Sonos Inc

Previous wording

On July 22, 2025, our board of directors appointed Tom Conrad as our new Chief Executive Officer, following his tenure as interim Chief Executive Officer since January 13, 2025. Under Mr. Conrad's direction, we have significantly improved our software products, reorganized our operations to improve our efficiency and effectiveness and recommitted to delivering the kind of premium experience our customers expect. With every new product, software feature and integration, the Sonos platform becomes more powerful and provides greater value to our customers.

Current wording

We are building on the strong foundation established during our transformational year in fiscal 2025. With Tom Conrad now in place as our Chief Executive Officer we are well-positioned to continue building upon the improvements we have made to our software products and operational efficiency. Under Mr. Conrad's direction, we have restored our software with reliability now exceeding historical levels, reorganized our operations to improve our efficiency and effectiveness and recommitted to delivering the kind of premium experience our customers expect. We have also recommitted to new product introductions, including the announcement of Amp Multi in January 2026. With every new product, software feature and integration, the Sonos platform becomes more powerful, provides greater value to our customers, and further strengthens as the differentiated system for connected home audio.

Previous wording

February 2025 (the "2025 restructuring plan") which are expected to result in approximately $20 million in savings during the remainder of fiscal 2025. See Note 13. Restructuring and Other Charges in the notes to condensed consolidated financial statements for further information. Furthermore, we remain focused on additional transformation efforts to improve both our operational efficiency and effectiveness. Additionally, during the third quarter of fiscal 2025, we began the process of exiting a partnership with one of our contract manufacturers to consolidate and improve supply chain efficiency. We expect to complete this exit with minimal disruption to our business by the second quarter of fiscal 2026. This exit did not impact the third quarter fiscal 2025. We continue to maintain diversified contract manufacturing partnerships.

Current wording

Our cost transformation initiative, which began in fiscal 2024, has delivered meaningful results. The organizational restructuring we completed—including workforce reductions of 6% in August 2024 and 12% in February 2025—has created a more streamlined, agile organization. We remain focused on transformation efforts to continually improve both our operational efficiency and effectiveness. Additionally, during the third quarter of fiscal 2025, we began the process of exiting a partnership with one of our contract manufacturers to consolidate and improve supply chain efficiency. We expect to complete this exit with minimal disruption to our business by the second quarter of fiscal 2026. We continue to maintain diversified contract manufacturing partnerships.

Previous wording

Our business and financial performance depend significantly on worldwide economic conditions. We face global macroeconomic challenges such as inflation, ongoing geopolitical conflicts, uncertainty in the markets, volatility in exchange rates, low or negative growth in certain regions, declining consumer sentiment of international customers towards U.S.-based companies as a result of U.S. trade policy, and uncertainty in consumer demand. In addition, our business may be adversely impacted by the potential expansion of tariffs on goods imported into the U.S., as well as any retaliatory tariffs or policies enacted in other countries.

Current wording

Our business and financial performance depend significantly on worldwide economic conditions. We face global macroeconomic challenges such as inflation, ongoing geopolitical conflicts, uncertainty in the financial markets, volatility in exchange rates, low or negative growth in certain regions, declining consumer sentiment of international customers towards U.S.-based companies as a result of

Previous wording

In addition to the measures presented in our condensed consolidated financial statements, we use the following key metrics to evaluate our business, measure our performance, identify trends affecting our business and assist us in making operational and strategic decisions. Our key metrics are total revenue, products sold, Adjusted EBITDA, and Adjusted EBITDA margin. The most directly comparable financial measure calculated under U.S. GAAP for Adjusted EBITDA is net income (loss). The most directly comparable financial measure calculated under U.S. GAAP for Adjusted EBITDA margin is net income (loss) margin.

Current wording

In addition to the measures presented in our condensed consolidated financial statements, we use the following key metrics to evaluate our business, measure our performance, identify trends affecting our business and assist us in making operational and strategic decisions. Our key metrics are total revenue, products sold, Adjusted EBITDA, and Adjusted EBITDA margin. The most directly comparable financial measure calculated under U.S. GAAP for Adjusted EBITDA is net income. The most directly comparable financial measure calculated under U.S. GAAP for Adjusted EBITDA margin is net income margin.

