SONO stock soared more than 20% after the company reported substantial beats on its quarterly financials.

Sonos reported Q4 adjusted EPS of 33c versus the consensus estimate of zero cents. The company reported Q4 revenue of $339.84M versus the consensus estimate of $298.77M.

Fourth Quarter 2020 Financial Highlights (unaudited)

  • GAAP net income increased to $18.4 million from ($29.6) million last year; non-GAAP net income excluding stock-based compensation, restructuring and legal and transaction related fees increased to $40.7 million from ($16.6) million last year
  • GAAP diluted earnings per share (EPS) increased to $0.15 from ($0.28) last year; non-GAAP diluted earnings per share (EPS) excluding stock-based compensation, restructuring, and legal and transaction related fees increased to $0.33 from ($0.15) last year
  • Adjusted EBITDA increased to $46.4 million from ($2.8) million last year; excluding the effect of tariffs, adjusted EBITDA increased to $48.9 million
  • Adjusted EBITDA margin increased to 13.7% from (0.9%) last year; excluding the effect of tariffs, adjusted EBITDA margin increased to 14.4%
  • Gross margin increased 530 basis points to 47.5%; excluding the effect of tariffs, gross margin increased 560 basis points to 48.3%
  • Revenue increased 16% year-over-year to $339.8 million; excluding the impact of the 14th week, revenue increased approximately 7% year-over-year
  • Direct-to-consumer revenue increased 67% year-over-year

Fiscal 2020 Financial Highlights (unaudited)

  • GAAP net loss increased to ($20.1) million from ($4.8) million last year; non-GAAP net income excluding stock-based compensation, restructuring, and legal and transaction related fees increased to $79.2 million from $41.8 million last year
  • GAAP diluted loss per share increased to ($0.18) from ($0.05) last year; non-GAAP diluted earnings per share (EPS) excluding stock-based compensation, restructuring, and legal and transaction related fees increased to $0.67 from $0.37 last year
  • Adjusted EBITDA increased 22% to a record $108.5 million; excluding the effect of tariffs, adjusted EBITDA increased 56% to $140.9 million
  • Adjusted EBITDA margin increased 120 basis points to record 8.2%; excluding the effect of tariffs, adjusted EBITDA margin increased 350 basis points to 10.6%
  • Gross margin increased 130 basis points to 43.1%; excluding the effect of tariffs, gross margin increased 370 basis points to a record of 45.6%
  • Revenue increased 5% to $1.326 billion; excluding the impact of the 53rd week in fiscal 2020, revenue increased approximately 3%
  • Direct-to-consumer revenue increased 84% and represented a record 21% of total revenue compared to 12% last year
  • Cash flows from operating activities of $162.0 million compared to $120.6 million last year
  • Free cash flow of $129.0 million compared to $97.4 million last year

Sonos CEO Patrick Spence commented, “We reached an inflection point in the fourth quarter that demonstrates the power and profitability of our model. As our customers recognize, Sonos products operate seamlessly together, with more products improving the experience. That’s why year in and year out, our existing customers add more products to their systems – every new household that we gain starts that cycle anew. Fiscal 2020 was the 15th year in a row we grew total households by at least 20%, while our existing customers once again showed strong repurchase habits, accounting for a record 41% of total product registrations. We deliver a consistent cadence of new, innovative products and services, and we have only started the process of realizing the lifetime value of our customers, both old and new.”

“In fiscal 2020, we delivered a record 8.2% adjusted EBITDA margin, or 10.6% excluding the effect of tariffs, and we project delivering 12% to 14% adjusted EBITDA margins next year, which is ahead of our prior targets,” continued Mr. Spence.

Mr. Spence concluded, “As we look ahead, we are focused on delivering innovative new products and services that customers love, strengthening our direct-to-consumer efforts, and supporting our incredible partnerships. We believe we are well positioned to deliver strong profit margins, cash flow, revenue growth and increased shareholder value over the long-term.”

Fiscal 2020 Company Highlights

  • Launched three new products including Arc, our premium smart soundbar replacing Playbar; Five, our most powerful speaker and replacing Play:5; and Sub (Gen 3), featuring the same iconic design and bold bass as its predecessor
  • Launched Sonos S2, a powerful new app and operating system
  • Announced multifaceted innovative marketing campaign with Disney, celebrating the widely anticipated premiere of the second season of “The Mandalorian”
  • Introduced Sonos Radio, a free, ad-supported radio service available in the Sonos app
  • Total households increased 20% to 10.9 million in fiscal 2020 on top of 22% growth last year
  • Existing households accounted for 41% of new product registrations in fiscal 2020 up from 37% last year
  • Added record 1.8 million net new households in fiscal 2020
  • Average number of registered products per household at 2.9 in fiscal 2020
  • Listening hours increased 33% in fiscal 2020 compared to 29% growth last year

Sonos, Inc. (Nasdaq: SONO) today announced that its Board of Directors has authorized a common stock repurchase program of up to $50 million.

Sonos completed its previous $50 million share repurchase program during the fourth quarter of fiscal 2020 pursuant to which it purchased 3.8 million shares.

Patrick Spence, Sonos CEO, commented, “This new authorization underscores the fact we’ve hit an inflection point in our business and demonstrates our commitment to delivering long-term shareholder value. We are confident in the earnings power of our model and our belief in the significant value creation opportunities that lie ahead.”

Under the repurchase program, Sonos may purchase shares of common stock on a discretionary basis from time to time through open market repurchases, privately negotiated transactions or other means, including through Rule 10b5-1 trading plans or through the use of other techniques such as accelerated share repurchases. The timing and number of shares repurchased will depend on a variety of factors, including stock price, trading volume, and general business and market conditions. The repurchase program has no time limit, does not obligate Sonos to acquire a specified number of shares and may be modified, suspended or discontinued at any time at the company’s discretion.

Repurchases under this program will be funded from the company’s existing cash and cash equivalents or future cash flow.

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