Speaker 1: You're listening to Bloomberg Business Week with Carol Messer and
Speaker 1: Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio. The bulk
Speaker 1: of earnings is over, but we're still getting to do
Speaker 1: a few of them, and among them was Sonas we
Speaker 1: talked about them, stock was up about three percent, up
Speaker 1: as much as six percent at its times today, settling
Speaker 1: though on this Thursday with a three percent gain. They
Speaker 1: reported earnings last night after the Clothes. Among the headlines
Speaker 1: that stood out fourth quarter revenue beat estimates and analysts
Speaker 1: finding the print to be solid. So let's see what
Speaker 1: our next guest has to say. He's President CEO of Sons.
Speaker 1: Patrick Spence is back with us and so delighted to
Speaker 1: have you in our interactive broker's studio. Welcome, thank you,
Speaker 1: it's great to be back. Yes, how are you talk
Speaker 1: to us about the business and how things are going.
Speaker 1: You know, we've seen things stabilized, so we obviously took
Speaker 1: a hit back in June in terms of kind of
Speaker 1: the trajectory in our business. And so then post pandemic,
Speaker 1: our continuation of a post pandemic reason, I think was
Speaker 1: more macro economic in terms of just generally like what
Speaker 1: consumers were doing and in the summer traveling and all
Speaker 1: of those things. And so yeah, we did a bit
Speaker 1: of a reset at that point, and what we've seen
Speaker 1: in this quarter is we got it right. Our business stabilized,
Speaker 1: and we shared a few data points on the call
Speaker 1: around registrations, which are kind of like the underlying activations
Speaker 1: of new Son No speakers that show in fact, it's
Speaker 1: kind of we're pretty optimistic in terms of where we
Speaker 1: are right now and what we're seeing and so, um,
Speaker 1: it's stable. Uh, And that's kind of the way we
Speaker 1: we've set our guidance as we go forward, and we're
Speaker 1: not expecting, you know, things to get much worse. We're
Speaker 1: not expecting it to get much better. So we're just
Speaker 1: trying to be prudent in this kind of environment. A
Speaker 1: lot of competition in the space. You guys are still
Speaker 1: relatively small, as you point out when you join us,
Speaker 1: you know, every few months, Um, I'm wondering about who
Speaker 1: your customer is. And I think about this in the
Speaker 1: context of what we saw from Walmart Tennis. Well that's
Speaker 1: the thing. Yeah, we all that that's true, but but
Speaker 1: I'm wondering, you know, as you try to grow. You know,
Speaker 1: we see a company like Walmart report results and they
Speaker 1: say that, you know, upper middle class customers are now
Speaker 1: trading down and shopping at Walmart rather than Target. We
Speaker 1: saw that play out this week. Who's your customer and
Speaker 1: are you worried about people trading down to less expensive editors?
Speaker 1: We're not. And I'm watching during a period like this,
Speaker 1: you want to watch market share very closely. And from
Speaker 1: what we're seeing, we're gaining share in this period. Um,
Speaker 1: And I think that speaks to the brand. But but
Speaker 1: we do talk about the more affluent homes that we're in,
Speaker 1: and and again you pointed it out. You know, we're
Speaker 1: so small in the grand scheme of things. We're in
Speaker 1: nine percent of the homes that we think we can
Speaker 1: be in ultimately, so we have a lot of room
Speaker 1: to go. Um, we don't, you know, we don't get
Speaker 1: overly promotional. We kind of approached this in a very sustainable,
Speaker 1: kind of steady way, and so we feel like there's
Speaker 1: lots of opportunity ahead. Um. They'll be obviously ups and
Speaker 1: downs because of the economy, but overall, we feel like
Speaker 1: our customer um is is stable right now from what
Speaker 1: we can see, and so We'll be watching it closely.
