Q1 2025 Sonos Inc Earnings Call - Q&A
Thank you for standing by my name is jail and it'll be a conference operator today.
This time I would like to welcome everyone to the <unk> first quarter fiscal 2025 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 would like to ask questions. During this time simply press star followed by the number one on your telephone keypad.
If you would like to withdraw your question Press Star one again.
James: Now I'd like to turn conference over to James James <unk> head of Investor Relations you may begin.
James Mcmanus: Good afternoon, and welcome to <unk> first quarter fiscal 2025 earnings Conference call I'm, James Mcmanus and with me today are Sun as interim CEO, Tom Conrad D F O salary, Casey and Chief legal and strategy Officer, Eddie Lazarus.
James Mcmanus: For those who joined the call early today's hold music is a sampling from the Sone US radio station. They allowed which is curated in collaboration with block at Sonus and recognition of Black history month before I hand, it over to Tom I would like to remind everyone that today's discussion will include forward looking statements regarding future events and our future financial performance.
James Mcmanus: These statements reflect our views as of today, only and should not be considered as representing our views of any subsequent date. 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.
James Mcmanus: A discussion of these risk factors is fully detailed under the caption risk factors in our filings with the SEC.
James Mcmanus: 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 first quarter results posted to the Investor relations portion of our website.
James Mcmanus: As a reminder, the press release supplemental earnings presentation, including our guidance conference call transcript will be available on our Investor Relations website investors Dos Santos dotcom.
Tom: I will now turn the call over to Tom.
Tom: Thank you James and thank you all for joining US today I'm now in my fourth week as interim CEO, it's still early days, but not too soon to make a few observations.
Tom: First.
Tom: We have a lot of work to do despite recent progress our core experience still needs significant improvement.
Tom: Second we must continue our effort to bring our expenses in line with our revenue.
Tom: And third I'm more convinced than ever that Sonus has a large market opportunity ahead of us.
Tom: Both in its current categories and in close Adjacencies and I know that we have the best team in the world to seize this opportunity.
Tom: We're moving quickly and with purpose across all these interrelated fronts.
Speaker Change: As a board member I started working closely with our software team. This past fall and I can tell you that they have an absolute dedication to improving the scientists experience to a place that exceeds the expectations of all of our customers.
Tom: I'm all in on reinvigorating and accelerating this essential work.
Tom: With focus and priorities as we tackle what are frankly, some very complex and long standing software problems.
Speaker Change: As a longtime passionate customer and myself I know the magic of summer, but I also know the extreme disappointment of the company's recent top challenges.
Speaker Change: With respect to our expense base I'm closely partnering with our CFO salary Casey to drive operational efficiency and improve our financial performance.
Speaker Change: To accomplish this I'm returning so nice to have scrap here and more focused enterprise drawing on the lessons I've learned from our successes and challenges I've navigated of companies of all stripes appropriate 30 years from Apple to Pandora to Snapchat to quickly.
To this end yesterday, we executed on a set of significant changes to the way we operate.
Speaker Change: I reorganized our product and engineering staff into functional teams for hardware software design quality and operations and away from dedicated business units devoted to individual product categories.
Speaker Change: This allows us to bring together right sized cross functional projects that maximize our efficiency as we continuously evaluate prioritize and focus on the highest value market opportunities.
Speaker Change: These changes will reveal the organizational layers and redundancies that we're not serving us.
Speaker Change: This means the difficult task of saying goodbye to about 200 employees, including nearly 50 managers and executives.
Speaker Change: This is one more step in the structural transformation process that CRE has been describing on our last two earnings calls.
Speaker Change: This process began in our G&A function in other parts of Sonus have followed suit.
Speaker Change: As I just mentioned our focus is now on the total overhaul of the product organization, which houses more than half of our employees.
Speaker Change: While these actions represent a major milestone in our transformation journey. We are not finished we will continue to carefully scrutinize the allocation of all dollars to ensure that they are being applied to the highest return opportunities.
