Morning Report: Here’s a first peek at the Sonos IPO document.
Ask yourself: how healthy is Sonos, the purveyors of wireless speaker hardware, as a company?
While you hold an answer in your mind, let’s start at the top with revenue. Sonos is a pretty big company. In its last fiscal year, ending September 30, 2017, the company had top line of $992.5 million. That’s nearly a billion. And it was up about $90 million from its prior-year result of $901.3 million.
Let’s turn to profit. In its most recent full, fiscal year, Sonos lost $14.2 million, an improvement from the preceding full fiscal year when it lost $38.2 million. As you can imagine, Sonos spends quite a lot of revenue on product as it sells hardware, including a full 54 percent of its revenue in its last fiscal year. So, Sonos had gross margins of around 46 percent in the year.
Sonos also provided two quarters for our perusal, both ending roughly at the end of calendar Q1. In the 2017 quarter listen, Sonos had revenue of $555.4 million and net income of $15.2 million. In the fiscal quarter corresponding to calendar Q1’18, Sonos has revenue of $655.7 million and net income of $13.1 million.
What we can glean from those results is that a first-quarter profit doesn’t imply that Sonos will make money on the year. In the preceding fiscal year, the firm made money in the first calendar quarter and lost money during its full fiscal period.
Finally, Sonos has generated cash from operations in all listed fiscal years and quarters (page 69). The firm’s free cash flow is not always positive, but Sonos has a history of free cash flow positivity as well.
So Sonos is large, growing, and showing occasional profits at pretty good hardware margins. That’s the core of what investors will now have to weigh.
Sonos has been in the news recently for non-financial reasons. Indeed, its new product, the “Sonos Beam,” was called a “living room upgrade” by The Verge. It went on to praise Sonos’s Alexa integration, its sound quality for TV viewing, and its ease of use. Not bad.
We’ll have more notes on the Sonos IPO when the firm sets a price range and we can better delve into its valuation.
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