Welcome to Sonos. Wherever we find you, I hope you're well, and I look forward to the day we see each other again in person. We're here today to share a brand-new product. We're really excited about it. Before we share all the details, I want to take a moment to recognize the incredible team who made this day possible. Building any new product is hard. Building one under these circumstances is even harder, not just for professional reasons, but also for personal ones. Seeing every person at Sonos come together to support their teammates and to bring everything they've got to work, even now, has been absolutely extraordinary. Of course, we've had a lot of inspiration, because as people worldwide have been spending more time together at home, they've been listening more. Music, movies, radio, and podcasts have brought us joy during a challenging time, and they've helped us all feel a little more connected. Which means that our mission at Sonos, to help people listen better, has never felt more important. As the world begins to open back up, we're going to want to bring the music with us, and the product we're about to share with you is designed to be enjoyed at home or on the road. Introducing Sonos Roam, the ultra-portable speaker that brings the amazing sound of Sonos from the kitchen to your bag, to the park, to the trail, anywhere your next adventure takes you, and back home again. Roam is the smartest speaker we have ever built. It's the fastest to set up, the easiest to use, the most affordable to own, and the lightest to carry. Roam weighs less than a pound, and it sounds so great, you'll want to listen to it everywhere. If you're a longtime Sonos owner, Roam is now the easiest way to enjoy brilliant sound anywhere you go. If you're new to Sonos, Roam is a great way to start your system. Roam does it all. It's built for the road, but it's also built for your home. Roam has enough power to fill a room. The sound is fantastic. Like all Sonos speakers, Roam is part of our system. You could start with one and add more over time. If you've never had the chance to give Sonos a try, there's never been a better moment to hear what we have to offer. For Sonos, Roam is an opportunity to introduce millions of new customers to the easiest way to enjoy great sound in any place they may be. I could not be more excited to see how people put it to use. Over the next 15 minutes, you'll hear directly from some of the people behind this product and learn a bit about the journey that brought us here. I hope you enjoy. Hi, everyone, and welcome. We're going to kick things off with the why. Why did we decide to make Roam? If you've ever used a portable speaker, you know how fun it is to roll up to a barbecue or a campfire and bring the music with you. You also know about all the usual trade-offs. With a typical portable speaker, you're balancing size against sound quality, portability against power, durability against design, the time you spend charging against the time you spend listening. The list goes on. With all those trade-offs, what you end up with is a sound experience that feels like a compromise and a user experience that feels complicated. There's all this stuff between you and the music. Our goal was to build the first ultra-portable speaker you actually want to bring with you, and one you actually use at home. One that invites you to pick it up when you're headed out the door, drop it right back in the stand when you get home, and to keep the music going the entire time. The question was: what would it take to create that kind of experience? First, a great portable speaker needs great sound, full stop. The audio needs to be clear and well-balanced. It needs to fill the space you're in, and it cannot feel like a compromise. The entire experience also needs to feel easy. You shouldn't have to think about the battery. You shouldn't need to worry about pairing, and you shouldn't feel like you're carrying a brick in your bag. Right out of the box, you should have a smart, lightweight speaker that plays what you want, where you want, however you want. A great portable speaker needs to give you freedom of choice, from the streaming services you use to the voice assistants that help. That might sound like table stakes, and it is for Sonos, but no other ultra-portable comes anywhere close to the level of choice we offer. We also strongly feel that a great portable speaker should look and feel like a premium product. We knew that Roam had to live up to the Sonos aesthetic. Roam looks good, and it is truly ready for any adventure. It's IP67, which means it's dust and waterproof. You can hold it three feet underwater for 30 minutes, and afterwards, it will still sound great. Finally, we started out knowing that a great portable speaker needs to be a Sonos speaker and integrate seamlessly with your system. This means easy Wi-Fi connectivity when you're home, easy Bluetooth while you're away, a seamless transition between the two, and on top of that, a seamless transition between playing music on your portable speaker and the rest of your system. That's a lot to pack into a speaker that weighs less than a pound, and I'm proud to say we did it. Roam does everything you expect from a portable speaker. There's Bluetooth, dust and waterproofing, 10 hours of battery life. Roam does everything you expect from a Sonos speaker. You get the freedom to listen to more than 100 streaming services, the freedom to use multiple voice assistants, and the freedom to control Roam any way you like, with your voice, your phone, or touch controls. Roam also does some things you wouldn't expect, and that's especially true when it comes to the listening experience. I can say with confidence that this is the best sounding ultra-portable speaker ever made, and I know you're going to be amazed when you hear it. A good day to everyone here with us. Let's talk more about sound. One thing we know at Sonos is that creating a great listening experience isn't just about making great hardware. You also need great software to drive it. That's true for any smart speaker, and it's especially true with a portable speaker. You're going to be listening to all kinds of content in all kinds of spaces. You might be playing for a single person or a whole crowd. We use hardware and software together to address these challenges, to create a speaker that can adapt to any situation and keep the music sounding great wherever you take it. Let's start with the hardware. Roam is the smallest speaker that Sonos has ever designed. It's just one- sixth of the size and weight of Move, but Roam's sound is astonishingly rich, and that's possible because Roam is built with custom-designed acoustics. It has a bespoke racetrack woofer powered by ultra-light, high-efficiency neodymium motors that maximize the bass but minimize the thickness. On the outside, Roam looks really sleek, and if you zoom in, you'll see its precision-engineered grill built in a toughened, acoustically transparent honeycomb substrate. It's elegant and durable and maximizes the quality of the sound. What you won't see is the software, and this is the smartest speaker we've ever built. To start, Roam has automatic Trueplay. It's constantly monitoring the acoustics of the space you're in, and it's adjusting the sound to fit. Auto Trueplay ensures that Roam sounds its very best anywhere you take it without lifting a finger. If you're a Sonos super fan, you'll know we first developed Auto Trueplay for Sonos Move, but Roam takes the technology to the next level. It tunes the sound not only when you're on Wi-Fi, but also when you're on Bluetooth. The result is a big upgrade in sound quality, so of course, we'll also bring it to Move. Let me introduce you to one of the coolest features of Roam. When you're listening at home, Roam automatically connects to your system on Wi-Fi, and when you leave, Roam automatically switches to Bluetooth. There's no need to switch between the two. It just works. Automatic switching may sound simple or obvious, and when you're using Roam, it is. No ultra-portable speaker has anything like this. You never have to worry about pairing or connecting or getting on the right network. You just grab it and go. What happens when you get back home is up to you. If you like, you can just keep the music playing on Roam. If you have other Sonos speakers, you can group Roam with other speakers in your home by pressing and holding play, and of course, by using the Sonos app. By the way, that includes if you're streaming via Bluetooth as well as Wi-Fi. We really wanted to go even further with a brand-new feature we call Sound Swap. Just keep holding the play button and Roam will throw the music to the nearest Sonos speaker in your house. Roam automatically detects which is closest and moves the music. Sound Swap really does feel like magic. Whatever you're listening to follows you home and then fills your home. The listening experience is totally seamless, from indoor to outdoor to indoor, which means that no matter where you are or where you're going, you'll never miss a beat. All the features I just described, automatic Trueplay, automatic switching, and Sound Swap, come on top of the software that comes standard with Sonos. There's Amazon Alexa, Google Assistant, AirPlay 2, grouping speakers, stereo pairing, and more. I can tell you there's a lot going under the hood to make this kind of sound experience possible. As a listener, Roam just feels easy from the moment you open the box at home. When you want to play something on Roam, you say, "Play." When you want to take it somewhere, you pick it up and go. When you come home, you can just set it down or you can just keep right on listening, or you can move the sound with the touch of a button. Now, let's talk about all the places you can take Roam and the design details which will keep it safe during every stretch of the journey. A virtual hello to you all, welcome to our last deep dive into the making of Roam. When we were designing Roam, we spent a lot of time thinking about the reasons that portable speakers end up gathering dust in a drawer. Some of them feel heavy. Some are weirdly shaped. Some are so delicate that you worry whether they can take a hit or survive getting splashed or dunked. Others are hard to charge or hard to keep charged. Even though we spend a lot more time in rather than out, most portable speakers just don't look like they belong in your home. We knew Roam had to be different, to feel inviting, and to be the companion you want to bring everywhere you go, especially for those moments that matter the most. That starts with a design that makes you want to pick Roam up. We built hundreds of models before we found one that felt just right. As you