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