UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): November 9, 2022
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) | |||||||||
| (Address of principal executive offices) | (Zip Code) | ||||||||||
(617 ) 300-0956
(Registrant’s telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |||||
| Soliciting material pursuant to Rule 14a–12 under the Exchange Act (17 CFR 240.14a–12) | |||||
| Pre–commencement communications pursuant to Rule 14d–2(b) under the Exchange Act (17 CFR 240.14d–2(b)) | |||||
| Pre–commencements communications pursuant to Rule 13e–4(c) under the Exchange Act (17 CFR 240.13e–4(c)) | |||||
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbols | Name of each exchange on which registered | ||||||||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition
On November 9, 2022, Sonder Holdings Inc. (the “Company”) issued a Shareholder Letter announcing its financial results for the quarter ended September 30, 2022. A copy of the Shareholder Letter is attached as Exhibit 99.1 to this Current Report on Form 8-K.
The information contained in this Item 2.02, including the Shareholder Letter attached as Exhibit 99.1 to this Current Report on Form 8-K, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section or Sections 11 and 12(a)(2) of the Securities Act of 1933, as amended. The information contained in this Item 2.02 and in the accompanying Exhibit 99.1 shall not be incorporated by reference into any registration statement or other document filed by the Company with the Securities and Exchange Commission (“SEC”), whether made before or after the date of this Current Report on Form 8-K, regardless of any general incorporation language in such filing, except as shall be expressly set forth by specific reference in such filing.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits
| Exhibit No. | Description | |||||||
| 99.1 | ||||||||
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) | |||||||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Sonder Holdings Inc. | ||||||||
Date: November 9, 2022 | By: | /s/ Chris Berry | ||||||
| Name: | Chris Berry | |||||||
| Title: | Chief Accounting Officer | |||||||
1November 9, 2022 Sonder Paseo de Gracia, Barcelona Opened in July 2022
2 Revenue ($M) $42 $19 $26 $28 $32 $47 $67 $87 $80 $121 $125 y/y growth n/a (49)% (34)% (36)% (25)% 151% 155% 204% 155% 157% 85% Cash Flow Positive Plan Announced June 9, 2022 Q1 ‘20 Q2 ‘20 Q3 ‘20 Q4 ’20 Q1 ‘21 Q2 ‘21 Q3 ‘21 Q4 ‘21 Q1 ‘22 Q2 ‘22 Q3 ’22 Operating Cash Flow Margin1 Quarterly Operating Cash Flow Margin and Free Cash Flow Margin Free Cash Flow Margin2 A B C D We’re pulling several levers to reach positive quarterly FCF within 2023, without additional fundraising and while keeping a robust cash cushion Cut cash costs by approximately $85M (vs. Q1 2022) on an annualized basis Reduce planned signings pace and drive growth primarily by opening already contracted units Improve growth quality by increasing our high threshold for incremental signings targeting 100% capital light Focus on RevPAR initiatives to improve near term FCF (1) Operating Cash Flow includes the impact of restructuring and other charges related to our Cash Flow Positive Plan announced in June 2022. Operating Cash Flow is equivalent to cash provided by (used in) operating activities. Operating Cash Flow Margin is defined as Operating Cash Flow as a percentage of revenue. (2) This is a Non-GAAP Financial Measure. Refer to section titled Non-GAAP Reconciliations & Other Supplemental Data for the reconciliation of our Non-GAAP Financial Measures to the most directly comparable GAAP Financial Measure.
3 Strong unit economics are at the heart of our Cash Flow Positive Plan – and Q3 results reaffirm our conviction in Sonder’s fundamentals. In Q3, we continued to improve our cash contribution margins, resulting in 5 consecutive quarters of improving unit economics. This sequential CCM improvement in Q3 is particularly exciting as it demonstrates our cost improvements at the property level. Operating Cash Flow1 improved by $8M vs the prior quarter to $(32)M, or (26)% of revenue. Free cash flow2, before one-time restructuring costs, improved by $6M vs the prior quarter to $(39)M or (31)% of revenue, driven in part by cost improvements. I’m most proud of the fact that we’ve achieved this FCF improvement while growing revenue rapidly at 85% y/y. I’m also incredibly excited about the recent additions to our Board of Directors. Michelle Frymire brings a wealth of experience in the travel industry, having served as CEO of CWT, one of the world’s largest travel management platforms. Sean Aggarwal is currently the Chair of the Board of Directors at Lyft and brings a deep understanding of both the real estate and technology sectors. And finally, we recently announced that Sanjay Banker will transition from his role as President and CFO to join the Board at the beginning of next year. I couldn’t be more excited about the level of talent, industry expertise, and public company experience we have assembled on our Board. Thank you to our investors, partners and employees for their ongoing support. Francis Davidson Co-founder and CEO A note from Francis Fellow Sonder shareholders, (1) Operating Cash Flow includes the impact of restructuring and other charges related to our Cash Flow Positive Plan announced in June 2022. Operating Cash Flow is equivalent to cash provided by (used in) operating activities. (2) This is a Non-GAAP Financial Measure. Refer to section titled Non-GAAP Reconciliations & Other Supplemental Data for the reconciliation of our Non-GAAP Financial Measures to the most directly comparable GAAP Financial Measure.
