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DATE

Monday, May 4, 2026 at 4:30 p.m. ET

CALL PARTICIPANTS

  • Chief Executive Officer — Tom Conrad
  • Chief Financial Officer — Saori Casey
  • Head of Corporate Finance — James Baglanis
  • Chief Legal Officer — Eddie Lazarus

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TAKEAWAYS

  • Revenue -- $282 million, growing 8% year over year and reaching the top end of management's guidance range.
  • Geographic performance -- APAC and EMEA revenues grew by 25% and 21%, respectively, while Americas increased by 2% year over year.
  • Growth markets -- Delivered double-digit revenue gains, underpinning the global growth narrative.
  • Foreign exchange impact -- FX contributed 4 percentage points to year-over-year growth; on a constant currency basis, APAC grew 18%, EMEA 9%, Americas 1%.
  • Product performance -- AR10100 and ArcUltra drove continued demand, while Play and Era 100 SL made minimal revenue contribution in the quarter due to late launch timing.
  • GAAP gross profit -- $125 million, up 10% year over year; non-GAAP gross profit reached $130 million, a 6% increase.
  • Gross margin -- GAAP margin at 44.3%; non-GAAP at 46%; both pressured by roughly 200 basis points due to higher memory costs.
  • Operating expenses -- GAAP operating expenses decreased 11% to $150 million, primarily driven by prior restructuring; non-GAAP expenses were $137 million, mainly flat year over year.
  • Adjusted EBITDA -- Positive $2 million, up from negative $1 million last year, marking the first fiscal Q2 with positive adjusted EBITDA in four years.
  • Non-GAAP EPS -- Negative $0.02, an improvement from negative $0.18 the prior year.
  • Share repurchases -- $40 million used to buy back 2.5 million shares, reducing outstanding shares by 2.1%, and leaving $65 million on the current authorization.
  • Net cash -- Ended the quarter with $249 million in net cash, including $40 million in marketable securities.
  • Inventory -- Inventory balance increased 16% year over year to $161 million, due to new product launches and tariff costs, offset by component inventory reduction.
  • Free cash flow -- Negative $70 million in the quarter, reflecting normal fiscal Q2 seasonality.
  • Fiscal Q3 revenue guidance -- Projected range of $355 million to $375 million, implying 3%-9% year-over-year growth and 6% at the midpoint.
  • Fiscal Q3 gross margin guidance -- GAAP margin expected at 42%-44.5%; non-GAAP margin to be approximately 150 basis points higher.
  • Fiscal Q3 adjusted EBITDA guidance -- Forecasted in the $20 million to $48 million range, representing 5.6%-12.7% margin.
  • Guidance on gross margin headwinds -- Fiscal Q3 guidance reflects a 400 basis point year-over-year headwind from elevated memory costs and 200 basis points more pressure than fiscal Q2 due to lack of tariff refunds.
  • Operating expense guidance -- Fiscal Q3 GAAP operating expenses projected at $150 million-$160 million; non-GAAP operating expenses expected to be approximately $18 million lower.
  • Leadership update -- Frank Barbieri appointed Chief Operating Officer, overseeing partnerships, DTC, CRM, customer experience, revenue systems, and IT.
  • Installed base -- More than 53 million connected devices across 17 million homes; management cited $5 billion revenue potential from multi-product household expansion, and $7 billion from converting single product households.
  • AI integration -- AI is transforming internal operations and efficiency, with future product and business model integration referenced but not detailed.

RISKS

  • Saori Casey said, "memory cost inflation to rise from [fiscal] Q3, which is likely to pressure gross margin in [fiscal] Q4," and noted that 2026 gross margins will be "somewhat lower than 2025" due to sustained memory price headwinds.
  • Tom Conrad warned of "the headwind of higher memory costs that are putting downward pressure on our gross margin," noting that the transition to DDR5 and high bandwidth memory driven by AI and data center demand is "tightening supply" for the DDR4 chips used by Sonos.
  • Saori Casey stated, "[Fiscal] Q2 free cash flow was negative $70 million, consistent with typical [fiscal] Q2 seasonality," flagging ongoing negative free cash flow in fiscal Q2 periods.
  • Management does "not expect to receive any tariff refunds during [fiscal] Q3," removing a prior offset to cost headwinds.

