Sonos, Inc.

Thank you for standing by. My name is Angela and I will be your conference operator today. At this time, I would like to welcome everyone to the Solano's second 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 this time, simply press star followed by the number one in your telephone keypad. If you would like to withdraw your question, press star 1 again. Thank you. I would now like to turn the call over to Mr. James Poglanis, Head of Corporate Finance. You may begin.

Good afternoon, and welcome to Sonos' second quarter fiscal 2026 earnings conference call. I'm James Poglanis, and with me today are Sonos CEO Tom Conrad, CFO Sayori Casey, and Chief Legal 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 second 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 the conference call transcript to the IR website. I will now turn the call over to Tom.

Good afternoon, everyone, and thanks for joining us. At the start of fiscal 2026, we said we expected to return Sonos to growth this year. Through the first half, that's exactly what we've done. We delivered $282 million of revenue in Q2, up about 8% year-over-year and near the top end of our guidance range. Gross profit dollars grew double digits on a gap basis and adjusted EBITDA came in above the midpoint of our range. Sayori will take you through the details in a moment. These are strong quarterly results, but what matters more is the broader picture. Across the first half and now looking into the second, we have changed the trajectory of the business. After a challenging period, Sonus is beginning to grow again, and we are seeing our progress show up across the company. First half revenue was up 2%, and adjusted EBITDA improved meaningfully year over year. At the center of that progress is a simple idea. The Sonus system is the product. Each device we add and each improvement we make increases the value of the whole system, compounding over time as customers expand across rooms and use cases. That system-level value and the way it builds over time is what differentiates us in the category. On our Q1 call, I outlined five dimensions we're focused on to drive durable growth. Product innovation, customer advocacy, more intentional marketing, geo-expansion, and tapping emerging demand trends. Together, these form the engine that drives both new household growth and expansion within our installed base. We're starting to see the results of that work in the business. The product pipeline is delivering, growth markets are performing well, and the system is more reliable than it has been in years, which is helping restore customer advocacy. Taken together, this has new customers entering and existing customers expanding into the system. I want to spend a moment on our newest product, Sonos Play. It launched just as the quarter closed, so its contribution to Q2 was de minimis. But the early reviews tell us something important about where we are as a company. Gizmodo called it a comeback. The Wall Street Journal described it as the Goldilocks speaker. The Verge called it a great way into the Sonos world. Bloomberg said, we're back on track. Reviewers around the world agree. Crisp and beautiful sound, unmatched versatility, beautiful craftsmanship. In short, Sonos doing what Sonos does best. These glowing reviews were written independently across a host of markets and geographies as the launch embargo lifted. This remarkable consistency reflects both the quality of the product and the clarity of the story around it. Over the past year, the product team has rebuilt the foundation, and now Colleen and our marketing teams are sharpening how we show up as a system, and you can see that work landing here. If you step back, Play illustrates three of our five growth dimensions working in concert. First, product innovation. This is differentiated hardware and software designed not as a standalone object, but as an entry point into the system and a reason to expand it. Second, marketing. The consistency of the global press narrative reflects a clearer and more coherent system story. And third, customer advocacy. When reviewers start using words like comeback and back on track, that shift in tone is consistent with improving customer sentiment and the progress we've been making. Arrow 100 SL, which launched alongside Play, nicely complements the work Play is doing for us. With a simplified design and $189 price point, it lowers the barrier to entry for the Sonos system. We've already seen that pricing changes on Aero 100 have driven new customer growth over multiple quarters, and Aero 100 SL should build directly on that momentum. We have more than 53 million connected devices across more than 17 million homes. As we've described before, the opportunity within that base is substantial. moving from roughly 4.5 devices per multi-product household to six represents about $5 billion in incremental revenue, before even considering new household growth, converting single-product households as another $7 billion. We continue to see behaviors that underpin our model. Customers are entering through accessible products and expanding across rooms and use cases over time, and now we have two new ways to enter the Sona system and more reasons for existing customers to expand inside and outside their homes. Turning to our operations, I want to take a moment to introduce a meaningful addition to our leadership team. Frank Barbieri is joining Sonos as Chief Operating Officer. Frank brings over 25 years of experience building and scaling consumer businesses, most recently leading Walmart's omnichannel consumer content, media, and gaming operations across both stores and e-commerce, one of the largest entertainment portfolios in U.S. retail. I've known Frank for nearly 20 years, and his combination of commercial depth and Operational discipline and genuine passion for consumer products makes him exactly the right person to join our team. As COO, Frank will take responsibility for partnerships, direct consumer relationships across DTC, CRM, and customer experience, as well as revenue systems and IT. This is a meaningful concentration of operational capability under an experienced leader, and I expect it to show up in how we execute against the growth agenda I've been describing. All in all, we're carrying real momentum into the second half. Play has launched a strong early reception. Arrow 100 SL looks to be the right product for a moment when many potential customers are focused on value. We have AMP Multi coming this fall as a much-anticipated product for our professional installer channel. More broadly, our pipeline remains healthy across not just hardware but also software with a continued focus on deepening the system experience. In our growth markets, which I noted as a fourth important lever for our business, we've now seen multiple consecutive quarters of strong performance. Sona's place warm reception by international press reinforces the vast opportunity in front of us. We continue to see our expansion markets as important contributors to our growth that will pay off more and more for us over time. On our last earnings call, I suggested that we would grow more in the second half of the year than in the first. I'm pleased to say that we performed somewhat better than expected in the first half, and my view that the second half will be stronger yet remains unchanged. Amid this optimism, I want to highlight one challenge. Looking to the second half and beyond, we're managing the headwind of higher memory costs, which are putting downward pressure on our gross margin. As you know, the semiconductor industry is in the middle of a transition from DDR4 to DDR5 and high bandwidth memory, driven by AI and data center demand. That is tightening supply for the DDR4 chips we use and increasing costs across consumer electronics. Our global operations team has been focused since early 2025 on securing sufficient supply to support our manufacturing demands. This means pursuing supply through multiple channels. We are also leveraging our engineering expertise to optimize memory requirements across current and future designs, all without compromising product performance or customer experience. With regard to the effect of higher memory prices, we have a variety of levers to mitigate the impact. Our focus is on managing the headwind thoughtfully without losing sight of the larger opportunity to drive top-line growth alongside increased profitability. On the topic of tariffs, we will be filing for a refund of prior duties paid under IEEPA now that the U.S. Customs and Border Protection has launched Phase 1 of CAPE. While the timing is uncertain, the benefit could be as large as $40 million, which would be another meaningful offset to the higher memory costs. So while memory headwinds are real, we are managing it from a position of preparation and expertise. Let me close with this. We've moved through a phase of stabilization. What comes next is building durable growth. We're at an important point, and the signals are showing up across product, markets, and customer behavior. The product pipeline is active again, Growth markets are showing strong performance. The system is stronger, more reliable, and easier to understand. Our progress on the dimensions we discussed today, new products, more effective marketing, geo-expansion, and a return to customer advocacy is beginning to deliver growth. But the opportunity to grow into emerging adjacencies is what I find most compelling. AI is already transforming how we operate internally. from the way we build software to how we execute marketing to how I run the company. But the external opportunity is vast. 17 million households and 53 million connected devices, voice-enabled and present room by room. This is an installed base with significant value, and as more people look for experiences that don't depend on pulling out their phone, that value only grows. We're building towards something larger here, and while I'm not ready to lay out the full picture today, There is considerably more to this story, and I look forward to sharing it with you in time. With that, I'll turn it over to Sayori.