Sonos, Inc. (SONO) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to day 2 of the BofA Global Technology Conference. Today, we are pleased to have Sonos, including the CFO, Brittany Bagley with us today. It's a pleasure to have you.

Thanks for having me. Great to be here.

I guess just to start out, I think generally, like most investors are pretty familiar with your story, but it would be useful if you could just talking about the company, the products itselves and also just a brief history, I think we'll start there and then move on.

Yes. Happy to. So Sonos has been around for quite a while at this point. We're in our 17th year of consecutive annual growth. And will largely sell wireless connected products for your home. If you don't have them, I'll make my pitch to go out and buy some right now because generally, our customers are pretty happy customers. But that's everything from portable speakers. We've got our Move and our Roam products, sound bars for your TV, more traditional wired WiFi speakers, and then we have some products that really go through our installed solutions channel, they're called AMP in port, and that's if you're doing a full remodel, new home, new construction, you want to have other passive speakers in your walls or in your house. We can power those and still deliver the same amazing software experience that we're really known for in terms of ease of setup, great user interface, really wonderful multiroom, synced audio and access to over 100 partners with content, so you can really get any content you want anywhere you want it.

Okay. And at least over the last number of quarters and maybe even beyond that, you've talked about this flywheel model and how that helps to drive the revenue -- the company's revenue growth. Can you just share a little bit more about that and overall, how that process works?

Yes. Thank you. So we're in just about 13 million homes. We are in both the U.S., we're in EMEA, and we have an APAC presence. And what we have found is that over our 17-year history, the homes who come in and buy Sonos come back and continue to buy over time. So our oldest cohort is in 2005, and they continue to come back and buy our products because it really is delightful to have any of the content you want streaming in your home. And so as you move, as you add rooms. And importantly, as we come out with new products that both drive new customers into our flywheel and get our existing customers to come back in and repurchase. So our own product is a smaller $179 portable Bluetooth speaker. It's a great add for the existing customers we have to come in and add that to their Sonos portfolio. So that wheel is our flywheel. It's what drives our growth. It's what has driven our growth is the fact that, we get new customers in through word of mouth because we're known for being really wonderful at what we do and then we deliver on that promise and our customers come back and buy more.

Okay. And we always have read about the turmoil going on in Russia, Ukraine as well as some of the impacts from higher food and other costs out there. Could you just talk about how the EMEA business is holding up just in [indiscernible] some of these challenges?

Yes. So our EMEA business is about 36% of our revenue. So it's a pretty big business for us. We are lucky enough to really not have any of that revenue be in Russia and Ukraine. And so -- it's been more of the follow-on effects that we've been watching and following. And for us, in Q2 earnings, we were able to say that we -- while we're watching it really closely to see what the impact continues to be. We have been pleased and impressed with the demand we continue to see from our customers, both in EMEA and really across all of our regions. So obviously, lots of turmoil, something we're keeping a really close eye on inflation disruption in that region. And hopefully, we end up with some resolution there soon. But so far for us, business continues nicely.

Glad to hear. And now North America is the other kind of hot topic, and we've heard different retailers talk about how they are seeing some pullback in discretionary demand. And maybe not necessarily in the speaker category, but overall, it would be great if you could just provide some update on how demand is going for you guys as well as also if there are any indicators we should be following to gauge broader speaker demand, that would be helpful.

Yes. One of the great things for us is even though we've been around for a while, we continue to have a pretty large market and market share opportunity in front of us. And so we don't necessarily trend the way the overall market trend. So again, we're watching pretty closely because it's such a volatile time right now for consumers, but continue to be very happy with how our consumer demand has held in there. And I think part of that really does come back to the fact that once you are a Sonos customer, you're in the Sonos system you're going to continue your purchase journey of Sonos. While we are premium, we're also not such a big ticket item that for a lot of our customers, they're really having to make trade-off decisions at least at this point. And then beyond that, we do have some more affordable entry price point products, I said, Roam, was it a $179. We've got our new premium entry level some of our speaker, we just launched at $279. So there are more affordable price point ways to get into the category. And so we're watching all of that. But we, along with a few of the other more premium retailers have said that we continue to see consumer demand really hanging in so far.

Okay. And now as we think about, I would say, like the next 5 years or so, and I know you guys have given a target for 2024 but say, even longer term, I mean, what should be the biggest driver of growth? Is it going to be new products? Is it going to be new features, it can be R&D. What are those main drivers that we should be paying attention to?

