Good afternoon, and welcome to the Sonos First Quarter 2023 Earnings Call. I would now like to turn the call over to Mr. James Baglanis, Senior Director of Investor Relations. Thank you. Please go ahead, sir.

Thank you. Good afternoon, and welcome to Sonos First Quarter Fiscal 2023 Earnings Conference Call. I am James Baglanis. With me today are Sonos' CEO, Patrick Spence, and CFO and Chief Legal Officer, Eddie Lazarus. For those who joined the call earlier, today's hold music features a selection from our Say It Loud station, curated in partnership with Black @ Sonos to honor Black History Month. Before I hand it over to Patrick, I would like to remind everyone that today's discussion will include forward-looking statements regarding future events and our financial performance. These statements reflect our views as of today only and should not be seen as representing our views at any future date. They are also subject to material risks and uncertainties that could result in actual outcomes differing significantly from the expectations described in the forward-looking statements. A discussion of these risk factors can be found under the caption Risk Factors in our SEC filings. During this call, we will refer to certain non-GAAP financial measures. For more information on our non-GAAP financials and a reconciliation to GAAP measures, please refer to today's press release regarding our first quarter fiscal 2023 results, which is available on the Investor Relations section of our website. As a reminder, the press release, supplemental earnings presentation, and conference call transcript will be accessible on our Investor Relations website, investors.sonos.com. Additionally, we have posted a separate investor presentation on our Investor Relations website that includes certain sections of our supplemental earnings presentation. I will now turn the call over to Patrick.