SUMMARY

Sonos (SONO +0.20%) demonstrated renewed top-line and margin growth, highlighted by 8% revenue expansion, double-digit gross profit increase, and a return to positive adjusted EBITDA for the first time in four fiscal second quarters. The company achieved notable improvement in international markets, as APAC and EMEA drove outsized growth, while new cost controls and favorable FX offset some inflationary pressures. Inventory levels rose to support new product launches, and management underscored multiple levers for future revenue growth within the installed base and from new household acquisition. Guidance for the upcoming quarter signals continued revenue momentum but warns of intensified memory cost pressures and reduced margin offsets from tariffs, with management actively pursuing mitigation but projecting year-over-year margin declines.

  • Sonos Play and Aero 100 SL contributed minimally to fiscal Q2 revenue, as their launches occurred at quarter-end, with management positioning them as new accessible entry points to drive household penetration in future periods.
  • Management introduced Frank Barbieri as Chief Operating Officer, centralizing customer experience and operational accountability in support of Sonos's growth pillars and marketing initiatives.
  • Pending a potential U.S. tariff refund, management could realize up to $40 million in cost recapture, though such benefit is excluded from current second-half guidance due to uncertain timing.
  • Product innovation, disciplined cost structure, and focus on system-level customer value are key to management's articulated roadmap for "durable growth" despite macro and component headwinds.
  • CEO Tom Conrad indicated that wider AI-enabled consumer adjacencies represent a future market opportunity leveraging the company’s 17 million household installed base, but withheld further detail on commercialization or timing.

INDUSTRY GLOSSARY

  • DTC: Direct to Consumer; online or direct sales channels outside third-party retailers.
  • CRM: Customer Relationship Management; systems used to manage customer interactions and data.
  • IEEPA: International Emergency Economic Powers Act; U.S. statute under which certain import tariffs were assessed.
  • CAPE: Customs Advance Processing Entry; referenced as phase one of a process for refunding U.S. tariffs.
  • Adjusted EBITDA: Earnings before interest, taxes, depreciation, and amortization, adjusted for nonrecurring and noncash items as defined by Sonos.
  • AR10100: Sonos product model called out for strong performance; likely a wireless speaker or home theater product within the lineup.
  • ArcUltra: Sonos product referenced as performing well; part of the home theater speaker line.
  • Era 100 SL: A cost-optimized Sonos speaker model, positioned for value-sensitive and privacy-conscious customers.
  • DDR4 / DDR5: Generations of double data rate memory chips, with DDR5 representing higher performance and driving supply constraints for DDR4 components.

Full Conference Call Transcript

Operator: Thank you for standing by. My name is Angela, and I will be your conference operator today. At this time, I would like to welcome everyone to the Sonos, Inc. second quarter fiscal 2026 conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again. Thank you. I would now like to turn the call over to Mr. James Baglanis, head of corporate finance. You may begin.

James Baglanis: Good afternoon, and welcome to Sonos, Inc.'s second quarter fiscal 2026 earnings conference call. I am James Baglanis, and with me today are Sonos, Inc.'s CEO, Tom Conrad, CFO, Saori Casey, and chief legal officer, Eddie Lazarus. Before I hand it over to Tom, I would like to remind everyone that today's discussion will include forward-looking statements regarding future events and our future financial performance. These statements reflect our views as of today only and should not be considered as our views of any subsequent date. These statements are also subject to material risks and uncertainties that could cause actual results to differ materially from the expectations in the forward-looking statements.

A discussion of these risk factors is fully detailed under the caption Risk Factors in our filings with the SEC. During this call, we will also refer to certain non-GAAP financial measures. For information regarding our non-GAAP financials, and a reconciliation of GAAP to non-GAAP measures, please refer to today's press release regarding our second quarter fiscal 2026 results posted to the investor relations portion of our website, investors.sonos.com. After the call concludes, we will upload our revised supplemental earnings presentation, including our guidance, as well as the conference call transcript to the IR website. I will now turn the call over to Tom.

