Sonos CEO: Demand for our products is ‘off the charts’

Consumer electronics company Sonos reported impressive earnings this quarter and raised its guidance on the strong Q2 sales beat. Patrick Spence, Sonos CEO, joins Yahoo Finance Live to discuss the latest financial results.

Video transcript

ZACK GUZMAN: Let's keep this earnings train rolling here, as well as a focus in on the reopening. Because we also got the update from speaker giant Sonos reporting this week. And fiscal second quarter revenues, $332.9 million-- surpassed expectations. The company also reported a surprise profit of $0.12 a share. The Street was bracing for a loss. The company also raised its outlook for fiscal 2021 again, expecting that $1.625 billion to $1.675 billion in full year revenue, up from a range topping out at $1.575 billion.

Here to chat that with us is Sonos CEO Patrick Spence back on the show, alongside Yahoo Finance's Brian Sozzi here, joining in on the conversation. And Patrick, it's interesting because we were just talking about reopening there being a big win for Disney. But you guys are also rolling out seemingly perfectly timed the Roam Speaker, really getting speakers out of the house there at Sonos. So talk to me about the confidence you have to raise guidance here yet again.

PATRICK SPENCE: Yeah, thanks for having me. It's great to be back. And one of the things that I mentioned about Roam is the fact that we actually saw 150% of the preorders that we were expecting. So, you know, I think it's really a story of people wanting to take the Sonos experience with them as the world reopens. That's why we built Roam. We got lucky on the timing for sure in terms of hitting it just right, but the early indications are very, very strong that as people start to leave their homes, they're going to want to take the Sonos experience with them.

BRIAN SOZZI: Patrick, a lot of your products are really sold out right now. I guess part of that is, what, because of the semiconductor shortage?

PATRICK SPENCE: Yeah, so, you know, we obviously came in much stronger than ourselves or anybody expected with our 90% year over year growth. So our supply chain team has done a phenomenal job. Really over the last three or four quarters, that there's been a lot of shortages in a lot of different areas, semis being the biggest. And so I think our team continues to do an amazing job. As Zack mentioned, we've increased our guidance for the year. So we've been managing it very well.

But no doubt, it's hitting us like everyone else as we go through this. But we still feel good about the outlook for the year. And we just have so much demand right now, Brian. I mean, it's just off the charts.

BRIAN SOZZI: So Patrcik, we've spent more than a year inside of our homes. And I imagine a lot of people have added to their Sonos collection. I mean, how many Sonos speakers does the average household own right now?

PATRICK SPENCE: Almost three, so it's 2.9 across the over 11 million homes that we're in today. We think that over time, that can be more like four or five, maybe six per home that's out there. But we're also growing more and more homes all the time. And we think Rome is going to be another product that gets us into a lot of new homes. And Brian, the other thing we're seeing is we've been watching very closely those areas that are reopening versus those areas that are still more closed or locked down. And the demand appears consistent across both of those different areas.

And so we feel like with the systemness of Sonos, that people will add more over time. The reopening, of course, changes things a little bit in terms of what people are doing. But they can bring a Roam with them. And also, it's not like they're not going to be returning home, watching movies, enjoying audio. And audio just continues to explode.

AKIKO FUJITA: Patrick, I want to get back to that question Brian asked about supply shortages. Certainly not something that's new to this quarter. You've been dealing with that since last year. And you've talked about this diversification in your supply chain, particularly those in Asia. I wonder how that transition is going and what's that timeline look like for you.

PATRICK SPENCE: Yeah, you know, it's been a little bit slower because of the pandemic. And obviously, that's kind of affected everybody. So we've seen that across our teams and our operations in China and Malaysia. So it's coming online. It's been helpful for us. I think having it diversified has been part of our long-term strategy, but actually having started it pre-pandemic put us in a little bit of a stronger position. But no doubt, it delayed it a little bit. But overall, as you can see from our results, you know, it still hasn't really stopped the momentum, if you will, in our business. And I just expect it to be something that will help as we think about the long-term future.

ZACK GUZMAN: Yeah, when we look at maybe how this all has changed, it was interesting just when I stepped back and thought about, oh, people getting out of the house and wanting the Roam speaker here. A lot of people may have already been traveling through all of this, too. So I mean, when you think about the way that you've been able to surpass expectations, I mean, how much to you is maybe a piece of it being people not necessarily knowing the way that people are going to be interacting with speakers moving forward? Are you kind of surprised at the way that you've been able to outperform those expectations?

PATRICK SPENCE: You know, we have-- we're confident because we're unlike any other company kind of in this space in the sense that it's a system, right? So the system gets better, your experience gets better the more products you add in the home. And the other big thing I would say is that, you know, a lot of our sales are through the home theater space. And one of the things that we all know-- and you've talked about a lot-- is what's happening with streaming, right? And all these movies and video is going direct to home. And I don't think that's going to change. I think the genie is out of the bottle on that. And so, a lot of people are going to invest more in home theaters.

The other big trend we're seeing is this what I call the great reshuffling, right, which is people moving all over now that they have more flexibility from their employers. So I think we saw in New York today more people moving in. And we've seen in the suburbs, more people moving out and back and forth. And so, people are on the move. They're establishing new homes, second homes. And it's really our audience that's doing that. So a lot of our customers are playing there. And if they're setting up a new home, they're definitely setting up with Sonos. So we feel good about those macro trends. It's why we're very confident in our long term outlook. We set some goals for fiscal 2024. And we're well on pace to those.

BRIAN SOZZI: Patrick, settle the debate we were having on Twitter. How many Sonos speakers do you have in your house? I told you I have eight.

PATRICK SPENCE: I've lost count, Brian, I have to admit. So I'm over 30. And it sounds like Myles has a little bit of work to do, but I'm hoping you can help him with that.

AKIKO FUJITA: I'm going to guess, Patrick, you have a bigger space than I do. I don't know if I have a place to put 30 speakers--

PATRICK SPENCE: Well, you can take them outside. You can take them outside, right? So we do have a number outside. This is the benefit of living in California. So, you know, that's an almost endless space for us.

AKIKO FUJITA: OK, one day we'll try to track those down. I don't know, Brian. I don't think I can even fit that many speakers in your place, too. But Patrick Spence, always good to talk to you. And our thanks to Brian Sozzi as well for joining in on the conversation.