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Item 1: Business
We pioneered multi-room, wireless audio products, Sonos' innovation helps the world listen better by giving people access to the content they love and allowing them to control it however they choose. Known for delivering an unparalleled sound experience, thoughtful design aesthetic, simplicity of use and an open platform, Sonos makes a breadth of audio content available to anyone.
Since we launched our first product 18 years ago, we have grown our install base by launching innovative new products, delivering a seamless customer experience, and expanding our global footprint. In fiscal 2023, existing customers accounted for approximately 44% of new product registrations. As of October 2, 2021,September 30, 2023, we had a total of nearly 37.146.6 million products registered in approximately 12.615.3 million households globally, including the addition of approximately 1.71.3 million new households during fiscal 2021.2023. Our customers have typically purchased additional Sonos products over time. As of October 2, 2021,September 30, 2023, 60% of our 12.615.3 million households had registered more than one Sonos product. As of October 2, 2021,September 30, 2023, our households own 3.0 products on average. We also estimate that our customers listened to 12.1 billion hours, excluding Bluetooth listening, of audio content using our products in fiscal 2021, which represents 19.0% growth from fiscal 2020.
Our innovative products, seamless customer experience, and expanding global footprint have driven 16 consecutive years of sustained revenue growth since our first product launch. Products
We generate revenue from the salesales of our Sonos speaker products, including wireless speakers and home theater speakers, from our Sonos system products, which largely comprises our component products, and from partner products and other revenue, including partnerships with IKEA and Sonance, Sonos and third-party accessories, licensing, advertising, and subscription revenue.
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Product | Launch Date | Description | ||||||
Era 100 | March 2023 | Our powerful smart speaker with improved acoustics and design that delivers detailed stereo sound and deep bass. Originally launched as One in October 2017 and completely redesigned in March 2023 as Era 100. | ||||||
Era 300 | March 2023 | Our bold, revolutionary speaker that offers the best out-loud listening experience for your favorite spatial audio content with Dolby Atmos. | ||||||
Sub Mini | October 2022 | Our wireless subwoofer which delivers powerful, balanced bass, rich, clear low end frequencies, in a compact cylindrical design. | ||||||
Ray | June 2022 | Our smallest, smart soundbar for TV, music, and more. | ||||||
Beam (Gen 2) | October 2021 | Our smart, compact soundbar for TV, music, and more, with support for Dolby Atmos. Originally introduced as Beam (Gen 1) in June 2018. | ||||||
Roam Colors Roam SL Roam | May 2022 March 2022 April 2021 | Our ultra-portable smart speaker with Bluetooth and WiFi for listening on the go and at home. Originally introduced as Roam in April 2021 | ||||||
Arc | June 2020 | Our premium smart soundbar for TV, movies, music, gaming, and more, with support for Dolby Atmos. Replaced Playbar, our first smart soundbar released in April 2013 and Playbase, our powerful sound base for TVs released in 2017. | ||||||
Five | June 2020 | Our high fidelity speaker for superior sound. Originally launched as Play:5 (Gen 1) in November 2009 and completely redesigned in November 2015 as Play:5 (Gen 2). | ||||||
Sub (Gen 3) | June 2020 | Our wireless subwoofer for deep bass. Originally introduced as Sub (Gen 1) in June 2012. | ||||||
Move 2 | September | Our | ||||||
| Originally introduced as Move in September | ||||||||
Product | Launch Date | Description | ||||||
Port | September 2019 | Our versatile streaming component for stereos or receivers. Replaced Connect which launched in January 2007. | ||||||
Amp | February 2019 | Our versatile amplifier powering all our customers’ entertainment. Replaced Connect: Amp which launched in September 2012. | ||||||
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Product | Launch Date | Description | ||||||
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Audi Partnership | April 2021 | Our first-ever automotive audio partnership delivering Sonos-tuned premium sound experience for the Q4 e-tron and further models including the A1, Q2, and Q3. | ||||||
Sonos Radio HD | November 2020 | Our subscription service of ad-free, high-definition streaming tier of our streaming radio, Sonos Radio. | ||||||
Sonos Radio | April 2020 | Our free, ad-supported streaming radio experience bringing together more than 60,000 stations from multiple streaming partners alongside original programming from Sonos. | ||||||
Sonos Architectural by Sonance | February 2019 | Our collection of installed passive speakers for indoor and outdoor use designed and optimized for Amp in partnership with Sonance, including in-ceiling, in-wall, and outdoor speakers. | ||||||
IKEA module units | Various | Hardware and embedded software integrated into final products manufactured and sold by IKEA. Current IKEA products include SYMFONISK picture frame, bookshelf speaker, and speaker lamp. | ||||||
Accessories | Various | Our custom-designed stands, mounts, shelves, cables, chargers, and more. | ||||||
Research and Development
Our research and development team develops new hardware products, software and services, while continually improving and enhancing our existing software and hardware products to address customer demands and emerging trends. Our teams have worked on features and enhancements to the Sonos system including developments to the Sonos app, product setup, Trueplay tuning, the ability to use Alexa or Google voice services, and Sonos Voice Control. Our audio team has developed a series of acoustic technologies which enabled us to create speakers that produce high-fidelity sound. In April 2022, we added a talented group of employees to our research and development team through our acquisition of Mayht, a Netherlands-based company, which invented a new approach to audio transducers. The addition of this team and its strategic technology is helping transform and enhance our product portfolio. Our wireless
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and radio team established world-class wireless performance that enabled multi-room experience, wireless surround sound, and many other applications. Our industrial design and mechanical engineering teams developed a cohesive, unique family of products across multiple categories and use-cases such as home theater, all-in-one, and portable. These products demonstrate a range of proprietary manufacturing and design details, logo application techniques, and assembly architecture. The products and software we develop require significant technical knowledge and expertise to develop at a competitive pace. We believe our research and development capabilities and our intellectual property differentiates us from our competitors. We intend to continue to significantly invest in research and development to bring new products and software to market and expand our platform and capabilities.
Sales and Marketing
We sell our products primarily through over 10,000 third-party physical retail stores and our products are distributed in more than 60 countries. The majority of our sales are transacted through traditional physical retailers, including on their websites. We also sell through online retailers, to custom installers who bundle our products with services that they sell to their customers, and directly through our website sonos.com.
We invest in customer experience and customer relationship management to drive loyalty, word-of-mouth marketing and sustainable, profitable growth. Our marketing investments are focused on driving profitable growth through advertising, public relations and brand promotion activities, including digital platforms, sponsorships, collaborations, brand activations, and channel marketing. We continue to invest in our marketing and brand development efforts, including investing in capital expenditures on product displays to support our channel marketing through our retail partners.
Manufacturing, Logistics and Fulfillment
We outsource the manufacturing of our speakers and components to contract manufacturers, who produce our products based on our design specifications. Our products are manufactured by contract manufacturers in China and Malaysia, and Vietnam. In fiscal 2023, we began the process of exiting certain partnerships with two of our contract manufacturers and we expect to complete these exits with minimal disruption by the first quarter of fiscal 2024. Additionally, we continued to diversify and add to our contract manufacturing partnerships and shifted more of our production into our locations in Malaysia and Vietnam, resulting in savings including tariff avoidance. In accordance with our agreements with our contract manufacturers, they will enter into purchase orders with their upstream suppliers for component inventory necessary to manufacture our products, based on our demand forecasts.
The vast majority of our products are shipped to our third-party warehouses which are then shipped to our distributors, retailers, and directly to our customers. Our third-party warehouses are located in the United States in California and Pennsylvania, as well as internationally in Australia, Canada, the Netherlands, China, Japan, and the United Kingdom.
We use a small number of logistics providers for substantially all of our product delivery to both distributors and retailers. This approach generally allows us to reduce order fulfillment time, reduce shipping costs, and improve inventory flexibility.
Our Competitive Strengths
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Our Growth Strategies
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Factors Affecting Performance
New Product Introductions. Since 2005, we have released products in multiple audio categories. We intend to introduce new products and Development
Ability to Sell Additional Products to Existing Customers. Our existing customers typically increase the number of Sonos products in their homes. In fiscal 2023, existing households represented approximately 44% of new product registrations. As we execute on our product roadmap to address evolving consumer preferences, we believe we can expand the number of products in our customers’ homes. Our ability to sell additional products to existing customers is a key part of our business model, as follow-on purchases indicate high customer engagement and satisfaction, decrease the likelihood of competitive substitution, and result in higher customer lifetime value. We will continue to innovate and invest in product development in order to enhance customer experience and drive sales of additional products to existing customers.
Expansion of Partner Ecosystem. Expanding and maintaining strong relationships with our partners will remain important to our success. Our ability to develop, manufacture, and sell voice-enabled speakers that deliver differentiated consumer experiences will be a critical driver of our future performance, particularly as we compete in a larger market with an expanding number of competitors. We currently compete with, and will continue to compete with, companies that have greater resources than we do, many of which have brought voice-enabled speakers to market. To date, our agreements with these partners have all been on a royalty-free basis. We believe our partner ecosystem improves customer experience, attracting more customers to Sonos, which in turn attracts more partners to the platform, further enhancing customer experience. We believe partners choose to be part of the Sonos platform because it provides access to a large, engaged customer base on a global scale. We look to partner with a wide variety of streaming music services, voice assistants, connected home integrators, content creators, podcast and audiobook providers. We have also partnered with certain companies in the development of our own voice-enabled products, while also bringing to market our own voice assistant focused specifically on the audio experience. Our competitiveness in the voice-enabled speaker market will depend on successful investment in research and development, team develops new software and hardwaremarket acceptance of our products and services, as well as improves and enhances our existing software and hardware products to address customer demands and emerging trends. Our team has worked on features and enhancements to the Sonos system including development and improvements to the Sonos app, product setup, Trueplay tuning, and the ability to use Alexa or Googlemaintain and benefit from our technology partnerships.
As competition increases, we believe our ability to give users the freedom to choose across a broad set of streaming services and voice services.control partners will be an important key differentiating factor.
Channel Strategy. We believe growing our own e-commerce channel will continue to be important to supporting our overall growth and profitability as consumers continue the shift from physical to online sales channels. We are investing in our e-commerce capabilities and in-app experience to drive direct sales. In fiscal 2023 and 2022, sales through our direct-to-consumer channel, primarily through sonos.com, represented 23.8% and 22.5% of our total revenue, respectively.
While we seek to increase sales through our direct-to-consumer sales channel, we expect that our partnerships with third-party retailers and custom installers will continue to be an important part of our ecosystem. We will continue to seek retail partners that can deliver differentiated in-store experiences to support customer demand for product demonstrations. Additionally, we intend to expand and strengthen our partnerships with custom installers who are valuable to our customer base and contribute to our new household growth. In fiscal 2023, sales through our installer solutions channel represented 20.7% of total revenue, and 21.2% in fiscal 2022. Our audio team has developedphysical retail distribution relies on third-party retailers and our ability to maintain our diversified manufacturing footprint and base of component suppliers in support of production efficiency and flexibility across our global supply chain.
International Expansion. Our products are sold in more than 60 countries, and in fiscal 2023, 41.3% of our revenue was generated outside the United States. Our international growth will depend on our ability to generate sales from the global population of consumers, develop international distribution channels, and diversify our partner ecosystem to appeal to a series of acoustic technologies which enabled usmore global audience. We are committed to create speakers that produce high-fidelity sound.strengthening our brand in global markets and our future success will depend in part on our growth in international markets.
Investing in Product and Software Development. Our wireless and radio team established world-class wireless performance that enabled multi-room experience, wireless surround sound, and many more applications. Our industrial design and mechanical engineering teams developed a cohesive, unique family of products across multiple categories and use-cases such as home theater, all-in-one, and portable. These products demonstrate a range of proprietary manufacturing and design details, logo application techniques, and assembly architecture. The productsinvestments in product and software we develop require significant technological knowledge and expertise to develop at a competitive pace. We believedevelopment consist primarily of expenses in the personnel who support our research and development capabilitiesefforts and capital expenditures for new tooling and production line equipment to manufacture and test our intellectual property differentiates us fromproducts. We believe that our competitors. We intendfinancial performance will significantly depend on the effectiveness of our investments to continue to significantly invest in researchdesign and development to bringintroduce innovative new products and softwareservices and enhance existing products and
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software. If we fail to marketinnovate and expand our platformproduct and capabilities.
Investing in Sales and Marketing
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and design. Our patents expire at various times and no single patent or other intellectual property right is solely responsible for protecting Sonos’ products and services. Sonos continues to invest in protecting its expanding innovation through ongoing development of its patent portfolio. In addition to its own intellectual property, Sonos also enters into licensing agreements with our third-party partners to provide access to a broad range of technology, services, and content for our customers.
Compensation and Benefits Program. Our compensation program is designed to attract and reward talented individuals who possess the skills necessary to support our business objectives, assist in the achievement of our strategic goals and create long-term value for our stockholders. We provide employees with compensation packages that include base salary, annual incentive bonuses, and long-term equity awards ("RSUs") tied to the value of our stock price. We believe that a compensation program with both short-term and long-term awards provides fair and competitive compensation and aligns employee and stockholder interests, including by incentivizing business and individual performance (pay for performance), motivating based on long-term company performance and integrating compensation with our business plans. In addition to cash and equity compensation, we also offer employees benefits such as life and health (medical, dental & vision) insurance, paid time off, paid parental leave, and a 401(k) plan.
Diversity, Equity and Inclusion. At Sonos, we believe that music and sound is universal and connects us as people, and we strive to build products that move everyone. To do this, we are committed to building an equitable and inclusive environment where diverse teams build more creative solutions, drive better results, innovate and bring their authentic selves to work each day. We monitor the representation of women and racially or ethnically diverse team members at different levels throughout the company and disclose the composition of our team in our annual Listen Better Report, which is our corporate social responsibility report available on the Investor Relations section of our website.
As an organization, we’ve committed to annual diversity, equity and inclusion goals to increase representation at all levels and foster greater connection and belonging at Sonos. To accomplish these goals, we’re implementing initiatives to help us reach these goals, including:
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Community Involvement. We aim to give back toenhance the communities where we live and work, and believe that this commitment helps in our efforts to attract and retain employees. We offer employees the opportunity to give back both through our Sonos Soundwaves program, which partners with leading non-profits, and our Sonos Cares program, which offers employees paid volunteer time each year.
Although we may not sustainachieved profitability or consistent revenue growth.
We expect our operating expenses to increase in the future as we expand our operations and execute on our product roadmap and strategy. We plan to make significant future expenditures related to the expansion of our business and our product offerings, including investments in:
If we are unable to accurately anticipate market demand for our products, we may have difficulty managing our production and inventory and our operating results could be harmed.
Following an increase in demand during the COVID-19 pandemic, we have recently seen a softening of consumer demand. As a result, we have had to, and may continue to, write-down or write-off inventory or sell the excess inventory at discounted prices, which has, and could in the future, cause our gross margin to suffer. In addition, excess inventory has, and may in the future, result in reduced working capital, which could adversely affect our ability to invest in other important areas of our business such as marketing and product development. If our channel partners have excess inventory of our products, they may decrease their purchases of our products in subsequent periods. In addition, in the event of excess inventory including excess component inventory, we may be unable to renegotiate our agreements with existing suppliers on mutually acceptable terms. Although in certain instances our agreements with certain suppliers allow us the option to cancel, reschedule, and adjust our requirements based on our business needs, our loss contingencies may include
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liabilities for contracts that we cannot cancel, reschedule or adjust with suppliers or partners. We may also deem it necessary or advisable to renegotiate agreements with our supply partners in order to scale our inventory with demand.
A resurgence of the COVID-19 pandemic could adversely impact our business and it remains uncertain how the post-COVID environment will impact demand for our products.
During the pandemic, consistent with its effects industry-wide, we experienced supply chain disruptions and challenges that increased costs and impacted our ability to meet demand and manage inventory levels. The pandemic has also contributed to ongoing global economic uncertainty. Any resurgence of the pandemic could have similar impacts on our business, operating results and financial condition.
In addition, we experienced increased demand for our products during the COVID-19 pandemic and have recently seen a softening of consumer demand and a shift in consumer spending from purchasing goods to purchasing services and travel. It remains uncertain the extent to which the post-pandemic environment will impact demand for our products and services or shift consumer spending habits generally over the longer term.
Global economic conditions and any associated impact on consumer discretionary spending could have a material adverse effect on our business, results of operations and financial condition.
Continued global economic uncertainty and reductions in consumer discretionary spending and consumer confidence may impact the sales of our products and services. Factors affecting the level of consumer spending for our products and services include general economic conditions, including the potential for an extended global recession, continued inflationary pressures, rising interest rates and, in certain markets, foreign currency exchange rate fluctuations. As global economic conditions continue to be volatile or economic uncertainty remains, trends in consumer discretionary spending also remain unpredictable. Unfavorable economic conditions may lead consumers to delay or reduce purchases of our products and services and consumer demand for our products and services may not grow as we expect. Any reduction in sales of our products and services resulting from reductions in consumer discretionary spending could have an adverse effect on our business, financial condition, and operating results.
The home audio and consumer electronics industries are highly competitive.
The markets in which we operate are extremely competitive and rapidly evolving, and we expect that competition will intensify in the future. Our competition includes established, well-known sellers of speakers and sound systems such as Bose, Samsung (and its subsidiaries Harman International and JBL), Sony, Bang & Olufsen, and Masimo (and its subsidiary Sound United that owns, among others, the Denon, Polk Audio and Bowers and Wilkens brands), and developers of voice-enabled speakers and systems such as Amazon, Apple and Google. We could also face competition from new market entrants, some of whom might be current partners of ours.
In order to deliver products that appeal to changing and increasingly diverse consumer preferences and to overcome the fact that a relatively high percentage of consumers may already own or use products that they perceive to be similar to those that we offer, we must develop superior technology, anticipate increasingly diverse consumer tastes and rapidly develop attractive products with competitive selling prices. In addition, many of our current and potential partners have business objectives that may drive them to sell their speaker products at a significant discount compared to ours. Amazon and Google, for example, both currently offer their speaker products at significantly lower prices than our speaker products. Many of these partners may subsidize these prices and seek to monetize their customers through the sale of additional services rather than the speakers themselves. Even if we are able to efficiently develop and offer innovative products at competitive selling prices, our operating results and financial condition may be adversely impacted if we are unable to effectively anticipate and counter the ongoing price erosion that frequently affects consumer products or if the average selling prices of our products decrease faster than we are able to reduce our manufacturing costs.
Many of our competitors have greater financial, technical and marketing resources available to them than those available to us, and, as a result, they may develop competing products that cause the demand for our products to decline. Our competitors have established, or may establish, cooperative relationships among themselves or with third parties to increase the abilities of their products to address the needs of our prospective customers, and other companies may enter our markets by entering into strategic relationships with our competitors. A failure to effectively anticipate and respond to these established and new competitors may adversely impact our business and operating results.
Further, our current and prospective competitors may consolidate with each other or acquire companies that will allow them to develop products that better compete with our products, which would intensify the competition that we face and may also disrupt or lead to termination of our distribution, technology and content partnerships. For example, if one of our competitors were to acquire one of our content partners, the consolidated company may decide to disable the streaming functionality of its service with our products.
If we are unable to compete with these consolidated companies or if consolidation in the market disrupts our partnerships or reduces the number of companies we partner with, our business would be adversely affected.
Our investments in research and development may not yield the results expected.
Our business operates in intensely competitive markets characterized by changing consumer preferences and rapid technological innovation. Due to advanced technological innovation and the relative ease of technology imitation, new products tend to become standardized more rapidly, leading to more intense competition and ongoing price erosion. In order to strengthen the competitiveness of our products in this environment, we continue to invest heavily in research and development. However, these investments may not yield the innovation or the results expected on a timely basis, or our competitors may surpass us in technological innovation, hindering our ability to timely commercialize new and competitive products that meet the needs and demands of the market, which consequently may adversely impact our operating results as well as our reputation.
We have, and may in the future continue to, seek to expand beyond our core sound systems and develop products that have wider applications outside theof home sound, such as commercial or office. For example, in April 2023, we introduced Sonos Pro, our new audio subscription service for businesses. Developing these products would require us to devote substantial additional resources, and our ability to succeed in developing such products to address such markets is unproven. It is likely that we would need to hire additional personnel, partner with new third parties and incur considerable research and development expenses to pursue such an expansion successfully. We may have less familiarity with consumer preferences for these products and less product or category knowledge, and we could encounter difficulties in attracting new customers due to lower levels of consumer familiarity with our brand. As a result, we may not be successful in future efforts to achieve profitability from new markets, services or new types of products, and our ability to generate revenue from our existing products may suffer. If any such expansion does not enhance our ability to maintain or grow our revenue or recover any associated development costs, our operating results could be adversely affected.
We experience seasonal demand for our products, and if our sales in high-demand periods are below our forecasts, our overall financial condition and operating results could be adversely affected.
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technologies, some of which have developed or may develop and sell voice-enabled speaker products of their own as further described herein.
In addition, the regulations of certain foreign countries do not protect our intellectual property rights to the same extent as the laws of the United States. As our brand grows, we may discover unauthorized products in the marketplace that are counterfeit reproductions of our products. If we are unsuccessful in pursuing producers or sellers of counterfeit products, continued sales of these products could adversely impact our brand, business, financial condition and results of operations.
If we are not able to maintain and enhance the value and reputation of our brand, or if our reputation is otherwise harmed, our business and operating results could be adversely affected.
We depend on a limited number of contract manufacturers to manufacture our products, with our key manufacturer, Inventec Appliances Corporation, (“Inventec”), manufacturing a majority of our products. We have also historically manufactured our products in China and inearlyChina. In fiscal 2020, we began our efforts to diversify our supply chain through the addition of new contract manufacturingmanufacturers and geographic diversification, starting with Malaysia and extending such efforts into Vietnam in Malaysia.fiscal 2022. During fiscal 2023, we began the process of exiting certain partnerships with two of our contract manufacturers, including our second-largest contract manufacturer, and may exit other partnerships with contract manufacturers from time to time. Our reliance on a limited number of contract manufacturers increases the risk that, in the event that any or all of such manufacturers experience an interruption in their operations, fail to perform their obligation in a timely manner or terminate agreements with us, we would not be able to maintain our production capacity without incurring material additional costs and substantial delays or we may be fully prevented from selling our products. Any material disruption in our relationship with our manufacturers would harm our ability to compete effectively and satisfy demand for our products and could adversely impact our revenue, gross margin and operating results.
We depend on a limited number of third-party components suppliers and logistics providers.
In addition, the longer lead time for many of our components presents challenges in our efforts to manage component inventory, as we procure such components based on our then current forecast of demand for our products. For example, during the pandemic we increased our investments in, and purchase commitments for, components with longer lead times where possible to secure inventory in anticipation of shortages and strong demand, and we may need to do so again in the future. In the event that actual demand for our products differs from our forecast, we may end up with an excess inventory of components, as we saw in fiscal 2023, negatively impacting our working capital.
We also use a small number of logistics providers for substantially all our product delivery to both distributors and retailers. If one of these providers were to experience financial difficulties or disruptions in its business, or be subject to closures or other disruptions, as a result of COVID-19, our own operations could be adversely affected. Because substantially all of our products are distributed from and into a small number of locations and by a small number of companies, we are susceptible to both isolated and system-wide interruptions caused by events out of our control, including COVID-19 shutdowns.control. Any disruption to the operations of our distribution facilities could delay product delivery, harm our reputation among our customers and adversely affect our operating results and financial condition.
We sell our products through a limited number of key channel partners, and the loss of any such channel partner would adversely impact our business.
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Additionally, our products may contain flaws that make them susceptible to unauthorized access or use. For example, we previously discovered a vulnerability in our products that could be exploited when a customer visited a website with malicious content, allowing the customer’s local network to be accessed by third parties who could then gain unauthorized access to the customer’s playlists and other data and limited control of the customer’s devices. While we devote significant resources to address and eliminate flaws and other vulnerabilities in our products, there can be no assurance that our products will not be compromised in the future. Any such flaws or vulnerabilities, whether actual or merely potential, could harm our reputation, competitive position, financial condition and results of operations.
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is a modification of our licensed software. If an author or other third party that distributes open source software that we use or license were to allege that we had not complied with the conditions of the applicable license, we could be required to incur significant legal expenses defending against those allegations and could be subject to significant damages, enjoined from offering or selling our products that contained the open source software and required to comply with the above conditions. Any of the foregoing could disrupt and harm our business and financial condition.
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September 30, 2023, we also had U.S. federal research and development tax credit carryforwards as filed of $62.0$54.4 million, and state research and development tax credit carryforwards as filed of $44.3$47.0 million, which will expire beginning in 20252038 and 2024,2025, respectively. Because of the change of ownership provisions of Sections 382 and 383 of the Code, use of a portion of the Company's domestic net operating losses and tax credit carryforwards may be limited in future periods depending upon future changes in ownership. Further, a portion of the carryforwards may expire before being applied to reduce future income tax liabilities if sufficient taxable income is not generated in future periods.
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arrangement. The success of these transactions and arrangements will depend in part on our ability to leverage them to enhance our existing products or develop compelling new ones. It may take longer than expected to realize the full benefits from these transactions and arrangements such as increased revenue or enhanced efficiencies, or the benefits may ultimately be smaller than we expected. These events could adversely affect our consolidated financial statements.
None.
Item 1C. Cybersecurity
Not applicable.
Item 2. Properties
Item 3. Legal Proceedings
From time to time, we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. Other than the matters described in Note 12. Commitments and Contingencies of the notes to our consolidated financial statements included in Part II. Item 8 of this Annual Report, we were not a party to any legal proceedings that in the opinion of our management, if determined adversely to us, would individually or taken together have a material adverse effect on our business, operating results, financial condition or cash flows. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors.
Item 4. Mine Safety Disclosures
None.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities
Shares of our common stock trade on The Nasdaq Global Select Market under the symbol “SONO.”
Holders of Record
As of November 8, 2021,3, 2023, there were 1,3974 holders of record of our common stock. This figure does not include a substantially greater number of beneficial holders of our common stock whose shares are held of record by banks, brokers and other financial institutions.
Dividend Policy
We have never declared or paid any cash dividends on our capital stock, and we do not currently intend to pay any cash dividends for the foreseeable future. We expect to retain future earnings, if any, to fund the development and growth of our business. Any future determination to pay dividends on our common stock will be made at the discretion of the Board and will depend upon, among other factors, our financial condition, operating results, current and anticipated cash needs, plans for expansion and other factors that the Board may deem relevant. In addition, the terms of our credit facilities contain restrictions on our ability to declare and pay cash dividends on our capital stock.