Speaker 1: You know, if if things change, will definitely make adjustments
Speaker 1: in our business. But right now, UM, it appears our
Speaker 1: customers are pretty stable. So you're not talking recession or
Speaker 1: thinking recession internally in terms of meetings and saying hey guys,
Speaker 1: we're gonna have to be thinking about this now. We're
Speaker 1: watching it very carefully. UM. Obviously not an economists, so
Speaker 1: I don't know whether recession or not. But it has
Speaker 1: slowed down, you know, it's slowed down. We kind of
Speaker 1: took that that change in June and then, but since
Speaker 1: then it's been stable. So we haven't seen it get worse.
Speaker 1: I seen it get better. Um. I do expect at
Speaker 1: some point it will get better, but I don't know
Speaker 1: if that's twelve months eighteen months, you know, from from
Speaker 1: now as well? Patrick, who's your best customer? Is it
Speaker 1: existing customers like a Tim and myself and others who
Speaker 1: already have Sennis equipment, or is it the new guy?
Speaker 1: So we added one point four million new ones in
Speaker 1: the last twelve months, were up to over fourteen million
Speaker 1: homes now and it's remarkably steady in the sense that
Speaker 1: forty of our sales every year come from our existing
Speaker 1: customers adding more and then the rest of it comes
Speaker 1: from new customers and so and the number one way
Speaker 1: that new customers coming to the system is existing customers
Speaker 1: telling their friends and family. So it's a it's a
Speaker 1: pretty powerful model in that way, and we've got a
Speaker 1: good balance between existing and new. Guilty I said this
Speaker 1: all the time, and I'm guilty of, you know, buying
Speaker 1: gifts sons, gifts from my sister and my dad, who
Speaker 1: are big customers. Hey Patrick, Um, you're not an economist,
Speaker 1: you said, but you've got to make decisions based on
Speaker 1: what you think the economy is to look like. What's
Speaker 1: headcount looking like in three Have you had to pull
Speaker 1: back and lay anyone off? Are you planning to lay
Speaker 1: anyone off? So we focused on sustainable, profitable growth before
Speaker 1: it was fashionable. So you know, we've been profitable for
Speaker 1: four years. Um, you know, we didn't get to what
Speaker 1: I say crazy in terms of hiring. You know, through
Speaker 1: these periods, we've been investing in a very disciplined way. Um,
Speaker 1: so I'd say we're kind of zigging while other zag
Speaker 1: We're still hiring people. I mentioned on our earnings call
Speaker 1: last night that we're looking at expanding into four new categories,
Speaker 1: and so we've been hiring people that help us actually
Speaker 1: do some things and bring some skills we don't have
Speaker 1: UM yet today. So I feel like this is one
Speaker 1: of those times where there's opportunity for us to emerge
Speaker 1: from this period even stronger. UM. And that's why we've
Speaker 1: focused on being profitable and being able to be in
Speaker 1: control of our own destiny. UM. You know, I want
Speaker 1: to talk about innovation, but we'll say that for the
Speaker 1: for the next block. What does worry you? Though you've
Speaker 1: been doing this for a long time with your business.
Speaker 1: I mean, at this point it's it's multiple years, UM,
Speaker 1: You've see different cycles thirty seconds. So what does worry
Speaker 1: you Our own ability to execute and deliver on the
Speaker 1: proms CEOs in presence Davis all the time. Well, it's
Speaker 1: much more about what you can control and what you
Speaker 1: can do, so making sure we bring out I know
Speaker 1: what you mean, but but it really is about our
Speaker 1: ability to get the new products out, you know, be
Speaker 1: able to do the things that we need to do.
Speaker 1: Because we can't control the economy, we can't control the consumer.
Speaker 1: All we can do is make sure that we're showing
Speaker 1: up in the best way possible and adjust accordingly. So
Speaker 1: there's better control over those factors right now. Patrick, In
Speaker 1: terms of supply chains and stuff, Oh, definitely. On supply chain,
Speaker 1: it's gotten much better than it was. You know, last
Speaker 1: year this time we were talking about the inability to
Speaker 1: get any product and people waiting months. So yeah, it's
Speaker 1: gotten much better. All right, Sit tight, just having some
Speaker 1: fun with We're gonna come back with Patrick Spence, CEO
Speaker 1: of Sonas here in our interactive broker studio. I do
Speaker 1: want to talk about innovation and what's in the pipeline.
