Achieves Record Number of New Customers and
Record Number of Existing Customers Adding Additional Products
Raises Fiscal 2021 Outlook
Sonos, Inc. (Nasdaq: SONO) today reported record first quarter
fiscal 2021 results.
First Quarter 2021 Financial Highlights (unaudited)
- GAAP net income increased 87% to $132.3 million from $70.8
million last year; non-GAAP net income excluding stock-based
compensation, restructuring and legal and transaction related fees
increased to $153.2 million from $87.4 million last year.
- GAAP diluted earnings per share (EPS) increased to $1.01 from
$0.60 last year; non-GAAP diluted earnings per share (EPS)
excluding stock-based compensation, restructuring, and legal and
transaction related fees increased to $1.17 from $0.74 last
year.
- Adjusted EBITDA increased 78% to $166.3 million from $93.2
million last year; excluding the effect of tariff duties and
refunds, adjusted EBITDA increased 45% to $163.2 million.
- Adjusted EBITDA margin increased 920 basis points to 25.8% from
16.6% last year; excluding the effect of tariff duties and refunds,
adjusted EBITDA margin increased to 25.3%.
- Gross margin increased 590 basis points to 46.4% from 40.5%
last year; excluding the effect of tariff duties and refunds, gross
margin increased to 45.9%.
- Revenue increased 15% year-over-year to $645.6 million; on a
constant-currency basis revenue increased approximately 12%
year-over-year.
- Cash flows from operating activities of $214.5 million compared
to $118.8 million last year.
- Free cash flow increased 97% to $203.2 million compared to
$102.9 million last year.
Sonos CEO Patrick Spence commented, “Despite all of the
challenges of the pandemic, our team rose to the occasion and
delivered the best quarter in our 18 year history. We welcomed a
record number of new customers while a record number of existing
customers returned to add additional products to their system.
Based on our outstanding first quarter performance, the momentum in
our business, the exciting products we have planned for the future,
and the power and profitability of our unique business model, we
are raising our outlook for fiscal 2021.”
Mr. Spence concluded, “We remain focused on delivering
innovative new products that both attract new customers and inspire
existing customers to add additional products, introducing services
that enhance and further differentiate the customer experience,
strengthening our direct-to-consumer efforts, and supporting our
incredible partnerships. We are extremely well positioned to
deliver solid adjusted EBITDA margin expansion, industry-leading
gross margins, strong revenue growth, significant free cash flow
and increased shareholder value over time. The future has never
been brighter for Sonos.”
Fiscal 2021 Outlook
- Adjusted EBITDA increased to a range of $195 million to $225
million representing growth in the range of 80% to 107%
year-over-year. This compares to a prior guidance range of $170
million to $205 million representing growth in the range of 57% to
89%. Excluding the effect of tariffs, growth is expected to be in
the range of 40% to 62%.
- Adjusted EBITDA margin increased to a range of 13% to 14%,
representing a 460 to 610 basis point improvement year-over-year
and compared to prior guidance range of 12% to 14%. Excluding the
effect of tariffs, adjusted EBITDA margin expected to be in range
of 13.0% to 14.4%.
- Gross margin increased to a range of 46.0% to 46.5%,
representing a 288 to 338 basis point improvement year-over-year
and compared to prior guidance of 45.3% to 45.8%. Excluding the
effect of tariffs, gross margin is expected to be in the range of
46.2% to 46.7%. Our fiscal 2021 outlook includes minimal impact
from ongoing tariffs and does not include the $29.2 million in
tariff refunds expected due to timing uncertainty.
- Revenue increased to a range of $1.525 billion to $1.575
billion, representing growth in the range of 15% to 19% from fiscal
2020 (17% to 21% on a comparable basis excluding the 53rd week in
fiscal 2020). This compares to prior revenue guidance of $1.44
billion to $1.5 billion, or 9% to 13% growth (11% to 15% on a
comparable basis excluding the 53rd week in fiscal 2020).
Virtual Investor Event - Tuesday, March 9, 2021
Sonos will host a virtual investor event at 4:00 pm ET on
Tuesday, March 9, 2021 highlighting its long-term strategic
priorities and targets.
