Q2 2023 Sonos Inc Earnings Call
Good day, everyone and welcome to the second quarter of fiscal 2023 conference call. At this time all participants are in a listen only mode. Later, we will take your questions. Please press star one to ask a question and now I would like to hand, the call over to Mr. James Bhagwan as part of Investor Relations. Please go ahead Sir.
Good afternoon, and welcome to <unk> second quarter fiscal 2023 earnings conference call I'm, James regardless of weapons. There, so yeah, Patrick Spence and CFO and Chief Legal Officer, Eddie Lazarus for those who joined the call early today's hold music is a sampling from our suites in spices station will just curios in collaboration with API Exxon and recognition of the issue.
Pacific Islander, long before I hand, it over to Patrick 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 as of any subsequent to these statements are also subject to material risks and uncertainties that could cause actual results to differ materially from.
Expectations reflected in the forward looking statements for a discussion of these risk factors is fully detailed under the caption risk factors in our filings with the SEC. During the 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 2020 results post.
The Investor Relations portion of our website as a reminder, the press release and supplemental earnings presentation and conference call transcript will be available on our Investor Relations website investors <unk> Com I would also like to note that for convenience, we have separately posted an investor presentation to our Investor Relations website, which contains certain portions of our supplemental earnings presentation I will now turn the call over to Patrick.
Thank you James and Hello, everyone. This.
This quarter was a tale of two cities, we executed the biggest and most successful launch in our history and we did something groundbreaking by launching two new products simultaneously error of 100 and ore 300.
Sarah 100 is the next generation of our best selling Sonus, one featuring all new hardware and software with Nextgen acoustics and design that delivers detailed stereo sound a deep base.
There are 300 as a board revolutionary New Speaker that offers the best outbound listening experience for your favorite spatial audio content with Dolby Atmos.
We also announced that Santos is Apple musics first and only speaker partner offering global access to spatial audio on Apple music.
These product launches took the industry and consumers by storm.
<unk> magazine calls are 100, the new smart speakers standard and GQ said of the <unk> 300, a killer Stonehouse era 300 speaker is here to kick start a spatial audio revolution.
Both products, both excellent media and customer review scores and our selling ahead of expectations are.
Our team raised the bar with are 100, and ore 300, reinforcing our commitment to leading innovation in the categories, we play in and creating products that will fuel our flywheel for years to come.
We also entered a new category for fiscal 'twenty to 'twenty three with the introduction of <unk> Pro.
We believe we have a tremendous opportunity to leverage everything we've learned and built for consumers to serve business customers.
We've seen the Consumerize Asian of technology across so many sectors of the industry and audio will be no different.
We're making it easy and reliable for businesses to create a great audio experience for their customers and of course. This is a software as a service offering as we explore the opportunities to layer services on top industry, leading hardware offerings.
We take another step towards Santos as a service for those customers that prefer that approach.
But even as we made all of this progress the near term macroeconomic pressures, we have flagged throughout fiscal 2023 intensified in Q2 and have diminished our second half and full year expectations.
While our financial results have generally met the expectations that we outlined for the first half of the year, we observed softening underlying demand trends in the second quarter.
This softening in conjunction with some of our channel partners tightening up on inventory has led us to reduce our outlook for the remainder of fiscal 2023.
Specifically, we're taking our fiscal 2023 revenue guidance down 6% at the midpoint, resulting at a constant currency year over year decline of 3%.
We knew that this would be a challenging year.
This is disappointing and inconsistent with our ambitions.
I'd like to take a moment to further explain what changed since our fiscal Q1 earnings in February .
First exiting the holiday period, we began to see softening run rate registration trends in February which continued through March.
The market data that we track showed a pronounced decline in U S home theater sales in March while the European home theater market remains very challenged.
Our home theater share gains in Q2 show that customers are still choosing sonus over the competition. Despite the deep discounts that legacy audio competitors are offering, but ultimately we are not immune to the widespread category weakness.
Second after being supply constrained and amp and other key installer oriented products for most of fiscal 2022, we were able to replenish this channel and clear the vast majority of our backlog in the first quarter of fiscal 2023.
Doing so we have seen our dealers begin to work through the existing channel inventory and trend toward a lower level of weeks on hand, rather than reorder and maintain prior levels.
