10-Q 1 sono-20220702.htm 10-Q 10-Q
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Table of contents

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 2, 2022

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

 

Commission File Number: 001-38603

 

SONOS, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

03-0479476

 

(State or other jurisdiction

of incorporation or organization)

 

(I.R.S. Employer Identification No.)

 

614 Chapala Street

Santa Barbara

CA

93101

(Address of Principal Executive Offices)

 

 

(Zip Code)

 

(805) 965-3001

Registrant's telephone number, including area code

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.001 par value

SONO

The Nasdaq Stock Market LLC

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

 

 

Emerging growth company

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

 

As of July 30, 2022, the registrant had 127,252,324 shares of common stock outstanding.

 

 

 


Table of contents

TABLE OF CONTENTS

 

 

Page

PART I. FINANCIAL INFORMATION

 

Item 1.

Financial Statements (unaudited)

 

 

Condensed consolidated balance sheets

3

 

Condensed consolidated statements of operations and comprehensive income (loss)

4

 

Condensed consolidated statements of stockholders' equity

5

 

Condensed consolidated statements of cash flows

7

 

Notes to condensed consolidated financial statements

8

Item 2.

Management’s discussion and analysis of financial condition and results of operations

23

Item 3.

Quantitative and qualitative disclosures about market risk

38

Item 4.

Controls and procedures

39

 

 

 

PART II. OTHER INFORMATION

 

Item 1.

Legal proceedings

40

Item 1A.

Risk factors

40

Item 2.

Unregistered sales of equity securities and use of proceeds

56

Item 3.

Defaults upon senior securities

56

Item 4.

Mine safety disclosures

56

Item 5.

Other information

56

Item 6.

Exhibit index

57

SIGNATURES

58

 

 

 


Table of contents

PART I. FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

SONOS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited, in thousands, except par values)

 

 

 

As of

 

 

 

July 2,
2022

 

 

October 2,
2021

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

     Cash and cash equivalents

 

$

439,726

 

 

$

640,101

 

     Accounts receivable, net of allowances

 

 

124,884

 

 

 

100,779

 

     Inventories

 

 

335,730

 

 

 

185,130

 

     Prepaids and other current assets

 

 

23,124

 

 

 

31,504

 

          Total current assets

 

 

923,464

 

 

 

957,514

 

Property and equipment, net

 

 

75,862

 

 

 

71,341

 

Operating lease right-of-use assets

 

 

28,093

 

 

 

33,841

 

Goodwill

 

 

79,824

 

 

 

15,545

 

Intangible assets, net

 

 

96,936

 

 

 

24,450

 

Deferred tax assets

 

 

1,804

 

 

 

10,028

 

Other noncurrent assets

 

 

37,247

 

 

 

26,085

 

          Total assets

 

$

1,243,230

 

 

$

1,138,804

 

 

 

 

 

 

 

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

     Accounts payable

 

$

308,032

 

 

$

214,996

 

     Accrued expenses

 

 

107,993

 

 

 

108,029

 

     Accrued compensation

 

 

27,250

 

 

 

77,695

 

     Deferred revenue, current

 

 

18,334

 

 

 

35,866

 

     Other current liabilities

 

 

43,611

 

 

 

39,544

 

          Total current liabilities

 

 

505,220

 

 

 

476,130

 

Operating lease liabilities, noncurrent

 

 

26,118

 

 

 

33,960

 

Deferred revenue, noncurrent

 

 

57,487

 

 

 

53,632

 

Deferred tax liabilities

 

 

10,789

 

 

 

2,394

 

Other noncurrent liabilities

 

 

880

 

 

 

3,646

 

          Total liabilities

 

 

600,494

 

 

 

569,762

 

 

 

 

 

 

 

 

Commitments and contingencies (Note 7)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

     Common stock, $0.001 par value

 

 

131

 

 

 

129

 

        Treasury stock

 

 

(65,050

)

 

 

(50,276

)