4 RevPAR $158 25% y/y improvement Occupancy Rate 84% 1,600 bps y/y improvement Free Cash Flow 2 $(39)M Free Cash Flow margin improvement to (31)% in Q3 2022 from (66)% in Q3 2021 Live Units | Total Portfolio 9.0K | 18.9K 43% y/y growth | 17% y/y growth Revenue $125M 85% y/y improvement Average Daily Rate (ADR) $189 3% y/y improvement Operating Cash Flow 1 $(32)M Operating Cash Flow margin improvement to (26)% in Q3 2022 from (59)% in Q3 2021 Cash Contribution 2 $27M Cash Contribution margin improvement to 22% in Q3 2022 from 5% in Q3 2021 Third quarter 2022 key results (1) Operating Cash Flow includes the impact of restructuring and other charges related to our Cash Flow Positive Plan announced in June 2022. Operating Cash Flow is equivalent to cash provided by (used in) operating activities. Operating Cash Flow Margin is defined as Operating Cash Flow as a percentage of revenue. (2) This is a Non-GAAP Financial Measure. Refer to section titled Non-GAAP Reconciliations & Other Supplemental Data for the reconciliation of our Non-GAAP Financial Measures to the most directly comparable GAAP Financial Measure.
5 Sonder Business Bay Dubai Opened September 2022 New property spotlight ~400 unit property Largest live property in Sonder’s portfolio Third property in Dubai Stunning amenities Elegant lobby, luxury swimming pool, on-site eatery, state-of-the-art fitness center Modern travel redefined Ideal location for leisure and business Studio to 3-bedroom apartments Prime location Near Dubai Mall and iconic Burj Khalifa Skyline and canal views
6 Q3 2022 Results Sonder The Boylston, Seattle Opened in November 2021
7 9.0K Live Units +43% y/y 786K Bookable Nights +47% y/y 661K Occupied Nights +80% y/y 84% Occupancy Rate $158 RevPAR +25% y/y 104% of Q3 2019 Q1 ‘21 Q2 ‘21 Q3 ‘21 Q4 ‘21 Q1 ‘22 Q2 ‘22 Q3 ’22 Q1 ‘21 Q2 ‘21 Q3 ‘21 Q4 ‘21 Q1 ‘22 Q2 ‘22 Q3 ’22 Q3 2022 Results Q3 2022 business performance 10.0K Quarterly Total Portfolio (End of Period) Quarterly Bookable Nights | Occupancy Rate Quarterly RevPAR | ADR Live Units Contracted Units 13.0K 14.7K 16.3K 18.1K 19.3K 8.0K 9.2K 10.5K 11.6K 5.0K 5.5K 7.6K 7.7K Q1 ‘21 Q2 ‘21 Q3 ‘21 Q4 ‘21 Q1 ‘22 Q2 ‘22 Q3 ’22 66% 68% 68% 73% 536K 411K 473K 611K 689K $115 $147 $184 $206 $160 69% RevPAR ADR $77 $100 $126 $117 $142 8.4K 10.3K 18.7K 725K 82% $203 $167 6.3K 84% 786K 9.0K 9.9K 18.9K $189 $158
8 Q3 2022 Results $125M Revenue 85% y/y improvement $(39)M Free Cash Flow2 Free Cash Flow margin improvement to (31)% in Q3 2022 from (66)% in Q3 2021 $(32)M Operating Cash Flow1 Operating Cash Flow margin improvement to (26)% in Q3 2022 from (59)% in Q3 2021 $27M Cash Contribution2 Cash Contribution margin improvement to 22% in Q3 2022 from 5% in Q3 2021 Q3 2022 financial performance (1) Operating Cash Flow includes the impact of restructuring and other charges related to our Cash Flow Positive Plan announced in June 2022. Operating Cash Flow is equivalent to cash provided by (used in) operating activities. Operating Cash Flow Margin is defined as Operating Cash Flow as a percentage of revenue. (2) This is a Non-GAAP Financial Measure. Refer to section titled Non-GAAP Reconciliations & Other Supplemental Data for the reconciliation of our Non-GAAP Financial Measures to the most directly comparable GAAP Financial Measure. Q1 ‘20 Q2 ‘20 Q3 ‘20 Q4 ’20 Q1 ‘21 Q2 ‘21 Q3 ‘21 Q4 ‘21 Q1 ‘22 Q2 ‘22 Q3 ’22 Operating Cash Flow Margin1 Quarterly Operating Cash Flow Margin and Cash Contribution Margin Cash Contribution Margin2
9 For 2022, we expect revenue of better than $455 million, representing more than 95% year-over-year growth and better than $129 million for the fourth quarter. For the second half of the year, Q3 and Q4 combined, we are reaffirming Free Cash Flow of better than $(70) million before restructuring costs which implies better than $(31) million in the fourth quarter. We remain focused on reaching positive quarterly free cash flow within 2023. Similar to past quarters, our guidance is based on our best knowledge available from internal data and third party forecasters and does not contemplate an extreme slowdown in demand. Q4 2022 Guidance Illustrative Free Cash Flow1 Based on Guidance ($M) $(62) $(45) Q1 2022 Q2 2022 Q3 2022 Q4 2022 $(39) Guidance: Reach positive quarterly free cash flow within 2023 while keeping a robust cash cushion ~ $(31) Actuals Guidance (1) This is a Non-GAAP Financial Measure. Refer to section titled Non-GAAP Reconciliations & Other Supplemental Data for the reconciliation of our Non-GAAP Financial Measures to the most directly comparable GAAP Financial Measure.
