Q2 2024 Sonos Inc Earnings Call - Q&A

Operator: Thank you for standing by. My name is Greg, and I will be your conference operator today. At this time, I would like to welcome everyone to the Sonos second quarter fiscal 2024 conference. All lines have been placed on mute to prevent any background noise.

Thank you for standing by my name is Greg and I will be your conference operator today at this time I would like to welcome everyone to the <unk> second quarter fiscal 2020 for a conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session if you'd like to.

Operator: After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star followed by the number one on your telephone keypad. And if you'd like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to James Baglanis, Head of Investor Relations. James, you have the floor.

James Baglanis: Ask a question during this time simply press star followed by the number one on your telephone keypad and if you'd like to withdraw your question Press Star one again. Thank you.

James Baglanis: I would now like to turn the call over to James Beglitis head of Investor Relations James you have the floor.

James Baglanis: Good afternoon, and welcome to Sonos' second quarter fiscal 2024 earnings conference call. I'm James Baglanis, and with me today are Sonos CEO, Patrick Spence, CFO, Saori Casey, and Chief Legal and Strategy Officer, Eddie Lazarus. For those who joined the call early, today's hold music is a sampling from our Sweets and Spices station, which is curated in collaboration with API at Sonos in recognition of Asian Pacific American heritage.

James Baglanis: Good afternoon, and welcome to <unk> second quarter fiscal 2024 earnings Conference call I'm, James look behind Us and with me today are CEO, Patrick Spence CFO salary, Casey and Chief legal and strategy Officer, Eddie Lazarus for those who joined the call early today's hold music is the sampling from our suites in.

James Baglanis: This station, which is curated in collaboration with API at Sonus and recognition of Asian Pacific American Heritage month, 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 of any subsequent date.

James Baglanis: 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 of any subsequent, These statements are also subject to material risks and uncertainties that could cause actual results to differ materially from the expectations reflected in the forward look. Discussion of these risk factors is fully detailed under the caption, Risk Factors, in our filings with the SBA.

Patrick: Payments are also subject to material risks and uncertainties that could cause actual results to differ materially from the expectations reflected in the forward looking statements a discussion of these risk factors is fully detailed under the caption risk factors in our filings with the SEC. During this call. We will also refer to certain non-GAAP financial measures for.

James Baglanis: During this 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 2024 results posted to the Investor Relations portion of our website. As a reminder, the press release, supplemental earnings presentation, and conference call transcript will be available on our Investor Relations website, investors.sonos I'd also like to note that for convenience, we have separately posted an investor presentation on our investor relations website, which contains certain portions of our supplemental earnings. I'll now turn the call over to Pat. Thank you, James. And hello everyone.

Pat: 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 2024 results posted to 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 Dos Santos dotcom.

Pat: I'd 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.

Patrick Spence: I'm pleased to report that we did what we set out to do in the first half of our fiscal year. This performance sets us up nicely to deliver on our previously outlined fiscal 2024 guidance. As you've heard from us and others previously, our categories remain under pressure, so our ability to deliver these results is a testament to the strengths of our team, our product portfolio, and our brand. We are holding our own and continuing to gain market share in U.S. home theater and streaming audio versus last year. As you all know, we've been making healthy investments in innovation. But our investments remain focused on two things. The first step is to attract new customers to Sonos.

Pat: Thank you James and Hello, everyone I'm pleased to report that we did what we set out to do in the first half of our fiscal year. This.

Patrick Spence: This performance sets us up nicely to deliver on our previously outlined fiscal 'twenty 'twenty four guidance.

Patrick Spence: As you've heard from us and others previously our categories remained under pressure so our ability to deliver these results is a testament to the strength of our team our product portfolio and our brand.

Patrick Spence: We are holding our own and continue to gain market share in U S home theater and streaming audio versus last year.

Patrick Spence: As you all know we've been making healthy investments in innovation are.

Patrick Spence: Our investments remain focused on two things. The first is attracting new customers to Santos and the second is getting our existing customers to add more suenos products to their life.

Patrick Spence: And the second is getting our existing customers to add more Sonos products to their lives. There are four things I want to highlight that stem directly from the investments we're making and how we're laser focused on attracting new customers and getting existing customers to add more products. The first is the all new Sonos app.

Patrick Spence: There are four things I want to highlight that stem directly from the investments, we're making and how we're laser focused on attracting new customers and getting existing customers to add more products.

Patrick Spence: The first is the all new sonar shop.

Patrick Spence: This is our most extensive app redesign and re-architecture yet. Our original app was designed and architected over a decade ago, when Sonos and our customers' needs were very different. We started from the ground up so we could build an app that would deliver our customers a great experience every day, allow us to more easily add new products and categories to it, and move faster with new innovations and features going forward. Our new platform brings services, content, and system controls to one customizable home screen, creating an unprecedented streaming experience. Best of all, the redesigned app is easier, faster, and better.

Patrick Spence: This is our most extensive app redesign and re architecture yet.

Patrick Spence: Our original App was designed and architected over a decade ago, when Sanofi and our customers' needs were very different.

Patrick Spence: We started from the ground up so we can build an app that would deliver our customers a great experience every day allows.

Patrick Spence: Allow us to more easily add new products and categories to it and move faster with new innovations and features going forward.

Patrick Spence: Our new operating services content and system controls to one customizable home screen, creating an unprecedented streaming experience.

Patrick Spence: First of all our redesigned app is easier faster and better.

Patrick Spence: It once again raises the bar for the home music listening experience and sets up our ability to expand into new categories and experiences. Our app is a proof point of what we have always said. We are the story of software eating audio.

Patrick Spence: Once again raises the bar for the whole music listening experience and sets up our ability to expand into new categories and experiences.

Patrick Spence: Our App is a proof point of what we have always said.

Patrick Spence: We are the story of software eating audio our software truly differentiates our product from everything else on the market and is key to unlocking the opportunity ahead for us.

Patrick Spence: Our software truly differentiates our products from everything else on the market and is key to unlocking the opportunity ahead for us. Speaking of which, the second is that we are just weeks away from unveiling our newest product. This launch will give us a foothold in a new multi-billion dollar category, expanding the number of categories we plan from five to six and further diversifying our business. This has been a multi-year investment, and we expect it to pay off in spades in Q3 and beyond.

Patrick Spence: Speaking of which the second is that we are just weeks away from unveiling our newest product.

Patrick Spence: This launch will give us a foothold into a new multibillion dollar category expanding the number of categories. We plan from five to six and further diversifying our business.

Patrick Spence: This has been a multiyear investment and we expect it to pay off in spades in Q3 and beyond.

Patrick Spence: This will also mark the beginning of new efforts on the marketing front to evolve the Sonos brand and reach new audiences. The third is expanding our distribution footprint. In March, we officially went live as a first-party seller on Amazon in the United States.

Patrick Spence: This will also mark the beginning of new efforts on the marketing front to evolve the Sonus brand and reach new audiences.

Patrick Spence: The third is expanding our distribution footprint.

Patrick Spence: In March we officially went live as a first party seller on Amazon in the United States.

Patrick Spence: The partnership is off to a great start and is a major milestone in our journey to ensure that we attract new customers to Sonos, particularly as we enter new categories. We continue to evaluate our distribution footprint with an eye towards reaching new customers and look forward to providing further updates in the quarters to come. And fourth, this quarter, we experimented with stimulating additional product sales in our installed base by delivering limited-time upgrade offers to some of our most loyal, longest tenured customers.

Patrick Spence: The partnership is off to a great start and is a major milestone in our journey to ensure that we attract new customers to sone us, particularly as we enter new categories.

Patrick Spence: We continue to evaluate our distribution footprint with an eye towards reaching new customers and look forward to providing further updates in the quarters to come.

Patrick Spence: And fourth this quarter, we experimented with stimulating additional product sales in our install base by delivering limited time upgrade offers to some of our most loyal longest tenured customers we.

Patrick Spence: We are always exploring how we can better use our unique data and insights to deliver more personalized experiences for our customers. The results of the targeted promotion came in well ahead of our expectations, validating our ongoing investments in systems to better harness and utilize our data. Selling both new and existing products into our installed base represents a tremendous revenue opportunity. It's what gives us confidence in the success of the product we're about to launch in a new category.

Patrick Spence: We're always exploring how we can better use our unique data and insights to deliver more personalized experiences for our customers.

Patrick Spence: The results of the targeted promotion came in well ahead of our expectations validating our ongoing investments in systems to better harness and utilize our data.

Patrick Spence: Selling both new and existing products into our installed base represents a tremendous revenue opportunity is.

Patrick Spence: What gives us confidence in the success of the product we're about to launch in a new category and it's what gives us confidence in our ability to scale. This business in the years to come.