heard earlier, Roam weighs just 15 oz. It's smaller than a water bottle, and it just feels like a grab-and-go speaker. Roam is easy to bring with you even when you're already carrying a lot. I should add, even the packaging leaves a light footprint. There are no single-use plastics. It's made of 100% sustainably sourced paper, and the new design minimizes the use of inks. Roam has premium look and feel, but in every way, it's built for adventure. One of the features that makes Roam tough is its concave end caps. Their shape increases the speaker's drop resistance. The shape also prevents accidental button presses. When you stand Roam up or drop it, or brush it against something, you're not going to accidentally stop the music or blast the volume. One more note on the buttons. You'll also notice they're tactile and slightly embossed. That's a departure for Sonos, but it's an important one for Roam. Raised buttons make it easy and intuitive for anyone to hit play or bump the volume up using touch alone. Once you pull Roam out of the box, or out of your bag, you can set it down in any orientation. You can stand it up, which is great when you're indoors and need the space, and when you're outside, maybe on an uneven surface like grass or sand, you can lay Roam down on its side. The triangular shape directs the sound upwards so you can still hear the music with crystal clarity. Finally, we knew Roam had to be ready for a full day of adventure, with a battery to match. Roam gets 10 hours of playtime from a single charge. It can last 10 days in sleep mode. That transition happens automatically when the sound stops, extending the battery life even more. When you want Roam to wake up, it happens in less than one second, much faster than any other portable speaker. Meanwhile, charging, like everything else about Roam, is designed to be easy. It works with any Qi-certified charging device. The one we've made snaps magnetically to the base, creating a seamless connection. When your adventure is done, all you have to do is to set Roam down. It'll be ready for the next one. In closing, I want to echo what Patrick said at the beginning of today's presentation. Roam isn't just an ultra-portable speaker, it's the ultra-portable speaker. The fastest to set up, the easiest to use, and the best to listen to. It is an addition to the Sonos family unlike any other, and a speaker that brings the sound that matter the most anywhere you go. Roam will be available globally April 20th, 2021 for $169. That makes it the most accessible and affordable speaker Sonos has ever built. You can pre-order Roam right now at sonos.com and later this month from partner retailers. Thank you again for joining us today. We're so glad you could tune in. In the coming months, we look forward to seeing you and Roam out in the world. Statements made in today's presentation may contain forward-looking information. Actual results may differ materially from what we are presenting today. The information on this slide identifies and provides details about some of the risks regarding those forward-looking statements, as well as where to find more information about our risk factors. Welcome to Sonos, and thank you for joining us. Today, we are going to focus on three things. The first is the size of the opportunity in front of us and the trends that will power our growth post-pandemic and for years to come. The second is the power of our unique business model, how it serves both our customers and our business, and how it sets us up for increasing customer lifetime value over time. Finally, we'll use the bulk of the time today to cover the strategic initiatives that will enable us to seize this opportunity and deliver on the fiscal year 2024 financial targets that Brittany will share. We start today where we always start at Sonos, with why we're here. We live in a world where there's a lot of noise, a lot of distraction. A lot of the products that are brought into the world these days are done so without a lot of care, cluttering up our lives, creating frustrating experiences, delivering mediocre sound, and ultimately finding themselves in a drawer or worse. We're different in the way we approach building products and services. In this noisy, distracting, and disposable world, we want to inspire the world to listen better. We do that through the craftsmanship of our products. We do it because we honor the artists who create all this incredible audio content. We do it by creating products that look and sound great. We do it by making it easy to play all types of audio in any room or every room. We do it by building products that last longer than anyone else in the industry. We do it by being open to all the services our customers demand. We do it all because we have a huge ambition. Our ambition is to be the world's leading sound experience company. Simply put, when people think of sound, we want them to think of Sonos. Today, people think of Sonos when they think of sound in their home, but we aim to eventually be there for sound in every area of their life and throughout their day. With our innovation in sound and software, we freed ourselves from the need to think about only traditional form factors for creating sound experiences. Our work with IKEA is a great example of this, and I see a lot more opportunity for sound to show up in surprising ways in the future. It's a huge ambition, but we don't just have an ambition when it comes to what we're building. It's also about the company we are building for the long term. I joined RIM, now BlackBerry, when it was 150 people doing a variety of engineering projects. I had the opportunity to get a seat at the table in determining what BlackBerry would be, and it felt like I could have a real impact. The chances of a small group of people in a small town in Canada having an impact on a global scale is pretty close to zero. We were a competitive, innovative bunch and worked tirelessly. We did whatever it took to make BlackBerry a success. In my last year at RIM, my team and I were responsible for $20 billion in revenue and 2,000 people. We did something that no one thought was possible during my 14 years at BlackBerry, and I'm proud to have played an instrumental role in making it happen. We also screwed it up. We didn't build the conviction in who we were, how we would innovate to say no to Verizon when they needed a response to the iPhone on AT&T. We spread ourselves way too thin. We didn't think about building company culture in a sustainable way. We didn't build the kind of culture that could pivot away from hardware when that was the right move. We didn't build something that would be successful long after we all left. Sonos is my second act and a chance to put everything that I learned at BlackBerry to work. This is the thing that brought me to Sonos, and it's the thing that fuels me to this day. A second chance like this is rare. This is why building an adaptable, admired, and enduring company where people can do their best work and everyone feels welcome and included is so important to me. When my time at Sonos is done, I will judge our success by whether Sonos continues to grow and evolve forever. That is the bar that I hold myself and all of Sonos to. We're making good progress. We score above industry benchmarks when it comes to engagement, retention, and belonging, all key drivers for building an enduring culture. We have something special happening at Sonos, and it's something we work hard at every day, and it's paid off. At the end of fiscal year 2020, we had 32 million products registered in 11 million homes. In the last quarter, our customers enjoyed over 3 billion hours of audio. It's easy for people to mistakenly believe that our success is only a result of our incredible hardware. With a tip of the hat to Marc Andreessen, Sonos is really a story of software eating audio. Over the last 19 years, we've disrupted the audio industry by focusing on how to bring the worlds of emerging technologies like Wi-Fi, cloud, apps, and streaming together in a way that makes it easy for customers to enjoy sound throughout their home. Software is at the core of this. Two-thirds of our engineering team is in software. It's the software that connects our customers to all the services they love. Of course, when you're disrupting an industry, you also want the help in the way of some macro trends that will help fuel your growth. We have three big ones. This is the golden age of audio. The sheer volume of music, audiobooks, and podcasts we have access to now is incredible, and customers are enjoying it. Over the last year, the amount of time spent listening to audio is up an incredible 24% per MIDiA Research. As more and more people become creators, we believe we'll spend even more time with audio and find interesting new audio formats like social audio. Second trend is what we're seeing with more and more video content going direct to home. We've seen a decade of change in the past year with companies like Disney and HBO bringing the newest movies right into our homes. It's not enough to have a great visual experience. Customers are demanding a theater-like audio experience in the home, that's something we deliver better than anyone. Third trend fueling our growth is one that Rich Barton at Zillow coined the Great Reshuffling. This is the untethering of people from their commutes and offices, which has really enabled people to reevaluate how and where they want to live. Given more and more companies are offering their people, especially the kind of people who are in our target market, the flexibility to work anywhere, we think this will be a multi-year cultural trend. These three trends are helping create the opportunity we see in front of us. We're going to look at our opportunity from two perspectives. The first is the number of homes that we're in today and how many we believe are addressable in the core markets we play today. As of the end of fiscal year 2020, we were in 11 million homes, or approximately 9% of the affluent homes we believe are most addressable for us today. This is a cumulative count of the homes, and you can see we have a huge number of affluent homes that aren't yet enjoying the benefits of Sonos. Of course, this does not contemplate the countries we aren't in yet, but even when you look at the penetration and opportunity ahead in the countries we're in today, we have a lot of runway. We have tens of millions of additional homes that we are determined to fill with Sonos over time. The other way we look at the opportunity is by looking at how much is spent on audio products each and every year. Unlike homes, which is cumulative, this is an annual number. We currently play in the $25 billion home audio market, and our