Third while we exited the holidays with a relatively healthy retail channel inventory position. We are seeing some of our retail partners in EMEA have tightened up their positions and reduce open to buy dollars.
The cumulative effect of these three developments is unfortunately significant to our expected revenue over the next six months.
Now you have heard us say in quarters past that if we started to deviate from our performance expectations, we would not hesitate to take the actions necessary to adapt to our environment and protect the profitability of our business.
That's what we are doing and will continue to do we.
We are taking swift action to manage expenses that we can still deliver an eight 5% to 10% adjusted EBITDA margin this year consistent with our prior guidance.
We've been investing heavily over the last few years because of all the opportunities we see over the long term.
We will reduce our spending while staying on track to deliver our ambitious roadmap Eddie will provide more detail on this shortly.
At the end of fiscal 2022, the average so in those household had 298 products up from $2 95. The prior year. This figure has steadily increased over the years underscoring how the lifetime value of our customers continues to grow.
And Theres a lot more room for additional growth.
As we've noted in the past 40% of our households are single product households, whereas our average multi product household has 430 products.
Other words, we are starting to get into the range. We have previously discussed a four to six products for every mature centers household we estimate by converting our existing single product households to the average multi product household install size represents a 5 billion dollar revenue opportunity.
This will not happen overnight, but it does highlight the long runway that we have to further monetize our install base.
We will continue to invest in our systems and programs to more aggressively go after this opportunity in fiscal 'twenty three and beyond.
I remain confident that Santos is on the right track to continue to deliver value for customers and investors over the long term. The <unk> was incredible and ushers in a new generation of home speakers that raise the bar and will fuel our flywheel.
On a pro gets us into a whole new category and steps us into software as a service and recurring revenue.
And we are actively working on products and three new exciting categories.
There is no doubt in my mind that we will emerge from this period, a stronger company and resume making progress toward delivering on our long term targets of $2 $5 billion in revenue and 375 million to $450 million and adjusted EBITDA.
Now I will turn the call over to Eddie to provide more details on our results and our outlook.
Thank you Patrick.
Before I discuss our Q2 performance and the details of our revisions to guidance.
Echo, Patrick and emphasize a disappointment and down downwardly revising our second half expectations.
Emerging from the pandemic has engendered sharp swings in fiscal conditions and consumer and partner behavior.
And after a resilient first quarter.
Did not sufficiently anticipate how these circumstances would affect visibility into our business in the short term.
As we navigate the remainder of fiscal 2023.
The top priority is setting a strong foundation for fiscal 2024.
This means evaluating how to right size, our expense base to enable us to make targeted investments in our product roadmap, while delivering operating leverage.
I said in our fourth quarter of fiscal 2022 call.
Not in the business of growing opex in excess of revenue.
It is of critical importance to Reaccelerate top line growth, while keeping expenses in check in order to achieve our long term financial targets.
Now turning to Q2, we reported revenues of $304 2 million down 23, 9% year over year, which was slightly ahead of our previously outlined expectation by 25% to 30% decline.
Recall that Q2 of fiscal 2022 was anomalous due to backlog fulfillment stemming from chronic supply constraints and the timing of channels now.
On a constant currency basis, Q2 revenues declined 22, 4%.
Quarterly registrations declined 2% year over year, while products sold declined 29%.
Quarterly products sold based on favorable comparisons due to the backlog and channel fill factors affecting Q2 of fiscal 2022 that I just mentioned.
Looking back a year further to Q2 of fiscal 2021 to smooth comparisons.
This quarter's reported revenue was down 9%, whereas registrations in products sold are down, 2% and 4% respectively.
Revenue declined by more than registration and products sold due to adverse product mix shifts and FX headwinds.
So our overall registration performance in the quarter was solid we saw steadily declining run rate registration trends throughout the quarter.
We attribute this to softening demand.
A multitude of macroeconomic factors are pressuring the home theater category broadly and competitors are becoming increasingly promotional.
We are pleased to see share gains in home theater in Q2.
We are not immune to the widespread category weakness.
Accordingly, we have extrapolated these lower run rates into our guidance, which assumes that demand will soften further throughout the second half of the year.
We have also changed our assumptions around sell in into the channel where we are now assuming that registrations will run ahead of replenishment through the end of the year as installers work down channel inventory.