Tom Conrad: Good afternoon, everyone, and thanks for joining us. At the start of fiscal 2026, we said we expected to return Sonos, Inc. to growth this year. Through the first half, that is exactly what we have done. We delivered $282 million of revenue in Q2, up about 8% year over year and near the top end of our guidance range. Gross profit dollars grew double digits on a GAAP basis and adjusted EBITDA came in above the midpoint of our range. Saori will take you through the details in a moment. These are strong quarterly results; what matters more is the broader picture.

Across the first half and now looking into the second, we have changed the trajectory of the business. After a challenging period, Sonos, Inc. is beginning to grow again, and we are seeing our progress show up across the company. First half revenue was up 2% and adjusted EBITDA improved meaningfully year over year. At the center of that progress is a simple idea: The Sonos, Inc. system is the product. Each device we add and each improvement we make increases the value of the whole system, compounding over time as customers expand across rooms and use cases. That system-level value and the way it builds over time is what differentiates us in the category.

On our Q1 call, I outlined five dimensions we are focused on to drive durable growth: product innovation, customer advocacy, more intentional marketing, geo expansion, and tapping emerging demand trends. Together, these form the engine that drives both new household growth and expansion within our installed base. We are starting to see the results of that work in the business. The product pipeline is delivering, growth markets are performing well, and the system is more reliable than it has been in years. This is helping restore customer advocacy. Taken together, this has new customers entering and existing customers expanding into the system. I want to spend a moment on our newest product, Sonos Play.

It launched just as the quarter closed, so its contribution to Q2 was de minimis. But the early reviews tell us something important about where we are as a company. Gizmodo called it a comeback. The Wall Street Journal described it as the Goldilocks speaker. The Verge called it a great way into the Sonos, Inc. world. Bloomberg said, back on track. Reviewers around the world agree: crisp and beautiful sound, unmatched versatility, beautiful craftsmanship. In short, Sonos, Inc. doing what Sonos, Inc. does best. These glowing reviews were written independently across a host of markets and geographies as the launch embargo lifted.

This remarkable consistency reflects both the quality of the product and the clarity of the story around it. Over the past year, the product team has rebuilt the foundation and now Colleen and our marketing teams are sharpening how we show up as a system. And you can see that work landing here. If you step back, Play illustrates three of our five growth dimensions working in concert. First, product innovation. This is differentiated hardware and software designed not as a standalone object but as an entry point into the system and a reason to expand it. Second, marketing. The consistency of the global press narrative reflects a clearer and more coherent system story. And third, customer advocacy.

When reviewers start using words like comeback and back on track, that shift in tone is consistent with improving customer sentiment and the progress we have been making. Aero 100 SL, which launched alongside Play, nicely complements the work Play is doing for us. With a simplified design and a $189 price point, it lowers the barrier to entry for the Sonos, Inc. system. We have already seen that pricing changes on Era 100 have driven new customer growth over multiple quarters and Era 100 SL should build directly on that momentum. We have more than 53 million connected devices across more than 17 million homes.

As we have described before, the opportunity within that base is substantial; moving from roughly 4.5 devices per multiproduct household to 6 represents about $5 billion in incremental revenue before even considering new household growth. Converting single product households adds another $7 billion. We continue to see behaviors that underpin our model. Customers are entering through accessible products and expanding across rooms and use cases over time, and now we have two new ways to enter the Sonos, Inc. system and more reasons for existing customers to expand inside and outside their homes. Turning to our operations, I want to take a moment to introduce a meaningful addition to our leadership team.

Frank Barbieri is joining Sonos, Inc. as Chief Operating Officer. Frank brings over 25 years of experience building and scaling consumer businesses, most recently leading Walmart's omnichannel consumer content, media, and gaming operations across both stores and ecommerce—one of the largest entertainment portfolios in U.S. retail. I have known Frank for nearly 20 years, and his combination of commercial depth, operational discipline, and genuine passion for consumer products makes him exactly the right person to join our team. As COO, Frank will take responsibility for partnerships, direct consumer relationships across DTC, CRM, and customer experience, as well as revenue systems and IT.

