Sonos Inc

Previous 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.

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 recommitted to new product introductions, including the announcement of Amp Multi in January 2026, followed by Sonos Play™ and Sonos Era 100™ SL in March 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. Additionally, we are refining our go-to-market strategy around a full-funnel brand architecture designed to align our long-term brand narrative with a consistent messaging system.

Previous 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.

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 completed the operational exit with minimal disruption to our business during 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 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

Current wording

Our business has been, and may continue to 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 or any "trade wars." In addition, we have been and may continue to be affected by the increases in demand for memory chips and other components caused by the build out of new AI technologies and data centers. We also face global macroeconomic challenges such as inflation, ongoing geopolitical conflicts, uncertainty in the financial markets, volatility in exchange rates, and low or negative growth in certain regions.

Previous wording

Global economic and political conditions and uncertainties, including global trade tensions, have caused and may continue to cause volatility in demand for our products as well as cost of materials and logistics, and as a result may impact our results of operations. We are continuing to evaluate and implement mitigating actions, including taking measures to manage our expenses and contain costs, leveraging our supply chain flexibility and evaluating potential pricing and promotion strategies.

Current wording

Global economic and political conditions and uncertainties, as well as global trade tensions and memory supply constraints, have caused and may continue to cause volatility in demand for our products as well as cost of materials and logistics, and as a result may impact our results of operations. We are continuing to evaluate and implement mitigating actions, including evaluating our pricing strategy across the portfolio and new product pipeline, taking measures to manage our expenses and contain costs, leveraging our supply chain flexibility, inventory management and engineering optimization.

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. The most directly comparable financial measure calculated under U.S. GAAP for Adjusted EBITDA margin is net income margin.

Current wording

We use the following key metrics, including measures presented in our condensed consolidated financial statements, 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.

Previous wording

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

Current wording

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

Previous 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.

Current 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.

Previous wording

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

Current wording

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

Previous wording

(1)Legal and transaction-related costs consist of expenses related to our intellectual property ("IP") litigation against Alphabet and Google, as well as legal and transaction costs associated with our acquisition activity, which we do not consider representative of our underlying operating performance.

Current wording

(1)Legal and transaction-related costs consist of expenses related to our intellectual property ("IP") litigation against Alphabet and Google, which we do not consider representative of our underlying operating performance.

Previous 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.

Current wording

Total revenue increased $16.6 million, or 2.0%, for the six months ended March 28, 2026 compared to the six months ended March 29, 2025, primarily due to favorability from foreign exchange rates and continued strength in Era 100, partially offset by softer demand due to market conditions.

Previous 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.

Current wording

Sonos speakers revenue represented 80.9% of total revenue for the six months ended March 28, 2026 and increased 1.1% compared to the six months ended March 29, 2025, primarily driven by Arc Ultra and Era 100, partially offset by declines in Arc and Sub. Sonos system products represented 14.2% of total revenue for the six months ended March 28, 2026 and increased 6.0% compared to the six months ended March 29, 2025, due to higher sales to our installed solutions channel. Partner products and other revenue represented 4.9% of total revenue for the six months ended March 28, 2026 and increased 6.1% compared to the six months ended March 29, 2025.

Previous 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.

Current wording

The volume of products sold decreased 1.4% for the six months ended March 28, 2026 compared to the six months ended March 29, 2025. Revenue grew while volume declined, primarily due to favorable foreign exchange rates, which benefited revenue but did not impact volume, and the impact of pricing actions.

Previous 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:

Current wording

The following table presents the change in revenue for the three and six months ended March 28, 2026 compared with the three and six months ended March 29, 2025:

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 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.

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 attribute certain costs to cost of revenue 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

Cost of revenue decreased $17.2 million, or 5.6%, for the three months ended December 27, 2025 compared to the three months ended December 28, 2024, primarily due to a decrease in product and material costs and inventory-related write-downs, partially offset by increased tariff expenses.