Patrick Spence: And it's what gives us confidence in our ability to scale this business in the years to come. For example, we've previously sized the opportunity of converting all single-product households to the average multi-product household to be over $6 billion in revenue. Switching gears, I wanted to briefly touch on our litigation with Google. Just last month, in early April, the Federal Circuit affirmed that Google had infringed five foundational Sonos patents.

Patrick Spence: For example, we've previously sized the opportunity of converting all single product households to the average multi product households to be over $6 billion in revenue.

Patrick Spence: Switching gears I wanted to briefly touch on our litigation with Google.

Patrick Spence: Just last month in early April the federal circuit affirmed that Google had infringed five foundational sone us patents.

Patrick Spence: With this ruling in hand, we look forward to pursuing damages for Google's misappropriation of Sonos' innovation. I want to reiterate that we continue to be laser focused on what we can control. We are at the onset of a multi-year product cycle as we harvest the benefits of our research and development investments to attract new customers and sell more to our existing customers. It's the flywheel that has powered Sonos for the past 20 years, and we're excited to add some more fuel to the flywheel this year.

Patrick Spence: With this ruling in hand, we look forward to pursuing damages for Google's misappropriation of <unk> innovations.

Patrick Spence: I want to reiterate that we continue to be laser focused on what we can control.

Patrick Spence: We were at the onset of a multiyear product cycle as we harvest the benefits of our research and development investments to attract new customers and sell more to our existing customers.

Patrick Spence: Its the flywheel that has powered zone those for the past 20 years and we're excited to add some more fuel to the flywheel this year.

Patrick Spence: We are positioning the company to accelerate growth while keeping expenses in check to deliver margin expansion in the years to come. The eventual recovery of our categories will only further fuel this reacceleration. The opportunity ahead remains large, as we have just 2% of the $100 billion global audio market and 9% of the total households in our core market. Each year, our business is driven by both the acquisition of new households that enter our install base and by our loyal customers who continue to make subsequent purchases. Our ability to capture a disproportionate share of the opportunity ahead of us will only improve from here. Great things are happening here at Sonos, and the best is yet to come. I'll now turn it over to Saori to take you through our financials. Thank you, Patrick. Hi everyone.

Patrick Spence: We are positioning the company to accelerate our growth while keeping expenses in check to deliver margin expansion in the years to come.

Saori: The eventual recovery of our categories will only further fuel this reacceleration.

Saori: The opportunity ahead remains large as we have just 2% of the $100 billion global audio market and 9% share of the total households in our core market.

Saori: Each year, our business is driven by both the acquisition of new households that enter our install base and by our loyal customers, who continue to make subsequent purchases over time.

Saori: Our ability to capture a disproportionate share of the opportunity ahead of us will only improve from here.

Saori: Things are happening here at <unk> and the best is yet to come.

Saori: I'll now turn it over to say already to take you through our financials.

Saori: Thank you Patrick Hi, everyone.

Saori Casey: Since joining Sonos as CFO a quarter ago, I've immersed myself in the details of the business and the exciting product world. I see tremendous opportunity ahead for Sonos to drive sustainable, profitable growth over the long term, and I'm thrilled to be part of the team. Now on to our results. Q2 revenues came in slightly ahead of our expectations at $252.7 million.

Saori: Since joining so not the CFO a quarter ago Ive immersed myself in the details of the business.

Saori Casey: Lighting product roadmap.

Saori Casey: See tremendous opportunity ahead for someone else to drive sustainable profitable growth over the long term and I'm thrilled to be part of the team.

Saori Casey: Our better than expected Q2 revenue was driven by a strong customer response to some promotions that we ran in the quarter. In particular, we saw great adoption of the targeted promotion to drive upgrade sales that Patrick referenced earlier. Revenue per product sold was $338, up 11% year over year. This increase resulted from favorable product, partially offset by increased promotional activity. This brings our first half revenue to $866 million, down 11% year over year. Ding in, performance varied significantly on a regional basis. Revenue in the Americas declined 5% year over year, whereas EMEA and APAC declined by 21% and 23%, respectively.

Saori Casey: Now onto our results Q2 revenues came in slightly ahead of our expectations at $252 $7 million or better than expected Q2 revenue was driven by strong customer response to some promotions that we ran in the quarter in particular, we saw great adoption to the targeted promotions to drive upgrades.

Saori Casey: Sales that Patrick referenced earlier revenue per product sold was $338 up 11% year over year. This.

Saori Casey: This increase resulted from favorable product mix, partially offset by increased promotional activity.

Saori Casey: This brings our first half revenue to $866 million down 11% year over year digging in performance there significantly on a regional basis revenue in the Americas declined 5% year over year, whereas EMEA and APAC declined by 21 and 23% respectively.

Saori Casey: Sales in our categories in both EMEA and APAC continue to be significantly impacted by the difficult macroeconomic environment. However, overall, our first half performance puts us in a good position to deliver on our full year guidance. Gap gross margin was 44.3%, up 100 basis points year over year, and roughly in line with the guidance we gave last quarter. The year-over-year increase was due to lower component costs and favorable product mix, partially offset by additional promotional activity.

Saori Casey: Sales in our categories in both EMEA and APAC continue to be significantly impacted by the difficult macroeconomic environment overall, our first half performance puts us in a good position to deliver on our full year guidance GAAP gross margin was 44, 3% up 100 basis points year over year and.

Saori Casey: Roughly in line with the guidance, we gave last quarter the year over year increase was due to lower component costs and favorable product mix, partially offset by additional promotional activity.

Saori Casey: Gross margin declined sequentially from our holiday quarter due to seasonal deleverage from lower revenue. Our Q2 performance brings our first half gross margin to 45.6%, up from 42.7% in the first half of last year. This performance demonstrates the resilience of our underlying gross margins and underpins our confidence that we will meet our fiscal 2024 target of $45 to $46 billion. Adjusted EBITDA was negative $34 million, ahead of our guidance due to higher than expected revenue and lower product and marketing. This brings our first half adjusted EBITDA to $81.6 million, representing a margin of 9.4%.

Saori Casey: Gross margin declined sequentially from our holiday quarter due to the seasonal deleverage from lower revenue in Q2.

Saori Casey: Our Q2 performance brings our first half gross margin to 45, 6% up.

Saori Casey: From 42, 7% in the first half of last year. This performance demonstrates the resilience of our underlying gross margins and underpins our confidence that we will meet our fiscal 2024 target of 45% to 46%.

Saori Casey: <unk> EBITDA was negative $34 million ahead of our guidance due to higher than expected revenue and lower product and marketing spend.

Saori Casey: This brings our first half adjusted EBITDA to $81 6 million representing.

Saori Casey: Representing a margin of nine 4%.

Saori Casey: Non-GEP adjusted operating expenses for $157 million in the quarter, down $22 million sequentially, primarily due to a seasonal decrease in sales and market. We ended the quarter with $292 million in net income, which included $46 million of marketable securities as we deployed some excess cash into short-duration treasury funds. Pre-cash flow in Q2 was negative $121 million due to typical seasonality, bringing our first half free cash flow to $148 million compared to $46 million in the first half of last year.

Saori Casey: non-GAAP adjusted operating expenses were $157 million in the quarter down $22 million sequentially, primarily due to a seasonal decrease in sales and marketing spend.

Saori Casey: We ended the quarter with $292 million of net cash which includes $46 million of marketable securities as we deployed some excess cash into short duration Treasury bills.

Saori Casey: Free cash flow in Q2 was negative $121 million due to typical seasonality, bringing our first half free cash flow to $148 million compared to $46 million in the first half of last year.

Saori Casey: This increase was primarily driven by working capital improvement, resulting from a focus on better managing our inventory through adjustments to our sourcing plans, as well as implementation of newly adopted payment terms with our suppliers. Our period and inventory balance was $180 million, down 45% year-over-year and up 4% from last quarter. This consists of $114 million of finished goods and $65 million of components. We're working hard to keep inventory balances in check. And finally, we returned $53 million to our shareholders through stock repurchases during the quarter. We repurchase 2.5% of our common shares outstanding as of Q1 at an average price of $17.32 per share.

Saori Casey: This increase was primarily driven by working capital improvement, resulting from a focus on better managing our inventory through adjustments to our sourcing plans as well as implementation of newly adopted payment terms with our suppliers.

Saori Casey: Our period end inventory balance was $180 million down 45% year over year and up 4% from last quarter. This consists of $114 million of finished goods and $65 million of components, we're working hard to keep inventory balances in check.

Saori Casey: And finally, we returned $53 million to our shareholders through stock repurchases in the quarter, we repurchased two 5% of common shares outstanding.

Saori Casey: As of Q1 at an average price of $17 32 per share.

Saori Casey: This brings our total year to date share repurchases to $76 million, leaving us with approximately $124 million remaining under our current $200 million share repurchases authorization.