Our prior assumption had been that installers would maintain and operate at higher levels of inventory after being under supplied throughout the pandemic.
Gross profit dollars declined 23% on a constant currency basis, and 26% on a reported basis.
Gross profit dollars declined by more than revenue due to a 150 basis point year over year contraction in gross margin.
Resulting in a 43, 3%.
Gross margin in the quarter.
This represents a 90 basis point sequential improvement from Q1, but.
But less than we expected to see primarily due to adverse product mix given weakness in the home theater category.
And inventory reserve increase related to end of life products.
FX excess components and FX.
<unk> the impact of FX gross margin was approximately 44, 4%.
Adjusted EBITDA declined to negative $10 6 million considerably ahead of our initial expectations due to the cost actions that Patrick mentioned, which we began to take intra quarter.
Foreign exchange was an approximately $3 million headwind to adjusted EBITDA.
Total non-GAAP operating expenses of $154 million.
Declined by $18 3 million or 11% from last quarter due to delayed program spend lower bonus accrual and typical seasonality of sales and marketing expense.
When we began to see demand soften we delayed some program spend and slowed our pace of hiring while we work to identify how to offset the expected revenue shortfall in the second half.
We also took steps to rightsize, our real estate footprint and both Santa Barbara and Seattle in light of changes in office usage as we transition out of the pandemic.
We ended the quarter with $295 million of cash and no debt.
Free cash flow was negative $122 million in the quarter, largely driven by a $120 million decrease in accounts payable and accrued expenses as well as a $25 million increase in inventory.
At the end of the quarter, our inventory balance was $326 million up 7% sequentially.
Within inventories finished goods were $274 million up 5% sequentially a.
Our component balance at $52 million was up 14% sequentially.
The reduction in second half revenue expectations will disrupt the harmonization between inventory and run rate sales trends in the near term adversely affecting free cash flow.
But as I have said previously improving cash conversion remains a top priority.
And finally before turning to guidance, we repurchased $15 million of stock in the quarter at an average price of $19 50 per share representing 6% of common shares outstanding as of Q1.
As a reminder, we have approximately $70 million remaining on our previous $100 million share repurchase authorization.
Now turning to guidance.
As Patrick mentioned the developments, we observed intra quarter, both demand and changes in our channels requires us to significantly reduce our expectations for revenue in the back half of the year.
To mitigate this we are taking decisive action to adjust our expense base and protect profitability.
That we are able to maintain our prior full year adjusted EBITDA margin expectations.
Our new plan assumes that we will be reducing our fiscal 2023 operating expense base by approximately $52 million at the midpoint.
We will achieve these savings through a combination of reduced program spend slowing planned hiring eliminating open positions bonus reduction and some restructuring of teams.
And revenue, we now expect to report full year revenues between one $6 million to $5 million and 165, sorry, $1 billion and $1 $6 75 billion.
This represents a year over year decline of seven 3% to four 4%.
Or four 6% to one 8% constant currency.
Our guidance bakes in a $46 million or two six point FX headwind.
Proximately $33 million less than previously expected.
Our revised FX assumptions are as follows.
As a reminder, EMEA was 33% of our revenue in fiscal 2022, and our FX sensitivity is about four to one euro to pound.
Based on results in the first half of the year. This outlook implies second half revenue of $648 million to $698 million.
At the midpoint this represents a $114 million or 15% reduction to our prior guidance.
As Patrick outlined at the outset of the call.
Three factors in our guidance reduction or one softening run rate levels of demand to dealers in our installer solutions channel targeting a lower than expected level of inventory and three.
Retail partner inventory tightening, particularly in EMEA.
We have adjusted our second half estimates to reflect these factors and are now assuming that a reduced level of run rate registrations will outpace our channel selling.
On gross margin, we now expect gross margin will be in the range of 44, 3% to 44, 8%.
Our revised FX headwind assumption translates to an approximately 150 basis points headwind to gross margin for the year.
At the midpoint this outlook implies a second half gross.
Due to lower promotional activity fewer spot buys on the component market and lower logistical costs and a reduced FX headwind.
In light of the expense actions, we will be taking we are slightly reducing our expected full year adjusted EBITDA range to be $138 million to $168 million.
Presenting a margin of eight 5% to 10%.
So the midpoint of $153 million represents a $9 5 million a decline from our prior guidance the range of eight 5% to 10% is unchanged.
