Sonos acknowledges glitchy app might affect its financial performance this year

Sonos has hit a major snag with their latest app release. The company has admitted that issues with the new app could hurt their financial performance for the rest of the year. This news comes even as Sonos reported a strong third quarter, thanks in part to the successful launch of their new Ace headphones.

On August 7, 2024, Sonos announced their third quarter fiscal results, showing a revenue of $397.1 million and a gross margin of 48.3%. They reported a GAAP net income of $3.7 million and a non-GAAP net income of $29.5 million, with adjusted EBITDA at $48.9 million. However, the excitement over these numbers was dampened by the fallout from their problematic app update.

Patrick Spence, Sonos CEO, was upfront about the issues during the earnings call. “Thanks to Ace, our long-awaited entry into headphones, we reported year-over-year revenue growth and delivered results that slightly exceeded our expectations in our third quarter. This was overshadowed by the problems that our customers and partners experienced as a result of the rollout of our new app, which in turn has required us to reduce our Fiscal 2024 guidance,” he said.

The new Sonos app, intended to streamline and modernize the user experience, has instead been riddled with bugs and missing features. Customers have reported everything from system crashes to missing functions that they had come to rely on, leading to a wave of frustration and negative feedback. The negative feedback resulted in the CEO writing a letter to users acknowledging the issues and promising that the company will make things right.

As reported by The Verge, during the company’s earning’s call, Spence emphasized the company’s commitment to resolving these issues swiftly, stating, “I will not rest until we’re in a position where we’ve addressed the issues and have customers raving about Sonos again. We believe our focus needs to be addressing the app ahead of everything else.” This focus has led Sonos to delay two major product releases initially planned for later this year. One of these products is speculated to be their next flagship soundbar, codenamed Lasso.

The app’s overhaul was a significant undertaking, with Spence defending the decision as a necessary step for future innovation. “Overhauling the app and its underlying infrastructure was the right thing to do for the company’s future. The new app has a modular developer platform based on modern programming languages that will allow us to drive more innovation faster,” Spence explained. However, he acknowledged that the execution was rushed, resulting in numerous unforeseen issues.

To tackle these problems, Sonos has committed to releasing app updates every two weeks. They’ve also brought in Nick Millington, the original software architect of the Sonos experience, to lead the effort to fix the app. Tom Conrad, a Sonos board member, is overseeing the improvement process to ensure it meets the company’s high standards.

The app update, which rolled out in May, has seen some features like queue management and sleep timers removed, much to the chagrin of users. Sonos has detailed a roadmap to reintroduce these features and improve stability by fall. The company is also offering promotional savings to thank customers for their patience, with these programs set to last through fiscal Q4 and into Q1 of 2025.

Despite the setback, Sonos remains optimistic about their long-term prospects. Spence concluded, “While our app setback is regrettable, it is one chapter in our over twenty years of delighting customers. Our #1 priority is to make this right and ensure that the next chapter is even better than the previous ones.”