Sonos generates over 10% of its revenue from its online store, but physical retailers drive most of its revenue.

(Staff and Bloomberg)—Wireless speaker maker Sonos Inc. has filed for a U.S. initial public offering.

Sonos, a pioneer in the market for internet-connected speakers and No. 217 in the Internet Retailer 2018 Top 1000, is targeting a valuation of $2.5 billion to $3 billion in the IPO, said people familiar with the matter in April, who asked not to be identified because the plans are private.

According to the filing, the manufacturer generated 10% of its revenue from its online store during its fiscal 2017, which ended Sept. 30, 2017. That’s about $99.3 million through its website alone, although it also generates revenue by selling wholesale to other e-commerce retailers.

Sales through Sonos.com are increasing, with 12% of revenue, or about $78.7 million, coming from its site during the first six months of Sonos’ fiscal year. Physical retailers generate the majority of the retailer’s revenue, with Sonos products being sold in more than 10,000 stores, a number Sonos expects to decline in the coming years.

However, the speaker maker’s filings state a goal of growing the direct-to-consumer business through its online store and in-app experiences. Users use the Sonos app to control the Wi-Fi-enabled speakers and could expose consumers to new products or deals.

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While the industry around wireless speakers is booming, competition has increased since Sonos introduced its first home audio system in 2005. The retailer cites an “extremely competitive and rapidly evolving” market among risk factors in its IPO, naming Bang & Olufsen A/S, Bose Corp. and Samsung Electronics Co. among its main rivals, alongside newer entrants Amazon.com Inc. (No. 1), Apple Inc. (No. 2) and Alphabet Inc.’s Google.

Sonos used the filing to differentiate itself from Amazon and other makers of smart speakers.

“Poorly conceived audio technology has infiltrated our homes through the rapid diffusion of devices—computers, tablets, mobile phones and flat-screen TVs—that are not designed or optimized for sound,” the filing reads. “Large, diversified technology companies are attempting to capitalize on the expansion of voice control to drive consumers towards their web services, such as e-commerce and search. To date, they have created discrete devices that are not optimized for sound throughout the home and often constrain consumers to a specific partner ecosystem.”

Sonos posted a net loss of $14.2 million on revenue of $992.5 million for fiscal 2017, down from a net loss of $38.2 million on $901.3 million of revenue in the previous financial year, the filing shows.

Morgan Stanley, Goldman Sachs Group Inc. and Allen & Co. are working on the listing.

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James Risley contributed to this report.

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