10 Sonder The Henry, London Opened in April 2022 Financial Statements
11 Financial Statements Sonder Holdings Inc. and Subsidiaries Consolidated balance sheets (In thousands) (Unaudited) Note: Effective January 1, 2022, Sonder adopted new leasing accounting standard ASC 842 / IFRS 16, which recognizes right-of-use assets and lease liabilities on our balance sheet for all operating leases, increasing both assets and liabilities. September 30, 2022 December 31, 2021 Assets Current assets: Cash $317,324 $69,726 Restricted cash 1,131 215 Accounts receivable, net of allowance 5,658 4,638 Prepaid rent - 2,957 Prepaid expenses 7,530 5,029 Other current assets 10,435 16,416 Total current assets 342,078 98,981 Property and equipment, net 35,469 27,461 Operating lease right-of-use assets 1,139,713 - Other non-current assets 15,272 22,037 Total assets $1,532,532 $148,479 Liabilities, mezzanine equity and stockholders' equity (deficit) Current liabilities: Accounts payable $9,236 $19,096 Accrued liabilities 16,504 19,557 Sales tax payable 14,368 8,412 Deferred revenue 49,431 18,811 Current portion of long-term debt - 13,116 Convertible notes - 184,636 Current operating lease liabilities 146,550 - Other current liabilities 2,349 - Total current liabilities 238,438 263,628 Non-current operating lease liabilities 1,082,412 - Deferred rent - 66,132 Long-term debt, net 166,707 10,736 Other non-current liabilities 5,844 3,906 Total liabilities 1,493,401 344,402 Mezzanine equity: Redeemable convertible preferred stock - 518,750 Exchangeable preferred stock - 49,733 Total mezzanine equity - 568,483 Stockholders' equity (deficit): Common stock 21 1 Additional paid-in capital 930,588 43,106 Cumulative translation adjustment 19,216 7,299 Accumulated deficit (910,694) (814,812) Total stockholders' equity (deficit) 39,131 (764,406) Total liabilities, mezzanine equity and stockholders' equity (deficit) $1,532,532 $148,479
12 Sonder Holdings Inc. and Subsidiaries Condensed consolidated statements of operations and comprehensive loss (In thousands, except for number of shares information and per share amounts) (Unaudited) Financial Statements Three Months Ended September 30, 2022 2021 Revenue $124,526 $67,454 Costs and operating expenses: Cost of revenue (excluding depreciation and amortization) 76,884 52,402 Operations and support 55,586 36,592 General and administrative 33,016 21,694 Research and development 6,936 5,443 Sales and marketing 13,372 6,724 Total costs and operating expenses 185,794 122,855 Loss from operations (61,268) (55,401) Interest expense, net 4,112 13,279 Change in fair value of SPAC warrants 1,305 - Change in fair value of Earn Out liability 2,223 - Other expense (income), net 5,175 (4,229) Total non-operating expenses, net 12,815 9,050 Loss before income taxes (74,083) (64,451) Provision for income taxes 416 133 Net loss $(74,499) $(64,584) Less: Net loss attributable to convertible and exchangeable preferred stockholders - - Net loss attributable to common stockholders $(74,499) $(64,584) Weighted average basic common shares outstanding 215,682,346 12,204,601 Add: Dilutive effect of outstanding stock awards - - Weighted average diluted common shares 215,682,346 12,204,601 Net loss per common share: Basic $(0.35) $(5.29) Diluted $(0.35) $(5.29) Net loss (74,499) (64,584) Change in foreign currency translation adjustment 4,833 (1,120) Comprehensive loss $(69,666) $(65,704)
13 Sonder Holdings Inc. and Subsidiaries Consolidated statements of cash flows (1/2) (In thousands) (Unaudited) Financial Statements Three Months Ended September 30, 2022 2021 Cash flows from operating activities: Net loss $(74,499) $(64,584) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 6,175 $4,357 Stock-based compensation 6,405 3,573 Amortization of operating lease right-of-use assets 35,341 - Straight-line rent - 6,696 Unrealized loss (gain) on foreign currency transactions 6,634 (792) Capitalization of interest on long-term debt 5,037 - Amortization of debt issuance costs 2 550 Amortization of debt discounts 376 11,032 Change in fair value of share-settled redemption feature and gain on conversion of convertible notes - (7,828) Change in fair value of derivative instruments - 4,100 Change in fair value of warrants - 109 Change in fair value of SPAC Warrants 1,305 - Change in fair value of Earn Out Liability 2,223 - Other operating activities 187 100 Changes in: Accounts receivable, net 1,381 (5,951) Prepaid expenses 2,334 5,584 Other current and non-current assets 7,433 (4,232) Accounts payable (6,019) (5) Accrued liabilities (4,601) (864) Sales tax payable 1,930 493 Deferred revenue 11,115 7,390 Operating lease right-of-use assets and operating lease liabilities, net (34,229) - Other current and non-current liabilities (1,007) 582 Net cash used in operating activities (32,477) (39,690) Cash flows from investing activities: Purchase of property and equipment (7,434) (3,560) Capitalization of internal-use software (274) (1,392) Net cash used in investing activities (7,708) (4,952) Cash flows from financing activities: Repayment of debt - (5,000) Proceeds from exercise of stock options 255 956 Net cash provided by (used in) financing activities 255 (4,044) Effects of foreign exchange on cash (2,359) (160) Net change in cash and restricted cash (42,289) (48,846) Cash and restricted cash at beginning of period 360,744 178,426 Cash and restricted cash at end of period $318,455 $129,580