None.
| Period | Total Number of Shares Purchased (1) | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in thousands) | ||||||||||||||||||||||
| Jul 4 - Jul 31 | 80,240 | $ | 32.48 | 80,240 | $ | 25,664 | ||||||||||||||||||||
| Aug 1 - Aug 28 | 670,199 | $ | 38.29 | 670,199 | $ | — | ||||||||||||||||||||
| Aug 29 - Oct 2 | — | $ | — | — | $ | — | ||||||||||||||||||||
| Total | 750,439 | 750,439 | ||||||||||||||||||||||||
Period |
| Total Number of Shares Purchased (1) |
|
| Average Price Paid per Share |
|
| Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs |
|
| Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs 1 |
| ||||
Jul 2 - Jul 29 |
|
| — |
|
| $ | — |
|
|
| — |
|
| $ | 54,974 |
|
Jul 30 - Aug 26 |
|
| 1,762,624 |
|
| $ | 13.92 |
|
|
| 1,762,624 |
|
| $ | 30,440 |
|
Aug 27 -Sep 30 |
|
| 2,244,894 |
|
| $ | 13.54 |
|
|
| 2,244,894 |
|
| $ | 34 |
|
Total |
|
| 4,007,518 |
|
|
|
|
|
| 4,007,518 |
|
|
|
| ||
1 Approximate dollar value of shares that may yet to be purchased under the plans or programs does not include the impact of direct costs incurred to acquire shares. |
| |||||||||||||||
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Stock Performance Graph
August 2,
2018September 28,
2018September 27,
2019October 2,
2020October 1,
2021Sonos, Inc. $ 100.00 $ 80.56 $ 67.86 $ 77.85 $ 162.03 Nasdaq composite index $ 100.00 $ 103.34 $ 103.11 $ 141.94 $ 192.31 S&P 500 $ 100.00 $ 103.43 $ 107.29 $ 118.44 $ 163.28
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
We operate on a 52-week or 53-week fiscal year ending on the Saturday nearest September 30 each year. Our fiscal year is divided into four quarters of 13 weeks, each beginning on a Sunday and containing two 4-week periods followed by a 5-week period. An additional week is included in the fourth fiscal quarter approximately every five years to realign fiscal quarters with calendar quarters. References to fiscal 2023 are to our 52-week fiscal year ended September 30, 2023, references to fiscal 2022 are to our 52-week fiscal year ended October 1, 2022, references to fiscal 2021 are to our 52-week fiscal year ended October 2, 2021 and references to fiscal 2020 are to our 53-week fiscal year ended October 3, 2020, and references to fiscal 2019 are to our 52-week fiscal year ended September 28, 2019.
Overview
We pioneered multi-room, wireless audio products, Sonos' innovation helpsdebuting the world listen better by giving people accessworld’s first multi-room wireless sound system in 2005. Today, our products include wireless, portable, and home theater speakers, components, and accessories to the content they love and allowing them to control it however they choose. Knownaddress consumers’ evolving audio needs. We are known for delivering an unparalleled sound, experience, thoughtful design aesthetic, simplicity of use, and an open platform. Our platform Sonos makeshas attracted a breadthbroad range of audiomore than 130 streaming content available to anyone.
We have developed a robust product and software roadmap that we believe will help us capture the expanding addressable market for our products. We believe executing on our roadmap will position us to acquire new customers, offer a continuously improving experience to our existing customers, and grow follow-on purchases.
During fiscal 2023, we experienced weakened retail demand due to store closures, modifications of the retail experience, and inventory re-balancing by retail partners. More recently, as retail stores have re-opened and restrictions have easedsaw improvements in more end-markets, we have seen a corresponding return of retail demand. COVID-19 has also affected our supply chain, consistent with its effect across many industries, including causing shipping and logistics challenges, and placing significant limits on component supplies. Especially when combined with the increased demandrecovery of supply for our products, these supply chain impacts have resulted in delayed product availability. During our fourth quarter of fiscal 2021, we experienced increaseddecreased spot market component costs, and increaseddecreased shipping and logistics costs relatedcompared to
In June 2023, in response to the softening of underlying demand trends we observed in the prior quarter resulting from industry-wide macroeconomic pressures, we initiated a restructuring plan to reduce our cost base (the “2023 restructuring plan”). The 2023 restructuring plan included a reduction in force involving approximately 7% of our employees, a further reduction of our real estate footprint, and a re-evaluation of certain program spend. Restructuring and abandonment costs under the 2023 restructuring plan were $11.4 million, substantially all of which were incurred in the third quarter of fiscal 2023. Additionally, in March 2023, in support of
29
operational efficiencies, we abandoned portions of our efforts to fully diversify our supply chain into Malaysia until fiscal 2022. We expect these impacts, including potential delayed product availability, to continueoffice spaces for as long as the global supply chain is experiencing these challenges. We continue to investremainder of their respective lease terms resulting in supply chain initiatives to meet increasing customer demand and address industry-wide capacity challenges. non-recurring abandonment charges of $4.8 million.
We continue to maintain our liquidity and believe our existing cash and cash equivalent balances, cash flow from operations, and committed credit lines are sufficient to meet our long-term working capital and capital expenditure needs.
| Fiscal Year Ended | |||||||||||||||||
| October 2, 2021 | October 3, 2020 | September 28, 2019 | |||||||||||||||
| (In thousands, except percentages) | |||||||||||||||||
| Revenue | $ | 1,716,744 | $ | 1,326,328 | $ | 1,260,823 | |||||||||||
| Products sold | 6,503 | 5,806 | 6,204 | ||||||||||||||
Adjusted EBITDA(1) | $ | 278,585 | $ | 108,543 | $ | 88,689 | |||||||||||
Adjusted EBITDA margin(1) | 16.2 | % | 8.2 | % | 7.0 | % | |||||||||||
| Fiscal Year Ended |
| ||||||||||
| September 30, |
|
| October 1, |
|
| October 2, |
| ||||
(In thousands, except percentages) |
|
|
|
|
|
|
|
|
| |||
Revenue |
| $ | 1,655,255 |
|
| $ | 1,752,336 |
|
| $ | 1,716,744 |
|
Products sold |
|
| 5,725 |
|
|
| 6,281 |
|
|
| 6,503 |
|
Net income (loss) |
|
| (10,274 | ) |
|
| 67,383 |
|
|
| 158,595 |
|
Net income (loss) margin(1) |
|
| (0.6 | )% |
|
| 3.8 | % |
|
| 9.2 | % |
Adjusted EBITDA(2) |
| $ | 153,878 |
|
| $ | 226,549 |
|
| $ | 278,585 |
|
Adjusted EBITDA margin(2) |
|
| 9.3 | % |
|
| 12.9 | % |
|
| 16.2 | % |
Revenue
For a description of our revenue recognition policies, see the section titled "Critical accounting policies and estimates."
Products Sold
We define adjusted EBITDA as net income (loss) adjusted to exclude the impact of stock-based compensation expense, depreciation, interest, other income (expense), taxes, and other items that we do not consider representative of our underlying operating performance.
Components of Results of Operations
We generate substantially all of our revenue from the sale of Sonos speakers and Sonos system products. We also generate a portion of revenue from Partner products and other revenue sources, such as module revenue from our IKEA partnership, architectural speakers from our Sonance partnership, and accessories such as speaker stands and wall mounts, as well as professional services, licensing, advertising, and subscription revenue. We attribute revenue from our IKEA partnership to our Asia Pacific ("APAC") region, as our regional revenue is defined by the shipment location. Our revenue is recognized net of allowances for returns, discounts, sales incentives, and any taxes collected from customers. We also defer a portion of our revenue that is allocated to unspecified software upgrades and cloud-based services, as well as for newly launched products sold to resellers not recognized until the date of general availability is reached. Our revenue is subject to fluctuation based on the foreign currency in which our products are sold, principally for sales denominated in the euro and the British pound. The introduction of new products may result in an increase in revenue but may also impact revenue generated from existing products as consumers shift purchases to new products.
For a description of our revenue recognition policies, see the section titled "Critical accounting policies and estimates."
Cost of Revenue
Cost of revenue consists of product costs, including costs of our contract manufacturers for production, component product costs,components, shipping and handling, costs, tariffs, duty costs, warranty replacement costs, packaging, fulfillment costs, manufacturing and tooling equipment depreciation, warehousing costs, hosting costs, and excess and obsolete inventory write-downs. It also includes licensing costs, such as royalties to third parties, and attributable amortization of acquired developed technology. In addition, we allocate certain costs related to management and facilities, personnel-related expenses, and other expenses associated with supply chain logistics.logistic costs. Personnel-related expenses consist of salaries, bonuses, benefits, and stock-based compensation expenses.
Our gross margin has fluctuated and may, in the future, fluctuate from period to period based on a number of factors, including the mix of products we sell, the channel mix through which we sell our products, fluctuations of the impacts of our product and material cost saving initiatives, the foreign currency in which our products are sold, and tariffs and duty costs implemented by governmental authorities.
Operating Expenses
Operating expenses consist of research and development, sales and marketing, and general and administrative expenses.
Research and development. Research and development expenses consist primarily of personnel-related expenses, consulting and contractor expenses, tooling, test equipment, prototype materials, and related overhead costs. To date, software development costs have been expensed as incurred because the period between achieving technological feasibility and the release of the software has been short and development costs qualifying for capitalization have been insignificant.
Sales and marketing. Sales and marketing expenses consist primarily of advertising and marketing activity for our products and personnel-related expenses, as well as trade show and event costs, sponsorship costs, consulting and contractor expenses, travel costs, depreciation for product displaydisplays, as well as related maintenance and repair expenses, and related depreciation, customer experience and technology support tool expenses, revenue related sales fees from our direct-to-consumer business, and overhead costs.
General and administrative. General and administrative expenses consist of personnel-related expenses for our finance, legal, human resources and administrative personnel, as well as the costs of professional services, information technology, litigation, patents, related overhead, and other administrative expenses.
Other Income (Expense), Net
Interest income. Interest income consists primarily of interest income earned on our cash and cash equivalents balances.
Interest expense. Interest expense consists primarily of interest expense associated with our debt financing arrangements and amortization of debt issuance costs.
31
Other income (expense), net. Other income (expense), net consists primarily of our foreign currency exchange gains and losses relating to transactions and remeasurement of asset and liability balances denominated in currencies other than the U.S. dollar. We expect our foreign currency gains and losses to continue to fluctuate in the future due to changes in foreign currency exchange rates.
Provision for (Benefit From) Income Taxes
We are subject to income taxes in the United States and foreign jurisdictions in which we operate. Foreign jurisdictions have statutory tax rates different from those in the United States. Accordingly, our effective tax rate will vary depending on jurisdictional mix of earnings, and changes in tax laws. In addition, certain U.S. tax regulations subject the earnings of our non-U.S. subsidiaries to current taxation in the United States. Our effective tax rate will be impacted by our ability to claim deductions and foreign tax credits to offset the taxation of foreign earnings in the United States.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is provided to reduce our deferred tax assets to amounts that are more-likely-than-not to be realized. We have assessed, on a jurisdictional basis, the available means of recovering deferred tax assets, including the ability to carry back net operating losses, the existence of taxable temporary differences, the availability of tax planning strategies and available sources of future taxable income. We have concluded that future taxable income can be considered a source of income to realize a benefit for deferred tax assets in certain foreign jurisdictions. In addition, we have concluded that a valuation allowance on deferred tax assets in the U.S. and certain foreign jurisdictions continues to be appropriate considering cumulative pre-tax losses in recent years and uncertainty with respect to future taxable income.
It is possible that withinin the next 12 monthsforeseeable future there may be sufficient positive evidence to release a portion or all of the remaining valuation allowance. Release of the remaining valuation allowance would result in a benefit to income tax expense for the period the release is recorded, which could have a material impact on net earnings. The timing and amount of the potential valuation allowance release are subject to significant management judgment, as well as prospective earnings in the United States and certain other foreign entities and jurisdictions.
The consolidated statements of operations data for fiscal years 2021, 2020,2023, 2022, and 2019,2021, and the consolidated balance sheet data as of October 2, 2021,September 30, 2023, and October 3, 2020,1, 2022, are derived from our audited consolidated financial statements appearing in Item 8, "Financial Statements and Supplementary Data," of this Annual Report on Form 10-K. The consolidated statements of operations data for fiscal years 2018,2020, and 2017,2019, and the consolidated balance sheet data as of September 28, 2019, September 29, 2018,October 2, 2021, October 3, 2020, and September 30, 2017,28,
32
2019, are derived from audited consolidated financial statements not included in this Annual Report on Form 10-K. Our historical results are not necessarily indicative of the results that may be expected in any future period.
| Fiscal Year Ended | |||||||||||||||||||||||||||||
| October 2 2021 | October 3, 2020 | September 28, 2019 | September 29, 2018 (4) | September 30, 2017 (4) | |||||||||||||||||||||||||
| (In thousands, except share and per share amounts and percentages) | |||||||||||||||||||||||||||||
| Revenue | $ | 1,716,744 | $ | 1,326,328 | $ | 1,260,823 | $ | 1,137,008 | $ | 992,526 | |||||||||||||||||||
Cost of revenue (1) | 906,750 | 754,372 | 733,480 | 647,700 | 536,461 | ||||||||||||||||||||||||
| Gross profit | 809,994 | 571,956 | 527,343 | 489,308 | 456,065 | ||||||||||||||||||||||||
| Operating expenses | |||||||||||||||||||||||||||||
Research and development (1) | 230,078 | 214,672 | 171,174 | 142,109 | 124,394 | ||||||||||||||||||||||||
Sales and marketing (1) | 272,124 | 263,539 | 247,599 | 270,869 | 270,162 | ||||||||||||||||||||||||
General and administrative (1) | 152,828 | 120,978 | 102,871 | 85,205 | 77,118 | ||||||||||||||||||||||||
| Total operating expenses | 655,030 | 599,189 | 521,644 | 498,183 | 471,674 | ||||||||||||||||||||||||
| Operating income (loss) | 154,964 | (27,233) | 5,699 | (8,875) | (15,609) | ||||||||||||||||||||||||
| Other income (expense), net | |||||||||||||||||||||||||||||
| Interest income | 146 | 1,998 | 4,349 | 731 | 120 | ||||||||||||||||||||||||
| Interest expense | (592) | (1,487) | (2,499) | (5,242) | (4,380) | ||||||||||||||||||||||||
| Other income (expense), net | 2,407 | 6,639 | (8,625) | (1,162) | 3,361 | ||||||||||||||||||||||||
| Total other income (expense), net | 1,961 | 7,150 | (6,775) | (5,673) | (899) | ||||||||||||||||||||||||
| Income (loss) before provision for (benefit from) income taxes | 156,925 | (20,083) | (1,076) | (14,548) | (16,508) | ||||||||||||||||||||||||
| Provision for (benefit from) income taxes | (1,670) | 32 | 3,690 | 1,056 | (2,291) | ||||||||||||||||||||||||
| Net income (loss) | $ | 158,595 | $ | (20,115) | $ | (4,766) | $ | (15,604) | $ | (14,217) | |||||||||||||||||||
| Net income (loss) per share attributable to common stockholders:⁽²⁾ | |||||||||||||||||||||||||||||
| Basic | $ | 1.30 | $ | (0.18) | $ | (0.05) | $ | (0.24) | $ | (0.25) | |||||||||||||||||||
| Diluted | $ | 1.13 | $ | (0.18) | $ | (0.05) | $ | (0.24) | $ | (0.25) | |||||||||||||||||||
| Weighted-average shares used in computing net income (loss) per share attributable to common stockholders:⁽²⁾ | |||||||||||||||||||||||||||||
| Basic | 122,245,212 | 109,807,154 | 103,783,006 | 65,706,215 | 56,314,546 | ||||||||||||||||||||||||
| Diluted | 140,309,152 | 109,807,154 | 103,783,006 | 65,706,215 | 56,314,546 | ||||||||||||||||||||||||
| Other Data: | |||||||||||||||||||||||||||||
Products sold(5) | 6,503 | 5,806 | 6,204 | 5,165 | 4,034 | ||||||||||||||||||||||||
Adjusted EBITDA (3) | $ | 278,585 | $ | 108,543 | $ | 88,689 | $ | 69,128 | $ | 55,955 | |||||||||||||||||||
Adjusted EBITDA margin (3) | 16.2 | % | 8.2 | % | 7.0 | % | 6.1 | % | 5.6 | % | |||||||||||||||||||
| Fiscal Year Ended |
| ||||||||||||||||||
| September 30, |
|
| October 1, |
|
| October 2, |
|
| October 3, |
|
| September 28, |
| ||||||
(In thousands, except share and per share amounts and percentages) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Revenue |
| $ | 1,655,255 |
|
| $ | 1,752,336 |
|
| $ | 1,716,744 |
|
| $ | 1,326,328 |
|
| $ | 1,260,823 |
|
Cost of revenue (1) |
|
| 938,765 |
|
|
| 955,969 |
|
|
| 906,750 |
|
|
| 754,372 |
|
|
| 733,480 |
|
Gross profit |
|
| 716,490 |
|
|
| 796,367 |
|
|
| 809,994 |
|
|
| 571,956 |
|
|
| 527,343 |
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Research and development (1) |
|
| 301,001 |
|
|
| 256,073 |
|
|
| 230,078 |
|
|
| 214,672 |
|
|
| 171,174 |
|
Sales and marketing (1) |
|
| 267,518 |
|
|
| 280,333 |
|
|
| 272,124 |
|
|
| 263,539 |
|
|
| 247,599 |
|
General and administrative (1) |
|
| 168,518 |
|
|
| 170,429 |
|
|
| 152,828 |
|
|
| 120,978 |
|
|
| 102,871 |
|
Total operating expenses |
|
| 737,037 |
|
|
| 706,835 |
|
|
| 655,030 |
|
|
| 599,189 |
|
|
| 521,644 |
|
Operating income (loss) |
|
| (20,547 | ) |
|
| 89,532 |
|
|
| 154,964 |
|
|
| (27,233 | ) |
|
| 5,699 |
|
Other income (expense), net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Interest income |
|
| 10,201 |
|
|
| 1,655 |
|
|
| 146 |
|
|
| 1,998 |
|
|
| 4,349 |
|
Interest expense |
|
| (733 | ) |
|
| (552 | ) |
|
| (592 | ) |
|
| (1,487 | ) |
|
| (2,499 | ) |
Other income (expense), net |
|
| 15,473 |
|
|
| (21,905 | ) |
|
| 2,407 |
|
|
| 6,639 |
|
|
| (8,625 | ) |
Total other income (expense), net |
|
| 24,941 |
|
|
| (20,802 | ) |
|
| 1,961 |
|
|
| 7,150 |
|
|
| (6,775 | ) |
Income (loss) before provision for (benefit from) income taxes |
|
| 4,394 |
|
|
| 68,730 |
|
|
| 156,925 |
|
|
| (20,083 | ) |
|
| (1,076 | ) |
Provision for (benefit from) income taxes |
|
| 14,668 |
|
|
| 1,347 |
|
|
| (1,670 | ) |
|
| 32 |
|
|
| 3,690 |
|
Net income (loss) |
| $ | (10,274 | ) |
| $ | 67,383 |
|
| $ | 158,595 |
|
| $ | (20,115 | ) |
| $ | (4,766 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net income (loss) per share attributable to common stockholders:⁽²⁾ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Basic |
| $ | (0.08 | ) |
| $ | 0.53 |
|
| $ | 1.30 |
|
| $ | (0.18 | ) |
| $ | (0.05 | ) |
Diluted |
| $ | (0.08 | ) |
| $ | 0.49 |
|
| $ | 1.13 |
|
| $ | (0.18 | ) |
| $ | (0.05 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Weighted-average shares used in computing net income (loss) per share attributable to common stockholders:⁽²⁾ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Basic |
|
| 127,702,885 |
|
|
| 127,691,030 |
|
|
| 122,245,212 |
|
|
| 109,807,154 |
|
|
| 103,783,006 |
|
Diluted |
|
| 127,702,885 |
|
|
| 137,762,078 |
|
|
| 140,309,152 |
|
|
| 109,807,154 |
|
|
| 103,783,006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Other Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Products sold(4) |
|
| 5,725 |
|
|
| 6,281 |
|
|
| 6,503 |
|
|
| 5,806 |
|
|
| 6,204 |
|
Adjusted EBITDA (3) |
| $ | 153,878 |
|
| $ | 226,549 |
|
| $ | 278,585 |
|
| $ | 108,543 |
|
| $ | 88,689 |
|
Net income (loss) margin |
|
| (0.6 | )% |
|
| 3.8 | % |
|
| 9.2 | % |
|
| (1.5 | )% |
|
| (0.4 | )% |
Adjusted EBITDA margin (3) |
|
| 9.3 | % |
|
| 12.9 | % |
|
| 16.2 | % |
|
| 8.2 | % |
|
| 7.0 | % |
| Fiscal Year Ended | |||||||||||||||||||||||||||||
| October 2, 2021 | October 3, 2020 | September 28, 2019 | September 29, 2018 | September 30, 2017 | |||||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||||||
| Cost of revenue | $ | 988 | $ | 1,106 | $ | 985 | $ | 198 | $ | 240 | |||||||||||||||||||
| Research and development | 25,075 | 23,439 | 17,643 | 13,960 | 13,605 | ||||||||||||||||||||||||
| Sales and marketing | 13,570 | 14,359 | 12,965 | 15,885 | 15,086 | ||||||||||||||||||||||||
| General and administrative | 22,494 | 18,706 | 14,982 | 8,602 | 7,619 | ||||||||||||||||||||||||
| Total stock-based compensation expense | $ | 62,127 | $ | 57,610 | $ | 46,575 | $ | 38,645 | $ | 36,550 | |||||||||||||||||||
| Fiscal Year Ended |
| ||||||||||||||||||
| September 30, |
|
| October 1, |
|
| October 2, |
|
| October 3, |
|
| September 28, |
| ||||||
(In thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Cost of revenue |
| $ | 2,038 |
|
| $ | 1,620 |
|
| $ | 988 |
|
| $ | 1,106 |
|
| $ | 985 |
|
Research and development |
|
| 35,530 |
|
|
| 30,724 |
|
|
| 25,075 |
|
|
| 23,439 |
|
|
| 17,643 |
|
Sales and marketing |
|
| 15,677 |
|
|
| 15,335 |
|
|
| 13,570 |
|
|
| 14,359 |
|
|
| 12,965 |
|
General and administrative |
|
| 23,612 |
|
|
| 27,961 |
|
|
| 22,494 |
|
|
| 18,706 |
|
|
| 14,982 |
|
Total stock-based compensation expense |
| $ | 76,857 |
|
| $ | 75,640 |
|
| $ | 62,127 |
|
| $ | 57,610 |
|
| $ | 46,575 |
|
33
| As of |
| ||||||||||||||||||
| September 30, |
|
| October 1, |
|
| October 2, |
|
| October 3, |
|
| September 28, |
| ||||||
(In thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Consolidated balance sheet data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Cash and cash equivalents |
| $ | 220,231 |
|
| $ | 274,855 |
|
| $ | 640,101 |
|
| $ | 407,100 |
|
| $ | 338,641 |
|
Working capital |
|
| 305,413 |
|
|
| 331,752 |
|
|
| 481,384 |
|
|
| 267,362 |
|
|
| 276,635 |
|
Total assets |
|
| 1,002,241 |
|
|
| 1,188,388 |
|
|
| 1,138,804 |
|
|
| 816,051 |
|
|
| 761,605 |
|
Total long-term debt |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 18,251 |
|
|
| 24,840 |
|
Total liabilities |
|
| 483,584 |
|
|
| 627,875 |
|
|
| 569,762 |
|
|
| 518,212 |
|
|
| 480,677 |
|
Accumulated deficit |
|
| (12,788 | ) |
|
| (2,514 | ) |
|
| (69,897 | ) |
|
| (228,492 | ) |
|
| (208,377 | ) |
Total stockholders' equity |
|
| 518,657 |
|
|
| 560,513 |
|
|
| 569,042 |
|
|
| 297,839 |
|
|
| 280,928 |
|
| As of | |||||||||||||||||||||||||||||
| October 2, 2021 | October 3, 2020 | September 28, 2019 | September 29, 2018 | September 30, 2017 | |||||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||||||
| Consolidated balance sheet data: | |||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | 640,101 | $ | 407,100 | $ | 338,641 | $ | 220,930 | $ | 130,595 | |||||||||||||||||||
| Working capital | 481,384 | 267,362 | 276,635 | 201,243 | 78,203 | ||||||||||||||||||||||||
| Total assets | 1,138,804 | 816,051 | 761,605 | 587,498 | 400,020 | ||||||||||||||||||||||||
| Total long-term debt | — | 18,251 | 24,840 | 33,097 | 39,600 | ||||||||||||||||||||||||
| Total liabilities | 569,762 | 518,212 | 480,677 | 379,140 | 309,652 | ||||||||||||||||||||||||
| Redeemable convertible preferred stock | — | — | — | — | 90,341 | ||||||||||||||||||||||||
| Accumulated deficit | (69,897) | (228,492) | (208,377) | (203,611) | (188,007) | ||||||||||||||||||||||||
| Total stockholders' equity | 569,042 | 297,839 | 280,928 | 208,358 | 27 | ||||||||||||||||||||||||
We define adjusted EBITDA as net income (loss) adjusted to exclude the impact of depreciation and amortization, stock-based compensation expense, interest income, interest expense, other income (expense), income taxes, and other items that we do not consider representative of underlying operating performance.We define adjusted EBITDA margin as adjusted EBITDA divided by revenue.