Current wording

Cost of revenue decreased $6.5 million, or 1.4%, for the six months ended March 28, 2026 compared to the six months ended March 29, 2025, primarily due to a decrease in product and material costs and fewer inventory-related write-downs, partially offset by increased tariff expenses and higher memory costs.

Previous wording

Gross margin increased 270 basis points for the three months ended December 27, 2025 compared to the three months ended December 28, 2024, primarily due to a decrease in product and material costs and inventory-related write-downs, in addition to foreign exchange rate favorability and the net impact of pricing changes, partially offset by tariff expenses and unfavorable product mix.

Current wording

Gross margin increased 190 basis points for the six months ended March 28, 2026 compared to the six months ended March 29, 2025, primarily due to a decrease in product and material costs, foreign exchange rate favorability, a decrease in inventory-related write-downs, and the net impact of pricing changes, partially offset by tariff expenses, higher memory costs, and unfavorable product mix.

Previous 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.

Current wording

Research and development expenses, excluding restructuring and other charges, decreased $22.5 million, or 15.5 %, for the six months ended March 28, 2026, compared to the six months ended March 29, 2025. This decrease was primarily driven by lower headcount and our reorganization efforts.

Previous wording

Sales and marketing expenses decreased $21.4 million, or 24.7%, for the three months ended December 27, 2025, compared to the three months ended December 28, 2024. This decrease was primarily driven by ongoing savings resulting from our cost transformation initiatives, lower marketing costs due to the timing of our launch of Arc Ultra in October 2024, and lower personnel-related costs due to lower headcount.

Current wording

Sales and marketing expenses, excluding restructuring and other charges, decreased $21.9 million, or 14.8 %, for the six months ended March 28, 2026, compared to the six months ended March 29, 2025. This decrease was primarily driven by ongoing savings as a result of our cost transformation journey, lower marketing costs due to the timing of our launch of Arc Ultra in October 2024, and lower personnel-related costs due to lower headcount.

Previous wording

General and administrative expenses increased $2.2 million, or 8.4%, for the three months ended December 27, 2025, compared to the three months ended December 28, 2024. This increase was primarily driven by an increase in legal fees mainly related to our IP litigation, partially offset by lower personnel-related costs due to lower headcount.

Current wording

General and administrative expenses, excluding restructuring and other charges, increased $2.8 million, or 5.1%, for the six months ended March 28, 2026, compared to the six months ended March 29, 2025. This increase was primarily driven by an increase in legal fees mainly related to our IP litigation, partially offset by lower personnel-related costs due to lower headcount.

Previous 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.

Current wording

Interest income and interest expense for the three months ended March 28, 2026 compared to the three months ended March 29, 2025, remained relatively consistent. Other income (expense), net for the three months ended March 28, 2026 compared to the three months ended March 29, 2025, increased from other income of $0.2 million for the three months ended March 29, 2025 to other expense of $1.4 million for the three months ended March 28, 2026 due to foreign currency exchange fluctuations.

Previous wording

We recognized an income tax provision of $8.3 million and an income tax benefit of $6.4 million for the three months ended December 27, 2025 and December 28, 2024, respectively. For the three months ended December 27, 2025, the repeal of the requirement to capitalize research and experimental expenditures under the OBBBA resulted in a reduction in the Company’s U.S. current tax expense with no impact to deferred tax expense as a result of the full valuation allowance maintained against the Company’s net U.S. deferred tax assets. The tax benefit for the three months ended December 28, 2024 primarily resulted from the application of a negative annual effective tax rate to year-to-date U.S. pre-tax income for the quarter, which was driven in part by the capitalization of research and experimental expenditures under Section 174 and the valuation allowance maintained against U.S. deferred tax assets.