products address the $18 billion premium segment, of which we have approximately a 7% dollar share today. Growing but tiny. We've come a long way, but we have a ton of opportunity to take a lot more of the home audio market and even more as we begin to expand into the broader audio market. This is a huge and growing opportunity. How you seize the opportunity is, of course, the key, and that brings me to our experience. Strategy really boils down to two things: where you play and how you win. We play in sound, and we win through experience. There are six dimensions to the Sonos experience. Connected is where it all starts, connected to all the services you love, connected to your entire system, so you can play in one room or every room. Easy, the ability to get the right sound at the right moment without any friction. Joyful, creating those moments and experiences that make people smile. Signature, unique Sonos-only experiences like Trueplay or Sound Swap that you saw us debut with Roam. Curated is all about personalization, helping you quickly find something you enjoy. Premium speaks to our craftsmanship, the sound, quality, physical design, and longevity we toil over in creating our products and services. Because of the way we've created our industry-leading experience, we've also created a unique business model that serves our customers and has enabled us to build a great business. The power of Sonos is that you can start with one product and expand to more over time, and our customers have proven they do just that. There are two sides to the model. The first is attracting new customers. As you can see, we've continued to become more efficient at doing that, lowering our household acquisition cost over time. The fact that our number one driver of new homes continues to be customers telling their friends and family definitely helps us, as does the high proportion of organic traffic we see to sonos.com. Both are important signals that we have a strong brand. The second side of the model is those customers coming back and adding additional Sonos products over time. As you can see, customers continue to add products over time, and we see this continuing in perpetuity. I'm proud to share that the customers who bought products in the first year we launched, 2005, continued to return and add more in 2020. Understanding HAC in the context of lifetime value is important. As we've disclosed previously, the average number of products per home is 2.9, which translates to $270 in lifetime value or about double the HAC. Going back to the fact we continue to see even our earliest customers return to purchase additional products, we believe the long-term opportunity here is much greater. Given the kind of trends we're seeing and the products and services we have planned, we believe getting to four to six products per home is well within reach. Even if we weren't to assume any improvement in HAC, we'd expect to see an LTV to HAC of 3x-4x, and this is before we layer services on top, which we expect to increase LTV even more. All of this leads us to the way we're thinking about the opportunity ahead. Last year, we surpassed 10 million homes, a huge milestone and a testament to a lot of work over the last 19 years. You'll hear us continue to talk about homes, but we're evolving as a company and really need to focus on the people in those homes. As we expand our offerings, we're thinking about the products and services that address the needs of every individual in the home. Our announcement of Roam today is a great example. This addresses the needs of multiple people in the home. We are building products and services that meet people's needs whether they're in the home or outside of it. We have roughly 25 million people in our 11 million homes using our products and services today. Our goal is to have more than 100 million people using our products and services over the next few years. An ambitious goal for sure, but one we feel is within our reach given what we have planned. Over the next 45 minutes, we'll cover the three strategic initiatives that will help us achieve this goal. The first is to expand our brand. This is all about understanding our customers better than anyone and how we're evolving our brand and marketing strategies to reach more of those customers. We'll talk about how we're expanding our offerings. You've seen that we have a tremendous opportunity ahead just in the categories we play today, but we have ambitious plans to expand into new categories, to expand into new customer segments, and to layer services on top of everything we do. All of this creates a tremendous amount of valuable intellectual property that we'll also provide an update on. We'll wrap things up by taking everyone through how we're driving operational excellence to achieve sustainable, profitable growth for the long term. It's been a transformational year for Sonos. We have our people and our customers to thank for that. I really want to recognize the efforts of our people as their adaptability and perseverance in the face of the pandemic and all the challenges it has brought has been incredibly inspiring. I've never been more proud of our team. I've never been more excited about our future. We are in the best position we have ever been. We have a ton of momentum. We have a huge opportunity in front of us. We're just getting started. [Presentation] Hey, everyone. I'm Pete Pedersen, Vice President of Brand and Marketing based in Seattle. I joined Sonos six years ago, very much drawn to the challenge of taking a truly beloved brand and scaling it. I'm here to provide a bit of insight into how we're doing just that, bringing Sonos to the masses. It starts with deeply understanding the customer. For us, the sweet spot is an audience that we call culture seekers. Culture seekers are content omnivores, always on the lookout for the latest movies, TV shows, podcasts, video games, and of course, music. They appreciate thoughtful design, and they're willing to pay a premium for rich experiences. Culture seekers are into tech, but they're not techie. They have a very low tolerance for things that are complicated. Culture seekers are the tastemakers in their social circles and have a high propensity for sharing their experiences online and off. By the numbers, culture seekers are a very affluent group. The vast majority are college-educated, own a home, are married, and have kids in the household. As mentioned a moment ago, culture seekers love sharing their experiences online. What you see on screen are just a few recent examples of Instagram posts from our owners. We see hundreds of these every month. Sonos fans sharing their passion for the brand in their social networks. We also know that the Sonos experience is very sticky. Repeat purchase is common. About 40% of all the products we sell are registered to existing households, and this has been a consistent trend for at least the past five years. This passion and very public owner advocacy fuels our brand. In fact, word of mouth is the number one source of awareness for Sonos. One out of every three culture seekers first learns about Sonos through word of mouth. What's the magic? It's the Sonos experience. Premium sound, great design, and ease of use fuels this passion, and our owners know how much we care about sound quality. So much so, in fact, that we routinely partner with some of the world's most highly acclaimed sound experts to help us tune Sonos speakers. What you see here is a picture of Grammy Award-winning engineer, Emily Lazar, one of the Sonos Soundboard members. Emily's pedigree is outrageously amazing. She's worked with artists like Beck and Coldplay, David Bowie, and hundreds of others. Oscar winner Chris Jenkins and Grammy winners Giles Martin and Manny Marroquin are also part of the Sonos Soundboard. Owners appreciate the fact that we're now also contributing to culture via Sonos Radio. We've partnered with artists like Dolly Parton, Björk, David Byrne, Thom Yorke, D'Angelo, and many others to create exclusive Sonos Radio stations. Our curatorial lens and handcrafted playlists have become very popular with owners. Sonos Radio is now the third most listened to music service on Sonos. In addition to partnering with the music community, we're also partnering with other brands to help us reach new audiences. For example, in Q1, we partnered with Disney+ to celebrate the much-anticipated premiere of Mandalorian Season 2. We invited consumers to elevate their listening adventures, making it clear that Sonos home theater products were the best way to fully experience Mandalorian's amazing score and heart-stopping sound effects. These types of partnerships work very hard for us. Disney's audience is huge, and the brand association reinforces our premium positioning. You can see the results for yourself. Double-digit increases in traffic to sonos.com, great engagement across social media, and a fair amount of press coverage to boot. Moving forward, you'll see us continue to partner with other premium brands as we invite a broader swath of consumers into the Sonos experience. To support the launch of Roam, for example, we'll be partnering with The North Face. Together, we'll showcase Roam's durability, portability, and of course, sound quality. You'll hear more about that in a few months. We'll also expand our retail distribution with Roam, selling in some places that are popular with culture seekers, but where you might not expect to see Sonos. Our partnering efforts are also extending to Instagram, where we've amassed literally hundreds of influencers with huge followings. These advocates span interest areas like home decor, fashion, adventure travel, and sports. The work here is really about helping us connect with culture seekers on their terms, and it brings to life the impact Sonos has on real people's lives. Of course, all of this perfectly complements our paid media approach. You can see on the screen some of the attention-grabbing creative we'll be using to launch Roam. Since our media mix is mostly all digital, we're favoring vibrant colors, snappy headlines, and easily digestible messages. All while playing up those relatable emotional benefits of Sonos in lifestyle settings. This is a whole new design language for us, and we're confident it'll help us reach a much broader audience than ever before. Our evolved aesthetic really comes to life in the 30-second Roam film I'm about to show you. This creative will appear on Hulu, YouTube TV, and some traditional over-the-air broadcasts. We're putting quite a bit of weight behind Roam, highlighting the product's versatility and durability. Let's take a look. [Presentation] You'll note that the film ends with a call to action to visit sonos.com. All of