Neil Cybart 9/25/24 Neil Cybart 9/25/24

The Sonos App Fiasco, Sonos Earnings, YouTube Premium Is Having A Moment

Hello everyone. We will begin today's update by focusing on the Sonos app fiasco. Our attention will then shift to Sonos earnings. The update concludes with an observation regarding YouTube Premium, YouTube's ad-free subscription offering.

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Neil Cybart 3/27/24 Neil Cybart 3/27/24

Sonos Earnings, Sonos Dropping More Hints of Headphones, Sonos vs. Apple Competition

The update begins with Neil’s thoughts on Sonos’ FY1Q24 earnings. The discussion then turns to Sonos dropping some of the clearest hints to date that it will soon unveil headphones. We look at the somewhat complicated competitive dynamic between Sonos and Apple.

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Neil Cybart 11/28/23 Neil Cybart 11/28/23

Sonos FY4Q23 Earnings, Sonos Discloses New Installed Base Data, Sonos’ Product Roadmap for 2024

Happy Tuesday. Today’s update will be dedicated to discussing Sonos. The company reported earnings a few days prior to the Thanksgiving break. Sonos is on a path to being a more direct competitor to Apple.

Let’s jump right in.

Sonos FY4Q23 Earnings

Two weeks ago, Sonos reported FY4Q23 earnings (July through September).

Sonos is feeling the impact of the consumer gadget recession. Revenue was down 3.5% to $305M as the number of products sold were down 8% and speaker registrations were down 13%. The 500 basis point gap between products sold and registrations is due to channel inventory fill. This means quarterly results were boosted by Sonos putting speakers into the channel ahead of the holidays. The stronger revenue total (-3.5%) versus products sold (-8%) was due to higher speaker ASP.

The following exhibit shows Sonos speaker sales on a TTM.

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Neil Cybart 6/1/23 Neil Cybart 6/1/23

Sonos Earnings, Sonos Unveils Sonos Pro, Peloton Earnings

Hello everyone. Two quick follow-ups to yesterday’s update:

The “ESPN in 100M households at its peak” vs. "Netflix’s 74M paying subscribers in the U.S. and Canada" is not a simple comparison. Not only is password sharing rampant with Netflix - making it likely that Netflix is found in more than 74M U.S. households – but it’s also very simple to signup/cancel a Netflix subscription. ESPN was, and still is, only available as part of a $$ bundle.
A few people reached out to me to say that they have never had a woven/fabric Apple Watch band tear or split despite years of usage. Such wear and tear for a band specifically marketed as rugged seems odd. I agree with that statement. At least based on my experience, Alpine Loop was far too delicate to be part of the Apple Watch Ultra series. That doesn't mean Apple should move away from comfortable materials for Ultra bands. Instead, they should introduce more rugged bands that begin to provide additional utility to the wearer.

In today’s update, we begin to wrap up our CY1Q23 earnings reviews with smaller companies that remain intriguing to keep an eye on from an industry/competition standpoint: Sonos and Peloton. We will cover Spotify tomorrow.

Sonos Earnings

Sonos was not able to escape the consumer gadget recession. CY1Q23 revenue was down 24% to $304M (vs. $400M last year) as fewer people bought premium speakers in the home. The closest equivalent to unit sales was down by about 30% While Sonos fell victim to a tough year-over-year compare, similar to what Apple experienced in a few product verticals, sell-through demand was also weaker.

Here is Sonos speaker sales on a TTM basis to remove the seasonality associated with the holidays:

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Neil Cybart 3/1/23 Neil Cybart 3/1/23

Sonos FY1Q23 Earnings, Sonos Hints Again at Entering New Product Category, Sonos vs. Big Tech (Above Avalon Daily)

Hello everyone.

Today’s update has a Sonos focus. We begin with Neil’s thoughts on Sonos FY1Q23 earnings (October to December). The discussion then turns to Sonos management once again hinting at the company entering a new product category. We discuss what that product category likely is and the challenges facing Sonos. The update concludes by examining a Sonos comment regarding Big Tech not doing a whole lot in the speaker space.

Sonos FY1Q23 Earnings

Back on February 8th, Sonos reported FY1Q23 earnings (covering October to December).

