Audio technology company Sonos (NASDAQ:) reported better-than-expected results in the first quarter of fiscal 2024, with revenue falling 16.9% year over year to $252.7 million. The company expects full-year revenues to be about $1.65 billion, in line with analyst estimates. It had a non-GAAP loss of $0.34 per share, down from its earnings of $0.04 per share in the same quarter last year.
Is now a good time to buy Sonos? Find out by reading the original article on StockStory, it's free.
Sonos Q1 2024 highlights:
- he won: $252.7 million vs. analyst estimates of $247.4 million (2.1% win)
- Earnings per share (non-GAAP): -$0.34 vs. analyst forecast of -$0.25 (36% error)
- Company It reaffirmed full-year revenue guidance $1.65 billion at the midpoint
- Gross Profit Margin (GAAP): 44.3%, up from 43.3% in the same quarter of last year
- Free cash flow It was -$121.4 million, down from $269.3 million in the previous quarter
- Market value: $2.21 billion
Sonos (NASDAQ:SONO), the leader in connected home audio systems, offers a range of wireless speakers and premium audio systems.
Toys and Electronics The toy and electronics industry presents both opportunities and challenges for investors. Established companies often have strong brand recognition and customer loyalty, while smaller players can carve out a niche if they develop a new, viral product. However, the downside is that success can be short-lived because the industry is very competitive: the barriers to entry in developing a new game are low, which can lead to pricing pressures, lower profit margins, and the rapid pace of technological advancement. It requires continuous product updates, increases R&D costs, and shortens product life cycles for electronics companies. Furthermore, these players must navigate different regulatory requirements, especially regarding product safety, which can pose operational challenges and potential legal risks.
Remove ads
.
Sales Growth Reviewing a company's long-term performance can reveal insights into the quality of its business. Any business can achieve success in the short term, but the top level sustains growth for years. Sonos' annual revenue growth rate of 5.4% over the past five years has been weak for its consumer discretionary business. Within consumer discretionary, a long-term historical view may miss a company riding on a successful new product or emerging trend. That's why we also track short-term performance. Sonos' recent history shows a reversal from its already weak five-year trend, with its revenue showing a 7.4% annual decline over the past two years.
In the quarter, Sonos' revenue fell 16.9% year over year to $252.7 million but beat Wall Street estimates by 2.1%. Looking ahead, Wall Street expects sales to grow 12.3% over the next 12 months, an acceleration from this quarter.
Cash is King Although earnings are undoubtedly valuable for evaluating a company's performance, we believe that cash is king because you cannot use accounting profits to pay the bills.
Over the past two years, Sonos has shown modest cash profitability, which puts it in a bind because it gives the company limited opportunities to reinvest, pay down debt, or return capital to shareholders. The average free cash flow margin was 1.8%, which is below average for a consumer discretionary business.
Sonos burned $121.4 million of cash in the first quarter, equivalent to a negative margin of 48.1% and in line with its cash burn last year. Over the next year, analysts expect Sonos' cash profitability to decline. Their consensus estimate is that the LTM free cash flow margin of 9.9% will decline to 6%.
Remove ads
.
Key Takeaways from Sonos' Q1 Results It was good to see Sonos beat analysts' revenue expectations in the quarter. On the other hand, its operating margin missed and its earnings per share were below Wall Street estimates. Overall, the results could have been better. The company fell 6.1% on the results and is currently trading at $16.5 per share.