14 Sonder Holdings Inc. and Subsidiaries Consolidated statements of cash flows (2/2) (In thousands) (Unaudited) Financial Statements Nine Months Ended September 30, 2022 2021 Cash flows from operating activities: Net loss $(95,882) $(217,074) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 17,801 12,689 Stock-based compensation 18,139 20,174 Amortization of operating lease right-of-use assets 105,569 - Straight-line rent - 12,895 Unrealized loss on foreign currency transactions 13,092 2,129 Capitalization of interest on long-term debt 12,544 - Amortization of debt issuance costs 149 1,562 Amortization of debt discounts 3,374 23,009 Change in fair value of share-settled redemption feature and gain on conversion of convertible notes (29,512) (7,828) Change in fair value of derivative instruments - - Change in fair value of warrants - 1,395 Change in fair value of SPAC Warrants (36,329) - Change in fair value of Earn Out Liability (94,299) - Other operating activities 1,362 846 Changes in: Accounts receivable, net (1,560) (6,115) Prepaid expenses (2,543) 3,787 Other current and non-current assets 10,750 (11,921) Accounts payable (28,401) (861) Accrued liabilities 2,295 5,937 Sales tax payable 6,181 2,475 Deferred revenue 30,204 20,112 Operating lease right-of-use assets and operating lease liabilities, net (58,493) - Other current and non-current liabilities 1,467 846 Net cash used in operating activities (124,092) (135,943) Cash flows from investing activities: Purchase of property and equipment (23,579) (8,036) Capitalization of internal-use software (2,510) (3,816) Net cash used in investing activities (26,089) (11,852) Cash flows from financing activities: Proceeds from Delayed Draw Notes, net of issuance costs 159,225 - Repayment of debt (24,680) (11,900) Extinguishment of debt (3,065) - Proceeds from issuance of debt - 162,366 Proceeds from business combination and PIPE offering 325,928 - Common stock issuance costs (58,555) - Proceeds from exercise of stock options 1,702 3,079 Proceeds from exercise of common stock warrants - 120 Issuance of redeemable convertible preferred stock - 1,020 Net cash provided by (used in) financing activities 400,555 154,685 Effects of foreign exchange on cash (1,860) (418) Net change in cash and restricted cash 248,514 6,472 Cash and restricted cash at beginning of period 69,941 123,108 Cash and restricted cash at end of period $318,455 $129,580
15 Sonder The Magnolia, Boston Opened in July 2022 Non-GAAP Reconciliations & Other Supplemental Data
16 Reconciliation of Cash used in operating activities to Free Cash Flow Non-GAAP Reconciliations & Other Supplemental Data (in thousands) Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Cash provided by (used in) operating activities $(48,771) $(50,256) $(56,824) $(46,651) $(40,308) $(55,945) $(39,690) $(43,448) $(50,693) $(40,922) $(32,477) (+) Cash provided by (used in) investing activities (7,094) (2,144) (3,123) (2,489) (2,676) (4,224) (4,952) (9,735) (11,616) (6,765) (7,708) Free Cash Flow including restructuring costs $(55,865) $(52,400) $(59,947) $(49,140) $(42,984) $(60,169) $(44,642) $(53,183) $(62,309) $(47,687) $(40,185) (+) Cash paid for restructuring costs - - - - - - - - - 2,363 1,114 Free Cash Flow excluding restructuring costs $(55,865) $(52,400) $(59,947) $(49,140) $(42,984) $(60,169) $(44,642) $(53,183) $(62,309) $(45,324) $(39,071) Revenue $41,881 $18,841 $26,471 $28,485 $31,558 $47,269 $67,454 $86,663 $80,466 $121,322 $124,526 Free Cash Flow margin (133)% (278)% (226)% (173)% (136)% (127)% (66)% (61)% (77)% (37)% (31)% Sonder supplements its consolidated financial statements presented in accordance with generally accepted accounting principles in the United States (“GAAP”) by providing additional financial measures that are not prepared in accordance with GAAP. Sonder’s management uses these non-GAAP financial measures, collectively, to evaluate ongoing operations and for internal planning and forecasting purposes. Sonder believes that these non-GAAP financial measures are useful in evaluating its operating performance, and may assist investors in comparisons with other companies, some of which use similar non-GAAP financial information to supplement their GAAP results. However, Sonder’s definitions may differ from the definitions used by other companies and therefore comparability may be limited. In addition, other companies may not publish these or similar measures. These non-GAAP financial measures should not be viewed in isolation or as a substitute for, or superior to, measures prepared in accordance with GAAP. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures. Free Cash Flow (“FCF”) is defined as cash provided by (used in) operating activities plus cash provided by (used in) investing activities, excluding the impact of restructuring charges, if any. Free Cash Flow Margin is defined as Free Cash Flow as a percentage of revenue. The most directly comparable GAAP financial measure is cash provided by (used in) operating activities.
