Sonos, Inc.

Good afternoon. My name is Emma, and I will be your conference operator today. At this time, I would like to welcome everyone to the Sonos fourth quarter and fiscal 2021 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press the star one. Thank you. Cameron McLaughlin, you may begin your conference.

Thank you. Good afternoon, and welcome to Sonos' fourth quarter and 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 is from Sonos Radio's collaboration station from Impulse Records and basketball legend, activist, and jazz historian Kareem Abdul-Jabbar. 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 fourth quarter and fiscal 2021 results posted to the Investor Relations portion of our website. As a reminder, the press release, 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. Our incredible fiscal 2021 financial results underscore the power of our model and our ability to execute despite the uncertainty and challenges throughout the year. I am so proud of what our team delivered, and I am very confident in our progress toward becoming the world's leading sound experience brand. We have a tremendous opportunity ahead and are well positioned to seize it. To start, we are thrilled to report a fourth quarter that caps off a record fiscal year 2021. We achieved total revenue of $1.717 billion, an increase of 29% from the prior year, or 32% when you adjust for the extra week last year. This marks our 16th consecutive year of revenue growth. Our leadership position in premium home audio continued throughout fiscal 2021 as our products continued to rank as the leading products in the wireless speaker and home theater categories in our core geographies. Demand remained very strong through the fourth quarter, driven by the continued strength of our industry-leading products, and we delivered a record $360 million in revenue despite increased supply chain constraints that we, like so many others in our industry, have been facing. Our fiscal 2021 results are an illustration of just how powerful and profitable our model is as we scale. We achieved record adjusted EBITDA of $279 million, an increase of 157%, representing an adjusted EBITDA margin of 16.2%, up 800 basis points. Our fiscal 2021 results put us significantly ahead of schedule toward achieving the fiscal 2024 targets outlined at our investor event this past March. Our brand is strong. We have an exciting and robust product roadmap ahead, and we are confident in our ability to continue to drive sustainable, profitable growth over the long term. Brittany will go into more detail on our fiscal 2024 targets shortly. Despite the supply challenges that continue to exist as we enter fiscal 2022, we are confident in our ability to continue to deliver strong growth and expect to deliver up to 16% revenue growth and 17% adjusted EBITDA growth at the high end of our range. Our demand is incredibly robust and we are confident we can sell every unit we can make this year. Brittany will also go into more detail on our fiscal 2022 outlook. We attribute our continued success to the fact Sonos is a system for your whole home, not just a single product solution, and to our consistent approach to delivering innovative new products and services. The real power of Sonos is that you can start with one product and expand more over time. The core of our model is that we continue to add new homes and that our existing homes keep coming back and adding additional products each and every year. On that note, we ended fiscal 2021 in 12.6 million homes, an increase of 15% from the prior year. 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 and have a tremendous runway to add tens of millions more homes to the Sonos ecosystem long-term. When it comes to existing customers adding additional products, in fiscal 2021, we saw 46% of our product registrations coming from our existing households. This is our flywheel in motion. We add lots of new homes, and they buy more and more from us over time. To that end, in fiscal 2021, we saw the number of products per home increase to 3.0 from 2.9 last year, underscoring that the lifetime value of our households continues to increase and is yet to be fully realized. In fact, we see a runway toward four to six products per household long term, driving significant increases in lifetime value over time. Then, as we layer services on top of this, the lifetime value will increase even further. Our model is a proven one and is a powerful one. In fiscal 2021, we made great progress on our three key strategic initiatives, the expansion of our brand, the expansion of our offerings, and driving operational excellence. First, on 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 those customers. The first step was updating our brand strategy to tap into the emotional connection derived from experiencing all of your favorite content on Sonos. We leaned into sports and outdoors, inking a partnership with globally renowned Liverpool Football Club as its official sound partner and teaming up with ESPN as the official sponsor of college football. We celebrated the launch of Rome by partnering with the North Face to create a multifaceted program that invited fans to sonically explore the outdoors, which was supported online by many North Face athletes sharing how Rome accompanied them on their outdoor adventures. Finally, we were named one of Fast Company's Brands That Matter. This list captures brands who are inspiring all of us, whether it be leading in pop culture or responding meaningfully to current events. And this is a testament to the enduring brand that we have built. Second, on the expansion of our offerings, our focus on innovation and the integration of our software, hardware, and services together provides a compelling proposition for our customers. We have an exciting and robust product roadmap ahead. As you saw, we are off to a great start this fiscal year with the launch of Beam Gen 2 on October 5th, the latest version of our industry-leading compact smart