Sonos, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the Sonos second quarter fiscal 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 will need to press star one on your telephone keypad. Please be advised today's conference is being recorded, and if you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Cameron McLaughlin. Please go ahead.

Thank you. Good afternoon, and welcome to Sonos' second quarter fiscal 2021 earnings conference call. I am Cameron McLaughlin, and with me today are Sonos CEO Patrick Spence, Brittany Bagley, CFO, and Eddie Lazarus, Chief Legal Officer. For those who joined the call early, today's hold music included highlights from the recently launched artist-curated stations by MIA and Ghostface Killa on Sonos Radio HD. Before I hand it over to Patrick, I'd 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 date. 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 filings of 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 second quarter results posted to the investor relations portion of our website. As a reminder, the press release, a supplemental earnings presentation, and conference call transcript will be available on our investor relations website at investors.sonos.com. I will now turn the call over to Patrick.

Thanks, Cameron. And hello, everyone. We are thrilled to yet again report a record quarter for Sonos. I first want to recognize the fantastic work by our people and our partners during this challenging time. These results are a testament to all of the hard work they put in every day, and I am so proud and very grateful. Our second quarter results exceeded our expectations as we experienced even stronger than expected demand for all of our products, and our team did an incredible job meeting as much demand as they could in the quarter. As a result of our strong second quarter performance, we are increasing our revenue and adjusted EBITDA outlook for the year. Our strong results are a testament to the fact we have a unique model that serves customers and enables us to build a sustainable, profitable business. The power of our business model is that customers can start with one product and expand to more over time, and our customers have proven that they do just that. We are experiencing tremendous demand for our newest product, Roam, from new and existing customers alike. Roam is not only our smartest and most versatile speaker, it's also our most affordable. Roam provides the opportunity for millions of new customers to get started with Sonos and is the right product at the right time as the weather warms up and we begin to gather again with friends and family. During the pre-order period, Roam far exceeded our expectations with sales reaching over 150% of our pre-order forecast in our DTC channel. Several hundred journalist reviews have been published globally, highlighting the product's incredible sound and ultra portability, with Rolling Stone calling it, quote, the new standard for portable smart speakers. We are confident that we've delivered another fantastic product that customers love and helps the Sonos flywheel. As we look toward the remainder of fiscal 2021 and beyond, there are three macro trends that will fuel our continued growth. First, this is the golden age of audio. The sheer volume of music, audiobooks, and podcasts we have access to now is incredible. As more and more people become creators, we believe we will spend even more time with audio and find interesting new audio formats like social audio. The second trend is that we are seeing more and more video content going direct to home. We have seen a decade of change in the past year with companies like Disney and HBO bringing the newest movies right into our homes. It's not enough to have a great visual experience. Customers are demanding a theater-like audio experience in the home, and this is something we deliver better than anyone. And the third trend fueling our growth is the great reshuffling. This is the untethering of people from their communities and offices, which has really enabled people to reevaluate how and where they want to live. Even more and more companies are offering their people, especially the kind of people who are in our target market, the flexibility to work anywhere, we think this will be a multi-year cultural trend that benefits Sonos significantly. As we look toward our opportunity ahead, we believe that Sonos is just getting started and has barely scratched the surface of our large and growing addressable market. As of the end of fiscal 2020, we were in 11 million homes or approximately 9% of the 116 million affluent homes we believe are most addressable for us today in our existing markets. we have tremendous runway to add tens of millions of more households to the Sonos ecosystem. On the revenue side, based on our upwardly revised fiscal 2021 revenue outlook, Sonos will only account for approximately 9% of the total spend in the $18 billion premium home audio market. And that's an even smaller fraction of the broader $89 billion global audio market that we expect to expand into over the long term. We've come a long way, but we have a ton of opportunity to take a lot more of the home audio market and even more as we begin to expand into the broader audio market. This is a huge and growing market. We will seize the significant opportunity ahead by focusing really on three key strategic initiatives. The first is the expansion of our brand. This is all about understanding our customers better than anyone and how we're evolving our brand and marketing strategies to reach more of these customers. Moving forward, you'll see us continue to partner with other premium brands as we invite a broader swath of consumers into the Sonos experience. To support the launch of Roam, for example, we have partnered with the North Face. Together, we'll showcase Roam's durability, portability, and of course, sound quality. More on that in a few months. Second, the expansion of our offerings. We have a tremendous opportunity ahead just in the categories we play in today, who expanded a new customer segment into their services on top of everything we do. We remain focused on our efforts to introduce at least two new products each year and have already exceeded this target for fiscal 2021. Thus far, we've introduced Sonos Radio HD, Roam, and taken our first step into auto with our partnership with Audi. And we're not done. Some of you may have seen the recent social media posts from IKEA and Sonos. We are excited about the products we're working on together and are looking forward to sharing more in the near future. Our long-term product roadmap remains robust, and we are excited to unveil what comes next. As it relates to services, we continue to be pleased with our early success with Sonos Radio and Sonos Radio HD. Sonos Radio is the third most listened to music service on our platform, and we remain focused on our long-term aspiration to reach over 500,000 subscribers to Sonos Radio HD. We see significant opportunities and services over the long term. Our third strategic priority is driving operational excellence to achieve sustainable, profitable growth for the long term. You are seeing us continue to execute ahead of our plan and deliver margin expansion and healthy top-line growth. I've never been more excited about the future of Sonos. We continue to see strong demand, and we are in the best position we have ever been. We have a huge opportunity in front of us, and we are just getting started. Now I'll turn the call over to Eddie to provide a brief update on our Google litigation.