Sonos, Inc.

quarter fiscal 2022 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. Bill Newby, you may begin your conference.

Thanks, Emma, and good afternoon, everyone, and welcome to Sonos' second quarter fiscal 2022 earnings conference call. I'm Bill Newby, and with me today are Sonos' CEO, Patrick Spence, and Brittany Bagley, CFO. Chief Legal Officer Eddie Lazarus will also be available during the question and answer session. Before I turn 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 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 with 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 fiscal 2022 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, investors.sonos.com. I will now turn the call over to Patrick.

Thanks, Bill, and hello, everyone. Our music today was brought to you by award-winning artist Lorde. Her new Sonos radio station, Solar System, launched today and showcases the songs and stories that move, shape, and inspire her, both at home and outdoors. Last quarter, I talked in detail about the power of our flywheel and Q2 was another proof point that the model we've built is working. We delivered record-setting Q2 revenue ahead of our expectations, representing more than 20% year-over-year growth. That's even more impressive in light of the fact that we delivered this 20% growth on top of the 90% year-over-year growth we delivered in Q2 of last year. And growth again this quarter was constrained by supply. Our consumer demand remains strong, and we continue to work through a backlog. We once again delivered sustainable, profitable growth, achieving adjusted EBITDA of $47 million in Q2, despite increased component costs and higher shipping and logistics costs. These results are a testament to the execution of our amazing team and to the fact that Sonos is not a typical one-and-done purchase. New customers are drawn to Sonos as a result of our existing customers' passionate evangelism, word of mouth remains the number one driver of new customers, and our continuous product innovation, which causes existing customers to return on a predictable basis to add additional products. This is the flywheel that is core to our growth, and it continues to deliver. Of course, product innovation is a critical part of powering that flywheel, which is why we were so excited to announce a trio of new innovations today. The first is Ray, our new compact soundbar that delivers incredible sound for its small size. Ray raises the bar for at-home entertainment with new acoustic innovations that deliver balanced sound, crisp dialogue, and solid bass. Ray brings our category-leading simplicity and versatility to a more accessible price point, which we expect will attract more new customers to Sonos and provide a new way for existing customers to expand their system. When we launched Sonos One, it opened up a whole new range of customers to Sonos, and we're looking to Ray to do the same thing for our home theater segment. Second, Sonos Voice Control is the first voice experience purpose-built for listening to and controlling your music on Sonos. Designed with privacy at its core, Sonos Voice Control is the simplest way to control your music, offering complete command of your Sonos system using only your voice. Sonos Voice Control works on every voice-capable Sonos speaker, processing requests entirely on the device. No audio or transcript is sent to the cloud, stored, listened to, or read by anyone. Sonos Voice Control will be available in the United States on June 1st. Third is that Sonos Roam, our ultra-portable smart speaker, is now available in three new colors, olive, wave, and sunset. Influenced by natural serenity, evening skies, and outdoor living, Roam's new colors are as versatile as the speaker itself, complementing interior and outdoor styles while harmonizing with the rest of the Sonos system. As with all Sonos products, the brand's newest speakers deliver great sound that helps you play more, hear more, and really feel more, whether at home or on the go. Innovation is in our DNA and remains a critical element of our ability to fuel the Sonos flywheel. We continue to invest in innovation both organically, as you've seen today with Ray, and through acquisitions, like you've also seen today with the introduction of Sonos Voice Control, which builds on the Snips acquisition we made in 2019. Our premium product portfolio continues to bring new households into the Sonos family and drive increased purchases among existing customers. Separate from what we are doing internally to drive growth, we continue to see three macro trends that we expect will offer significant tailwinds to our business for years to come. We've previously labeled these the golden age of audio, Hollywood at home, and the great reshuffling. Whether it's audio or video, individuals continue to find new, exciting ways to consume content throughout their lives and increasingly demand better products and services to bring this content to life. This is where Sonos leads the way. As everyone is aware, external headwinds have picked up since our last earnings call. These include increasing supply chain pressures and COVID lockdowns across some of the largest cities in China. This is prolonging and in some cases intensifying industry-wide chip shortages and resulting in higher component and shipping costs. At the same time, we are watching the impact of the war in Ukraine on Europe, as well as rising global inflation and the strengthening of the U.S. dollar. While we have a large customer base across Europe, we did not have any material revenue from Russia or Ukraine and are no longer doing any business there. Despite these headwinds, we remain confident that we can deliver on our fiscal 2022 revenue outlook. We are monitoring demand closely, and from everything we can see today, our consumer demand remains healthy. As I mentioned at the top of the call, we continue to have a backlog of orders. Fulfilling this demand for the balance of fiscal 2022 will cost us a little more than we had previously expected due to the increasing component and logistics costs, and this is reflected in our updated gross margin outlook. While our short-term focus is all the hard work our teams are doing to minimize the impact of the industry-wide supply challenges, there remains tremendous long-term opportunity ahead for Sonos. Our growth pillars are proven and strong. The Sonos flywheel of new household acquisition and existing customer repurchases continues to spin. We have a robust product roadmap and track record of at least two new product launches annually, and we have an addressable market that is large and growing, as well as macro tailwinds that even further underscore the opportunity ahead. I also want to take a brief moment to provide an update on our activities defending our intellectual property. We were encouraged to see the ITC's importation ban go in effect in March, marking the most recent development in our victory against Google. Both sides have appealed aspects of the ITC decision to the federal circuit. And while that plays out, we are actively litigating our second case against Google in federal court in Northern California. Now we'll turn the call over to Brittany to provide more details on our results and our outlook.