As previously discussed a significant portion of the FX headwind flows through and reduces adjusted EBITDA.
We now expect our full year non-GAAP adjusted operating expenses to amount to approximately $630 million.
A reduction of approximately $52 million from our previous guide.
Looking ahead to Q3, we expect a sequential increase in revenue in the range of 10% to 15% driven primarily by timing of channel replenishment consistent with typical Q3 seasonality.
We expect sequential improvement in gross margin from Q2, primarily due to product mix and for non-GAAP adjusted up.
Due to product mix and for a desk adjusted site and for non-GAAP adjusted operating expenses to increase by $5 million to $7 million, resulting in a positive low to mid single digit adjusted EBITDA margin.
Despite the short term industry headwinds there was no doubt in my mind that Sonus is well positioned to be successful over the long term.
We will continue to invest in our exciting product roadmap, while making the right decisions on operating expenses to ensure that we can deliver operating leverage in fiscal year 'twenty four.
Last but not least to touch briefly entered Google litigation, how trial in northern California kicked off earlier this week.
A matter of policy, while the trial is pending we won't be making any additional comments, but we will provide an update when appropriate.
That I would like to turn the call over to questions.
And ladies and gentlemen, once again it is star one if you would like to ask a question today, we will take our first question from Erik Woodring Morgan Stanley .
Hey, good afternoon, guys. Thanks for taking the question.
I guess, if we just circle.
The point that Youre, making here on on channel inventory and whatnot, if we rewind three months ago I feel like you guys were very confident that you werent seeing any of these less open to buy dollars werent seeing didn't necessarily seeing the impact to inventory. So I guess, maybe my question is what do you think changed in the law.
Last three months or even kind of in February and March that got some of your channel partners and dealer partners to kind of put the brakes and say well hold on a second I'm just curious what feedback you have there and then I have a follow up.
And we're living in extremely uncertain financial times, we always knew that this would be a difficult year.
But things have happened from a banking crisis to a variety of other external factors. The question of whether theres going to be a default I mean, you name it.
And I think across a number of categories certainly in the consumer electronics space.
There was a softening of demand and retailers now respond to that very very quickly.
And that's what we've seen so in EMEA.
Things change quickly.
I run rates things changed quickly.
And then the Ias channel.
The housing market has been in a difficult spot.
With the increase in interest rates.
Again their demands down a bit.
And since they had so much channel replenishment in in our fiscal Q1.
It appears that they have decided not to hold the inventory, but to work it down and so we factored all of that into our new guidance, but.
You always wish that you had seen things a little quicker.
But we live in a pretty volatile consumer environment, and so things have changed rapidly, yes, I would just layer on there I think that any other industry headwinds at the end of the day and so the thing we go back to you and in these situations. These type of situations is how are we doing relative to what's happening out there and we're seeing.
We're seeing declines of anywhere from 5% to 20% year over year in the sales in the categories that we compete and we are holding up well, even gaining share in some situations and so I feel like our brands the innovation, you've seen with <unk> 100, and air 300 <unk>.
<unk> as well for the long term.
But we're seeing these really short term industry headwinds I think blowing strongly.
Okay. That's helpful color and then maybe Patrick just on the <unk> Pro launch I'd love to get some incremental color from you on how you think about that opportunity kind of why now is the right time is this you pushing this to customers is this your customers asking for this type of.
And any time any type of guidance you can provide for us maybe how to think about the trajectory of the ramp of monetization or impact to the model over there.
The next one to three years or however, long you can help us think about that that'd be super helpful. And that's for me. Thank you so much.
Thanks, Eric Yeah. So super excited about <unk> Pro you know, we take some time to build these things, but we do it based on what we're seeing in the marketplace.
And we have seen.
Small and medium sized businesses start to use <unk>, because just like we've seen in so many industries.
Consumer solution is reliable and fantastic easy to use creates a great experience and so we've kind of been we've been lucky in a way that businesses have chosen sonus before we even had the.
The ability to provide a service that allows them to do things like.
Our monitor it in.
Set permissions for the employees choose the muzak do all of these things and so it's kind of a it's a good way to leverage everything we've invested in.
And really bring that phone is experience into small and medium sized businesses.