Speaker Change: The leaner and more effective we are as a company the better we can capitalize on the opportunities in front of us.
Speaker Change: It's a wonderful honor to be stepping in to lead <unk> at this pivotal juncture. The board will be conducting a robust national search for the next permanent CEO with the assistance of a leading executive search firm and I will be a candidate.
Speaker Change: While that process plays out there's no time to lose and pushing forward the vital work of fixing restructuring and innovating.
Speaker Change: Today has the deepest most innovative product lineup in its history.
Speaker Change: There is tremendous opportunity in front of us and my job is to help scientists take full advantage of it while running the company with a heightened focus on fiscal responsibility we.
Speaker Change: We have a terrific team and I look forward to the progress we're going to make together.
Speaker Change: Now, let me turn things over to Sarah to discuss our Q1 results.
Sarah: Thank you Tom Hi, everyone. We delivered Q1 revenue towards the high end of our guidance at $551 million on a year over year basis revenue was down 10% versus our guidance of down 22% to down 9%. The decline was driven by softer demand due to market conditions and challenges resulting from.
Sarah: Our 2024 App rollout.
Sarah: We've been talking about for some time now our categories remains cyclically challenged and highly promotional.
Sarah: Which was particularly notable in our portables category.
Sarah: Despite these headwinds we saw stronger than expected demand for our new industry, leading sound bar, the Ark, Ultra which helped us achieve our highest ever quarterly market share in U S home theater on a dollar basis.
Sarah: GAAP gross margin was 43, 8% plus 80 basis points above the high end of our guidance range driven by better cost and product mix. As a reminder, we began amortizing the might intangible assets now that we are using it sound motion technology, and Oracle trial, which was minus 40 basis points.
Sarah: <unk> year over year GAAP gross margins.
non-GAAP gross margins were 44, 7%.
Sarah: Q1, GAAP operating expenses for $193 million and non-GAAP operating expenses were $169 million.
Down, 5% and down 6% year over year, respectively.
Sarah: Both figures includes $6 million of App recovery investments in the quarter.
Sarah: non-GAAP operating expenses came in about $13 million below our guidance due to both expense management efforts and timing of spend.
Sarah: Speaking of expense management last quarter I spoke about how we had begun our transformation efforts last year with our G&A functions. As a result, this quarter, we saw GAAP G&A expenses decreased significantly to $25 $8 million down 35% year over year.
Sarah: This decline is attributable to four factors one lower personnel costs from the August 2020 for reduction in force, which was focused on reducing management layers and optimizing cost structure.
Sarah: Second lower litigation expenses third lower operational costs are facilities in vendor spend rationalization.
Timing shift of spending which had an approximately $2 million of benefit to G&A in the quarter.
Sarah: On a GAAP year over year basis sales and marketing increased by 3% in part due to the App recovery investments research.
Sarah: Research and development increased 2%, primarily due to our stock based compensation expense related to retention of key personnel.
Sarah: On a non-GAAP year over year basis, G&A expenses decreased by 31% research and development expenses decreased by 3% and sales and marketing expenses increased by 1%.
Sarah: Adjusted EBITDA was $91 2 million, representing a margin of 16, 6%.
Sarah: This was above the high end of our guidance range due to higher gross margin and lower operating expenses.
Sarah: We ended the quarter with $328 million of net cash which includes $41 million of marketable securities as we hold excess cash and short duration Treasury bills.
Sarah: Q1 free cash flow was $143 million down from $269 million last year due to lower revenue as well as two unique factors that impacted last year's free cash flow.
Sarah: First we were actively working down our excess owned inventory as we entered Q1 of fiscal 2024 with $82 million more finished goods inventory than this year's Q1.
Sarah: Q1 of last year benefited from the implementation of new payment terms with our suppliers, which resulted in a large one time benefit to free cash flow.
Sarah: Our period end inventory balance decreased by 19% year over year to $141 million, primarily due to lower component balances. So.
Sarah: <unk> this was a decline of 39%.
