Sonos, Inc.

Ladies and gentlemen, thank you for standing by. My name is Abby and I will be your conference operator today. At this time, I would like to welcome everyone to the Sonos first quarter fiscal 2026 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 that time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star 1 a second time. Thank you. And I would now like to turn the conference over to James Baglanis, head of corporate finance. You may begin.

Good afternoon, and welcome to Sonos' first quarter fiscal 2026 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 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 first quarter fiscal 2026 results posted to the investor relations portion of our website, investors.sonos.com. After the call concludes, we will upload our revised supplemental earnings presentation, including our guidance, as well as a conference call transcript to the IR website. I will now turn the call over to Tom.

Good afternoon, everyone, and thank you for joining us. Coming into fiscal 2026, my focus was straightforward. Build on the stability we reestablished in 2025 and start bending the trajectory of the business towards durable growth and profitability. I'm proud to say the fiscal year is off to a good start. We delivered Q1 revenue of $546 million, with gross profit dollars growing 5% year over year. Adjusted EBITDA grew 45% year-over-year to $132 million. Revenue came in above the midpoint of our guidance range, and on the bottom line, we generated as much adjusted EBITDA in this one quarter as we did in all of fiscal 2025. That performance reflects the fiscal discipline and structural changes we've put in place over the past 18 months which have driven more than $100 million in run rate savings while still preserving room to invest in innovation. We're encouraged by the strength of Q1, but our ambition is far greater than one quarter. The work ahead is about building durable, repeatable growth over time. Returning our company to growth is not about a single quarter, a single launch, or a single trend. It's about sustained, coordinated action anchored in the power of the Sonos system. At the center of our strategy is a simple idea. Sonos is not a collection of products. It's a system that gets more valuable as you add to it, use it across more rooms, and rely on it over time. That system behavior is what drives repeat purchase, longer customer lifetimes, and ultimately more durable growth. So we're now executing across five growth dimensions, each designed to strengthen that system advantage. The first growth dimension is product innovation. We are focused on creating new products that are genuinely differentiated, deeply tied to the home and designed to strengthen Sonos as a system rather than standalone devices. Our hardware and software roadmaps are tightly connected and the goal is simple. Products that work better together, unlock more use cases and make the system more powerful with every addition. The second growth dimension is a return to customer advocacy built on excellence in performance, reliability, ease of use, and customer service alongside a broader and more coherent software platform. When the system works well, customers trust it, expand it, and recommend it. System reliability is not just a quality metric for us, it's a growth driver. The third growth dimension is more intentional and effective marketing. With the arrival of our new CMO, Colleen DeCourcy, we are rebuilding our go-to-market engine around a full-funnel brand architecture that connects long-term brand storytelling with a clear, consistent system narrative. Sonos is the easiest way to build a sound system for the home, and it gets better as you add to it. That clarity is sharpening both how people enter the system and how quickly they expand once they're in. The fourth growth dimension is accelerating our success in geo-expansion. We see a meaningful opportunity to expand our global footprint through the right mix of products, pricing, partnerships, and local relevance, while making it simple for new households around the world to start with Sonos and then grow their system over time. The fifth growth dimension is tapping demand from emerging external trends. Our system position allows us to explore new interaction models, including conversational AI in the home and new modes of content interaction in ways that feel additive rather than uninvited or far afield. These are experiences that only make sense because a trusted system is already in place. Let me highlight a few areas where you can already see progress against these growth dimensions. Starting with product innovation, our hardware and software roadmaps are now tightly aligned around the opportunities ahead. After an intentional pause in new hardware launches last year while we focused on strengthening our software foundation, we are back to introducing new products with a lot planned for the rest of 2026. Last week, we unveiled Sonos AMP Multi. It offers our installer partners a powerful new building block combining flexible, best-in-class multi-zone amplification with simpler installation, configuration, and tuning. Amp Multi makes complex systems easier to design, deploy, and manage while advancing both sound quality and reliability. More importantly, Amp Multi is a clear expression of our system strategy. This is what we mean by building products that don't just perform on their own, but make the whole home experience easier and better. As homes become more