Adjusted EBITDA and adjusted EBITDA margin are non-GAAP financial measures, and should not be considered in isolation of, or as an alternative to, measures prepared in accordance with U.S. GAAP. There are a number of limitations related to the use of adjusted EBITDA rather than net income (loss), which is the nearest U.S. GAAP equivalent of adjusted EBITDA, and the use of adjusted EBITDA margin rather than operatingnet income (loss) margin, which is the nearest U.S. GAAP equivalent of adjusted EBITDA margin. These limitations include that the non-GAAP financial measures:
34
Because of these limitations, these non-GAAP financial measures should be considered along with other operating and financial performance measures presented in accordance with U.S. GAAP.
| Fiscal Year Ended | |||||||||||||||||||||||||||||
| October 2, 2021 | October 3, 2020 | September 28, 2019 | September 29, 2018 | September 30, 2017 | |||||||||||||||||||||||||
| (In thousands, except percentages) | |||||||||||||||||||||||||||||
| Net income (loss) | $ | 158,595 | $ | (20,115) | $ | (4,766) | $ | (15,604) | $ | (14,217) | |||||||||||||||||||
| Depreciation and amortization | 33,882 | 36,426 | 36,415 | 39,358 | 35,014 | ||||||||||||||||||||||||
| Stock-based compensation expense | 62,127 | 57,610 | 46,575 | 38,645 | 36,550 | ||||||||||||||||||||||||
| Interest income | (146) | (1,998) | (4,349) | (731) | (120) | ||||||||||||||||||||||||
| Interest expense | 592 | 1,487 | 2,499 | 5,242 | 4,380 | ||||||||||||||||||||||||
| Other (income) expense, net | (2,407) | (6,639) | 8,625 | 1,162 | (3,361) | ||||||||||||||||||||||||
| Provision for (benefit from) income taxes | (1,670) | 32 | 3,690 | 1,056 | (2,291) | ||||||||||||||||||||||||
Restructuring and related expenses (1) | (2,446) | 26,285 | — | — | — | ||||||||||||||||||||||||
Legal and transaction related costs (2) | 30,058 | 15,455 | — | — | — | ||||||||||||||||||||||||
| Adjusted EBITDA | $ | 278,585 | $ | 108,543 | $ | 88,689 | $ | 69,128 | $ | 55,955 | |||||||||||||||||||
| Revenue | $ | 1,716,744 | $ | 1,326,328 | $ | 1,260,823 | $ | 1,137,008 | $ | 992,526 | |||||||||||||||||||
| Adjusted EBITDA margin | 16.2 | % | 8.2 | % | 7.0 | % | 6.1 | % | 5.6 | % | |||||||||||||||||||
| Fiscal Year Ended |
| ||||||||||||||||||
| September 30, |
|
| October 1, |
|
| October 2, |
|
| October 3, |
|
| September 28, |
| ||||||
(In thousands, except percentages) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net income (loss) |
| $ | (10,274 | ) |
| $ | 67,383 |
|
| $ | 158,595 |
|
| $ | (20,115 | ) |
| $ | (4,766 | ) |
Add (deduct): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Depreciation and amortization |
|
| 48,969 |
|
|
| 38,504 |
|
|
| 33,882 |
|
|
| 36,426 |
|
|
| 36,415 |
|
Stock-based compensation expense |
|
| 76,857 |
|
|
| 75,640 |
|
|
| 62,127 |
|
|
| 57,610 |
|
|
| 46,575 |
|
Interest income |
|
| (10,201 | ) |
|
| (1,655 | ) |
|
| (146 | ) |
|
| (1,998 | ) |
|
| (4,349 | ) |
Interest expense |
|
| 733 |
|
|
| 552 |
|
|
| 592 |
|
|
| 1,487 |
|
|
| 2,499 |
|
Other (income) expense, net |
|
| (15,473 | ) |
|
| 21,905 |
|
|
| (2,407 | ) |
|
| (6,639 | ) |
|
| 8,625 |
|
Provision for (benefit from) income taxes |
|
| 14,668 |
|
|
| 1,347 |
|
|
| (1,670 | ) |
|
| 32 |
|
|
| 3,690 |
|
Legal and transaction related costs (1) |
|
| 32,950 |
|
|
| 22,873 |
|
|
| 30,058 |
|
|
| 15,455 |
|
|
| — |
|
Restructuring, abandonment, and related expenses(2) |
|
| 15,649 |
|
|
| — |
|
|
| (2,446 | ) |
|
| 26,285 |
|
|
| — |
|
Adjusted EBITDA |
| $ | 153,878 |
|
| $ | 226,549 |
|
| $ | 278,585 |
|
| $ | 108,543 |
|
| $ | 88,689 |
|
Revenue |
|
| 1,655,255 |
|
|
| 1,752,336 |
|
|
| 1,716,744 |
|
|
| 1,326,328 |
|
|
| 1,260,823 |
|
Net income (loss) margin |
|
| (0.6 | )% |
|
| 3.8 | % |
|
| 9.2 | % |
|
| (1.5 | )% |
|
| (0.4 | )% |
Adjusted EBITDA margin |
|
| 9.3 | % |
|
| 12.9 | % |
|
| 16.2 | % |
|
| 8.2 | % |
|
| 7.0 | % |
Revenue
| Fiscal Year Ended | Change from Prior Fiscal Year | ||||||||||||||||||||||
| October 2, 2021 | October 3, 2020 | $ | % | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Sonos speakers | $ | 1,378,808 | $ | 1,034,813 | $ | 343,995 | 33.2 | % | |||||||||||||||
| Sonos system products | 265,180 | 218,788 | 46,392 | 21.2 | |||||||||||||||||||
| Partner products and other revenue | 72,756 | 72,727 | 29 | — | |||||||||||||||||||
| Total revenue | $ | 1,716,744 | $ | 1,326,328 | $ | 390,416 | 29.4 | % | |||||||||||||||
| Volume data (products sold in thousands) | Units | % | |||||||||||||||||||||
| Total products sold | 6,503 | 5,806 | 697 | 12.0 | |||||||||||||||||||
| Fiscal Year Ended |
|
| Change from Prior Fiscal Year |
| |||||||||||
| September 30, |
|
| October 1, |
|
| $ |
|
| % |
| |||||
(Dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Sonos speakers |
| $ | 1,293,440 |
|
| $ | 1,368,916 |
|
| $ | (75,476 | ) |
|
| (5.5 | )% |
Sonos system products |
|
| 285,064 |
|
|
| 297,110 |
|
|
| (12,046 | ) |
|
| (4.1 | ) |
Partner products and other revenue |
|
| 76,751 |
|
|
| 86,310 |
|
|
| (9,559 | ) |
|
| (11.1 | ) |
Total revenue |
| $ | 1,655,255 |
|
| $ | 1,752,336 |
|
| $ | (97,081 | ) |
|
| (5.5 | )% |
Volume data (products sold in thousands) |
|
|
|
|
|
|
| Units |
|
| % |
| ||||
Total products sold |
|
| 5,725 |
|
|
| 6,281 |
|
|
| (556 | ) |
|
| (8.9 | )% |
Total revenue increased $390.4decreased $97.1 million, or 29.4%5.5%, for fiscal 20212023, compared to fiscal 2020.2022. The 53rd weekdecrease was mainly driven by reduced orders from retail and installer solutions partners as they tightened channel inventory positions, as well as demand softening in fiscal 2020 added approximately $25.0 million in fiscal 2020 revenue. Excluding the 53rd week in fiscal 2020, revenue increased approximately 31.9% for fiscal 2021 comparedlater part of the year and the unfavorable impact of foreign exchange rates. These impacts were further exacerbated by an unfavorable comparison to fiscal 2020.2022, during which we experienced significant fulfillment of backorders as supply began to improve following a long period of supply constraints. The increaseoverall decrease was driven by strong overall demand across all our product categories and the success of new product launches, partially offset by the impactstrong performance of constrainedour new product availability.
The volume of products sold decreased 8.9% for fiscal 20212023, compared to fiscal 2020 was2022, driven by growth in Sonos speakers and Sonos system products.unit decreases across all categories. The rate of increasedecrease of volume of products sold andwas larger than the rate of decrease of revenue differed for fiscal 20212023, compared to fiscal 20202022, primarily due to product and channel mix onlarge decreases in products with lower selling prices which contributed a smaller corresponding decrease in revenue. This volume growth was partially offset
Revenue by volume declines by IKEA that slowed ordering modules due to impacts of COVID-19 and as a result of the cyclical product launches.
| Fiscal Year Ended |
|
| Change from Prior Fiscal Year |
|
|
|
| ||||||||||||
| September 30, |
|
| October 1, |
|
| $ |
|
| % |
|
| Constant Currency |
| ||||||
(Dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Americas |
| $ | 1,048,245 |
|
| $ | 1,044,113 |
|
| $ | 4,132 |
|
|
| 0.4 | % |
|
| 1.5 | % |
EMEA |
|
| 518,179 |
|
|
| 578,034 |
|
|
| (59,855 | ) |
|
| (10.4 | ) |
|
| (6.8 | ) |
APAC |
|
| 88,831 |
|
|
| 130,189 |
|
|
| (41,358 | ) |
|
| (31.8 | ) |
|
| (25.8 | ) |
Total revenue |
| $ | 1,655,255 |
|
| $ | 1,752,336 |
|
| $ | (97,081 | ) |
|
| (5.5 | )% |
|
| (3.3 | )% |
| Fiscal Year Ended | Change from Prior Fiscal Year | ||||||||||||||||||||||
| October 2, 2021 | October 3, 2020 | $ | % | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Cost of revenue | $ | 906,750 | $ | 754,372 | $ | 152,378 | 20.2 | % | |||||||||||||||
| Percentage of revenue | 52.8 | % | 56.9 | % | |||||||||||||||||||
| Gross profit | $ | 809,994 | $ | 571,956 | $ | 238,038 | 41.6 | % | |||||||||||||||
| Gross margin | 47.2 | % | 43.1 | % | |||||||||||||||||||
| Fiscal Year Ended |
|
| Change from Prior Fiscal Year |
| |||||||||||
| September 30, |
|
| October 1, |
|
| $ |
|
| % |
| |||||
(Dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cost of revenue |
| $ | 938,765 |
|
| $ | 955,969 |
|
| $ | (17,204 | ) |
|
| (1.8 | )% |
Percentage of revenue |
|
| 56.7 | % |
|
| 54.6 | % |
|
|
|
|
|
| ||
Gross profit |
| $ | 716,490 |
|
| $ | 796,367 |
|
| $ | (79,877 | ) |
|
| (10.0 | )% |
Gross margin |
|
| 43.3 | % |
|
| 45.4 | % |
|
|
|
|
|
| ||
Cost of revenue increased $152.4decreased $17.2 million, or 20.2%1.8%, from $754.4 million for fiscal 2020 to $906.8 million for fiscal 2021. The increase in cost of revenue was driven by the increase in products sold, as well as expedited air freight shipping, product mix, and an overall increase in shipping and logistics costs incurred related to industry-wide supply chain challenges. This increase was partially offset by a reduction in tariff expenses during the year, recognition of $18.3 million in refunds from tariffs paid in prior periods, product and material cost savings realized in the first quarter of fiscal 2021, and fixed cost leverage on higher sales volume.
Gross margin decreased 216 basis points for fiscal 2023, compared to fiscal 2022. The decrease was primarily due to higher promotional activity, higher general component costs, the unfavorable impact of foreign exchange rates, and higher inventory-related write-downs. The overall decrease was partially offset by lower shipping and logistics costs, the impact of planned selling price increases and decreased spot market component costs due to the United States from gross profit divided by total revenue.
Research and Development
| Fiscal Year Ended | Change from Prior Fiscal Year | ||||||||||||||||||||||
| October 2, 2021 | October 3, 2020 | $ | % | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Research and development | $ | 230,053 | $ | 209,598 | $ | 20,455 | 9.8 | % | |||||||||||||||
| Restructuring and related expenses | 25 | 5,074 | (5,049) | (99.5) | % | ||||||||||||||||||
| Total research and development | $ | 230,078 | $ | 214,672 | $ | 15,406 | 7.2 | % | |||||||||||||||
| Percentage of revenue | 13.4 | % | 16.2 | % | |||||||||||||||||||
| Fiscal Year Ended |
|
| Change from Prior Fiscal Year |
| |||||||||||
| September 30, |
|
| October 1, |
|
| $ |
|
| % |
| |||||
(Dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Research and development |
| $ | 294,445 |
|
| $ | 256,073 |
|
| $ | 38,372 |
|
|
| 15.0 | % |
Restructuring and abandonment costs |
|
| 6,556 |
|
|
| — |
|
|
| 6,556 |
|
| * |
| |
Total research and development |
| $ | 301,001 |
|
| $ | 256,073 |
|
| $ | 44,928 |
|
|
| 17.5 | % |
Percentage of revenue |
|
| 18.2 | % |
|
| 14.6 | % |
|
|
|
|
|
| ||
* not meaningful |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Research and development expenses increased $15.4$44.9 million, or 7.2%17.5%, for fiscal 20212023, compared to fiscal 2020. Excluding2022. This increase was primarily driven by $40.4 million of higher personnel-related expenses, stock-based compensation and overhead driven by increased headcount related to our continued execution on our product roadmap and category expansion, and the impact of $5.0$6.6 million of restructuring and relatedabandonment costs resulting from the 2023 restructuring plan.
Sales and Marketing
| Fiscal Year Ended |
|
| Change from Prior Fiscal Year |
| |||||||||||
| September 30, |
|
| October 1, |
|
| $ |
|
| % |
| |||||
(Dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Sales and marketing |
| $ | 261,883 |
|
| $ | 280,333 |
|
| $ | (18,450 | ) |
|
| (6.6 | )% |
Restructuring and abandonment costs |
|
| 5,635 |
|
|
| — |
|
|
| 5,635 |
|
| * |
| |
Total sales and marketing |
| $ | 267,518 |
|
| $ | 280,333 |
|
| $ | (12,815 | ) |
|
| (4.6 | )% |
Percentage of revenue |
|
| 16.2 | % |
|
| 16.0 | % |
|
|
|
|
|
| ||
* not meaningful |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Sales and marketing expenses for employee severance and benefit costs, site closures, and other costs related to the 2020 restructuring plan, research and development expensesdecreased $12.8 million, or 4.6%, for fiscal 20212023, compared to fiscal 2020 increased by 9.8%. The increase2022. This decrease was primarily due to higherdriven by lower marketing expenses of $28.0 million partially offset by an increase of $6.3 million in personnel-related expenses, of $12.4 millionstock-based compensation and overhead due to increased headcount, and higher bonus, stock-based compensation and related payroll taxes as well as an increase of $5.0 million in product development costs and professional fees. These increases were partially offset by the costs of diversifying our manufacturing into Malaysia in the prior year, and ongoing cost savings associated with the 2020 restructuring plan and a reduction of costs related to global travel restrictions and work-from-home policies due to COVID-19.
| Fiscal Year Ended | Change from Prior Fiscal Year | ||||||||||||||||||||||
| October 2, 2021 | October 3, 2020 | $ | % | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Sales and marketing | $ | 274,595 | $ | 243,751 | $ | 30,844 | 12.7 | % | |||||||||||||||
| Restructuring and related expenses | (2,471) | 19,788 | (22,259) | (112.5) | % | ||||||||||||||||||
| Total sales and marketing | $ | 272,124 | $ | 263,539 | $ | 8,585 | 3.3 | % | |||||||||||||||
| Percentage of revenue | 15.9 | % | 19.9 | % | |||||||||||||||||||
37
| Fiscal Year Ended | Change from Prior Fiscal Year | ||||||||||||||||||||||
| October 2, 2021 | October 3, 2020 | $ | % | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| General and administrative | $ | 152,828 | $ | 119,555 | $ | 33,273 | 27.8 | % | |||||||||||||||
| Restructuring and related expenses | — | 1,423 | (1,423) | (100.0) | % | ||||||||||||||||||
| Total general and administrative | $ | 152,828 | $ | 120,978 | $ | 31,850 | 26.3 | % | |||||||||||||||
| Percentage of revenue | 8.9 | % | 9.1 | % | |||||||||||||||||||
| Fiscal Year Ended |
|
| Change from Prior Fiscal Year |
| |||||||||||
| September 30, |
|
| October 1, |
|
| $ |
|
| % |
| |||||
(Dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
| ||||
General and administrative |
| $ | 165,060 |
|
| $ | 170,429 |
|
| $ | (5,369 | ) |
|
| (3.2 | )% |
Restructuring and abandonment costs |
|
| 3,458 |
|
|
| — |
|
|
| 3,458 |
|
| * |
| |
Total general and administrative |
| $ | 168,518 |
|
| $ | 170,429 |
|
| $ | (1,911 | ) |
|
| (1.1 | )% |
Percentage of revenue |
|
| 10.2 | % |
|
| 9.7 | % |
|
|
|
|
|
| ||
* not meaningful |
|
|
|
|
|
|
|
|
|
|
|
| ||||
General and administrative expenses increased $31.9decreased $1.9 million, or 26.3%1.1%, for fiscal 20212023, compared to fiscal 2020. Excluding the impact of $1.42022. The decrease was mainly due to $14.9 million of restructuringdecreased stock-based compensation expense and related expenses for employee severance and benefitlower overhead costs, site
| Fiscal Year Ended | Change from Prior Fiscal Year | ||||||||||||||||||||||
| October 2, 2021 | October 3, 2020 | $ | % | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Interest income | $ | 146 | $ | 1,998 | $ | (1,852) | (92.7)% | ||||||||||||||||
| Interest expense | $ | 592 | $ | 1,487 | $ | (895) | (60.2)% | ||||||||||||||||
| Other income, net | $ | 2,407 | $ | 6,639 | $ | (4,232) | (63.7)% | ||||||||||||||||
| Fiscal Year Ended |
|
| Change from Prior Fiscal Year |
| |||||||||||
| September 30, |
|
| October 1, |
|
| $ |
|
| % |
| |||||
(Dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Interest income |
| $ | 10,201 |
|
| $ | 1,655 |
|
| $ | 8,546 |
|
| * |
| |
Interest expense |
|
| (733 | ) |
|
| (552 | ) |
|
| (181 | ) |
|
| 32.80 | % |
Other income (expense), net |
|
| 15,473 |
|
|
| (21,905 | ) |
|
| 37,378 |
|
| * |
| |
Total other income (expense), net |
| $ | 24,941 |
|
| $ | (20,802 | ) |
| $ | 45,743 |
|
| * |
| |
* not meaningful |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Interest income decreased by $1.9 million, from $2.0 million for fiscal 20202023, compared to $0.1 million for fiscal 2021,2022, increased due to lowerhigher yields inon our cash and cash equivalents during fiscal 2021.
Provision for Income Taxes
| Fiscal Year Ended |
|
| Change from Prior Fiscal Year | ||||||||||
| September 30, |
|
| October 1, |
|
| $ |
|
| % | ||||
(Dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
| |||
Provision for income taxes |
| $ | 14,668 |
|
| $ | 1,347 |
|
| $ | 13,321 |
|
| * |
* not meaningful |
|
|
|
|
|
|
|
|
|
|
| |||
For the fiscal year ended September 30, 2023, our U.S. tax expense was adversely impacted by the requirement to capitalize and amortize research and development expenses under Section 174 of the U.S. Internal Revenue Code (“Section 174”) as we recorded a U.S. current tax expense with no corresponding deferred tax benefit due to the timing of unrealized foreign currency exchange gains.
| Fiscal Year Ended | Change from Prior Fiscal Year | ||||||||||||||||||||||
| October 2, 2021 | October 3, 2020 | $ | % | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Provision for (benefit from) income taxes | $ | (1,670) | $ | 32 | $ | (1,702) | * | ||||||||||||||||
| * not meaningful | |||||||||||||||||||||||
Comparison of Fiscal Years 20202022 and 2019
For the comparison of fiscal years 20202022 and 2019,2021, refer to Part II, Item 7 "Management's discussion and analysis of financial condition and results of operations" on Form 10-K for our fiscal year ended October 3, 2020,1, 2022, filed with the SEC on November 23, 2020,2022, under the subheading "Comparison of fiscal years 20202022 and 2019.2021."
Our operations are financed primarily through cash flows from operating activities and net proceeds from the sale of our equity securities. As of October 2, 2021,September 30, 2023, our principal sources of liquidity consisted of cash flows from operating activities,
On October 13, 2021, we repaid allentered into the Revolving Credit Agreement. The Revolving Credit Agreement provides for (i) a five-year senior secured revolving credit facility in the amount of our outstanding principal balance of $24.9 million under the Term Loan which had an original maturity date of October 28, 2021. As of October 2, 2021, we did not have any remaining short- or long-term debt obligations, and as of October 3, 2020, our short- and long-term debt obligations were as follows:
| October 3, 2020 | |||||||||||
| Rate | Balance | ||||||||||
| (In thousands, except percentages) | |||||||||||
Term Loan (1) | 2.4 | % | $ | 25,000 | |||||||
Unamortized debt issuance costs (2) | (82) | ||||||||||
| Total indebtedness | 24,918 | ||||||||||
| Less short term portion | (6,667) | ||||||||||
| Long-term debt | $ | 18,251 | |||||||||
Cash Flows
| Fiscal Year Ended | |||||||||||
| October 2, 2021 | October 3, 2020 | ||||||||||
| (In thousands) | |||||||||||
| Net cash provided by (used in): | |||||||||||
| Operating activities | $ | 253,226 | $ | 161,986 | |||||||
| Investing activities | (45,531) | (69,324) | |||||||||
| Financing activities | 24,967 | (27,091) | |||||||||
| Effect of exchange rate changes | 148 | 2,900 | |||||||||
| Net increase in cash, cash equivalents and restricted cash | $ | 232,810 | $ | 68,471 | |||||||
| Fiscal Year Ended |
| ||||||
| September 30, |
|
| October 1, |
| |||
(In thousands) |
|
|
|
|
|
| ||
Net cash provided by (used in): |
|
|
|
|
|
| ||
Operating activities |
| $ | 100,406 |
|
| $ | (28,260 | ) |
Investing activities |
|
| (50,286 | ) |
|
| (172,632 | ) |
Financing activities |
|
| (108,592 | ) |
|
| (150,260 | ) |
Effect of exchange rate changes |
|
| 3,848 |
|
|
| (14,094 | ) |
Net decrease in cash, cash equivalents and restricted cash |
| $ | (54,624 | ) |
| $ | (365,246 | ) |
39
Cash Flows from Operating Activities
Net cash provided by operating activities of $253.2$100.4 million for fiscal 20212023 consisted of net incomeloss of $158.6$10.3 million, non-cash adjustments of $92.1$149.6 million and a net increasedecrease in cash related to changes in operating assets and liabilities of $2.6$38.9 million.Non-cash adjustments primarily consisted of stock-based compensation expense of $62.1$76.9 million, depreciation and amortization of $33.9$49.0 million,and impairment provision for inventory obsolescence of $20.6 million, restructuring and abandonment charges of $3.6$5.5 million, and other adjustments of $5.5 million, partially offset by foreign currency transaction gains of $7.3 million.The net increasedecrease in net operating assets and liabilities was primarily due to an increase in accrued compensation of $33.4 millionprimarily due to an increase in bonuses, an increase in deferred revenue of $27.6 million, and an increasea decreases in accounts payable and accrued expenses of $26.2 million.$162.3 million due to lower inventory purchases, a decrease in deferred revenue of $4.6 million, and a decrease in accrued compensation of $2.2 million due to lower accrued variable compensation. The increasenet decrease in netcash from the change in operating assets and liabilities was partially offset by an increaselower inventory balances of $87.0 million as a result of improved inventory management, a decrease in accounts receivable of $45.7$32.1 million, driven by revenue growth, an increaseand a decrease in other assets of $30.0$10.5 million primarily due to capitalized costs for activities to replace our legacy enterprise resource management system, as well as deferred costs for newly launched products sold not recognized until reaching the date of general availability, an increase in inventory of $7.9 million as well asdriven by a decrease in other liabilities $1.1 million.prepaid expenses.
Cash used in investing activities for fiscal 20212023 of $45.5$50.3 million wasconsisted primarily dueof purchases of property and equipment mainly related to payments for property, equipmentpoint-of-sale product displays and other assets. Payments for property, equipment, and intangible assets were primarily comprised of manufacturing-related tooling and test equipment to support the launch of new products as well as other assets.
Cash Flows from Financing Activities
Cash provided byused in financing activities for fiscal 20212023 of $25.0$108.6 million wasconsisted primarily by proceeds from the exercise of stock options of $147.8 million, partially offset by $50.0 million for payments for repurchasesrepurchase of common stock $47.8of $100.1 million, for payments for repurchasesrepurchase of common stock related to shares withheld for taxes associatedtax in connection with vesting of RSUs as well as repayments for borrowings of $25.0$29.9 million, partially offset by proceeds from exercise of common stock options of $21.3 million.
| Payments due by period | ||||||||||||||||||||||||||||||||
| Total | < 1 year | 1-3 years | 3-5 years | More than 5 years | ||||||||||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||||||||||
Operating leases (1) | $ | 49,692 | $ | 13,407 | $ | 25,431 | $ | 10,720 | $ | 134 | ||||||||||||||||||||||
Inventory-related purchase obligations (2) | 92,488 | 92,488 | — | — | — | |||||||||||||||||||||||||||
Other purchase obligations (3) | 57,112 | 32,447 | 24,665 | — | — | |||||||||||||||||||||||||||
| Total | $ | 199,292 | $ | 138,342 | $ | 50,096 | $ | 10,720 | $ | 134 | ||||||||||||||||||||||
See Note 6. Leases and Note 12. Commitments and Contingencies of the notes to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for further information.
(3)Our other purchase obligations consist of non-cancelable obligations related to software, advertising, and telecommunication services, and other activities.
Our consolidated financial statements are prepared in accordance with U.S. GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ materially from those estimates.
Our critical accounting policies requiring estimates, assumptions and judgments that we believe have the most significant impact on our consolidated financial statements are described below.
Revenue Recognition
We generate substantially all of our revenue primarily includes salesfrom the sale of Sonos speakers and Sonos system products, which include software that enables our products to operate over a customer’s wireless network as well as connect to various third-party services, including music and voice.products. We also generate a small portion of revenue from partner products and other revenue sources, such as module revenue from our IKEA partnership, architectural speakers from our Sonance partnership, and accessories such as speaker stands and wall mounts, as well as professional services, advertising revenue, licensing and advertising revenue. Modulesubscription revenue is comprisedsuch as Sonos Radio HD and Sonos Pro (software-as-a-service).
40
Our contracts generally include a combination of products and related software, and services. Products and related software primarily constitute Sonos speakers and Sonos system products and include software that enables our products to operate over a customer’s wireless network as well as connect to various third-party services, including music and voice. Additionally, module revenue includes hardware and embedded software that is integrated into final products that are manufactured and sold by our partners. Our software primarily consists of firmware embedded in the products and the Sonos app, which is software that can be downloaded to consumer devices at no charge, with or without the purchase of one of our products. Products and related software are accounted for as a single performance obligation and all intended functionality is available to the customer upon purchase. The revenue allocated to the products and related software is the substantial portion of the total sale price. Revenue is recognized at the point in time when control is transferred, which is either upon shipment or upon delivery to the customer, depending on delivery terms.