Saori Casey: We continue to be balanced in our capital allocation strategy and expect to be active in the market repurchasing our stock.

Saori Casey: This brings our total year-to-date share repurchases to $76 million, leaving us with approximately $124 million remaining under our current $200 million share repurchase program. We continue to be balanced in our capital allocation strategy and expect to be active in the market repurchasing our services. Turning to our outlook, we remain confident in our previous guidance for FY24, which I will quickly, We expect revenue in the range of $1.6 to $1.7 billion, roughly flat year over year at the As previously noted, our guidance assumes that our products in the new multibillion-dollar category will generate a large portion of the over $100 million revenue we expect from new products. We expect gap gross margin in the range of 45 to 46%, with non-ga Due to approximately $7 million of stock-based compensation and amortization of intangibles included in the GAAP cost of revenue.

Saori Casey: Turning to our outlook, we remain confident in our previous guidance for FY 'twenty for which I will quickly recap.

Saori Casey: We expect our revenue in the range of one six to $1 7 billion roughly flat year over year at the midpoint as previously noted our guidance assumes that our products and the new multibillion dollar category will generate a large portion of the over $100 million revenue, we expect from new products. This year.

Saori Casey: We expect GAAP gross margin in the range of 45% to 46% with non-GAAP gross margins in the range of 45, 4% to 46, 4% due to approximately $7 million of stock based compensation and amortization of intangibles included in the GAAP cost of revenue.

Saori Casey: Adjusted EBITDA is expected to be in the range of $150 to $180 million, representing a margin of $9.4 to $10.6 million. As previously discussed, we're not providing formal guidance for free cash flow in fiscal 2020. So we continue to expect to significantly improve our free cash flow conversion versus last year. Turning to Q3, we expect revenue to grow year over year in the range of $375 to $405 million, which includes a sizable contribution from our launch of a highly anticipated new product.

Saori Casey: Adjusted EBITDA is expected to be in the range of $150 million to $180 million, representing a margin of nine 4% to 10, 6%.

Saori Casey: As previously discussed we're not providing formal guidance for free cash flow in fiscal 2024. So we continue to expect to significantly improve our free cash flow conversion versus last year.

Saori Casey: Turning to Q3, we expect revenue to grow year over year in the range of $375 million to $405 million.

Saori Casey: It includes a sizable contribution from our launch of our highly anticipated new product.

Saori Casey: We expect the gap growth margin to increase sequentially to 45 to 46, primarily due to fixed cost leverage from higher revenue. Non-GAAP operating expenses are expected to be in the range of $147-$159 million, resulting in adjusted EBITDA in the range of $35-$40 million.

Saori Casey: We expect GAAP gross margin to increase sequentially to 45% to 46% primarily due to a fixed cost leverage from higher revenue in Q3.

Saori Casey: non-GAAP operating expenses are expected to be in the range of $147 million to $159 million, resulting in adjusted EBITDA in the range of $35 million to $40 million.

Saori Casey: With a solid first half in the books, we're in a good position to deliver on our fiscal 2024 guidelines, laser-focused on our execution and accelerating revenue growth in the second half. While tightly managing our expenses to drive margin, With that, I'd like to turn the call over to you for questions. All right, thank you. And at this time, I would like to remind everyone that in order to ask a question, press star then the number one on your telephone keypad. Once again, star and the number.

Saori Casey: With a solid first half in the books, we're in a good position to deliver on our fiscal 2024 guidance, we're laser focused on our execution and accelerating revenue growth in the second half of the year, while tightly managing our expenses to drive margin expansion.

Speaker Change: With that I'd like to turn the call over for questions.

Speaker Change: Alright, Thank you and at this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad once again star and the number one and we will pause just a moment to compile the Q&A roster.

Operator: And we will pause just a moment to compile the Q&A roster. All right, looks like our first question comes from the line of Steve Frankel with Rosenblatt. Steve, please go ahead. Good afternoon, I'd like to start with a couple of the new initiatives that happened during the quarter and maybe give us some feedback on early learnings from the direct presence on Amazon. And any more details you could give us on the installation-based promotion and what you might do going forward around?

Operator: Alright, it looks like our first question comes from the line of Steve Frankel with Rosenblatt, Steve. Please go ahead.

Steven Bruce Frankel: Yeah, thanks, Steve. It's Patrick here on Amazon.

Speaker Change: Good afternoon.

Steven Bruce Frankel: Start with a couple of the new initiatives that happened during the quarter and maybe give us some feedback on early learnings from the direct president presence on Amazon and kind of any more details you could give us on the installed base promotion.

Steven Bruce Frankel: And what you might do going forward around that.

Patrick Spence: We're very pleased with our start there. As I mentioned, we are very focused on how we find new customers. And that is something that we've been able to deliver on just getting started but something we think is going to be even more important going forward, given some of the new categories that we're going into. So I think that's been helpful in terms of our overall plan and, you know, positioning ourselves for growth.

Steven Bruce Frankel: Yes, Thanks, Steve It's Patrick here.

Patrick Spence: On Amazon, we're very pleased with our start there as I am.

Patrick Spence: Mentioned very focused on how we find new customers.

Patrick Spence: And that is something that we've been able to deliver on just getting started but something we think is going to be even more important going forward given some of the new categories that we're going into so I think that's been.

Patrick Spence: Helpful in terms of our overall plan.

Patrick Spence: Positioning ourselves for growth.

Patrick Spence: And then the install base, this is one that, as you know, is a large opportunity for us over time. If we can get more of the single player homes to the multiproduct average, that's a $6 billion opportunity.

Patrick Spence: And then the on the installed base. This is one that.

Patrick Spence: As you know well.

Patrick Spence: A large opportunity for us over time, if we can get more of the single player homes to the multi product average.

Patrick Spence: $6 billion opportunity and we continue to invest in the systems and the tools to allow us to go after this opportunity even more and so we're very excited about the opportunities there I feel like we're getting well positioned particularly through our direct to consumer channel to really tap into that as well, which I think.

Patrick Spence: <unk>.

Patrick Spence: Really helps particularly as we think about.

Patrick Spence: As well some of the new products that are coming into play because they're going to help as we tap into our existing base too. So excited about both I think we have lots of opportunity in both.

Patrick Spence: And we're going to continue working on those and there is other ones we're working on.

Patrick Spence: Again with that real focus of trying to.

Patrick Spence: And we continue to invest in the systems and the tools to allow us to go after this opportunity even more. And so we're very excited about the opportunities there. I feel like we're getting well positioned, partners that can help us get into new homes. Because, as everyone knows, we're only in about 9% of the total number of homes we think we can address.

Patrick Spence: Find other partners that can help us get into new homes because.

Patrick Spence: As everyone knows we're only in about 9% of the total homes. We think we can address and so finding new homes as the name of the game.

Patrick Spence: And so finding new homes is the name of the game. Great. And then one last question, some characterization of channel inventories, and if you'd give us an insight geographically how they may differ.

Speaker Change: Great and then one last question some characterization of channel inventories.

Patrick Spence: And if you could give us some insight geographically how they may differ as well.

Patrick Spence: Yeah, on the channel inventory, we ended with a very comfortable level; we don't usually break it down into the geographic or channel details further on the call, but we're comfortable with where we ended. Okay, great. Thank you. I'll jump back in the queue.

Speaker Change: Yeah on the <unk>.

Speaker Change: Channel inventory, we ended with a very comfortable level, we don't usually break to break it down into the geographic geographic or channel details further on the call, but we're comfortable with where we ended.

Speaker Change: Okay, great. Thank you I'll jump back in the queue.

Steven Bruce Frankel: Thanks, Steve. And thank you, Steve. And our next question comes from the line of Erik Woodring with Morgan Stanley. Erik, please go ahead. Thanks, guys. First, you know, clearly. Help us understand what you've learned. I say that because, You know, we see the most flagging, real car.

Speaker Change: Thanks, Steve.

Erik William Richard Woodring: Thank you Steve.

Erik William Richard Woodring: You know, your outlook for this new product has been positive. So can you maybe just help us connect the dots, what's driving the comments? Maybe some of the macro outlook, especially Your Remaining Caravan. I'm not sure how to characterize it. You bet, Erik. I'd say for our categories, the last three months have been more of the same. And I do wonder if it's, you know, our categories have been challenged for a while. And maybe, you know, I think we were characterized last year as kind of being in pretty weak, you know, weak categories, overall.

Steven Bruce Frankel: And our next question comes from the line of Erik Woodring with Morgan Stanley. Please go ahead.

Speaker Change: Super Thank you very much for taking the questions guys. So Patrick.

Erik William Richard Woodring: Maybe maybe you first clearly still banking on a pretty significant product launch in fiscal <unk> can.