This is a meaningful concentration of operational capability under an experienced leader, and I expect it to show up in how we execute against the growth agenda I have been describing. All in all, we are carrying real momentum into the second half. Play has launched to strong early reception. Aero 100 SL looks to be the right product for a moment when many potential customers are focused on value. We have AMP Multi coming this fall as a much-anticipated product for our professional installer channel. More broadly, our pipeline remains healthy across not just hardware, but also software, with a continued focus on deepening the system experience.

In our growth markets, which I noted as a fourth important lever for our business, we have now seen multiple consecutive quarters of strong performance. Sonos, Inc. Play's warm reception by international press reinforces the vast opportunity in front of us. We continue to see our expansion markets as important contributors to our growth that will pay off more and more for us over time. On our last earnings call, I suggested that we would grow more in the second half of the year than in the first. I am pleased to say that we performed somewhat better than expected in the first half, and my view that the second half will be stronger yet remains unchanged.

Amid this optimism, I want to highlight one challenge. Looking to the second half and beyond, we are managing the headwind of higher memory costs that are putting downward pressure on our gross margin. As you know, the semiconductor industry is in the middle of a transition from DDR4 to DDR5 and high bandwidth memory, driven by AI and data center demand. That is tightening supply for the DDR4 chips we use and increasing costs across consumer electronics. Our global operations team has been focused since early 2025 on securing sufficient supply to support our manufacturing demands. This means pursuing supply through multiple channels.

We are also leveraging our engineering expertise to optimize memory requirements across current and future designs, all without compromising product performance or customer experience. With regard to the effect of higher memory prices, we have a variety of levers to mitigate the impact. Our focus is on managing the headwind thoughtfully without losing sight of the larger opportunity to drive top-line growth alongside increased profitability. On the topic of tariffs, we will be filing for a refund of prior duties paid under IEEPA now that the U.S. Customs and Border Protection has launched phase one of CAPE.

While the timing is uncertain, the benefit could be as large as $40 million, which would be another meaningful offset to the higher memory costs. So while memory headwinds are real, we are managing them from a position of preparation and expertise. Let me close with this. We have moved through a phase of stabilization. What comes next is building durable growth. We are at an important point, and the signals are showing up across product, markets, and customer behavior. The product pipeline is active again. Growth markets are showing strong performance. The system is stronger, more reliable, and easier to understand.

Our progress on the dimensions we discussed today—new products, more effective marketing, geo expansion, and a return to customer advocacy—is beginning to deliver growth. But the opportunity to grow into emerging adjacencies is what I find most compelling. AI is already transforming how we operate internally, from the way we build software to how we execute marketing to how I run the company. The external opportunity is vast: 17 million households and 53 million connected devices, voice-enabled and present room by room. This is an installed base with significant value. And as more people look for experiences that do not depend on pulling out their phone, that value only grows.

We are building towards something larger here, and while I am not ready to lay out the full picture today, there is considerably more to this story, and I look forward to sharing it with you in time. With that, I will turn it over to Saori.

Saori Casey: Thank you, Tom. Hi, everyone. We closed out 2026 on a high note with revenue growth of 2% thanks to our strong Q2 results. This return to growth was accompanied by disciplined execution, with 7% and 6% growth in GAAP and non-GAAP gross profit dollars, respectively. GAAP operating expenses decreased by 16%, and non-GAAP operating expenses decreased by 10%. The combination of gross profit dollar growth and operating expense reduction resulted in adjusted EBITDA growing 48%, representing margin improvement of 510 basis points. Q2 results overall came in strong against our expectations, marking our seventh consecutive quarter of executing against our commitments.

Revenue grew 8% year over year to $282 million, near the high end of our guidance range, driven by APAC and EMEA growing 25% and 21%, respectively, while Americas grew 2% year over year. Our growth markets delivered double-digit growth, further validating our view that this will be a key driver of our growth in the years to come. Foreign exchange contributed 4 points to our year-over-year growth. On a constant currency basis, APAC grew 18%, EMEA grew 9%, and Americas grew 1%. On a product basis, we saw continued strength in the demand for AR10100, as well as strong performance of ArcUltra.