soundbar, delivering upgraded, more immersive sound experience with greater depth and clarity, as well as support for Dolby Atmos. We continue to deliver on our promise to introduce at least two new products per year, and in fiscal 2021 brought new products and services to the market such as Roam, Sonos Radio HD, and new partner products with Audi and Ikea. In April, we launched Roam, the ultra-portable smart speaker built to deliver great sound at home and on any adventure. Roam provides the opportunity for millions of new customers to get started with Sonos and is the right product at the right time as we begin to gather again with friends and family. Early in fiscal 2021, we introduced Sonos Radio HD, an ad-free, high-definition streaming tier of Sonos Radio, featuring even more exclusive content directly in the Sonos app. We are pleased to report that Sonos Radio listening hours doubled during the past year and is now the third most listened to service on our platform. We also announced our first ever automotive audio partnership with Audi, a partner that shares our vision and approach, placing the same value on innovation and premium design as Sonos. And finally, we continue to expand our partnership with IKEA, introducing two new products to the Symfonisk range. In June, we launched the Symfonisk picture frame speaker, followed by an updated and customizable table lamp. Symfonisk is now sold in more than 50 markets worldwide, and we will continue to expand our distribution through 2022. We have tremendous opportunity ahead in the categories we play in today, but we also have ambitious plans to expand into new categories and new customer segments and to layer services on top of everything we do. As we look ahead to fiscal 2022 and beyond, our product roadmap remains robust and we are excited to unveil what comes next over time. And on to our third key strategic initiative, 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. Our supply chain, logistics, and operations team has done an outstanding job navigating a difficult supply chain and logistics environment. Our fiscal 2021 results and execution in light of this universal challenge truly underscores our ability to drive operational excellence as an organization. Every year, we strive to improve our efforts as a responsible company, which we share in our annual Listen Better report. In fiscal 2021, we partnered with a leading third party to map the carbon footprint of our entire value chain, from sourcing materials to packaging to how our products are used throughout their life, identifying where our work has the greatest environmental impact. Armed with this knowledge, we have developed our first climate action plan, which we will share alongside our annual Listen Better report in December. Last, I am proud to report that Sonos was included on Inc. Magazine's first ever list of the 250 best-led companies, coming in at number 13. This list highlights America's thriving midsize companies and leaders that are the unsung heroes of the U.S. economy. I am even more excited about the future ahead. There are three macro trends that we believe have and will continue to fuel our growth. First, the golden age of audio. The volume of music, audio books, and podcasts we have access to now is enormous. And as more and more people become creators and find interesting new audio formats, even more time will be spent with audio. As the leading premium home audio brand, Sonos is very well positioned to continue to capitalize on this. Second, Hollywood at home. With more and more video content going direct to home, there has been a decade of change in the past year and companies bringing the newest movies right into our living room. Consumers are demanding a theater-like experience at home, evidenced by the fact that consumers are buying larger and larger TVs and driving significant growth in smart TV and streaming video time. Sonos, as the number one brand in premium home theater, is well-positioned to be the go-to source for consumers looking to bring theater-like sound to their home theater setup. And the third trend fueling our growth is the great reshuffling. This is the untethering of people from their commutes and offices, which has really enabled them to reevaluate how and where they want to live. We believe this will be a multi-year cultural trend driving consumers to continue to invest in their homes. As our target consumers buy new primary and vacation residences, they often turn to custom audio video installers for their multi-room home audio setups and home theaters. Custom installers have a lot of influence over purchase decisions given their expertise, and customers that work with installers tend to have larger systems and higher net promoter scores. Sonos' continued partnership with professional installers has resulted in a record number of amps, ports, and Sonos by Sonance products being integrated into homes all over the world. One of our great strengths is the ongoing collaboration between ourselves and the many small businesses who specialize in using Sonos to create amazing audio experiences for their customers. In fact, according to a CE Pro report, we have earned 92% share in the wireless audio category, which significantly outpaces our competitors and really underscores the strength of our brand, the quality of our products, and our strong competitive position in the categories we play. We are looking forward to our continued growth in this space as we broaden to serving builders, remodelers, and architects. In conclusion, despite the uncertainty and challenges presented this year, the Sonos team rose to the occasion and delivered a record year. I am proud of what we've accomplished and I'm excited for the tremendous opportunity that lies ahead. We have a robust product roadmap and our addressable markets are large and growing. The long-term opportunity is enormous and we are just scratching the surface. Now I'll turn the call over to Eddie to provide a brief update on our IP litigation.