addition, for purposes of setting annual
guidance, it would be difficult to quantify stock-based
compensation expense for the year with reasonable accuracy in the
current quarter. As a result, we do not believe that a GAAP
reconciliation would provide meaningful supplemental information
about our outlook.
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
October 1, 2022, our fiscal 2024 targets, our long-term focus,
financial, growth and business strategies and opportunities, growth
metrics and targets, our business model, new products, services and
partnerships, profitability and gross margins, our
direct-to-consumer efforts, our market share, and other factors
affecting variability in our financial results. These
forward-looking statements are only predictions and may differ
materially from actual results due to a variety of factors,
including, but not limited to the duration and impact of the
COVID-19 pandemic and related mitigation efforts on our industry
and our supply chain; supply chain challenges, including shipping
and logistics challenges and significant limits on component
supplies; changes in general economic or market conditions that
could affect consumer income and overall consumer spending; our
ability to successfully introduce new products and services and
maintain or expand the success of our existing products; the
success of our efforts to expand our direct-to-consumer channel;
the success of our financial, growth and business strategies; our
ability to meet product demand and manage any product availability
delays; and the other risk factors set forth under the caption
“Risk Factors” in our Annual Report on Form 10-K for the year ended
October 2, 2021 and our other filings filed with the Securities and
Exchange Commission (the “SEC”), copies of which are available free
of charge at the SEC’s website at www.sec.gov or upon request from
our investor relations department. All forward-looking statements
herein reflect our opinions only as of the date of this press
release, and we undertake no obligation, and expressly disclaim any
obligation, to update forward-looking statements herein in light of
new information or future events. Sonos and Sonos product names are
trademarks or registered trademarks of Sonos, Inc. All other
product names and services may be trademarks or service marks of
their respective owners.
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 Santa Barbara,
California. Learn more at www.sonos.com.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220208006286/en/
Investor Contact Cammeron McLaughlin IR@sonos.com
Press Contact Tom Lodge PR@sonos.com
Sonos (NASDAQ:SONO)
Historical Stock Chart
From May 2024 to Jun 2024
Sonos (NASDAQ:SONO)
Historical Stock Chart
From Jun 2023 to Jun 2024