Supplemental Earnings Presentation
The Company has posted a supplemental earnings presentation
accompanying its first quarter fiscal 2021 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 2021 results on
February 10, 2021 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 (833) 921-1637 with
conference ID 9987111. Participants outside the U.S. can access the
call by dialing (236) 714-2128 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 2,
2021 December 28, 2019 Revenue
$
645,584
$
562,083
Cost of revenue
346,159
334,463
Gross profit
299,425
227,620
Operating expenses Research and development
52,346
52,526
Sales and marketing
74,453
77,423
General and administrative
35,242
30,209
Total operating expenses
162,041
160,158
Operating income
137,384
67,462
Other income (expense), net Interest income
36
998
Interest expense
(265
)
(453
)
Other income, net
4,257
4,424
Total other income (expense), net
4,028
4,969
Income before provision for income taxes
141,412
72,431
Provision for income taxes
9,120
1,656
Net income
$
132,292
$
70,775
Net income attributable to common stockholders: Basic
$
132,292
$
70,775
Diluted
$
132,292
$
70,775
Net income per share attributable to common stockholders: Basic
$
1.14
$
0.65
Diluted
$
1.01
$
0.60
Weighted-average shares used in computing net income per share
attributable to common stockholders: Basic
115,610,523
108,984,683
Diluted
130,644,147
118,415,968
Total comprehensive income Net income
$
132,292
$
70,775
Change in foreign currency translation adjustment
847
(519
)
Comprehensive income
$
133,139
$
70,256
Condensed Consolidated Balance Sheets (unaudited, in
thousands, except par values)
As of January 2,
2021 October 3, 2020 Assets Current assets: Cash
and cash equivalents
$
677,834
$
407,100
Restricted cash
198
191
Accounts receivable, net of allowances
113,616
54,935
Inventories
88,194
180,830
Prepaids and other current assets
21,076
17,321
Total current assets
900,918
660,377
Property and equipment, net
64,170
60,784
Operating lease right-of-use assets
41,462
42,342
Goodwill
15,545
15,545
Intangible assets, net
25,975
26,394
Deferred tax assets
1,886
1,800
Other noncurrent assets
16,904
8,809
Total assets
$
1,066,860
$
816,051
Liabilities and stockholders’ equity Current
liabilities: Accounts payable
$
239,760
$
250,328
Accrued expenses
96,433
45,049
Accrued compensation
29,424
44,517
Short-term debt
24,937
6,667
Deferred revenue, current
16,382
15,304
Other current liabilities
48,828
31,150
Total current liabilities
455,764
393,015
Operating lease liabilities, noncurrent
42,268
50,360
Long-term debt
-
18,251
Deferred revenue, noncurrent
52,459
47,085
Deferred tax liabilities
2,434
2,434
Other noncurrent liabilities
3,726
7,067
Total liabilities
556,651
518,212
Commitments and contingencies Stockholders’ equity: Common
stock, $0.001 par value
121
114
Treasury stock
(26,004
)
(20,886
)
Additional paid-in capital
633,335
548,993
Accumulated deficit
(96,200
)
(228,492
)
Accumulated other comprehensive loss
(1,043
)
(1,890
)
Total stockholders’ equity
510,209
297,839
Total liabilities and stockholders’ equity
$
1,066,860
$
816,051
Condensed Consolidated Statements of Cash Flows (unaudited,
in thousands)
Three Months Ended January
2,2021 December 28,2019 (unaudited) Cash flows
from operating activities Net income
$
132,292
$
70,775
Adjustments to reconcile net income to net cash provided by
operating activities Depreciation and amortization
7,982
9,105
Stock-based compensation expense
14,844
13,204
Other
(1,050
)
1,471
Deferred income taxes
12
51
Foreign currency transaction gain
(1,633
)
(1,924
)
Changes in operating assets and liabilities: Accounts receivable,
net
(56,650
)
(31,411
)
Inventories
93,495
107,343
Other assets
(7,330
)
(11,853
)
Accounts payable and accrued expenses
33,271
(39,416
)
Accrued compensation
(15,481
)
(14,568
)
Deferred revenue
5,633
4,879
Other liabilities
9,128
11,184
Net cash provided by operating activities
214,513
118,840
Cash flows from investing activities Purchases of property,
equipment, intangible and other assets
(11,333
)
(15,914
)
Cash paid for acquisition, net of acquired cash
-
(35,622
)
Net cash used in investing activities
(11,333
)
(51,536
)
Cash flows from financing activities Repayments of
borrowings
-
(1,667
)
Payments for repurchase of common stock
-
(5,078
)
Proceeds from exercise of stock options
69,505
7,969
Payments for repurchase of common stock related to shares withheld
for tax in connection with vesting of RSUs
(5,118
)
-
Net cash provided by financing activities
64,387
1,224
Effect of exchange rate changes on cash, cash equivalents and
restricted cash
3,174
1,254
Net increase in cash, cash equivalents and restricted cash
270,741
69,782
Cash, cash equivalents and restricted cash Beginning of