We're not we're not changing the model our guidance or anything like that we obviously havent baked in in terms of what we're doing on pro but we're just getting started in this segment and we're pragmatic about these things so we want to make sure that.
We learned from this we're getting some great organic interest off the start so we're very pleased about that we've been working with a lot of business is in beta testing. This so we're feeling good about the experience and the solution and the early signs and.
I think it's going to be a big opportunity over time, especially in it really gets us into this whole new world of professional and commercial.
<unk>, we think we can bring b.
Raising experience the reliability and the simplicity of what we do at <unk> to this large category as well and so.
We've kicked it off which is exciting we are seeing good.
Good response at this point and we're looking forward to continuing to bring new things into this space. So watch for more because we think it's a great long term opportunity.
Awesome, Thanks for the color guys.
Next up Jason Haas Bank of America.
Hey, good afternoon, thanks for taking my questions.
So it looks like the second half guidance.
And Thats about four percentage point.
Higher gross margin in the second half of the year versus the first half.
Despite the talk about competition getting more promotional it sounds like you're also maybe a little heavier than you'd like on inventory.
So what gives you confidence that you will see that improvement in gross margin in the back half.
So we fully expect to be less promotional in the back half than the than we were in the front half. So that's going to be a significant piece of it.
And we do expect to see some continued supply chain improvement, we're seeing that now.
Compared to what we saw in the first half.
And the last piece is just the FX headwind is.
Basically going to even out in the back half and so between those things.
We think we can hit that 47%.
<unk>.
<unk>.
We've had it before and so we think it's a reasonable place to target.
Great and then I think you also called out.
I think it was $52 million of cost Takeouts, if I had that correctly how.
How much of that is structural in nature that we should continue to assume continues in future years versus temporary meaning like that would need to come back next year.
So we have two things that we have to do.
That overlap at the same time, one is to make sure that we get our opex squared away for this year.
And thats, the $52 million and some of that would be.
Opex savings that will rollover and some of it is opex savings that Walt rollover.
But at the same time, we're already looking to make sure that our houses in order for fiscal 'twenty, four and we will take the additional steps necessary.
To make sure that we do add operational leverage next year, we were always thinking about 'twenty four is a pivot year for us. This makes the challenge a little tougher.
But with discipline, we will absolutely get there and.
And so as.
I said that but part of the $52 million, yes part no.
But we already are looking for the longer term at what we need to do for 24.
Got it that makes sense. Thank you.
Thanks, Jason.
And Tom <unk> <unk> has the next question.
Great. Thanks, So one question and one follow up and Patrick and Eddie. Thank you very much for your prepared remarks, certainly answered a lot of my other questions I had.
So the first question is.
Do you have an opportunity to lean into direct to consumer to offset channel inventory challenges.
During the pandemic you did an excellent job.
Lenient to DTC.
So how should we think about that.
We are definitely leading into DTC, Tom you may recall, one of the things that I did mentioned in the prepared remarks is continuing to go after that enormous that $5 billion opportunity in our existing base.
And Lindsay and the team that runs DTC is doing a lot of work to look at how we do that DTC has also led the way.
And I think we shared some of this in the Q1 reporting really selling sets as well so getting people started with more products as well and we use that then to help our channel with how to sell our products how to effectively package them and do some of those things and so I think there is omni channel benefits, if you will as well.
But we absolutely are leaning in on DTC, and we will continue to because we see so much opportunity there.
Our existing base.
Great and then for my follow up and I might get back in the queue for a couple of more but how should we think about your ability to increased promotional activity and possibly take advantage of improving supply chain related costs. So there'll be little to no impact on gross margin.
We're going to have to remain pretty targeted in our promotions.
That is our standard practice anyway Tom.
We're not going to see quite as much improvement in the component costs.
Right now as we will later on.
Because we had bought so many components when the prices were a little bit higher so we're going to be careful about it.
As I said, we're going to do we're going to promote we're going to do targeted strategic stuff, but.
But I don't think were going to.
Dramatically increase the amount of promotion because we're going to offer that would be offset by supply chain savings, we're going to use those savings such as they are to increase our gross margin to get to the target range. We have yes, I think the customer Tom I would say.
You need to see the balance like the value and the innovation that we're bringing and that's.
That's underscored by the market share that we're seeing in terms of being able to hold or in some cases increase that despite legacy audio players running promotions that we've never seen the likes of bright there has been 30%, 40% off promotions, we've been holding up with our existing.
