Sonos Says It Has 93% of the CI Channel Wireless Speaker Category
Sonos has 93% share of the wireless speaker category in the custom installation channel, said the company’s 10-K report filed with the SEC Wednesday. In FY ’22, ended Oct. 1, Sonos generated 21.2% of revenue through the installer solutions channel. Best Buy generated 15% of revenue.
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Revenue through Sonos’ direct-to-consumer e-commerce business slipped to 22.5% of total revenue in FY ’22, from 24.2% in the prior year, it said. The e-commerce business grew 46.5% year on year in FY ’21. Some 45% of FY ’22 revenue came from international markets; Sonos products are sold in over 60 countries, it said.
Sonos ended the fiscal year with existing households at about 44% of new product registrations. The company believes it can derive additional revenue from its installed base of systems in the market. “Our ability to sell additional products to existing customers is a key part of our business model, as follow-on purchases indicate high customer engagement and satisfaction, decrease the likelihood of competitive substitution, and result in higher customer lifetime value,” it said.
Sonos' ability to develop, manufacture, and sell voice-enabled speakers with differentiated consumer experiences will be a critical driver of future performance, it said, “particularly as we compete in a larger market with an expanding number of competitors.”
The wireless speaker company competes with companies that have brought voice-controlled speakers to market and has agreements with some that “to date” are on a royalty-free basis, it said. Its relationship with Amazon allows that company to “disable the Alexa integration in our voice-enabled products with limited notice,” Sonos said. The company introduced its own voice assistant in June, focused specifically on the audio experience.
Its competitiveness in the voice-enabled speaker market will depend on “successful investment in research and development,” market acceptance of its products and its ability to maintain and benefit from its technology partnerships. “As competition increases, we believe our ability to give users the freedom to choose across a broad set of streaming services and voice control partners will be an important key differentiating factor,” Sonos said.
Sonos operates in “intensely competitive markets characterized by changing consumer preferences and rapid technological innovation,” it said. “Due to advanced technological innovation and the relative ease of technology imitation, new products tend to become standardized more rapidly, leading to more intense competition and ongoing price erosion," it said. Sonos invests heavily in R&D to strengthen its competitiveness.
Among risk factors to Sonos’ profitability are factors “outside of our control” such as the global economy, it said. Demand for Sonos products in FY '22 was affected by economic uncertainty, inflation and war in Ukraine. Despite ending FY ’21 with a profit, the company accumulated a $2.5 million deficit at the end of FY ’22. Sonos expects operating costs to increase in the future as it expands global operations and develops new products.
Sonos may look to expand beyond core residential sound systems and develop products for the commercial or office space, it said. Doing so would require “substantial additional resources” and carry risk due to its unproven ability to address such markets, it said.