Previous wording

(1)Net income (loss) margin is calculated by dividing net income (loss) by revenue.

Current wording

(1)Net income margin is calculated by dividing net income by revenue.

Previous wording

(2)For additional information regarding Adjusted EBITDA and Adjusted EBITDA margin (which are non-GAAP financial measures), including reconciliations of net income (loss) to Adjusted EBITDA, see the section titled "Non-GAAP Financial Measures" below.

Current wording

(2)For additional information regarding Adjusted EBITDA and Adjusted EBITDA margin (which are non-GAAP financial measures), including reconciliations of net income to Adjusted EBITDA, see the section titled "Non-GAAP Financial Measures" below.

Previous wording

Products sold represents the number of products that are sold during a period, net of returns and includes units sold from the Sonos speakers and Sonos system products categories, and module units sold through our partnerships from our Partner products and other revenue category. Growth rates between products sold and revenue are not perfectly correlated because our revenue is affected by other variables, such as the mix of products sold during the period, promotional discount activity, the introduction of new products that may have higher or lower than average selling prices, changes to selling prices, the impact of foreign exchange rate fluctuations, as well as the impact of recognition of previously deferred revenue.

Current wording

Products sold represents the number of products that are sold during a period, net of returns, and includes units sold from the Sonos speakers and Sonos system products categories, as well as architectural speakers sold through our partnerships from our Partner products and other revenue category. Growth rates between products sold and revenue are not perfectly correlated because our revenue is affected by other variables, such as the mix of products sold during the period, promotional discount activity, the price at which we sell our products, the introduction of new products that may have higher or lower than average selling prices, the impact of foreign exchange rate fluctuations, as well as the impact of recognition of previously deferred revenue.

Previous wording

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, legal and transaction related costs, restructuring and other costs, and other items that we do not consider representative of underlying operating performance. We define Adjusted EBITDA margin as Adjusted EBITDA divided by revenue.

Current wording

We define Adjusted EBITDA as net income adjusted to exclude the impact of depreciation and amortization, stock-based compensation expense, interest income, interest expense, other income (expense), income taxes, legal and transaction related costs, restructuring and other costs, and other items that we do not consider representative of underlying operating performance. We define Adjusted EBITDA margin as Adjusted EBITDA divided by revenue.

Previous wording

The following table presents a reconciliation of net income (loss) to Adjusted EBITDA:

Current wording

The following table presents a reconciliation of net income to Adjusted EBITDA:

Previous wording

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, including accessories such as speaker stands and wall mounts, and architectural speakers from our Sonance partnership.

Current wording

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 architectural speakers from our Sonance partnership, accessories such as speaker stands and wall mounts, professional services, licensing, and advertising revenue.

Previous wording

Total revenue decreased $107.3 million, or 8.5%, for the nine months ended June 28, 2025 compared to the nine months ended June 29, 2024, primarily due to softer demand due to market conditions and challenges resulting from our 2024 app rollout, partially offset by the introduction of Arc Ultra in October 2024.

Current wording

Total revenue decreased $5.2 million, or 0.9%, for the three months ended December 27, 2025 compared to the three months ended December 28, 2024, attributable to softer demand due to market conditions, partially offset by favorability from foreign exchange rates.

Previous wording

Sonos speakers revenue represented 79.2% of total revenue for the nine months ended June 28, 2025 and decreased 7.7% compared to the nine months ended June 29, 2024, primarily driven by expected declines in sales of Arc and Sonos One, as well as Move and Beam. These declines were partially offset by the introduction of Arc Ultra, as well as Era 100. Sonos system products represented 15.9% of total revenue for the nine months ended June 28, 2025 and decreased 12.0% compared to the nine months ended June 29, 2024, due to lower sales to our installed solutions channel. Partner products and other revenue represented 4.9% of total revenue for the nine months ended June 28, 2025 and decreased 10.0% compared to the nine months ended June 29, 2024.

Current wording

Sonos speakers revenue represented 84.2% of total revenue for the three months ended December 27, 2025 and decreased 1.7% compared to the three months ended December 28, 2024, primarily driven by expected declines in Arc, as well as Sub and portables, partially offset by higher sales of Arc Ultra and Era 100. Sonos system products represented 11.9% of total revenue for the three months ended December 27, 2025 and increased 7.9% compared to the three months ended December 28, 2024, due to higher sales to our installed solutions channel. Partner products and other revenue represented 3.9% of total revenue for the three months ended December 27, 2025 and decreased 8.9% compared to the three months ended December 28, 2024.