our advertising is now optimized to land consumers on sonos.com, where we believe we can provide a truly rich educational shopping experience. Two-thirds of all traffic to sonos.com is organic, which speaks to the strong word-of-mouth dynamic I referenced earlier. Between the organic traffic and the qualified leads being delivered by advertising, DTC growth has been very strong. You can see here some of the impressive stats from FY 2020, where DTC enjoyed an 84% increase in revenue. Indirect retail remains a vital part of our channel mix. Our retail partners help us reach new customers at scale. Costco is a great example here. Sonos is now in nearly 700 Costco warehouses, where thousands of culture seekers shop every week. Our business was growing at a really good clip there. Retail partners also help us enter new geographies. The right partner can give us credibility and help us establish trust with customers very quickly. Yodobashi Camera in Japan is a great example here. Once a new customer becomes a Sonos owner, the virtuous cycle starts all over again. Consumers fall in love with the Sonos experience, they add to their Sonos systems, they become Sonos brand evangelists. In marketing, our job is to keep the flywheel spinning by continually reaching new customers and finding ways to authentically connect with them. We have brand new design language, we have new brand partnerships, new influencer relationships, a new advertising campaign, and new retail distribution. We're really excited by how all of these pieces will work together to usher in Roam and bring Sonos to a whole new group of customers. Thanks very much. Hi, everybody. I'm Ted Dworkin, and I lead the Product Management and Customer Experience team here at Sonos. Feel really fortunate to be representing the team here today and taking you through our product portfolio, and especially emphasizing what makes Sonos so unique and so powerful. I joined Sonos more than three years ago. As a longtime Sonos owner, I really believed in the product I was using. Once I met the Sonos team, I was most taken by the culture and its collective imagination for what the Sonos experience would become. I wanted to help lead a company that builds products that last, products that bring meaning and joy and connections to so many households. It's a company of inventors and makers with a culture and a vision that takes our offerings now beyond the home, marrying brilliant devices with engaging services. It's a great responsibility to have a customer base that's so committed to our products. We spend a lot of time with our customers, understanding what they appreciate and what they would love to see us create next. That commitment to customers translates into tremendous engagement and loyalty. The Sonos app is our daily connection to customers, with more than 1 billion unique app sessions in the last quarter alone. 1 billion touch points, 1 billion moments to engage. 1 billion moments to satisfy, to pique a customer's interests, to bring joy. I mentioned products that last. You see here just how many of our products are still being enjoyed by customers that have been with us since the 2000s. Think about that time horizon. All the odd devices that you've had that are long gone. Quality and sustainability matter. A system that gets better over time matters. Every customer that buys a second or third Sonos product gets greater value because from our inception, we knew we weren't just building devices. We were building a coherent, connected system. The Sonos system is built on a platform that enables devices to connect and complement each other, filling space with brilliant sound. Our design intent is to ensure that the system not only gets better when you add the second or third speaker, but that the system gets better over time through software and services. A second or third speaker isn't just a stand-alone device. Now to start, we've established an incredible hardware and software foundation. Our wireless speaker lineup brings sound to your whole home. Surprising sound that's so much bigger than the physical speakers. With Sonos Move and now Roam, we have battery-powered Bluetooth Wi-Fi speakers that complement the household and extend Sonos beyond its four walls. Our home theater line sets the standard for clear TV dialogue and powerful entertainment audio from our soundbars. Modular designs that allow you to start with any device and add more over time. For example, you can add a soundbar to wireless speakers and know those wireless speakers are surrounds for your home theater. A wireless Sub adds bass performance. All this is designed to blend seamlessly into your home. Components, Port, and Amp. They increase flexibility for customers and unlock scale for larger installations. With Amp and our Sonance partnership, we bring the versatility to make indoor and outdoor spaces part of an integrated entertainment system. Our bookshelf and lamp speakers with IKEA bring two complementary companies and brands together to introduce great sound and design to a broader audience via hundreds of retail locations worldwide. Now, many of these product decisions were radical choices when we first made them, but we had a vision and a commitment, and we created not just categories, but a self-reinforcing system. Now, how has this foundation performed? It's fueled our growth with market-leading positions in every category in which we compete, from our soundbars to our highest-end Sonos Five. Our Sub, which we launched nearly 10 years ago and refreshed recently, is still the iconic category leader for delivering the best sound and premium design. It leads for dollar share in our major markets. With Move, we created a new category, premium portable. When installers are involved, we want Sonos to be the brand of choice for custom installations. Custom installers have a lot of influence over purchase decisions, given their expertise. Customers that work with installers tend to have larger systems and higher NPS. Customers want Sonos, which creates a very healthy flywheel with installers that you see here reflected in this data. It takes software horsepower and scale to bring this much sound to so many configurations across a growing portfolio. We do all that with a pretty unique point of view. An open platform that allows customers to choose the content they love and allows them to control it however and wherever they choose, from more than 130 content partners, 40 home control and automation partners, and the leading voice assistants. There's just no ecosystem lock-in with Sonos. Achieving this ambition takes a unique point of view, we anchor our development in our experience principles. This keeps us really grounded in the value that we create for customers. Connected. Sonos is a connected system for sound. Sound bars that are great for TV and music. Wireless speakers that are great for music and home theater. It all works together. Easy. Much of the magic in product development is in the work to eliminate complexity and make it possible to set up home theater, to create stereo pairs, to move sound upstairs and downstairs, to have that all feel simple and intuitive. Joyful. Moments of spark in the experience. Moments of creativity that inspire. The sound a speaker makes when you join. It's not just a sound of confirmation, it's a sound of a little celebration. Sound Swap. We just showed you that for the first time with Roam, where you can move music magically from one speaker to another with just a button press. Signature. The brand work that Pete talked through. You see that reflected in all of our industrial design. A speaker is identifiably Sonos. How you group and move sound around your system, all identifiably Sonos. Curated, ensuring that the best voice assistants, the best content providers, are all available in a single interface and a single control model that makes it one-touch easy to get the content you want into the space you want. Finally, premium. Great sound, high quality, longevity, the craft of detail and fit and finish. As Patrick showed you earlier, we're playing right now in just a small part of the revenue opportunity. We have opportunity to do more in hardware and in services, in consumer and in business. Anchored in our experience principles, we're going to expand our opportunity in the marriage of hardware and services. We showed you Roam today. By its own right, it's an amazing product that is Sonos to the core. Incredible sound, remarkable design, great flexibility, and built for living. It's also an indicator of where we're headed. Roam opens up new audiences for us, new partnership opportunities, new contexts in which Sonos will not just be relevant, but highly desirable. Back in 2017, we said that we'd release at least two new products every year, and we've delivered on that each and every year. In fact, we introduced five last year, when you include Sonos Radio HD. All expanding our offerings, enabling new experiences, and embracing our design principles. We're going to continue to announce and reveal new hardware products when they're ready, and you all know those are measured in multiple months, and we sweat the details to get them just right at launch. The world of services is new for us, and we're taking a very different approach than we do with hardware. Services are about experimentation, iteration, and continuous improvement. With services, we're expanding how we engage with customers, how we elevate the sound experience while increasing the customer lifetime value. This past April, we introduced Sonos Radio: free, ad-supported streaming radio just for Sonos customers. Sonos Radio is a great new way to explore music on Sonos, the broadest range of radio stations from around the world. It also brings a unique and growing catalog of Sonos' hand-curated original programming. More than 50% of listening hours on Sonos is radio. You can see why we were motivated to elevate that experience. We launched Radio HD in November. Radio HD is an upgraded experience that delivers an expanded catalog of exclusive, original content tuned for Sonos in high definition audio, the highest quality of any streaming radio service, all with skips, repeats, and no ad interruptions. This is a really new service for us. It's just a few months old, and we'll continue to test and learn and enhance the experience toward driving that lifetime value. With the scale and traction we're seeing with the free service, we do expect radio advertising to remain the larger part of the business. You can see our subscription ambition reflected here. For Sonos Radio HD, 500,000 paid subscribers and growing. We started Sonos Business with a pretty simple concept. Businesses need legal music. We can help connect our