Sarah: Inventory consists of $117 million of finished goods and $24 million of components.
Sarah: After pausing share repurchases in fiscal Q4, we returned $27 million to shareholders in Q1, reducing our share count by one 9 million shares, leaving us with $44 million under our current $200 million share repurchases authorization for <unk>.
Sarah: Turning capital to our shareholders remain a key pillar of our capital allocation framework.
Sarah: Turning to our guidance the Q2 outlook, we're providing reflects our best estimates as of today.
Sarah: We expect Q2 revenue in the range of $240 million to $265 million a year over year change of negative 5% to positive 5%.
Sarah: Our Q1 results and Q2 guidance implies our revenue in the first half of the year will be down between minus 9% to minus 6% versus the first half of fiscal 2024.
Sarah: Please note that while we are not providing guidance beyond Q2 at this point I'd like to remind everyone that we benefited from the launch and associated channel fill of Ace headphones towards the end of Q3 last year and as a result, we expect to have a very difficult year over year comparison in Q3.
Sarah: We expect Q2 GAAP gross margin in the range of 42% to 44% down at midpoint from Q1, driven by deleverage, partly offset by product mix and seasonally lower discount.
Sarah: The decrease from last year's Q2, GAAP gross margin of 44, 3% is driven by FX headwinds and the amortization of might intangible assets for the sound motion technology and arc altra, partly offset by improved cost structure.
Sarah: non-GAAP gross margins are expected to be 44% to 45, 8%.
Sarah: 180 bps to 200 bps higher than GAAP gross margins.
Sarah: You may recall, we underwent a significant effort to diversify our supply chain a few years ago, which resulted in a manufacturing of nearly all of our U S bound products shifting to Malaysia, and Vietnam. As a result, we expect tariffs to have a minimal impact to our gross margin in Q2 based on what we know today.
Sarah: We expect non-GAAP operating expenses to be between $140 million to $145 million compared to $157 million last year.
Sarah: As a result, we expect Q2 adjusted EBITDA to be in the range of negative $27 million to negative $6 million.
Sarah: Compared to negative $34 million last year.
Sarah: Our guidance contemplates that we will make another $4 million to $8 million of App recovery investments in Q2.
Sarah: Lastly, I want to summarize the actions from the transformation journey that Tom and I had mentioned on this earnings call.
Sarah: We expect the run rate savings of the announced actions from yesterday and those taken in FY 'twenty four to be in the range of 60 million to $70 million into FY 'twenty six while we're not providing fiscal 2025 expense target. Please note that our FY 'twenty four baseline opex normalize for variable compensation.
Sarah: <unk> and restructuring expenses was around $770 million on a GAAP basis and around $680 million on a non-GAAP basis.
Sarah: We expect that the actions we have taken so far will fundamentally change and simplify the way, we operate or flattening in evolving our organization structure as well as identifying areas to reduce our operational costs.
Sarah: These actions are intended to reduce our run rate expense base, while improving our efficiency and effectiveness.
Sarah: Though we have made significant progress.
Sarah: Transformation journey will continue as we work to identify other areas of operational improvements and spend rationalization. We believe that successfully executing on our efforts will allow us to invest in the most impactful growth oriented opportunities, while structurally improving our profitability.
Sarah: We will continue to update you on our progress as we work through the year with that I'd like to turn the call over for questions.
Sarah: Thank you the floor is now open for questions. If you have dialed in and would like to ask a question. Please press star one on your telephone keypad to raise your hand and joined the queue.
Sarah: If you would like to withdraw your question simply press Star one again.
Sarah: You are called upon to ask a question and are listening if you're allowed to speak on your device. Please pickup your handset and ensure that your phone is not on mute when asking your question.
Sarah: Your first question comes from the line of Steve Frankel of Rosenblatt. Your line is open.
Steve Frankel: Good afternoon.
Speaker Change: They released today was a bit unconventional with the numbers out before they open and then Paul happened. This afternoon, what drove that behavior.