Yes, yes to all of that. It's really the flywheel. So as I mentioned, I think we have an enormous opportunity to continue to get new households into Sonos. We think that there are across the regions that we play in, a number of new households who we continue to get bring into the Sonos ecosystem. And then our services, our R&D investments or software features, all of those really go to continuing to enhance the experience and continuing to drive new product introductions. And so those new product introductions when they come out, just continue to support that flywheel for existing and new customers. And so yes, we continue to invest in things that we think are exciting and have a pretty exciting roadmap ahead of us.

And just quickly on the services side of things. I have gotten questions from investors on that. Can you just elaborate a little bit more about what that is and also like how that drives revenue growth?

Yes. So we've got 2 good examples out there right now. One is our Sonos Radio business. There is a free portion of that, which is ad-supported. And what we found was there was really an opportunity for us to create curated radio stations. We partnered with artists who are also big Sonos fans to create curated radio stations. And it means for new customers when you buy Sonos, you can get audio right out of the box. You don't have to remember your log in or your password or sign up for a service. It's just you've got immediate time to play on your music. It's also a pretty easy way to just sort of relax and have something playing in the background. So that's become our third most listened to service. And then we just launched Sonos Voice. Again, our view across both of these services is not to go compete with big players who are doing much broader music or voice services, but really to improve the experience for our Sonos customers because what we've seen is that engagement. And the more you engage with your Sonos system, the more you listen, the more likely you are to come back and buy more, the more likely you are to recommend it to your friends. Word-of-mouth is still a huge driver for us. And so that's really the near-term goal with our services is to continue to improve that experience for our customers and drive engagement. Long term was an advertising or subscription revenue from our Sonos Radio business side. I won't mind that, but it's not material enough to break out yet.

Okay. And then next is we've -- you've talked a little bit about Roam and Ray and how that's going to help to bring in consumers perhaps towards the lower end of the income spectrum. How successful so far has Roam been achieving that? And then also, could you talk about the extent to which Roam customers have followed up with orders in other Sonos products and areas?

Yes. So as I said, we're in about 13 million households today. We think that there are about 145 million households that we could be in, who are premium affluent householders. We define that as $75,000 and up of discretionary income. And so Roam and Ray are more affordable entry price point products, but we really continue to appeal to a premium customer as they look at Sonos. I would say one thing we've actually been surprised about on Roam is, well, it certainly generates new households. It's actually done really well with our existing households. So it's continuing to fill in really nicely in that flywheel, continuing to drive that lifetime value in that products per household up for us. And Ray general availability was Monday. So a little early to call on that one.

Yes, of course. And backlog, this is another thing that investors have been monitoring pretty closely, and it's relatively feasible at least anyway. Since you do always provide on the website, some sense as to when the product will ship. And it looks like right now, the backlogs are a little bit longer than normal for the 5 and the Beam and quite extended for the Sonos amp. I think even at 12, 13 weeks or so. So very long there. Just generally, what are the key drivers of those backlogs?

Yes. Supply chain continues to be a big topic and it continues to be challenging for us. And so -- what we're always trying to do is we're trying to get an enough supply for our customers to fulfill their demand. We don't really want to run a backlog business. And so our goal is always to have our products available when customers want them. What you're seeing in those delays is that we do continue to have some challenges in the supply chain. We've talked about component costs. We've talked about how we've had to go out to the spot market and pay more for some of those components to really try and get as much supply in as we can. And so what you're seeing on some of those products is the combination of continued healthy demand and a challenging supply chain environment for us.

Okay. And as part of the supply chain, you talked about how you're now looking to add production in Vietnam. Can you just talk about why Vietnam, what's kind of logic on that? What are the areas might you have looked at that also would have been appealing. I know you might not want to elaborate too much on that, but just generally, any color around that front would be helpful.

Yes. So a couple of years ago, we just did our manufacturing in China. And I should say we manufacture with contract manufacturers. We don't have our own manufacturing facilities. So a couple of years ago, we diversified into Malaysia. We've been very happy with that having a more diversified global strategy from a manufacturing standpoint. And so -- that's a large part of what drove our decision to also move into Vietnam was just continuing to have geographic diversification and supply chain resiliency, hopefully, should anything happen in some of the countries that we do manufacturing. So we've said we should be in production in Vietnam sometime next year. And I think we're not alone in that the global supply chain is trying to diversify more and more companies are adding Malaysia or Vietnam or some countries are adding India to their manufacturing. And so I think it's a trend you're going to continue to see.

