Eddie Lazarus Appointed Chief Financial
Officer
Sonos, Inc. (Nasdaq: SONO) today reported fourth quarter and
fiscal 2022 results.
Fiscal 2022 Financial Highlights (unaudited)
- Revenue increased 2.1% year-over-year to $1,752.3 million; on a
constant-currency basis, revenue increased approximately 4.9%
year-over-year
- Gross margin decreased (180) basis points year-over-year to
45.4%
- GAAP net income of $67.4 million compared to $158.6 million
last year
- GAAP diluted earnings per share (EPS) of $0.49 compared to
$1.13 last year
- Non-GAAP net income1 of $165.9 million compared to $248.3
million last year
- Non-GAAP diluted EPS1 of $1.20 compared to $1.77 last year
- Adjusted EBITDA of $226.5 million compared to $278.6 million
last year
- Adjusted EBITDA margin of 12.9% compared to 16.2% last
year
- Free cash flow of $(74.5) million. Cash flows (used) in
operating activities of $28.3 million
Fourth Quarter 2022 Financial Highlights (unaudited)
- Revenue decreased 12.0% year-over-year to $316.3 million; on a
constant-currency basis, revenue decreased approximately 6.6%
year-over-year
- Gross margin decreased 720 basis points year-over-year to
39.2%
- GAAP net (loss) of $(64.1) million compared to $(8.7) million
last year
- GAAP diluted (loss) per share of $(0.50) compared to $(0.07)
last year
- Non-GAAP net (loss)1 of $(40.4) million compared to non-GAAP
net income of $11.8 million last year
- Non-GAAP diluted (loss) per share1 of $(0.32) compared to $0.08
last year
- Adjusted EBITDA of $(25.6) million compared to $17.1 million
last year
- Adjusted EBITDA margin of (8.1%) compared to 4.8% last
year
- Free cash flow of $(125.2) million. Cash flows (used) in
operating activities of $103.9 million
Notes: 1 Non-GAAP net income/EPS and non-GAAP net (loss)/(loss)
per share exclude stock-based compensation and legal and
transaction related fees. See “Use of Non-GAAP Measures” and
reconciliations to GAAP measures below.
“The macroeconomic backdrop became significantly more
challenging in Fiscal 2022 and I am proud of our team's tremendous
efforts to deliver our 17th consecutive year of revenue growth. We
grew the team to build on our leadership in existing categories,
and pursue four additional categories, to ultimately capture more
of the $96 billion global audio market. We were pleased to see
trends stabilize in Q4, and head into the holidays with a good
early response to our latest product, Sub Mini, and our healthiest
in-stock inventory position in three years,” said Patrick Spence,
CEO of Sonos.
Mr. Spence continued, “We will remain disciplined as we invest
in the year ahead, and will take all necessary steps to protect the
health of the business. My conviction in the long-term potential of
Sonos has never been stronger. As these headwinds subside, I am
confident that we will return to double-digit revenue growth.”
Sonos today announced that Eddie Lazarus, the Company’s interim
Chief Financial Officer and Chief Legal Officer, has been appointed
as Chief Financial Officer of the Company. A search will commence
for a General Counsel who will assume the day-to-day
responsibilities of the legal organization, reporting to Mr.
Lazarus.
“Eddie has seamlessly transitioned into his expanded role and
made an immediate impact on the organization,” said Mr. Spence. “I
am confident that under his leadership we will execute on our
strategic priorities, drive greater organizational efficiency and
make continued progress toward delivering on our long term
financial targets.”