        Additional paid-in capital

 

 

649,449

 

 

 

690,462

 

        Retained earnings (accumulated deficit)

 

 

61,553

 

 

 

(69,897

)

        Accumulated other comprehensive loss

 

 

(3,347

)

 

 

(1,376

)

          Total stockholders’ equity

 

 

642,736

 

 

 

569,042

 

          Total liabilities and stockholders’ equity

 

$

1,243,230

 

 

$

1,138,804

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

3


Table of contents

SONOS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(unaudited, in thousands, except share and per share amounts)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

July 2,
2022

 

 

July 3,
2021

 

 

July 2,
2022

 

 

July 3,
2021

 

Revenue

 

$

371,783

 

 

$

378,672

 

 

$

1,436,046

 

 

$

1,357,204

 

Cost of revenue

 

 

195,935

 

 

 

200,811

 

 

 

763,779

 

 

 

714,142

 

               Gross profit

 

 

175,848

 

 

 

177,861

 

 

 

672,267

 

 

 

643,062

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

          Research and development

 

 

62,522

 

 

 

55,578

 

 

 

188,798

 

 

 

164,294

 

          Sales and marketing

 

 

63,993

 

 

 

67,231

 

 

 

207,684

 

 

 

198,888

 

          General and administrative

 

 

42,373

 

 

 

38,323

 

 

 

126,189

 

 

 

113,372

 

               Total operating expenses

 

 

168,888

 

 

 

161,132

 

 

 

522,671

 

 

 

476,554

 

Operating income

 

 

6,960

 

 

 

16,729

 

 

 

149,596

 

 

 

166,508

 

Other income (expense), net

 

 

 

 

 

 

 

 

 

 

 

 

          Interest income

 

 

429

 

 

 

34

 

 

 

585

 

 

 

114

 

          Interest expense

 

 

(196

)

 

 

(77

)

 

 

(384

)

 

 

(525

)

          Other income (expense), net

 

 

(9,858

)

 

 

1,998

 

 

 

(13,541

)

 

 

4,678

 

               Total other income (expense), net

 

 

(9,625

)

 

 

1,955

 

 

 

(13,340

)

 

 

4,267

 

Income (loss) before provision for (benefit from) income taxes

 

 

(2,665

)

 

 

18,684

 

 

 

136,256

 

 

 

170,775

 

Provision for (benefit from) income taxes

 

 

(2,068

)

 

 

858

 

 

 

4,805

 

 

 

3,436

 

Net income (loss)

 

$

(597

)

 

$

17,826

 

 

$

131,451

 

 

$

167,339

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to common stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

          Basic and diluted

 

$

(597

)

 

$

17,826

 

 

$

131,451

 

 

$

167,339

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per share attributable to common stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

          Basic

 

$

0.00

 

 

$

0.14

 

 

$

1.03

 

 

$

1.38

 

          Diluted

 

$

0.00

 

 

$

0.12

 

 

$

0.94

 

 

$

1.20

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average shares used in computing net income (loss) per share attributable to common stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

          Basic

 

 

127,884,400

 

 

 

125,138,279

 

 

 

127,886,487

 

 

 

120,876,472

 

          Diluted

 

 

127,884,400

 

 

 

144,181,632

 

 

 

139,502,527

 

 

 

139,293,775

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

 

(597

)

 

 

17,826

 

 

 

131,451

 

 

 

167,339

 

Change in foreign currency translation adjustment

 

 

(1,711

)

 

 

(784

)

 

 

(1,971

)

 

 

262

 

               Comprehensive income (loss)

 

$

(2,308

)

 

$

17,042

 

 

$

129,480

 

 

$

167,601

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

4


Table of contents

SONOS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(unaudited, in thousands, except share amounts)

 

 

 

Common Stock

 

 

 

 

 

Treasury Stock

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Additional Paid-In Capital

 

 

Shares

 

 

Amount

 

 

Accumulated
Deficit

 

 