We determined that unspecified software upgrades represent a separate performance obligation as they occur subsequent to the time of purchase, fulfillment of these promises can be made separately, there are no resulting significant modification or customization to our products, and these services are provided to customers at no additional charge. We have also determined cloud-based services to be a separate performance obligation based as they are additive to our products rather than transformative.
Transaction price
Revenue is recognized at transaction price which is the amount that we expect to receive in exchange for our products and services. Transaction price is calculated as the stated consideration net of variable consideration such as allowances for returns, discounts, sales incentives, and any tax collected from customers. The transaction price is allocated to the separate performance obligations in the contract based on relative standalone selling priceprices ("SSP"SSPs") for each distinct performance obligation requires judgment. .
We estimate SSP for items that are not sold separately, which include the products and related software, unspecified software upgrades and cloud services, using information that may include competitive pricing information, where available, as well as analysis of the cost of providing the products or services plus a reasonable margin. In developing SSP estimates, we also consider the nature of the products and services and the expected level of future services.
We offer sales incentives through various programs, consisting primarily of discounts, cooperative advertising and market development fund programs. Reductions in revenue related to discounts are allocated to products and services on a relative basis based on their respective SSP. Estimates for sales incentives are developed using the most likely amount based on our past experience with similar contracts and are included in the transaction price to the extent that a significant reversal of revenue would not result once the uncertainty is resolved.
We accept returns from direct customers and from certain resellers. To establish an estimate for returns, we use the expected value method by considering a portfolio of contracts with similar characteristics to calculate the historical returns rate.
A change in contract, future business initiatives, or customer behavior due to macroeconomic conditions could require us to change the above estimates, or if actual results differ significantly from the estimates, we would be required to increase or reduce revenue to reflect the impact.
Revenue Recognition
Revenue is allocated to products and related software, and to unspecified software upgrades and cloud-based services. Revenue allocated to the products and related software is the substantial portion of the total sale price. Revenue for products and related software is recognized at the point in time when control is transferred to the customer, which is either upon shipment or upon delivery to the customer, depending on delivery terms.
Revenue allocated to unspecified software upgrades and cloud-based services is deferred and recognized ratably over our best estimate of the period that the customer is expected to receive the services. Determining the revenue recognition period for unspecified software upgrades and cloud services requires judgment. We recognize revenue attributable to these performance obligations ratably over the best estimate of the period that the customer is expected to receive the services. In developing the estimated period of providing future services, we consider our past history, our plans to continue to provide services, including plans to continue to support updates and enhancements to prior versions of our products, expected technological developments, obsolescence, competition and other factors. The estimated service period may change in the future in response to competition, technology developments and our business strategy.
41
For fiscal 2023, there has not been any event that would require us to cooperative advertising and market development fund programs with customers as a reductionmaterially change the underlying assumptions of revenue estimates. A hypothetical 10% change to revenue unless we receive a distinct benefit in exchange for credits claimed by the customer and can reasonably estimate the fair value of the benefit received, in which case we record them as operating expenses. We recognize a liability, our SSP estimates and/or a reduction to accounts receivable, and reduce revenue for sales incentives based on the estimated amount of sales incentives that will be claimed by customers. Estimatesrecognition period for sales incentives are developed using the most likely amountunspecified software upgrades and are included in the transaction price to the extent that a significant reversal of revenuecloud-based services, would not result once the uncertainty is resolved. In developingin a material change to our estimates, we also consider the susceptibility of the incentive to outside influences, the length of time until the uncertainty is resolved, our experience with similar contracts, and the range of possible outcomes. Reductions in revenue related to discounts are allocated to products and services on a relative basis based on their respective SSP. Judgment is required to determine the timing and amount of recognition of marketing funds, which we estimate based on past practice of providing similar funds.
We prepare and file income tax returns based on our interpretation of each jurisdiction’s tax laws and regulations. In preparing our consolidated financial statements, we estimate our income tax liability in each of the jurisdictions in which we operate by estimating our actual current tax expense together with assessing temporary differences resulting from differing treatment of items for tax and financial reporting purposes. These differences result in deferred tax assets and liabilities, which are included in our consolidated balance sheets. Significant management judgment is required in assessing the realizability of our deferred tax assets. In performing this assessment, we consider whether it is "more-likely-than-not" that some portion or all the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. In making this determination, we consider the scheduled reversal of deferred tax liabilities, projected future taxable income and the effects of tax planning strategies. We recorded a valuation allowance against all our U.S. deferred tax assets and certain of our foreign deferred tax assets as of October 2, 2021.September 30, 2023. We intend to continue maintaining a full valuation allowance on our U.S. and certain foreign deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of these allowances.
We account for uncertain tax positions using a "more-likely-than-not" threshold for recognizing and resolving uncertain tax positions. We evaluate uncertain tax positions on a quarterly basis and consider various factors, that include, but are not limited to, changes in tax law, the measurement of tax positions taken or expected to be taken in tax returns, the effective settlement of matters subject to audit, information obtained during in process audit activities and changes in facts or circumstances related to a tax position. We accrue for potential interest and penalties related to unrecognized tax benefits in income tax expense.
Our policy with respect to the undistributed earnings of our non-U.S. subsidiaries is to maintain an indefinite reinvestment assertion as they are required to fund needs outside of the United States. This assertion is made on a jurisdiction by jurisdiction basis and takes into account the liquidity requirements in both the United States and of our foreign subsidiaries.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Risk
To date, we have not been exposed, nor do we anticipate being exposed, to material risks due to changes in interest rates. A hypothetical 10% change in interest rates during any of the periods presented would not have had a material impact on our consolidated financial statements.
Foreign Currency Risk
We do not currently use foreign exchange contracts or derivatives to hedge any foreign currency exposures. The volatility of exchange rates depends on many factors that we cannot forecast with reliable accuracy. Our continued international expansion increases our exposure to exchange rate fluctuations and, as a result, such fluctuations could have a significant impact on our future results of operations.
See Note 2. Summary of Significant Accounting Policies of the notes to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for a discussion of recent accounting pronouncements.
43
Item 8. Financial Statements and Supplementary Data
44
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Sonos, Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Sonos, Inc. and its subsidiaries (the “Company”) as of October 2, 2021September 30, 2023 and October 3, 2020,1, 2022, and the related consolidated statements of operations and comprehensive income (loss), of stockholders’ equity and of cash flows for each of the three years in the period ended October 2, 2021,September 30, 2023, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of October 2, 2021,September 30, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of October 2, 2021September 30, 2023 and October 3, 2020,1, 2022, and the results of its operations and its cash flows for each of the three years in the period ended October 2, 2021September 30, 2023 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of October 2, 2021,September 30, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Annual Report on Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
45
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Revenue Recognition - Estimates of Standalone Selling Price and Service Period for Unspecified Software Upgrades and Cloud-Based Services
As described in Notes 2 and 5 to the consolidated financial statements, the Company’s contracts with customers generally contain promises to transfer products and services which are not sold separately. Service revenue includes revenue allocated to (i) unspecified software upgrades and (ii) cloud-based services, which are each distinct performance obligations, based on relative standalone selling price. Management’s estimation of standalone selling price requires judgment. Management has disclosed that there are factors considered in estimating standalone selling price including competitive pricing information, where available, analyses of the cost of providing the products or services plus a reasonable gross margin, the nature of the products and services and the expected level of future services. Determining the revenue recognition period for unspecified software upgrades and cloud-based services also requires judgment. Management recognizes revenue attributable to these performance obligations ratably over the estimated service period. In developing the estimated service period over which to recognize service revenue, management considers past history, plans to continue to provide services, including plans to continue to support updates and enhancements to prior versions of the Company’s products, expected technological developments, obsolescence, competition and other factors. Deferred revenue primarily relates to revenue allocated to unspecified software upgrades and cloud-based services and was $70.4$80 million as of October 2, 2021.
The principal considerations for our determination that performing procedures relating to revenue recognition, - specifically estimationestimates of standalone selling pricesprice and service period attributable tofor unspecified software upgrades and cloud-based services, - is a critical audit matter as there wasare the significant judgment by management in estimating the standalone selling price and the service period. Thisperiod, which in turn led to significant auditor judgment, subjectivity, and audit effort in performing procedures and evaluating audit evidence relating to (i) management’s estimates of standalone selling price made by management, includingconsidering estimates of the cost of providing the services plus a reasonable gross margin, and (ii) management’s assumptions in estimating theestimates of service period includingby considering management’s plans to continue to support updates and enhancements to prior versions of the Company’s products.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the revenue recognition process, including over the estimation of the standalone selling prices and service period for unspecified software upgrades and cloud-based services. The procedures also included, among others, testing management’s process for estimating the standalone selling price and service period. Procedures performedto test management's process for the estimates ofestimating standalone selling price included (i) evaluating the appropriateness of management’s cost plus gross margin method of estimating standalone selling priceprice; (ii) comparing the estimate of standalone selling price to competitive pricing information for comparable services using publicly disclosed information; (iii) evaluating the reasonableness of estimates of the cost of providing the services; and (iv) evaluating the reasonableness of gross margin assumption.margins. Evaluating the reasonableness of estimates of the cost of providing the services involved (i) testing the allocation of engineering costs, which is driven by time spent on software upgrades and cloud-based services;services and (ii) testing the completeness, accuracy, relevance, and classification of the engineering costs. Evaluating the reasonableness of the gross margin assumptionmargins involved comparing management’s gross margin to the gross margin earned for similar services by third party peer companies within the same industry. Procedures were also performed to test management’smanagement's process for estimating the service period for these services includingincluded (i) testing the completeness and accuracy of underlying data on which the estimate is based. This includedand (ii) evaluating the reasonableness of management’smanagement's plans to continue to support updates and enhancements to prior versions of the Company’sCompany's products through a look-back analysis performed using historical software updates, as well as considering currently active products receiving software updates.
/s/ PricewaterhouseCoopers LLP
Los Angeles, California
November 22, 2021
46
SONOS, INC.
Consolidated Balance Sheets
(in thousands, except share and par values)As of October 2,
2021October 3,
2020Assets Current assets: Cash and cash equivalents $ 640,101 $ 407,100 Restricted cash — 191 Accounts receivable, net of allowances of $20,707 and $18,822 as of October 2, 2021, and October��3, 2020 100,779 54,935 Inventories 185,130 180,830 Prepaid and other current assets 31,504 17,321 Total current assets 957,514 660,377 Property and equipment, net 71,341 60,784 Operating lease right-of-use assets 33,841 42,342 Goodwill 15,545 15,545 Intangible assets, net 24,450 26,394 Deferred tax assets 10,028 1,800 Other noncurrent assets 26,085 8,809 Total assets $ 1,138,804 $ 816,051 Liabilities and stockholders’ equity Current liabilities: Accounts payable $ 214,996 $ 250,328 Accrued expenses 108,029 45,049 Accrued compensation 77,695 44,517 Short-term debt — 6,667 Deferred revenue, current 35,866 15,304 Other current liabilities 39,544 31,150 Total current liabilities 476,130 393,015 Operating lease liabilities, noncurrent 33,960 50,360 Long-term debt — 18,251 Deferred revenue, noncurrent 53,632 47,085 Deferred tax liabilities 2,394 2,434 Other noncurrent liabilities 3,646 7,067 Total liabilities 569,762 518,212 Commitments and contingencies (Note 12) 0 0 Stockholders’ equity: Common stock, $0.001 par value; 500,000,000 and 500,000,000 shares authorized, 128,857,085 and 113,915,233 shares issued, 126,985,273 and 112,344,095 shares outstanding as of October 2, 2021, and October 3, 2020, respectively 129 114 Treasury stock, 1,871,812 and 1,571,138 shares at cost as of October 2, 2021, and October 3, 2020, respectively (50,276) (20,886) Additional paid-in capital 690,462 548,993 Accumulated deficit (69,897) (228,492) Accumulated other comprehensive loss (1,376) (1,890) Total stockholders' equity 569,042 297,839 Total liabilities and stockholders’ equity $ 1,138,804 $ 816,051
| As of |
| ||||||
| September 30, |
|
| October 1, |
| |||
|
|
|
|
|
|
| ||
Assets |
|
|
|
|
|
| ||
Current assets: |
|
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 220,231 |
|
| $ | 274,855 |
|
Accounts receivable, net of allowances of $31,786 and $26,317 as of September 30, 2023, and October 1, 2022, respectively |
|
| 67,583 |
|
|
| 101,206 |
|
Inventories |
|
| 346,521 |
|
|
| 454,288 |
|
Prepaid and other current assets |
|
| 25,296 |
|
|
| 37,042 |
|
Total current assets |
|
| 659,631 |
|
|
| 867,391 |
|
Property and equipment, net |
|
| 87,075 |
|
|
| 86,168 |
|
Operating lease right-of-use assets |
|
| 48,918 |
|
|
| 28,329 |
|
Goodwill |
|
| 80,420 |
|
|
| 77,300 |
|
Intangible assets, net: |
|
|
|
|
|
| ||
In-process research and development |
|
| 69,791 |
|
|
| 64,680 |
|
Other intangible assets |
|
| 20,218 |
|
|
| 26,384 |
|
Deferred tax assets |
|
| 1,659 |
|
|
| 1,508 |
|
Other noncurrent assets |
|
| 34,529 |
|
|
| 36,628 |
|
Total assets |
| $ | 1,002,241 |
|
| $ | 1,188,388 |
|
Liabilities and stockholders’ equity |
|
|
|
|
|
| ||
Current liabilities: |
|
|
|
|
|
| ||
Accounts payable |
| $ | 187,981 |
|
| $ | 335,758 |
|
Accrued expenses |
|
| 89,717 |
|
|
| 109,290 |
|
Accrued compensation |
|
| 22,079 |
|
|
| 23,624 |
|
Deferred revenue, current |
|
| 20,188 |
|
|
| 27,318 |
|
Other current liabilities |
|
| 34,253 |
|
|
| 39,649 |
|
Total current liabilities |
|
| 354,218 |
|
|
| 535,639 |
|
Operating lease liabilities, noncurrent |
|
| 54,956 |
|
|
| 25,596 |
|
Deferred revenue, noncurrent |
|
| 60,650 |
|
|
| 56,152 |
|
Deferred tax liabilities |
|
| 9,846 |
|
|
| 9,642 |
|
Other noncurrent liabilities |
|
| 3,914 |
|
|
| 846 |
|
Total liabilities |
|
| 483,584 |
|
|
| 627,875 |
|
Commitments and contingencies (Note 12) |
|
|
|
|
|
| ||
Stockholders’ equity: |
|
|
|
|
|
| ||
Common stock, $0.001 par value; 500,000,000 shares authorized, 130,399,940 and 129,823,663 shares issued, 125,113,916 and 126,668,723 shares outstanding as of September 30, 2023, and October 1, 2022, respectively |
|
| 130 |
|
|
| 130 |
|
Treasury stock, 5,286,024 and 3,154,940 shares at cost as of September 30, 2023 and October 1, 2022, respectively |
|
| (72,586 | ) |
|
| (50,896 | ) |
Additional paid-in capital |
|
| 607,345 |
|
|
| 617,390 |
|
Accumulated deficit |
|
| (12,788 | ) |
|
| (2,514 | ) |
Accumulated other comprehensive loss |
|
| (3,444 | ) |
|
| (3,597 | ) |
Total stockholders' equity |
|
| 518,657 |
|
|
| 560,513 |
|
Total liabilities and stockholders’ equity |
| $ | 1,002,241 |
|
| $ | 1,188,388 |
|
The accompanying notes are an integral part of these consolidated financial statements.
47
SONOS, INC.
Consolidated Statements of Operations and Comprehensive Income (Loss)
(in thousands, except share and per share data)
| Year Ended | |||||||||||||||||
| October 2, 2021 | October 3, 2020 | September 28, 2019 | |||||||||||||||
| Revenue | $ | 1,716,744 | $ | 1,326,328 | $ | 1,260,823 | |||||||||||
| Cost of revenue | 906,750 | 754,372 | 733,480 | ||||||||||||||
| Gross profit | 809,994 | 571,956 | 527,343 | ||||||||||||||
| Operating expenses | |||||||||||||||||
| Research and development | 230,078 | 214,672 | 171,174 | ||||||||||||||
| Sales and marketing | 272,124 | 263,539 | 247,599 | ||||||||||||||
| General and administrative | 152,828 | 120,978 | 102,871 | ||||||||||||||
| Total operating expenses | 655,030 | 599,189 | 521,644 | ||||||||||||||
| Operating income (loss) | 154,964 | (27,233) | 5,699 | ||||||||||||||
| Other income (expense), net | |||||||||||||||||
| Interest income | 146 | 1,998 | 4,349 | ||||||||||||||
| Interest expense | (592) | (1,487) | (2,499) | ||||||||||||||
| Other income (expense), net | 2,407 | 6,639 | (8,625) | ||||||||||||||
| Total other income (expense), net | 1,961 | 7,150 | (6,775) | ||||||||||||||
| Income (loss) before provision for (benefit from) income taxes | 156,925 | (20,083) | (1,076) | ||||||||||||||
| Provision for (benefit from) income taxes | (1,670) | 32 | 3,690 | ||||||||||||||
| Net income (loss) | $ | 158,595 | $ | (20,115) | $ | (4,766) | |||||||||||
| Net income (loss) attributable to common stockholders: | |||||||||||||||||
| Basic | $ | 158,595 | $ | (20,115) | $ | (4,766) | |||||||||||
| Diluted | $ | 158,595 | $ | (20,115) | $ | (4,766) | |||||||||||
| Net income (loss) per share attributable to common stockholders: | |||||||||||||||||
| Basic | $ | 1.30 | $ | (0.18) | $ | (0.05) | |||||||||||
| Diluted | $ | 1.13 | $ | (0.18) | $ | (0.05) | |||||||||||
| Weighted-average shares used in computing net income (loss) per share attributable to common stockholders: | |||||||||||||||||
| Basic | 122,245,212 | 109,807,154 | 103,783,006 | ||||||||||||||
| Diluted | 140,309,152 | 109,807,154 | 103,783,006 | ||||||||||||||
| Total comprehensive income (loss) | |||||||||||||||||
| Net income (loss) | $ | 158,595 | $ | (20,115) | $ | (4,766) | |||||||||||
| Change in foreign currency translation adjustment | 514 | (1,826) | 1,613 | ||||||||||||||
| Comprehensive income (loss) | $ | 159,109 | $ | (21,941) | $ | (3,153) | |||||||||||
| Year Ended |
| ||||||||||
| September 30, |
|
| October 1, |
|
| October 2, |
| ||||
Revenue |
| $ | 1,655,255 |
|
| $ | 1,752,336 |
|
| $ | 1,716,744 |
|
Cost of revenue |
|
| 938,765 |
|
|
| 955,969 |
|
|
| 906,750 |
|
Gross profit |
|
| 716,490 |
|
|
| 796,367 |
|
|
| 809,994 |
|
Operating expenses |
|
|
|
|
|
|
|
|
| |||
Research and development |
|
| 301,001 |
|
|
| 256,073 |
|
|
| 230,078 |
|
Sales and marketing |
|
| 267,518 |
|
|
| 280,333 |
|
|
| 272,124 |
|
General and administrative |
|
| 168,518 |
|
|
| 170,429 |
|
|
| 152,828 |
|
Total operating expenses |
|
| 737,037 |
|
|
| 706,835 |
|
|
| 655,030 |
|
Operating income (loss) |
|
| (20,547 | ) |
|
| 89,532 |
|
|
| 154,964 |
|
Other income (expense), net |
|
|
|
|
|
|
|
|
| |||
Interest income |
|
| 10,201 |
|
|
| 1,655 |
|
|
| 146 |
|
Interest expense |
|
| (733 | ) |
|
| (552 | ) |
|
| (592 | ) |
Other income (expense), net |
|
| 15,473 |
|
|
| (21,905 | ) |
|
| 2,407 |
|
Total other income (expense), net |
|
| 24,941 |
|
|
| (20,802 | ) |
|
| 1,961 |
|
Income before provision for (benefit from) income taxes |
|
| 4,394 |
|
|
| 68,730 |
|
|
| 156,925 |
|
Provision for (benefit from) income taxes |
|
| 14,668 |
|
|
| 1,347 |
|
|
| (1,670 | ) |
Net income (loss) |
| $ | (10,274 | ) |
| $ | 67,383 |
|
| $ | 158,595 |
|
Net income (loss) attributable to common stockholders: |
|
|
|
|
|
|
|
|
| |||
Basic and diluted |
| $ | (10,274 | ) |
| $ | 67,383 |
|
| $ | 158,595 |
|
|
|
|
|
|
|
|
|
|
| |||
Net income (loss) per share attributable to common stockholders: |
|
|
|
|
|
|
|
|
| |||
Basic |
| $ | (0.08 | ) |
| $ | 0.53 |
|
| $ | 1.30 |
|
Diluted |
| $ | (0.08 | ) |
| $ | 0.49 |
|
| $ | 1.13 |
|
Weighted-average shares used in computing net income (loss) per share attributable to common stockholders: |
|
|
|
|
|
|
|
|
| |||
Basic |
|
| 127,702,885 |
|
|
| 127,691,030 |
|
|
| 122,245,212 |
|
Diluted |
|
| 127,702,885 |
|
|
| 137,762,078 |
|
|
| 140,309,152 |
|
Total comprehensive income (loss) |
|
|
|
|
|
|
|
|
| |||
Net income (loss) |
| $ | (10,274 | ) |
| $ | 67,383 |
|
| $ | 158,595 |
|
Change in foreign currency translation adjustment |
|
| 153 |
|
|
| (2,221 | ) |
|
| 514 |
|
Comprehensive income (loss) |
| $ | (10,121 | ) |
| $ | 65,162 |
|
| $ | 159,109 |
|
The accompanying notes are an integral part of these consolidated financial statements.
48
SONOS, INC.
Consolidated Statements of Stockholders’ Equity
(in thousands, except share amounts)Common Stock Additional
Paid-In
CapitalTreasury Stock Accumulated Deficit Accumulated Other Comprehensive Loss Total Stockholders' Equity Shares Amount Shares Amount Balance at September 29, 2018 100,868,250 $ 101 $ 424,617 (807,040) $ (11,072) $ (203,611) $ (1,677) $ 208,358 Issuance of common stock pursuant to equity incentive plans 8,755,167 9 31,565 — — — — 31,574 Repurchase of common stock — — — (213,735) (2,426) — — (2,426) Stock-based compensation expense — — 46,575 — — — — 46,575 Net loss — — — — — (4,766) — (4,766) Change in foreign currency translation adjustment — — — — — — 1,613 1,613 Balance at September 28, 2019 109,623,417 110 502,757 (1,020,775) (13,498) (208,377) (64) 280,928 Issuance of common stock pursuant to equity incentive plans 8,392,371 8 42,278 — — — — 42,286 Retirement of treasury stock (4,100,555) (4) (53,652) 4,100,555 53,656 — — — Repurchase of common stock — — — (3,787,783) (50,015) — — (50,015) Repurchase of common stock
related to shares withheld for tax
in connection with vesting of
restricted stock unit awards
("RSUs")— — — (863,135) (11,029) — — (11,029) Stock-based compensation expense — — 57,610 — — — — 57,610 Net loss — — — — — (20,115) — (20,115) Change in foreign currency translation adjustment — — — — — (1,826) (1,826) Balance at October 3, 2020 113,915,233 114 548,993 (1,571,138) (20,886) (228,492) (1,890) 297,839 Issuance of common stock pursuant to equity incentive plans 17,544,060 18 147,800 — — — — 147,818 Retirement of treasury stock (2,602,208) (3) (68,458) 2,602,208 68,461 — Repurchase of common stock — — — (1,394,006) (50,014) — — (50,014) Repurchase of common stock
related to shares withheld for tax
in connection with vesting of
restricted stock unit awards
("RSUs")— — — (1,508,876) (47,837) — — (47,837) Stock-based compensation expense — — 62,127 — — — — 62,127 Net income — — — — — 158,595 — 158,595 Change in foreign currency translation adjustment — — — — — 514 514 Balance at October 2, 2021 128,857,085 $ 129 $ 690,462 (1,871,812) $ (50,276) $ (69,897) $ (1,376) $ 569,042
| Common Stock |
|
|
|
|
| Treasury Stock |
|
|
|
|
|
|
|
|
|
| |||||||||||||||
| Shares |
|
| Amount |
|
| Additional |
|
| Shares |
|
| Amount |
|
| Accumulated Deficit |
|
| Accumulated Other Comprehensive Loss |
|
| Total Stockholders' Equity |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Balance at October 3, 2020 |
|
| 113,915,233 |
|
| $ | 114 |
|
| $ | 548,993 |
|
|
| (1,571,138 | ) |
| $ | (20,886 | ) |
| $ | (228,492 | ) |
| $ | (1,890 | ) |
| $ | 297,839 |
|
Issuance of common stock pursuant to equity incentive plans |
|
| 17,544,060 |
|
|
| 18 |
|
|
| 147,800 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 147,818 |
|
Retirement of treasury stock |
|
| (2,602,208 | ) |
|
| (3 | ) |
|
| (68,458 | ) |
|
| 2,602,208 |
|
|
| 68,461 |
|
|
| — |
|
|
| — |
|
|
| — |
|
Repurchase of common stock |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,394,006 | ) |
|
| (50,014 | ) |
|
| — |
|
|
| — |
|
|
| (50,014 | ) |
Repurchase of common stock related to shares withheld for tax in connection with vesting of restricted stock unit awards ("RSUs") |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,508,876 | ) |
|
| (47,837 | ) |
|
| — |
|
|
| — |
|
|
| (47,837 | ) |
Stock-based compensation expense |
|
| — |
|
|
| — |
|
|
| 62,127 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 62,127 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 158,595 |
|
|
| — |
|
|
| 158,595 |
|
Change in foreign currency translation adjustment |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 514 |
|
|
| 514 |
|
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 |
|
| 7,825,793 |
|
|
| 8 |
|
|
| 40,435 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 40,443 |
|
Retirement of treasury stock |
|
| (6,859,215 | ) |
|
| (7 | ) |
|
| (189,147 | ) |
|
| 6,859,215 |
|
|
| 189,154 |
|
|
| — |
|
|
| — |
|
|
| — |
|
Repurchase of common stock |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (6,578,973 | ) |
|
| (150,121 | ) |
|
| — |
|
|
| — |
|
|
| (150,121 | ) |
Repurchase of common stock related to shares withheld for tax in connection with vesting of RSUs |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,563,370 | ) |
|
| (39,653 | ) |
|
| — |
|
|
| — |
|
|
| (39,653 | ) |
Stock-based compensation expense |
|
| — |
|
|
| — |
|
|
| 75,640 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 75,640 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 67,383 |
|
|
| — |
|
|
| 67,383 |
|
Change in foreign currency translation adjustment |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2,221 | ) |
|
| (2,221 | ) |
Balance at October 1, 2022 |
|
| 129,823,663 |
|
|
| 130 |
|
|
| 617,390 |
|
|
| (3,154,940 | ) |
|
| (50,896 | ) |
|
| (2,514 | ) |
|
| (3,597 | ) |
|
| 560,513 |
|
Issuance of common stock pursuant to equity incentive plans |
|
| 6,714,406 |
|
|
| 6 |
|
|
| 21,340 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 21,346 |
|
Retirement of treasury stock |
|
| (6,138,129 | ) |
|
| (6 | ) |
|
| (108,242 | ) |
|
| 6,138,129 |
|
|
| 108,248 |
|
|
| — |
|
|
| — |
|
|
| - |
|
Repurchase of common stock |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (6,555,702 | ) |
|
| (100,064 | ) |
|
| — |
|
|
| — |
|
|
| (100,064 | ) |
Repurchase of common stock related to shares withheld for tax in connection with vesting of RSUs |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,713,511 | ) |
|
| (29,874 | ) |
|
| — |
|
|
| — |
|
|
| (29,874 | ) |
Stock-based compensation expense |
|
| — |
|
|
| — |
|
|
| 76,857 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 76,857 |
|
Net loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (10,274 | ) |
|
| — |
|
|
| (10,274 | ) |
Change in foreign currency translation adjustment |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 153 |
|
|
| 153 |
|
Balance at September 30, 2023 |
|
| 130,399,940 |
|
| $ | 130 |
|
| $ | 607,345 |
|
|
| (5,286,024 | ) |
| $ | (72,586 | ) |
| $ | (12,788 | ) |
| $ | (3,444 | ) |
| $ | 518,657 |
|
The accompanying notes are an integral part of these consolidated financial statements.