Thank you, James. And hello, everyone. Our record first quarter revenue is a testament to the strength of the Sonos brand and our category leadership. It's another performance that proves our flywheel is working. We acquire new customers through disciplined marketing efforts and through our existing customers who tell their friends and family that they should get Sonos. Our existing customers return to make additional purchases, building out their Sonos systems and growing products per household. Our team demonstrated its ability to execute amidst a challenging macroeconomic backdrop as we delivered constant currency revenue growth of 7%, a healthy adjusted EBITDA margin of 18.4%, and $168 million of free cash flow. As we always take a long-term view, the most important thing to note is that these results are where we expected them to be in order to deliver on our fiscal 2023 guidance. In the context of the current market environment, these are especially outstanding numbers. Consumer spending was rather tepid, especially as the pendulum has swung away from goods and towards travel and services as the consumer enjoys some of the activities that they were deprived of during the pandemic. The consumer electronics space, in particular, continues to experience softness after 3 years of very strong growth. For this reason, despite our strong start to fiscal 2023, we are standing pat on our annual guidance. The macroeconomic environment remains challenging and consumer spending uncertain. The dollar, while weakening some, continues to erode our top line, gross margins, and adjusted EBITDA. Given everything we see right now, we are maintaining our previously issued guidance range of $1.7 billion to $1.8 billion in revenue, 45% to 46% gross margins, and $145 million to $180 million in adjusted EBITDA. We believe this is prudent in the face of a lot of unknowns this early in the year. In Q1, we did exceedingly well on a comparative basis. We built upon our already strong share of the home theater market and saw significant gains in the U.S., U.K., Germany, and the Nordics, resulting in our highest share in terms of both dollars and units in 3 years. We performed well amidst the competition in the wireless speaker category as well. There is a reason why the New York Times crossword puzzle selected Sonos as the answer to the clue, 'wireless home audio company.' And Michelle Obama named it her most used app recently while on the Late Show with Stephen Colbert. The Sonos brand has never been stronger. And when consumer spending picks up and the balance of goods and services expenditure stabilizes, we will be well positioned to deliver accelerating top and bottom line growth. On the last earnings call, we discussed how being in stock in our products would enable us to run our typical focused promotions for the first time in 3 years. As we expected, customers responded in force to these promotions. We saw very strong customer response to our sets' offering, resulting in our highest level of sets as a percent of direct-to-consumer orders in years. We are keenly focused on driving multiproduct starts because they have proven to have greater lifetime value than single product starts as well as a higher propensity to repurchase over time. We were pleased with the balance of sales to new households as well as the repurchase activity by our existing household base, which we believe is yet another validation of our flywheel. As a reminder, in any given period, we tend to see existing households account for 40% to 45% of our registrations, providing us with a sticky, predictable revenue stream from our installed base. Our flywheel has proven to be remarkably consistent over our history. Even in the midst of the ongoing economic uncertainty, it continues to drive growth. We are still in the early innings of our growth as our more than 14 million households represent just 9% of the 158 million affluent households in our core markets. At the end of fiscal 2022, the average Sonos household had 2.98 products, up from 2.95 the prior year. This figure has steadily increased over the years, underscoring how the lifetime value of our customers continues to grow. And there's a lot more room for additional growth. As we noted on our last call, a significant portion of our households are single-product households, whereas our average multiproduct household has 4.30 products. In other words, we are starting to get into the range we had previously discussed of 4 to 6 products for every mature Sonos household. We estimate that converting our single-product households to the average multiproduct household installed base size represents a $5 billion revenue opportunity. Of course, this will not happen overnight, but it does highlight the long runway we have to further monetize our installed base. We are investing in the systems and programs to more aggressively go after this opportunity in fiscal 2023 and beyond. One example I'm proud of is Sonos Voice Control. With Sonos Voice Control, we have created a dedicated, easy-to-use, music-focused voice service for Sonos households. Our hypothesis is that this will result in increased engagement, which will translate into additional products purchased over time, further driving lifetime value. I am pleased to report that the Net Promoter Score of Sonos Voice Control far exceeds that of the other voice assistants on our platform. SVC, as we call it, caught up to 50% of Alexa total enablements in the U.S. in just 7 months and is trending to become the number one voice solution for Sonos in both the U.S. and France, where it only launched in December. Before I turn the call over to Eddie, I want to take a moment to address something that gets asked often, how the pandemic has affected Sonos' performance and what our path forward looks like. There can be no doubt that over the last 3 years, the pandemic created stay-at-home tailwinds, which drove strong demand for our products. These tailwinds were partially offset by the persistent supply chain disruption that we faced. This quarter was a step in the direction of normalization as these stay-at-home tailwinds subside, and we faced minimal supply disruption. But importantly, and as our record-setting Q1 revenue attests, the 5 million new homes that we added over the last 3 years are contributing to our flywheel. From everything we've seen in our data, these customers are behaving similarly to those customers who joined prior to 2020 in that they are: one, adding additional products over time; and two, they've become great advocates for Sonos, helping us attract more new customers. The last 3 years didn't just yield a temporary spike in sales nor was it a one-and-done phenomenon. It brought our business to a higher baseline from which we will grow further. As we discussed last quarter, we are making thoughtful and targeted investments to drive our medium- and long-term growth while being mindful of the continued importance of delivering profitability. Our investments are focused on driving our flywheel of new household acquisitions and existing customer repurchases. And while we are investing in these opportunities, we are simultaneously tightening our belts, reducing discretionary spending, and doing some restructuring to make our teams more efficient. We are laser-focused on what we can control. So if we begin to fall short of our targets in fiscal 2023, we won't hesitate to adapt to the environment, prioritize our key initiatives, and protect the profitability of our business. We are on the cusp of launching some exceptional new products, and our product roadmap continues to get more exciting. As I mentioned on the last call, we'll be announcing our entry into a new category this year, one of four that we're working on. We have a proven track record of gaining share when entering a new category, which underpins our conviction that we will continue to gain a larger and larger share of the $96 billion global audio market over time. The future is bright, and we're well-positioned to seize it. Now I'll turn the call over to Eddie to provide more details on our results and our outlook.