Erik William Richard Woodring: Can you maybe help us understand what you've learned about consumer demand over the last three months and I say that because we see most consumer companies flagging real caution in kind of the spending environment. Your outlook for this new product has been unwavering. So can you maybe just help us connect the dots, what's driving the confidence as we.

Erik William Richard Woodring: Maybe some of the macro outlook, especially as it relates to consumer spending remained kind of unchanged negative maybe deteriorate not sure how to characterize it but maybe you could share some color with us that'd be helpful. Thank you.

Speaker Change: You bet, Eric I'd say for our categories last three months have been more of the same.

Erik William Richard Woodring: And I do wonder if it's.

Erik William Richard Woodring: Our categories have been challenged for a while.

Patrick Spence: And so we're not, we're not seeing anything that makes us believe it's getting any weaker or any stronger as we go through it. And I think the, you know, so we continue to really focus on what we can control. And I think it's a huge testament to the team, really the state of our brand and our product portfolio that we've been able to execute across the first half successfully. And so obviously, we take learnings from that, and understanding from that. I think the other thing is we've done a lot of work to make sure we understand the new category we're going into. You know, it's a large one.

Erik William Richard Woodring: And maybe you know I think we would characterize last year kind of being in a pretty weak.

Patrick Spence: Weak categories overall, and so we're not we're not seeing anything that makes us believe its getting any weaker any stronger as we go through it and I think the so we continue to really focus on what we can control and I think it's a huge testament to the team.

Patrick Spence: Really the state of our brand and our product portfolio that we've been able to execute across the first half successfully.

Patrick Spence: No.

Patrick Spence: Obviously, we take learnings from that understanding from that I think the other thing is we've done a lot of work.

Patrick Spence: To make sure we understand the new category, we're going into.

Patrick Spence: So that gives us confidence. We believe we bring a unique perspective, as well. As you might imagine, we've had lots of conversations with channel partners, and we also know it's a growing category. So from our perspective, it's a little different than the other categories we're in right now because it is growing year over year. And so all those things combined, plus our ability to execute across the first half is really what gives us, you know, the confidence to keep our guidance for fiscal 2024 intact.

Patrick Spence: It's a large one so that gives us confidence we believe we bring a unique perspective as well as you might imagine we've had lots of conversations with channel partners.

Patrick Spence: And we also know it's a growing category so from our perspective, it's a little different than the other categories. We're in right now because it is growing year over year and so all those things combined plus our ability to execute across the first half is really what gives us.

Patrick Spence: The confidence to keep our guidance for fiscal 2024.

Patrick Spence: Intact.

Patrick Spence: Great. And then, you know, I'm not sure if this is for you, Patrick, or Saori, but obviously, a lot going on investment-wise. How much of this is kind of... Run Rate Operating versus how much is a bit of what I would call heavy lifting that you need to do and maybe a bit of pull forward and spend that some of it potentially doesn't repeat as we look again beyond this year.

Speaker Change: Great and then.

Patrick Spence: I'm not sure. If this is for you Patrick or for you.

Patrick Spence: But obviously a lot going on investment wise this year, which is great to see.

Patrick Spence: How much of this is kind of run rate operating expenses or investments as we think about the forward look beyond just this year versus how much is a bit of what I would call heavy lifting that you need to do and maybe the pull forward and spend.

Patrick Spence: Yes, some of it potentially doesn't repeat as we as we look at again beyond this year can you just help us understand.

Saori Casey: Can you just help us understand? Some of that. Thanks, Erik. You know, certainly what our investment approach is embedded in our guidance range, the FY 24 guidance that we've confirmed, you know, we are continuing to invest to optimize for profit, profit growth over the long term, at the same time, making sure that we're optimizing for future growth as well. The new product launches and as we continue to monitor the market, the market continues to be challenging, and we realize that we need to stay on top of the market.

Speaker Change: That'd be really helpful. Thank you so much.

Speaker Change: Thanks, Eric.

Saori Casey: Our investment approach is embedded in our guidance range. The 24 guidance that we've confirmed.

Saori Casey: We are continuing to invest.

Saori Casey: To optimize for profit profit growth over the long term at the same time, making sure that we're optimizing for the future growth as well.

Saori Casey: So it is embedded in our guidance and we will share more as.

Saori Casey: We.

Erik: I'll go through the.

Saori Casey: The new product launches as we continue to monitor the market the market continues to be challenging and we realized that we need to stay pulse on the market.

Saori Casey: But at the same time, we will continue to control what we can control.

Speaker Change: Great. Thanks, so much for the color guys. Good luck.

Saori Casey: But at the same time, we will continue to control what we can control. Thanks, sir. Thank you, Erik. All right. Our next question comes from the line of Jake Norrison with Raymond James. Jake, please go ahead. Perfect. Good afternoon. I just wanted to start and double click on the promotional focus on getting new homes. Could you just speak to the levers here that you'd be able to pull? Obviously, this is a high level, it's early days, but, you know, maybe just compare and contrast it to previous partnerships like the IKEA one that weren't as successful in gaining new customers. Thanks. Yeah, so it's not promo-related.

Speaker Change: Thanks, Eric.

Speaker Change: Thank you Eric.

Jake Norrison: This is more structural and long-term oriented. So if we're going to add a, you know, any channel partner, it really is about assessing who they're reaching and who they're talking to, and how does that fit with today's product portfolio and the one we're building for the future. And so this is much more strategic in nature in terms of identifying how else we can tap into the, you know, 91% of homes that we believe we can address but aren't in yet. And so that's what's guiding our push for the expanded distribution that you've seen, and we'll continue to see. Okay, great. I appreciate the color there.

Jake Norrison: Alright. Our next question comes from the line of Jay <unk> with Raymond James Jake. Please go ahead.

Speaker Change: Perfect good afternoon.

Speaker Change: I just wanted to start in Doubleclick on the promotional focus on getting new homes.

Speaker Change: Could you just speak to the levers here that you'd be able to pull obviously this is high level. It's early days, but maybe just compare and contrast, it to previous partnerships like the Ikea, one that werent as successful in gaining new customers. Thanks.

Jake Norrison: Yes.

Jake Norrison: It's not promo related this is more structural and long term oriented so if we're going to add any.

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Jake Norrison: It really is about assessing who they're reaching and who they are talking to and how does that fit with todays product portfolio and the one we're building for the future and so this is much more strategic in nature in terms of identifying how else do we tap into the 91% of homes that we believe we can address but arent in yet and so that's what's guy.

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Jake Norrison: That's what's guiding really our push for the expanded distribution.

Jake Norrison: That you've seen and will continue to see.

Patrick Spence: And then last one for me, I'm hoping you could just dive a little deeper on international trends. Of course, we've seen the weakness, but can you maybe speak to, you know, your market share versus the broader audio segment in those regions? Thanks. You bet. Yeah, so this is one we watch very closely because, you know, we want to know how we're doing relative to the other players that are there. As I mentioned, we continue to, in fact, gain or hold share in the US home theater and streaming audio, even though those are down year over year, which is what we're looking at. Similarly, we're seeing, you know, significantly down year over year, anniversarying a negative year over year last year as well across EMEA and then as well into Australia, which is our biggest APAC market at this point.

Speaker Change: Okay, Great I appreciate the color there and then last one from me I'm, hoping you could just dive a little deeper on international trends of course, we've seen the weakness, but can you just maybe speak to your market share versus the broader audio segment and those regions. Thanks.

Speaker Change: You bet Yeah. So this is one we watch very closely because.

Patrick Spence: We want to know how we're doing relative to the other players that are out there.

Speaker Change: As I mentioned.

Patrick Spence: We continue to in fact gain or hold share in the U S home theater and the streaming audio.

Patrick Spence: Even though those are down year over year, which is what we're looking at similarly, we're seeing significantly down year over year anniversarying negative year over year last year as well.

Patrick Spence: Across EMEA, and then as well into Australia, which is our biggest APAC market at this point and so those are ones, where we are holding our own we feel like and so from everything we can see at this point, we continue to hold up well relative to what's happening in the industry more broadly.

Patrick Spence: And so those are ones where we are holding our own, we feel like. And from everything we can see at this point, we continue to hold up well relative to what's happening in the industry more broadly. And I think when you look at our results in terms of the geographies, I think they're very representative of what you're seeing across the industry as opposed to anything Sonos unique.

Patrick Spence: And I think when you look at our results in terms of the geographies I think they are very representative of what you're seeing across the industry as opposed to anything.

Patrick Spence: <unk> unique.

Jake Norrison: Awesome. Thanks, Patrick. I appreciate it.

Speaker Change: Awesome, Thanks, Patrick I appreciate it.

Speaker Change: Thank you.

