Sonos, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the Sonos Fiscal First Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1 in your telephone. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Cameron McLaughlin, Vice President, Investor Relations. Thank you. Please go ahead.

Thank you. Good afternoon and welcome to Sonos first quarter fiscal 2021 earnings conference call. I am Cameron McLaughlin and with me today are Sonos CEO Patrick Spence and CFO Brittany Bagley. For those of you who joined the call early, today's hold music included highlights from the recently launched artist curated stations by D'Angelo and FKA Twigs on Sonos Radio HD. Before I hand it over to Patrick, I would like to remind everyone that today's discussion will include forward-looking statements regarding future events and our future financial performance. These statements reflect our views as of today only and should not be considered as representing our views of any subsequent seat. These statements are also subject to material risks and uncertainties that could cause actual results to differ materially from expectations reflected in the forward-looking statements. A discussion of these risk factors is fully detailed under the caption risk factors in our filing for the SEC. During this call, we will also refer to certain non-GAAP financial measures. For information regarding our non-GAAP financials and a reconciliation of GAAP to non-GAAP measures, please refer to today's press release regarding our first quarter fiscal 2021 results posted to the IR portion of our website.

as a reminder the press release a supplemental earnings presentation and our conference call transcript will be available on our ir website at investors.sonos.com i will now turn the call over to patrick thanks cameron uh 2020 2021 is off to a great start for sonos i'm so proud and appreciative of all the hard work by our team and our partners these results are incredible in their own right but doubly so in the face of the pandemic and all the challenges it brings While we anticipated delivering a strong first quarter, our results were meaningfully ahead of our expectations. On the heels of this strength, the momentum we continue to see, and our ambitious roadmap, we have even greater confidence in our ability to drive transformational 2021 results. We are increasing our outlook for the year on all of our key metrics. As I highlighted last quarter, we have hit an important inflection point that proves that our unique model delivers for both customers and investors. Our approach from the beginning has been to build a system of premium products and now services that deliver an amazing experience, whether you start with one of them or start with many. This creates a virtuous cycle where customers return to add additional Sonos products and services over time. Our model has two important drivers. The first is attracting new customers, and the second is driving additional purchases from existing customers. We made big gains on both fronts in this quarter. We added a record number of new homes, and we saw our existing customers return to add additional products at a record level. Brittany will cover the financials in detail, but I wanted to highlight one thing. The first quarter illustrates the strong free cash flow and adjusted EBITDA our model delivers as we scale it. We delivered a record 25.8% adjusted EBITDA margin thanks to our innovative products, our ability to expand gross margins, and our continued operating expense leverage. This is a strong proof point to the profitability and sustainability of our model. Revenue during the first quarter increased 15% year over year to a record $645.6 million. As you know, we've been focused on leading with direct to consumer and our DTC performance accelerated in the first quarter. We had a very strong holiday selling period led by growth across all of our product categories. As you know, we limit regular promotions keep our campaigns few and targeted throughout the year, and believe strongly in maintaining our premium position in the marketplace. The biggest driver of new customers continues to be existing customers telling their friends and family members about Sonos. There is no better testament to the power of a brand than that. While our efforts to improve availability proved helpful during the quarter to drive stronger performance than expected, we do remain out of stock on three products. We anticipate being largely in stock by the end of the second quarter. As a result of our strong performance and outlook for the remainder of the year, we are on track to deliver our 16th consecutive year of revenue growth, now expecting to deliver 17% to 21% growth for the year on a comparable 52-week basis compared to our prior outlook of 11% to 15% growth. As we look forward to fiscal 2021, we see tremendous opportunity and remain focused on the following priorities for this year. The first is to continue to deliver innovative new products that both new and existing customers love, plus services that enhance and further differentiate the customer experience. We remain committed to maintaining a relentless focus on innovation in our traditional product segments, and you'll see continued innovation and experimentation in services as we believe there's plenty of opportunity given our highly engaged customer base. We remain committed to launching at least two new products per year and are well on track as we look at our fiscal 2021 product roadmap. We are excited to introduce our newest product next month. Stay tuned for details. We are pleased with the momentum we are seeing around Sonos Radio and Sonos Radio HD. We look forward to developing more direct paid relationships with our customers over time, and we'll be talking more about this at our investor event next month. Second, we will continue to focus on strengthening our direct-to-consumer efforts and engaging even more deeply with consumers. we are increasingly focused on direct distribution and engagement to ensure we are delivering a great end to end experience for our customers. We have seen that consumers are willing to engage and transact with a trusted brand like Sonos and expect that that will only increase over time. Third, we will continue to strengthen and support our incredible partnerships. We've been very pleased with the results of our IKEA partnership and the opportunity it has created to introduce new consumers to the Sonos brand and our platform. We will look to continue to enhance our partnership with IKEA this year and bring additional new partners onto the platform. As far as our longer-term strategic priorities in the future, I look forward to discussing this at our first investor event on March 9th. We're excited to have all of you join for that, and I've never been more excited about the opportunity ahead for Sonos. Let me turn it over to Brittany now.