49
Consolidated Statements of Cash Flows
(in thousands)Year Ended October 2,
2021October 3,
2020September 28,
2019Cash flows from operating activities Net income (loss) $ 158,595 $ (20,115) $ (4,766) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 33,882 36,426 36,415 Impairment and abandonment charges 3,552 14,174 — Stock-based compensation expense 62,127 57,610 46,575 Other 1,951 5,710 2,713 Deferred income taxes (8,330) (567) (268) Foreign currency transaction (gain) loss (1,108) (4,143) 4,035 Changes in operating assets and liabilities: Accounts receivable, net (45,697) 49,593 (32,078) Inventories (7,911) 38,010 (31,796) Other assets (30,009) (5,749) (7,605) Accounts payable and accrued expenses 26,231 (24,440) 85,878 Accrued compensation 33,447 1,088 8,231 Deferred revenue 27,587 4,754 6,165 Other liabilities (1,091) 9,635 7,137 Net cash provided by operating activities 253,226 161,986 120,636 Cash flows from investing activities Purchases of property and equipment, intangible and other assets (45,531) (33,035) (23,222) Cash paid for acquisition, net of acquired cash — (36,289) — Net cash used in investing activities (45,531) (69,324) (23,222) Cash flows from financing activities Payments of offering costs — — (585) Proceeds from exercise of stock options 147,818 42,286 31,574 Payments for repurchase of common stock (50,014) (50,015) (2,426) Payments for repurchase of common stock related to shares withheld for tax in connection with vesting of RSUs (47,837) (11,029) — Repayments of borrowings (25,000) (8,333) (6,667) Net cash provided by (used in) financing activities 24,967 (27,091) 21,896 Effect of exchange rate changes on cash, cash equivalents and restricted cash 148 2,900 (1,610) Net increase in cash, cash equivalents, and restricted cash 232,810 68,471 117,700 Cash, cash equivalents, and restricted cash Beginning of period 407,291 338,820 221,120 End of period $ 640,101 $ 407,291 $ 338,820 Supplemental disclosure Cash paid for interest $ 502 $ 1,647 $ 2,517 Cash paid for taxes, net of refunds $ 4,114 $ 783 $ 3,570 Cash paid for amounts included in the measurement of lease liabilities $ 18,657 $ 17,194 $ — Supplemental disclosure of non-cash investing and financing activities Purchases of property and equipment, accrued but not paid $ 5,653 $ 3,911 $ 11,687 Right-of-use assets obtained in exchange for lease liabilities $ 2,010 $ 77,416 $ —
| Year Ended |
| ||||||||||
| September 30, |
|
| October 1, |
|
| October 2, |
| ||||
|
|
|
|
|
|
|
|
|
| |||
Cash flows from operating activities |
|
|
|
|
|
|
|
|
| |||
Net income (loss) |
| $ | (10,274 | ) |
| $ | 67,383 |
|
| $ | 158,595 |
|
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |
|
|
|
|
|
|
|
|
| |||
Depreciation and amortization |
|
| 48,969 |
|
|
| 38,504 |
|
|
| 33,882 |
|
Restructuring and abandonment charges |
|
| 5,533 |
|
|
| — |
|
|
| — |
|
Stock-based compensation expense |
|
| 76,857 |
|
|
| 75,640 |
|
|
| 62,127 |
|
Provision for inventory obsolescence |
|
| 20,640 |
|
|
| 6,276 |
|
|
| 2,790 |
|
Other |
|
| 5,535 |
|
|
| 4,705 |
|
|
| 2,713 |
|
Deferred income taxes |
|
| (583 | ) |
|
| (1,508 | ) |
|
| (8,330 | ) |
Foreign currency transaction (gain) loss |
|
| (7,335 | ) |
|
| 10,775 |
|
|
| (1,108 | ) |
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
| |||
Accounts receivable, net |
|
| 32,120 |
|
|
| (5,513 | ) |
|
| (45,697 | ) |
Inventories |
|
| 87,004 |
|
|
| (277,489 | ) |
|
| (7,911 | ) |
Other assets |
|
| 10,470 |
|
|
| (16,604 | ) |
|
| (30,009 | ) |
Accounts payable and accrued expenses |
|
| (162,345 | ) |
|
| 129,686 |
|
|
| 26,231 |
|
Accrued compensation |
|
| (2,185 | ) |
|
| (52,904 | ) |
|
| 33,447 |
|
Deferred revenue |
|
| (4,576 | ) |
|
| (1,667 | ) |
|
| 27,587 |
|
Other liabilities |
|
| 576 |
|
|
| (5,544 | ) |
|
| (1,091 | ) |
Net cash provided by (used in) operating activities |
|
| 100,406 |
|
|
| (28,260 | ) |
|
| 253,226 |
|
Cash flows from investing activities |
|
|
|
|
|
|
|
|
| |||
Purchases of property and equipment, intangible and other assets |
|
| (50,286 | ) |
|
| (46,216 | ) |
|
| (45,531 | ) |
Cash paid for acquisitions, net of acquired cash |
|
| — |
|
|
| (126,416 | ) |
|
| — |
|
Net cash used in investing activities |
|
| (50,286 | ) |
|
| (172,632 | ) |
|
| (45,531 | ) |
Cash flows from financing activities |
|
|
|
|
|
|
|
|
| |||
Payments for debt issuance costs |
|
| — |
|
|
| (929 | ) |
|
| — |
|
Proceeds from exercise of stock options |
|
| 21,346 |
|
|
| 40,443 |
|
|
| 147,818 |
|
Payments for repurchase of common stock |
|
| (100,064 | ) |
|
| (150,121 | ) |
|
| (50,014 | ) |
Payments for repurchase of common stock related to shares withheld for tax in connection with vesting of RSUs |
|
| (29,874 | ) |
|
| (39,653 | ) |
|
| (47,837 | ) |
Repayments of borrowings |
|
| — |
|
|
| — |
|
|
| (25,000 | ) |
Net cash provided by (used in) financing activities |
|
| (108,592 | ) |
|
| (150,260 | ) |
|
| 24,967 |
|
Effect of exchange rate changes on cash, cash equivalents and restricted cash |
|
| 3,848 |
|
|
| (14,094 | ) |
|
| 148 |
|
Net increase (decrease) in cash, cash equivalents, and restricted cash |
|
| (54,624 | ) |
|
| (365,246 | ) |
|
| 232,810 |
|
Cash, cash equivalents, and restricted cash |
|
|
|
|
|
|
|
|
| |||
Beginning of period |
|
| 274,855 |
|
|
| 640,101 |
|
|
| 407,291 |
|
End of period |
| $ | 220,231 |
|
| $ | 274,855 |
|
| $ | 640,101 |
|
Supplemental disclosure |
|
|
|
|
|
|
|
|
| |||
Cash paid for interest |
| $ | 1,330 |
|
| $ | 344 |
|
| $ | 502 |
|
Cash paid for taxes, net of refunds |
| $ | 9,522 |
|
| $ | 9,306 |
|
| $ | 4,114 |
|
Cash paid for amounts included in the measurement of lease liabilities |
| $ | 14,218 |
|
| $ | 14,636 |
|
| $ | 18,657 |
|
Supplemental disclosure of non-cash investing and financing activities |
|
|
|
|
|
|
|
|
| |||
Purchases of property and equipment, accrued but not paid |
| $ | 2,784 |
|
| $ | 9,112 |
|
| $ | 5,653 |
|
Right-of-use assets obtained in exchange for lease liabilities |
| $ | 31,692 |
|
| $ | 5,054 |
|
| $ | 2,010 |
|
Change in estimate of asset retirement obligations |
| $ | 2,290 |
|
| $ | — |
|
| $ | — |
|
The accompanying notes are an integral part of these consolidated financial statements.
50
Sonos, Inc. and its wholly owned subsidiaries (collectively, “Sonos,” the “Company,” “we,” “us” or “our”) designs, develops, manufactures, and sells audio products and services. The Sonos sound system provides customers with an immersive listening experience created by the design of its speakers and components, a proprietary software platform, and the ability to stream content from a variety of sources over the customer’s wireless network or over Bluetooth.
The Company’s products are sold through third-party physical retailers, including custom installers of home audio systems, select e-commerce retailers, and its website sonos.com. The Company’s products are distributed in over 5060 countries through its wholly owned subsidiaries: Sonos Europe B.V. in the Netherlands, Beijing Sonos Technology Co. Ltd. in China, Sonos Japan GK in Japan, and Sonos Australia Pty Ltd. in Australia.
2. Summary of Significant Accounting Policies
The consolidated financial statements, which include the accounts of Sonos, Inc. and its wholly owned subsidiaries, have been prepared in conformity with accounting principles generally accepted in the United States ("U.S. GAAP"). All intercompany accounts and transactions have been eliminated in consolidation. Certain prior period amounts have been reclassified to conform to the current period presentation.
The Company operates on a 52-week or 53-week fiscal year ending on the Saturday nearest September 30 each year. The Company’s fiscal year is divided into four quarters of 13 weeks, each beginning on a Sunday and containing two 4-week periods followed by a 5-week period. An additional week is included in the fourth fiscal quarter approximately every five years to realign fiscal quarters with calendar quarters.This last occurred in the Company’s fiscal year ended October 3, 2020, and will reoccur in the fiscal year ending October 3, 2026. As used in the Annual Report on Form 10-K, “fiscal 2023” refers to the 52-week fiscal year ending September 30, 2023, “fiscal 2022” refers to the 52-week fiscal year ending October 1, 2022, and “fiscal 2021” refers to the 52-week fiscal year ending October 2, 2021, “fiscal 2020” refers to the 53-week fiscal year ended October 3, 2020, and “fiscal 2019” refers to the 52-week fiscal year ended September 28, 2019.2021.
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and judgments that affect the amounts reported and disclosed in the consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates. For revenue recognition, examples of estimates and judgments include: determining the nature and timing of satisfaction of performance obligations, determining the standalone selling price ("SSP") of performance obligations and estimating variable consideration such as sales incentives and product returns. Additionally, estimates and judgments are made by management for allowances for credit losses, excess and obsolete inventory, loss on purchase commitments, useful lives associated with property and equipment, incremental borrowing rates associated with leases, the recording of and release of valuation allowances with respect to deferred tax assets and uncertain tax positions, impairment of long-lived assets, impairment of goodwill and indefinite-lived intangible assets, warranty, contingencies and valuation and assumptions underlying stock-based compensation and other equity instruments. On an ongoing basis, the Company evaluates its estimates and judgments compared to historical experience and trends that form the basis for making estimates and judgments about the carrying value of assets and liabilities.
Comprehensive income (loss) consists of two components: net income (loss) and other comprehensive income (loss). Other comprehensive income (loss) refers to net gains and losses that are recorded as an element of stockholders’ equity but are excluded from net income (loss). The Company’s other comprehensive income (loss) consists of net unrealized gains and losses on foreign currency translation adjustments from those subsidiaries not using the U.S. dollar as their functional currency.
51
Cash equivalents consist of short-term, highly liquid financial instruments with insignificant interest rate risk that are readily convertible to cash and have maturities of three months or less from the date of purchase. As of October 2, 2021,September 30, 2023, and October 3, 2020,1, 2022, cash equivalents consisted of money market funds, which are recorded at fair value.
The allowance for credit losses is established through a provision for net bad debt expense which is recorded in general and administrative expense in the consolidated statements of operations and comprehensive income (loss). The Company determines the adequacy of the allowance for credit losses by evaluating the collectability of accounts, including consideration of the age of invoices, each customer’s expected ability to pay and collection history, customer-specific information, and current economic conditions that may impact the customer's ability to pay. This estimate is periodically adjusted as a result of the aforementioned process, or when the Company becomes aware of a specific customer’s inability to meet its financial obligations.
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and cash equivalents and accounts receivable. The Company maintains cash and cash equivalents in several high-quality financial institutions. Cash and cash equivalents held at these banks, including those held in foreign branches of global banks, may exceed the amount of insurance provided on such deposits. These deposits may be redeemed upon demand, and management believes that the financial institutions that hold the Company’s cash and cash equivalents are financially sound and, accordingly, minimal credit risk exists with respect to cash. The Company has not experienced any losses in such accounts.
|
|
|
|
|
| |||
| September 30, |
|
| October 1, |
| |||
Customer A |
|
| 32 | % |
|
| 34 | % |
| Accounts Receivable, net | |||||||||||
| October 2, 2021 | October 3, 2020 | ||||||||||
| Customer A | 19 | % | 39 | % | |||||||
| Customer B | 10 | % | * | ||||||||
|
|
|
|
|
|
|
|
| ||||
| Year Ended |
| ||||||||||
| September 30, |
|
| October 1, |
|
| October 2, |
| ||||
Customer A |
|
| 17 | % |
|
| 15 | % |
|
| 14 | % |
| Revenue | |||||||||||||||||
| Year Ended | |||||||||||||||||
| October 2, 2021 | October 3, 2020 | September 28, 2019 | |||||||||||||||
| Customer A | 14 | % | 12 | % | 16 | % | |||||||||||
| Customer C | * | * | 10 | % | |||||||||||||
Inventories primarily consist of finished goods and to a lesser extent, component parts, which are purchased from contract manufacturers and component suppliers. Inventories are stated at lower of cost and net realizable value onvalue. Cost is determined using a standard costing method, which approximates first-in first-out basis.first-out. Inventory costs primarily consist of materials, inbound freight, import duties, tariffs, direct labor and manufacturing overhead, logistics, and other handling fees. The Company assesses the valuation of inventory balances including an assessment to determine potential excess and/or obsolete inventory. The Company may be required to write down the value of inventory if estimates of future demand and market conditions indicate excess and/or obsolete inventory. Inventory write-downs and losses on purchase commitments are recorded as a component of cost of revenue in the consolidated statement of operations and comprehensive income (loss). For the periods presented, the Company has not experienced significant write-downs.fiscal years ended September 30, 2023, and October 1, 2022, losses related to purchase commitments were $14.7 million and $12.0 million, respectively. Ownership of inventory transfers to the Company at the time the goods are shipped from the suppliers. Inventories recordedbased on the Company's consolidated balance sheets include in transit inventory owned by the Company that have been shipped but have not yet been received at a Company distribution center.contractual terms with its contract manufacturers.
52
SONOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Computer hardware and software | 1-5 years | ||||
Furniture and fixtures | 2-5 years | ||||
Tooling and production line test equipment | 2-4 years | ||||
Leasehold improvements | 2-15 years | ||||
Product displays | 1-4 years |
Costs incurred to improve leased office space are capitalized. Leasehold improvements are amortized on a straight-line basis over the shorter of the term of the lease or the estimated useful life of the improvement. Expenditures for major renewals and improvements that extend the useful lives of property and equipment are capitalized. Maintenance, repair costs and gains or losses associated with disposals are charged to expense as incurred.
The Company incurs costs to implement cloud computing arrangements that are hosted by a third-party vendor. Beginning in fiscal 2020, and continuing through fiscal 2021, the Company began activities to replace its legacy enterprise resource management system in order to accommodate the Company's expanding operations. Implementation costs incurred during the application development stage are capitalized until the software is ready for its intended use. The costs are then amortized on a straight-line basis over the term of the associated hosting arrangement and are recognized as an operating expense within the consolidated statements of operations and comprehensive income (loss). Beginning in fiscal 2020, the Company conducted activities to replace its legacy enterprise resource planning ("ERP") system in order to accommodate the Company's expanding operations and went live with the new ERP in May 2022.Capitalized costs related to cloud computing arrangements, net of accumulated amortization, were $14.3$18.0 million and $4.8$21.7 million as of October 2, 2021September 30, 2023 and October 3, 2020,1, 2022, respectively, and are reported as a component of other noncurrent assets on the Company's consolidated balance sheets. Amortization expenses for implementation costs for cloud-based computing arrangements for the twelve months ended September 30, 2023, and October 1, 2022, were $3.7 million and $1.9 million, respectively. Accumulated amortization for cloud-based computing arrangements was $6.2 million and $2.5 million as of September 30, 2023, and October 1, 2022, respectively.
In connection with the Company's evaluation of goodwill impairment, the Company performs a qualitative assessment to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the qualitative assessment is not conclusive, the Company tests goodwill for impairment, including comparing the fair value of the reporting unit to its carrying value (including attributable goodwill). The Company determines fair value of its reporting unit using an income or market approach incorporating market participant considerations and management’s assumptions on revenue growth rates, operating margins, discount rates and expected capital expenditures. Fair value determinations may include both internal and third-party valuations. The Company performs its annual goodwill impairment assessment during the third quarter of each fiscal year and more frequently if circumstances otherwise dictate.
In connection with the Company’s evaluation of indefinite-lived intangible asset impairment, the Company performs a qualitative assessment to determine if it is more likely than not that the fair value of the asset is less than its carrying amount. If the qualitative assessment is not conclusive, the Company proceeds to test for impairment by comparing the fair value of the asset to the carrying value. Fair value is determined based on estimated discounted future cash flow analyses that include significant management assumptions such as revenue growth rates, weighted-average costs of capital and assumed royalty rates. If the carrying value exceeds fair value, an impairment charge will be recorded to reduce the asset to fair value. For fiscal years 2023, 2022, and 2021, the Company’s qualitative assessments identified no factors indicating it was more likely than not that the fair value of the Company’s reporting unit and indefinite-lived intangible assets were less than their respective carrying amounts. Therefore, the Company incurred no impairment charges.
53
SONOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The Company accounts for treasury stock acquisitions using the cost method. The Company accounts for the retirement of treasury stock by deducting its par value from common stock and reflecting any excess of cost over par value as a deduction from additional paid-in capital on the consolidated balance sheets.
Fair Value Accounting
Assets and liabilities recorded at fair value on the consolidated balance sheets are categorized based upon the level of judgment associated with the inputs used to measure their fair value.
Level Input | Input Definition | |||||||
Level 1 | Quoted prices for identical assets or liabilities in active markets at the measurement date. | |||||||
Level 2 | Inputs, other than quoted prices included in Level 1, such as quoted prices for similar assets or liabilities, in active markets or other inputs that are observable or can be corroborated with market data at the measurement date. | |||||||
Level 3 | Unobservable inputs that reflect management's best estimate of what market participants would use in pricing the asset or liability at the measurement date. |
Certain of the Company’s wholly owned subsidiaries have non-U.S. dollar functional currencies. The Company translates assets and liabilities of non-U.S. dollar functional currency subsidiaries into U.S. dollars using exchange rates in effect at the end of each
54
SONOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
period and stockholders’ equity at historical rates. Revenue and expenses for these subsidiaries are translated using rates that approximate those in effect during the period. Gains and losses from translation are recognized in foreign currency translation included in accumulated other comprehensive loss.
| September 30, |
|
| October 1, |
|
| October 2, |
| ||||
(In thousands) |
|
|
|
|
|
|
|
|
| |||
Foreign currency remeasurement and transaction gains (losses) |
| $ | 13,674 |
|
| $ | (21,877 | ) |
| $ | 2,353 |
|
| October 2, 2021 | October 3, 2020 | September 28, 2019 | |||||||||||||||
| (In thousands) | |||||||||||||||||
| Foreign currency remeasurement and transaction gains (losses) | $ | 2,353 | $ | 6,594 | $ | (8,622) | |||||||||||
Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products or services. The Company's contracts generally include a combination of products and services. Revenue is allocated to distinct performance obligations and is recognized net of allowances for returns, discounts, sales incentives and any taxes collected from customers, which are subsequently remitted to governmental authorities. Shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are not considered a separate performance obligation and are accounted for as a fulfillment cost and are included in cost of revenue. As of October 2, 2021, and October 3, 2020, the Company did not have any material assets related to incremental costs to obtain or fulfill customer contracts.
Product revenue primarily includes sales of Sonos speakers and Sonos system products, which include software that enables the Company’s products to operate over a customer’s wireless network, as well as connect to various third-party services, including music and voice. The Company also generates a small portion of revenue from Partner products and other revenue sources in connection with partnerships, accessories, professional services, licensing, advertising, and subscription revenue. Revenue for module units is related to hardware and embedded software that is integrated into final products that are manufactured and sold by the Company's partners. Software primarily consists of firmware embedded in the products and the Sonos app, which is software that can be downloaded to consumer devices at no charge, with or without the purchase of one of the Company’s products. Products and related software are accounted for as a single performance obligation and all intended functionality is available to the customer upon purchase. The revenue allocated to the products and related software is the substantial portion of the total sale price. Product revenue is recognized at the point in time when control is transferred, which is either upon shipment or upon delivery to the customer, depending on delivery terms.
The Company’s contracts with customers generally contain promises to transfer products and services as described above. Determining whether products and services are considered distinct performance obligations that should be accounted for separately requires significant judgment.
SONOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Determining the revenue recognition period for unspecified software upgrades and cloud-based services also requires judgment. The Company recognizes revenue attributable to these performance obligations ratably over the best estimate of the period that the customer is expected to receive the services. In developing the estimated period of providing future services, the Company considers past history, plans to continue to provide services, including plans to continue to support updates and enhancements to prior versions of the Company’s products, expected technological developments, obsolescence, competition and other factors. The estimated service period may change in the future in response to competition, technology developments and the Company’s business strategy.
Supplier Concentration
The Company invoices each order upon hardware shipment or delivery and recognizes revenue for each distinct performance obligation when transfer of control has occurred, which in the case of services, may extend over several reporting periods. Amounts invoiced in advance of revenue recognition are recorded as deferred revenue on the consolidated balance sheets. Deferred revenue primarily relates to revenue allocated to unspecified software upgrades and platform services, as well as for newly launched products sold to resellers not recognized until the date of general availability is reached. General availability deferrals are classified as current deferred revenue as the Company starts shipping the product to the reseller within one month prior to the general availability date. The Company classifies deferred revenue as noncurrent if amounts are expected to be recognized as revenue beyond one year from the balance sheet date.
Payment Terms
Research and Development
SONOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
In-process research and development ("IPRD") assets represent the fair value of incomplete research and development projects obtained as part of a business combination that have not yet reached technological feasibility and are initially not subject to amortization; rather, these assets are subject to impairment considerations of indefinite-lived intangible assets. Upon completion of development, IPRD assets are considered definite-lived intangible assets, transferred to developed
Advertising Costs
Income Taxes
57
SONOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
the Company determines that it would be able to realize its deferred tax assets in the future in excess of their net recorded amount, the Company would make an adjustment to the deferred tax asset valuation allowance, which would result in a benefit to income taxes.
The Company operates as 1one operating segment as it only reports aggregate financial information on a consolidated basis, accompanied by disaggregated information about revenue by geographic region and product category to its Chief Executive Officer, who is the Company’s chief operating decision maker.
The substantial majority of the Company’s leases are for its office spaces and facilities, which are accounted for as operating leases. The Company determines whether an arrangement is a lease at inception if there is an identified asset, and if it has the right to control the identified asset for a period of time. Some of the Company’s leases include options to extend the leases for up to 5 years, and some include options to terminate the leases within 1 year. The Company's lease terms are only for periods in which it has enforceable rights and are impacted by options to extend or terminate the lease only when it is reasonably certain that the Company will exercise the option. For leases with terms greater than 12 months, the Company records the related right-of-use asset and lease obligation at the present value of lease payments over the lease terms. Leases with an initial term of 12 months or less are not recorded on the balance sheet. Lease expense is recognized on a straight-line basis over the lease term. Lease agreements will typically exist with lease and non-lease components, which are accounted for separately. The Company's agreements may contain variable lease payments. The Company includes variable lease payments that depend on an index or a rate and exclude those which depend on facts or circumstances occurring after the commencement date, other than the passage of time. As most of the Company’s leases do not contain an implicit interest rate, the Company uses judgment to determine an incremental borrowing rate to use at lease commencement.