As a reminder, both Play and Era 100 SL had negligible contribution to Q2 revenue given the timing of their launch. GAAP gross profit of $125 million grew 10% year over year while non-GAAP gross profit of $130 million grew 6%. The growth was driven by higher revenue and FX favorability, partially offset by higher memory costs. GAAP gross margin was 44.3% and non-GAAP gross margin was 46%. Higher memory costs were approximately a 200 basis point headwind to gross margin, whereas tariffs, like last quarter, were offset by our mitigation.

Q2 GAAP operating expenses of $150 million decreased 11% year over year, primarily due to the significant restructuring costs associated with last year's reduction in force, while non-GAAP operating expenses of $137 million were mostly flat to prior year and a bit below the midpoint of our guidance range. Stock-based compensation was $14.9 million, down 36% year over year. Adjusted EBITDA was positive $2 million, above the midpoint of our guidance range, increasing $3 million from negative $1 million last year. This is an important milestone, as this was our first Q2 with positive adjusted EBITDA in the past four years. Non-GAAP earnings per share of negative $0.02 was up from negative $0.18 last year.

We spent $40 million on share repurchases in Q2 to buy back 2.5 million shares, reducing our share count by 2.1%, which leaves us with $65 million remaining on our current share repurchase authorization. Our balance sheet remains strong, as our net cash balance ended the quarter at $249 million, which includes $40 million of marketable securities. Our period-end inventory balance of $161 million was up 16% year over year, driven by new product launches and tariff costs, partially offset by workdown of component inventory. Inventory consists of $144 million of finished goods and $17 million of components. Q2 free cash flow was negative $70 million, consistent with typical Q2 seasonality.

CapEx was $5 million, down from $6 million last year. Turning to our guidance, the Q3 outlook we are providing today reflects the trends that we have observed quarter to date and are our best estimates. We expect Q3 revenue to be in the range of $355 million to $375 million, representing growth of 3% to 9% year over year, up 6% at the midpoint. Our guidance represents modest year-over-year acceleration from Q2 on a constant currency basis, as we expect FX to have a negligible contribution to growth in Q3. Please note that there will be no revenue contribution from AMP Multi in Q3, which is slated to launch in the fall.

We see continued momentum into Q4, delivering full-year growth consistent with what we have communicated over the past two quarters. We expect Q3 GAAP gross margin to be in the range of 42% to 44.5%, with non-GAAP gross margin approximately 150 basis points higher than GAAP. Both are roughly flat year over year at the midpoint. Our guidance implies mid-single-digit growth in gross profit dollars at the midpoint, in line with the revenue growth. Please note our gross margin guidance range embeds an approximately 400 basis point year-over-year headwind from higher memory costs in Q3. We also do not expect to receive any tariff refunds during Q3, roughly 200 basis points more headwind than Q2.

We are not guiding beyond Q3 at this time. But to provide some color, we currently expect memory cost inflation to rise from Q3, which is likely to pressure gross margin in Q4. As a result, we currently expect both GAAP and non-GAAP gross margin for 2026 to be somewhat lower than 2025, which was 43.5% on a GAAP basis and 44.9% on a non-GAAP basis. As Tom mentioned, we are actively working on a variety of mitigation actions to navigate this industry headwind. We are focused on managing this challenge thoughtfully and without losing sight of the larger opportunity to drive top-line growth and increase profitability.

While any tariff refunds received in the future would likely be a benefit to gross margin, that second-half commentary I just outlined does not incorporate any such benefit given uncertainty around timing. We expect Q3 GAAP operating expenses to be in the range of $150 million to $160 million. We expect non-GAAP operating expenses to be lower than GAAP by approximately $18 million, implying non-GAAP operating expenses stay roughly flat to Q2 at the midpoint. Looking beyond Q3, please note that our quarter-to-quarter results may vary in part due to timing of our product launches.

Bringing it all together, we expect Q3 adjusted EBITDA to be in the range of $20 million to $48 million, representing a margin of 5.6% to 12.7%. Our performance in the first half proves that we have built momentum. This was our third consecutive semiannual period of revenue growth improvement, and we expect to sustain this momentum into the second half of this year, making fiscal 2026 the year that Sonos, Inc. returned to top-line growth. Looking beyond fiscal 2026, our focus remains on delivering durable top-line growth, while balancing continued profitability improvements and disciplined reinvestment.