Operator: Thank you. All right, thank you, Jake. Just as a reminder, ladies and gentlemen, again, if you'd like to ask a question, it is star one on your telephone keypad. Once again, star and then. And our next question comes from the line of Alex Fuhrman with Craig Hallam. Alex, please go ahead. Hey guys, thanks for taking my question. Just from a high level, wondering if you could explain to us a little bit. Seems like your business today is roughly the same size as it was about three years ago when there was a lot more housing activity, and now there's been kind of a multi-year slump in housing velocity.

Speaker Change: Alright. Thank you Jake just as a reminder, ladies and gentlemen, again, if you'd like to ask a question. It is star one on your telephone keypad once again star and the number one.

Operator: And our next question comes from the line of Alex Fuhrman with Craig Hallum. Alex. Please go ahead.

Alex Joseph Fuhrman: Can you talk to us a little bit about what that has done to your customer profile, who you have coming into the brand, how many products they're buying, maybe what their first products they might be buying, and what steps are you taking to be ready for demand to come back if, presumably, we do see some type of an uptick in the housing market at some point in the future? Yeah, thanks, Alex.

Speaker Change: Hey, guys. Thanks for taking my question just from a high level I'm wondering if you can can you explain to us a little bit.

Alex Joseph Fuhrman: Seems like your business today is roughly the same size as it was about three years ago. When there was a lot more housing activity and now it's been kind of a multi year slump in housing velocity can you talk to us a little bit about what that's done to your customer profile, who you have.

Alex Joseph Fuhrman: Coming into the brand how many products they are buying maybe what their first products they might be buying.

Alex Joseph Fuhrman: And what steps are you taking to be ready.

Alex Joseph Fuhrman: For demand to come back if presumably we do see some some type of an uptick in the housing market at some point in the future.

Alex Joseph Fuhrman: I think the theme of focusing on what we can control is kind of the theme of focusing on what we can control. You'll recall in Q1, one of the big areas we focused on was bundles. And we had our highest, you know, proportion of new homes starting with multiple products in that quarter as well.

Speaker Change: Yes, Thanks, Alex I think the.

Alex Joseph Fuhrman: We've actually been working again and kind of the theme of focusing on what we can control youll recall in Q1, one of the big areas. We focused on was bundles and we had our highest.

Alex Joseph Fuhrman: The proportion of new homes, starting with multiple products in that quarter as well and so I think if anything we've shown an ability to try and make sure that we can drive customers because because there are so many we havent tapped into right as we think about being only a 9% of those homes is that if we can put the right kind of packages together for them.

Patrick Spence: And so I think, if anything, we've shown an ability to try and make sure that we can drive customers because there are so many we haven't tapped into, right, as we think about being only in 9% of those homes. If we can put the right kind of packages together for our customers and make it easy for them to buy, as we showed through the holiday season, then I think we can, to some degree, buck the trends. Now, overall, obviously, our categories remain under pressure.

Patrick Spence: Customers make it easy for them to buy as we showed through the holiday season than I think we can we to some degree are bucking the trends now overall, obviously our categories remain under pressure I think to your point.

Patrick Spence: Housing is something that we think would.

Patrick Spence: Naturally as a tailwind for us ultimately that's there and so I think you I think you prepare for the good times by focusing and getting better in the challenging times on how you execute.

Patrick Spence: I think to your point, you know, housing is something that we think would naturally be a tailwind for us, ultimately. And so I think you prepare for the good times by focusing and getting better in the challenging times on how you execute, you know, how you invest, where you invest, and trying to be as creative as possible.

Patrick Spence: How you invest where you invest and trying to be as creative as possible so coming up with bundles looking at how we do promotions to our install base all of the things that we're doing today the innovation.

Patrick Spence: We're doing across our product team Nu.

Patrick Spence: Marketing and brand kind of aspects that we're doing for our new product all of these things.

Patrick Spence: I think will benefit us greatly if we get some tailwind from the categories as well or housing if you will and so all of the activities. We're doing in this challenging period will pay off.

Patrick Spence: So coming up with bundles, looking at how we do promotions to our install base, all of the things that we're doing today, the innovation we're doing across our product team, the new marketing and brand kind of aspects that we're doing for a new product, all of these things, you know, I think will benefit us greatly if we get some tailwinds from the categories. As well, and or housing, if you will, and so all of the activities we're doing in this, you know, challenging period will pay off when we see the tailwinds come back and the categories pick up.

Patrick Spence: We see.

Patrick Spence: The tailwind is come back in the categories pick up.

Patrick Spence: So, I think we're doing all the right things we can, and obviously, we'll watch carefully, but we're going to also manage our business appropriately to make sure we navigate these challenging times successfully and do so profitably, as we've outlined many times. Great, that's really helpful.

Patrick Spence: So I think we're doing all the right things, we can and obviously, we'll watch carefully but we're going to also.

Patrick Spence: Manage our business appropriately to make sure we navigate these challenging times successfully and do so profitably as we've outlined many times.

Alex Joseph Fuhrman: Thank you very much, Patrick. Thanks, Alex. Thank you.

Speaker Change: Great. That's really helpful. Thank you very much Patrick.

Speaker Change: Thanks, Alex.

Speaker Change: Thank you.

Operator: And our next question comes from the line of Brent Thill on Jeopardy. Hey, Patrick. Thanks.

Alex Joseph Fuhrman: And our next question comes from the line of Brent Thill with Jefferies.

Brent John Thill: Hey, Patrick, you have the magic wand, and you can kind of wave it. What are the things that you think could really help get the environment back to where you'd want it to be? What are the two or three things you'd wave that wand over? Oh, that's amazing. That's a great question. I mean, you know, I think tailwinds are in our category. So people shifting their, you know, their investments from wherever they happen to be investing today into audio products would be a great thing for us. That would be the biggest thing. I think to Alex's point, like housing, is one that certainly we expect to be benefiting from.

Brent John Thill: Please go ahead, Hey, Patrick.

Speaker Change: Thanks, Patrick you are you get the magic wand and do you think kind of way that what are the things that you think could really help get the environment back to where you would want to be what are the two or three things you'd wave that wand over.

Brent John Thill: Oh.

Patrick Spence: [laughter] that's amazing.

Speaker Change: Great. That's a great question I mean.

Brent John Thill: I think tailwind in our category so people shifting their their investments from wherever they happen to be investing today into.

Brent John Thill: Audio products would be a great thing for us that that would be the biggest thing I think to Alex's point like housing is one that certainly we expect to be benefiting from that so that would be something that would be underlying it but again.

Patrick Spence: So that would be something that would be underlying it. But again, you know, we're not, you know, we're not going to, because there are no magic ones. We're not going to, not going to focus on that too much. And instead, we're just focused on how do we, you know, tap further into that installed base and tap into that $6 billion opportunity. And how do we, you know, make sure that we're finding new channels, new countries where we can reach those homes that we're not in yet.

Speaker Change: We're not we're not going to because there are no magic ones. We're not going to you are not going to focus on that too much and instead, we're just focused on how do we tap further into that installed base rate and tap into that $6 billion opportunity and how do we.

Patrick Spence: Make sure that we're finding new channels, new countries, where we can tap into those homes that were not in yet and so things like expanding distribution of our product innovation pipeline.

Patrick Spence: And so things like expanding distribution, our product innovation pipeline, and then, as well, how we deal with our existing install base and, you know, find ways for them to enjoy more Sonos products and tell their friends and families kind of where we're putting all of our efforts.

Patrick Spence: And then as well, how we deal with our existing installed base and <unk>.

Patrick Spence: Find ways for them to enjoy more sonus products and tell their friends and family is kind of where we're putting all of our efforts.

Brent John Thill: I'm sorry if I missed this, just on some of the promotional pricing that you put in. I know some of that seemed like it was working. But to what extent are you using that going forward? And do you need to lean on that harder? Or is that something that, given your premium product, you don't, you don't want to pull that thread?

Speaker Change: And sorry, if I missed this just on on some of the promotional pricing that you've put in I know some of that seemed like it was working but.

Brent John Thill: What extent are you using that going forward and do you need to lean on that harder or is that something that given your premium product. You don't you don't want to pull that threat or how do you how should we think about that.

Saori Casey: Or how do you think we should think about that? Yeah, we continue to look at promotion very thoughtfully. Clearly, our goal is to drive for more profitable profit dollars, not just revenue. So certainly, you know, certain markets have become very promotional and highly competitive. And we're continuing to keep our pulse on the dynamics of the business to make sure we can grow profit to the bottom line. Great, thanks.

Brent John Thill: Yeah, we continue to look at promotion on a very thoughtfully.

Saori Casey: Really our goal is to drive for more profitable profit dollars not just revenues. So certainly them certain markets are very has become very promotional and highly competitive and we're continuing to keep our <unk>.

