Sonos reports positive Q3 results despite challenges with new app

Sonos recorded solid results in the third quarter of the fiscal year 2024, despite the challenges posed by the introduction of a new app. James Baglanis, Head of Investor Relations and Treasury at Sonos, opened the conference and handed over to CEO Patrick Spence, who apologized and stated that improving the app has been made the company's top priority. The redevelopment of the Sonos app, which includes a modern user interface and a modular developer platform, aimed to enhance reliability and performance, paving the way for future innovations. However, this redesign has so far exhibited numerous errors due to complex system changes. Older products, in particular, are affected by issues, leading to a decline in customer satisfaction and the postponement of two planned product launches in the fourth quarter. On a positive note, the successful launch of Ace, Sonos' first headphones, has resulted in high customer satisfaction and market share in the premium segment. Despite price cuts and promotional activities by competitors, Sonos managed to stay competitive in this growing $5-billion market. The financial figures for the third quarter show revenue growth and an impressive improvement in gross margins. Quarterly revenue was $397 million, marking a 6% increase compared to the previous year. The gross margin rose to 48.3%, benefiting from a one-time advantage due to improved inventory management. However, expectations for the fourth quarter have been reduced due to the app issues. Sonos now forecasts revenue of $240 to $260 million for Q4. Saori Casey, CFO of Sonos, explained that an additional $20 to $30 million will be invested in app improvements and customer support, which will impact financial results in the short term. In summary, Patrick Spence emphasized that the development of the new app is crucial for the future of Sonos, and the company is taking all necessary steps to address the current issues and restore customer satisfaction.