Okay. And now just back to kind of the broader macro picture, which I know we touched on a little bit earlier, but what's some of the concern out there about a recession, whether it's globally, whether it's more focused on North America, how generally should we expect Sonos and also the broader per category to perform in a recessionary environment.

Yes. It's just such a hard one to predict because I think it depends on what type of recession we have? What's really driving that? Is it a recession in nominal terms or also in real terms. I mean with inflation where it is, we could be in a recessionary environment but still growing on a nominal basis. And so I don't know that I have a great macro prediction for what it will look like. What I will say is we continue to focus on execution and doing the best job that we can in terms of making it a wonderful customer experience. We do have a fairly premium affluent customer. So hopefully, that will help support us through anything that happens in the next '23 period. And we also continue to think that we have good market share to gain. So we're just going to continue to focus on execution, controlling what we can control and trying to deliver a healthy, strong business through really whatever comes.

Okay. That's very helpful. And probably the most common question I get from investors, especially ones that are New Year story is how should they think about the competition from the likes of Google and Amazon. So first of all, I guess, how do they compete with you? And then also more broadly, how would you frame the overall competitive environment for Sonos.

Yes. It's always a tricky one to answer because they are very impressive and serious competitors. So you never want to be dismissive of what they are doing and what they can do. But we've also competed against them for a number of years at this point. So they really entered the smart speaker category back in 2015, '16 time frame. And so what I generally point to is look at how we have been competing against them over the last 5, 6, 7 years. And -- we've really continued to execute on our game plan and continue to execute very well, driving top line and bottom line growth. And I think that the reason we are able to do that again is because we play in a slightly more premium part of the market. We deliver a really wonderful combination of hardware and software. And we have wonderful existing customers who are in the ecosystem really value Sonos and want to have that multiroom experience that we deliver so well. So we always try and be thoughtful and cognizant but also stick to doing what we do really well.

Okay. And on revenue guidance for the year, it looks like you're guiding to a particularly strong second half, and I think this was pretty apparent even after the fourth quarter earnings. Can you talk about what are the main drivers of that growth for the second half? And also what generally gives you confidence that you can achieve that guidance.

Yes. So there's a couple of things that have gone into our '22 guidance, which really play into the second half of the year as we talk about it. One is we took price increases back in September, so you continue to see the price increases impacting our second half of the year. And on average, those price increases were about 10%. So you see that benefit in the second half. I think one of the other big drivers and at the beginning of the year because we don't talk about our product road map in advance, it can be hard to put some context around it. But another big driver is just new product introductions for us. And so with Ray having a GA availability in June. We also announced our Roam colors. We've got our Sonos voice experience out there. We have new product introductions that benefit the second half of the year. And then I think some of the last factor is just our ability to get supply in and how we've been balancing that supply and demand. So the first half of the year was particularly tricky from a supply standpoint, especially Q1, which is our seasonally largest quarter. And so while we are still having supply chain challenges, we are in much better shape from an inventory standpoint in terms of what our channel has. And as you mentioned, our backlog numbers, there's only 3 products that are on our backlog list right now, which creates better availability.

Okay. And the Ray and Roam colors, well, so first one, I guess, in the past, you've talked about how you want to do at least 2 new product introductions each year. To the Ray clearly would qualify for that. To the Roam colors? Are those included in that? And then also, how should we think about potential for additional product launches in the second half? Or are those already announced?

Yes. So I would include those by my count word about 5 new product introductions so far this year. So we're well ahead of our at least 2. And that would include Beam, which we did at the beginning of the year. That was a refresh, Roam SL, Roam Colors, Ray and our Sonos Voice Control.

Okay. And you can't comment, I guess, on whether or not there will be additional comment.

I can't, you noticed, I guess.

All right. I appreciate that. And then now as we think about the guidance for $2.5 billion in revenue by 2024 or by the end of 2024. What are the assumptions that help you get to that target?

Yes. I think it's really that we continue to execute. We continue to pull new households in. Our existing households continue to come back and purchase I think one of the easiest ways if you're trying to get your head around the model is to actually look at how our existing households have repurchased historically. And that's been, on average, about 40% of our registrations come from existing households. It was higher in '21, but we don't have to believe '21 is the normal going forward. So you look at what existing households can come back in and repurchase and then you can sort of figure out what that means from a new household standpoint. And to support those new households coming in and those existing households repurchasing, we continue to drive spending in sales and marketing to acquire those new households. And we continue to drive investment in R&D to really deliver an exciting product road map. And it's really our confidence in the product road map between now and the end of '24 that gives us confidence in that top line number.