To that end, through the adoption of AI, we are starting to see significant improvements in our team's productivity across a variety of functions, including software engineering, IT, accounting, customer support, and many more. We believe we are just beginning to scratch the surface of harnessing the potential of AI to continue to improve our efficiency and accelerate our business. After the call, we will update our earnings slides to reflect our Q3 guidance and the second-half commentary. With that, I would like to turn the call over for questions.

Operator: We will now open the call for questions. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. If you are called upon to ask your question and are listening by a loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Your first question comes from the line of Steve Frankel with Wilson Black. Your line is now open.

Steve Frankel: Good afternoon, and thank you. Tom, I know you are reticent to talk about this AI monetization strategy, but maybe just at a high level, give us some thoughts on is this a plot to try to create a recurring revenue business or is this a bounty-led, advertising-driven business like Roku started with? How should we think about monetization from AI services for third parties?

Tom Conrad: Hi, Steve. Thank you for joining the call. You know, just to frame this out at the highest level, as I said on the call, there are sort of two different pieces of how AI is intersecting the business, of course. It is just profoundly transforming how we operate inside the company—how we build software, how we market, how I personally run the business. But Sonos, Inc. is really, I think, uniquely positioned with respect to how we can integrate AI technology into consumers' lives. A lot of other companies are asking how do we move AI off of phones and computers, bringing these experiences into people's lives in new and seamless ways.

And at Sonos, Inc., we already have that path: 17 million households, 53 million connected devices that are voice-enabled, present as you navigate through your life room by room. That is really a head start that nobody else can buy. And as much as I would like to get into the specifics of the product roadmap and the business models that will underpin our expansion into those adjacencies, I think it is premature to get into those details today.

Steve Frankel: Okay. No. I cannot blame you for trying. So on the memory issue, clearly understand the rising cost pressure. But where are you in ensuring that you have adequate supply given the new product ramp in the back half of the year? Are you comfortable that you have enough product at your disposal?

Tom Conrad: Yes. We are feeling really good about supply. Our global operations team started doing the hard work of securing sufficient supply through multiple channels going back as early as the beginning of 2025. And so, as you see us guiding to 6% growth at the midpoint for Q3, we are obviously confident that we are going to have sufficient supply to meet the growing demand for Sonos, Inc.'s products. So while these macro headwinds that get thrown at you are always an interesting challenge, I really do feel like we are operating from a place of both preparation and strength.

James Baglanis: Okay.

Steve Frankel: And then lastly, congratulations on the 100 SL. Do you see this as an attempt to get to an even lower price point to grow the installed base, or is this a device without a voice agent? Is that something that either appeals to a different class of customers or makes sense in a multiunit house where you do not need every Sonos, Inc. product to have a voice agent inside of it? What is the theory there?

Tom Conrad: Yes. I mean, Aero 100 SL is a really exciting product, I think, because it is so well matched to the moment when consumers are really shopping for value while at the same time Sonos, Inc. is looking to accelerate the acquisition of new households. And so having a product that, at its MSRP, can sell at only $189, I think, is just a really great addition to the line. I think the thing to note about what we have done with Aero 100 SL is that this is a sort of no-compromises, cost-optimized product from top to bottom. So not just removing the microphones and the speech capabilities.

We have done all kinds of interesting work to bring our cost down on this product. Just to give you an example, most of our products are painted, and on Aero 100 SL we have been able to use color injection molding so we do not have the extra expense of paint, with no noticeable change to the product's fit and finish. The global operations team at Sonos, Inc. continues to do an incredible job of finding ways to deliver the same premium experience we have at lower and lower price points. And you certainly touched on all of the dimensions that are at play when you think about a product without microphones.

