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Sonos (SONO) Beats on Q3 Earnings, Raises Fiscal 2021 Outlook

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Sonos, Inc. (SONO - Free Report) reported solid third-quarter fiscal 2021 results, wherein both the bottom line and the top line beat the Zacks Consensus Estimate.

This Santa Barbara, CA-based sound experience company remains focused on its three strategic initiatives — the expansion of its brand, the expansion of its offerings and driving operational excellence.

Net Income

On a GAAP basis, quarterly net income was $17.8 million or 12 cents per share against a net loss of $57 million or loss of 52 cents per share in the prior-year quarter. The significant improvement primarily resulted from an operating income and higher other income.

Non-GAAP net income was $38.7 million or 27 cents per share against a net loss of $11.6 million or loss of 11 cents per share in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate by 44 cents, delivering a surprise of 258.8%.

Sonos, Inc. Price, Consensus and EPS Surprise Sonos, Inc. Price, Consensus and EPS Surprise

Sonos, Inc. price-consensus-eps-surprise-chart | Sonos, Inc. Quote

Revenues

Quarterly revenues increased 51.9% year over year to $378.7 million, driven by robust demand for its products. The top line surpassed the consensus estimate of $320 million.

By product category, revenues for Sonos speakers were $310.2 million compared with $196.9 million in the prior-year quarter. Sonos system products revenues were $47.6 million, up 12.9%, and the same from partner products and other revenues totaled $20.8 million compared with $10.3 million a year ago.

Region wise, revenues from the Americas came in at $223.7 million compared with $151.2 million a year ago. Revenues from Europe, Middle East and Africa were $126.2 million, up from $83.8 million and the same from Asia Pacific grew 100.5% to $28.7 million.

Other Details

Gross profit was $177.9 million compared with $109.8 million in the prior-year quarter with the respective margins of 47% and 44%. Total operating expenses were $161.1 million, down from $166.7 million, reflecting lower research and development as well as sales and marketing expenses.

Operating income was $16.7 million against an operating loss of $56.9 million in the year-ago quarter. Adjusted EBITDA totaled $46.7 million against a negative $2.7 million a year ago, with the respective margins of 12.3% and -1.1%.

Cash Flow & Liquidity

During the first nine months of fiscal 2021, Sonos generated $246.7 million of cash from operations compared with $83.2 million in the prior-year period. Free cash flow increased 298% to $211.9 million.

As of Jul 3, 2021, the company had $670.9 million in cash and cash equivalents with zero long-term debt.

Fiscal 2021 Outlook Raised

Thanks to the stellar performance, Sonos has raised the outlook for fiscal 2021. It now expects revenues to grow at 28-29% year over year to be in the band of $1.695 billion and $1.710 billion compared with the prior guidance of $1.625-$1.675 billion.

Adjusted EBITDA is estimated to be between $270 million and $280 million with the margin increased to a range of 15.9-16.4%. This compares with the prior outlook of $225-$250 million with the margin ranging from 13.8% to 14.9%. Gross margin is projected to be between 46.5% and 46.9%, increased from the prior guidance of 46-46.5%.

Zacks Rank & Stocks to Consider

Sonos currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader sector are Clearfield, Inc. (CLFD - Free Report) , Juniper Networks, Inc. (JNPR - Free Report) and Qualcomm, Inc. (QCOM - Free Report) . While Clearfield sports a Zacks Rank #1 (Strong Buy), Juniper and Qualcomm carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Clearfield delivered a trailing four-quarter earnings surprise of 49%, on average.

Juniper pulled off a trailing four-quarter earnings surprise of 7.5%, on average.

Qualcomm delivered a trailing four-quarter earnings surprise of 13.5%, on average.