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Sonos Narrows Losses as Ikea Revenues Start to Roll In

Sonos ended its most recent quarter with much narrower losses than Wall Street had anticipated, with solid revenue growth across its core product categories, and some added revenue from its new cooperation with Ikea.

In its fiscal third quarter, which ended on June 29, Sonos generated revenue of $260.2 million compared to $208.4 million during the same quarter a year ago. Net losses for the quarter were $14 million, or $0.13 per share, compared to losses of $27 million in fiscal Q3 of 2018.

Analysts had expected losses per share of $0.23.

Sonos officially rolled out its partnership with Ikea at the beginning of this month, with the furniture giant selling 2 Sonos-powered and co-branded speaker models in around 300 stores worldwide.

Sonos generates revenues by selling Ikea a hardware module necessary for multi-room audio streaming. The company’s Q3 2019 earnings report listed that added revenue in an “other” product category, which grew from $5.5 million in fiscal Q3 of 2018 to $17.7 million for this past quarter.

Granted, that’s still peanuts when compared to the company’s core revenue drivers. During the quarter, wireless speakers were responsible for $104.6 million of revenue, with home theater speakers accounting for close to $89.7 million.

However, Sonos clearly believes that the Ikea partnership won’t just add some incremental revenues in the form of hardware module sales. “The IKEA partnership represents an innovative way to bring the Sonos experience to new potential customers at a global scale,” wrote CEO Patrick Spence in his letter to investors.

“We believe it has the potential to significantly expand our audience by bringing the Sonos experience into millions of new homes that our current portfolio does not address,” he added. “Once introduced to the simplicity of the Sonos experience, we anticipate that many customers will consider adding additional Sonos products to their homes to augment their home sound systems.”

On Wednesday’s earnings call, Sonos CFO Brittany Bagley said that the company was prepared for the 10% tariffs that the Trump administration said it would impose on imports from China starting on September 1. “We are focusing on managing that impact,” she said. “We have been moving towards diversifying our supply chain outside of China.”

Spence also used the earnings call to once again hint at plans to release products in new categories. “We see a lot of opportunity in a variety of markets,” Spence said, adding that the company was looking to share “something new we know customers will love” later this quarter.

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