connected, Sonos can become the audio platform that underpins whole home experiences, and AMP Multi allows Sonos to be built directly into the architecture of sophisticated homes. This product is designed specifically for our installer and integrator partners. It helps them take on larger projects, work more efficiently, and grow their businesses with Sonos as a trusted system at the center. The relationships we've built with professional installers over the past few decades are a real differentiator for Sonos. When our installers do well, Sonos does well, and we see meaningful opportunities to continue investing in products, software, and support that help them scale with confidence. Turning to customer advocacy, we continue to make meaningful progress this quarter on system performance and reliability across 10 software upgrades. These improvements are showing up in higher customer satisfaction across all channels and measures, and better system performance accelerates everything we do. On marketing and demand creation, We are getting more precise about how people enter the Sonos system and how quickly they expand once they're in. One early decision we made was to reduce the price of Arrow 100, recognizing its role as a critical gateway into Sonos. That move is paying off. Q1 marked the third consecutive quarter of accelerating new customer growth among households that start with Arrow 100, up more than 40% year over year. Arrow 100 is doing exactly what we designed it to do, Introduce new households to the Sonos system in a way that naturally leads to expansion across rooms and use cases. Expanding lifetime value within our installed base is another important leverage. Customers who start with ARR 100 have historically shown strong repurchase behavior, and that pattern continued this quarter with newer cohorts. We also saw growth in multi-product customer starts, which matters because customers who experience Sonos as a system from the outset build deeper, longer-lasting relationships with us. As a reminder, increasing lifetime value represents a significant opportunity within our existing installed base alone. If we move from today's average of almost four and a half devices per multi-product household to six devices per household, that represents roughly $5 billion in incremental revenue. Converting single product households to current multi-product levels adds another $7 billion. That upside is driven by system behavior. When customers use Sonos across more rooms and moments, they buy more over time and stay with us longer. Looking beyond our installed base, we currently hold about 6% of the $24 billion global premium audio market. There is substantial room to grow that share, particularly outside our core markets, while continuing to expand the sound system category that Sonos created. A great example of this is we saw another quarter of dollar share gains in premium home theater in both the U.S. and EMEA. Finally, our platform positions us well to tap into new external demand trends. With more than 53 million connected devices and over 17 million homes, Sonos is a trusted platform where services old and new can coexist, giving households real choice anchored in a system they value. That puts us in a strong position to explore new interaction models, including conversational AI in the home, in ways that complement the experiences people already love. As I've said before, our vision for Sonos is to be every dimension of sound for the home. Music, movies, stories, rooms, formats, conversations, and control, all connected through a single, cohesive, and radically easy system. That idea of systemness is the lens through which we make decisions and the foundation of our long-term advantage. What ultimately drives all of this is the world we're building for our customers, a home that comes alive with sound, experiences that move naturally between moments, moods, and spaces, where products and software work together, and the whole becomes meaningfully greater than the sum of its parts. You'll see more of that vision come to life with the products we have planned for the second half of fiscal 2026. After a year inside the company, seeing the people, the craft, and the ambition up close, my conviction has only grown that Sona says everything it needs to return to durable growth. Q1 mattered not just because of the results, but because it showed that the underlying business is getting healthier. We proved we can manage through tariffs with discipline, deliver profitability above expectations, and do it while continuing to strengthen the system. The second quarter will be quieter as it is often for us, but the first half as a whole reflects a business that is stabilizing and beginning to turn. For the past year, as we focused on software performance and reliability, we've been operating without new products to bring new customers into the system or spark repurchase. That changes in the back half of the year. We are entering that period with the system performing better and more reliably than it has in many years, with customer sentiment improving, and with a slate of new products designed to strengthen the system rather than just add devices. We're already gearing up for that moment now. With a solid Q1 behind us, modest growth expected at the midpoint of our Q2 guidance, and a clear line of sight to acceleration in the second half, We are executing against a clear plan to return Sonos to growth in fiscal 2026. With that, I'll turn things over to Sayori.