Fiscal 2023 Outlook
- Revenue in the range of $1.7 billion to $1.8 billion,
representing a decline of -3% to growth of 3% from fiscal 2022, or
growth of 1% to 7% on a constant currency basis
- Gross margin in the range of 45.0% to 46.0%
- Adjusted EBITDA in the range of $145 million to $180 million,
representing a decline of 36% to 21% from fiscal 2022
- Adjusted EBITDA margin of 8.5% to 10.0%
Fiscal 2022 Company Highlights (unaudited)
Key Metrics:
- Total households increased 11% to 14.0 million in fiscal
2022
- Existing households accounted for 44% of new product
registrations in fiscal 2022
- Average number of registered products per household of 2.98 in
fiscal 2022 vs 2.95 last year
- Listening hours increased 6% year-over-year to 12.8
billion
- Direct-to-consumer (DTC) revenue decreased 5% and represented
23% of total revenue
- New disclosure: Installer Solutions (IS) revenue increased 28%
and represented 21% of total revenue
New Stock Repurchase Program
- As announced in a separate release today, the company’s Board
of Directors has authorized a new common stock repurchase program
of up to $100 million.
- Under its most recently completed repurchase program, the
company repurchased $150 million in stock, representing 6.6 million
shares at an average price of $22.80 per share, enabling the
company to return capital to shareholders and offset dilution from
compensation plans.
Strategic Initiatives
- Expansion of our Ecosystem
- Mayht - Acquisition Announced April 2022: Mayht is a
Netherlands-based company that has invented a new, revolutionary
approach to audio transducers. Transducers are the foundational
element within speakers that create sound, and Mayht has
re-engineered them to enable smaller and lighter form factors while
producing exceptional sound.
- Sonos Voice Control - May 2022: The first voice experience
created purely for listening on Sonos. Designed with privacy at its
core, Sonos Voice Control is the simplest way to control your
music, offering complete command of your Sonos system using only
your voice.
- Sonos Ray - June 2022 - $279 MSRP: Our entry-level, smart
soundbar for TV, music and more.
- Sub Mini - September 2022 - $429 MSRP: The wireless subwoofer
that sets a new standard in its category for powerful, balanced
bass. Building on the award-winning design of Sub, Sub Mini
delivers rich, clear low end in a more compact, cylindrical
design.
- Expansion of our Brand
- LFC delivered TV viewership of over 270M in Season 1/
FY22.
- ESPN delivered 205M impressions in its first season.
- Food52, a platform with a large female following, delivered
more than 28M impressions by the end of FY22
- For the launch of Roam Colors, more than 170 advocates in the
outdoor, travel and wellness spaces delivered inspiring video
content showcasing how they Feel More with Sonos, resulting in more
than 70M impressions in FY22
- Responsibility and Innovation
- Recognized as one of the best places to work for LGBTQ+
equality by the Human Rights Campaign (HRC) Foundation.
- Publishing annual Listen Better Report on November 29th,
highlighting the work we have done to improve our efforts as a
responsible company. In FY22, we advanced our Climate Action Plan
by conducting an annual assessment of our greenhouse gas
emissions.
- Won two awards for our product packaging. First-place in 2022
Dieline Awards under the electronics, office, e-commerce,
entertainment and self-promo category, and Industrial Designers
Society of America IDEA 2022 Jury Chair Award for Sonos Global
Packaging System.
- Won CIO 100 award for “IT in a Box.”
Supplemental Earnings Presentation
The company has posted a supplemental earnings presentation
accompanying its fourth quarter and 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 fourth quarter and fiscal 2022 results on
November 16, 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 8641747. 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.
