Key Points
- Revenue rose 6.4% year over year to $397.1 million.
- GAAP gross margin rose 270 basis points to 48.3%.
- Guidance was revised down due to issues with the new app rollout.
Audio products specialist Sonos (SONO -2.61%) released fiscal 2024 third-quarter earnings on Wednesday that showed growth on several metrics but also included troubling guidance revisions for the full year.
| Metric | Q3 2024 | Q3 2023 | Change (YOY) |
|---|---|---|---|
| Revenue | $397.1 million | $373.4 million | 6.4% |
| Gross margin (GAAP) | 48.3% | 45.6% | 270 bps |
| Adjusted EBITDA | $48.9 million | $34.3 million | 42.6% |
| Adjusted net income | $29.5 million | $21.3 million | 38.5% |
| Adjusted EPS | $0.23 | $0.16 | 44% |
Source: Sonos. YOY = Year over year. GAAP = Generally accepted accounting principles. EBITDA = earnings before interest, taxes, depreciation, and amortization.
Understanding Sonos
Sonos is a leading manufacturer specializing in high-quality smart audio systems, including speakers and home theater products. A notable highlight for this quarter was the launch of the Ace headphones, which marked the company's debut in the headphone market and contributed positively to revenue growth.
operates within the premium audio market, heavily emphasizing continuous product innovation and enhancing customer retention. Key success factors include strong direct-to-consumer sales, international market penetration, and a committed approach to research and development.
Quarterly Highlights
During the quarter, Sonos reported some notable advancements and one big challenge:
Revenue growth: Powered by the launch of the Ace headphones, quarterly revenue increased to $397.1 million, up 6.4% year over year.
Gross margin improves: The company achieved a of 48.3%, exceeding management expectations and reflecting improved product mix and operational efficiencies.
Adjusted EBITDA jumps: Sonos reported $48.9 million in adjusted EBITDA, up nearly 43% from 2023's Q3.
App rollout issues: The newly launched app faced technical difficulties, negatively impacting the customer experience. CEO Patrick Spence said the company is working to quickly resolve the issues raised.
Geographic performance: All three regions posted year-over-year growth. Revenue by geographical region:
- Americas: $264.6 million, up 5.2% year over year.
- Europe, Middle East and Africa: $110.9 million, up 5.3% year over year.
- Asia Pacific: $21.6M, up 31.7% year over year.
Looking Ahead
Issues with the new app rollout adversely affected customer experience and led management to revise full-year year guidance. Sonos adjusted its fiscal 2024 guidance down, although specific updated figures were not disclosed. The management's focus is on correcting technical issues promptly to preserve customer trust and maintain brand loyalty.
Investors should watch to see if Sonos enacts effective and swift action plans to improve customer satisfaction and retention. Investors should also note whether continued innovation sustains growth, especially in new product categories like headphones. Improving performance in regions outside the Americas will be vital for diversified and sustained revenue growth.