Accumulated Other Comprehensive Loss

 

 

Total Stockholders’ Equity

 

Balance at October 2, 2021

 

 

128,857,085

 

 

$

129

 

 

$

690,462

 

 

 

(1,871,812

)

 

$

(50,276

)

 

$

(69,897

)

 

$

(1,376

)

 

$

569,042

 

Issuance of common stock pursuant to equity incentive plans

 

 

2,030,373

 

 

 

2

 

 

 

13,230

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13,232

 

Retirement of treasury stock

 

 

(1,010,286

)

 

 

(1

)

 

 

(38,647

)

 

 

1,010,286

 

 

 

38,648

 

 

 

 

 

 

 

 

 

 

Repurchase of common stock

 

 

 

 

 

 

 

 

 

 

 

(1,032,249

)

 

 

(31,365

)

 

 

 

 

 

 

 

 

(31,365

)

Repurchase of common stock related to shares withheld for tax in connection with vesting of restricted stock unit awards ("RSUs")

 

 

 

 

 

 

 

 

 

 

 

(344,198

)

 

 

(11,882

)

 

 

 

 

 

 

 

 

(11,882

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

17,459

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

17,459

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

123,481

 

 

 

 

 

 

123,481

 

Change in foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(360

)

 

 

(360

)

Balance at January 1, 2022

 

 

129,877,172

 

 

$

130

 

 

$

682,504

 

 

 

(2,237,973

)

 

$

(54,875

)

 

$

53,584

 

 

$

(1,736

)

 

$

679,607

 

Issuance of common stock pursuant to equity incentive plans

 

 

2,500,969

 

 

 

2

 

 

 

16,019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

16,021

 

Retirement of treasury stock

 

 

(2,418,184

)

 

 

(2

)

 

 

(71,877

)

 

 

2,418,184

 

 

 

71,879

 

 

 

 

 

 

 

 

 

 

Repurchase of common stock

 

 

 

 

 

 

 

 

 

 

 

(1,611,921

)

 

 

(43,115

)

 

 

 

 

 

 

 

 

(43,115

)

Repurchase of common stock related to shares withheld for tax in connection with vesting of RSUs

 

 

 

 

 

 

 

 

 

 

 

(376,925

)

 

 

(10,720

)

 

 

 

 

 

 

 

 

(10,720

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

21,225

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

21,225

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8,566

 

 

 

 

 

 

8,566

 

Change in foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

100

 

 

 

100

 

Balance at April 2, 2022

 

 

129,959,957

 

 

$

130

 

 

$

647,871

 

 

 

(1,808,635

)

 

$

(36,831

)

 

$

62,150

 

 

$

(1,636

)

 

$

671,684

 

Issuance of common stock pursuant to equity incentive plans

 

 

1,950,471

 

 

 

2

 

 

 

8,001

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8,003

 

Retirement of treasury stock

 

 

(947,114

)

 

 

(1

)

 

 

(25,202

)

 

 

947,114

 

 

 

25,203

 

 

 

 

 

 

 

 

 

 

Repurchase of common stock

 

 

 

 

 

 

 

 

 

 

 

(2,006,106

)

 

 

(42,611

)

 

 

 

 

 

 

 

 

(42,611

)

Repurchase of common stock related to shares withheld for tax in connection with vesting of RSUs

 

 

 

 

 

 

 

 

 

 

 

(477,528

)

 

 

(10,811

)

 

 

 

 

 

 

 

 

(10,811

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

18,779

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

18,779

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(597

)

 

 

 

 

 

(597

)

Change in foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,711

)

 

 

(1,711

)

Balance at July 2, 2022

 

 

130,963,314

 

 

$

131

 

 

$

649,449

 

 

 

(3,345,155

)

 

$

(65,050

)

 

$

61,553

 

 

$

(3,347

)

 

$

642,736

 

 

5


Table of contents

 

 

 

Common Stock

 

 

 

 

 

Treasury Stock

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Additiona