A month has gone by since the last earnings report for Sonos (SONO Quick QuoteSONO - Free Report) . Shares have added about 1.4% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Sonos due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Sonos Q3 Earnings & Revenues Beat Estimates

Sonos reported third-quarter fiscal 2024 non-GAAP earnings per share of 23 cents. It had registered earnings per share of 16 cents in the prior-year quarter. On a GAAP basis, the company reported earnings of 3 cents against a loss of 18 cents in the year-ago quarter. The Zacks Consensus Estimate was pegged at 19 cents.

Quarterly revenues increased 6% year over year to $397.1 million, primarily benefiting from the launch of Sonos’ first over-the-ear Bluetooth headphone, Sonos Ace, earlier this quarter.  The top line surpassed the Zacks Consensus Estimate by 1%.

Sonos launched a major app redesign in May 2024 to enhance the streaming experience, but the execution fell short. Undetected bugs surfaced during the rollout, leading to a less satisfactory experience for many customers. This incident also delayed the two major new product releases planned for the fiscal fourth quarter.

Revenue Details

Revenues from Sonos speakers were $301.1 million, up 3.9% year over year. 

Sonos system products’ revenues of $75.2 million rose 17.1% year over year. 

Revenues from Partner products and other totaled $20.9 million, up 7.5% year over year. 

Region-wise, revenues from the Americas of $264.6 million increased 5.2% year over year. Europe, the Middle East and Africa generated revenues of $110.9 million, up 5.3%. Revenues from the Asia Pacific rose 31.7% year over year to $21.6 million.

Other Details

Non-GAAP gross profit was $193.3 million, up 11.6% on a year-over-year basis. Non-GAAP gross margin expanded 230 basis points to 48.7%, resulting from improved inventory management.

Total operating expenses amounted to $179 million, down from $193 million in the year-ago quarter, reflecting lower research and development costs as well as general and administrative costs.

Non-GAAP adjusted operating income was $38.4 million compared with $23.6 million in the year-ago quarter. Adjusted EBITDA totaled $48.9 million compared with $34.3 million a year ago. 

Cash Flow & Liquidity

For the fiscal third quarter, Sonos used $63.5 million of cash from operations. Free cash outflow was $40.3 million.

As of Jun 29, cash and cash equivalents were $227.1 million compared with $291.6 million as of Mar 30, 2024.

The company returned $52.5 million to shareholders through stock repurchases in the quarter. It has $71 million worth of shares left for repurchase under the current $200 million buyback authorization.

Guidance Updated

The company revised its fourth-quarter fiscal 2024 expectations due to challenges with its new app rollout. This impacted revenues in two ways: lower sales across the portfolio owing to app issues and the decision to delay two major product launches until the app meets expected quality standards. 

Management expects fiscal fourth quarter revenues to be in the range of $240 million to $260 million. GAAP gross margin is projected to be in the band of 40% to 42%, down sequentially.
Margin performance is expected to be affected by deleveraging arising from lower revenues.
Adjusted EBITDA loss for the fiscal fourth quarter is likely to be in the range of $14 million to $ 37 million.

Revenues are expected to be in the band of $1.503 billion to $1.523 billion for the full year.
GAAP gross profit is projected to be in the range of $682 million to $696 million, representing a gross margin of 45.4% to 45.7%.

Adjusted EBITDA is anticipated to be in the range of $93 million to $117 million for the fiscal year, representing a margin of 6.2% to 7.7%.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.

The consensus estimate has shifted 118.18% due to these changes.

VGM Scores

At this time, Sonos has a great Growth Score of A, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Sonos has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Sonos is part of the Zacks Audio Video Production industry. Over the past month, GoPro (GPRO Quick QuoteGPRO - Free Report) , a stock from the same industry, has gained 3.3%. The company reported its results for the quarter ended June 2024 more than a month ago.

GoPro reported revenues of $186.22 million in the last reported quarter, representing a year-over-year change of -22.7%. EPS of -$0.24 for the same period compares with -$0.07 a year ago.

For the current quarter, GoPro is expected to post a loss of $0.04 per share, indicating a change of -200% from the year-ago quarter. The Zacks Consensus Estimate has changed -387.5% over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for GoPro. Also, the stock has a VGM Score of D.