17 Reconciliation of Cash used in operating activities to Cash Contribution Non-GAAP Reconciliations & Other Supplemental Data (1) Composed of channel fees. (2) Composed of customer service, laundry/consumables, maintenance and utilities and insurance included in operations and support. (3) Excludes restructuring costs. (in thousands) Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Non-property level sales and marketing: Sales and marketing $4,374 $2,923 $3,108 $2,443 $2,511 $4,888 $6,724 $9,367 $9,461 $12,414 $13,372 (-) Property level sales and marketing ¹ (3,980) (1,262) (1,272) (1,220) (1,592) (3,052) (4,638) (6,634) (6,814) (9,535) (10,566) Non-property level sales and marketing $394 $1,661 $1,836 $1,223 $919 $1,836 $2,086 $2,733 $2,647 $2,879 $2,806 Non-property level operations and support: Operations and support $35,063 $22,641 $29,227 $28,141 $25,423 $34,889 $36,592 $45,824 $48,267 $54,003 $55,586 (-) Property level operations and support ² (10,443) (6,127) (7,762) (9,195) (9,921) (13,308) (14,795) (19,855) (22,104) (24,814) (26,967) Non-property level operations and support $24,620 $16,514 $21,465 $18,946 $15,502 $21,581 $21,797 $25,969 $26,163 $29,189 $28,619 Non-property level operating expenses: General and administrative $21,268 $15,156 $17,972 $22,637 $32,149 $24,615 $21,694 $27,677 $36,981 $31,277 $33,016 (+) Research and development 5,479 3,999 3,853 4,221 3,319 4,066 5,443 6,263 7,625 8,088 6,936 (+) Non-property level sales and marketing 394 1,661 1,836 1,223 919 1,836 2,086 2,733 2,647 2,879 2,806 (+) Non-property level operations and support 24,620 16,514 21,465 18,946 15,502 21,581 21,797 25,969 26,163 29,189 28,619 (-) Stock based compensation (3,067) (1,742) (1,020) (1,394) (14,153) (2,448) (3,573) (5,073) (6,680) (5,054) (6,405) (-) Depreciation and amortization (4,152) (4,206) (4,269) (4,342) (4,119) (4,213) (4,357) (5,025) (5,630) (5,996) (6,175) Non-property level operating expenses $44,542 $31,382 $39,837 $41,291 $33,617 $45,437 $43,090 $52,544 $61,106 $60,383 $58,797 Cash contribution: Cash provided by (used in) operating activities $(48,771) $(50,256) $(56,824) $(46,651) $(40,308) $(55,945) $(39,690) $(43,448) $(50,693) $(40,922) $(32,477) (+) Cash paid for restructuring costs - - - - - - - - - 2,363 1,114 (+) Non-property level operating expenses 44,542 31,382 39,837 41,291 33,617 45,437 43,090 52,544 61,106 60,383 58,797 Cash contribution ³ $(4,229) $(18,874) $(16,987) $(5,360) $(6,691) $(10,508) $3,400 $9,096 $10,413 $21,824 $27,434 Revenue $41,881 $18,841 $26,471 $28,485 $31,558 $47,269 $67,454 $86,663 $80,466 $121,322 $124,526 Cash contribution margin (10)% (100)% (64)% (19)% (21)% (22)% 5% 10% 13% 18% 22% Cash Contribution is defined as operating cash flow before other operating expenses, excluding the impact of restructuring charges, if any. Cash Contribution Margin is defined as Cash Contribution as a percentage of revenue. The most directly comparable GAAP financial measure is cash provided by (used in) operating activities.
18 (in thousands) Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Loss from operations $(71,229) $(54,265) $(52,197) $(66,131) $(71,049) $(64,934) $(55,401) $(68,561) $(95,764) $(67,680) $(61,268) Add: Non-property level operations and support $24,620 $16,514 $21,465 $18,946 $15,502 $21,581 $21,797 $25,969 $26,163 $29,189 $28,619 General and administrative 21,268 15,156 17,972 22,637 32,149 24,615 21,694 27,677 36,981 31,277 33,016 Research and development 5,479 3,999 3,853 4,221 3,319 4,066 5,443 6,263 7,625 8,088 6,936 Non-property level sales and marketing 394 1,661 1,836 1,223 919 1,836 2,086 2,733 2,647 2,879 2,806 Restructuring and other charges - - - - - - - - - 4,033 - Property Level Profit (Loss) $(19,468) $(16,935) $(7,071) $(19,104) $(19,160) $(12,836) $(4,381) $(5,919) $(22,348) $7,786 $10,109 Memo GAAP Rent to Landlord Payments Adjustment $1,267 $3,765 $(5,693) $5,577 $3,811 $3,188 $5,706 $14,265 $12,468 $4,368 $4,073 Note: Given the focus on Cash Contribution as the primary unit economics measure, Sonder plans to stop providing reconciliations for Property Level Profit after reporting fourth quarter 2022 results. Non-GAAP Reconciliations & Other Supplemental Data Supplemental Reconciliation of Income from operations to Property Level Profit Property Level Profit (Loss) (“PLP” or “PLL”) is defined as profit (loss) from operations after adding back corporate-level expenses, excluding the impact of restructuring charges, if any. Property Level Costs (“PLC”) represent costs directly associated with guest-facing functions in each of Sonder’s buildings. These costs include (i) channel fees paid to Online Travel Agencies, (ii) customer service costs, (iii) laundry/consumables costs, (iv) maintenance costs, and (v) utilities & insurance costs. Property Level Profit (Loss) Margin is defined as Property Level Profit (Loss) divided by revenue. The most directly comparable GAAP financial measure is income from operations.