Current wording

We recognized an income tax benefit of $2.2 million and an income tax provision of $11.0 million for the three months ended March 28, 2026 and March 29, 2025, respectively. For the three months ended March 28, 2026, the repeal of the requirement to capitalize research and experimental expenditures under the OBBBA resulted in a reduction in the Company’s U.S. current tax expense with no impact to deferred tax expense as a result of the full valuation allowance maintained against the Company’s net U.S. deferred tax assets. The tax provision for the three months ended March 29, 2025 primarily resulted from the application of a negative annual effective tax rate to year-to-date U.S. pre-tax loss for the quarter, which was driven in part by the capitalization of research and experimental expenditures under Section 174 and the valuation allowance maintained against U.S. deferred tax assets. We recognized tax provisions of $6.0 million and $4.6 million for the six months ended March 28, 2026 and March 29, 2025, respectively. This increase was driven by a change in the prescribed U.S. GAAP method to calculate the interim income tax benefit for the period ending March 28, 2026 versus the method used to calculate the income tax provision for the period ending March 29, 2025.

Previous 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.

Current wording

Our operations are financed primarily through cash flows from operating activities. As of March 28, 2026, our principal sources of liquidity consisted of cash flows from operating activities, cash and cash equivalents of $200.2 million, including $111.2 million held by our foreign subsidiaries, marketable securities of $48.9 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 March 28, 2026, as they are intended to fund needs outside of the United States. In the event funds from foreign operations are repatriated to the United States, we may incur income or withholding taxes associated with such distributions. In addition, certain of our non-U.S. subsidiaries have the ability to repatriate funds to the United States in a tax-free manner.

Previous wording

As of December 27, 2025, our open purchase orders to contract manufacturers for finished goods were approximately $125 million, the majority of which are expected to be paid over the next six months. As of December 27, 2025, our expected commitments to suppliers for components were in the range of $141 million to $159 million, the majority of which is expected to be paid and/or utilized by our contract manufacturers in building finished goods within the next two years. The expected commitments are subject to change as a result of fluctuations in the demand forecast, as well as ongoing negotiations with contract manufacturers and suppliers. These commitments are related to components that can be specific to Sonos products and comprised 1) indirect obligations to third-party manufacturers and suppliers, 2) the inventory owned by contract manufacturers procured to manufacture Sonos products, and 3) purchase commitments made by contract manufacturers to their upstream suppliers.

Current wording

As of March 28, 2026, our open purchase orders to contract manufacturers for finished goods were approximately $92 million, the majority of which are expected to be paid over the next six months. As of March 28, 2026, our expected commitments to suppliers for components were in the range of $198 million to $222 million, the majority of which is expected to be paid and/or utilized by our contract manufacturers in building finished goods within the next two years. The expected commitments are subject to change as a result of fluctuations in the demand forecast, as well as ongoing negotiations with contract manufacturers and suppliers. These commitments are related to components that can be specific to Sonos products and comprised 1) indirect obligations to third-party manufacturers and suppliers, 2) the inventory owned by contract manufacturers procured to manufacture Sonos products, and 3) purchase commitments made by contract manufacturers to their upstream suppliers.

Previous 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.

Current wording

Net cash provided by operating activities of $97.9 million for the six months ended March 28, 2026, consisted of net income of $64.9 million, non-cash adjustments of $62.8 million, and an unfavorable impact of net changes in operating assets and liabilities of $29.8 million. Non-cash adjustments primarily consisted of stock-based compensation expense and depreciation and amortization. The net decrease in cash from the change in operating assets and liabilities was primarily due to a decrease in accounts payable and accrued expenses of $33.3 million driven by payments for inventory purchases, and an increase in accounts receivable of $31.7 million driven by the timing of new product launches. The net decrease in cash from the change in operating assets and liabilities was partially offset by an increase in deferred revenue of $17.0 million driven by product general availability deferrals, and a decrease in inventories of $9.8 million due to seasonality.

Previous 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.

Current wording

Cash used in investing activities of $6.8 million for the six months ended March 28, 2026, primarily consisted of the purchases of marketable securities of $25.2 million and purchases of property and equipment of $10.7 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 $29.1 million.

Previous 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.

Current wording

Cash used in financing activities of $66.7 million for the six months ended March 28, 2026, primarily consisted of payments for repurchases of common stock of $65.1 million, and payments for repurchases of common stock related to shares withheld for tax in connection with vesting of stock awards of $15.9 million, partially offset by proceeds from the exercise of stock options of $15.1 million.