Okay. And just the last question I have, at least anyway, on the guidance. You're targeting now gross margins of 44% to 45% in the second half. And longer term, you're continuing to target gross margin of 45% to 47%. What bridges or what gets you rather from the 44% to 45% back into that 45% to 47% range? And then also just generally, what are the risks and opportunities to that guidance?

Yes. So there's a lot that goes into our gross margins. There's product mix, there's channel mix and then there's, of course, everything going on in the supply chain. So I would say, when I think about gross margin, I really think about it as an annual number because we guide annually. So we're looking at 45.5% to 46% for the year that continues to be in our 45% to 47% long-term guidance range. And we think we'll continue to stay in that range as we get out to '24. Remember, for the second half of the year, we called out spot buys and component costs that are really quite high. And so we'll see as we continue to move forward, how the spot market in particular trends. But at some point, the supply chain will get more under control, and some of those headwinds we're seeing will moderate at least a bit. Now I'm not calling for all of the cost to come out of the supply chain, that's fully baked into our ability to continue to hit 45% to 47%. But the spot buys that we had to do that made us take down gross margin guidance for the year is something I would call out as not being sustainable long term.

Okay. That's helpful. And actually, just while we're on this topic, I just want to see if anyone in the audience had any questions in this area or if we should move on. Looks like we're good for now. So I'll keep going. And you were just talking about the supply chain, and this has been a challenge for a lot of different companies out there. Could you just frame how the supply chain is faring for you now relative to how it had been last year, whether it's better or worse and also to what degree?

Yes. I think that we and a lot of other people were hopeful to by the second half of this year that we really saw the supply chain going back to more normal. And I think that, that hope has been unfounded in that at this point really until at some point in '23, maybe longer. Some of the semi companies will call it better than I do. So you tell me what they say out of this conference in terms of when it's getting better. But I think there's going to continue to be some challenges from a supply chain standpoint. Certainly with the COVID lockdowns that went on in China over the last few months, that has just added additional challenges and complexity from a shipping and logistics standpoint. So at some point, we hopefully get fewer surprises and see a bit more normalization in the supply chain. And then some things like shipping and logistics costs are probably going to remain high. There's probably a new normal there. But the important thing for us is really to start to see some stabilization, so we can plan around those things.

Okay. And one question we're generally asking at this conference anyway, just to understand like the labor side of things. The market was very tight last year, and that continued into the first part of this year, still even pretty tight now. Generally, what are you seeing on that front? Also to the extent you can comment, what are your powering plans and how has that changed?

Yes. One of the really nice things for us is a lot of people who work for Sonos, work for Sonos, because they're mission-driven. They love the product. They love music. They love audio. They love what we put out into the world. And we focused really heavily on culture and being a great place to work and being an employer of choice and that has I think, served us well over the last couple of years. It will continue to serve us well going forward. So we really focus on that. And then, of course, there is inflation in labor. And I think all companies will have to figure out how they handle that, how they pay at market because market is moving up, and we will do that as well. But the nice thing for us is we have a healthy business. We have a healthy balance sheet. I certainly wish our share price was back where it was a couple of months ago. But if you look over a long period of time, we are performing relatively well, and our employees all appreciate that. So it's on my list of things that I think about, but it's probably not near the top of things to worry about for us as I think about our ability to hit our long-term targets to drive our business.

Okay. And now you have about -- it was based on our estimates, somewhere around $500 million or so cash after the Mayht acquisition. I guess, obviously, that will depend a little bit on how you guys do in the quarter. But just broadly, can you just remind us of your capital allocation priorities? And then also how much cash you'd like to keep on the balance sheet?

Yes. So I have laid out 3 capital allocation priorities. One is invest in the business organically, and you saw us do that in Q2 by making some investments into inventory. That inventory supports our new product launches. It supports us getting the channel back in a healthier position. So investing in the business is one of my priorities. And then it really comes down to M&A and share repurchases. And you've seen us do both. So we had a $150 million share repurchase authorization at the beginning of the year. Through Q2, we've done about $75 million of that. We had about $75 million left on that share repurchase authorization. And we have done a couple of M&A deals, including Mayht that you called out. Our M&A deals, what I look for in M&A is really something that can help us accelerate the opportunity we see in front of us from a road map standpoint. We've talked about how there is more categories we could get into, and there's more opportunity in front of us. We want to continue to innovate. We want to continue to be differentiated. And so I use M&A to drive that part of the acceleration of the product road map. And then we also use share repurchases as a way to do things like offset dilution, return capital to shareholders. And really, we have confidence in the future of our business, which I think is indicated with the size of our share repurchases. So I haven't explicitly come out with a number that I'll keep on the balance sheet. But I think it's important for us to have a healthy balance sheet and then continue with our capital allocation priorities.