Consolidated Statements of Operations
and Comprehensive Income (Loss)
(unaudited, in thousands, except share and
per share amounts)
Three Months Ended
Twelve months ended
October 1, 2022
October 2, 2021
October 1, 2022
October 2, 2021
Revenue
$
316,290
$
359,539
$
1,752,336
$
1,716,744
Cost of revenue
192,191
192,608
955,969
906,750
Gross profit
124,099
166,931
796,367
809,994
Operating expenses
Research and development
67,274
65,783
256,073
230,078
Sales and marketing
72,649
73,236
280,333
272,124
General and administrative
44,240
39,457
170,429
152,828
Total operating expenses
184,163
178,476
706,835
655,030
Operating income
(60,064
)
(11,545
)
89,532
154,964
Other income (expense), net
Interest income
1,070
33
1,655
146
Interest expense
(168
)
(67
)
(552
)
(592
)
Other income (expense), net
(8,364
)
(2,271
)
(21,905
)
2,407
Total other income (expense), net
(7,462
)
(2,305
)
(20,802
)
1,961
Income (loss) before provision for
(benefit from) income taxes
(67,526
)
(13,850
)
68,730
156,925
Provision for (benefit from) income
taxes
(3,459
)
(5,106
)
1,347
(1,670
)
Net income (loss)
$
(64,067
)
$
(8,744
)
$
67,383
$
158,595
Net income (loss) attributable to common
stockholders:
Basic and diluted
$
(64,067
)
$
(8,744
)
$
67,383
$
158,595
Net income (loss) per share attributable
to common stockholders:
Basic
$
(0.50
)
$
(0.07
)
$
0.53
$
1.30
Diluted
$
(0.50
)
$
(0.07
)
$
0.49
$
1.13
Weighted-average shares used in computing
net income (loss) per share attributable to common
stockholders:
Basic
127,104,659
126,351,433
127,691,030
122,245,212
Diluted
127,104,659
126,351,433
137,762,078
140,309,152
Total comprehensive income (loss)
Net income (loss)
$
(64,067
)
$
(8,744
)
$
67,383
$
158,595
Change in foreign currency translation
adjustment
(249
)
252
(2,221
)
514
Comprehensive income (loss)
$
(64,316
)
$
(8,492
)
$
65,162
$
159,109
Consolidated Balance Sheets
(unaudited, dollars in thousands, except
par values)
As of
October 1, 2022
October 2, 2021
Assets
Current assets:
Cash and cash equivalents
$
274,855
$
640,101
Accounts receivable, net of allowances
101,206
100,779
Inventories
454,288
185,130
Prepaids and other current assets
37,042
31,504
Total current assets
867,391
957,514
Property and equipment, net
86,168
71,341
Operating lease right-of-use assets
28,329
33,841
Goodwill
77,300
15,545
Intangible assets, net:
In-process research and development
64,680
20,100
Other intangible assets
26,384
4,350
Deferred tax assets
1,508
10,028
Other noncurrent assets
36,628
26,085
Total assets
$
1,188,388
$
1,138,804
Liabilities and stockholders’
equity
Current liabilities:
Accounts payable
$
335,758
$
214,996
Accrued expenses
109,290
108,029
Accrued compensation
23,624
77,695
Deferred revenue, current
27,318
35,866
Other current liabilities
39,649
39,544
Total current liabilities
535,639
476,130
Operating lease liabilities,
noncurrent
25,596
33,960
Deferred revenue, noncurrent
56,152
53,632
Deferred tax liabilities
9,642
2,394
Other noncurrent liabilities
846
3,646
Total liabilities
627,875
569,762
Stockholders’ equity:
Common stock, $0.001 par value
130
129
Treasury stock
(50,896
)
(50,276
)
Additional paid-in capital
617,390
690,462
Accumulated deficit
(2,514
)
(69,897
)
Accumulated other comprehensive loss
(3,597
)
(1,376
)
Total stockholders’ equity
560,513
569,042
Total liabilities and stockholders’
equity
$
1,188,388
$
1,138,804
Consolidated Statements of Cash
