Sonos (SONO) Q3 Earnings Fall Y/Y, 2023 Guidance Updated
Sonos, Inc SONO reported third-quarter fiscal 2023 non-GAAP earnings per share (EPS) of 16 cents compared with 19 cents in the prior-year quarter. On a GAAP basis, the company reported a loss of 18 cents against the breakeven reported in the year-ago quarter. The Zacks Consensus Estimate was pegged at breakeven.
Quarterly revenues increased 0.4% (up 0.3% on a constant-currency basis) year over year to $373.4 million due to strong consumer demand. However, the top line beat the Zacks Consensus Estimate by 9.6%.
Sonos, Inc. Price, Consensus and EPS Surprise
Sonos, Inc. price-consensus-eps-surprise-chart | Sonos, Inc. Quote
Revenues Details
Revenues from Sonos speakers were $289.7 million, down 7.8% from the prior-year quarter’s levels. The consensus estimate for the Sonos speakers segment is pegged at $276.9 million.
Sonos system products’ revenues were $64.2 million, up 67.4% year over year. The consensus estimate for the Sonos system products segment is pegged at $40.9 million. Revenues from Partner products and other totaled $19.3 million, up 0.9% year over year.
Region-wise, revenues from the Americas totaled $251.6 million, up 8.3% year over year. Europe, the Middle East and Africa generated revenues of $105.3 million, down 6.5%. Revenues from the Asia Pacific were down 38.4% to $16.4 million.
Other Details
Gross profit was $171.7 million, down 2.3% from the prior-year quarter’s levels. Gross margin contracted 130 bps year over year to 46%, mainly due to the lack of promotional activity in the prior-year quarter, partly offset by favorable product mix shift and fewer spot component purchases.
Total operating expenses amounted to $193 million, up from $168.9 million in the prior-year quarter, reflecting higher research and development and general and administrative expenses.
Operating loss was $21.2 million against the operating income of $6.9 million in the year-ago quarter. Adjusted EBITDA totaled $34.3 million compared with $42.1 million in the prior-year quarter. Lower gross margins and higher headcount mainly resulted in the downside.
Cash Flow & Liquidity
For the fiscal third quarter, Sonos generated $8.9 million of cash from operations. Free cash outflow was $7.8 million.
As of Jul 1, 2023, cash and cash equivalents were $268.3 million compared with $294.9 million as of Mar 31. SONO has no debt.
Sonos repurchased shares worth $15 million. The company has $54.9 million worth of shares remaining under its $100 million authorization.
2023 Guidance
For fiscal 2023, Sonos now expects revenues to be down 5-6% year over year and in the range of $1.64-$1.66 billion (earlier view: down 4-7% year over year and in the range of $1.625-$1.675 billion). On a constant-currency basis, revenues are anticipated to decline 3-4% (earlier view: decrease in the range of 2-5%).
The gross margin is now projected to be between 44% and 44.2%. Adjusted EBITDA is estimated to be between $148 million and $158 million, with the margin in the range of 9-9.5%.
Zacks Rank & Stocks to Consider
Sonos currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader technology space are Watts Water Technologies WTS, Badger Meter BMI and Woodward WWD. Each of these companies presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Watts Water’s 2023 EPS has increased 5.8% in the past 60 days to $7.61. The company’s long-term earnings growth rate is 8%.
Watts Water’s earnings beat estimates in all the trailing four quarters, delivering an average surprise of 12.5%. Shares of WTS have rallied 28.3% in the past year.
The Zacks Consensus Estimate for Badger Meter’s 2023 EPS has increased 6.3% in the past 60 days to $2.86.
Badger Meter’s earnings beat the Zacks Consensus Estimate in all the last four quarters, the average being 6.7%. Shares of BMI have surged 63.7% in the past year.
The Zacks Consensus Estimate for Woodward’s fiscal 2023 EPS has increased 12.6% in the past 60 days to $4.03.
WWD’s long-term earnings growth rate is 13.5%. Shares of WWD have gained 27.2% in the past year.
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