Thank you, Patrick. And hello, everyone. At the outset, I'd like to dig a little deeper into the point Patrick was making about our business establishing a new baseline. As our Q1 results show, the pandemic did not create a high watermark for Sonos. Instead, the pandemic strengthened the underlying fundamentals of our business, and we have great confidence that we will be able to continue to grow from the new level that we have attained. I also want to call attention to another phenomenon associated with emerging from the pandemic. Our year-over-year comparisons have been and will continue to be a bit wonky. This is due to the timing of backlog fulfillment, whether we were in and out of stock on key products, if we ran normal promotions, and many more factors. Although we see the shape of our year normalizing somewhat in fiscal 2023, we will likely have to lap this year in order to get back to some semblance of normalcy in terms of year-over-year comparisons. Against that backdrop, I'll provide what context seems to make the most sense, and let me start with revenue. In Q1, we grew revenues 7% constant currency or 1% reported to a total of $672.6 million. Foreign exchange was a $39 million headwind to revenue and was roughly in line with our expectations for the quarter. We're very encouraged by this revenue achievement, which fit with our ambitious expectations. And we're further encouraged that we beat Q1 of FY '22, which in turn beat Q1 of FY '21, even though FY '21 was in the heart of COVID demand and saw fewer supply challenges than FY '22. Quarterly registrations grew 27% year-over-year, while products sold grew 4%. Quarterly registrations for this last quarter faced a very favorable comparison as Q1 of fiscal 2022 registration growth had declined 24% year-over-year due to product supply constraints, timing of channel fill, and low holiday promotional activity in that period. Looking back a year further to Q1 of fiscal 2021 to smooth comparisons, this quarter's reported revenue was up 4%, whereas registrations and products sold are down 4% and 6%, respectively. So all told, we saw revenue up from Q1 of fiscal '21 due to price increases and channel mix, but we were down to touch on units sold compared to the height of COVID demand. On a regional basis, Americas revenues grew 6% year-over-year in reported terms and accounted for 59% of sales. EMEA revenues grew 11% constant currency but declined 2% reported to account for 36% of sales. As a reminder, the bulk of our FX exposure is to the euro and, to a lesser extent, the pound. We are pleased with our constant currency performance in the EMEA region and continue to monitor the economic landscape there closely. APAC revenues declined 15% constant currency or 21% reported to account for 5% of our sales. Gross profit dollars grew 2% on a constant currency basis but declined 10% on a reported basis. Gross margins declined 540 basis points to 42.4%. While our return to a normal holiday promotion drove the bulk of the decline in gross margin, it is also worth noting that FX was a 300-basis-point headwind to gross margins. Another point to emphasize here: This quarter's gross margin should be the low point for the year, and it landed roughly in line with our expectations and does not change our view that we can deliver gross margins in the range of 45% to 46% for fiscal 2023. Adjusted EBITDA declined 24% to $123.9 million, representing a margin of 18.4%. The 610 basis point year-over-year decline in adjusted EBITDA margin was driven by our lower gross margin as well as non-GAAP operating expense growth of 6%. Foreign exchange was an approximately $35 million headwind to adjusted EBITDA. Total non-GAAP operating expenses of $172.3 million grew by $11.9 million or 7% from the fourth quarter of fiscal '22 due to increased head count as well as the reset of our bonus accrual from last year's depressed levels. These factors result in uneven year-over-year comparisons beginning in Q2 of this year. Thus, I want to emphasize that non-GAAP operating expenses should be roughly stable in absolute dollars from this quarter's level. Free cash flow was $168 million in the quarter, largely driven by a $148 million decrease in inventories. Last quarter, we discussed our plans to exit Q1 with a more normal inventory position, and that is exactly what we did. At the end of the quarter, our inventory balance was $306 million, down 33% sequentially. Within inventories, finished goods were $261 million, down 36% sequentially. Our component balance of $45 million was down 5% sequentially. We ended the quarter with $432 million of cash and no debt. The increase in our cash balance was largely due to the $148 million decrease in inventory I just outlined, partially offset by the repurchase of $15 million of our stock. Last quarter, I mentioned that we were taking actions to improve our cash conversion, and I am pleased with the team's progress in that regard. One additional call-out, changes to the internal revenue code that Congress mandated back in 2017 now require that we capitalize and amortize our R&D spend. This change resulted in a $27 million hit to our net income this quarter, which naturally affects year-over-year comparisons. We anticipate that this change in law will result in a modest increase in our cash tax rate for the full fiscal year, and we're assessing how to mitigate the impact. As Patrick mentioned, we're leaving our fiscal 2023 guidance unchanged. We continue to believe that constant currency revenue growth of 1% to 7% for the year is representative of the underlying demand that we see and the range of outcomes that the year could yield. Significant economic uncertainty remains, and we do not believe it is prudent to adjust annual expectations based on one quarter of performance. We're aware that the dollar has weakened from the levels we discussed last quarter, but as I mentioned earlier, the impact we felt in Q1 was roughly in line with our expectations. I will now briefly recap our fiscal '23 guidance. We continue to expect constant currency revenue growth in the range of 1% to 7%, which factors in a $79 million FX headwind at the rate assumptions we outlined last quarter. This translates to reported revenue in the range of $1.7 billion to $1.8 billion, down 3% at the low end, up 3% at the high in reported terms. We continue to expect the gross margin to land in the range of 45% to 46%, roughly flat year-over-year. Our FX headwind assumption translates to an approximate 240-basis-point headwind to gross margin for the year. We continue to guide to adjusted EBITDA of $145 million to $180 million, representing a margin of 8.5% to 10%. As previously discussed, a significant portion of the FX headwind flows directly through and reduces adjusted EBITDA. As I also mentioned earlier, we're dealing with uneven year-over-year comparisons, and that's certainly the case in the second quarter of fiscal 2023. And while it is not our practice to provide quarterly revenue guidance, we do think, given the unusual puts and takes, that it is important to explain our expectations for the shape of fiscal 2023. In the last five years, we have booked an average of 57% of annual revenue in the first half of the fiscal year. Excluding certain COVID-impacted periods that are not representative of our normal-course seasonality, 38% to 40% of annual revenue is generated in Q1 with Q2 generally down 55% to 60% quarter-on-quarter to be in the 16% to 17% of annual revenue range. As our business returns to more normal seasonality, we expect this year to be no different, where Q2 is our smallest revenue quarter of the year. Q2 of fiscal '22 was a completely anomalous one due to backlog fulfillment as a result of supply constraints and timing of channel fill. Thus, the year-over-year comparison of down 25% to 30% is not, I repeat, not indicative of underlying trends in the business. As Patrick emphasized, we are pleased to be tracking to a plan that allows us to continue prudent and targeted incremental investments in the business. Our investments in our product roadmap are squarely aimed at reaccelerating top-line growth to our previously achieved levels of low double digits, with adjusted EBITDA growth in excess of that. But I also want to echo his caution that should our performance in fiscal 2023 start to fall short of our expectations, we are fully prepared to take remedial actions to prioritize our key initiatives and protect the profitability of our business. Finally, I typically give a brief update on our Google litigation, but this quarter didn't see major milestones. Right now, we are heads down as we prepare for the May trial in our Northern California case and the summer hearings in the cases Google brought at the ITC. With that, I'd like to turn it over for questions.

