Key Takeaways From Sonos’ First Earnings Report As A Public Company

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Wireless home audio equipment maker Sonos (NASDAQ:SONO) published its first set of results as a public company, posting a year-over-year decline in quarterly revenues and a wider net loss, causing the company’s stock price to decline by nearly 20% in trading on Tuesday, September 11. Below, we provide some of the key takeaways from the company’s fiscal Q3 earnings and look at what it is doing to improve sales.

We have outlined our detailed forecasts and estimates for the company in our interactive dashboard analysis on What Sonos Is Worth. You can modify key drivers and arrive at your own estimates for the company’s value.

Revenues Face Some Pressure 

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Sonos shipped a total of 887k products over the quarter, marking an increase of about 11% on a year-over-year basis. However, revenues declined by about 6% year-over-year due to a tough comparison with last year, when the company launched premium soundbar Playbase, and also due to a less favorable product mix, with the $199 Sonos One speaker accounting for a larger portion of sales. Moreover, the company’s move to reduce pricing on the Play 1 and Play 3 speakers earlier this fiscal year also impacted sales. Sonos’ profitability also took a hit due to the less favorable product mix, with gross margins declining by 2.3% year-over-year to 45.8%. Net losses widened to $27 million from $14.5 million in the year-ago period.

What Is Sonos Doing To Drive Sales Growth?

Sonos should see growth over the full fiscal year, as it guided for revenues between $1.109 billion and $1.114 billion, marking an increase of about 11%. Although we expect the company’s growth rates to continue to decelerate over the long term, due to the long replacement cycles for its products (5 to 10 years) and mounting competition, the company has undertaken multiple initiatives to drive sales. For instance, Sonos is looking to expand beyond its primary existing markets of North America and Europe by launching its products in Japan, which is the world’s second largest music market. Sonos could also see traction with Apple’s affluent user base, following the introduction of AirPlay 2 support on its newer speakers.  The company is also looking to grow its share of direct-to-customer sales, as opposed to sales via third parties, in order to improve margins.

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