Speaker 1: It's coming up next on Bloomberg. I want to get
Speaker 1: back to our guest, Patrick Spence, still with us, of course,
Speaker 1: the CEO of Sonas. We've been talking about the most
Speaker 1: recent quarter stock was up about I think three in
Speaker 1: today's session. Um so, Patrick, innovation, how do you think
Speaker 1: about it? In the space? Um, you know, we're playing
Speaker 1: in a few different areas of audio today, so about
Speaker 1: four different categories, and we are always balancing. Do we
Speaker 1: do something new to raise the bar in the existing
Speaker 1: category that we're already playing in, or do we expand
Speaker 1: into a new one? Um? And so we go through uh,
Speaker 1: really an assessment of kind of where our capabilities are
Speaker 1: and the opportunities we see in the market and uh,
Speaker 1: and then we kind of you know, follow our instinct
Speaker 1: quite frankly in terms of okay, we think this is
Speaker 1: somewhere that our customers will want to go with us.
Speaker 1: And so in our story has really been you know,
Speaker 1: software eating audio. So where can we bring our system
Speaker 1: and our software and do something differentiated? Uh, in a
Speaker 1: new space or in the space we're in, like raise
Speaker 1: the bar if you will. So you will see us
Speaker 1: at times bring out things that are new like we
Speaker 1: did with the Rome, like a portable speaker, and into
Speaker 1: a new area or um like we've done with sub
Speaker 1: many recently. Where okay, we're gonna do something different in
Speaker 1: a space we're already in. And we try then if
Speaker 1: we're doing something in the space we're already in, to
Speaker 1: have a good, better, best approach to our portfolio. So
Speaker 1: we've got products for a variety of price point and
Speaker 1: customers and um, you know, different aesthetic appeals as well.
Speaker 1: Where's the room left to innovate? Uh? You know this
Speaker 1: is the thing that I think companies are always looking
Speaker 1: at and trying to understand, you know, where to go
Speaker 1: next in our world. You know, we really only play
Speaker 1: in about twenty billion of the audio market today and
Speaker 1: our revenue last year was one point seven so you
Speaker 1: have a lot of room in the home. But then
Speaker 1: there's a whole bunch of categories beyond that. They take
Speaker 1: us to ninety six billion dollars. So, as I mentioned yesterday,
Speaker 1: we're investing in the categories that we're already in, but
Speaker 1: we're as well investing in four new ones UM that
Speaker 1: we think called a lot of potential um as well.
Speaker 1: So we're excited that we're working on those and we're
Speaker 1: looking forward to bring out you know, those products over
Speaker 1: time too. But I mean, apart from getting smaller, batteries
Speaker 1: lasting longer, audio quality getting better, and you know, you
Speaker 1: already have speakers for what seemed like to me as
Speaker 1: a Sonos customer, kind of every occasion right now, I've
Speaker 1: heard that for ten years, UM. And we keep coming
Speaker 1: out with the woods that reach into you know, new
Speaker 1: customers and new ideas. And that's the fun part of
Speaker 1: the job, is to come out with these products that
Speaker 1: then our our existing customers rushed out and buy. Let's no,
Speaker 1: of course, not our customers will go out and buy
Speaker 1: and that with the tracks new ones right as well.