Our first question comes from Tom Forte from D.A. Davidson.

Great. I have two questions. And then time permitting, I'll get back in the queue for a couple more. So industry-wide, you're seeing material pullback in container costs and, therefore, supply chain-related costs. So at a high level, assuming that you're also starting to benefit from that, would you let that flow through to margins? Or do you potentially reinvest some of that by taking price?

Well, first, the first part of the question, I would agree that we're seeing a moderating of supply chain costs. In the first quarter, for example, last year, we had to airship a whole bunch of stuff. We didn't have to do that. The logistics overall are smoothing out, and that's a plus for the business. But we've laid out our prudent investment path for the year at this point, and we're not going to modulate and toggle one way or the other just based on that. We evaluate price all the time. We think we deliver tremendous value to the customer, but we'll make those assessments on a quarter-by-quarter basis.

Great. So my second question is, could you elaborate on what you mentioned earlier? Since you had a more normalized inventory position in the December quarter, you expected your promotions to help you attract new customers and increase penetration with existing ones. How successful were your promotions? And how should we perceive the potential for future promotional activities in the December quarter?

Yes. Thanks, Tom. It's Patrick. I'll take that one. We refer to our situation as normalized because we reviewed past performance and compared the promotions to the period before the pandemic, and they align well. We believe this approach has effectively attracted new customers and encouraged existing customers to return for additional purchases. Additionally, we focused more on sets this year, including packages with a couple of speakers or a home theater setup. This strategy performed exceptionally well. From this experience and our data, we anticipate leading with more sets, especially in direct-to-consumer channels. Overall, we feel positive about returning to a more normal environment with inventory management, allowing us to execute with confidence concerning our gross margin, brand, and portfolio strength. Thus, we feel we're returning to a more typical state, similar to our pre-pandemic promotional activities.

Our next question comes from Tom Babcock from Bank of America.

It's actually John Babcock. But yes, I just actually wanted to quickly follow up on that. Overall, it does seem like you're having a promotional period here ahead of the Super Bowl. Is this something you've done in past years, if you can just remind me?

Yes, it is, John. This is Patrick. This is the biggest time of year for TV sales in the United States, so we tend to focus on our home theater products during this period. That is something we typically do.

Yes, Tom, I believe you will notice throughout the year that we are going to revert to a regular schedule of promotions. We will engage in the types of activities we have conducted in the past, particularly during times when consumers are highly engaged with our market. However, overall, we will not adopt as aggressive a promotional strategy as some other brands.

Yes. And I'd just say, the one thing I'd layer on is the sets. So you'll also see us probably lead more with promos around sets given the way that helps new homes get started the right way.