Okay. Kind of curious, I mean I got this one -- this question, I'm not 100% sure if it even necessarily makes sense to you. But what is kind of your uptake for putting debt on the balance sheet, recognizing that the market is competitive and companies in that category may not necessarily want to lever up too much, but just generally, I mean what is the uptake there? And to the extent that might make sense to you guys?

I mean, I'm pretty return driven. So if we had something where it made sense to put debt on the balance sheet and drive a healthy return, we would certainly consider that will we'll continue anything that may -- continue to evaluate anything that makes a lot of sense for the business. It's probably a harder question now than it was 6 months ago, which was a lot cheaper. But you look for us, it's really about what are the opportunities out there, what would we go spend our capital on and what's the most accretive to our business and our shareholders.

Okay. And another area I wanted to touch on is just the operating leverage side of the story. And I guess we'll see what happens to revenues over the next couple of years -- not the next couple of years, but the next couple of quarters as kind of the economy goes through its current challenges. But just generally, what are the opportunities Sonos has to drive further operating leverage from here? And then also if you could because I think back during the Investor Day, you also talked about kind of household acquisition cost, can you just generally talk about how that's trended since then?

Yes. So we're really targeting being in that 15% to 18% by '24. We obviously are in that range but closer to the bottom in our guidance for '22. And so it comes back to really investing in the business to drive future growth and drive profitable future growth. So we invest in sales and marketing to drive in some of those new households. While we do talk about household acquisition costs coming down, what I'm really focused on is lifetime value to our household acquisition costs, so our LTV to HAC instead of CAC and making sure that, that's in a healthy range. And so it really depends both on what our household acquisition cost continues to be. You can go -- it's a very simple calculation for us. We just take all the new households that we get in and all of our sales and marketing dollars and divide those. So it's a calculation everyone can follow along with us. And then we look at how our lifetime value is doing. On average, we are now at 3 products per household. So that's ticked up slightly over the last couple of quarters, which is an indication that our household -- existing households are in and buying more. So that's what we look at as we look at sales and marketing. R&D is a couple of places. There's the R&D that we're really investing in software. About 2/3 of our R&D spend is actually into the software side of the R&D investment. And that's everything you see from the app, the user experience, the setup experience, the services we're coming out with the music partnerships, the content partnerships we have. And then the other piece is about investing in our future product road map and products that we're going to come out with over the next couple of years. On average, think about our product cycle as being about 2 years. So we're investing now for products that will come out about 2 years from now. And then we talked a little bit about how we got ahead of ourselves from a scale standpoint in '21 and needed to invest a bit back in into G&A to help support that scale. That includes a new ERP system. So that's where we should start to see some leverage once we've put in those infrastructure investments. And then Beyond that, it's really just that balance between making sure our flywheel is continuing to drive, making sure we're investing enough for the future and dropping nice profitability to the bottom line in the year we're in.

Okay. And then earlier, you mentioned how EMEA is about 36% of your sales. What are some of the other geographic areas that you're targeting now for growth. So obviously, if you could just review which other markets you participated in and also which areas might make sense longer term?

Yes. We are, obviously, in North America, we're in EMEA. We continue to think there's great opportunities in both of those markets. And then we are in APAC, it's a smaller portion of our business, but growing very healthily. So that includes Japan, Australia, New Zealand, China, so continuing to develop and mature in some of our APAC markets. At some point, there's no reason we can't be everywhere, right? You need good WiFi and you need some content partnerships. But we'll be very -- we have so much opportunity in the markets that we're in that it's really a balance between growing where we are and continuing to expand.

Okay. just open it up. Any questions from the audience at this point in this area or any others that we posted? I guess, I mean, we're -- just have a little bit of time here. But I mean, just generally, I mean, what's -- what would you say is most misunderstood by investors regarding the story? And particularly, we've seen the stock fluctuate a fair bit and I guess, it's been a little bit more challenged as of late, which might be more macro related and/or partly kind of getting beyond the pandemic-related stories. But just generally, I mean, what do you think is most misunderstood about the story itself?