Previous wording

The volume of products sold decreased 15.8% for the three months ended June 28, 2025 compared to the three months ended June 29, 2024, consistent with the decline in revenue.

Current wording

The volume of products sold decreased 3.1% for the three months ended December 27, 2025 compared to the three months ended December 28, 2024.

Previous wording

The following table presents the change in revenue for the three and nine months ended June 28, 2025 compared with the three and nine months ended June 29, 2024:

Current wording

The following table presents the change in revenue for the three months ended December 27, 2025 compared with the three months ended December 28, 2024:

Previous wording

Cost of revenue consists of product costs, including costs of our contract manufacturers for production, components, shipping and handling, 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 supply chain logistic costs. Personnel-related expenses consist of salaries, bonuses, benefits, and stock-based compensation expenses.

Current wording

Cost of revenue consists of product costs, including costs of our contract manufacturers for production, components, shipping and handling, 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 amortization attributable to acquired developed technology. In addition, we allocate certain costs related to management and facilities, personnel-related expenses, and supply chain logistic costs. Personnel-related expenses consist of salaries, bonuses, benefits, and stock-based compensation expenses.

Previous wording

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.

Current wording

Research and development expenses consist primarily of personnel-related expenses, third-party resource 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.

Previous wording

Research and development expenses excluding restructuring and other costs decreased $26.9 million, or 11.5%, for the nine months ended June 28, 2025, compared to the nine months ended June 29, 2024. This decrease was primarily driven by lower personnel-related costs due to lower headcount and our reorganization efforts.

Current wording

Research and development expenses decreased $21.1 million, or 26.1%, for the three months ended December 27, 2025, compared to the three months ended December 28, 2024. This decrease was primarily driven by lower personnel-related costs due to lower headcount and our reorganization efforts.

Previous wording

Sales and marketing expenses consist primarily of advertising and marketing activity for our products and personnel-related expenses, depreciation for product displays, as well as related maintenance and repair expenses, customer experience expenses, revenue related sales fees from our direct-to-consumer business, and related overhead costs.

Current wording

Sales and marketing expenses consist primarily of advertising and marketing activity for our products and personnel-related expenses, maintenance and repair expenses for our product displays, as well as depreciation, customer experience expenses, revenue related sales fees from our direct-to-consumer and installer solution sales channels, and related overhead costs.

Previous wording

Interest income consists primarily of interest income earned on our cash, cash equivalents, and marketable securities balances. Interest expense consists primarily of interest expense associated with our debt financing arrangements and amortization of debt issuance costs. Other income, 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.

Current wording

Interest income consists primarily of interest income earned on our cash, cash equivalents, and marketable securities balances. Interest expense consists primarily of interest expense associated with our debt financing arrangements and amortization of debt issuance costs. 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.

Previous wording

Interest income for the three months ended June 28, 2025 compared to the three months ended June 29, 2024, decreased due to lower cash balances. Interest expense for the three months ended June 28, 2025 compared to the three months ended June 29, 2024, remained relatively consistent. Other income (expense), net for the three months ended June 28, 2025 compared to the three months ended June 29, 2024, increased from other expenses of $2.5 million for the three months ended June 29, 2024 to other income of $0.7 million for the three months ended June 28, 2025 due to foreign currency exchange fluctuations.

Current wording

Interest income for the three months ended December 27, 2025 compared to the three months ended December 28, 2024, decreased due to higher international cash balances with lower yields. Interest expense for the three months ended December 27, 2025 compared to the three months ended December 28, 2024, remained relatively consistent. Other income (expense), net for the three months ended December 27, 2025 compared to the three months ended December 28, 2024, increased from other expenses of $6.0 million for the three months ended December 28, 2024 to other income of $0.4 million for the three months ended December 27, 2025 due to foreign currency exchange fluctuations.

Previous wording

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. On July 4, 2025, H.R.1, commonly referred to as the One Big Beautiful Bill Act (“OBBBA”) was enacted. We continue to evaluate the bill's impact on our consolidated financial statements.

