Sonos shares crank up 30% on ‘record’ results and $50m stock buyback

Sitting atop the Nasdaq as trading closed on Thursday, home audio innovators Sonos (NASDAQ:SONO) saw their share price rocket on a double-barrelled packet of good news for its investors.

The company swung from a $29.6 million loss to $18.4 million income year-on-year during the fourth quarter. Similarly, revenue jumped by 16%, to $339.8 million, while adjusted EBITDA spun around, from a $2.8 million loss to $46.4 million in earnings.

The situation was equally peachy for SONOS shareholders, with diluted EPS flipping from a $0.28 loss to a $0.15 profit year-on-year.

The big news for stakeholders, though, was that the company have completed a $50 million share buyback programme – in which it repurchased 3.8 million shares – and now the Board have authorised an additional buyback programme for the same amount of shares to be purchased again.

Funded by cash and cash equivalents, the buyback will see outstanding Sonos shares absorbed from the open market, which, inevitably, has given the company’s share price another reason to surge higher.

Speaking on the company’s updates, and what he sees as a paradigm shift in the business, CEO, Patrick Spence, said: “We reached an inflection point in the fourth quarter that demonstrates the power and profitability of our model. As our customers recognize, Sonos products operate seamlessly together, with more products improving the experience. That’s why year in and year out, our existing customers add more products to their systems – every new household that we gain starts that cycle anew.”

“Fiscal 2020 was the 15th year in a row we grew total households by at least 20%, while our existing customers once again showed strong repurchase habits, accounting for a record 41% of total product registrations. We deliver a consistent cadence of new, innovative products and services, and we have only started the process of realizing the lifetime value of our customers, both old and new.”

“In fiscal 2020, we delivered a record 8.2% adjusted EBITDA margin, or 10.6% excluding the effect of tariffs, and we project delivering 12% to 14% adjusted EBITDA margins next year, which is ahead of our prior targets,” continued Mr. Spence.

He added that, going forwards, the company will remain committed to delivering ‘innovative new products’ and supporting its partnerships. Over the long-term, he believes the company can deliver strong profit margins, cash flow, revenue growth and increased shareholder value.

Following the news, Sonos shares soared by 29.84%, up to $22.19 19/11/20. This is not only well above its year-to-date nadir of $7.92, but ahead of its previous all-time-high, of $20.95 back in August 2018.

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Senior Journalist at the UK Investor Magazine. Also a contributing writer at the Investment Observer, UK Property Journal and UK Startup Magazine. Postgraduate of King's College London with a specialisation in Business Ethics. Interested in Development Economics and David Hume.