Flows
(unaudited, dollars in thousands)
Twelve months ended
October 1, 2022
October 2, 2021
Cash flows from operating
activities
Net income
$
67,383
$
158,595
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization
38,504
33,882
Impairment and abandonment
62
3,552
Stock-based compensation expense
75,640
62,127
Other
10,919
1,951
Deferred income taxes
(1,508
)
(8,330
)
Foreign currency transaction (gain)
loss
10,775
(1,108
)
Changes in operating assets and
liabilities:
Accounts receivable, net
(5,513
)
(45,697
)
Inventories
(277,489
)
(7,911
)
Other assets
(16,604
)
(30,009
)
Accounts payable and accrued expenses
129,686
26,231
Accrued compensation
(52,904
)
33,447
Deferred revenue
(1,667
)
27,587
Other liabilities
(5,544
)
(1,091
)
Net cash provided by (used in) operating
activities
(28,260
)
253,226
Cash flows from investing
activities
Purchases of property and equipment,
intangible and other assets
(46,216
)
(45,531
)
Cash paid for acquisitions, net of
acquired cash
(126,416
)
—
Net cash used in investing activities
(172,632
)
(45,531
)
Cash flows from financing
activities
Payments for debt issuance costs
(929
)
Proceeds from exercise of stock
options
40,443
147,818
Payments for repurchase of common
stock
(150,121
)
(50,014
)
Payments for repurchase of common stock
related to shares withheld for tax in connection with vesting of
restricted stock units
(39,653
)
(47,837
)
Payments of borrowings
—
(25,000
)
Net cash provided by (used in) financing
activities
(150,260
)
24,967
Effect of exchange rate changes on cash
and cash equivalents
(14,094
)
148
Net increase (decrease) in cash and cash
equivalents
(365,246
)
232,810
Cash and cash equivalents
Beginning of period
640,101
407,291
End of period
$
274,855
$
640,101
Supplemental disclosure
Cash paid for interest
$
344
$
502
Cash paid for taxes, net of refunds
$
9,306
$
4,114
Cash paid for amounts included in the
measurement of lease liabilities
$
14,636
$
18,657
Supplemental disclosure of non-cash
investing and financing activities
Purchases of property and equipment in
accounts payable and accrued expenses
$
9,112
$
5,653
Right-of-use assets obtained in exchange
for new operating lease liabilities
$
5,054
$
2,010
Reconciliation of Net Income (Loss) to
Adjusted EBITDA
(unaudited, dollars in thousands except
percentages)
Three Months Ended
Twelve months ended
October 1, 2022
October 2, 2021
October 1, 2022
October 2, 2021
Net income (loss)
$
(64,067
)
$
(8,744
)
$
67,383
$
158,595
Add (deduct):
Depreciation and amortization
10,805
8,093
38,504
33,882
Stock-based compensation expense
18,177
15,372
75,640
62,127
Interest income
(1,070
)
(33
)
(1,655
)
(146
)
Interest expense
168
67
552
592
Other (income) expense, net
8,364
2,271
21,905
(2,407
)
Provision for (benefit from) income
taxes
(3,459
)
(5,106
)
1,347
(1,670
)
Restructuring and related expenses(1)
—
165
—
(2,446
)
Legal and transaction related costs(2)
5,529
5,028
22,873
30,058
Adjusted EBITDA
$
(25,553
)
$
17,113
$
226,549
$
278,585
Revenue
$
316,290
$
359,539
$
1,752,336
$
1,716,744
Adjusted EBITDA margin
(8.1
)%
4.8
%
12.9
%
16.2
%
(1)
Restructuring and related
expenses for the twelve months ended October 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. The gain represents the difference between the
related operating lease liability and previously accrued
restructuring expenses versus the early termination payment.