period
407,291
338,820
End of period
$
678,032
$
408,602
Supplemental disclosure Cash paid for interest
$
166
$
472
Cash paid for taxes, net of refunds
$
2,672
517
Cash paid for amounts included in the measurement of lease
liabilities
$
8,102
4,304
Supplemental disclosure of non-cash investing and
financing activities Purchases of property and equipment in
accounts payable and accrued expenses
$
7,814
$
7,908
Right-of-use assets obtained in exchange for new operating lease
liabilities
$
1,509
$
74,683
Reconciliation of Net Income to Adjusted EBITDA (unaudited,
dollars in thousands)
Three Months Ended January 2,
2021 December 28, 2019 Net income
$
132,292
$
70,775
Add (deduct): Depreciation and amortization
7,982
9,105
Stock-based compensation expense
14,844
13,204
Interest income
(36
)
(998
)
Interest expense
265
453
Other income, net
(4,257
)
(4,424
)
Provision for income taxes
9,120
1,656
Restructuring and related expenses (1)
(2,611
)
-
Legal and transaction related costs (2)
8,666
3,448
Adjusted EBITDA
$
166,265
$
93,219
Revenue
$
645,584
$
562,083
Adjusted EBITDA margin
25.8
%
16.6
%
(1) Restructuring and related expenses includes 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. 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 ("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 2, 2021 December 28,
2019 Cash flows provided by operating activities
$
214,513
$
118,840
Less: purchases of property and equipment, intangible and other
assets
(11,333
)
(15,914
)
Free cash flow
$
203,180
$
102,926
Revenue by Product Category (unaudited, dollars in
thousands)
Three Months Ended
January 2, 2021
December 28, 2019
Sonos speakers
$
527,516
$
466,677
Sonos system products
97,759
61,521
Partner products and other revenue
20,309
33,885
Total revenue
$
645,584
$
562,083
Revenue by Geographical Region (unaudited,
dollars in thousands)
Three Months Ended
January 2, 2021
December 28, 2019
Americas
$
367,239
$
303,194
Europe, Middle East and Africa
240,007
212,738
Asia Pacific
38,338
46,151
Total revenue
$
645,584
$
562,083
Stock-based Compensation (unaudited, dollars in thousands)
Three Months Ended January 2, 2021 December 28,
2019 Cost of revenue
$
214
$
282
Research and development
6,258
5,116
Sales and marketing
3,408
3,541
General and administrative
4,964
4,265
Total stock-based compensation expense
$
14,844
$
13,204
Restructuring and Related Expenses (1) (unaudited, dollars
in thousands)
Three Months Ended January 2, 2021
Research and development
$
25
Sales and marketing
(2,636
)
Total
$
(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. 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 will better align 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, gross margin excluding the
effect of tariff duties and refunds, adjusted EBITDA excluding the
effect of tariff duties and refunds, adjusted EBITDA margin
excluding the effect of tariff duties and refunds, net income
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 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 calculate gross margin excluding the
effect of tariff duties and refunds as gross profit, less the
effect of tariffs imposed on goods imported to the U.S. from China
and any tariffs refunds subject to a tariff refund claim approved
by U.S. Customs and Border Protection, divided by revenue. We
define free cash flow as net cash from operations less purchases of
property and equipment and intangible assets. We calculate adjusted
EBITDA excluding the effect of tariff duties and refunds as net
income excluding the effect of tariffs imposed on goods
manufactured in China and any tariffs refunds subject to a tariff
refund claim approved by U.S. Customs and Border Protection and
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
calculate non-GAAP net income excluding stock-based compensation,
restructuring and legal and transaction related fees as net income
less stock-based compensation, restructuring fees and legal and
transaction related fees. We calculate non-GAAP diluted earnings
per share (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 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 ended
October 2, 2021, 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, our tariff expense 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;
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
and accurately forecast 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 3, 2020 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 letter, 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/20210210005767/en/
Investor Contact Cammeron McLaughlin IR@sonos.com
Press Contact Tom Lodge PR@sonos.com
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