content partners with business customers that use Sonos. What we've learned through having this platform, in talking to our end customers, to installers, to business owners, and to IT managers, is that we have an opportunity that's tremendous in the business space. Our combination of hardware and software, outstanding sound, a content ecosystem, ease of flexibility and setup, control integrations matter tremendously in retail, in leisure, in wellness and healthcare, in hospitality, and in the enterprise. The ability to control sound in spaces, to decide who can access, to ensure the music is legal, to manage and move that sound around distinctly in zones, all of this is critical to business. The larger the business, the more critical the ability to manage. As you've seen in the consumerization of IT in so many other industries, we see a huge opportunity in all types of businesses, and we're very excited about delivering an end-to-end solution for business. We've talked about this previously as a test and learn, and while we're still in the early stages of the offering, we believe there's a strong opportunity here that we're going to continue to develop. The one principle consistent with our hardware approach is that we're not going to talk in a lot of detail about what's coming down the pipe, instead sharing it with the world when it's ready for customers. We think the business space holds just as much future opportunity for Sonos as we have in the consumer space. Thank you. [Presentation] Hello, everybody. My name is Eddie Lazarus, and for the last two years, I've had the pleasure of serving as the Chief Legal Officer for Sonos. Now that we've given you a sense of our plans and ambition, I get to change gears a little bit and talk about some of what makes my job enormously fun and interesting, the legal side of innovation and a different kind of capital that we've built up within the company, specifically its intellectual property. In a few minutes, I'll get to some of the facts and figures, but it's impossible to appreciate the depth and value of our patent portfolio without a brief primer on the history of Sonos' innovation that Patrick touched on at the outset. The first fundamental disruption that Sonos pioneered was to move home audio away from the world of centralized, wire-connected systems to a decentralized system of networked, intelligent devices that could be easily placed around the home and linked wirelessly. Sonos engineered how to deliver the power and content of the internet to each device independently or in groups. Wireless multi-room home audio was born. Our early patents reflect this disruptive shift and include, for example, patents related to setting up a system of independent smart devices, forming dynamic groups of these smart devices, and wirelessly synchronizing playback, managing volume controls for the dynamic grouping, and enabling stereo pairing of speakers. Solving these problems, Sonos created a world where a consumer can enjoy the benefit of a single smart speaker, but also compound his or her listening pleasure by later adding more smart speaker devices that can be controlled either individually or collectively in groups. The development of the smart home sound platform paved the way for Sonos to develop and patent additional features and technology, such as enabling the ability to cast and control media content from a mobile phone or tablet to one or more smart device. Sonos also patented many aspects of using smart speakers to access and play cloud-based services for listening to music. Today, many hundreds of our patents are practiced by smart speakers and smart devices every day. Importantly, the life of many of these Sonos patents extends into the 2030s. Sonos' innovative process continues every day as we develop new foundational ideas around the audio experiences of today and tomorrow. That's why we've already obtained a host of patents dealing with home theater, multi-device voice and concurrency experiences, Wi-Fi and portable, spatial audio, and much more. Great new products like Roam are the practical embodiment. Presently, Sonos has 2,149 utility and design patents worldwide, and we just crossed the 1,000 patent mark here in the U.S. In each of the last four years, we've been in the Intellectual Property Owners Top 300 for U.S.-issued patents, our portfolio has been named repeatedly as one of the most valuable patent portfolios in consumer electronics. Looking at the chart, you can see that Sonos continues to add lots of patents to its portfolio, as well as filing new patent applications that protect the future. Sonos was not only ahead of its time in establishing the smart speaker market, it was alone in building the many sound experiences that millions of people have come to enjoy daily. You can see from this chart just how far ahead of the field Sonos was. We're pleased that we've been able to conclude licensing agreements with a number of companies like Sound United, Lenbrook, and Legrand. We're looking forward to extending that licensing program, as quite a number of companies have built their products on the technologies from setup to sync, to group volume, to zone scenes, to cloud queuing and more that Sonos developed and patented. That's why our portfolio, which we intend to defend firmly, is so valuable. Sometimes a firm defense will mean resorting to litigation, as it has with Google, a situation that many of you have been following. A few highlights on that topic. Over a year ago, we showed Google how they infringe 100 Sonos U.S. utility patents. That number has only grown as we've obtained new patents and Google has implemented new features. Today, we estimate that Google infringes about 150 U.S. utility patents from 30 different patent families. All of those patent families are still alive, we continue to obtain high-value patents from them. We included five patents in our action against Google at the International Trade Commission. That's basically the limit of what you can fit in any one case. Those patents were directed to grouping and synchronizing playback among smart devices, volume control for a group and individual devices, stereo pairing, and setup. We just recently finished trial in the ITC, remain confident in the strength of our case, and expect a preliminary decision in early to mid-May. We filed another case in the Western District of Texas that involves five completely different patents. These patents are directed at another set of very important and widely adopted features, such as creating and storing groups and transferring playback responsibility for a cloud-based stream of media content from a user's device, such as a smartphone, to a media playback system that is then configured to retrieve and play back the cloud-based media content. Trial is scheduled for June 2022. We look forward to having our day in court. I'm Brittany Bagley, I've been the CFO of Sonos for the last two years. I joined from KKR, where I invested in Sonos in 2012 and then sat on the Board until I stepped in as CFO. I'm so excited to be here today sharing the potential of Sonos that I saw and the future opportunities that made me want to join. Let me start by spending time on our business model and why we are so excited for Sonos' future. We have the opportunity, the brand, and the product to continue building something even better than we have today. First, let's take everything we've talked about and put it all together. We have a winning business model and value proposition to our consumers because of our system all working together. That includes industry-leading hardware design, quality, and sound, and a significant investment in software so that everything works together, is reliable, and is easy to use. Services, either our own or through our partners. We offer unparalleled choice with more than 130 third-party apps, two voice providers, and more of our own proprietary offerings like Sonos Radio, and in the future, things like Sonos Voice or other services we might introduce. That kind of ecosystem, where a company is good at both hardware and software and has invested the time and money to be a platform for finding all the content you want, has proven to be powerful for our customers and hard to replicate for our competitors. You can see that power in the strength of our existing households who stay with us and the new households we add every year. Since 2016, that has resulted in a 24% CAGR for our active households. Those existing households stay active, not just in using their systems, but in coming back and buying more. You can see that our older customer groups keep buying every year. 2005 - 2015 was still repurchasing in 2020. Was 2016, and 2017, and so on. As our household base grows, they make up a larger percentage of our overall business, representing 41% of registrations in fiscal year 2020. As we add great new products, this trend will continue. As Patrick covered, our lifetime value of a customer increases over time. From what we see, the lifetime of our customers just keeps going. This means that every year, we don't start from zero. We start with a great base of existing household repurchases from which to build our revenue. Why is that? Sonos is better as a system. Our households own 2.9 products on average, and generally, the more Sonos you own, the happier you are with the experience. 