Earnings

Sonos earnings: Sales down, but speaker use surging

Sonos earnings: Sales down, but speaker use surging
  • Fiscal Q2 revenue: $175M (-17% YoY, -69% QoQ, vs. $208M expected)
  • Q2 loss: $52.3M (Up 129% YoY from $22.8M Q2 2019)
  • Q3 guidance: Sonos withdrew its FY 2020 guidance, and has historically not offered quarterly guidance.

The big number: The smart speaker maker's sales tanked during the quarter as retailers closed stores across the globe, with revenue declining 23% in March alone. The company's business stabilized in April, only trailing April 2019 revenues by 5%.

People are talking: "It's a very volatile time," Sonos CEO Patrick Spence told Protocol on Wednesday. "I don't think anybody really knows what the next few months hold." Spence said his company has been looking for ways to weather the storm, including by reducing costs through a freeze on new hires and raises. However, Spence also said the company may spend more on marketing in the coming months to position itself as a solution for people staying at home. "The world just changed," he said. "That means our marketing does need to change."

Opportunities: Sonos introduced three new products Wednesday, including a redesigned sound bar that should reinvigorate demand. What's more, stay-at-home orders have yielded a massive surge in use of existing Sonos products. Listening hours in March were up 32% year-over-year, and increased an estimated 48% year-over-year in April. That's good news for the company's nascent services business; Sonos launched its first ad-supported streaming service in April.

Threats: It's been a challenging couple of years for the consumer electronics industry as a whole. In 2018, component shortages slowed manufacturing. Last year, the threat of tariffs kept the industry on edge. Now, COVID-19 provides the latest hit. "There's always something," Spence said. "The companies that can adjust and then persevere through this, I think it just makes you stronger as you think about the future."

The power struggle: One of the big industry transformations affecting Sonos is the shift from traditional retail to ecommerce, and COVID-19 seems to be accelerating this. The company's web sales were up 400% year-over-year in April as retail closed its doors. That momentum changes how Sonos is thinking about sales in general. In the past, many assumed that consumers would want to listen to a $500 speaker before opening up their pocketbooks. "That's questionable," Spence said. "We've seen that acceleration of people being confident in their ecommerce purchases."

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