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Earnings Results: Sonos execs say trends have ‘stabilized,’ stock heads higher after earnings


Sonos Inc. executives say trends in the business have recently “stabilized,” and its shares headed higher in Wednesday’s aftermarket activity as the speaker maker beat revenue expectations for its latest quarter.

The company generated $316.3 million in revenue for its fiscal fourth quarter, down from $359.5 million a year before but ahead of the FactSet consensus, which was for $298.7 million. Sonos

executives also gave a forecast of $1.7 billion to $1.8 billion in revenue for the new fiscal year, which at its midpoint is ahead of the $1.724 billion that analysts were anticipating.

Shares were up more than 6% in after-hours trading Wednesday following the report.

The latest commentary comes about three months after Sonos warned of “significantly more challenging” macroeconomic conditions that, at the time, prompted the company to cut its outlook for the fiscal year that just ended.

While Sonos currently isn’t performing at rates that executives see as ideal for the business, Chief Executive Patrick Spence told MarketWatch in an interview that Sonos is “encouraged headed into this quarter and holiday period” as the company has seen “good underlying registration trends” among people “lighting up” devices they just bought.

Spence said that Sonos’ business model, in which customers tend to purchase additional devices for their homes, is an advantage in the current climate, as is its brand perception.

“What we’ve been watching closely is market share,” he said. “As things have gotten more challenging from a macro perspective, we’ve actually been winning.”

The outlook is “prudent in light of the economy,” Spence continued.

Chief Financial Officer Eddie Lazarus said that while the midpoint of Sonos’ annual revenue forecast implies flat performance relative to the year that just ended, it also assumes a “very strong” currency headwind. Lazarus had been serving as Sonos’ CFO in an interim capacity but was just appointed to the role permanently.

Sonos paused hiring during the fiscal fourth quarter “to look at the business and assess where we were,” but Lazarus said the company has since “resumed hiring at a significantly slower pace.” Sonos is undertaking other cost-cutting measures around discretionary expenses and looking to sublet excess office space.

The company recorded a fiscal fourth-quarter net loss of $64.1 million, or 50 cents a share, compared with a loss of $8.7 million, or 7 cents a share, in the year-earlier quarter. Analysts tracked by FactSet were anticipating a 44-cent GAAP loss per share. For the full fiscal year, Sonos posted a $67.4 million GAAP profit.

Sonos also posted a quarterly loss on the basis of adjusted earnings before interest, taxes, depreciation and amortization (Ebitda) of $25.6 million, whereas it recorded positive adjusted Ebitda of $17.1 million a year before. The FactSet consensus was for a $30 million loss on the basis of adjusted Ebitda.

Separately, the company said its board of directors has authorized a share buyback program of up to $100 million.

Spence noted that after years of supply issues, Sonos is in a far better inventory position headed into the coming holiday season, giving the company the ability to run promotions similar to how it did prior to the supply crunch. The company will look to do so in a way that respects its “pretty disciplined gross-margin range” and focuses on older products.

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