19 Supplemental Reconciliation of Net income to Adjusted EBITDA Non-GAAP Reconciliations & Other Supplemental Data (in thousands) Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Net (loss) income $(61,743) $(60,799) $(55,514) $(72,260) $(78,541) $(73,949) $(64,584) $(77,313) $22,392 $(43,775) $(74,499) Interest expense, net $1,507 $1,669 $1,658 $1,568 $3,827 $12,522 $13,279 $14,462 $8,202 $4,382 $4,112 Provision for income taxes - 3 11 309 23 70 133 16 31 117 416 Depreciation and amortization 4,152 4,206 4,269 4,342 4,119 4,213 4,357 5,025 5,630 5,996 6,175 EBITDA $(56,084) $(54,921) $(49,576) $(66,041) $(70,572) $(57,144) $(46,815) $(57,810) $36,255 $(33,280) $(63,796) Restructuring and other Charges - - - - - - - - - $4,033 - Stock-based compensation 3,067 1,742 1,020 1,394 14,153 2,448 3,573 5,073 6,680 5,054 6,405 Total other expense (income), net (10,993) 4,862 1,648 4,252 3,642 (3,577) (4,229) (5,726) (126,389) (28,404) 8,703 COVID-19 related offboardings - 3,507 5,008 1,360 - - - - - - - Adjusted EBITDA $(64,010) $(44,810) $(41,900) $(59,035) $(52,777) $(58,273) $(47,471) $(58,463) $(83,454) $(52,597) $(48,688) Memo GAAP Rent to Landlord Payments Adjustment $1,267 $3,765 $(5,693) $5,577 $3,811 $3,188 $5,706 $14,265 $12,468 $4,368 $4,073 FF&E Allowance Realized - - - - 531 475 1,915 1,401 4,448 9,756 8,313 Note: Given the focus on Free Cash Flow as the primary profitability measure, Sonder plans to stop providing reconciliations for Adj. EBITDA after reporting fourth quarter 2022 results. Adjusted EBITDA is defined as net loss excluding the impact of depreciation, stock-based compensation, COVID-19 pandemic related offboardings (costs associated with exiting units at the beginning of the COVID-19 pandemic), restructuring charges (if any), and other expense (income), net (which primarily includes mark-to-market adjustments related to financial instruments such as convertible debt and warrants). Adjusted EBITDA Margin is defined as Adjusted EBITDA divided by revenue. The most directly comparable GAAP financial measure is net income.
20 Historical Data: Revenue Measures Non-GAAP Reconciliations & Other Supplemental Data 2020 2021 2022 (In thousands, except $ and %) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Live Units 5.0 4.3 3.9 4.5 5.0 5.5 6.3 7.6 7.7 8.4 9.0 Contracted Units 8.2 7.1 6.5 7.5 8.0 9.2 10.0 10.5 11.6 10.3 9.9 Total Portfolio 13.2 11.4 10.4 12.0 13.0 14.7 16.3 18.1 19.3 18.7 18.9 Bookable Nights 428 400 346 385 411 473 536 611 689 725 786 Occupied Nights 268 228 257 260 274 321 366 420 503 598 661 Occupancy Rate 63% 57% 74% 68% 66% 68% 68% 69% 73% 82% 84% Average Daily Rate $156 $83 $103 $109 $115 $147 $184 $206 $160 $203 $189 RevPAR $98 $47 $77 $74 $77 $100 $126 $142 $117 $167 $158
21 Property Level Profit (Loss) Property Level Profit (Loss) (“PLP” or “PLL”) is defined as profit (loss) from operations after adding back corporate-level expenses, excluding the impact of restructuring charges, if any. Property Level Costs (“PLC”) represent costs directly associated with guest-facing functions in each of Sonder’s buildings. These costs include (i) channel fees paid to Online Travel Agencies, (ii) customer service costs, (iii) laundry/consumables costs, (iv) maintenance costs, and (v) utilities & insurance costs. Property Level Profit (Loss) Margin is defined as Property Level Profit (Loss) divided by revenue. Reconciliation of Property Level Profit to the most comparable GAAP measure can be found on pg 18. Adjusted EBITDA Adjusted EBITDA is defined as net loss excluding the impact of depreciation, stock-based compensation, COVID-19 pandemic related offboardings (costs associated with exiting units at the beginning of the COVID-19 pandemic), restructuring charges (if any), and other expense (income), net (which primarily includes mark-to-market adjustments related to financial instruments such as convertible debt and warrants). Adjusted EBITDA Margin is defined as Adjusted EBITDA divided by revenue. Reconciliation of Adjusted EBITDA to the most comparable GAAP measure can be found on pg 19. Landlord Payments Landlord Payments represent cash payments to real estate owners recognizing abatement at the time it is utilized (often at the commencement of a real estate contract), expressed in U.S. dollars. This recognizes the economic substance of the payment to real estate owners as reflected in the real estate contract (e.g., if Sonder’s Takeover Date, the date on which Sonder receives the keys and is able to begin opening the building, was January 1, 2021 and it had three months of abatement at the beginning of the real estate contract, the Landlord Payments for the building in the first quarter of 2021 would be $0). The Takeover Date represents the date on which Sonder receives the keys and is able to begin onboarding a building (e.g., moving in furniture, staging / photographing units for listing). GAAP rent to Landlord