Speaker Change: So let me start by apologizing for the unconventional nature of this timing and he will take you through a little bit about how we ended up there.
Speaker Change: I've been here for three five weeks now and I'm working to move the company forward quickly and with purpose.
Speaker Change: We've made a set of organizational optimization and the related cost savings.
Speaker Change: We're among my top priorities coming in the door, which meant that the timing of the reorganization announcement in the earnings was sort of a delicate matter I had to balance effectively communicating these complicated changes involving around 200 departing colleagues in nearly 1000 product team members being reorganized with my responsibilities around the call.
Speaker Change: I decided that the best course was to announce the reorganization and related breath. After the market closed yesterday and the day ahead of earnings which gave me the time late yesterday to land these changes with the team.
To minimize uncertainty with our investors today, we moved the release timing to before the market opened.
Speaker Change: We let the timing of the earnings call itself intact, because it had been announced and before I arrived and we thought it would be too disruptive to move it. Thank you for your understanding about.
Speaker Change: The late breaking shifts at all of this.
Speaker Change: Thank you for that insight maybe give.
Speaker Change: Give us the top two or three most important changes do you think the company has to make.
Speaker Change: Going forward.
Speaker Change: Yeah.
Speaker Change: As I said I have a pretty pretty strong biased action in my first three and a half weeks, we've reorganized the company into a far more efficient structure. We've made concrete progress on right sizing our expense base, we've clarified our areas of focus to get the entire company rowing together in the same direction.
Speaker Change: Which really sets us all up to begin operating the company much more efficiently and with a much more shared stronger sense of purpose.
Speaker Change: So my focus now is getting <unk> back on track, which means improving the core experience for our customers optimizing our business to drive innovation and delivering operational and financial performance.
Speaker Change: Okay.
Speaker Change: Last quarter.
Speaker Change: The message was the App was almost there.
Speaker Change: Where do we think we are today and how much longer is it going to take to get both the iOS and Android.
Speaker Change: Android experience, where they need to be to kind of restore the brand.
Speaker Change: So the team has certainly made a lot of progress in Q4 and that allowed us to successfully launch our ultra and sub four both of which are a hit with both customers and reviewers.
Speaker Change: And now I would say that the team and I are just really focused on what I would call a return to excellence in the core experience kind of having moved beyond getting the app back to the.
The place that we needed this core functionality to be.
Speaker Change: But honestly there remains a lot of work to do to meet my bar and so were focusing on three areas performance and reliability usability and design and new experiences.
Speaker Change: Okay.
Speaker Change: And any timetable for.
Speaker Change: When you think you'll be satisfied.
Speaker Change: I mean at some level as our product and engineering leader of 30 years I'm not sure I'm never going to be fully satisfied part of what makes great companies is to continuing to invest in improving the experience day in day out and I put most of the work that we have in front of us and exactly that category.
Speaker Change: Okay, and then one last quick one.
Speaker Change: Where are channel inventories today, and how does that square with.
Speaker Change: The desired levels.
Speaker Change: Hi, David.
Speaker Change: I can take that question.
Speaker Change: We ended the channel inventory at a comfortable place at the end of Q1.
Speaker Change: As you recall last year, we were in a different place. So we're pleased with where we ended the quarter going into Q.
Speaker Change: Okay. Thank you I'll go back into the queue.
Speaker Change: Your next question comes from the line of Logan Huntsman of Raymond James and is open.
Hi, guys. This is Logan on for Adam just two quick ones for me.
Speaker Change: Tom maybe first for you.
Speaker Change: With all the changes you're implementing or can we still expect to product launches a year.
Speaker Change: Or has that been put on pause.
Speaker Change: We're certainly committed to continuing to ship many great products.
Speaker Change: Each year.
Speaker Change: I'm, probably going to hold off on making specific commitments about the product roadmap.
Speaker Change: Yes. It makes sense. Thank you and then just one last question from me any changes to capital allocation or anything that you guys want to.
Talk about around that.
Speaker Change: You can take that question.