39% of our existing customers only own one product, though, and that's a huge opportunity for us to convert them into our full system over time. What that also means is that when you do become part of the Sonos system, the other 61% of our customers own over four products on average. This supports how we think about the lifetime value opportunity for our customers over time, before they even add on services. What does this powerful business model do for us? We have materially increased our profitability over the last five years. In fiscal year 2021, we expect a 13.5% adjusted EBITDA margin at the midpoint of our range, which reached our long-term guidance of 13%-15% provided at IPO. We got there faster than many expected. In addition to EBITDA, we have delivered strong free cash flow conversion. Our $129 million of free cash flow was 119% of adjusted EBITDA in fiscal year 2020. The other way you can see the power of Sonos' business model and the value of our software is through our industry-leading gross margins. We're well above our prior long-term guidance of 42%-44%, as we have worked through supply chain improvements, material cost reductions, and have benefited from both product and channel mix. This strong improvement in profitability has gone alongside top-line growth that has exceeded our prior guidance of 10%. Since 2016, we will have grown the business on average at an 11.5% CAGR, and we continue to see huge opportunities in the future. Overall, we've done what we said we would do. We achieved this by focusing on some core areas of strength that will continue to help us drive growth in the future. We accelerated new product introductions, and the products we have introduced have been fantastic. Move, Arc, and Amp have all performed incredibly well, and we're so excited that we got to introduce Roam today. Roam shows us expanding in one of our new categories at a new price point. We expect it to appeal to both new and existing households. The new households we are acquiring now, along with our existing base, will continue to support us for years to come. Overall, we're growing faster than our $25 billion market, increasing our households, and continuing to expand globally. Today, 57% of our revenue is from the Americas, 36% from EMEA, and 8% from APAC. We have opportunities to grow in all our markets. We also continue to drive operational excellence through the business. We've increased gross margins and diversified our manufacturing. We have gotten much more efficient on our sales and marketing. You saw how our household acquisition costs have come down, and we see continued improvement in our LTV to HAC multiples in the future, just reinforcing our ability to grow profitably. We've done this without sacrificing the need to invest in R&D to support our future product roadmap. We have and will invest in the infrastructure we need to scale our company further. This combination has left us with a strong balance sheet. We ended Q1 with $653 million of net cash. As a business that operates with inventory, working capital, and manages a supply chain, we will always keep a prudent cash balance on hand. This leaves us a nice cushion to further invest in our business. Of course, we do this organically, but we're increasingly thinking through accretive M&A opportunities we can pursue. Examples of these would be companies that accelerate our product roadmap, support our new initiatives, or further differentiate our customer experience. We will also continue to execute share repurchases to offset dilution and return capital to shareholders. We completed a $50 million share repurchase in fiscal year 2020 and have another $50 million authorization. I'm sure what you've all been waiting for is what does this mean in terms of the targets we're putting on the business? You already heard Patrick talk about some of our bigger long-term aspirations. From a financial standpoint, we are providing targets out to fiscal year 2024. Despite all the uncertainty that still exists in the world, including what would a post-pandemic world look like, we continue to see strong macro trends for Sonos. Overall, we plan to deliver $2.25 billion of revenue in fiscal year 2024. This is over a 13% CAGR based on the midpoint of our fiscal year 2021 guidance. Despite the fact we always have product and channel mix shifts, we are raising our gross margin target to be between 45%-47% every year. We expect to achieve adjusted EBITDA margins of 15%-18% by fiscal year 2024. Given where our current gross margins and EBITDA targets are, much of this expansion comes through continued scale and leveraging our OpEx. In order to execute against this, we expect to see momentum from our core differentiated products, as well as the expansion of our offerings, where we invest to drive some of the new opportunities Ted talked about. We continue to achieve industry-leading premium margins, which includes supporting our own direct-to-consumer channel initiatives. We continue to drive down household acquisition costs while investing in acquiring new households, and our existing households continue to add to their systems. We continue to scale our business, including implementing a new ERP system and putting in place all the systems and infrastructure we need to fully support Sonos Radio and other potential services initiatives, as well as ongoing efforts to continue diversifying our manufacturing. We balance the investments we need to grow with a focus on improving profitability and scaling EBITDA margins. We grow adjusted EBITDA faster than revenue with a CAGR of over 20% during this period. By continuing to focus on and invest in the future, we have more opportunity beyond our three-year horizon. This is just the next chapter. As you've now heard, we want over 100 million people in tens of millions of homes and businesses using Sonos products and services, and the TAM is there to make this a reality. We have trends of increasing at-home content consumption, along with incredible new products fueling our growth even beyond COVID. We're supported by our new customers and our existing customers who repurchase and drive increasing lifetime value. We have a powerful business model that is scaling profitably. As you can see from our fiscal year 2024 targets, we're confident in the team, roadmap, and opportunity in front of us. That is why we're so excited for Sonos' future. Thank you for joining us today. [Presentation] Hi, welcome to the Sonos Investor Day. Thank you for joining us. We've got the management team here with me to answer some live Q&A. We've got some of our great research analysts who are here to ask us questions. Up first, we're going to go to Katy Huberty with Morgan Stanley. Great, thank you. I have a couple of questions. First one is for you, Brittany. You raised the long-term revenue growth from 10% to 13%, but the EBITDA CAGR of 20% is relatively in line with your prior guidance. Can you just talk about why that is? Is it incremental investment that's required on the back of moving the addressable market beyond the home? And then can you just explicitly explain what you've included, if anything, around licensing revenue in that long-term EBITDA growth forecast? Yeah, great question. Thank you. As we thought about our long-term guidance, we were pretty happy to be able to raise our growth rate. That's on a lot of the tailwinds that Patrick has been talking about through his presentation, even as we come out of COVID. It's as we look at the market, we continue to have significantly higher growth rates than the market. We're really thrilled to be able to do that. At the same time, as we have always said as we go through this, we're really balancing investing for growth, so investing in our R&D and investing in infrastructure to scale our business With that top-line growth. As we look out to fiscal year 2024, we're really looking to maintain that balance between investing for the future and driving a higher long-term growth and those expanded gross margins. In terms of licensing revenue, our general approach to forecasting is to call it like we see it, and to include everything that we have a great line of sight on, or everything that we can sort of reasonably estimate and put into our forecasts. What that means specifically on any big litigation pieces is that we're too early to put numbers around that. We've been really clear that we don't have numbers to share on the IP stuff at this point. You can assume we don't have a certain enough outcome to include that into our long-term plans. That general licensing that we do have line of sight on is something that reasonably could be included in that forecast. Okay. Thank you. Patrick, a follow-up for you. It's really exciting to think about where Sonos might be in the world outside of the home, and one of the opportunities you didn't explicitly talk about was autos. I know you don't like to talk about future products, but Audi published some photos that if you zoom in, you can see that Sonos is integrated into the Q4 e-tron. I'm sure you'll get this question more and more now. Can you just talk at a high level how you would think about approaching the auto market and how big that opportunity might be for you? Yeah. Thanks, Katy. First of all, it is exciting to announce, and like we've said, we want to be in all the different categories of audio. One of the big ones, if you think about the $90 billion that's spent every year in auto or in audio, a big chunk of that is in auto. We're excited. Our first partnership of bringing our sound experience to automobiles is with Audi and the Q4 e-tron. You'll see a lot more on that very shortly, so stay tuned for more. The way we think about all of this is how can we bring that overall experience into new areas of audio. You saw it today with Roam, as we thought about that product, how do we make sure that it's not like so many products that have been out there that get thrown in a drawer and forgot about, right? We want to build it in a way that it's really easy for people to engage it, and we do that by creating and inventing technology like Sound Swap, which allows you to easily move the music. As we've thought about auto, thinking about how it connects to the system and how we make it easy for our customers is really what we're thinking about. That's not all going to come in the first iteration as we go through this, but every category of audio that we go into, we want to bring that unique experience, that unique connectedness that we talked about to it. We see doing the exact same thing in auto over time. We love to be getting started with Audi. They are very innovative on this front and willing to experiment. Early days, but you can expect us to be thinking and bringing our connectedness to all areas of audio. Great. Thank you. Thank you, Katy. Up next, we have Rod Hall from Goldman Sachs. Yeah. Thanks, Brittany. Thanks for the question, and thanks for doing this. I guess I'll start with you, Brittany. I wanted to ask what you are expecting in terms of gross margin contribution from the Roam. Should we assume that that would be similar to the existing corporate level gross margins or above, below? I know that sometimes new products impact the gross margin. I have a follow-up. We don't break out gross margin by our products specifically, but I think a general rule of thumb is that you can think about, on average, our higher price point products contributing higher gross margins and our lower price point products contributing lower gross margins to the overall blended Sonos P&L. That said, everything that we see in our product roadmap, including Roam, which we were so pleased to announce today, is included in that forward gross margin target of 45%-47%. We're very happy with the level of premium gross margins that we're going to be able to continue delivering going forward. Could you say a word, too, on supply there? I know a product like that at that price point, I would think it'd be in pretty high demand, especially as people start leaving their houses. Could you say a word about what you guys are thinking in terms of ability to supply? Yeah. We