Payment adjustment GAAP rent to Landlord Payment adjustment represents the adjustment to translate rent to Landlord Payments, expressed in U.S. dollars. GAAP rent straight lines abatement and future escalation payments over the duration of the real estate contract. In contrast, Landlord Payments recognize abatement from real estate owners at the time abatement is utilized (often at the commencement of a real estate contract), and future escalation payments at the time they actually occur, in an effort to most accurately reflect the timing of cash outflows for rent. Use of non-GAAP financial measures Sonder supplements its consolidated financial statements presented in accordance with generally accepted accounting principles in the United States (“GAAP”) by providing additional financial measures that are not prepared in accordance with GAAP, including Free Cash Flow, Free Cash Flow Margin, Cash Contribution, Cash Contribution Margin, Property Level Costs, Property Level Profit (Loss), Property Level Profit (Loss) Margin, Adjusted EBITDA and Adjusted EBITDA Margin. Further information about these measures appears under “Key Terms” below. Sonder’s management uses these non-GAAP financial measures, collectively, to evaluate ongoing operations and for internal planning and forecasting purposes. Sonder believes that these non-GAAP financial measures are useful in evaluating its operating performance, and may assist investors in comparisons with other companies, some of which use similar non-GAAP financial information to supplement their GAAP results. However, Sonder’s definitions may differ from the definitions used by other companies and therefore comparability may be limited. In addition, other companies may not publish these or similar measures. These non-GAAP financial measures should not be viewed in isolation or as a substitute for, or superior to, measures prepared in accordance with GAAP. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures. Sonder has not reconciled consolidated Free Cash Flow guidance to projected consolidated GAAP cash provided by (used in) operating activities because we do not provide guidance on GAAP cash provided by (used in) operating activities or the reconciling items between Free Cash Flow and GAAP cash provided by (used in) operating activities, as a result of the uncertainty regarding, and the potential variability of, certain of these items. Accordingly, a reconciliation of the non-GAAP financial measure guidance to the corresponding GAAP measure is not available without unreasonable effort. Key Terms Total Portfolio Total Portfolio represents Live Units plus Contracted Units. This includes any unit that has a signed real estate contract, regardless of whether or not the unit is available for guests to book. This excludes any units that have been exited (i.e., the lease was terminated or allowed to expire). Live Units are defined as units which are available for guest bookings on Sonder.com, the Sonder app and other channels. Sonder pays rent (or utilizes pre-negotiated abatement) and is able to generate revenue from these units. Contracted Units are units for which Sonder has signed real estate contracts, but are not yet available for guests to book. Sonder is not yet able to generate revenue from these units. Occupancy Rate Occupancy Rate (“OR”) is defined as Occupied Nights divided by Bookable Nights, expressed as a percentage. Bookable Nights represent the total number of nights available for stays across all Live Units. This excludes nights lost to full building closures of greater than 30 nights. Occupied Nights represent the total number of nights occupied across all Live Units. Revenue per Available Room Revenue Per Available Room (“RevPAR”) represents the average revenue earned per available night, and is calculated either by dividing revenue by Bookable Nights, or by multiplying Average Daily Rate by Occupancy Rate. Average Daily Rate (“ADR”) represents the average revenue earned per night occupied and is calculated as revenue divided by Occupied Nights. Free Cash Flow Free Cash Flow (“FCF”) is defined as cash provided by (used in) operating activities plus cash provided by (used in) investing activities, excluding the impact of restructuring charges, if any. Free Cash Flow Margin is defined as Free Cash Flow as a percentage of revenue. Reconciliation of Free Cash Flow to the most comparable GAAP measure can be found on pg 16. Cash Contribution Cash Contribution is defined as operating cash flow before other operating expenses, excluding the impact of restructuring charges, if any. Cash Contribution Margin is defined as Cash Contribution as a percentage of revenue. Reconciliation of Cash Contribution to the most comparable GAAP measure can be found on pg 17. FF&E Allowance Realized FF&E Allowance Realized represents cash payments from real estate owners received for capital expenditure financing.