Current wording

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. On July 4, 2025, H.R. 1, commonly referred to as the One Big Beautiful Bill Act (“OBBBA”), was enacted. The legislation includes provisions such as accelerated cost recovery of qualified property, immediate expensing of U.S.-based research and development costs, and changes to the U.S. international taxation regime.

Previous wording

Our operations are financed primarily through cash flows from operating activities. As of June 28, 2025, our principal sources of liquidity consisted of cash flows from operating activities, cash and cash equivalents of $201.3 million, including $91.8 million held by our foreign subsidiaries, marketable securities of $52.7 million, proceeds from the exercise of stock options, and borrowing capacity under the credit facility under our Revolving Credit Agreement. In accordance with our policy, the undistributed earnings of our non-U.S. subsidiaries remain indefinitely reinvested outside of the United States as of June 28, 2025, as they are required to fund needs outside of the United States. In the event funds from foreign operations are needed to fund operations in the United States and if U.S. tax has not already been previously provided, we may be required to accrue and pay additional U.S. taxes to repatriate these funds.

Current wording

Our operations are financed primarily through cash flows from operating activities. As of December 27, 2025, our principal sources of liquidity consisted of cash flows from operating activities, cash and cash equivalents of $312.5 million, including $195.7 million held by our foreign subsidiaries, marketable securities of $51.0 million, proceeds from the exercise of stock options, and borrowing capacity under the credit facility under our Revolving Credit Agreement. In accordance with our policy, the undistributed earnings of our non-U.S. subsidiaries remain indefinitely reinvested outside of the United States as of December 27, 2025, as they are required to fund needs outside of the United States. In the event funds from foreign operations are needed to fund operations in the United States and if U.S. tax has not already been previously provided, we may be required to accrue and pay additional U.S. taxes to repatriate these funds.

Previous wording

We believe our existing cash and cash equivalent balances, cash flows from operations and committed credit lines will be sufficient to meet our long-term working capital and capital expenditure needs for at least the next 12 months. We hold our cash with a diverse group of major financial institutions and have processes and safeguards in place to manage our cash balances and mitigate the risk of loss. In October 2021, we entered into the Revolving Credit Agreement, which allows us to borrow up to $100 million, with a maturity date of October 2026. Our future capital requirements may vary materially from those currently planned and will depend on many factors, including our rate of revenue growth, the timing and extent of spending on research and development efforts and other business initiatives, our planned sales and marketing activities, the timing of new product introductions, our potential merger and acquisition activity, market acceptance of our products, and overall economic conditions. To the extent that current and anticipated sources of liquidity are insufficient to fund our future business activities and requirements, we may be required to seek additional equity or debt financing. The sale of additional equity would result in increased dilution to our stockholders. If we were to incur additional debt financing, it would result in increased debt service obligations and the instruments governing such debt could require additional operating and financing covenants that would restrict our operations.

Current wording

We believe our existing cash and cash equivalent balances, cash flows from operations and committed credit lines will be sufficient to meet our long-term working capital and capital expenditure needs for at least the next 12 months. We hold our cash with a diverse group of major financial institutions and have processes and safeguards in place to manage our cash balances and mitigate the risk of loss. In October 2021, we entered into the Revolving Credit Agreement, which was amended in October 2025 to provide for aggregate commitments of up to $80.0 million with a maturity date in October 2030. Our future capital requirements may vary materially from those currently planned and will depend on many factors, including our rate of revenue growth, the timing and extent of spending on research and development efforts and other business initiatives, our planned sales and marketing activities, the timing of new product introductions, our potential merger and acquisition activity, market acceptance of our products, and overall economic conditions. To the extent that current and anticipated sources of liquidity are insufficient to fund our future business activities and requirements, we may be required to seek additional equity or debt financing. The sale of additional equity would result in increased dilution to our stockholders. If we were to incur additional debt financing, it would result in increased debt service obligations and the instruments governing such debt could require additional operating and financing covenants that would restrict our operations.