think it's going to appeal to both new households and existing households, and we do think it's a great time for the product as people can get out more and more. We're absolutely factoring that in as we think about supply and availability of the product. Anytime you introduce a new product, you're sort of always guessing a bit at what demand will look like because you don't have any run rate history on that. We'll start taking pre-orders coming up in April, and we'll have a better sense, and then we'll continue to manage Roam and ramp that up. We've talked a bit about our supply chain and everything we're doing there. Certainly that's part of our effort, is to get Roam up, ready, and out the door. I had one for Patrick, if I can sneak it in. Patrick, I lived through that BlackBerry situation and Nokia when iPhone launched. I remember being on those earnings calls, and I think it's really interesting that you've learned from that experience. I wonder if you could talk a little bit about maybe double-click on this idea of creating a more resilient technology platform. I know a lot of that is making it more software-oriented, but could you maybe say a little bit more about how you see setting this technology platform out for longevity? Yeah, sure, Rod. I really think that one of the most important lessons is what you do today may not be what you do in the future as you think about it. It's why I've been so passionate and pushed so hard on things like our IKEA partnership. What we're trying to do as we think about going beyond the home as well. Really, talking to all of you about the power of our software platform and the opportunities it opens up, other partnerships, how we go into auto. As we think about the opportunity long term, and we think about things like services, what we do today may not be what we do 10, 20 years from now. I think being okay and building a culture where people understand that and are okay that we're going to figure it out and figure out whatever the world throws at us is absolutely critical. I am so proud of the way we've seen our team, our company respond to everything that's happened through the pandemic. I really feel like we are building that resiliency and that adaptability. This has been a real test over the last 12 months. Look at our supply chain team and their ability to really deliver during this period that has been so difficult for so many companies. Those are the kind of things that I think are so important. What I spend a good chunk of my time on is making sure that we are going to be able to adapt to whatever opportunities arise, and we don't discount them out of hand. I think there's a balance between the focus, but then as well exploring some of those new ideas. Like Ted talked about, it's a big cultural shift to experiment with some of these services, get into these areas where you want to be shipping something new every month, right. Because on the hardware side, we determine what great looks like two years in advance. Then we go and we try to bring out pretty much a perfect product. Developing the services culture, the culture of learning and adapting in real time, is something that I'm very passionate about. That openness to what you do today may not be what you do 10, 20 years from now, I think is absolutely critical. Great. All right. Thanks a lot. Thank you, Rod. Up next, we're going to have John Babcock from Bank of America. Thanks for taking my questions. I guess just wanted to start out. Roam is clearly a lower price product relative to what you've launched in the past. On that point, I was just wondering if you can share a little bit about how this changes the way in which you acquire customers and also how they're going to kind of roll through your ecosystem in the future. Yeah. We have found that new customers come in to us through almost all of our products. Certainly, lower price point products help introduce people to Sonos who might not have been introduced to Sonos before. Roam will sneak in just below our One SL from a price point standpoint. It is going to be our lowest price point product. It's actually fitting in very well to our line-up and our assortment. What we see is customers come in, and they continue to have great repurchase habits over time. The more new customers we get in, whether or not through Roam or through some of our other products, continue to repurchase and become part of that Sonos lifetime value that we've been talking about. The next question I had, we've seen some companies in the past where if you have too many products in the end, you can kind of spread yourself too thin and recognizing, most of these are still in the speaker category. There's certainly a lot of carryover from one product to the next. I just want to see how you plan to balance that as you go forward, especially when you launch into certain areas like business, for example. I think that's a great question to turn over to Ted, who does a lot of our product management. Thanks, Brittany. Yeah, I'm happy to speak to that. It really actually ties back to Patrick's point about scale and how we think about investing in platform. When you think about the work that we're doing, even in the last couple of years, the number of products that we've been able to put out into the market and then advance into services, we haven't had to replicate half the company each time when we go out and do something new. We take advantage of scale in our investment. That scale, of course, also needs to ensure that we can do interesting differentiated things depending on the category that we're in. We're not simply replicating a thing that we do with one device with another. We're introducing unique capabilities that make sense for that device and that context. How do we make sure that we don't spread ourselves too thin? We make sure that we're really grounded in what the customer really wants. We make sure that we're grounded in our experience principles, so we don't take on a challenge unless we're sure that we can accomplish it in the way that makes Sonos unique, in the way that will win those customers, and that we can then support that investment over the long term. Our approach to platform, our approach to scale, and our approach to differentiation, depending on the category, all allow us to make those decisions. Yeah. Thanks. Just last question, just for you, Brittany. I was just wondering if you might be able to talk about those long-term targets, revenue, gross margin, EBITDA, and ultimately, which of those might be the most challenging to achieve. I mean, recognizing that's probably not the best question, but I just want to kind of get your sense on which of those might be a little bit more challenging overall. I really think it's the balance between the three of them, right? It's that balance between growth in our top-line revenue, maintaining those gross margins, and growing EBITDA faster than we're growing revenue. I think a lot of companies can sort of pull one of those levers by trading off the others, it's very hard to keep all three of them going in that direction over time. We're very confident that we can do it. We have done it. We've demonstrated that we can generate significant top-line growth and improve our margins and profitability. I would say it's really that balance between the three of them. Okay. Thank you. Thank you. With that, I'll ask Brent Thill of Jefferies to join. Thank you for hosting today. Very helpful. Patrick, you've had incredible success with the direct-to-consumer channel. I'm curious if you can tie it into Brittany's target on the $2.25 billion in 2024, how you see the direct-to-consumer component really driving that. I know you're probably not going to give a percentage of the mix of your channel, but maybe if you can just speak to it. It's been an impressive stat, I think, the last few quarters. Then I had a quick follow-up for Brittany. Yeah, thanks, Brent. It definitely has. Really, we've seen multiple years of kind of acceleration over the last 12 months. From FY 2019 to FY 2020, we basically doubled the percentage of sales that were going through DTC. That was a concerted effort as the pandemic hit and we really wanted to help customers and be able to reach out. So that is something, as Pete mentioned in his section, we're going to continue to focus on. We think we have a unique ability, particularly to reach those existing customers, which account for about 40% of our registrations every year. A really unique ability to reach them through our direct-to-consumer channels. Then we keep testing and trying to learn, how do you educate new customers that way as well? We're going to continue to do that. Our assumptions have been built in there. You see benefits when you think about not only driving revenue growth, but as well gross margin and some of those things. We've built that into the model as we think about the long term. It's really going to be a mix. We're continuing to experiment. As Pete also mentioned, you will see Roam actually show up in new locations too. We're looking to add selectively new retailers, new partners, new areas to show up as we think about these other products. All of it is an important mix to get right. We'll continue to really lead with our DTC as kind of the best instantiation of what we have. Also, don't forget, we have a massive and a very resilient, actually, if I may say, over the last year, custom installer channel too. The people that are going around to the homes and actually installing products, they've bounced back tremendously. We're excited about that group too. As Ted talked about with business, we think there's a big opportunity with that group. There's a whole bunch of levers at play that really we're excited about for the future. Just a quick follow-up on the upgrade program. As a large Sonos client, I have had extra time, obviously, at home to go through that upgrade. You've been offering some great incentives to get I think at the IPO, you said the average life of a Sonos product is around seven years, and correct me if I'm wrong, but there seems to be an aging install base that is in that upgrade process. Can you just give us a sense of how that's trending and what you've seen during COVID on the upgrade program? Pete, would you like to talk a little bit about our upgrade program and how we approach that? I'm happy to. Without getting into specific numbers, we've seen tremendous engagement from our existing install base on the upgrade program. We've added some new products into the upgrade program, and we'll continue to look to do that in the future. Our intent is to make sure all of our owners have the very best sound experience at home, the very best experience overall with Sonos at home. We believe