22 Webcast Details Sonder will host a webcast Wednesday, November 9, 2022 at 2:00 p.m. Pacific Time / 5:00 p.m. Eastern Time to discuss these financial results and business highlights and guidance. To listen to a live audio webcast, please visit the “Events” section of Sonder’s Investor Relations website at investors.sonder.com. The archived webcast will be available on Sonder’s Investor Relations website shortly after the call. About Sonder Sonder is revolutionizing hospitality through innovative, tech-powered service and inspiring, thoughtfully designed accommodations combined into one seamless managed experience. Launched in 2014 and headquartered in San Francisco, Sonder provides a variety of accommodation options — from spacious rooms to fully-equipped suites and apartments — found in over 40 markets spanning ten countries and three continents. The Sonder app gives guests full control over their stay. Complete with self-service features, simple check-in and 24/7 on-the-ground support, amenities and services at Sonder are just a tap away, making a world of better stays open to all. To learn more, visit www.sonder.com or follow Sonder on Facebook, Twitter or Instagram. Download the Sonder app on Apple or Google Play. The information that can be accessed through hyperlinks or website addresses included herein is deemed not to be incorporated in or part of this Shareholder Letter. Forward-Looking Statements This Shareholder Letter contains a number of “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, but are not limited to, statements about Sonder’s forecasted revenue growth, costs, and cash flow (including Sonder’s guidance for revenue and Free Cash Flow for the quarter and year ending December 31, 2022, and statements about potential cash flow margin), statements about Sonder’s total addressable market, anticipated numbers of Live and Contracted Units, the statements regarding “Cash Flow Positive Plan,” including anticipated cost reductions, targeted capital-light signings and potential cash flow improvements and its plan to reach positive quarterly FCF within 2023 without additional fundraising, the anticipated recovery of travel demand, booking patterns, and other trends, expectations, and objectives discussed in the sections of this Shareholder Letter titled “A note from Francis,” “Q3 2022 Results,” and “Q4 2022 Guidance,” potential new markets, and market penetration, innovation plans and initiatives including plans for enhanced app functionality and features, the success of Sonder’s corporate travel efforts and other RevPAR initiatives, anticipated unit economics, and other information concerning Sonder’s possible or assumed future financial or operating results and measures, business strategies, corporate governance structure (including composition of the Board of Directors), competitive position, industry environment, potential growth opportunities, and future operations. These forward-looking statements are based on Sonder’s management’s current expectations, estimates, projections and beliefs, as well as a number of assumptions concerning future events. When used in this Shareholder Letter, the words “estimates,” “projected,” “expects,” “anticipates,” “forecasts,” “plans,” “intends,” “believes,” “seeks,” “may,” “will,” “should,” “future,” “proposed,” “guidance,” and variations of these words or similar expressions (or the negative versions of such words or expressions) are intended to identify forward-looking statements. These forward-looking statements are not guarantees of future performance, conditions or results, and involve a number of known and unknown risks, uncertainties, assumptions and other important factors, many of which are outside Sonder’s management’s control, that could cause actual results to differ materially from the results discussed in the forward-looking statements. These risks, uncertainties, assumptions and other important factors include, but are not limited to: potential negative impacts on Sonder’s financial results as a result of changes in travel, hospitality, real estate and vacation markets, including the possibility that travel demand and pricing do not recover to the extent anticipated, particularly in the current geopolitical and macroeconomic environment; potential inability to negotiate satisfactory leases or other arrangements to operate new properties, onboard new properties in a timely manner, or renew or replace existing properties on attractive terms, and the possibility of lease terminations prior to scheduled expirations; possible delays in real estate development and construction projects related to Sonder’s leases, or other delays in generating revenues from new properties; the possibility that Sonder may not benefit from any market recovery to the extent it anticipates; risks and uncertainties associated with Sonder’s Cash Flow Positive Plan announced in June 2022, including the possibility that Sonder will not realize the anticipated cost savings, capital-light signings or cash flow improvements or will need to engage in additional fundraising, and the risk that the plan will adversely affect employee retention, effectiveness and hiring or other aspects of Sonder’s business; the possibility that Sonder will be unable to effectively manage its growth; potential delays or difficulties introducing new or upgraded amenities, services or features, including enhancements to the Sonder app; the possibility that new RevPAR initiatives will not achieve the desired results and that future pricing and/or occupancy will be lower than anticipated; the possibility of higher than expected capital expenditures, property-related costs or other operating expenses and unanticipated conditions or incidents at leased properties; risks associated with Sonder’s relationships with and reliance upon real estate owners, OTAs and other third parties, and their performance of their obligations; changes in applicable laws or regulations, including legal, tax or regulatory developments, and the impact of any litigation or other legal or regulatory proceedings; the possibility that Sonder may be adversely affected by other economic, business and/or competitive factors, including the additional risks associated with operating internationally; risks related to the impact of the ongoing COVID-19 pandemic, including the Omicron variant or future variants and further governmental and other restrictions (including travel restrictions) resulting therefrom; Sonder’s success in retaining or recruiting officers, key employees and directors; and other risks and uncertainties described under the heading “Risk Factors” in Sonder’s most recent Quarterly Report on Form 10-Q filed with the SEC on August 12, 2022 and Annual Report on Form 10-K filed with the SEC on March 28, 2022. You are cautioned not to place undue reliance upon any forward-looking statements, which speak only as of the date made. Except as required by law, Sonder does not undertake any obligation to update or revise its forward-looking statements to reflect events or circumstances after the date of this Shareholder Letter. Additional risks and uncertainties are identified and discussed in Sonder’s reports filed and to be filed with the SEC and available on the SEC’s website at www.sec.gov. CONTACTS Media press@sonder.com Investors ir@sonder.com
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