Sonos, Inc.

Thank you for standing by. My name is Kayla and I will be your conference operator today. At this time, I'd like to welcome everyone to this 60-minute Sonos fourth quarter and fiscal 2025 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'd like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you'd like to withdraw your question, again, press the star and one. I would now like to turn the call over to James Baglanas, head of corporate finance. You may begin.

Good morning, and welcome to Sonos' fourth quarter and fiscal 2025 earnings conference call. I am James Baglanis, and with me today are Sonos CEO, Tom Conrad, CFO, Sayori Casey, and Chief Legal and Business Development Officer, Eddie Lazarus. Before I hand it over to Tom, 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 fourth quarter and fiscal 2025 results posted to the Investor Relations portion of our website. As a reminder, the press release, supplemental earnings presentation including our guidance, and conference call transcript will be available on our Investor Relations website, investors.sonos.com. I will now turn the call over to Tom.

Good morning, everyone, and thank you for joining us today. Q4 brings a strong close to fiscal 2025 for Sonos. In Q4, we grew revenues 13% year-over-year and posted strong, positive, adjusted EBITDA. 2025 was, without question, a transitional year for the company, but I'm proud of all we accomplished. We restored the quality of our software and now can speak confidently about the new capabilities we're delivering across the Sonos experience. We drove efficiencies and financial discipline into every aspect of our operations. We reorganized the way that we work in product and engineering, and as a result, today we are executing with greater urgency, focus, and effectiveness. Over the course of the last three quarters, you've also seen the work we're doing to rebuild our senior leadership team. And today, I'm thrilled to announce another important step on this front. In January, Colleen DeCourcy will join Sonos as our new Chief Marketing Officer. Colleen is one of the most celebrated creative leaders of her generation, bringing extraordinary taste, cultural insight, and a proven ability to connect creativity with business growth. She joins us following a successful tenure at Snap, where she served as Head of Marketing and Chief Creative Officer, and before that as Co-President and Chief Creative Officer at Wieden & Kennedy. All of this progress creates a strong foundation of excellence from which to return to growth and expand profitability. But there is more to do. The company doesn't just need more discipline, better execution, and a revitalized team. We need a new strategy. Over the last several years, Sonus has produced excellent products. But in thinking about what hardware to make, what software experiences to deliver, and how to bring those offerings effectively to market, we've lost focus on what makes us different and better, and what's more, we've lacked an organizing theory of the case. I'm changing that, and I'd like to tell you a bit more about the details today. while others sell fragments, a soundbar for the TV, headphones for the commute, Bluetooth for the beach. Sonos is every dimension and sound for the home. Music, movies, stories, rooms, formats, conversations, and control, all connected into a single, cohesive, and radically easy system. The pursuit of this system is now our organizing lens for decisions and the foundation of our durable advantage. The Sonos system is independent by design and is the premier platform to connect first- and third-party experiences with incredible audio. It's why today Spotify, Apple Music, YouTube Music, Amazon Music, and over 100 others all thrive on Sonos. It's also why we bring together Bluetooth, AirPlay, Spotify Connect, and analog sources alongside formats like Dolby Atmos and Lossless Audio to uniquely deliver every dimension of sound. With our installed base of over 53 million smart internet-connected devices and more than 17 million homes and growing every day, The Sonos platform is the trusted place where services, old and new, work side by side, giving households freedom of choice anchored in a system that they love. Casting into the future, we see a world where live, natural conversations with AI personalities are as commonplace as smartphones are today. And we believe Sonos' expertise in internet-connected, voice-enabled, personal hardware products for the home can position us as the center of these interactions. Starting now, our future hardware and software roadmaps are single-mindedly directed at leveraging our position in the home to deliver bold experiences, both traditional and entirely new, that will make Sonos even more relevant and beloved in the eyes of our customers. From a financial perspective, this strategy is underpinned by a compounding model built on generating new households and increasing lifetime value. Generating new households means bringing more homes into the Sonos ecosystem, growing our installed base through great gateway products, sharper marketing that tells our story more forcefully, and continued international expansion. Increasing lifetime value is about deepening our relationship within every household. That starts with engagement, delivering products that become an essential part of everyday life and then encouraging people to grow their Sonos systems over time, whether that's adding more rooms, headphones, or building out a comprehensive home theater experience. At the end of fiscal 2025, the average Sonos household grew their system to 3.13 products and multi-product households increased to an average of 4.49, still well below what we believe a fully realized Sonos home can become. But lifetime value isn't just about how many products someone owns. It's about the horizon over which they're investing in their Sonos systems. We want households to keep upgrading, expanding, and discovering new ways to enjoy Sonos for decades. We'll do that by keeping system fresh through reliable software, excellent service, and product updates that inspire people to reinvest in Sonos. As one example of the power of this compounding model, we see a $5 billion revenue opportunity in driving devices per multi-product household higher to six per home. and another $7 billion in converting single-product households to current multi-product levels. Taken together, this alone is a $12 billion opportunity just within our existing base. Our opportunity is to write the next great chapter for Sonos. For the last many years, we were just selling speakers and experimenting with new categories. Today, we're building a cohesive system that compounds in value, stronger as it grows, smarter as it evolves, and more essential over time. We hold just 6% of the $24 billion global premium audio market. There's no reason we cannot garner a much larger share of this market while we simultaneously grow the sound system category that we invented. While our strategy will take time to fully manifest in our hardware portfolio, including the delivery of entirely new products for use cases and spaces in the home that we do not occupy today, We enter fiscal 2026 with an incredible portfolio of products that we are bringing into tight alignment with the strategy through software updates. We'll further strengthen the family with new hardware products launching in the second half of the year, and we'll continue to sharpen our brand storytelling, expand internationally, drive excellence in our installer channel, and partner selectively to reach new audiences. As we turn this page, we also continue to execute effectively and with discipline. We've reduced our operating expense run rate by more than $100 million, while selectively investing in the opportunities where our conviction is highest. We've kept margins healthy even while navigating tariffs. We've grown adjusted EBITDA despite top-line challenges. We've invested in innovation to unlock future growth while returning capital to shareholders through buybacks. and we've deepened our relationships with our channel and installer partners. What drives all of this is the world we're building for our customers, a home that comes alive with sound and experiences that move seamlessly between moments, moods, and spaces, where every product, software component, and interaction works together, and the whole becomes much greater than the sum of its parts. I've said before that Sonos is one of the few companies in the world with the ingredients to build beloved consumer products at the very highest level. As we enter fiscal 2026, I've never been more certain of our ability to do this. I see it in the passion of our team, in the way customers respond when we make their systems better, and in the discipline with which we've reshaped the company around our core strengths. Great things lie ahead. Now let me turn things over to Sayori.