that's unlocked with our new app, S2, and adoption of S2 has been well beyond our expectations at this point. We're very pleased with the progress we've made, and the customers who have taken advantage of the upgrade program seem to be sticking with us. That's great. Great. Thank you. Thank you, Brent. With that, I'd like to ask Tom Forte at D.A. Davidson. Great. Thanks, Brittany. I have a question for Patrick. Patrick, I want to talk about your long-term vision for Sonos. When I think about Sonos core competencies, I think of technology, design, networking, connected home, and brand. How, though, do you think about the long-term vision for Sonos, including outside of music? Yeah. I think we've already shown that we're beyond music in the sense that we're supporting things like the explosion of audiobooks and podcasts, and we brought those onto the platform. I think you nailed a number of the core capabilities of the company. From my perspective, it really is this idea of trying to build the world's leading sound experience company. That means showing up in ways, in different and maybe unexpected ways, like we have with IKEA, like we will with Audi. As well, what we've been able to do with software and our sound engineering is ultimately things like Trueplay, which allow us to free sound from traditional form factors. I'm very excited about thinking through how else it shows up in the future. That presents a ton of opportunity. We're going to continue to explore that and look at other kind of interesting and exciting ways to show up. I just think there's a lot of opportunity in that kind of $90 billion pool of spending every year right now. We'll look at what else do we do to help customers in terms of the categories we're in today and help them with anything they need to do in their life with sound. Great. For my follow-up question, I wanted to know, on your intellectual property, what does success look like as far as defending it, one-time fees versus licensing revenue? When you talk about your patent portfolio, clearly there's others beyond Google that may be violating your patents. Do you have the financial resources to fight multiple battles on the IP front at the same time? Thank you. I'm going to let Eddie talk about our IP strategy broadly here. I think the most important thing to recognize with respect to how we think about the potential revenue is that we have foundational IP in the areas of our core competency that stretches out well into the 2030s, and as we get new patents, it'll extend even beyond that. We really don't think about this process as involving one-time payments. This is something that we want to develop as an ongoing stream of revenue as far as the eye can see. As for active litigation, look, litigation is always a last resort. It's really not our preferred strategy for developing relationships with the companies that are using our technologies. I hope we don't end up in a situation where we have to sue lots of big companies all at once, but we're going to do what's necessary, and we have the wherewithal to do what it takes to make sure that the many companies that have built their platforms on the technologies we developed and patented treat us fairly in that process. That's the road we're going down. Great. Thanks for taking my questions. Thank you. With that, Matt Sheerin at Stifel. Yes. Hi. Thanks, Brittany. Yeah, just following up on some earlier questions, can you update us on the supply chain challenges you've been dealing with, near-term expectations? Is that in line with what you've been talking about on the last call? Given the expanded product portfolio, are you looking at any changes to that strategy, such as adding another contract manufacturer or expanding manufacturing into other regions beyond Malaysia? We're pretty comfortable with our current manufacturing strategy and our ability to support the long-term plan that we've put out. We have no update today on some of the nearer-term supply chain conversations. Just no update there right now. Okay, great. Just a follow-up on the revenue targets that you have three to four years out, does any of that contemplate non-hardware revenue, such as significant revenue from radio or services beyond the royalties that you talked about? Everything that we have line of sight on factoring in, we have factored into that guidance. You saw Ted put out a target for our Radio subscribers. There's no specific date on when we'll hit that target, but you can imagine that we are factoring in the things that we have visibility on as we look out at our forecast. Okay. Thank you. Thank you. With that, Adam Tindle at Raymond James, please. Okay, thanks, Brittany. I actually just wanted to start with Patrick, if I could, your plan to attack more of that $89 billion audio market beyond the premium market over time. You included a lot of customer analysis today, which was great. I would just be curious if you could touch on the profitability of a customer in that broad market versus the premium market, why pursue that? You're just 7% of the premium TAM right now. What would be in it for you to pursue the broader TAM and at this point, how does the customer profitability profile look? Yeah. Thanks, Adam. I think what we aim to do is actually just continue, just as you've seen with Roam today, even though it's at $169, it is a premium product, right? What we expect that we can do is address a whole lot more of those affluent homes that are there. As we start to pull in more and more homes and address more, it'll still be in a premium mindset, right? We believe that we'll be able to get people that maybe wouldn't have spent as much on audio products in the past to step up the experience because they've maybe started with Roam, right? They've seen how great it can be. They've heard from family and friends, right? Just like Pete talked about, it's the number one driver. They've heard from family and friends of how great the system is. They start younger, maybe, entering with Roam, and then over time, add a Beam, add an Arc, start to add a Move around the home, maybe a Five, a Sub. We think we've got a great way to start to enter with more people with something like Roam, and then over time, they can build out that system. We feel good about the premium nature of what we build. You see it's one of our experience principles. We won't be compromising that as we reach into these other areas, and I think we very much feel like more and more people over time, given we are in the golden age of audio, will be willing to step up and invest a little bit more in their listening experience. Okay, maybe a related question on HAC. You talked about 2x LTV to HAC, which was helpful. I think if I backed into it correctly, your HAC is somewhere around $135 or so. As you try to go further to this mass market or down market beyond the premium, maybe talk about opportunities to lower that HAC. What would be the leverage you can pull to do so? Yeah. Thanks, Adam. I think a couple things. One, I think Patrick's point about how we are staying premium is an incredibly important point. Our premium customers, where we still have a ton of room to get further penetration, also buy products where they have audio listening that we don't provide today. You can think about that as a huge opportunity that we have sort of a right to own in some ways. That's really, I think, important. Because of that, as we increase our brand and do a lot of the things Pete was talking about, we will continue that trend of driving household acquisition costs. I just want to give Pete some credit and a minute to talk about that because he's been a lot of the architect behind driving down that HAC for us. Great. Thanks, Brittany. There's really three points to be made. First is our scale is really aiding us at this point, right? There's that flywheel effect and the dynamic of word-of-mouth recommendation. The more customers we have that are happy with the Sonos experience, the more people they're telling, and so on and so forth. Scale in this instance really does help. The other point to be made is our operational excellence has really improved. I'm so proud of the team, especially during COVID, doing such great work and really honing in on those things that matter, those things that count and are going to resonate and connect with the culture seeker. Probably the most important point is we've just gotten to be better at marketing. Our targeting is much more on point. We've eliminated waste from our paid media spend. It's gone all digital, and as I mentioned during my presentation, it all points to sonos.com, so that really helps us become much more efficient. The creative product itself is better. The Roam 30-second spot you saw, I'm pleased to report, is the highest-scoring piece of creative we've ever made. It's the right media plan, the right creative to service that media plan, driving people to sonos.com. All of those things work together to help us become more efficient and drive down that household acquisition cost. Thank you, Pete, and thank you to all the analysts for their wonderful questions today. It was really great to have them on. With that, we've gotten the questions answered, and we're at time, and I will turn it over to Patrick for some closing remarks. Thank you again. Thanks, Brittany. Four things I'd want to leave you with. The first is we've got big opportunity, as you've seen today, with some great tailwinds. Whether you look at it in terms of the homes and the homes we address or the revenue that's spent every year on audio, big opportunity ahead. Secondly, we have a unique business model, which is benefiting customers in that they can start with one, add more over time, and it's building a great business for us as well. You've seen that through the HAC and LTV today. The third is we're evolving in the way we think about this whole space. We're not only thinking about those homes, but we're thinking even more specifically about the people in the homes and how they're using these products and the products and services we can build for each individual, right? Our aspiration is to get to 100+ million people using our products and services. You see that today with a product like Roam, where we think that product can be addressing multiple people in a home. You may have two or three Roams in your home as well. We're excited about that. Finally, you've seen that we've increased our long-term financial targets as a result of all of this and the hard work by the team, plus our roadmap and our investments for the future. I think we're in an excellent position today. I've never been more excited about the opportunity ahead, and we're really just getting started. Thank you very much, and we'll talk to you soon.