Speaker Change: We continue to be focused on our capital allocation strategy as you recall, we did pause the buyback in Q4, while we were focused on the up recovery progress to make sure that it was stable enough, but we have resumed the buyback.
Speaker Change: As we mentioned and a weak we continue to.
Seems to be judicious about our capital allocation and returning capital.
Speaker Change: To our shareholders remains our pillar of our strategy.
Speaker Change: Great. Thanks, guys.
Speaker Change: Yes.
Speaker Change: Your next question comes from the line of Erik Woodring of Morgan Stanley. Your line is open.
Erik Woodring: Great. Thank you so much for taking my question.
Speaker Change: Nice to meet you Tom.
Speaker Change: In the letter you send to employees yesterday, you reference so no it's becoming mired in too many layers that have made collaboration and decision making harder than it needs to be can.
Speaker Change: Can you maybe just expand upon exactly.
Speaker Change: What do you mean by that and help us understand how the actions you're taking are going to kind of help on the on the product front or if it's more would be on the products, but just help us understand what exactly you mean by that and then I have a quick follow up thank you.
Speaker Change: Sure so.
Speaker Change: The product organization in particular had had a sort of business unit organization strategy, where there were separate organizations for different elements of our product line, our professional category of portables category home category and so on and.
Speaker Change: What that meant is we had a bunch of kind of redundancies across those teams.
Speaker Change: Head of mechanical engineering for example on each one and team members underneath that.
Speaker Change: As we seek to have flexibility.
Speaker Change: <unk> ability and the way that we apply our resources to our roadmap, having that particular set of products hard coded into the organizational structure just creates a lot of overhead and a lack of flexibility around being able to react nimbly to market conditions and so by moving to a functional organization with a hardware.
Speaker Change: And our software team and operations team and the design team and our QA team that allows us to sort of put together, what I would call right sized projects that have the.
Speaker Change: Sort of minimal powerful set of people that need to come together to address some particular market opportunity and that just.
Let us move more quickly and it gets us collaborating much more efficiently.
Speaker Change: I was alluding to.
Speaker Change: E Mail yesterday.
Speaker Change: No no that's helpful.
Speaker Change: Maybe maybe I have a different follow up which is just.
Speaker Change: If I could maybe double click on that is.
Speaker Change: It seems like Thats been.
Speaker Change: And please correct me if I'm wrong.
Speaker Change: Somehow for years, if not decades now so I guess what has.
Speaker Change: <unk> really changed now I mean, you've been on the board I guess I'm just I'm just wondering why make the change now with if we look back beyond maybe the last three years you guys were going through multiple years of 10% growth. Obviously, it's been a very challenging market, but you've had that structure. While you were successful.
Speaker Change: Why is that not the success successful structure going forward or is this really just about making sure you're being more efficient going forward.
Speaker Change: Yes, actually the business unit structure was put into place about 18 months ago.
Speaker Change: At replacing sort of what I would call it sort of semi functional model that was I guess I would describe it as hardware top heavy in its previous incarnation where the.
Speaker Change: Included in the hardware organization, where some of these same more product line.
Speaker Change: Dimensions, but.
Speaker Change: The hardware group is complemented by a functional group for software at a functional group for design for example.
Speaker Change: And so what we're doing here is in a way a return to form that worked so well for us.
Speaker Change: But also I.
Speaker Change: I think we are further refining the model pulling out the idea that everything we do has to start with a hardware new product.
Speaker Change: Which would allow us I think to navigate much more.
Speaker Change: Not just efficiently, but effectively with respect to the kinds of poor experience initiatives that our customers care about.
Speaker Change: Okay that makes that makes sense.
Speaker Change: Thank you for that clarification Super helpful and then.
Last question for me sorry.
Speaker Change: I know you don't guide beyond the quarter out if you look and I. Appreciate the comments you made on the product launch last June quarter.
Speaker Change: You look back in history, and just exclude the June 24 quarter your seasonality in fiscal <unk> revenue seasonality has been anywhere between down 7% sequentially and up 42% sequentially.
