Sonos (SONO) Q1 2025 earnings summary

Executive summary

• Q1 FY2025 revenue was $551 million, down 10% year-over-year due to softer demand and challenges from the 2024 app rollout, partially offset by new product launches such as Arc Ultra and Ace headphones.

• Net income was $50.2 million, a 38% decrease from the prior year, with adjusted EBITDA at $91.2 million (16.6% margin), both down year-over-year.

• A major reorganization was executed, including a 12% workforce reduction (about 200 employees), leadership changes, and a shift to functional teams to improve efficiency.

• Gross margin declined to 43.8% from 46.1% year-over-year, impacted by inventory write-downs, unfavorable channel mix, and increased depreciation.

• The company is focused on operational efficiency, cost alignment, and enhancing the core customer experience, with further changes expected.

Financial highlights

• Q1 revenue was $551 million, down from $613 million in the prior year.

• GAAP gross margin was 43.8%, down from 46.1% year-over-year; non-GAAP gross margin was 44.7%.

• Adjusted EBITDA was $91.2 million (16.6% margin), down from $115.2 million (18.8% margin) year-over-year.

• Free cash flow was $143 million, down from $269 million last year.

• Cash, cash equivalents, and marketable securities totaled $328 million at quarter end.

Outlook and guidance

• Q2 revenue expected between $240 million and $265 million, a year-over-year change of -5% to +5%.

• Q2 GAAP gross margin guidance is 42%-44%, with non-GAAP gross margin 44%-45.8%.

• Q2 adjusted EBITDA expected to be between -$27 million and -$6 million, an improvement over last year.

• Run rate savings from recent and FY24 actions projected at $60-$70 million into FY26.

• Guidance for the remainder of FY2025 to be provided during the earnings call.