I really think it's the fact that our customers come back in and repurchase and so it's not recurring revenue, but it is reoccurring revenue, and it has been very stable, steady, consistent for a long time for us. And so I think it's underappreciated about how once customers come into the Sonos ecosystem, they really continue to stay in that ecosystem and buy more products over time and by some of our new products over time. Probably the other maybe slightly under appreciated a bit, though maybe that depends on who you talk to, is probably just the strength of our installed solutions channel. So we talk a lot about our growth in DTC, which has been very strong over the last couple of years and our direct-to-consumer businesses is healthy and very important to us. Our retail partnerships are also very important to us because it's great when people can touch, feel, listen to the product, bundle it with the TV sale, however they want to do that through retail. But I think our installed solutions channel gets sort of less time and attention, and those are really our component products. Think about our component products as a proxy for how our installed solutions channel is doing. And if you talk to any of those installers, we are just incredibly highly recommended. I think we have a stat somewhere in our Investor Day that like 92 out of 100 installers will recommend Sonos go in. And so for anybody who's really doing a remodel or doing new construction, it's a great channel for us and has been a great channel.

Okay. And just I think it was a year, maybe 2 years ago or so, you talked about Sonos Flex, which was a subscription service you were trialing over in Europe. Could you just remind us where that stands, if that's something that you guys are still looking at, and if there's really much opportunity on that front?

Yes. So we ran a small trial in the Netherlands and the early trial went really well and then what we have been doing and continue to do is collect a lot of data on how those customers and just on backup Sonos Flex was basically offering a bundle of our products as a subscription rather than a buy upfront purchase. And so what we've really been looking at is for the customers who did that, how has that gone? Have they been happy with that experience? Have they wanted to continue to rent our hardware rather than buy it. And so when we have something to announce one way or the other on what we found and what we learned from that, we will. But I think it really speaks to the fact that we try and be fairly data-driven as we assess what our customers want and what good opportunities for them would be going forward and that we're trying new things out there. So stay tuned for where we land on that.

Okay. And then just one more question as it pertains to the guidance a little bit here. Can you -- or not even really the guidance, but just to help people understand like how to model out for the rest of the year. Can you talk about what impact the supply chain had on your revenues, particularly in the fourth quarter of last year and also the first quarter of this year?

Yes. I mean we haven't [indiscernible], but I think I can safely say that if we had more supply, we would have had higher revenue if we had more supply in Q1 and really throughout this year, we probably would have expected higher revenue for the whole year. Look, we continue to build backlog. Our customers were incredibly patient about waiting, but you can't imagine that you didn't lose some new households coming in just because you didn't have product on the shelves or you didn't have product available when they needed it. And so we know there's some amount of lost revenue out there. The only other thing I would say is, to some extent, having had supply being constrained has been a bit of a natural hedge for us in the second half of the year. And so whether or not it's the fact that we actually can supply the demand or because demand has softened or we still can't supply the demand because supply continues to be challenged. We sort of know how much product we can make for the second half of the year. And I think that's part of what's given us the confidence that it has in keeping the guide when we came out with Q2 numbers.

Okay. And then just last question, I'll ask and then we can put it out to the audience and/or close it after that. Can you just broadly talk about on kind of the global audio market? Are there certain markets that are appealing to Sonos to look at recognizing you're not going to talk distinctly about new product areas we want to get into, but which markets generally are appealing as a whole and then also which ones might be less appealing and why to the extent you can comment on that, too.

Yes. So from the data that we have out there, there's sort of a $96 billion global audio market. We estimate we plan about $22 billion of that today. So it's very appealing for us to be able to enter new categories that expand our market opportunity. But when we look at new categories and going into new categories, and I would say going into Move and Roam in affordable category where you have batteries and Bluetooth was a new category for us. When we look at new categories, we want to make sure that we do it in a way where Sonos continues to have a really compelling value proposition to our customers. We're not just going to throw sort of a copycat product out there, but has a really compelling value proposition. And it's something where we can continue to hit our financial commitments of the 45% to 47% blended gross margins for the company in the 15% to 18% EBITDA margins. And so we, I think, have said we will enter new categories over time, but we are being thoughtful and methodical and really making sure we do it in a careful Sonos ask way when we go do that.

Okay. Thank you, Brittany. Any other questions from the audience? All right. With that, we'll end up here. So thank you again, Brittany for coming and really a pleasure to learn more about Sonos.

Thank you for having me. Great to be here.