Sonos, Inc.

Thank you for standing by. My name is Greg, and I will be your conference operator today. At this time, I would like to welcome everyone to the SONOS second quarter fiscal 2024 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'd like to ask a question during this time, simply press star followed by the number one on your telephone keypad. And if you'd like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to James Baglanis, head of investor relations. James, you have the floor.

Good afternoon and welcome to Sonos' second quarter fiscal 2024 earnings conference call. I'm James Maglanis and with me today are Sonos CEO Patrick Spence, CFO Sayori Casey, and Chief Legal and Strategy Officer Eddie Lazarus. For those who joined the call early, today's hold music is a sampling from our Sweets and Spices station, which is curated in collaboration with API at Sonos in recognition of Asian Pacific American Heritage Month. 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 date. These statements are also subject to material risks and uncertainties that could cause actual results to differ materially from the 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 2024 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 would also like to note that for convenience, we have separately posted an investor presentation to our investor relations website, which contains certain portions of our supplemental earnings presentation. I'll now turn the call over to Patrick.

Thank you, James, and hello, everyone. I'm pleased to report that we did what we set out to do in the first half of our fiscal year. This performance sets us up nicely to deliver on our previously outlined fiscal 2024 guidance. As you've heard from us and others previously, our categories remain under pressure, so our ability to deliver these results is a testament to the strengths of our team, our product portfolio, and our brand. We are holding our own and continue to gain market share in U.S. home theater and streaming audio versus last year. As you all know, we've been making healthy investments in innovation. Our investments remain focused on two things. The first is attracting new customers to Sonos, and the second is getting our existing customers to add more Sonos products to their life. There are four things I want to highlight that stem directly from the investments we're making and how we're laser focused on attracting new customers and getting existing customers to add more products. The first is the all-new Sonos app. This is our most extensive app redesign and re-architecture yet. Our original app was designed and architected over a decade ago when Sonos and our customers' needs were very different. We started from the ground up, so we can build an app that would deliver our customers a great experience every day, allow us to more easily add new products and categories to it, and move faster with new innovations and features going forward. Our new app brings services, content, and system controls to one customizable home screen, creating an unprecedented streaming experience. Best of all, our redesigned app is easier, faster, and better. It once again raises the bar for the home music listening experience and sets up our ability to expand into new categories and experiences. Our app is a proof point of what we have always said. We are the story of software eating audio. Our software truly differentiates our products from everything else on the market and is key to unlocking the opportunity ahead for us. Speaking of which, the second is that we are just weeks away from unveiling our newest product. This launch will give us a foothold into a new multi-billion dollar category, expanding the number of categories we plan from five to six and further diversifying our business. This has been a multi-year investment and we expect it to pay off in spades in Q3 and beyond. This will also mark the beginning of new efforts on the marketing front to evolve the Sonos brand and reach new audiences. The third is expanding our distribution footprint. In March, we officially went live as a first party seller on Amazon in the United States. The partnership is off to a great start and is a major milestone in our journey to ensure that we attract new customers to Sonos, particularly as we enter new categories. We continue to evaluate our distribution footprint with an eye towards reaching new customers and look forward to providing further updates in the quarters to come. And fourth, this quarter, we experimented with stimulating additional product sales in our install base by delivering limited time upgrade offers to some of our most loyal, longest tenured customers. We are always exploring how we can better use our unique data and insights to deliver more personalized experiences for our customers. The results of the targeted promotion came in well ahead of our expectations, validating our ongoing investments in systems to better harness and utilize our data. Selling both new and existing products into our install base represents a tremendous revenue opportunity. It's what gives us confidence in the success of the product we're about to launch in a new category, and it's what gives us confidence in our ability to scale this business in the years to come. For example, we've previously sized the opportunity of converting all single product households to the average multi-product household to be over $6 billion in revenue. Switching gears, I wanted to briefly touch on our litigation with Google. Just last month in early April, the federal circuit affirmed that Google had infringed five foundational Sonos patents. With this ruling in hand, we look forward to pursuing damages for Google's misappropriation of Sonos' innovations. I want to reiterate that we continue to be laser focused on what we can control. We are at the onset of a multi-year product cycle as we harvest the benefits of our research and development investments to attract new customers and sell more to our existing customers. It's the flywheel that has powered Sonos for the past 20 years, and we're excited to add some more fuel to the flywheel this year. We are positioning the company to accelerate our growth while keeping expenses in check to deliver margin expansion in the years to come. The eventual recovery of our categories will only further fuel this reacceleration. The opportunity ahead remains large, as we have just 2% of the $100 billion global audio market and 9% share of the total households in our core market. Each year, our business is driven by both the acquisition of new households that enter our install base and by our loyal customers who continue to make subsequent purchases over time. Our ability to capture a disproportionate share of the opportunity ahead of us will only improve from here. Great things are happening here at Sonos, and the best is yet to come. I'll now turn it over to Sayori to take you through our financials.