Sonos (SONO +1.31%) came through with blowout financial results in Wednesday afternoon's fiscal first quarter's report, but the pending retirement of its CFO and uninspiring guidance are weighing on any potential rally. The maker of high-end wireless speaker systems can't seem to catch a break in its first year as a public company.
The recent debutante seemed to piece together a healthy quarter with revenue and earnings exceeding its own and Wall Street's expectations. Sonos came through with record top-line results, as well as scoring its most profitable quarter in company history. However, simply reiterating its full-year guidance after blowing through its goals for the first quarter suggests weakening momentum. Announcing that CFO Mike Giannetto will be retiring later this year also isn't going to go over well for a company that's only been trading since August.
Check out the latest Sonos earnings call transcript.
Image source: Sonos.
Sounding off
Revenue rose 6% to $496.4 million in Sonos' fiscal first quarter. Strength in its home theater speakers -- lifted higher by heady growth with its subwoofer and soundbase accessories -- were more than enough to offset a decline in its legacy wireless speaker systems.
The news gets even better on the bottom line, as better-than-expected widening of margins resulted in adjusted EBITDA rising 34% to $87.4 million and net income soaring 35% to $61.7 million or $0.55 a share. It's a record showing for Sonos in the seasonally potent holiday quarter.
Sonos landed just ahead of the $485 million to $495 million in revenue that it was targeting back in November, and it blew threw its goal of a modest 1% to 6% in adjusted EBITDA growth. It's sticking with its outlook for all of fiscal 2019 -- eyeing increases of 10% to 12% on the top line and 20% in 27% in adjusted EBITDA -- but that's not good news. Sonos edging out its fiscal first-quarter goalposts while keeping its full-year forecast the same is being rightfully interpreted as a weakening outlook for the balance of fiscal 2019, and there's the rub.
Sell-through velocity began to slow down near the end of the fiscal first quarter, and that means that retailers are stuck with more channel inventory than Sonos was hoping for heading into the fiscal second quarter. The production schedule for Symfonisk -- the first line of smart speakers being rolled out with its partnership with IKEA -- being bumped from the second to the third fiscal quarter is also weighing on its near-term prospects.
Sonos also points out that adoption through Europe for its voice-activated smart speakers is off to slow start. Europeans are largely flocking to the cheaper products being put out by tech giants that are willing to subsidize gadgetry for the sake of embrace market share. Sonos points out that the same thing happened in the U.S., with customers eventually trading up its products -- but it's just one more speck of doubt in this surprising gray cloud after a blowout quarter.
Sonos continues to trade below last summer's IPO price of $15. This week's dicey outlook and the retirement of its chief bean counter will keep it a broken IPO. A strong quarter needs boosted guidance to complete the spike after the volleyball set and Sonos whiffed. It will need to complete the play if it wants to woo investors next time out.
