Sonos Reports Q1 2025 Earnings, Faces Significant Challenges

Sonos faces challenges in Q1 2025 as it reports a 10% revenue decline despite improving margins. The interim CEO emphasizes the need for a structural overhaul and effective cost management to navigate market difficulties.

Date: 07-02-2025

AI Rating: 5

Revenue Growth: Sonos reported Q1 revenue of $551 million, which was down 10% compared to the previous year. However, this figure is toward the high end of their guidance, showcasing a slight better-than-expected performance despite industry challenges.

Gross Margins: The GAAP gross margin was reported at 43.8%, which is 80 basis points above the high end of the guidance range. Non-GAAP gross margins were at 44.7%. Improved cost management contributed to these positive margins despite the revenue drop. The company expects gross margins to range between 42% and 44% for the following quarter.

Operating Expenses: Sonos is actively managing its operating expenses, reporting a 5% decline year-over-year in GAAP operating expenses. Non-GAAP operating expenses showed a decrease of 6% year over year and also came in approximately $13 million below guidance as a result of expense management efforts.

Free Cash Flow (FCF): The free cash flow for the quarter was $143 million, down from $269 million the previous year. This reduction reflects lower revenue and specific unique factors affecting last year's cash flow figures.

Outlook: The guidance for Q2 indicates revenue expectations ranging from a decrease of 5% to an increase of 5% year-over-year, which suggests uncertainty in the market sentiment. Additionally, ongoing transformation efforts aim to ensure the company is more agile in response to market conditions.

Stocks: SONO