Our pricing approach.
In that competitive environment, and so we feel good about where we're positioned.
Now the industry headwinds are the big issue, but we feel very well positioned on the competition front. So we're going to be the company that continues to innovate and deliver.
Products that customers want and are willing to pay for that innovation.
Great. Thanks for taking my questions.
Thanks, Tom.
We will go next to Brent Thill Jefferies.
Okay. Thanks.
Any color on the 100 300, how how that trended out of the gate relative to your expectation.
Yes.
This is why it's a tale of two cities Brent is because we launch those products. We did a big tour of media and artists and we have them in the studios we've done some interesting things with a number of artists and we've seen I think we saw over 4 billion impressions.
That product and the reviews have been amazing customer response has been amazing I mean, it's been ahead of our expectations.
And that's why it's.
Again in a challenging industry moment, right and Thats why.
It's such a strange time quite frankly because.
That to me proves okay like with the innovation in these new products, we've got something and this is something great and you know we build these things for the next five years to 10 years not for one quarter.
But it was it was fantastic to see that raising the bar on those existing products was able to get us.
To something Thats, a little bit higher than we had even expected and so I think they're off to a great start.
The fundamentals.
At a moment like this are what what's the customer response, what are those reviews looking like what's the media, saying in all of those things look very strong on the air products.
Okay and then.
Do you see this in the direct to consumer channel as well where did that hold up better than the channel and can you remind us.
And what percent of the businesses is channel now.
Yes, so we do.
So DTC at the end of last year I want to say was around 22, 23% in terms of we update that once a year Brent in terms of what their it doesn't it doesn't deviate much from where that is at this point. We are like we said we have seen registration trends and that's what we're watching which is cross channel in terms of that weakening there.
Some of the some of the revenue side.
To Eddie's point has more to do with the channels and some of the restocking and things there. So we have a tighter.
With DTC is we have got tighter time to registration as we call. It from when we actually sell a product and somebody lights, it up and so but we're seeing registrations across the board.
Be challenged which again I think boils down to the industry headwinds.
Thank you.
Next step is Jake Northland Raymond James.
Hey, Thanks for taking my questions just a couple from me here so.
Firstly I'm, hoping you can just touch on multi product household formation in the quarter.
Do you see there any color on the linearity and then further how are you driving multi product household formation as you get further into.
The year with the macro uncertainty just in relation to selling more sets just more color there would be helpful.
Yes.
We've been focused it's a great question because it's an area that we started to really focus on in first quarter in terms of what we're able to do and kind of lead the way with our direct to consumer efforts and so we haven't seen a I.
I think in Q1, it's fair to say with a little more buyers out there and everything that we saw.
Sure.
Really strong quarter in terms of what's there I don't think we saw anything that deviated from kind of our general multi product household formation in Q2. So I don't know if you have anything to add from upfront we are.
Registering initially more products per household.
And the set strategy clearly is paying off for us.
I would just say overall.
The flywheel continues to spin.
We're adding the new households, where we're adding.
We're getting the repurchase rates, we're looking for.
But the external forces or just slowing it down a bit and thats.
That's reflected in the new guidance and we'll continue to focus on that because we know NPS is higher lifetime value is higher as well. So youll continue to see us focus on sex.
Even more so as we go through this especially with our push around direct to consumer and growing your turbines.
Okay, perfect that makes sense and then last one for me.
Just at a high level of anything to call out in terms of control.
Control versus the competition.
Any incremental progress there I know last call you guys had called out pretty outstanding results.
Yes continued good momentum on that front, a great reaction from customers highest NPS service on our platform continues to lead the way in terms of growth with new homes, and we've got some exciting stuff planned to make it even better that our team is working on so I just got a chance to spend some time with that team.
Just recently, obviously that is also an area where machine learning and artificial intelligence comes into play.
So our team there has done incredible things and I'd.
Remind everybody we're doing that with a team of.
I think.
60 to 70 people.
You've probably heard some of the big Tech.
The investments of the tens of thousands of people on those but we have a pretty darn good voice service that our customers are using.
Loving that our scrappy team has put together so feel good about how that plays into the overall experience and it continues to lead the way when it comes to voice assistance on the Sonus platform.