Saori Casey: Both on the dynamic with the business to make sure we can.

Saori Casey: Gross profit to the bottom line.

Speaker Change: Great. Thanks.

Brent John Thill: Thanks, Brent. All right. Thank you, Brent.

Speaker Change: Thanks, Brian Alright, Thank you Brett.

Operator: And again, ladies and gentlemen, this is last call. If you would like to ask a question, please press star and the number one on your telephone keypad. Once again, Star One, and we'll just pause for a few moments if we have any last-minute questions. All right, it appears there are no further questions. So I will now hand it back to CEO Patrick Spence for closing. Patrick, the floor is yours. All right. Thank you. I just want to hit two quick things in closing.

Speaker Change: And again, ladies and gentlemen last call. If you would like to ask a question. Please press star and the number one on your telephone keypad. Once again star. One then we will just pause for a few moments.

Operator: Any last minute questions.

Operator: Okay.

Operator: Yeah.

Operator: Yeah.

Operator: Alright. It appears there are no further questions. So I will now hand, it back to CEO, Patrick Spence for closing remarks, Patrick the floor is yours.

Patrick Spence: First, we did what we set out to do in the first half of the fiscal year, and this puts us in a great position to deliver on our fiscal 2024 guidance. Second, we are on the cusp of an exciting launch that takes us into a new multi-billion dollar category that is growing. We look forward to sharing this new product with the world soon. And, of course, there's a lot more in the pipeline that we're excited about. Thanks for your time today.

Patrick Spence: Thank you I just want to get two quick things in closing first we did what we set out to do in the first half of the fiscal year and this puts us in a great position to deliver on our fiscal 2020 for guidance.

Patrick Spence: We are on the cusp of an exciting launch that takes us into a new multibillion dollar category that is growing we look forward to sharing this new product with the world soon.

Patrick Spence: And of course, there's a lot more in the pipeline that were excited about.

Patrick Spence: And we look forward to speaking with you again next quarter. Take care. Thank you, Patrick, and thank you all for joining us. You may now disconnect. Tell me, did you fall in love at first glance? Do you think you'll take a chance? Do you think on the weekend I could know?

Speaker Change: Thanks for your time today, and we look forward to speaking with you again next quarter take care.

Speaker Change: Thank you Patrick and thank you all for joining you may now disconnect.

Patrick Spence: Yes.

Patrick Spence: Okay.

Patrick Spence: Okay.

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unknown: Yes.

unknown: <unk>.

unknown: Yeah, I feel like we've just begun. I feel like we've just begun. Nothing's ever good enough. Tell me, is this how it's gone? Yeah, I feel like we've just begun. Nothing's ever good enough. Tell me, is this how it's gone? I feel like we've just begun. Nothing's ever good enough. Tell me, is this how it's gone? I feel like we've just begun. Nothing's ever good enough. Tell me, is this how it's gone? [inaudible] Tell me, did you fall in love?

unknown: [music].

unknown: Sure.

unknown: Yes.

unknown: Okay.

unknown: Yes.

unknown: Okay.

unknown: Okay.

unknown: <unk>.

unknown: [music].

unknown: Another forgotten memory We've built the city that we're sinking into Nobody wants to play pretend I just know that I feel like we've just begun. Nothing's ever good enough Tell me, is this how it's gone? Yeah, I feel like we've just begun. Nothing's ever good enough. Tell me, is this how it's gone? Yeah, I feel like we've just begun. Nothing's ever good enough. Tell me, is this how it's gone? Yeah, I feel like we've just begun. I feel like we've just begun. Nothing's ever good enough. Tell me, is this how it's gone?

unknown: Yes.

unknown: [music].

unknown: Okay.

unknown: [music].

unknown: Sure.

unknown: [music].

unknown: Yes.

unknown: Okay.

unknown: Yes.

unknown: [music].

unknown: Yeah, I feel like we've just begun. Nothing's ever good enough. Tell me, is this how it's gone? I feel like we've just begun. Nothing's ever good enough. Tell me, is this how it's gone? Yeah, I feel like we've just begun. Nothing's ever good enough. Tell me, is this how it's gone? [inaudible] Tell me, did you fall in love? Tell me, did you fall in love at first glance? Do you think you'll take a chance? Do you think on the weekend I could find out?

unknown: Yes.

unknown: Yes.

unknown: Okay.

unknown: Yes.

unknown: Yes.

unknown: Okay.

unknown: Yes.

unknown: Yes.

unknown: Show me, before you haunt me on the screen. Will my affection pull the string? Another forgotten memory We've built the city that we're sinking into. Nobody wants to play pretend. I just know that I'm feeling like we've just begun. Nothing's ever good enough. Tell me, is this how it's gone? Yeah, I feel like we've just begun. Nothing's ever good enough. Tell me, is this how it's gone?

unknown: Yeah.

unknown: Yes.

unknown: Sure.

unknown: Okay.

unknown: Yes.

unknown: Okay.

unknown: [music].

unknown: Yes.

unknown: Yes.

unknown: Thanks.

unknown: Okay.

unknown: [music].

unknown: Okay.

unknown: Yes.

unknown: Okay.

unknown: Yeah, I feel like we've just begun. I feel like we've just begun. Nothing's ever good enough. Tell me, is this how it's gone? Yeah, I feel like we've just begun. Nothing's ever good enough. Tell me, is this how it's gone? I feel like we've just begun. Nothing's ever good enough. Tell me, is this how it's gone? I feel like we've just begun. Nothing's ever good enough. Tell me, is this how it's gone? [inaudible] Tell me, did you fall in love? Tell me, did you fall in love at first glance? Do you think you'll take a chance? Do you think on the weekend I could find out?

unknown: [music].

unknown: Yes.

unknown: Neutral.

unknown: Yes.

unknown: Okay.

unknown: [music].

unknown: Show me, before you haunt me on the screen Will my affection pull the string? Another forgotten memory We've built the city that we're sinking in Nobody wants to play pretend I just know that I'm feeling like I just begun Nothing's ever good enough Tell me is it all just gone, gone, gone, gone I'm feeling like I just begun Nothing's ever good enough Tell me is it all just gone, gone, gone, gone I'm feeling like I just begun Nothing's ever good enough Tell me is it all just gone, gone, gone, gone I'm feeling like I just begun Nothing's ever good enough Tell me is it all just gone, gone, gone, gone I'm feeling like I just begun Nothing's ever good enough Tell me is it all just gone, gone, gone, gone I'm feeling like I just begun Nothing's ever good enough Nothing's ever gone, [inaudible] Tell me, did you fall in love? Tell me, did you fall in at first glance? Do you think you'll take a chance? Do you think on the weekend I could know?

unknown: Yes.

unknown: Yes.

unknown: Okay.

unknown: Yes.

unknown: Yes.

unknown: Yes.

unknown: Okay.

unknown: Okay.

unknown: Okay.

unknown: [music].

unknown: Yeah.

unknown: [music].

unknown: Yes.

unknown: Yes.

unknown: Oh.

unknown: Okay.

unknown: [music].

unknown: Yes.

unknown: Okay.

unknown: Okay.

unknown: Sure.

unknown: Yes.

unknown: Yes.

unknown: [music].

unknown: Okay.

unknown: Okay.

unknown: Okay.

unknown: Okay.

unknown: Ooh Ooh Ooh.

unknown: Sure.

unknown: Oh.

unknown: Zero.

unknown: [music].

unknown: Yeah.

unknown: [music].

Speaker Change: Thank you.

unknown: Okay.

