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A month has gone by since the last earnings report for Sonos (SONO). Shares have added about 0.9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Sonos due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Sonos Beats on Q3 Earnings, Raises Fiscal 2021 Outlook
Sonos reported solid third-quarter fiscal 2021 results, wherein both the bottom line and the top line beat the Zacks Consensus Estimate.
The sound experience company remains focused on its three strategic initiatives — the expansion of its brand, the expansion of its offerings and driving operational excellence.
On a GAAP basis, quarterly net income was $17.8 million or 12 cents per share against a net loss of $57 million or loss of 52 cents per share in the prior-year quarter. The significant improvement primarily resulted from an operating income and higher other income.
Non-GAAP net income was $38.7 million or 27 cents per share against a net loss of $11.6 million or loss of 11 cents per share in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate by 44 cents, delivering a surprise of 258.8%.
Quarterly revenues increased 51.9% year over year to $378.7 million, driven by robust demand for its products. The top line surpassed the consensus estimate of $320 million.
By product category, revenues for Sonos speakers were $310.2 million compared with $196.9 million in the prior-year quarter. Sonos system products revenues were $47.6 million, up 12.9%, and the same from partner products and other revenues totaled $20.8 million compared with $10.3 million a year ago.
Region wise, revenues from the Americas came in at $223.7 million compared with $151.2 million a year ago. Revenues from Europe, Middle East and Africa were $126.2 million, up from $83.8 million and the same from Asia Pacific grew 100.5% to $28.7 million.
Gross profit was $177.9 million compared with $109.8 million in the prior-year quarter with the respective margins of 47% and 44%. Total operating expenses were $161.1 million, down from $166.7 million, reflecting lower research and development as well as sales and marketing expenses.
Operating income was $16.7 million against an operating loss of $56.9 million in the year-ago quarter. Adjusted EBITDA totaled $46.7 million against a negative $2.7 million a year ago, with the respective margins of 12.3% and -1.1%.
Cash Flow & Liquidity
During the first nine months of fiscal 2021, Sonos generated $246.7 million of cash from operations compared with $83.2 million in the prior-year period. Free cash flow increased 298% to $211.9 million.
As of Jul 3, 2021, the company had $670.9 million in cash and cash equivalents with zero long-term debt.
Fiscal 2021 Outlook Raised
Thanks to the stellar performance, Sonos has raised the outlook for fiscal 2021. It now expects revenues to grow at 28-29% year over year to be in the band of $1.695 billion and $1.710 billion compared with the prior guidance of $1.625-$1.675 billion.
Adjusted EBITDA is estimated to be between $270 million and $280 million with the margin increased to a range of 15.9-16.4%. This compares with the prior outlook of $225-$250 million with the margin ranging from 13.8% to 14.9%. Gross margin is projected to be between 46.5% and 46.9%, increased from the prior guidance of 46-46.5%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -29.52% due to these changes.
Currently, Sonos has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. However, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Sonos has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
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