Previous wording

On October 13, 2021, we entered into the Revolving Credit Agreement. The Revolving Credit Agreement provides for (i) a five year senior secured revolving credit facility in the amount of up to $100 million and (ii) an uncommitted incremental facility subject to certain conditions. Proceeds are to be used for working capital and general corporate purposes. The facility may be drawn as an Alternative Base Rate Loan (at 1.00% plus an applicable margin) or Term Benchmark Loan (SOFR plus an applicable margin). We 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 agreement and (ii) a per annum fee equal to the applicable margin over SOFR multiplied by the aggregate face amount of outstanding letters of credit. As of June 28, 2025, we did not have any outstanding borrowings and had $2.4 million in undrawn letters of credit that reduce the availability under the Revolving Credit Agreement.

Current wording

On October 13, 2021, we entered into the Revolving Credit Agreement which was amended in October 2025 with JPMorgan Chase Bank, N.A., KeyBank National Association and Goldman Sachs Bank USA. Amendment No. 2 to the Revolving Credit Agreement provides for (i) a five-year senior secured revolving credit facility in the amount of up to $80.0 million and (ii) an uncommitted incremental facility subject to certain conditions. Proceeds are to be used for working capital and general corporate purposes. The facility may be drawn as an Alternative Base Rate Loan (at 1.00% plus an applicable margin) or Term Benchmark Loan (SOFR plus an applicable margin). We 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 agreement and (ii) a per annum fee equal to the applicable margin over SOFR multiplied by the aggregate face amount of outstanding letters of credit. As of December 27, 2025, we did not have any outstanding borrowings and had $2.4 million in undrawn letters of credit that reduce the availability under the Revolving Credit Agreement.

Previous wording

Net cash provided by operating activities of $133.9 million for the nine months ended June 28, 2025, consisted of net loss of $23.3 million, non-cash adjustments of $133.0 million, and a favorable impact of net changes in operating assets and liabilities of $24.3 million. Non-cash adjustments primarily consisted of stock-based compensation expense, depreciation and amortization, as well as non-cash restructuring and other charges. The net increase in cash from the change in operating assets and liabilities was primarily due to a decrease in inventories of $106.2 million due to seasonality and as the result of measures taken to more efficiently manage inventory, a decrease in other assets of $11.6 million, and an increase in accrued compensation of $10.4 million. The net increase in cash from the change in operating assets and liabilities was partially offset by a decrease in accounts payable of $55.3 million due to lower inventory purchases, and an increase in accounts receivable of $49.0 million.

Current wording

Net cash provided by operating activities of $163.3 million for the three months ended December 27, 2025, consisted of net income of $93.8 million, non-cash adjustments of $29.8 million, and a favorable impact of net changes in operating assets and liabilities of $39.7 million. Non-cash adjustments primarily consisted of stock-based compensation expense and depreciation and amortization. The net increase in cash from the change in operating assets and liabilities was primarily due to a decrease in inventories of $45.5 million due to higher sales volumes during the holiday season, an increase in accounts payable and accrued expenses of $31.2 million, and an increase in other liabilities of $5.2 million. The net increase in cash from the change in operating assets and liabilities was partially offset by an increase in accounts receivable of $49.1 million.

Previous wording

Cash used in investing activities of $24.2 million for the nine months ended June 28, 2025, primarily consisted of the purchases of marketable securities of $43.9 million and purchases of property and equipment of $23.4 million mainly related to point-of-sale product displays and manufacturing-related tooling and test equipment to support the launch of new products, partially offset by cash provided by maturities of marketable securities of $43.2 million.

Current wording

Cash used in investing activities of $4.1 million for the three months ended December 27, 2025, primarily consisted of the purchases of marketable securities of $12.5 million and purchases of property and equipment of $6.0 million mainly related to manufacturing-related tooling and test equipment to support the launch of new products, partially offset by cash provided by maturities of marketable securities of $14.4 million.

Previous wording

Cash used in financing activities of $78.7 million for the nine months ended June 28, 2025, primarily consisted of payments for repurchases of common stock of $60.6 million and payments for repurchases of common stock related to shares withheld for tax in connection with vesting of stock awards of $20.8 million, partially offset by proceeds from the exercise of stock options of $2.7 million.

Current wording

Cash used in financing activities of $23.4 million for the three months ended December 27, 2025, primarily consisted of payments for repurchases of common stock of $25.0 million, and payments for repurchases of common stock related to shares withheld for tax in connection with vesting of stock awards of $10.9 million, partially offset by proceeds from the exercise of stock options of $13.2 million.