Speaker Change: Please go ahead.

unknown: No.

unknown: <unk>.

unknown: <unk>.

unknown: Show me, before you haunt me on the screen. Will my affection pull the string? Another forgotten memory We've built the city that we're sinking in. Nobody wants to play pretend. I just know that I'm feeling like I've just begun. Nothing's ever good enough. Tell me, is it hard to come? Yeah, I'm feeling like I've just begun. Nothing's ever good enough. Tell me, is it hard to come?

unknown: Sure.

unknown: Yes.

unknown: Sure.

unknown: Great.

unknown: Okay.

unknown: Sure.

unknown: Okay.

unknown: <unk>.

unknown: Sure.

unknown: Great.

unknown: [music].

unknown: Yes.

unknown: Sure.

unknown: Sure.

unknown: Yes.

unknown: Yeah, I feel like I've just begun. I feel like I've just begun. Nothing's ever good enough. Tell me, is it hard to come? Yeah, I feel like I've just begun. Nothing's ever good enough. Tell me, is it hard to come? I feel like I've just begun. Nothing's ever good enough. Tell me, is it hard to come? Yeah, I feel like I've just begun. Nothing's ever good enough. Tell me, is it hard to come? [inaudible] Tell me, did you fall in love? Tell me, did you fall in love at first glance? Do you think you'll take a chance? Do you think on the weekend I could find out?

unknown: [music].

unknown: Yes.

unknown: Okay.

unknown: Okay.

unknown: Yeah.

unknown: Yes.

unknown: [music].

unknown: Show me, before you haunt me on the screen. Will my affection pull the string? Another forgotten memory We've built the city that we're sinking in. Nobody wants to play pretend. I just know that. I feel like I've just begun. Nothing's ever good enough. Tell me, is it all just gone? Yeah, I'm feeling like I just began. Nothing's ever good enough. Tell me if it's all just gone.

unknown: Yes.

unknown: [music].

unknown: Yes.

unknown: [music].

unknown: Yes.

unknown: Okay.

unknown: [music].

unknown: Yeah, I'm feeling like I just began. I'm feeling like nothing's ever good enough. Tell me if it's all just gone? Yeah, I'm feeling like I just began. Nothing's ever good enough. Tell me if it's all just gone? I feel like I've just begun. Nothing's ever good enough. Tell me, is it all just gone? I feel like I've just begun. Nothing's ever good enough. Tell me, is it all just gone? [inaudible] Tell me, did you fall in love? Tell me, did you fall in love at first glance? Do you think you'll take a chance? Do you think on the weekend I could find out?

unknown: Okay.

unknown: Yes.

unknown: Yes.

unknown: Yes.

unknown: Yes.

unknown: Yes.

unknown: [music].

unknown: Yes.

unknown: [music].

unknown: Okay.

unknown: Okay.

unknown: [music].

unknown: Yes.

unknown: Okay.

unknown: [music].

unknown: Okay.

unknown: Yes.

unknown: Okay.

unknown: [music].

unknown: Yes.

unknown: Neutral.

unknown: Yes.

unknown: Okay.

unknown: [music].

unknown: Yes.

unknown: Okay.

unknown: Sure.

unknown: Yes.

unknown: [music].

unknown: Yes.

unknown: Okay.

unknown: Okay.

unknown: [music].

unknown: Yeah.

unknown: [music].

unknown: Yes.

unknown: Yes.

unknown: Oh.

unknown: Okay.

unknown: [music].

unknown: Yes.

unknown: Okay.

unknown: Okay.

unknown: Sure.

unknown: Yes.

unknown: Yes.

unknown: [music].

unknown: Okay.

unknown: Okay.

unknown: Perfect.

unknown: Okay.

unknown: Ooh Ooh Ooh.

unknown: Sure.

unknown: Oh.

unknown: Okay.

unknown: Yeah.

unknown: [music].

unknown: Great.

Speaker Change: Thank you.

unknown: Certainly.

unknown: No.

unknown: Yeah.

unknown: Show me, before you haunt me on the screen Will my affection pull the string? Another forgotten memory We've built the city that we're sinking in Nobody wants to play pretend I just know that I'm feeling like I've just begun Nothing's ever good enough Telling yourself it's gone Yeah, I'm feeling like I've just begun Nothing's ever good enough Telling yourself it's gone I'm feeling like I've just begun Nothing's ever good enough Telling yourself it's gone Yeah, I'm feeling like I've just begun Nothing's ever good enough I'm feeling like I've just begun Nothing's ever good enough Telling yourself it's gone Yeah, I'm feeling like I've just begun Nothing's ever good enough Telling yourself it's gone I'm feeling like I've just begun Nothing's ever good enough Telling yourself it's gone Yeah, I'm feeling like I've just begun Nothing's ever good enough Telling yourself it's gone, [inaudible] Tell me, did you fall in love? Tell me, did you fall in at first glance? Do you think you'll take a chance? Do you think on the weekend I could know?

unknown: Sure.

unknown: Yes.

unknown: Sure.

unknown: Please.

unknown: Show me, before you haunt me on the screen. Will my affection pull the string? Another forgotten memory We've built the city that we're sinking into. Nobody wants to play pretend. I just know that I feel like we've just begun. Nothing's ever good enough. Tell me, is this how it's gone? Yeah, I feel like we've just begun. Nothing's ever good enough. Tell me, is this how it's gone?

unknown: Okay.

unknown: Sure.

unknown: Okay.

unknown: <unk>.

unknown: Great.

unknown: [music].

unknown: Yes.

unknown: Sure.

unknown: Sure.

unknown: Yes.

unknown: Sure.

unknown: Yeah, I feel like we've just begun. I feel like we've just begun. Nothing's ever good enough. Tell me, is this how it's gone? Yeah, I feel like we've just begun. Nothing's ever good enough. Tell me, is this how it's gone? I feel like we've just begun. Nothing's ever good enough. Tell me, is this how it's gone? Yeah, I feel like we've just begun. Nothing's ever good enough. Tell me, is this how it's gone? [inaudible] Tell me, did you fall in love? Tell me, did you fall in love at first glance? Do you think you'll take a chance? Do you think on the weekend I could find out?

unknown: [music].

unknown: Sure.

unknown: Okay.

unknown: Sure.

unknown: Yeah.

unknown: [music].

unknown: <unk>.

unknown: Show me, before you haunt me on the screen. Will my affection pull the string? Another forgotten memory We've built the city that we're sinking in. Nobody wants to play pretend. I just know that I'm feeling like I've just begun. Nothing's ever good enough. Tell me, is that all it's got? Yeah, I feel like I've just begun. Nothing's ever good enough. Tell me is that all it's got?

unknown: Okay.

unknown: [music].

unknown: Yes.

unknown: [music].

unknown: Yes.

unknown: [music].

unknown: Yes.

unknown: Okay.

unknown: Yes.

unknown: [music].

unknown: Yeah, I feel like I've just begun. I feel like I've just begun. Nothing's ever good enough. Tell me, is that all it's got? Yeah, I feel like I've just begun. Nothing's ever good enough. Tell me, is that all it's got? I feel like I've just begun. Nothing's ever good enough. Tell me, is that all it's got? I feel like I've just begun. Nothing's ever good enough. Tell me, is that all it's got?

unknown: Thanks.

unknown: Okay.

unknown: Yes.

unknown: Okay.

unknown: [music].

unknown: Sure.

unknown: Yes.

unknown: Thanks.

unknown: Simple things always mean the most to me. (Inaudible) Tell me, did you fall in love? Did you fall in love at first glance? Do you think you'll take a chance? Do you think on the weekend I could know? Show me, before you haunt me on the screen. Will my affection pull the string? Another forgotten memory We've built the city that we're sinking into Nobody wants to play pretend I just know that. ["Feelin' Like I Just Begun"]

unknown: Okay.

unknown: Okay.

unknown: [music].

unknown: Okay.

unknown: [music] approach.

unknown: Sure.

unknown: Okay.

unknown: Yes.

unknown: Yeah.

unknown: Yes.

unknown: <unk>.

unknown: [music].

unknown: Yeah.

unknown: [music].

unknown: Yeah.

unknown: Okay.

unknown: Okay.

unknown: Okay.

unknown: Yes.

unknown: [music].

unknown: Yes.

unknown: Yes.

Speaker Change: All right.

unknown: Okay.

unknown: [music].

unknown: Yes.

unknown: Okay.

unknown: Okay.

unknown: Okay.

unknown: Okay.

unknown: Yes.

unknown: Okay.

unknown: [music].

unknown: Okay.

unknown: Yes.

unknown: Okay.

unknown: Yes.

unknown: Yes.

unknown: Ooh.

unknown: No.

unknown: Yes.

unknown: [music].

unknown: Okay.

unknown: Yeah.

unknown: Okay.

unknown: Yes.

Speaker Change: Thank you.

unknown: Okay.

unknown: Certainly.

unknown: No.

unknown: <unk>.

unknown: Sure.

unknown: Yes.

unknown: Sure.

unknown: Yeah.

unknown: Great.

unknown: Okay.

unknown: Sure.

unknown: Okay.

unknown: <unk>.

unknown: Great.

unknown: [music].

unknown: Yes.

unknown: Sure.

unknown: Yes.

unknown: [music].

unknown: Okay.

unknown: Yes.

unknown: Great.

unknown: Sure.

Speaker Change: Uh huh.

unknown: Sure.

unknown: [music].

unknown: Yes.

unknown: [music].

unknown: Yes.

unknown: [music].

unknown: Yes.

unknown: Yes.

unknown: Okay.

unknown: Sure.

unknown: Yeah.

unknown: Yes.

unknown: Yes.

unknown: [music].

unknown: Okay.

unknown: Yes.

unknown: Yeah.

unknown: Yes.

unknown: Okay.

unknown: Yes.

unknown: Okay.

unknown: [music].

unknown: Okay.

unknown: [music].

unknown: Sure.

unknown: Okay.

unknown: Yes.

unknown: Yeah.

unknown: Yes.

unknown: <unk>.

unknown: [music].

unknown: Yes.

unknown: Okay.

unknown: Okay.

unknown: Okay.

unknown: Yes.

unknown: [music].

unknown: Yes.

unknown: Yes.

unknown: Yeah.