Perfect. Thank you guys so much.
Thank you as a reminder, it is star one if you have a question we will take a follow up from Tom sorry, Paul.
Great.
Two quick follow up ones.
Is there anything you can do on the financing front to stimulate sales.
As an example, Apple recently rolled out a buy now pay later find.
Buy now pay later effort.
We're not looking at that particular option, but we're always thinking about ways to experiment.
With marketing and selling our products and there are some things.
That are in the pipeline.
So I would just say stay tuned on that we're going to be testing and learning.
A variety of different things and we do use be NPL partner on some of the stock comp. So we have that as an option for customers as well.
Great and then last question for me and Thanks for taking my question on the software as a service effort I don't think you mentioned this and I apologize. If you did are you using a direct sales force.
<unk> resellers, what's the go to market strategy there.
Yes, we're doing both we're leveraging some of our installer channel right because they are out there some of them focus on <unk>.
While medium business customers, we as well have.
Inside sales our own people working it as well and so this is all part of kind of building this up.
Because we think there is a long term is a great opportunity here, so you'll see us.
Continue to evolve it and get to self service as well, but there's definitely room to work with our installer channel.
We think thats pretty exciting because I think as we've said on previous calls we think theres a lot more opportunity with our installer channel. They think there's a lot more opportunity out there for sonus to play in some of the markets that we're not today. So that's another good reason why pro is something thats, so promising for us.
Great. Thank you.
Thanks, Tom.
We will go back to Brent Thill.
Thanks, Patrick.
Do you think the consumer.
Dollars are falling more into experiences.
In other areas or do you feel that just the Walter generally kind of.
Getting getting held up and maybe there is just a stolid in general whats your sense of kind of where where do you think this is falling too.
All I know for sure Brent is that it's not coming to audio right now from everything I see these are those moments, where you get even more in my seat you get even more focused on okay, where.
Where do we sit from a market share perspective, right and are those are those unprecedented discounts that competitors doing changing any market share numbers and theyre not so.
We're mindful of that and making sure that we're still delivering the value for money that we expect to.
And all those products.
I would say I suspect that those dollars are going towards other experiences right now based on what I see.
In the macro economy, and the kinds of things that I've seen.
Out there, but again I'm not an expert in that part of it or the macro economy stuff I am an expert on the audio industry side and that is not where people are.
Spending right now and so we will.
It's interesting because I do think with era.
And everything around that perhaps we did.
The trigger some people that werent thinking of spending on audio and we created such a splash with that that maybe we pulled some of the dollars that people were were earmarking for travel or restaurants or what name it.
What have you but.
Yes, I think the it's hard it's hard for me to specifically say.
What's happening in that macro picture Im just really focused on how we make sure that we continue to win in the audio space.
I think that hopefully that's helpful.
And just a quick follow up just beyond the home I know you spoke in the past about the.
Auto opportunity you've got many other opportunities can you just any any update there.
Maybe a refreshed.
Year on what you are seeing outside the home.
Yeah, So I think.
Outside the home as well.
Continue with kind of in the same bucket right now from an audio perspective, so as we look at speakers share for instance, there's really nothing different I would say about outside the home versus inside the home right now.
It looked to be behaving similarly, which is.
Down year over year.
And so we kind of have the same headwinds right now across those different categories that we have of the portables.
The speaker in the home and home theater, as well and components. So.
That's what we're facing right across the audio industry.
Thank you.
Thanks, Brent everyone. At this time there are no further questions I'll hand, the conference back to our speakers for any additional or closing remarks.
Thanks, Lisa and thanks to everybody for joining today definitely facing the industry headwinds, we're taking the actions we need to do to ensure that we continue to have.
I have a strong balance sheet remain profitable and be able to invest in innovation I would remind everybody as we set out into fiscal 'twenty. Three we talked about investing in categories that are pre revenue that's something that takes us anywhere from two to three years, sometimes longer in our product development cycles and so.
We've never had a more exciting product roadmap, but we've also never really focused.
I'd never faced kind of the short term industry headwinds we have so we will navigate this period, we're excited about what we have coming.
In the future and we're going to continue to stay focused on how we build.
A sustainable profitable company for the long term.
Thank you everyone.
Once again, everyone that does conclude today's conference I would like to thank you all for your participation you may now disconnect.
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