Audio technology Sonos company (NASDAQ:SONO) reported Q1 FY2024 results topping analysts' expectations, with revenue down 8.9% year on year to $612.9 million. The company expects the full year's revenue to be around $1.65 billion, in line with analysts' estimates. It made a non-GAAP profit of $0.84 per share, improving from its profit of $0.79 per share in the same quarter last year.
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Sonos (SONO) Q1 FY2024 Highlights:
- Revenue: $612.9 million vs analyst estimates of $587.2 million (4.4% beat)
- EPS (non-GAAP): $0.84 vs analyst estimates of $0.54 (57% beat)
- The company reconfirmed its revenue guidance for the full year of $1.65 billion at the midpoint
- Free Cash Flow of $269.3 million, up from $11.99 million in the previous quarter
- Gross Margin (GAAP): 46.1%, up from 42.4% in the same quarter last year
- Market Capitalization: $1.97 billion
A pioneer in connected home audio systems, Sonos (NASDAQ:SONO) offers a range of premium wireless speakers and sound systems.
Consumer ElectronicsConsumer electronics companies aim to address the evolving leisure and entertainment needs of consumers, who are increasingly familiar with technology in everyday life. Whether it’s speakers for the home or specialized cameras to document everything from a surfing session to a wedding reception, these businesses are trying to provide innovative, high-quality products that are both useful and cool to own. Adding to the degree of difficulty for these companies is technological change, where the latest smartphone could disintermediate a whole category of consumer electronics. Companies that successfully serve customers and innovate can enjoy high customer loyalty and pricing power, while those that struggle with these may go the way of the VHS tape.
Sales GrowthA company’s long-term performance can give signals about its business quality. Any business can put up a good quarter or two, but many enduring ones muster years of growth. Sonos's annualized revenue growth rate of 6.5% over the last 5 years was weak for a consumer discretionary business. Within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends. That's why we also follow short-term performance. Sonos's recent history shows a reversal from its 5-year trend, as its revenue has shown annualized declines of 4.1% over the last 2 years.
This quarter, Sonos's revenue fell 8.9% year on year to $612.9 million but beat Wall Street's estimates by 4.4%. Looking ahead, Wall Street expects sales to grow 7.1% over the next 12 months, an acceleration from this quarter.
Cash Is KingIf you've followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills.
While Sonos posted positive free cash flow this quarter, the broader story hasn't been so clean. Over the last two years, Sonos's demanding reinvestments to stay relevant with consumers have drained company resources. Its free cash flow margin has been among the worst in the consumer discretionary sector, averaging negative 5%.
Sonos's free cash flow came in at $269.3 million in Q1 equivalent to a 43.9% margin, up 60.7% year on year.
Key Takeaways from Sonos's Q1 Results We were impressed by how significantly Sonos blew past analysts' EPS expectations this quarter. We were also glad its revenue outperformed estimates. The company plans to announce an undisclosed new product line in a few months, likely building some excitement. Sonos's guidance, however, remained unchanged. Overall, this quarter's results seemed fairly positive and shareholders should feel optimistic. The stock is up 15.3% after reporting and currently trades at $18.98 per share.