In June 2016,March 2020, the Financial Accounting Standard Board ("FASB")FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses: Measurement2020-04, Reference Rate Reform (Topic 848): Facilitation of Credit LossesEffects of Reference Rate Reform on Financial Instruments,Reporting, and it subsequentlythen issued subsequent amendments to the initial guidance under ASU No. 2021-01 and ASU No. 2022-06 (collectively referredTopic 848). Topic 848 provides practical expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, derivatives, and other transactions affected by reference rate reform if certain criteria are met. The expedients and exceptions provided by the amendments in this update apply only to contracts, hedging relationships, derivatives, and other transactions that reference the London Interbank Offered Rate ("LIBOR") or another reference rate expected to be discontinued as "Topic 326"a result of reference rate reform. Topic 848 is currently effective and upon adoption may be applied prospectively to contract modifications and hedging relationships made on or before December 31, 2024. In June 2023, the Company amended its Revolving Credit Agreement (as defined below) to change the reference rate from LIBOR to the Secured Overnight Financing Rate (“SOFR”), which provide a new impairment model that requires measurement and recognition of expected credit losses for most financial assets and certain other instruments, including accounts receivable.effective July 1, 2023. The Company adopted this standard effective October 4, 2020, usingapplied the practical expedients provided in Topic 848 to account for the modification as a modified retrospective approach. Under the new standard, the allowance for credit losses is based on the Company's assessment of collectability of accounts, including considerationcontinuation of the age of invoices, each customer's expected ability to pay and collection history, customer-specific information and current economic conditions that may impact a customer's ability to pay.existing contract. The adoption of this standard did not have a materialmodification had no significant impact on the Company'sCompany’s consolidated financial statements.
58
SONOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
In November 2018,October 2021, the FASB issued ASU No. 2018-18, Collaborative Arrangements2021-08, Business Combinations (Topic 808)805): Clarifying the Interaction between Topic 808Accounting for Contract Assets and Topic 606. This standard resolves the diversity in practice concerning whether certain transactions between collaborative arrangement participants should be accounted for as revenue under Accounting Standards Codification 606, RevenueContract Liabilities from Contracts with Customers ("Topic 606").Customers. This standard specifies when a participant is a customerupdate requires that an entity recognize and measure contract assets and contract liabilities acquired in a collaboration, adds guidance for unit of account to alignbusiness combination in accordance with Topic 606 and provides presentation guidance for collaborative arrangements.606. The Company adopted this standard in the firstfourth quarter of fiscal 2021.2023. The adoption did not have a material impact on the Company's consolidated financial statements.
3. Fair Value Measurements
| September 30, 2023 |
| ||||||||||||||
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| |||||
(In thousands) |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Money market funds (cash equivalents) |
| $ | 51,522 |
|
| $ | — |
|
| $ | — |
|
| $ | 51,522 |
|
|
| October 1, 2022 |
| |||||||||||||
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||
(In thousands) |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Money market funds (cash equivalents) |
| $ | 187,170 |
|
| $ | — |
|
| $ | — |
|
| $ | 187,170 |
|
| October 2, 2021 | |||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Money market funds (cash equivalents) | $ | 484,482 | $ | — | $ | — | $ | 484,482 | |||||||||||||||
| October 3, 2020 | |||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Money market funds (cash equivalents) | $ | 281,380 | $ | — | $ | — | $ | 281,380 | |||||||||||||||
| October 2, 2021 | October 3, 2020 | September 28, 2019 | |||||||||||||||
| (In thousands) | |||||||||||||||||
| Americas | $ | 980,931 | $ | 755,874 | $ | 678,224 | |||||||||||
| Europe, Middle East and Africa ("EMEA") | 618,476 | 470,883 | 484,785 | ||||||||||||||
| Asia Pacific ("APAC") | 117,337 | 99,571 | 97,814 | ||||||||||||||
| Total revenue | $ | 1,716,744 | $ | 1,326,328 | $ | 1,260,823 | |||||||||||
| September 30, |
|
| October 1, |
|
| October 2, |
| ||||
(In thousands) |
|
|
|
|
|
|
|
|
| |||
Americas |
| $ | 1,048,245 |
|
| $ | 1,044,113 |
|
| $ | 980,931 |
|
Europe, Middle East and Africa ("EMEA") |
|
| 518,179 |
|
|
| 578,034 |
|
|
| 618,476 |
|
Asia Pacific ("APAC") |
|
| 88,831 |
|
|
| 130,189 |
|
|
| 117,337 |
|
Total revenue |
| $ | 1,655,255 |
|
| $ | 1,752,336 |
|
| $ | 1,716,744 |
|
Revenue is attributed to individual countries based on ship-to address and also includes the applicable service revenue for software upgrades and cloud-based services attributable to each country. Revenue by significant countries is as follows:
| October 2, 2021 | October 3, 2020 | September 28, 2019 | |||||||||||||||
| (In thousands) | |||||||||||||||||
| United States | $ | 890,837 | $ | 697,410 | $ | 630,012 | |||||||||||
| Other countries | 825,907 | 628,918 | 630,811 | ||||||||||||||
| Total revenue | $ | 1,716,744 | $ | 1,326,328 | $ | 1,260,823 | |||||||||||
| September 30, |
|
| October 1, |
|
| October 2, |
| ||||
(In thousands) |
|
|
|
|
|
|
|
|
| |||
United States |
| $ | 971,151 |
|
| $ | 964,118 |
|
| $ | 890,837 |
|
Other countries |
|
| 684,104 |
|
|
| 788,218 |
|
|
| 825,907 |
|
Total revenue |
| $ | 1,655,255 |
|
| $ | 1,752,336 |
|
| $ | 1,716,744 |
|
59
| September 30, |
|
| October 1, |
|
| October 2, |
| ||||
(In thousands) |
|
|
|
|
|
|
|
|
| |||
Sonos speakers |
| $ | 1,293,440 |
|
| $ | 1,368,916 |
|
| $ | 1,378,808 |
|
Sonos system products |
|
| 285,064 |
|
|
| 297,110 |
|
|
| 265,180 |
|
Partner products and other revenue |
|
| 76,751 |
|
|
| 86,310 |
|
|
| 72,756 |
|
Total revenue |
| $ | 1,655,255 |
|
| $ | 1,752,336 |
|
| $ | 1,716,744 |
|
| October 2, 2021 | October 3, 2020 | September 28, 2019 | |||||||||||||||
| (In thousands) | |||||||||||||||||
| Sonos speakers | $ | 1,378,808 | $ | 1,034,813 | $ | 1,008,422 | |||||||||||
| Sonos system products | 265,180 | 218,788 | 187,172 | ||||||||||||||
| Partner products and other revenue | 72,756 | 72,727 | 65,229 | ||||||||||||||
| Total revenue | $ | 1,716,744 | $ | 1,326,328 | $ | 1,260,823 | |||||||||||
| October 2, 2021 | October 3, 2020 | ||||||||||
| (In thousands) | |||||||||||
| United States | $ | 40,669 | $ | 35,372 | |||||||
| China | 23,460 | 17,624 | |||||||||
| Other countries | 7,212 | 7,788 | |||||||||
| Property and equipment, net | $ | 71,341 | $ | 60,784 | |||||||
| September 30, |
|
| October 1, |
| |||
(In thousands) |
|
|
|
|
|
| ||
China |
| $ | 32,045 |
|
| $ | 40,609 |
|
United States |
|
| 30,430 |
|
|
| 30,870 |
|
Other countries |
|
| 24,600 |
|
|
| 14,689 |
|
Property and equipment, net |
| $ | 87,075 |
|
| $ | 86,168 |
|
| September 30, |
|
| October 1, |
|
| October 2, |
| ||||
(In thousands) |
|
|
|
|
|
|
|
|
| |||
Beginning balance |
| $ | 2,744 |
|
| $ | 1,547 |
|
| $ | 1,307 |
|
Increases |
|
| 1,561 |
|
|
| 2,098 |
|
|
| 1,529 |
|
Write-offs |
|
| (1,594 | ) |
|
| (901 | ) |
|
| (1,289 | ) |
Ending balance |
| $ | 2,711 |
|
| $ | 2,744 |
|
| $ | 1,547 |
|
| October 2, 2021 | October 3, 2020 | September 28, 2019 | |||||||||||||||
| (In thousands) | |||||||||||||||||
| Beginning balance | $ | 1,307 | $ | 1,255 | $ | 872 | |||||||||||
| Increases | 1,529 | 1,127 | 1,034 | ||||||||||||||
| Write-offs | (1,289) | (1,075) | (651) | ||||||||||||||
| Ending balance | $ | 1,547 | $ | 1,307 | $ | 1,255 | |||||||||||
| September 30, |
|
| October 1, |
|
| October 2, |
| ||||
(In thousands) |
|
|
|
|
|
|
|
|
| |||
Beginning balance |
| $ | 23,573 |
|
| $ | 19,160 |
|
| $ | 17,515 |
|
Charged to revenue |
|
| 139,657 |
|
|
| 51,225 |
|
|
| 95,249 |
|
Utilization of sales incentive allowance |
|
| (134,155 | ) |
|
| (46,812 | ) |
|
| (93,604 | ) |
Ending balance |
| $ | 29,075 |
|
| $ | 23,573 |
|
| $ | 19,160 |
|
60
SONOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Inventories
| October 2, 2021 | October 3, 2020 | September 28, 2019 | |||||||||||||||
| (In thousands) | |||||||||||||||||
| Beginning balance | $ | 17,515 | $ | 20,051 | $ | 11,754 | |||||||||||
| Charged to revenue | 95,249 | 108,843 | 87,703 | ||||||||||||||
| Utilization of sales incentive allowance | (93,604) | (111,379) | (79,406) | ||||||||||||||
| Ending balance | $ | 19,160 | $ | 17,515 | $ | 20,051 | |||||||||||
| September 30, |
|
| October 1, |
| |||
(In thousands) |
|
|
|
|
|
| ||
Finished goods |
| $ | 281,571 |
|
| $ | 406,657 |
|
Components |
|
| 64,950 |
|
|
| 47,631 |
|
Inventories |
| $ | 346,521 |
|
| $ | 454,288 |
|
| October 2, 2021 | October 3, 2020 | ||||||||||
| (In thousands) | |||||||||||
| Finished goods | $ | 154,608 | $ | 172,184 | |||||||
| Components | 30,522 | 8,646 | |||||||||
| Inventories | $ | 185,130 | $ | 180,830 | |||||||
Property and Equipment, Net
October 2,
2021October 3,
2020Computer hardware and software $ 40,098 $ 45,798 Furniture and fixtures 7,483 8,239 Tooling and production line test equipment 76,210 67,495 Leasehold improvements 49,846 51,102 Product displays 57,863 48,925 Total property and equipment 231,500 221,559 Accumulated depreciation and amortization (160,159) (160,775) Property and equipment, net $ 71,341 $ 60,784
| September 30, |
|
| October 1, |
| |||
(In thousands) |
|
|
|
|
|
| ||
Computer hardware and software |
| $ | 41,679 |
|
| $ | 42,000 |
|
Furniture and fixtures |
|
| 6,971 |
|
|
| 7,511 |
|
Tooling and production line test equipment |
|
| 108,693 |
|
|
| 100,337 |
|
Leasehold improvements |
|
| 53,648 |
|
|
| 49,656 |
|
Product displays |
|
| 68,771 |
|
|
| 56,885 |
|
Total property and equipment |
|
| 279,762 |
|
|
| 256,389 |
|
Accumulated depreciation and amortization |
|
| (192,687 | ) |
|
| (170,221 | ) |
Property and equipment, net |
| $ | 87,075 |
|
| $ | 86,168 |
|
Goodwill
The following table presents the property and equipment that was abandoned aschanges in carrying amount of goodwill for the fiscal year ended September 30, 2023:
(In thousands) |
|
|
| |
Balance as of October 1, 2022 |
| $ | 77,300 |
|
Effect of exchange rate changes on goodwill |
|
| 3,120 |
|
Balance as of September 30, 2023 |
| $ | 80,420 |
|
Intangible Assets
As part of the 2020 restructuring plan, referacquisition of Mayht Holding BV ("Mayht") in fiscal 2022, the Company recognized $71.8 million in intangible assets related to Note 14. Restructuring Plan.
61
SONOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
table reflects the changes in the net carrying amount of the components of intangible assets associated with the Company's acquisition activity:
| October 2, 2021 | |||||||||||||||||||||||
| Gross Carrying Amount | Accumulated Amortization | Net Carrying Value | Weighted-Average Remaining Life | ||||||||||||||||||||
| (In thousands, except weighted-average remaining life) | |||||||||||||||||||||||
| Technology | $ | 7,752 | $ | (3,405) | $ | 4,347 | 2.67 | ||||||||||||||||
| Other | 39 | (36) | 3 | 0.17 | |||||||||||||||||||
| Total finite-lived intangible assets | 7,791 | (3,441) | 4,350 | 2.67 | |||||||||||||||||||
| In-process research and development and other intangible assets not subject to amortization | 20,100 | — | 20,100 | ||||||||||||||||||||
| Total intangible assets | $ | 27,891 | $ | (3,441) | $ | 24,450 | |||||||||||||||||
| September 30, 2023 |
| ||||||||||||||||||
| Gross Carrying Amount |
|
| Accumulated Amortization |
|
| Foreign Currency Translation |
|
| Net Carrying Value |
|
| Weighted-Average Remaining Life |
| ||||||
(In thousands, except weighted-average remaining life) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Tradename |
| $ | 451 |
|
| $ | (113 | ) |
| $ | (12 | ) |
| $ | 326 |
|
|
| 4.50 |
|
Technology-based |
|
| 31,480 |
|
|
| (11,588 | ) |
|
| - |
|
|
| 19,892 |
|
|
| 4.89 |
|
Total finite-lived intangible assets |
|
| 31,931 |
|
|
| (11,701 | ) |
|
| (12 | ) |
|
| 20,218 |
|
|
| 4.88 |
|
In-process research and development and other intangible |
|
| 71,759 |
|
|
| - |
|
|
| (1,968 | ) |
|
| 69,791 |
|
|
|
| |
Total intangible assets |
| $ | 103,690 |
|
| $ | (11,701 | ) |
| $ | (1,980 | ) |
| $ | 90,009 |
|
|
|
| |
The following table summarizes the estimated future amortization expense of the Company's intangible assets as October 2, 2021:
| Fiscal years ending | Future Amortization Expense | ||||
| (In thousands) | |||||
| 2022 | $ | 1,917 | |||
| 2023 | 1,243 | ||||
| 2024 | 1,020 | ||||
| 2025 | 170 | ||||
| 2026 and thereafter | — | ||||
| Total future amortization expense | $ | 4,350 | |||
Fiscal years ending |
| Future Amortization Expense |
| |
(In thousands) |
|
|
| |
2024 |
| $ | 5,969 |
|
2025 |
|
| 3,367 |
|
2026 |
|
| 3,038 |
|
2027 |
|
| 3,022 |
|
2028 and thereafter |
|
| 4,822 |
|
Total future amortization expense |
| $ | 20,218 |
|
62
Accrued Expenses
October 2,
2021October 3,
2020 (In thousands) Accrued advertising and marketing $ 19,989 $ 10,609 Accrued taxes 16,941 6,252 Accrued inventory 37,117 2,843 Accrued manufacturing, logistics and product development 14,943 9,753 Accrued general and administrative 13,066 10,068 Accrued restructuring 114 1,062 Other accrued payables 5,859 4,462 Total accrued expenses $ 108,029 $ 45,049
| September 30, |
|
| October 1, |
| |||
(In thousands) |
|
|
|
|
|
| ||
Accrued inventory and supply chain costs |
| $ | 48,384 |
|
| $ | 51,011 |
|
Accrued advertising and marketing |
|
| 13,029 |
|
|
| 21,292 |
|
Accrued taxes |
|
| 11,410 |
|
|
| 7,081 |
|
Accrued general and administrative expenses |
|
| 9,924 |
|
|
| 21,634 |
|
Accrued product development |
|
| 4,298 |
|
|
| 8,168 |
|
Other accrued payables |
|
| 2,672 |
|
|
| 104 |
|
Total accrued expenses |
| $ | 89,717 |
|
| $ | 109,290 |
|
Deferred Revenue
October 2,
2021October 3,
2020September 28,
2019(In thousands) Deferred revenue, beginning of period $ 62,389 $ 56,449 $ 50,967 (19,175) (13,052) (11,934) Revenue deferred, net of revenue recognized on contracts
in the respective period46,284 18,992 17,416 Deferred revenue, end of period $ 89,498 $ 62,389 $ 56,449
| September 30, |
|
| October 1, |
|
| October 2, |
| ||||
(In thousands) |
|
|
|
|
|
|
|
|
| |||
Deferred revenue, beginning of period |
| $ | 83,470 |
|
| $ | 89,498 |
|
| $ | 62,389 |
|
Recognition of revenue included in beginning of period deferred revenue |
|
| (27,057 | ) |
|
| (41,438 | ) |
|
| (19,175 | ) |
Revenue deferred, net of revenue recognized on contracts in the respective period |
|
| 24,425 |
|
|
| 35,410 |
|
|
| 46,284 |
|
Deferred revenue, end of period |
| $ | 80,838 |
|
| $ | 83,470 |
|
| $ | 89,498 |
|
For the fiscal years ending 2022 2023 2024 2025 2026 and Beyond Total (In thousands) Revenue expected to be recognized $ 35,866 $ 14,867 $ 12,805 $ 10,476 $ 15,484 $ 89,498
| For the fiscal years ending |
|
|
|
| |||||||||||||||||||
| 2024 |
|
| 2025 |
|
| 2026 |
|
| 2027 |
|
| 2028 and Beyond |
|
| Total |
| |||||||
(In thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Revenue expected to be recognized |
| $ | 20,188 |
|
| $ | 17,086 |
|
| $ | 14,718 |
|
| $ | 12,088 |
|
| $ | 16,758 |
|
| $ | 80,838 |
|
| September 30, |
|
| October 1, |
| |||
(In thousands) |
|
|
|
|
|
| ||
Reserve for returns |
| $ | 21,462 |
|
| $ | 18,263 |
|
Short-term operating lease liabilities |
|
| 1,153 |
|
|
| 10,532 |
|
Warranty liability |
|
| 7,466 |
|
|
| 5,771 |
|
Other |
|
| 4,172 |
|
|
| 5,083 |
|
Total other current liabilities |
| $ | 34,253 |
|
| $ | 39,649 |
|
63
SONOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
| October 2, 2021 | October 3, 2020 | ||||||||||
| (In thousands) | |||||||||||
| Reserve for returns | $ | 19,266 | $ | 14,195 | |||||||
| Short-term operating lease liabilities | 10,724 | 10,910 | |||||||||
| Product warranty liability | 5,604 | 3,628 | |||||||||
| Other | 3,950 | 2,417 | |||||||||
| Total other current liabilities | $ | 39,544 | $ | 31,150 | |||||||
| October 2, 2021 | October 3, 2020 | ||||||||||
| (In thousands) | |||||||||||
| Warranty liability, beginning of period | $ | 3,628 | $ | 3,254 | |||||||
| Provision for warranties issued during the period | 15,304 | 12,711 | |||||||||
| Settlements of warranty claims during the period | (13,328) | (12,337) | |||||||||
| Warranty liability, end of period | $ | 5,604 | $ | 3,628 | |||||||
| September 30, |
|
| October 1, |
| |||
(In thousands) |
|
|
|
|
|
| ||
Warranty liability, beginning of period |
| $ | 5,771 |
|
| $ | 5,604 |
|
Provision for warranties issued during the period |
|
| 12,517 |
|
|
| 13,033 |
|
Settlements of warranty claims during the period |
|
| (10,822 | ) |
|
| (12,866 | ) |
Warranty liability, end of period |
| $ | 7,466 |
|
| $ | 5,771 |
|
The Company entered into various non-cancelable lease agreements for offices and facilities, as well as auto leases. The substantial majority of the Company's leases are for its office spaces and facilities, which are accounted for as operating leases. The Company's main offices are leasedCompany leases office space in California, and Massachusetts,as well as offices in various locations in the U.S., with additional sales, operations, and research and development offices around the world. These facilities operate under leases with initial terms from one to ten years and expire at various dates through 2026. The Company determines whether an arrangement is a lease at inception if there is an identified asset, and it has the right to control the identified asset for a period of time. Some of the Company's leases include options to extend the lease for up to 5 years, and some include options to terminate the lease within 1 year. The Company's lease terms are only for periods in which it has enforceable rights and are impacted by options to extend or terminate the lease only when it is reasonably certain that the Company will exercise the option.
For leases with terms greater than 12 months, the Company records the related right-of-use asset and lease obligation at the present value of lease payments over the lease terms. Leases with an initial term of 12 months or less are not recorded on the balance sheet. Lease expense is recognized on a straight-line basis over the lease term. The Company's leases do not include any residual value guarantees or bargain purchase options or asset retirement obligations.
Lease agreements will typically exist with lease and non-lease components, which are accounted for separately. The Company's agreements may contain variable lease payments. The Company includes variable lease payments that depend on an index or a rate and exclude those which depend on facts or circumstances occurring after the commencement date, other than the passage of time.
Most of the Company's leases do not contain an implicit interest rate. Therefore, the Company uses judgment to estimate an incremental borrowing rate, which is defined as the rate of interest the Company would have to pay to borrow an amount that is equal to the lease obligations, on a collateralized basis, and over a similar term. The Company takes into consideration the terms of the Company's Credit Facility (as defined in Note 7. Debt), lease terms, and current interest rates to determine the incremental borrowing rate at lease commencement date. At October 2, 2021,September 30, 2023, the Company's weighted-average discount rate was 4.07%5.14%, while the weighted-average remaining lease term was 3.89.1 years. As part of the supplemental cash flow disclosure, the right-of-use assets obtained in exchange for new operating lease liabilities does not reflect the impact of prepaid or deferred rent.
On May 11, 2023, the Company amended its existing operating lease at the Lafayette City Center in Boston, Massachusetts. The effect of the modification was a partial reduction in the square footage of the lease and an extension of the lease term through July 2035. The modification resulted in the Company continuing to classify the lease as an operating lease, with an increase in right-of-use assets and lease liabilities totaling $31.6 million and $30.4 million, respectively.
On July 13, 2023, as part of the Company's ongoing evaluation of real estate needs and overall lease consolidation initiatives, the Company entered into a lease agreement for a new headquarters location for approximately 50,000 square feet of office space located in Goleta, California. The lease expires in May 2031, with no option to extend. The Company anticipates taking possession of the leased premises in October 2023 and intends to relocate its headquarters to this space in fiscal 2024.
Refer to Note 14. Restructuring Plan for discussion of the impact of lease abandonment charges.
64
SONOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
| Year Ended |
| ||
| September 30, 2023 |
| ||
(In thousands) |
|
|
| |
Operating lease cost |
| $ | 12,324 |
|
Short-term lease cost |
|
| 340 |
|
Variable lease cost |
|
| 5,480 |
|
Total lease cost |
| $ | 18,144 |
|
| |||||
2021 | |||||
Fiscal years ending |
| Operating leases |
| |
(In thousands) |
|
|
| |
2024 |
| $ | 4,415 |
|
2025 |
|
| 9,579 |
|
2026 |
|
| 7,888 |
|
2027 |
|
| 6,395 |
|
2028 |
|
| 5,841 |
|
Thereafter |
|
| 41,040 |
|
Total lease payments |
|
| 75,158 |
|
Less imputed interest |
|
| (19,049 | ) |
Total lease liabilities |
| $ | 56,109 |
|
| Fiscal years ending | Operating leases | ||||
| (In thousands) | |||||
| 2022 | $ | 13,407 | |||
| 2023 | 13,263 | ||||
| 2024 | 12,168 | ||||
| 2025 | 9,048 | ||||
| 2026 | 1,672 | ||||
| Thereafter | 134 | ||||
| Total lease payments | 49,692 | ||||
| Less imputed interest | (5,008) | ||||
Total lease liabilities (1) | $ | 44,684 | |||
On October 13, 2021, the Company repaid allentered into a Revolving Credit Agreement with JPMorgan Chase Bank, N.A., as the administrative agent, and the lenders party thereto (the "Revolving Credit Agreement").
The Revolving Credit Agreement provides for (i) a five-year senior secured revolving credit facility in the amount of its outstanding principal balanceup to $100.0 million and (ii) an uncommitted incremental facility subject to certain conditions. Proceeds are to be used for working capital and general corporate purposes. In June 2023, the Company amended the Revolving Credit Agreement, replacing prior references to LIBOR with references to SOFR a result of $24.9 millionthe discontinuation of LIBOR. The facility may be drawn as an Alternative Base Rate Loan (at 1.00% plus an applicable margin) or Term Benchmark Loan (at the Term SOFR Rate, plus the applicable Term SOFR Adjustment ranging from 0.11% to 0.43%, plus an applicable margin (in total, "Adjusted Term SOFR")). The Company must also pay (i) an unused commitment fee ranging from 0.200% to 0.275% per annum of the average daily unused portion of the aggregate revolving credit commitment under the J.P. Morgan Chase Bank, N.A. Securedagreement and (ii) a per annum fee equal to the applicable margin over Adjusted Term Loan (the "Term Loan") which had an original maturity dateSOFR multiplied by the aggregate face amount of October 28, 2021.outstanding letters of credit. As of October 2, 2021,September 30, 2023, the Company did not have any remaining short- or long-term debt obligations, and as of October 3, 2020, the Company’s short- and long-term debt obligations were as follows:
| October 3, 2020 | |||||||||||
| Rate | Balance | ||||||||||
| (In thousands) | |||||||||||
Term Loan (1) | 2.4 | % | $ | 25,000 | |||||||
Unamortized debt issuance costs (2) | (82) | ||||||||||
| Total indebtedness | 24,918 | ||||||||||
| Less short term portion | (6,667) | ||||||||||
| Long-term debt | $ | 18,251 | |||||||||
The Company’s obligations under the Revolving Credit FacilityAgreement are secured by substantially all of the Company’s assets. The Revolving Credit Agreement contains customary representations and the Term Loan requiredwarranties, customary affirmative and negative covenants, a financial covenant that is tested quarterly and requires the Company to maintain a certain consolidated fixed chargeleverage ratio, of at least 1.0, restrict distribution of dividends unless certain conditions were met, such as having a fixed charge
65
events of at least 1.15, and required financial statement reporting and delivery of borrowing base certificates.default. As of October 2, 2021, and October 3, 2020,September 30, 2023, the Company was in compliance with all financial covenants. Thecovenants under the Revolving Credit Facility and the Term Loan were collateralized by eligible inventory and accounts receivable of the Company, as well as the Company's intellectual property including patents and trademarks. For more information, refer to Note 15. Subsequent Event.Agreement.
