Shares of Sonos (NASDAQ: SONO), the maker of Bluetooth-enabled sound bars, speakers, and other audio equipment, were moving higher today after the company delivered better-than-expected results in its fiscal first-quarter earnings report. The company also said it would cut 12% of its workforce as part of an ongoing restructuring, as sales are still declining even as it beat estimates.
As of 3:01 p.m. ET, the stock was up 4.5% on the news after gaining as much as 10% earlier in the session.
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Image source: Sonos.
Sonos clears the bar
Revenue in the quarter fell 9% to $550.9 million, but that was well ahead of the consensus at $519.5 million.
Its gross margin also declined to 43.8% from 46.1% due to deleveraging from lower sales, and operating income slipped from $79.7 million to $48 million. The company finished the quarter with adjusted earnings per share of $0.64, which was down from $0.84 in the quarter a year ago, but still beat the consensus at $0.30.
In order to adjust costs and streamline the business, management also announced a 12% workforce reduction and said it would incur $15 million to $18 million in related charges for the current quarter.
What's next for Sonos
In a letter to employees announcing the layoffs, CEO Tom Conrad said that the company had too many managerial layers that made collaboration and decision-making difficult. He intends to organize the company into flatter, smaller, and more focused teams.
Sonos did not give guidance, but presumably, management is focused on returning the company to revenue and profit growth.
The layoffs seem to make sense given the direction of the company and the recent pattern in the tech industry.
While a turnaround could take time, the stock has considerable upside potential if it can get back to growth.
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Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Sonos. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