Of course, there are consumers who prefer to not have microphones as part of the offering. Of course, there are customers who are highly price sensitive who prefer to save the money. And there are rooms and use cases—from surround satellites to secondary rooms in the home—where you might not want to have a microphone. So, really exciting product for us. It is kind of the quiet sibling to Sonos Play, which has received such glowing reviews from the press, but we are really excited about what it will do in terms of our strategy to bring Sonos, Inc. to more and more households.

Steve Frankel: Great. Thank you. I will jump back into the queue.

Operator: Your next question comes from the line of Eric Woodring with Morgan Stanley.

Analyst: Hi. This is Ralph Earl on behalf of Eric. Good evening, and thank you very much for taking my question. Could you just walk us through some of the scenarios or the moving parts that get you to the high end and the low end of your Q3 gross margin guidance range? And then I will just have one follow-up after that. Thank you.

Saori Casey: Yes. Thank you for your question. We can walk through the Q3 guidance. We guided to 42% to 44.5%, a range comprised of, certainly, the memory cost headwind. Let me start sequentially. Sequentially, we have the memory headwind that we talked about—an additional 200 basis points—on top of the 200 basis points that we experienced in Q2. Offsetting that, we do grow our revenues sequentially, so we have leverage that is going in our favor. And then, on a sequential basis, we will have tariffs at the new lower rate of 10%, so tariffs will also be a tailwind for us, helping offset some of the memory impact.

Then there are other moving parts, as you say, of mix of our products and the timing at which we sell our products and at what promotion during the course of the quarter, and those are some moving parts that will get us to different parts of the range we just gave out. On a year-over-year basis, memory is a 400 basis point headwind versus last year. And then we have tariffs that we were experiencing, but due to the mitigation actions that we had taken, we will end up being net slightly positive, given the reduction to the tariff rate.

Then our ongoing cost-saving efforts, as well as leverage, will be a partial offset to this 400 basis points of memory headwind that we are experiencing.

Analyst: Okay. Great. Thank you for that. And my second question here would be, I know you target consumers interested in your premium experiences among other categories, so I was just wondering if you could share with us whether you are seeing any changes in demand, particularly considering ongoing geopolitical conflicts today that might have impacts on how consumers are thinking about where they are putting their dollars? Thank you.

Tom Conrad: I would just say that we are really excited about the demand picture for Sonos, Inc. in the market. Certainly that is what is driving our growth as we go into the second half. We are also really proud of the way that we have expanded the portfolio to take advantage of the value-conscious customer with launches like Aero 100 SL and even Sonos Play, which has such a flexible set of use cases that it can solve for. You just get a tremendous amount of value in that product as a single product. So obviously, we continue to keep an eye on the macro, but I am feeling good about where demand is for Sonos, Inc.

Analyst: Great. Thank you so much. Really helpful.

Operator: Your next question comes from the line of Brent Thill with Jefferies. Your line is now open.

Brent Thill: Thanks. Tom, just on the “second half gets stronger” thesis, maybe if you can underscore what you are most excited about—what are the stepping stones for that continued improvement?

Tom Conrad: Well, we are certainly excited to have Sonos Play and Aero 100 SL in the market. And I think we are really starting to see the growth dimensions that I have been talking about on the call start to stack together. So, product innovation through our new product offerings, more intentional marketing telling the system story of Sonos, Inc., thanks to the great work that our new CMO, Colleen DeCourcy, is doing. We are many quarters into strong performance for our geo expansion investments. And then finally, we are, I think, starting to see the tailwind of a return of customer advocacy after a period of repair and stabilization.

The best way to see that externally is the way the press is talking about our new generation of products—really talking about it being a kind of comeback moment for Sonos, Inc.

Brent Thill: And I know you have made some changes in the marketing group. I am curious—maybe it is too early to see so far from our side—but what steps, in terms of the improvement in awareness build, are you starting to take, or are you hearing that is starting to resonate even stronger now?

Tom Conrad: Yes. So, Colleen has been with us for about six months now, and she is putting together a marketing organization that is really aligned with our system strategy, and building the muscle of being able to tell a full-funnel brand story—from base awareness through consideration and purchase—and it is just really exciting to see her both build that team and the early work that is coming from that momentum.

Brent Thill: Thanks.

Operator: Star 1 on your telephone keypad. Thank you. There are no further questions. Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.