The last few years have not been kind to new public hardware companies, but Sonos Inc. hopes to break away from this pattern by focusing on a little help from tech giants like Amazon.com Inc.
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makes high-end speakers, and the company has sought to take advantage of the increased interest in voice commands by lending its products "smart" capabilities. Sonos currently sells products that are compatible with Amazon
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Alexa Voice Assistant and Sonos expect his speakers to collaborate with Alphabet Inc.
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Google Assistant later this year.
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Adding Siri compatibility is a bit more complicated since Apple Inc.
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Services generally do not play well with third-party hardware. Sonos plans to introduce Siri 2018 on its speakers via Airplay 2, a kind of backdoor that allows Apple devices to stream audio to other devices. Sonos also has its own voice controls.
Investors looking for a pure game for the rise of language assistants may get a chance in the coming months as Sonos filed a prospectus with the Securities and Exchange Commission on Friday offering public offerings. The motion included insight into Sonos' finances, including subdued revenue growth compared to other recent IPOs and low net year-over-year losses.
Sonos intends to increase its offer by up to $ 100 million according to the prospectus, but this is usually a placeholder amount that will be updated in future registrations. On the assumption of the IPO, the shares in Nasdaq will be traded under the ticker SONO.
Here are five things to know about Sonos and its IPO plans.
Older Growth Profile
Sonos has been around since 2002, which means it's financially different than many younger technology companies. The company has not raised debt since 2014, according to FactSet, and will generate $ 1 billion in revenue for the fiscal year ending in September.
The company generated $ 992 million in revenue in the 2017 fiscal year. $ 901 million in 2016, representing a growth rate of 10%. Sonos reported a net loss of $ 14 million in 2017, compared to a net loss of $ 38 million in 2016.
The company achieved revenue for the first six months of the 2018 Sonos fiscal year, which includes vacation time a net profit of $ 13 million. Sonos was also profitable in the first half of the previous fiscal year.
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"You do not have to show investors that they have a path to profitability, but they need an answer to the 800-pound Gorilla, "said Phil Haslett, co-founder of EquityZen, an online marketplace for pre-IPO shares. This means that Sonos has to show how it wants to compete against devices from "diversified, money-rich companies" like Amazon and Google.
Confidence in Retailers
Sonos generates most of its revenue from physical retailers or their websites. Best Buy Co. Inc.
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is its largest distributor in the US, accounting for 16% of sales in the last fiscal year of last year, while the "So Group" is the largest distributor in China with 12% Europe is. of sales.
"Each time you focus the distribution on a product, it carries a risk," Haslett told MarketWatch. It is possible that Sonos generated only 45% of last year's sales from the US, which means that nearly one third of US sales come from Best Buy.
On the positive side, Haslett said that Sonos' ability to build strong relationships with distributors in the US and Europe is a good omen for its probable trials in Asia.
A loyal customer base
Sonos has been proven to be able to drive repeat purchases from its customers. By the end of March, more than 19 million Sonos devices had been registered by customers and are in use in approximately 6.9 million households. The company said in its prospect that 61% of households registered more than one device, and among the customers who initially bought a Sonos product, the average person purchased another 1.4.
The loyal user base is encouraging as Sonos achieves high prices for its products. The company's entry-level speaker costs $ 149, and Sonos sells several items for $ 699. Yet, there are obvious limits to the number of speakers a household could reasonably need.
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Sonos may in the end annoy his loyal users to induce them to buy more products as it's ready to seems to be updating software on some of its older speakers. The company lists among its risk factors the possibility of "customer dissatisfaction" if Sonos decides not to support any older versions of its products. Customers "have increasingly expected this support," according to the submission, but Sonos predicts "that backward compatibility will not be practical or cost-effective in the near and medium term."
Breaking the hardware curse?
A hardware IPO recalls some high-profile disappointments in recent years as shares of Fitbit Inc.
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and GoPro Inc.
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both trade well below their IPO prices. The biggest success story was Roku Inc.
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who emphasized their "platform" business during their roadshow and now generate more than half of their revenues from non-hardware sources.
Is Sonos a Fitbit or a Roku? Maybe not. EquityZen's Haslet pointed out that Sonos, unlike Fitbit and GoPro, has been around for a while and its finances are a mature one. Sonos investors are unlikely to expect massive growth at the beginning of Fitbit investors. However, compared to Roku, Sonos has no obvious path to a platform-based business.
Simple Voting Structure
Many companies that have recently gone public have complex voting structures that come from multiple share classes, but the Sonos submission shows only one share class. In the past investors were not distracted by two-tier structures, but the simple arrangement at Sonos is at least not a negative outcome.
Haslett Is Convinced of Share Payments Sonos' current CEO, Patrick Spence, is not a company founder.
Sonos has "a diversified base of owners compared to a founder who tries to retain much control," he said.
The largest owner before the bid is KKR Stream Holdings with 25.7% of the shares, followed by affiliated companies with index ventures with 13% of the outstanding shares.