(2)
Legal and transaction related
costs consist of expenses related to our intellectual property
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 GAAP Net Income (Loss) to Non-GAAP Net
Income (Loss)
(unaudited, in thousands, except share and
per share amounts)
Three Months Ended
Twelve months ended
October 1, 2022
October 2, 2021
October 1, 2022
October 2, 2021
Reconciliation of GAAP net income
(loss)
GAAP net income (loss)
$
(64,067
)
$
(8,744
)
$
67,383
$
158,595
Stock-based compensation expense
18,177
15,372
75,640
62,127
Restructuring and related expenses
—
165
—
(2,446
)
Legal and transaction related costs
5,529
5,028
22,873
30,058
Non-GAAP net income (loss)
$
(40,361
)
$
11,821
$
165,896
$
248,334
Reconciliation of net income (loss) per
share
GAAP net income (loss) per share,
diluted
$
(0.50
)
$
(0.07
)
$
0.49
$
1.13
Non-GAAP adjustments to net income (loss)
per share
$
0.19
$
0.15
$
0.72
$
0.64
Non-GAAP net income (loss) per share,
diluted
$
(0.32
)
$
0.08
$
1.20
$
1.77
Weighted-average shares used in GAAP and
non-GAAP per share calculation, diluted
127,104,659
126,351,433
137,762,078
140,309,152
Note: Certain figures may not sum due to
rounding
Reconciliation of Cash Flows Provided
by (Used in) Operating Activities to Free Cash Flow
(unaudited, dollars in thousands)
Three Months Ended
Twelve months ended
October 1, 2022
October 2, 2021
October 1, 2022
October 2, 2021
Cash flows provided by (used in) operating
activities
$
(103,917
)
$
6,486
$
(28,260
)
$
253,226
Less: Purchases of property and equipment,
intangible and other assets
(21,269
)
(10,739
)
(46,216
)
(45,531
)
Free cash flow
$
(125,186
)
$
(4,253
)
$
(74,476
)
$
207,695
Revenue by Product Category
(unaudited, dollars in thousands)
Three Months Ended
Twelve months ended
October 1, 2022
October 2, 2021
October 1, 2022
October 2, 2021
Sonos speakers
$
235,091
$
273,525
$
1,368,916
$
1,378,808
Sonos system products
62,782
67,738
297,110
265,180
Partner products and other revenue
18,417
18,276
86,310
72,756
Total revenue
$
316,290
$
359,539
$
1,752,336
$
1,716,744
Revenue by Geographical Region
(unaudited, dollars in thousands)
Three Months Ended
Twelve months ended
October 1, 2022
October 2, 2021
October 1, 2022
October 2, 2021
Americas
$
199,686
$
196,034
$
1,044,113
$
980,931
Europe, Middle East and Africa
91,438
137,936
578,034
618,476
Asia Pacific
25,166
25,569
130,189
117,337
Total revenue
$
316,290
$
359,539
$
1,752,336
$
1,716,744
Stock-based Compensation
(unaudited, dollars in thousands)
Three Months Ended
Twelve months ended
October 1, 2022
October 2, 2021
October 1, 2022
October 2, 2021
Cost of revenue
$
467
$
265
$
1,620
$
988
Research and development
8,037
6,008
30,724
25,075
Sales and marketing
3,685
3,253
15,335
13,570
General and administrative
5,988
5,846
27,961
22,494
Total stock-based compensation expense
$
18,177
$
15,372
$
75,640
$
62,127
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 and legal and transaction related fees and
diluted earnings (loss) per share excluding stock-based
compensation 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 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 and other
assets. We calculate non-GAAP net income (loss) excluding
stock-based compensation and legal and transaction related fees as
net income (loss) less stock-based compensation and legal and
transaction related fees. We calculate non-GAAP diluted earnings
(loss) per share excluding stock-based compensation and legal and
transaction related fees as net income (loss) less stock-based
compensation 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
September 30, 2023, our long-term outlook, 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, market growth and
our market share, the macroeconomic environment and our ability to
weather it, 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, component
supply-related challenges and inflationary pressures; our ability
to effectively manage inventory levels, particularly during periods
of fluctuating component availability; the impact of global
economic, market and political events, including the continuing
conflict between Russia and Ukraine, foreign currency exchange
fluctuations and inflation; changes in consumer income and overall
consumer spending as a result of economic or political uncertainty;
changes in consumer spending patterns; 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 Quarterly Report on Form 10-Q for the quarter ended July 2,
2022 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.
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version on businesswire.com: https://www.businesswire.com/news/home/20221116005412/en/
Investor Contact James Baglanis IR@sonos.com Press Contact Tom
Lodge PR@sonos.com
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