Share Repurchase Program
Treasury stock during the fiscal year ended October 2, 2021,September 30, 2023, included shares withheld to satisfy employees' tax withholding requirements in connection with vesting of RSUs. Additionally, during the fiscal year ended October 2, 2021,September 30, 2023, the Company retired 2,602,2086,138,129 shares of treasury stock. The Company accounts for the retirement of treasury stock by deducting its par value from common stock and reflecting any excess of cost over par value as a deduction from additional paid-in-capital on the consolidated balance sheets.
Number of Options | Weighted-Average Exercise Price | Weighted-Average Remaining Contractual Term | Aggregate Intrinsic Value | ||||||||||||||||||||
| (In years) | (In thousands) | ||||||||||||||||||||||
| Outstanding at October 3, 2020 | 28,422,940 | $ | 12.03 | 5.6 | $ | 99,053 | |||||||||||||||||
| Exercised | (13,397,782) | $ | 11.04 | ||||||||||||||||||||
| Forfeited | (479,919) | $ | 14.44 | ||||||||||||||||||||
| Outstanding at October 2, 2021 | 14,545,239 | $ | 12.86 | 5.1 | $ | 282,141 | |||||||||||||||||
| At October 2, 2021 | |||||||||||||||||||||||
| Options exercisable | 12,723,601 | $ | 12.62 | 4.9 | $ | 249,899 | |||||||||||||||||
| Options vested and expected to vest | 14,404,584 | $ | 12.85 | 5.1 | $ | 279,604 | |||||||||||||||||
The summary of the Company’s stock option activity is as follows:
| Number of |
|
| Weighted-Average Exercise Price |
|
| Weighted-Average Remaining Contractual Term |
|
| Aggregate Intrinsic Value |
| |||||
|
|
|
|
|
|
| (In years) |
|
| (In thousands) |
| |||||
Outstanding at October 1, 2022 |
|
| 10,802,882 |
|
| $ | 13.37 |
|
|
| 4.5 |
|
| $ | 10,956 |
|
Exercised |
|
| (2,005,776 | ) |
| $ | 10.64 |
|
|
|
|
|
|
| ||
Forfeited |
|
| (247,149 | ) |
| $ | 14.20 |
|
|
|
|
|
|
| ||
Outstanding at September 30, 2023 |
|
| 8,549,957 |
|
| $ | 13.99 |
|
|
| 3.6 |
|
| $ | 1,689 |
|
At September 30, 2023 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Options exercisable |
|
| 8,549,957 |
|
| $ | 13.99 |
|
|
| 3.6 |
|
| $ | 1,689 |
|
Options vested and expected to vest |
|
| 8,549,957 |
|
| $ | 13.99 |
|
|
| 3.6 |
|
| $ | 1,689 |
|
66
SONOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
over a weighted-average period of 0.2 years. The total intrinsic value of stock options exercised was $15.3 million, $58.0 million and $242.7 million for fiscal 2023, 2022 and 2021, respectively.
Restricted Stock Units
Pursuant to the 2018 Plan, the Company issues RSUs to employees and directors. The fair value of RSUs is based on the Company's closing stock price on the trading day immediately preceding the date of grant. RSUs vest quarterly over the service period, which is generally four years with certain awards subject to an initial annual cliff vest. The summary of the Company’s unvested RSU activity is as follows:
| Number of |
|
| Weighted-Average Grant Date Fair Value |
|
| Aggregate Intrinsic Value |
| ||||
|
|
|
|
|
|
| (In thousands) |
| ||||
Outstanding at October 1, 2022 |
|
| 8,308,177 |
|
| $ | 19.25 |
|
| $ | 115,484 |
|
Granted |
|
| 5,272,828 |
|
| $ | 17.33 |
|
|
|
| |
Released |
|
| (4,458,367 | ) |
| $ | 16.66 |
|
|
|
| |
Forfeited |
|
| (1,460,603 | ) |
| $ | 19.34 |
|
|
|
| |
Outstanding at September 30, 2023 |
|
| 7,662,035 |
|
| $ | 19.42 |
|
| $ | 98,917 |
|
At September 30, 2023 |
|
|
|
|
|
|
|
|
| |||
Units expected to vest |
|
| 6,618,791 |
|
| $ | 19.39 |
|
| $ | 85,449 |
|
Number of Units | Weighted-Average Grant Date Fair Value | Aggregate Intrinsic Value | |||||||||||||||
| (In thousands) | |||||||||||||||||
| Outstanding at October 3, 2020 | 11,647,951 | $ | 10.50 | $ | 180,543 | ||||||||||||
| Granted | 2,860,688 | $ | 19.07 | ||||||||||||||
| Released | (4,146,278) | $ | 11.38 | ||||||||||||||
| Forfeited | (1,078,836) | $ | 11.45 | ||||||||||||||
| Outstanding at October 2, 2021 | 9,283,525 | $ | 12.64 | $ | 299,487 | ||||||||||||
| At October 2, 2021 | |||||||||||||||||
| Units expected to vest | 7,887,232 | $ | 12.54 | $ | 254,442 | ||||||||||||
As of September 30, 2023 and October 2, 2021,1, 2022, the Company had $90.0$111.6 million and $120.6 million of unrecognized stock-based compensation expense related to RSUs, each of which isare expected to be recognized over a weighted-average period of 2.4 and 2.5 years.
| Number of |
|
| Weighted-Average Grant Date Fair Value |
|
| Aggregate Intrinsic Value |
| ||||
|
|
|
|
|
|
| (In thousands) |
| ||||
Outstanding at October 1, 2022 |
|
| 398,077 |
|
| $ | 26.96 |
|
| $ | 5,533 |
|
Granted |
|
| 249,370 |
|
| $ | 17.54 |
|
|
|
| |
Released |
|
| (263,158 | ) |
| $ | 26.26 |
|
|
|
| |
Forfeited |
|
| (119,098 | ) |
| $ | 21.45 |
|
|
|
| |
Outstanding at September 30, 2023 |
|
| 265,191 |
|
| $ | 21.27 |
|
| $ | 3,424 |
|
Number of Units | Weighted-Average Grant Date Fair Value | Aggregate Intrinsic Value | |||||||||||||||
| (In thousands) | |||||||||||||||||
| Outstanding at October 3, 2020 | — | $ | — | $ | — | ||||||||||||
| Granted | 158,521 | $ | 22.81 | ||||||||||||||
| Vested | — | ||||||||||||||||
| Forfeited | — | ||||||||||||||||
| Outstanding at October 2, 2021 | 158,521 | $ | 22.81 | $ | 5,114 | ||||||||||||
67
SONOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Stock-based Compensation
| September 30, |
|
| October 1, |
|
| October 2, |
| ||||
(In thousands) |
|
|
|
|
|
|
|
|
| |||
Cost of revenue |
| $ | 2,038 |
|
| $ | 1,620 |
|
| $ | 988 |
|
Research and development |
|
| 35,530 |
|
|
| 30,724 |
|
|
| 25,075 |
|
Sales and marketing |
|
| 15,677 |
|
|
| 15,335 |
|
|
| 13,570 |
|
General and administrative |
|
| 23,612 |
|
|
| 27,961 |
|
|
| 22,494 |
|
Total stock-based compensation expense |
| $ | 76,857 |
|
| $ | 75,640 |
|
| $ | 62,127 |
|
| October 2, 2021 | October 3, 2020 | September 28, 2019 | |||||||||||||||
| (In thousands) | |||||||||||||||||
| Cost of revenue | $ | 988 | $ | 1,106 | $ | 985 | |||||||||||
| Research and development | 25,075 | 23,439 | 17,643 | ||||||||||||||
| Sales and marketing | 13,570 | 14,359 | 12,965 | ||||||||||||||
| General and administrative | 22,494 | 18,706 | 14,982 | ||||||||||||||
| Total stock-based compensation expense | $ | 62,127 | $ | 57,610 | $ | 46,575 | |||||||||||
| September 30, |
|
| October 1, |
|
| October 2, |
| ||||
(In thousands) |
|
|
|
|
|
|
|
|
| |||
Domestic |
| $ | (9,904 | ) |
| $ | 54,609 |
|
| $ | 126,810 |
|
Foreign |
|
| 14,298 |
|
|
| 14,121 |
|
|
| 30,115 |
|
Income before provision for (benefit from) income taxes |
| $ | 4,394 |
|
| $ | 68,730 |
|
| $ | 156,925 |
|
| October 2, 2021 | October 3, 2020 | September 28, 2019 | |||||||||||||||
| (In thousands) | |||||||||||||||||
| Domestic | $ | 126,810 | $ | (15,194) | $ | (858) | |||||||||||
| Foreign | 30,115 | (4,889) | (218) | ||||||||||||||
| Income (loss) before provision for (benefit from) income taxes | $ | 156,925 | $ | (20,083) | $ | (1,076) | |||||||||||
October 2,
2021October 3,
2020September 28,
2019(In thousands) Current: U.S. Federal $ — $ (1,388) $ 1,366 U.S. State 440 724 1,132 Foreign 6,216 1,220 1,463 Total current 6,656 556 3,961 Deferred: U.S. Federal — — — U.S. State — — — Foreign (8,326) (524) (271) Total deferred (8,326) (524) (271) Provision for (benefit from) income taxes $ (1,670) $ 32 $ 3,690
|
| September 30, |
|
| October 1, |
|
| October 2, |
| |||
(In thousands) |
|
|
|
|
|
|
|
|
| |||
Current: |
|
|
|
|
|
|
|
|
| |||
U.S. Federal |
| $ | 7,507 |
|
| $ | — |
|
| $ | — |
|
U.S. State |
|
| 4,947 |
|
|
| 483 |
|
|
| 440 |
|
Foreign |
|
| 2,810 |
|
|
| 3,401 |
|
|
| 6,216 |
|
Total current |
|
| 15,264 |
|
|
| 3,884 |
|
|
| 6,656 |
|
Deferred: |
|
|
|
|
|
|
|
|
| |||
U.S. Federal |
|
| — |
|
|
| (1,459 | ) |
|
| — |
|
U.S. State |
|
| — |
|
|
| (21 | ) |
|
| — |
|
Foreign |
|
| (596 | ) |
|
| (1,057 | ) |
|
| (8,326 | ) |
Total deferred |
|
| (596 | ) |
|
| (2,537 | ) |
|
| (8,326 | ) |
Provision for (benefit from) income taxes |
| $ | 14,668 |
|
| $ | 1,347 |
|
| $ | (1,670 | ) |
Components of the Company’s deferred income tax assets and liabilities are as follows:
| September 30, |
|
| October 1, |
| |||
(In thousands) |
|
|
|
|
|
| ||
Deferred tax assets |
|
|
|
|
|
| ||
Research & development tax credit carryforwards |
| $ | 75,593 |
|
| $ | 92,487 |
|
Capitalized research & development |
|
| 63,395 |
|
|
| 9,420 |
|
Accrued expenses and reserves |
|
| 17,837 |
|
|
| 8,872 |
|
Deferred revenue |
|
| 15,855 |
|
|
| 14,170 |
|
Operating lease liability |
|
| 13,097 |
|
|
| 7,717 |
|
Stock-based compensation |
|
| 7,727 |
|
|
| 9,261 |
|
Foreign net operating loss carryforwards |
|
| 7,606 |
|
|
| 7,702 |
|
Other capitalized costs |
|
| 5,364 |
|
|
| 3,799 |
|
Depreciation |
|
| 2,700 |
|
|
| 2,239 |
|
U.S. net operating loss carryforwards |
|
| 1,852 |
|
|
| 26,363 |
|
Other |
|
| 494 |
|
|
| 182 |
|
Total deferred tax assets |
|
| 211,520 |
|
|
| 182,212 |
|
Valuation allowance |
|
| (185,840 | ) |
|
| (162,267 | ) |
Deferred tax assets, net of valuation allowance |
|
| 25,680 |
|
|
| 19,945 |
|
Deferred tax liabilities |
|
|
|
|
|
| ||
Intangibles |
|
| (22,475 | ) |
|
| (22,125 | ) |
Right-of-use asset |
|
| (11,392 | ) |
|
| (5,940 | ) |
Other |
|
| — |
|
|
| (14 | ) |
Total deferred tax liabilities |
|
| (33,867 | ) |
|
| (28,079 | ) |
Net deferred tax assets (liabilities) |
| $ | (8,187 | ) |
| $ | (8,134 | ) |
|
|
|
|
|
|
| ||
Reported as |
|
|
|
|
|
| ||
Deferred tax assets |
| $ | 1,659 |
|
| $ | 1,508 |
|
Deferred tax liabilities |
|
| (9,846 | ) |
|
| (9,642 | ) |
Net deferred tax assets (liabilities) |
| $ | (8,187 | ) |
| $ | (8,134 | ) |
| October 2, 2021 | October 3, 2020 | ||||||||||
| (In thousands) | |||||||||||
| Deferred tax assets | |||||||||||
| Accrued expenses and reserves | $ | 18,601 | $ | 12,014 | |||||||
| Deferred revenue | 13,915 | 11,831 | |||||||||
| U.S. net operating loss carryforwards | 25,284 | 8,242 | |||||||||
| Foreign net operating loss carryforwards | 13,240 | 12,183 | |||||||||
| Research & development tax credit carryforwards | 77,607 | 53,543 | |||||||||
| Stock-based compensation | 9,082 | 11,018 | |||||||||
| Operating lease liability | 9,908 | 14,377 | |||||||||
| U.S. amortization | 8,031 | 7,648 | |||||||||
| Depreciation | 1,875 | 1,101 | |||||||||
| Other | 428 | 603 | |||||||||
| Total deferred tax assets | 177,971 | 132,560 | |||||||||
| Valuation allowance | (155,978) | (113,939) | |||||||||
| Deferred tax assets, net of valuation allowance | 21,993 | 18,621 | |||||||||
| Deferred tax liabilities | |||||||||||
| Tax accounting method change | (962) | (2,946) | |||||||||
| Right-of-use asset | (7,388) | (9,914) | |||||||||
| Foreign amortization | (5,833) | (6,093) | |||||||||
| Depreciation | (32) | (187) | |||||||||
| Other | (144) | (115) | |||||||||
| Total deferred tax liabilities | (14,359) | (19,255) | |||||||||
| Net deferred tax assets (liabilities) | $ | 7,634 | $ | (634) | |||||||
| Reported as | |||||||||||
| Deferred tax assets | $ | 10,028 | $ | 1,800 | |||||||
| Deferred tax liabilities | (2,394) | (2,434) | |||||||||
| Net deferred tax assets (liabilities) | $ | 7,634 | $ | (634) | |||||||
Because of the change of ownership provisions of Sections 382 and 383 of the Internal Revenue Code, and similar state provisions, use of a portion of the Company’s U.S. federal and state net operating loss and research and development tax credit carryforwards may be limited in future periods depending uponif there are future changes in ownership. Further, a portion of the carryforwards may expire before being applied to reduce future taxable income and income tax liabilities if sufficient taxable income is not generated in future periods.
69
SONOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
| September 30, |
|
| October 1, |
|
| October 2, |
| ||||
(In thousands) |
|
|
|
|
|
|
|
|
| |||
Beginning balance |
| $ | 162,267 |
|
| $ | 155,978 |
|
| $ | 113,939 |
|
Increase during the period |
|
| 23,628 |
|
|
| 13,841 |
|
|
| 49,791 |
|
Decrease during the period |
|
| (55 | ) |
|
| (7,552 | ) |
|
| (7,752 | ) |
Ending balance |
| $ | 185,840 |
|
| $ | 162,267 |
|
| $ | 155,978 |
|
| October 2, 2021 | October 3, 2020 | September 28, 2019 | |||||||||||||||
| (In thousands) | |||||||||||||||||
| Beginning balance | $ | 113,939 | $ | 95,088 | $ | 72,380 | |||||||||||
| Increase during the period | 49,791 | 18,851 | 22,708 | ||||||||||||||
| Decrease during the period | (7,752) | — | — | ||||||||||||||
| Ending balance | $ | 155,978 | $ | 113,939 | $ | 95,088 | |||||||||||
October 2,
2021October 3,
2020September 28,
2019(In thousands) U.S. federal income taxes at statutory rate $ 32,954 $ (4,217) $ (226) U.S. state and local income taxes, net of federal benefit and state credits (9,473) (2,798) (9,315) Foreign income tax rate differential 1,430 (75) 129 Stock-based compensation (47,496) 869 (2,399) Federal research and development tax credits (21,535) (8,012) (8,418) Unrecognized federal tax benefits 4,041 815 (2,806) Change in tax rate (2,681) — 1,161 Global intangible low taxed income, net of foreign tax credits — — 239 Base erosion and anti-abuse tax — (781) 781 Other (565) 598 822 Change in valuation allowance 41,655 13,633 23,722 Provision for income taxes $ (1,670) $ 32 $ 3,690
| September 30, |
|
| October 1, |
|
| October 2, |
| ||||
(In thousands) |
|
|
|
|
|
|
|
|
| |||
U.S. federal income taxes at statutory rate |
| $ | 923 |
|
| $ | 14,433 |
|
| $ | 32,954 |
|
U.S. state and local income taxes, net of federal benefit and state credits |
|
| (841 | ) |
|
| (2,594 | ) |
|
| (9,473 | ) |
Foreign income tax rate differential |
|
| 734 |
|
|
| 970 |
|
|
| 1,430 |
|
Stock-based compensation |
|
| 104 |
|
|
| (15,532 | ) |
|
| (47,496 | ) |
Federal research and development tax credits |
|
| (7,591 | ) |
|
| (8,983 | ) |
|
| (21,535 | ) |
Unrecognized federal tax benefits |
|
| 184 |
|
|
| (2,482 | ) |
|
| 4,041 |
|
Change in tax rate |
|
| — |
|
|
| 5,013 |
|
|
| (2,681 | ) |
Global intangible low taxed income, net of foreign tax credits |
|
| 1,234 |
|
|
| 290 |
|
|
| — |
|
Foreign -derived intangible income (FDII) deduction |
|
| (6,863 | ) |
|
| — |
|
|
| — |
|
Subpart F income |
|
| 1,374 |
|
|
| — |
|
|
| — |
|
162(m) executive compensation limitation |
|
| 2,513 |
|
|
| 2,574 |
|
|
| — |
|
Other |
|
| (695 | ) |
|
| 1,079 |
|
|
| (565 | ) |
Change in valuation allowance |
|
| 23,592 |
|
|
| 6,579 |
|
|
| 41,655 |
|
Provision for income taxes |
| $ | 14,668 |
|
| $ | 1,347 |
|
| $ | (1,670 | ) |
| September 30, |
|
| October 1, |
|
| October 2, |
| ||||
(In thousands) |
|
|
|
|
|
|
|
|
| |||
Beginning balance |
| $ | 17,021 |
|
| $ | 21,252 |
|
| $ | 14,721 |
|
Decrease - tax positions in prior periods |
|
| (566 | ) |
|
| (6,039 | ) |
|
| (4 | ) |
Increase - tax positions in current periods |
|
| 1,164 |
|
|
| 1,808 |
|
|
| 6,535 |
|
Ending balance |
| $ | 17,619 |
|
| $ | 17,021 |
|
| $ | 21,252 |
|
| October 2, 2021 | October 3, 2020 | September 28, 2019 | |||||||||||||||
| (In thousands) | |||||||||||||||||
| Beginning balance | $ | 14,721 | $ | 12,527 | $ | 17,794 | |||||||||||
| Decrease - tax positions in prior periods | (4) | (768) | (8,226) | ||||||||||||||
| Increase - tax positions in current periods | 6,535 | 2,962 | 2,959 | ||||||||||||||
| Ending balance | $ | 21,252 | $ | 14,721 | $ | 12,527 | |||||||||||
The Company does not anticipate material changes to its unrecognized benefits within the next 12 months that would result in a material change to the Company’s financial position. The unrecognized tax benefits as of October 2, 2021,September 30, 2023, would have no impact on the effective tax rate if recognized.
70
SONOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
be subject to withholding taxes payable at that time. Outside basis differences in the Company's foreign subsidiaries including unremitted earnings and any related taxes are not material.
| September 30, |
|
| October 1, |
|
| October 2, |
| ||||
(In thousands, except share and per share data) |
|
|
|
|
|
|
|
|
| |||
Numerator: |
|
|
|
|
|
|
|
|
| |||
Net income (loss) attributable to common stockholders - basic and diluted |
| $ | (10,274 | ) |
| $ | 67,383 |
|
| $ | 158,595 |
|
Denominator: |
|
|
|
|
|
|
|
|
| |||
Weighted-average shares of common stock - basic |
|
| 127,702,885 |
|
|
| 127,691,030 |
|
|
| 122,245,212 |
|
Effect of potentially dilutive stock options |
|
| — |
|
|
| 5,472,807 |
|
|
| 10,120,238 |
|
Effect of RSUs |
|
| — |
|
|
| 4,385,406 |
|
|
| 7,875,245 |
|
Effect of PSUs |
|
| — |
|
|
| 212,835 |
|
|
| 68,457 |
|
Weighted-average shares of common stock—diluted |
|
| 127,702,885 |
|
|
| 137,762,078 |
|
|
| 140,309,152 |
|
|
|
|
|
|
|
|
|
|
| |||
Net income (loss) per share attributable to common stockholders: |
|
|
|
|
|
|
|
|
| |||
Basic |
| $ | (0.08 | ) |
| $ | 0.53 |
|
| $ | 1.30 |
|
Diluted |
| $ | (0.08 | ) |
| $ | 0.49 |
|
| $ | 1.13 |
|
| October 2, 2021 | October 3, 2020 | September 28, 2019 | |||||||||||||||
| (In thousands, except share and per share data) | |||||||||||||||||
| Numerator: | |||||||||||||||||
| Net income (loss) attributable to common stockholders - basic and diluted | $ | 158,595 | $ | (20,115) | $ | (4,766) | |||||||||||
| Denominator: | |||||||||||||||||
| Weighted-average shares of common stock - basic | 122,245,212 | 109,807,154 | 103,783,006 | ||||||||||||||
| Effect of potentially dilutive stock options | 10,120,238 | — | — | ||||||||||||||
| Effect of RSUs | 7,875,245 | — | — | ||||||||||||||
| Effect of PSUs | 68,457 | — | — | ||||||||||||||
| Weighted-average shares of common stock—diluted | 140,309,152 | 109,807,154 | 103,783,006 | ||||||||||||||
| Net income (loss) per share attributable to common stockholders: | |||||||||||||||||
| Basic | $ | 1.30 | $ | (0.18) | $ | (0.05) | |||||||||||
| Diluted | $ | 1.13 | $ | (0.18) | $ | (0.05) | |||||||||||
| October 2, 2021 | October 3, 2020 | September 28, 2019 | |||||||||||||||
| Stock options to purchase common stock | 9,030,004 | 33,503,698 | 42,300,183 | ||||||||||||||
| Restricted stock units | 3,505,140 | 9,225,127 | 4,147,463 | ||||||||||||||
| Performance stock units | 55,586 | — | — | ||||||||||||||
| Total | 12,590,730 | 42,728,825 | 46,447,646 | ||||||||||||||
| September 30, |
|
| October 1, |
|
| October 2, |
| ||||
Stock options to purchase common stock |
|
| 9,449,904 |
|
|
| 6,877,530 |
|
|
| 9,030,004 |
|
Restricted stock units |
|
| 9,742,444 |
|
|
| 5,041,645 |
|
|
| 3,505,140 |
|
Performance stock units |
|
| 149,991 |
|
|
| 88,672 |
|
|
| 55,586 |
|
Total |
|
| 19,342,339 |
|
|
| 12,007,847 |
|
|
| 12,590,730 |
|
12. Commitments and Contingencies
Commitments to suppliers
The Company utilizes contract manufacturers to build its products. These contract manufacturers acquire components and build products based on demand forecast information the Company supplies, which typically covers the fiscal year. Consistent with industry practice, the Company acquires inventories from such manufacturers through blanket purchase orders against which orders are applied based on projected demand information and availability of goods. Such purchase commitments typically cover the Company's forecasted product and manufacturing requirements for periods that range a number of months. In certain instances, these agreements allow the Company the option to cancel, reschedule, and/or adjust our requirements based on its business needs for a period of time before the order is due to be fulfilled. The Company's purchase orders typically are not cancellable in the event of a demand plan change or other circumstances, such as where the supplier has procured unique, Sonos-specific designs, and/or specific non-cancellable, non-returnable components based on our provided forecasts.
71
| Fiscal years ended | ||||||||||||||||||||||||||||||||||||||||||||
| Total | 2022 | 2023 | 2024 | 2025 | 2026 | Beyond | ||||||||||||||||||||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||||||||||||||||||||||
| Inventory-related purchase obligations | $ | 92,488 | $ | 92,488 | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||||||||||||||
| Other purchase obligations | 57,112 | 32,447 | 20,898 | 3,767 | — | — | — | |||||||||||||||||||||||||||||||||||||
| Total | $ | 149,600 | $ | 124,935 | $ | 20,898 | $ | 3,767 | $ | — | $ | — | $ | — | ||||||||||||||||||||||||||||||
From time to time, the Company is involved in legal proceedings in the ordinary course of business, including claims relating to employee relations, business practices, and patent infringement. Litigation can be expensive and disruptive to normal business operations. Moreover, the results of complex legal proceedings are difficult to predict, and the Company’s view of these matters may change in the future as the litigation and events related thereto unfold. The Company expenses legal fees as incurred. The Company records a provision for contingent losses when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. An unfavorable outcome to any legal matter, if material, could have an adverse effect on the Company’s operations or its financial position, liquidity or results of operations.
On January 7, 2020, the Company filed a complaint with the U.S. International Trade Commission ("ITC") against Alphabet Inc. ("Alphabet") and Google LLC ("Google") and a counterpart lawsuit in the U.S. District Court for the Central District of California against Google. The complaint and lawsuit each allege infringement by Alphabet and Google of certain Sonos patents related to its smart speakers and related technology. On February 6, 2020,The counterpart lawsuit is stayed pending completion of the ITC initiated a formal investigation intoand appeal thereof. The ITC concluded its investigation in January 2022, finding all five of the Company’s claims. Google and Alphabet filed an initial answer in the ITC action on February 27, 2020, and an amended answer on April 3, 2020, denying infringement and alleging that the asserted patents are invalid. On August 13, 2021, an administrative law judge at the ITC issued an initial determination finding all 5 of Sonos' asserted patents to be valid and infringed by Google. The judge also ruledGoogle, and further finding that certain proposed redesigns of Google products, one specific redesign per patent proposed by Google would qualify as non-infringing alternativesavoid infringement. The ITC issued a limited exclusion order and a cease-and-desist order with respect to Google's current product designs.Google’s infringing products. The full commission is expected to decide whether and to what extent it will review the initial determination on or before November 19, 2021. On March 4, 2020, the California District Court stayed the district court proceeding pending resolutionoutcome of the ITC investigation. On March 11, 2020, Google filed an answer ininvestigation is currently being appealed by the California District Court, denying infringementCompany and alleging that the asserted patents are invalid.