Speaker 1: So we're always thinking about how are we servicing those
Speaker 1: existing customers but at the same time attracting a new
Speaker 1: set of customers into the products. And so it's this,
Speaker 1: you know, this balance kind of that we're doing from
Speaker 1: year to year in terms of what products we're going
Speaker 1: to bring out and how we attract more people into
Speaker 1: the system. But it is a long term view two, right,
Speaker 1: Like I don't you know next year will be next
Speaker 1: year for for me, the biggest thing is what happens
Speaker 1: over the next ten years. And so we're investing in
Speaker 1: you know, software and a and all the all the
Speaker 1: kind of stuff that everybody knows is happening in tech
Speaker 1: to make sure that we can bring out products and
Speaker 1: experiences that will continue to surprise people. How do you
Speaker 1: deal with okay, wait, two questions metaverse? Do you think
Speaker 1: about that? I think, yeah, I think the whole idea
Speaker 1: of augmented reality, virtual reality, there's definitely something to that
Speaker 1: and audio will play a big role. Um, So it's
Speaker 1: definitely something that we think about today. Don't know exactly
Speaker 1: what it looks like yet, but um, you know, we've
Speaker 1: we're pretty good about partnering with a variety different companies
Speaker 1: and trying to figure out our ways into spaces like that.
Speaker 1: So we're watching it very closely, all right. And I
Speaker 1: asked this of a lot of leaders of publicly held
Speaker 1: companies stock down for you two percent this year? How
Speaker 1: do you think about it? Wor get into the conversations, Um,
Speaker 1: how does the board kind of approach, like how do
Speaker 1: you think about that? And there's a lot of names
Speaker 1: that are beaten down, menag down what we So I'm
Speaker 1: just but I'm curious. It's got to be something you
Speaker 1: keep in mind. Oh, absolutely, it has to be. And
Speaker 1: I think those that claim that they don't, I don't
Speaker 1: think are necessarily being genuine because it is a factor.
Speaker 1: And all of our people, you know, all of our people,
Speaker 1: UM get compensation through restricted stock units, so that matters. Um.
Speaker 1: I feel responsibility to our people and to our investors,
Speaker 1: and so I think it's important too in these times,
Speaker 1: like really make sure you're telling your story clearly. So
Speaker 1: when we did our earnings call last night, we disclosed
Speaker 1: some data points that we hadn't before around registrations inventry
Speaker 1: U and as well future products, even about the number
Speaker 1: of categories we're going into to help people better understand
Speaker 1: where we're going, so we can always do a better
Speaker 1: job I think of telling our story. And then there
Speaker 1: then there are some things that are out of our
Speaker 1: control in terms of the markets and those kind of things.
Speaker 1: But fundamentally, you know, I do think, Um, you have
Speaker 1: to be mindful of it, and then you also have
Speaker 1: to understand you can't control it, but you can control
Speaker 1: your communications. And then the number one thing you can
Speaker 1: control is your own execution and the ability to actually deliver,
Speaker 1: you know, on those things over time and build, you know,
Speaker 1: build a real business. Right thirty seconds, Patrick, You're based
Speaker 1: in Santa Barbara, a very desirable place to live. Not
Speaker 1: a lot of companies based there. Do you have to
Speaker 1: overpay to attract talent or do you have to do
Speaker 1: you underpay because it is such a desirable place to be.
Speaker 1: So we uh through the pandemic, We've been hiring all
Speaker 1: over the United States. We pay the same you know,
Speaker 1: salary whether you happen to live in City A or
Speaker 1: City b. Um, as we go through it across the country,
Speaker 1: because I figured as as we try to attract you know,
Speaker 1: the the group of like amazing talent, a group of
Speaker 1: diverse talent that we can and why you know, if
Speaker 1: you're doing the same job as somebody in city A
Speaker 1: versus City B, why would you be paid I need differently, right,
Speaker 1: I think that less live in city B. Well, but
Speaker 1: but that doesn't mean you should get paid less for
Speaker 1: your impact at a company. So you know, like I
Speaker 1: think it should be. I'm just playing double's advocate. Yeah, yeah, no,
Speaker 1: I understand, but but I think a personal question. But
Speaker 1: I do think, you know, people should be paid based
Speaker 1: on the impact they're having in their organization. What a gem.
Speaker 1: Come back soon. Thank you, Patrick Span, CEO at Sona's