Speaker Change: This leaves a very.
Speaker Change: Wide range for consensus to fall in.
Speaker Change: Wondering if you have.
Speaker Change: And Sir any comments to help us on the call kind of make sure that we're kind of thinking about just where baby what years, we could look to in history to maybe set the proper bar for the June quarter I realize there's a lot of moving pieces, but just wondering if we could have I mean any more detail to just kind of maybe help us narrow the scope of how we should be thinking about.
Speaker Change: The June quarter and Thats. It for me. Thank you.
Speaker Change: Hi, Eric Thanks for that question. It certainly is.
Challenging even if I was looking back if there was a pattern there and to your point there is a wide range. At this point, we were only able to provide color relative to last year's view that the pattern will look different than last year as a result of the ace launched in that channel.
At the end of the quarter, so well leave it at that at this point.
Speaker Change: To your point there is not a great pattern on a sequential basis going into Q3.
Speaker Change: Okay. Thank you, Okay I understand I understand thank you so much.
Speaker Change: Hmm.
Speaker Change: Your next question comes from the line of Alex Fuhrman of Craig Hallum. Your line is open.
Alex Fuhrman: Hey, guys. Thanks, very much for taking my question.
Speaker Change: Wanted to ask about the workforce reduction and just more more broadly.
Speaker Change: About kind of the company going forward being a leaner more streamlined operation how much of the organization today is focused on hardware development versus software development versus things like sales and marketing can you give us a sense of just the biggest shifts in how the company is different today than how it was just a year.
[noise] ago.
Speaker Change: Okay.
Speaker Change: I'll start by talking about the product organization.
Speaker Change: So I think.
Speaker Change: So much of what we do that people perceive as hardware is actually software and so our software organization is today in fact quite a bit larger than our hardware organization I think the rough numbers are hardware is around 150 people and software is more than double that.
Speaker Change: Uh Huh of course, we have a talented team around design QA.
Speaker Change: Operations, and so forth that complements all of that in our product organization.
Speaker Change: Terry do you want to talk to you and how that relates to the art Yeah. Just from a if you look at our Opex, you'll see the ratio among just on a dollar basis, among R&D sales and marketing and G&A now now.
Speaker Change: They're our cyclicality to the marketing spend for holiday seasons, and so forth so and just in general in aggregate, but from a head count perspective that.
Speaker Change: Probably.
Speaker Change: The biggest part of the company by far is the R&D head count.
Speaker Change: And then those G&A head count and then sales and marketing head count and marketing.
Speaker Change: I would have a big part of the expenses related to the CEB non head count dollars, but G&A more leaning towards the head count down for us as it is for R&D. So.
Speaker Change: Probably best to look at this on a dollar basis because of the the way we spend at the operating expenses and investments, but that's sort of the general lineup relative terms in terms of headcount resources.
Speaker Change: That's really helpful. And then so you worry I think you'd mentioned some kind of baseline opex numbers from this year should we be thinking about the opportunity for a step function lower in the future in opex or is it maybe more about an opportunity to just be growing sales faster than expenses in future.
Speaker Change: For years can you help us understand that.
Speaker Change: Yes.
Speaker Change: Yes, thanks for that question.
Speaker Change: While we've announced these risk reduction in force specifically around the head count we're continuing to look at a lot of the cost optimization opportunities I know, we've been a little less concrete about what it means by changing cost structures that it really is looking at every dollar and how were they look us.
Speaker Change: Spend a dollar and a more efficient way effective way and that could be anywhere from real estate footprint that may or not be it would be effective in producing and helping our better best return for the investments all the way to negotiating better fees and so forth. So that's it is beyond head count that we're looking at.
Speaker Change: We continue to go through our transformation process and so it's sort of a journey than what we've already announced so far.
Speaker Change: Announcing any guidance on opex beyond what we're providing today, but we are continuing to look at this to make sure that.