Speaker Change: All right.

unknown: Okay.

unknown: [music].

unknown: Yes.

unknown: Okay.

unknown: Okay.

unknown: Okay.

unknown: [music].

unknown: Yes.

unknown: [music].

unknown: Okay.

unknown: Okay.

unknown: Yes.

unknown: [music].

unknown: Sure.

unknown: Oh.

unknown: Zero.

unknown: [music].

unknown: Yes.

unknown: Thanks.

unknown: Certainly.

unknown: No.

unknown: Sure.

unknown: Yes.

unknown: Great.

unknown: Yes.

unknown: Okay.

unknown: Sure.

unknown: Okay.

unknown: <unk>.

unknown: Okay.

unknown: Great.

unknown: [music].

unknown: Yes.

unknown: Sure.

unknown: Sure.

unknown: Yes.

unknown: Sure.

unknown: Yeah.

unknown: [music].

Speaker Change: Thank you.

unknown: Yes.

unknown: Okay.

unknown: Yes.

unknown: Yes.

unknown: [music].

unknown: Okay.

unknown: Yes.

unknown: [music].

unknown: Okay.

unknown: Yes.

unknown: Okay.

unknown: Yes.

unknown: [music].

unknown: Sure.

unknown: Okay.

unknown: [music].

unknown: Sure.

unknown: Okay.

unknown: Yes.

unknown: Yeah.

unknown: Yes.

unknown: <unk>.

unknown: [music].

unknown: Yes.

unknown: [music].

unknown: Okay.

unknown: [music].

unknown: Yes.

unknown: [music].

unknown: Yes.

unknown: Yes.

unknown: Yeah.

Speaker Change: All right.

unknown: Okay.

unknown: [music].

unknown: Yes.

unknown: Okay.

unknown: Okay.

unknown: Okay.

unknown: [music].

unknown: Yes.

unknown: [music].

unknown: Okay.

unknown: Okay.

unknown: Sure.

unknown: [music].

unknown: Sure.

unknown: Oh.

unknown: [music].

unknown: Zero.

unknown: Yeah.

unknown: [music].

Speaker Change: Thank you.

unknown: Okay.

Speaker Change: Please go ahead.

unknown: No.

unknown: Yeah.

unknown: Sure.

unknown: Sure.

unknown: Great.

unknown: Okay.

unknown: Sure.

unknown: Okay.

unknown: <unk>.

unknown: Okay.

unknown: Great.

unknown: [music].

unknown: Nobody.

unknown: Okay.

unknown: Yeah.

unknown: Sure.

unknown: Yeah.

unknown: [music].

unknown: Okay.

unknown: Yes.

unknown: Yes.

unknown: Yes.

unknown: [music].

unknown: Okay.

unknown: [music].

unknown: Yes.

unknown: Yes.

unknown: Yes.

unknown: [music].

unknown: Yes.

unknown: Yeah.

unknown: [music].

unknown: Yes.

unknown: Okay.

unknown: Okay.

unknown: Yes.

unknown: [music].

unknown: Yeah.

unknown: Yes.

unknown: Oh.

unknown: Okay.

unknown: [music].

unknown: Yes.

unknown: Okay.

unknown: Okay.

unknown: Yes.

unknown: [music].

unknown: Yes.

unknown: [music].

unknown: Yes.

unknown: Yes.

unknown: Okay.

unknown: Okay.

unknown: Okay.

unknown: Okay.

unknown: [music].

unknown: Zero.

unknown: Yeah.

unknown: [music].

unknown: Okay.

Speaker Change: Please go ahead.

unknown: No.

unknown: <unk>.

unknown: Sure.

unknown: Sure.

unknown: Great.

unknown: Okay.

unknown: <unk>.

unknown: <unk> never said that.

unknown: <unk>.

unknown: Sure.

unknown: Okay.

unknown: Great.

unknown: [music].

unknown: Nobody.

unknown: Great.

unknown: Yes.

unknown: [music].

unknown: Yes.

unknown: Okay.

unknown: Okay.

unknown: Yes.

unknown: [music].

unknown: Yes.

unknown: [music].

unknown: Yes.

unknown: [music].

unknown: Okay.

unknown: [music].

unknown: Yes.

unknown: [music].

unknown: Always.

unknown: [music].

unknown: Okay.

unknown: Yeah.

unknown: Okay.

unknown: Okay.

unknown: Okay.

unknown: [music].

unknown: Yes.

unknown: [music].

unknown: Yes.

unknown: Okay.

unknown: Yes.

unknown: Okay.

unknown: Okay.

unknown: Yes.

unknown: [music].

unknown: Zero.

unknown: [music].

unknown: Okay.

Speaker Change: Please go ahead.

unknown: No.

unknown: Sure.

unknown: Sure.

unknown: Sure.

unknown: Great.

unknown: Sure.

unknown: Okay.

unknown: <unk>.

unknown: Great.

unknown: [music].

unknown: Nobody.

unknown: Okay.

unknown: Yeah.

unknown: [music].

unknown: Yes.

unknown: [music].

unknown: Okay.

unknown: [music].

unknown: Okay.

unknown: Okay.

unknown: Yes.

unknown: [music].

unknown: Yeah.

unknown: [music].

unknown: Okay.

unknown: Okay.

unknown: [music].

unknown: Yes.

unknown: Okay.

unknown: Sangamo.

unknown: [music].

unknown: Okay.

unknown: Yes.

unknown: Okay.

unknown: Okay.

unknown: [music].

unknown: Zero.

unknown: [music].

unknown: Okay.

Speaker Change: Please go ahead.

unknown: No.

unknown: Sure.

unknown: Yeah.

unknown: Sure.

unknown: Great.

unknown: Sure.

unknown: Okay.

unknown: <unk>.

unknown: Great.

unknown: [music].

unknown: Nobody.

unknown: Okay.

unknown: Yeah.

unknown: [music].

unknown: Yes.

unknown: [music].

unknown: Okay.

unknown: [music].

unknown: Yes.

unknown: [music].

unknown: <unk>.

unknown: [music].

unknown: Yes.

unknown: Okay.

unknown: Okay.

unknown: Okay.

unknown: [music].

unknown: Okay.

unknown: Yes.

unknown: Okay.

unknown: Okay.

unknown: Yes.

unknown: [music].

unknown: Zero.

unknown: [music].

unknown: Okay.

Speaker Change: Please go ahead.

unknown: No.

unknown: Sure.

unknown: Yeah.

unknown: Sure.

unknown: Great.

unknown: Sure.

unknown: Okay.

unknown: <unk>.

unknown: Great.

unknown: [music].

unknown: Nobody.

unknown: Okay.

unknown: Yeah.

unknown: [music].

unknown: Yes.

unknown: [music].

unknown: Okay.

unknown: [music].

unknown: Yes.

unknown: [music].

unknown: Yes.

unknown: Okay.

unknown: Sangamo.

unknown: Okay.

unknown: [music].

unknown: Yes.

unknown: [music].

unknown: Okay.

unknown: Yes.

unknown: Okay.

unknown: Okay.

unknown: Yes.

unknown: [music].

unknown: Zero.

unknown: Yeah.

unknown: [music].

unknown: Okay.

Speaker Change: Please go ahead.

unknown: No.

unknown: Yeah.

unknown: Sure.

unknown: Sure.

unknown: Great.

unknown: Sure.

unknown: Okay.

unknown: <unk>.

unknown: Okay.

unknown: Great.

unknown: [music].

unknown: Nobody.

unknown: Okay.

unknown: Yeah.

unknown: Sure.

unknown: Yeah.

unknown: [music].

unknown: Okay.

unknown: [music].

unknown: Okay.

unknown: [music].

unknown: Yes.

unknown: [music].

unknown: Yes.

unknown: Okay.

unknown: Sangamo.

unknown: Okay.

unknown: [music].

unknown: Yes.

unknown: [music].

unknown: Okay.

unknown: Yes.

unknown: Okay.

unknown: Okay.

unknown: Yes.

unknown: [music].

unknown: Zero.

unknown: Yeah.

unknown: [music].

unknown: Okay.

Speaker Change: Please go ahead.

unknown: No.

unknown: Yeah.

unknown: Sure.

unknown: Sure.

unknown: Great.

unknown: Sure.

unknown: Okay.

unknown: <unk>.

unknown: Okay.

unknown: Great.

unknown: [music].

unknown: Nobody.

unknown: Okay.

unknown: Yeah.

unknown: Sure.

unknown: Yeah.

unknown: [music].