Got you. And following up, at least on a geographic breakdown, I know you provided some commentary on Americas and also EMEA in terms of what went on there. Just in terms of Asia, how much of that declined? Because it looked reasonably steep. It was driven by kind of the COVID lockdowns in China, if there were any other factors at play.

So the Australian television market has been weak right now. We think it'll bounce back. It's, as you know, a relatively modest part of our overall revenue. We've got some new geographies that we've been working on in the APAC region, Japan and India; those are going well. But the Australian market had a dip. China is now reopened. That's a big part of the Australian economy. We'll see how that flows through, but we don't see any kind of long-term implications here.

Okay. Great. And then I guess just my last question before I get back in the queue. Are there any updates on the ongoing litigation with Google? And also, if you can just remind us what the next key deadlines are to be mindful there, that would be helpful.

Nothing from this quarter in terms of big milestones. The next big moment here is going to be May 8 when we open trial in Northern California in our first trial against Google.

Okay. And what's going on exactly?

We're actually getting to trial in the Northern California case, and that trial will last something like 10 days. So of course, there are a lot of preliminary skirmishing before you get there, but assuming that nothing surprising happens, we'll be presenting our case to the jury.

Our next question comes from Erik Woodring from Morgan Stanley.

I just want to dig into the kind of product registrations versus products sold dynamic because I know there are some kind of wild comps if we look back over the last, like, 2-year stack almost. And so I guess kind of simplistically, as we look at the metrics for the December quarter, did you ship kind of in line with demand? Was there a channel restocking? Were you able to work down some channel inventories? And maybe if you could just include in that, how customers or how channel partners are thinking about managing inventory into 2023, just because we hear from some of your peers, they're still being relatively tight. So would love to know if that's the same for how they treat your products as well, and then I have a follow-up.

Inventories significantly decreased. We had a high level of finished goods inventory at the end of the last fiscal year, but we expected and predicted a return to normalized levels, which we achieved with a drop of about $150 million. We ended the quarter with our partners in a healthy inventory position, showing neither excess nor deficiency, which reflects our share gains. Our products were selling well in stores, and our key partners were very satisfied with the performance during the holiday quarter. Assuming this trend continues, they will reorder regularly. However, we are in an uncertain environment, and no one wants to hold excessive inventory. Therefore, partners are being cautious, but we have maintained a steady rhythm in our collaboration with them.

Okay. Helpful. And then maybe as a follow-up, looking at Asia Pac. Maybe slightly different is I kind of look at Asia Pac down year-over-year. I look at the partner revenue down year-over-year. And that, to me, indicates there might be some weakness within the IKEA partnership just because I know it falls into both of those segments. So maybe just give us an update on where that partnership stands, how demand for those products is proceeding, especially in light of the December product launch. I know you came out with a floor lamp. So just kind of what's going on there? And that's it for me.

Yes, it's Patrick. I just spoke with our key contact at IKEA recently. We have launched a new product, but it's still in the early stages. IKEA is currently working on some in-store displays to promote sales as we move forward. Unfortunately, things aren't at the level they had hoped for at this point, nor are we entirely satisfied. I believe the focus needs to shift more towards execution in-store rather than other issues. We anticipate seeing progress throughout fiscal 2023 and will continue collaborating with them on future products. However, it has been somewhat challenging for IKEA to recover foot traffic and generate the usual business levels post-pandemic, which impacts their overall operations, not just the new products.

Got it. And maybe just, again, just to double-click on that. No change to how you guys think about that channel as maybe like an entry-level channel that you can get younger demographics on and hope to upsell over time. That's still kind of a focus for you guys. Is that a fair statement to make?

That is. That's exactly why we do it.

Our next question comes from Brent Thill from Jefferies.

Really impressive top and bottom line beat, but you didn't really flow any of that beat through to the guidance for the full year. So maybe just drill in kind of what's in your thinking through that. And then also, Patrick, you mentioned a new category launch this year. Are you baking anything into the guide for that launch this year? Is that still yet to come?

