Sonos, Inc SONO reported second-quarter fiscal 2023 non-GAAP earnings of 4 cents per share compared with 26 cents in the prior-year quarter. On a GAAP basis, the company reported a loss of 24 cents against the earnings of 6 cents reported in the year-ago quarter. The Zacks Consensus Estimate was pegged at a loss of 14 cents.
Quarterly revenues decreased 23.9% (down 22.4% on a constant-currency basis or cc) year over year to $304.2 million due to weak consumer demand. Tougher year-over-year comparison owing to backlog fulfillment and timing of channel fill in the prior-year quarter added to the woes. Unfavorable foreign exchange movements affected sales by $6 million. However, the top line beat the Zacks Consensus Estimate by 3.5%.
For fiscal 2023, Sonos now expects revenues to be down 4-7% year over year and in the range of $1.625-$1.675 billion (earlier view: down 3% to up 3% year over year and in the range of $1.7-$1.8 billion). On a constant-currency basis, revenues are anticipated to decline 2-5% (earlier view: increase in the range of 1-7%).
The gross margin is now projected to be between 44.3% and 44.8%. Adjusted EBITDA is estimated between $138 million and $168 million, with the margin ranging from 8.5-10%.
Following the announcement, shares are down 21.6% in pre-market trading on May 11. In the past year, shares of Sonos have gained 11.2% compared with the sub industry’s increase of 15.7%.
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Revenues from Sonos speakers were $241.2 million, down 24.1% from the prior-year quarter’s levels.
Sonos system products’ revenues were $44.1 million, down 28% year over year. Revenues from Partner products and other totaled $18.9 million, down 9.2% year over year.
Region-wise, revenues from the Americas totaled $196.5 million, down 17.5% year over year. Europe, the Middle East and Africa generated revenues of $89.1 million, down 30.7%. Revenues from the Asia Pacific were down 43.9% to $18.6 million.
Sonos, Inc. Price, Consensus and EPS Surprise
Sonos, Inc. price-consensus-eps-surprise-chart | Sonos, Inc. Quote
Gross profit was $131.6 million, down 26.5% from the prior-year quarter’s levels. Gross margin contracted 150 bps year over year to 43.3%, mainly due to unfavorable product mix shift and forex volatility partly offset by fewer spot component purchases.
Total operating expenses amounted to $188.8 million, up from $169 million in the prior-year quarter, reflecting higher research and development, and general and administrative expenses.
Operating loss was $57.2 million against the operating income of $10 million in the year-ago quarter. Adjusted EBITDA loss totaled $10.6 million against the adjusted EBITDA income of $46.9 million in the prior-year quarter. Lower revenues mainly resulted in the downside.
Cash Flow & Liquidity
For the fiscal second quarter, Sonos used $113 million of cash from operations. Free cash outflow was $121.7 million.
As of Mar 31, cash and cash equivalents were $294.9 million compared with $431.5 million as of Dec 31, 2022. SONO has no debt.
Sonos repurchased shares worth $15 million. The company has $69.9 million worth of shares remaining under its $100 million authorization.
Zacks Rank & Other Stocks to Consider
Sonos currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader technology space are Badger Meter BMI, Watts Water Technologies WTS and Blackbaud BLKB. BMI and BLKB sport a Zacks Rank #1 (Strong Buy) whereas WTS currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Badger Meter’s 2023 earnings has increased 4.7% in the past 60 days to $2.69 per share. BMI’s earnings beat the Zacks Consensus Estimate in the last four quarters, the average being 5.3%. Shares of BMI have surged 79.4% in the past year.
The Zacks Consensus Estimate for WTS’ 2023 earnings has increased 5.3% in the past 60 days to $7.19 per share. The long-term earnings growth rate is expected to be 8%.
WTS’ earnings beat the Zacks Consensus Estimate in the last four quarters, the average surprise being 16.3%. Shares of WTS have gained 29.3% in the past year.
The Zacks Consensus Estimate for Blackbaud’s 2023 earnings is pegged at $3.68 per share, up 7.3% in the past 60 days. The long-term earnings growth rate is anticipated to be 10.4%.
Blackbaud’s earnings beat the Zacks Consensus Estimate in the last four quarters, the average being 10.4%. Shares of BLKB have increased 37.2% in the past year.
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