On September 29, 2020, the Company filed aanother lawsuit against Google in the U.S. District Court for Western District of Texas, alleging infringement of those 5additional Sonos patents and seeking monetary damages and other non-monetary relief. This dispute over venue has now been resolved, with the case proceeding in the Northern District of California, where the judge has bifurcated the case, scheduling early disposition of 2 representative claims in mid-2022 andA jury trial on all other claimswas held in May 2023. 2023, which found one Sonos patent to be infringed and another Sonos patent not infringed, and returned an award of $32.5 million based on a royalty rate of $2.30 per infringing unit. After trial, the court held Sonos’ patents unenforceable under the doctrine of prosecution laches and invalid as a result of amendments made during prosecution. The Company is appealing the ruling.
On December 1, 2020, the Company filed a lawsuit against two Google Germany GmbH and Google Ireland Ltd.foreign subsidiaries in the regional court of Hamburg, Germany, alleging infringement of a Sonos patent related to control of playback of media by mobile and playback devices and seeking non-monetary relief. SonosThe Company has chosen to withdraw these preliminary injunction actionssince withdrawn this action after having received some preliminary relief.
On June 11, 2020, Google filed a lawsuit in the U.S. District Court for the Northern District of California against the Company alleging infringement by the Company of 5five Google patents generally related to noise cancellation, digital rights management, media search and wireless relays and seeking monetary damages and other non-monetary relief. On November 2, 2020, the California District Court granted Sonos’ motion to dismiss Google’s allegation of infringement of 1Four of these 5 Google patents specifically ahave since been found invalid by the Court or by the U.S. Patent and Trademark Office, or have been withdrawn from the case by Google. In this lawsuit, one patent generally related to media search, finding thatremains asserted against the invention at issueCompany. No trial date is patent ineligible. On June
72
SONOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
On August 21, 2020, Google filed a lawsuit against Sonos Europe B.V. and Sonos, Inc. in France, alleging infringement of 2two Google patents generally related to digital rights management and search notifications, and seeking monetary damages and an injunction preventing sales of anyallegedly infringing Sonos products. OnIn February 8, 2021, Google withdrew its infringement allegations regarding the search notificationsone patent in view of prior art brought to the attention of the court by the Company. In March 2022, the French trial court ruled for the Company on one of Google's asserted patents. The French trial court found the other Google patent invalid in November 2023. Google has appealed the French trial court's March 2022 ruling, which is pending.
On August 21, 2020, Google filed a lawsuit against Sonos Europe B.V. and Sonos, Inc. in the Netherlands alleging infringement of a Google patent related to search notifications, and seeking monetary damages and an injunction preventing sales of anyallegedly infringing Sonos products. In October, 2022, the Netherlands court ruled that the Company does not infringe Google’s patent.
In September 2020, Google filed a lawsuit against Sonos Europe B.V. in the Netherlands, alleging infringement of a Google patent and seeking an injunction preventing sales of allegedly infringing products. In February 2022, the Court rejected Google's claims concerning this patent. Google has appealed this decision, which is pending.
On August 8, 2022, Google filed two complaints with the ITC against the Company and two counterpart lawsuits in the Northern District of California against the Company, collectively alleging infringement by the Company of seven Google patents generally related to digital rights management,wireless charging, device setup, and voice control, and seeking monetary damages and enforcement of an injunction preventing sales of any infringing Sonos products, which was transferred to the Midden-Netherlands court on March 22, 2021, following the grantother non-monetary relief. The counterpart lawsuits are stayed pending completion of the Company's challengeITC investigations. The ITC has terminated the investigation as to improper jurisdiction.one Google patent as a result of imminent expiration of that Google patent. An oral hearing in the first ITC investigation took place in June 2023, with the administrative law judge issuing an initial determination of no violation by the Company. Google is seeking internal Commission review of the initial determination with a final decision by the Commission scheduled for January 2024. The Netherlands courtoral hearing in the second ITC investigation has now heard argument inbeen postponed after the administrative law judge has indicated that she will be invalidating both pending Google cases and decisions are expected no earlier than December 2021. A range of loss, if any, associated with these matters is not probable or reasonably estimable as of October 2, 2021.
On March 10, 2017, Implicit, LLC (“Implicit”) filed a patent infringement action in the United States District Court, District of Delaware against the Company. Implicit is asserting that the Company has infringed on 2certain claims of two patents in this case. The Company denies the allegations. The claims at issue have been held unpatentable by the USPTO. Implicit has appealed this ruling, which will be heard by the appeals court in 2024. There is no assurance of a favorable outcome and the Company’s business could be adversely affected as a result of a finding that the Company patents-in-suit are invalid and/or unenforceable. A range of loss, if any, associated with this matter is not probable or reasonably estimable as of October 2, 2021.
On May 13, 2020, the Company was granted a temporary exclusion from the August 2019 Section 301 Tariff Action (List 4A) ("Section 301 tariffs") for its component products. On July 23, 2020, the Company was granted a temporary exclusion from Section 301 tariffs for its core speaker products. These exclusions eliminated, eliminating the tariffs on the Company's component and core speaker products imported from China until August 31, 2020, and entitled the Company to a refund for the tariffs paid since September 2019, the date the Section 301 tariffs were imposed. On August 28, 2020, the United States Trade Representative granted an extension through December 31, 2020, of the exclusion for the Company’s core products, with the Section 301 tariffs for our core products automatically reinstating on January 1, 2021.2020. The exclusion for the Company’s component products was not extended past August 31, 2020, with the Section 301 tariffs for our component products automatically reinstatingreinstated on September 1, 2020. Tariff refund claims are subjectOn July 23, 2020, the Company was granted a temporary exclusion from Section 301 tariffs, eliminating the tariffs on the Company’s core speaker products imported from China until August 31, 2020. These exemptions entitled the Company to reviewrefunds for tariffs paid from September 2019 through December 2020. On August 28, 2020, the United States Trade Representative granted an extension through December 31, 2020 of the exclusion for the Company’s core speaker products, with the Section 301 tariffs for our core speaker products automatically reinstated on January 1, 2021. On March 23, 2022, the Company was granted an exclusion extension from the Section 301 tariffs, eliminating tariffs on the Company’s core speaker products, including certain new product introductions, imported from China from April 13, 2022 through December 31, 2022. This exemption entitled the Company to refunds for tariffs paid from October 12, 2021 through April 12, 2022.
For fiscal 2023 and approval by U.S. Customs and Border Protection. As of October 2, 2021,2022, the Company recognized $18.3$10.4 million and $15.8 million, respectively, in refunds based upon acceptance of the Company's refund request, recognized as a reduction to cost of revenue, and the outstanding refund receivable was approximately $0.8 million which is recorded in other current assets on the consolidated balance sheets.revenue. As of October 2, 2021,September 30, 2023, the remaining outstanding tariff refundrefunds the Company expectsexpected to recover was approximately $15.4 million.were minimal for tariffs paid from September 2019 through December 2020, and from October 12, 2021 through April 12, 2022. The Company did not record these potential refunds due to uncertainty of the timing of acceptance of approval, andbut such refunds will be recognized as a reduction to cost of revenue if and when acceptance occurs.
Guarantees and Indemnifications
13. Quarterly Financial Data (Unaudited)
| Three Months Ended |
| ||||||||||||||
| September 30, |
|
| July 1, |
|
| April 1, |
|
| December 31, |
| |||||
(In thousands, except per share amounts) |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Revenue |
| $ | 305,147 |
|
| $ | 373,356 |
|
| $ | 304,173 |
|
| $ | 672,579 |
|
Gross profit |
|
| 128,054 |
|
|
| 171,762 |
|
|
| 131,618 |
|
|
| 285,057 |
|
Net income (loss) |
|
| (31,239 | ) |
|
| (23,571 | ) |
|
| (30,652 | ) |
|
| 75,188 |
|
Net income (loss) per share - basic |
| $ | (0.25 | ) |
| $ | (0.18 | ) |
| $ | (0.24 | ) |
| $ | 0.59 |
|
Net income (loss) per share - diluted |
| $ | (0.25 | ) |
| $ | (0.18 | ) |
| $ | (0.24 | ) |
| $ | 0.57 |
|
| Three Months Ended |
| ||||||||||||||
| October 1, |
|
| July 2, |
|
| April 2, |
|
| January 1, |
| |||||
(In thousands, except per share amounts) |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Revenue |
| $ | 316,290 |
|
| $ | 371,783 |
|
| $ | 399,781 |
|
| $ | 664,481 |
|
Gross profit |
|
| 124,099 |
|
|
| 175,848 |
|
|
| 179,034 |
|
|
| 317,385 |
|
Net income (loss) |
|
| (64,067 | ) |
|
| (597 | ) |
|
| 8,566 |
|
|
| 123,481 |
|
Net income (loss) per share - basic |
| $ | (0.50 | ) |
| $ | 0.00 |
|
| $ | 0.07 |
|
| $ | 0.97 |
|
Net income (loss) per share - diluted |
| $ | (0.50 | ) |
| $ | 0.00 |
|
| $ | 0.06 |
|
| $ | 0.87 |
|
| Three Months Ended | |||||||||||||||||||||||
| October 2, 2021 | July 3, 2021 | April 3, 2021 | January 2, 2021 | ||||||||||||||||||||
| (In thousands, except per share amounts) | |||||||||||||||||||||||
| Revenue | $ | 359,539 | $ | 378,672 | $ | 332,949 | $ | 645,584 | |||||||||||||||
| Gross profit | 166,931 | 177,861 | 165,776 | 299,425 | |||||||||||||||||||
| Net income (loss) | (8,744) | 17,826 | 17,221 | 132,292 | |||||||||||||||||||
| Net income (loss) per share - basic | $ | (0.07) | $ | 0.14 | $ | 0.14 | $ | 1.14 | |||||||||||||||
| Net income (loss) per share - diluted | $ | (0.07) | $ | 0.12 | $ | 0.12 | $ | 1.01 | |||||||||||||||
| Three Months Ended | |||||||||||||||||||||||
| October 3, 2020 | June 27, 2020 | March 28, 2020 | December 28, 2019 | ||||||||||||||||||||
| (In thousands, except per share amounts) | |||||||||||||||||||||||
| Revenue | $ | 339,837 | $ | 249,310 | $ | 175,098 | $ | 562,083 | |||||||||||||||
| Gross profit | 161,536 | 109,791 | 73,009 | 227,620 | |||||||||||||||||||
| Net income (loss) | 18,411 | (56,980) | (52,320) | 70,775 | |||||||||||||||||||
| Net income (loss) per share - basic | $ | 0.17 | $ | (0.52) | $ | (0.48) | $ | 0.65 | |||||||||||||||
| Net income (loss) per share - diluted | $ | 0.15 | $ | (0.52) | $ | (0.48) | $ | 0.60 | |||||||||||||||
On June 23, 2020,14, 2023, the Company initiated a restructuring plan as part of its efforts to reduce operating expenses and preserve liquidity due to the uncertainty and challenges stemming from the COVID-19 pandemicits cost base (the "2020“2023 restructuring plan"plan”). As partThe 2023 restructuring plan included a reduction in force involving approximately 7% of the 2020Company's employees, further reducing the Company’s real estate footprint, and re-evaluation of certain program spend. Total pre-tax restructuring plan, the Company eliminated approximately 12% of its global headcount and closed its New York retail store and 6 satellite offices in order to better align resources to provide further operating flexibility and more efficiently position the business for its long-term strategy. Activitiesabandonment costs under the 20202023 restructuring plan were $11.4 million, substantially completedall of which were incurred in the third quarter of fiscal 2023, with nominal amounts to be incurred through the first quarter of fiscal 2021.
74
SONOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Restructuring and abandonment costs by major cost-type incurred were as follows:
|
| Twelve Months Ended |
| |
(in thousands) |
| September 30, |
| |
Employee-related costs |
| $ | 9,083 |
|
Lease abandonment charges1 |
|
| 5,600 |
|
Other restructuring costs |
|
| 966 |
|
Total restructuring and abandonment costs |
| $ | 15,649 |
|
1 Restructuring and abandonment costs for fiscal 2023, include $4.8 million of non-recurring lease abandonment charges that were incurred in March 2023, when the Company abandoned portions of its office spaces for the remainder of their respective lease terms in support of operational efficiencies. |
| |||
Restructuring and relatedabandonment costs underare recorded in the 2020 restructuring plan were $26.4 million, which was incurred in fiscal 2020. For the assets deemed to be impaired as part of the 2020 restructuring, the Company estimated fair value using an income-approach based on management’s forecast of future cash flows expected to be derived from the property.
|
| Twelve Months Ended |
| |
(in thousands) |
| September 30, |
| |
Research and development1 |
| $ | 6,556 |
|
Sales and marketing1 |
|
| 5,635 |
|
General and administrative1 |
|
| 3,458 |
|
Total restructuring and abandonment costs |
| $ | 15,649 |
|
1 Restructuring and abandonment costs for twelve months ended September 30, 2023, include accelerated depreciation for leasehold improvements and non-recurring write-offs for operating lease right-of-use assets that were incurred in March 2023, when the Company abandoned portions of its office spaces for the remainders of their respective lease terms in support of operational efficiencies. |
| |||
The cash paid related tofollowing table summarizes the settlement of the lease liability as part of the early termination is included within "Cash paid for amounts includedCompany's restructuring activities recorded in the measurement of lease liabilities"accrued expenses and accrued compensation within the supplemental disclosure on the consolidated statements of cash flows.balance sheets:
(in thousands) |
| Employee Related Costs |
|
| Lease Abandonment and Other Restructuring Costs |
|
| Total |
| |||
Balance as of October 1, 2022 |
| $ | - |
|
| $ | - |
|
| $ | - |
|
Restructuring charges |
|
| 9,083 |
|
|
| 1,022 |
|
|
| 10,105 |
|
Cash paid |
|
| (7,015 | ) |
|
| (966 | ) |
|
| (7,981 | ) |
Balance as of September 30, 2023 |
| $ | 2,068 |
|
| $ | 56 |
|
| $ | 2,124 |
|
15. Subsequent Events
SONOS, INC.
Notes to Consolidated Financial Statements
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures as required under Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended (“Exchange Act”) as of October 2, 2021.September 30, 2023. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures are effective as of October 2, 2021.
Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Exchange Act Rule 13a-15(f).
Our Chief Executive Officer and Chief Financial Officer, with assistance from other members of management, assessed the effectiveness of our internal control over financial reporting as of October 2, 2021,September 30, 2023, based on the framework and criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, our management concluded that our internal control over financial reporting was effective as of October 2, 2021.
The effectiveness of our internal control over financial reporting as of October 2, 2021,September 30, 2023, has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears in Item 15(a) of this Annual Report on Form 10-K.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting in management's evaluation pursuant to Rule 13a-15(f) during the quarter ended October 2, 2021,September 30, 2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
On September 7, 2023, Julius Genachowski, Chairperson and a member of our Board of Directors, adopted a trading plan intended to satisfy the requirements of Rule 10b5-1(c). The plan provides that Mr. Genachowski may sell up to 46,434 shares of common stock subject to options granted under our equity incentive plan. The plan terminates on the earlier of the date all shares under the plan are sold or 1) March 10, 2025, with respect to 6,724 shares of common stock subject to options granted in March 2015 and 2) March 14, 2025, with respect to 39,710 shares of common stock subject to options granted in November 2016.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
Item 10. Directors, Executive Officers and Corporate Governance
The information required by this item is included under the captions "Board of Directors and Corporate Governance," "Proposal One: Election of Directors," "Executive Officers" and "Delinquent Section 16(a) Reports" included in our definitive Proxy Statement for the 20222024 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of our year ended October 2, 2021,September 30, 2023, and is incorporated herein by reference.
Item 11. Executive Compensation
The information required by this item is included under the captions “Board of Directors and Corporate Governance” and "Executive Compensation" in our definitive Proxy Statement for the 20222024 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of our year ended October 2, 2021,September 30, 2023, and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this item is included under the captions "Equity Compensation Plan Information" and “Security Ownership of Certain Beneficial Owners and Management” in our definitive Proxy Statement for the 20222024 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of our year ended October 2, 2021,September 30, 2023, and is incorporated herein by reference.
The information required by this item is included under the captions "Board of Directors and Corporate Governance" and “Certain Relationships and Related Party Transactions” in our definitive Proxy Statement for the 20222024 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of our year ended October 2, 2021,September 30, 2023, and is incorporated herein by reference.
Item 14. Principal AccountingAccountant Fees and Services
The information required by this item is included under the caption “Proposal Two: Ratification of Appointment of Independent Registered Public Accounting Firm” in our definitive Proxy Statement for the 20222024 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of our year ended October 2, 2021,September 30, 2023, and is incorporated herein by reference.
Item 15. Exhibits, Financial Statement Schedules
(a)(1) Financial Statements
The information concerning Sonos’ consolidated financial statements and the Report of Independent Registered Public Accounting Firm required by this Item 15(a)(1) is incorporated by reference herein to the section of this Annual Report on Form 10-K in Part II, Item 8, titled "Financial Statements and Supplementary Data."
(a)(2) Financial Statement Schedules
All financial statement schedules have been omitted as the information is not required under the related instructions or is not applicable or because the information required is already included in the consolidated financial statements or the notes to those consolidated financial statements.
(a)(3) Exhibits
We have filed, or incorporated into this Annual Report on Form 10-K by reference, the exhibits listed on the accompanying Exhibit Index immediately preceding the signature page of this Annual Report on Form 10-K.
EXHIBIT INDEXExhibit
Number Incorporated By Reference Filed or Furnished
HerewithExhibit Title Form File No. Exhibit Filing Date 3.1 10-Q 001-38603 3.1 9/11/2018 3.2 10-Q 001-38603 3.2 9/11/2018 4.1 S-1 333-226076 4.01 7/6/2018 4.2 S-1 333-226076 4.02 7/6/2018 4.3 10-K 001-38603 4.3 11/26/19 10.1+ S-1 333-226076 10.01 7/6/2018 10.2+ S-1 333-226076 10.02 7/6/2018
Exhibit Number | Incorporated By Reference | Filed or Furnished Herewith | ||||||||||
Exhibit Title | Form | File No. | Exhibit | Filing Date | ||||||||
3.1 | 10-Q |
| 001-38603 |
| 3.1 |
| 9/11/2018 |
|
| |||
3.2 | 10-Q |
| 001-38603 |
| 3.2 |
| 9/11/2018 |
|
| |||
4.1 |
|
| S-1 |
| 333-226076 |
| 4.01 |
| 7/6/2018 |
|
| |
4.2 |
|
| S-1 |
| 333-226076 |
| 4.02 |
| 7/6/2018 |
|
| |
4.3 |
|
| 10-K |
| 001-38603 |
| 4.3 |
| 11/26/19 |
|
| |
10.1+ |
|
| S-1 |
| 333-226076 |
| 10.01 |
| 7/6/2018 |
|
| |
10.2+ |
| 2003 Stock Plan, as amended, and forms of agreement thereunder |
| S-1 |
| 333-226076 |
| 10.02 |
| 7/6/2018 |
|
|
10.3+ | 2018 Equity Incentive Plan and forms of agreement thereunder | 10-Q |
| 001-38603 |
| 10.1 |
| 8/12/2021 |
|
| ||
10.4+ |
| 2018 Employee Stock Purchase Plan and form of subscription agreement |
| S-1 |
| 333-226076 |
| 10.04 |
| 7/6/2018 |
|
|
10.5+ |
| Offer Letter between Patrick Spence and the Registrant, dated May 25, 2012 |
| S-1 |
| 333-226076 |
| 10.05 |
| 7/6/2018 |
|
|
10.6† |
|
| S-1 |
| 333-226076 |
| 10.08 |
| 7/6/2018 |
|
| |
78
| 10.3+ | 10-Q | 001-38603 | 10.1 | 8/12/2021 | ||||||||||||||||||||||||||||||||||
| 10.4+ | S-1 | 333-226076 | 10.04 | 7/6/2018 | ||||||||||||||||||||||||||||||||||
| 10.5+ | S-1 | 333-226076 | 10.05 | 7/6/2018 | ||||||||||||||||||||||||||||||||||
| 10.6+ | 10-Q | 001-38603 | 10.1 | 5/10/2019 | ||||||||||||||||||||||||||||||||||
| 10.7† | S-1 | 333-226076 | 10.08 | 7/6/2018 | ||||||||||||||||||||||||||||||||||
| 10.8+ | 10-K | 001-38603 | 10.09 | 11/28/2018 | ||||||||||||||||||||||||||||||||||
| 10.9+ | 10-K | 001-38603 | 10.10 | 11/28/2018 | ||||||||||||||||||||||||||||||||||
| 10.10+ | 10-Q | 001-38603 | 10.1 | 2/7/2019 | ||||||||||||||||||||||||||||||||||
| 10.11+ | 10-Q | 001-38603 | 10.1 | 8/6/2020 | ||||||||||||||||||||||||||||||||||
| 10.12+ | 10-Q | 001-38603 | 10.1 | 2/6/2020 | ||||||||||||||||||||||||||||||||||
| 10.13+ | 10-Q | 001-38603 | 10.1 | 2/11/2021 | ||||||||||||||||||||||||||||||||||
| 21.1 | S-1 | 333-226076 | 21.1 | 7/6/2018 | ||||||||||||||||||||||||||||||||||
| 23.1 | X | |||||||||||||||||||||||||||||||||||||
| 24.1 | X | |||||||||||||||||||||||||||||||||||||
| 31.1 | X | |||||||||||||||||||||||||||||||||||||
| 31.2 | X | |||||||||||||||||||||||||||||||||||||
| 32.1* | X | |||||||||||||||||||||||||||||||||||||
| 32.2* | X | |||||||||||||||||||||||||||||||||||||
| 101.INS | XBRL Instance Document | X | ||||||||||||||||||||||||||||||||||||
| 101.SCH | XBRL Taxonomy Extension Schema Document | X | ||||||||||||||||||||||||||||||||||||
| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | X | ||||||||||||||||||||||||||||||||||||
| 101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | X | ||||||||||||||||||||||||||||||||||||
| 101.LAB | XBRL Taxonomy Extension Label Linkbase Document | X | ||||||||||||||||||||||||||||||||||||
| 101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | X | ||||||||||||||||||||||||||||||||||||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in the Exhibit 101 attachments) | X | ||||||||||||||||||||||||||||||||||||
10.7+ |
| Offer Letter between Nicholas Millington and the Registrant, dated February 27, 2003 |
| 10-K |
| 001-38603 |
| 10.9 |
| 11/28/2018 |
|
|
10.8+ |
| Offer Letter between Maxime Bouvat-Merlin and the Registrant dated June 23, 2016 |
|
|
|
|
|
|
|
|
| X |
10.9+ |
|
| 10-Q |
| 001-38603 |
| 10.1 |
| 2/7/2019 |
|
| |
10.10+ |
| Performance Share Award Agreement between Patrick Spence and the Registrant, dated May 28, 2020 |
| 10-Q |
| 001-38603 |
| 10.1 |
| 8/6/2020 |
|
|
10.11+ |
| Offer Letter between Edward Lazarus and the Registrant, dated December 5, 2018 |
| 10-Q |
| 001-38603 |
| 10.1 |
| 2/6/2020 |
|
|
10.12+ |
| Form of Performance Share Award Agreement under 2018 Equity Incentive Plan |
| 10-Q |
| 001-38603 |
| 10.1 |
| 2/11/2021 |
|
|
10.13+ |
| Offer Letter between Shamayne Braman and the Registrant dated August 20, 2021. |
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| X |
21.1 |
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| S-1 |
| 333-226076 |
| 21.01 |
| 7/6/2018 |
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| |
23.1 |
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| X | |
24.1 |
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| X | |
31.1 |
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| X | |
31.2 |
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| X | |||
32.1* |
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| X | |||
32.2* |
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| X | |
97+ |
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| X | |
101.INS | XBRL Instance Document | X | ||||||||||
101.SCH | XBRL Taxonomy Extension Schema Document | X | ||||||||||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | X | ||||||||||
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | X | ||||||||||
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | X | ||||||||||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | X | ||||||||||
104 |
| Cover Page Interactive Data File (formatted as Inline XBRL and contained in the Exhibit 101 attachments) |
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| X |
* Furnished and not filed.
79
SONOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+ Indicates a management contract or compensatory plan or arrangement.
† Confidential treatment has been granted with respect to portions of this exhibit.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SIGNATURES
Date: November | By: | /s/ Patrick Spence | ||||||
Patrick Spence | ||||||||
Chief Executive Officer and Director | ||||||||
(Principal Executive Officer) | ||||||||
Date: November | By: | /s/ | ||||||
| ||||||||
Chief | ||||||||
(Principal Financial Officer) | ||||||||
Date: November 20, 2023 | By: | /s/ Chris Mason | ||||||
Chris Mason | ||||||||
SVP, Finance and Chief Accounting Officer | ||||||||
(Principal Accounting Officer) | ||||||||
SONOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
POWER OF ATTORNEY
Signature | Title | Date | ||||||||||||
/s/ Patrick Spence | Chief Executive Officer and Director | November | ||||||||||||
Patrick Spence | (Principal Executive Officer) | |||||||||||||
/s/ | Chief Financial Officer and Chief Legal Officer | November | ||||||||||||
| (Principal Financial Officer) | |||||||||||||
/s/ Chris Mason | SVP, Finance and Chief Accounting Officer | November 20, 2023 | ||||||||||||
Chris Mason | (Principal Accounting Officer) | |||||||||||||
/s/ Karen Boone | Director | November | ||||||||||||
Karen Boone | ||||||||||||||
/s/ Joanna Coles | Director | November | ||||||||||||
Joanna Coles | ||||||||||||||
/s/ Thomas Conrad | Director | November | ||||||||||||
Thomas Conrad | ||||||||||||||
/s/ Julius Genachowski | ||||||||||||||
Director and Chairperson of the Board of Directors | November | |||||||||||||
Julius Genachowski | ||||||||||||||
/s/ Michelangelo Volpi | Director | November 20, 2023 | ||||||||||||
Michelangelo Volpi | ||||||||||||||
82