I'll address the new category first. We factor everything in regarding our expectations for the year. When we enter new categories, we commit to them long-term, but we don't anticipate a rapid start; instead, we focus on ensuring we do it correctly from the beginning. Our main driver remains our portfolio. I want to emphasize that we're still dedicated to launching at least two new products each year. Although the Sub Mini launched in Q1, it does not count toward this year's two product goal. I hope this clarifies our guidance approach. Additionally, as Eddie mentioned, we're closely monitoring market feedback. Our retailers have been very supportive, especially considering our category share gains emerging from Q1, and they're quite enthusiastic about the upcoming product launches we have planned together. However, we remain cautious following last year's strong Q1, aiming to be prudent given the broader macroeconomic signals we observe, even outside our business. While none of us are economists, we want to be thoughtful about how the year unfolds without getting ahead of ourselves. Thus, at this stage, we're not celebrating prematurely as Eddie puts it. Instead, we are ensuring we measure outcomes accurately, launch products successfully, and continue effective retail execution throughout the year. I hope this provides further insight into our perspective on the year ahead.

Yes. But just to jump in, just...

Yes. I mean, just a quick follow-up on that. Are you leaving a little more wiggle room in the guide given some of the macro concerns in terms of versus historic guidance? Or is this the kind of similar guidance gains you've been giving us for years?

The range is a little broader. And for just that reason, it is a very uncertain time, and we're still very early in the year. The only other thing I would say about this is that we're on our internal plan much more closely, I think, than we are on the external guide. Part of the risk, of course, we're only giving annual guidance. It's the shape of the year, and it's a little bit harder to penetrate. But we expected to do well being in stock and being able to promote. We did do well. We're very pleased about that. But we think given where we are in the year and given the cloudy economic environment, standing pat on the guidance is the right call.

Our last question comes from Tom Forte from D.A. Davidson.

Great. Last two for me. So Patrick, I want to re-ask a question I asked last quarter now that we've had more time. I would appreciate your current thoughts on competition scaling back their hardware efforts and for Sonos.

Yes, it's a good time to address that question, Tom, as we've just completed fiscal Q1, which is the peak season for consumer electronics and audio. We've noticed that some of the established players have heavily discounted their products, following the traditional approaches we've always opposed. Meanwhile, the larger tech companies haven't been particularly active or innovative lately. This situation has allowed us to leverage our portfolio, brand strength, and operational momentum, while competitors, aside from the usual legacy companies discounting heavily, have stepped back, enabling us to gain market share and execute our strategy effectively. We must remain cautious and not become overly confident. However, with the new developments from Apple, I am excited and confident about our product roadmap and our capacity to capture a larger portion of the $96 billion market. We are actively exploring new opportunities and investing in four new categories, while also enhancing our existing ones. Our team is doing an excellent job, and their performance in Q1 reflects that. I feel very positive about our current position. While we will focus on what we can control, we are still monitoring the competition, which seemed to have little impact in Q1.

Excellent. All right. So then this is also another re-ask, I apologize. But Eddie is talking about kind of the persistent strength of the U.S. dollar, and would appreciate your current thoughts on the potential for increasing prices for markets outside the U.S. given the persistent strength in the U.S. dollar.

We don't have anything to announce at this time. And as you know, if you follow it, the currency is bouncing all over the place these days, but it's something we evaluate. From our perspective, we want to make sure we're delivering value to the customer. And given the lifetime, how long our products last, the quality they deliver, the experiences we're investing in that we deliver through our software updates, we think we deliver that value, and we do think we have pricing power at times. But that doesn't mean you always want to use it because we want to grow our household base and keep that flywheel spinning. And so it's always a balance, but we don't have anything to announce at this time.

Our last question will come from John Babcock from Bank of America.

Overall, just one last question on guidance here. Just if you can just clarify, did you say you expected revenues to be down 55% to 60% from Q1 to Q2? And then assuming that is right, is there anything in terms of inventories or timing differences that might be impacting that? It just seems like a relatively weak quarter given what we saw even back to '21, and it obviously would be the weakest since 2020.

There's nothing specific to mention. The timing of new product initiatives is always important. It's not a matter of excess inventory. We have believed, as stated in our annual guidance last call, that this is a subdued consumer environment. Therefore, we haven't adjusted our expectations based on that, even though we performed well in the first quarter. We do not view Q2 as weak. Historically, if you look back at our first half, it's going to align with our usual percentages. We anticipate a strong second half. It's just how the year's trends are playing out.

We have no further questions. I would like to turn the call back over to Patrick Spence for closing remarks.

Thank you. And thanks, everybody, for joining us today. Fiscal 2023 is off to a good start. A lot of uncertainty out there, obviously, with the consumer. But at the same time, we're focusing on what we can control. We have an awesome product portfolio today. Our brand has never been stronger. We're taking market share, and we've got some exciting products coming up. So thanks, everybody, and we will talk to you soon. Take care.