Speaker Change: It's it's a there's still opportunities as we said on the earnings on the prepared remarks that theres still opportunities that we can continue to drive for.
I'll just I'll just add that if you.
Speaker Change: Obviously I was just going to add that if you look at my background Youre going to see a lot of instances, where I have helped take young startup companies through their growth phase and into being newly public and one of the muscles that you're really developing that processes is learning to scrutinize all expenses as they come through and I'm really particularly focused.
Speaker Change: On making sure that we're making investments where we'll see the highest possible returns.
Speaker Change: Okay. That's really helpful. Thank you both.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: Thank you and again, if he would like to ask a question. Please press star one on your telephone keypad to join the queue.
Speaker Change: Your next question comes from the line of Brent Thill of Jefferies. Your line is open.
Brent Thill: Yeah. Thanks, Tom just on the 12%.
Speaker Change: <unk> and <unk> can you discuss what's that.
Speaker Change: Kind of across all functional areas was it focused on a couple of bigger areas.
Speaker Change: Perhaps you could you could discuss some of the changes that you've made in the software development team have you have you made changes leadership what are you what are you doing there.
Speaker Change: Those experiences back so we adult consumers have a have a cleaner simpler experience.
Speaker Change: Yes, so a lot of great work had been done by say ori to bringing our operating expenses in line and the G&A line.
Speaker Change: In previous quarters.
Speaker Change: Yes.
Speaker Change: This set of changes is really focused on the remaining dimensions of the company with a particular emphasis on changes in the product organization as I've described the reorganization itself revealed.
Speaker Change: Significant redundancies across the product organization and opportunities for us too.
Speaker Change: Step into a smaller but more effective team is another thing that kind of comes from having spent a chunk of my career in startup land do you often discover that that.
Speaker Change: The size of the team is not highly correlated with the output of the team and we've done a really great job I think over the course.
Speaker Change: Of this recent period of.
Speaker Change: Sorting of path to making the product and engineering organization smaller, but more efficient and more powerful I'm really confident that we have the right team in place too.
To deliver on.
Speaker Change: Enhancements to the core experience that I'm so committed to.
Speaker Change: Okay and just on the software side have you made changes and that leadership team to ensure they are on the right track.
Speaker Change: That's right so about across the product organization we.
Speaker Change: Exited about half a dozen vice president's and reorganized teams around our most effective leadership for the for the go forward plan.
Speaker Change: It's a great group I know, we're gonna make lots of progress.
Speaker Change: Okay, great. Thanks.
Speaker Change: We have a follow up question from the line of Steve Frankel of Rosenblatt. Your line is open.
Steve Frankel: I just wondered if you might give us any color on how ace did any important holiday season.
Speaker Change: Hi, Steve.
Steve Frankel: We.
Steve Frankel: From a revenue results perspective, certainly ace was an incremental two our year over year and so our quarter and it continues to get great reviews from our customers and as.
Steve Frankel: As we mentioned on our earnings call. It was off to a slow start and so we were whereas we continue to go through the recovery of our brand and certainly if <unk> launched at the worst time possible from an up launch timing perspective, and so it's a we're certainly.
Steve Frankel: <unk> progress and we're not able to disclose the exact results.
Steve Frankel: As we disclose the categories that we do externally, but we are pleased to have <unk>.
Steve Frankel: Being a great review from our customers and incremental to our revenue.
Steve Frankel: Alright, thank you.
Steve Frankel: Yeah.
Steve Frankel: With no further questions that concludes our Q&A session and the conference call. We thank you for your attendance you may now disconnect.
Steve Frankel: Okay.
Steve Frankel: Okay.
Steve Frankel: Okay.
Steve Frankel: Thank you.
Thank you.
Steve Frankel: Steve.
Steve Frankel: Okay.
Steve Frankel: Yeah.
Steve Frankel: [music].
Steve Frankel: Okay.
Steve Frankel: [music].
Steve Frankel: Okay.
[music].
Steve Frankel: Thank you Jason.
Steve Frankel: Yeah.