Revenue was up 1% (7% excluding currency impact) with speaker unit sales up 4% (to 2.5M). Sonos speaker demand was driven by promotional activity. Management called out sales around sets (more than one speaker) as being especially effective with promotions. Sonos talked about speaker share gains. It would not be surprising to find out those gains are coming against Amazon, Google, and traditional speaker companies (Bose, Samsung/Harman, Sony).

Here is Sonos speaker sales on a TTM basis to remove the seasonality associated with the holidays:

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Neil Cybart 12/1/22 Neil Cybart 12/1/22

Sonos 4Q22 Earnings, Spotify Subscriber Trends (Daily Update)

We kick off today’s update by looking at the latest earnings release from Sonos. The discussion then turns to Spotify’s earnings with a focus on the company’s subscriber trends.

Hello everyone. Welcome to December. This month is going to fly by.

Two quick notes:

1) The Elon Musk saga took another twist yesterday. Tim Cook invited Musk to Apple Park. This was the first time Musk and Cook have talked with each other. According to Musk, "Tim was clear that Apple never considered [removing Twitter from the App Store]." Musk had just said the opposite - that Apple had "threatened to withhold Twitter from its App Store" without explanation – two days earlier. Musk’s initial tweet never sounded accurate to me. It’s not clear what Cook actually told Musk while walking around Apple Park yesterday. The following tweet that I wrote yesterday sums up the situation:

2) Looking back over the past two months of updates, we have gone over 10 earnings reports from various Apple competitors.

Warner Bros. Discovery (Nov 16)
Roku (Nov 10)
Peloton (11/10)
Disney (11/9)
Amazon (11/8)
Microsoft (11/8)
Meta (11/2)
Apple (10/28, 10/31, 11/1)
Alphabet (10/26)
Netflix (10/19)
Nike (10/3)

In today’s update, we will go over two earnings reports that have been on my list: Sonos and Spotify. Sonos was one of the last companies to report earnings. As for Spotify, it’s been six months since we took a closer look at the company’s subscriber trends.

Sonos 4Q22 Earnings

Sonos reported FY4Q22 earnings two weeks ago. Management had previously warned that things were going to look funky with demand slowing a bit over the summer and the company placing what ended up being poorly-timed bets on inventory.

4Q22 revenue was down 12% to $316M.
Gross margins dropped by 720 basis points (to 39.2%). Management claims the drop is temporary.

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Neil Cybart 8/31/22 Neil Cybart 8/31/22

Revisiting the HomePod Discontinuation, Sonos Earnings, Smart Speakers Getting Squeezed (Daily Update)

The following update was sent to members on August 24th.

Hello everyone. A good way to get back into the swing of things is to talk more about HomePod. The discussion will include a look at the latest earnings report from Sonos and a broader theory of mine regarding smart speakers.

Let’s jump right in.

Revisiting the HomePod Discontinuation

The most recent Above Avalon Report was dedicated to Apple’s HomePod discontinuation, a decision that is still surrounded by many unanswered questions.

In a development that likely deserves its own report, we have seen Apple very recently go down the path of discontinuing a few products (iMac Pro / iPod). While each discontinuation has its own story and surrounding circumstances (the company did embrace a product strategy shift a few years back), the HomePod discontinuation stands out to me as being the most peculiar.

Member reactions to the report came in swiftly. Some agreed with my experience that the HomePod was a very impressive product – one of the most impressive Apple has shipped in years. Others raised concerns with how their HomePod(s) produced a feeling of “never [being] in control of the device.” Additional issues cited included connectivity problems, headaches with needing to restart and update the units, and just an overall uncharacteristic unevenness in experiences. That last item is interesting as the HomePod, in addition to the HomePod mini, are indeed different products when thinking of how they are designed to be used in communal settings while Apple Watch, AirPods, iPhone, etc. are designed for one-to-one settings.

One comment in particular though stood out to me.

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The daily updates have become widely read and influential in the world of Apple and technology. They are unmatched in the marketplace in terms of comprehensive analysis and research on all things Apple. Members reside in 60 countries and hold a diverse range of backgrounds and occupations. They include Silicon Valley executives and investors, the largest Apple shareholders, and the leading Apple journalists in the business.

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