SEC Filing | Sonder Holdings Inc.

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sond-20220930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

___________________________________

FORM 10-Q

___________________________________

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to ______

Commission file number 001-39907

___________________________________

SONDER HOLDINGS INC.

___________________________________

(Exact name of registrant as specified in its charter)


Delaware						85-2097088
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)
101 15th Street San Francisco, California						94103
(Address of principal executive offices)						(Zip Code)

(617) 300-0956

(Registrant’s telephone number, including area code)

___________________________________

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.0001 per share	SOND	The Nasdaq Stock Market LLC
Warrants, each whole warrant exercisable for one share of Common Stock at an exercise price of $11.50 per share	SONDW	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☐
		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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

The registrant had 218,058,524 shares of common stock outstanding as of November 4, 2022.

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TABLE OF CONTENTS


			Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements			5
Condensed Consolidated Balance Sheets (unaudited)			5
Condensed Consolidated Statements of Operations and Comprehensive Loss (unaudited)			6
Condensed Consolidated Statements of Mezzanine Equity and Stockholders’ Equity (Deficit) (unaudited)			7
Condensed Consolidated Statements of Cash Flows (unaudited)			10
Notes to the Condensed Consolidated Financial Statements (unaudited)			12
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			34
Item 3. Quantitative and Qualitative Disclosures About Market Risk			54
Item 4. Controls and Procedures			55

PART II - OTHER INFORMATION
Item 1. Legal Proceedings			56
Item 1A. Risk Factors			56
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			92
Item 3. Defaults Upon Senior Securities			92
Item 4. Mine Safety Disclosures			92
Item 5. Other Information			92
Item 6. Exhibits			93
SIGNATURES			94

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Private Securities Litigation Reform Act of 1995. Forward-looking statements generally relate to future events or our expected future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,” or “continue,” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans, or intentions. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from historical experience or our present expectations.

Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:

• our plans to achieve positive quarterly Free Cash Flow within 2023 without additional fundraising and to target “capital light” lease signings, as part of our Cash Flow Positive Plan announced on June 9, 2022;

• our financial, operating and growth forecasts and projections;

• expectations for our business, revenue, expenses, operating results, and financial condition;

• our ability to achieve or maintain profitability in the future;

• trends in the travel and hospitality industries, including the anticipated timing and nature of any travel recovery;

• our pricing and revenue management strategies, pricing and occupancy forecasts and anticipated trends, and expectations about demand elasticity;

• our expectations concerning future transaction structures and the anticipated rent, rent abatement, capital expenditure provisions, and other terms of our future leases;

• potential ancillary revenue opportunities and our ability to improve our revenue management capabilities;

• anticipated capital expenditure obligations, including expectations for real estate owners’ funding of capital expenditures and other pre-opening costs at our leased properties;

• the expected adequacy of our capital resources, and the anticipated use of proceeds from any financings;

• trends in corporate travel and the potential for additional group and corporate travel revenue;

• anticipated occupancy rates and expectations about guests’ average length of stay;

• our ability to anticipate and satisfy guest demands, including through the introduction of new features, amenities or services;

• expectations about our geographic market mix and product mix between hotels and apartments, and their impact on our financial results;

• our plans to roll out additional features, amenities and technologies, and our beliefs about the positive impact of our technology investments on our brand and financial results;

• our future competitive advantages and anticipated differentiation in cost structure and guest experience compared to other accommodation providers;

• expectations for increased cost efficiencies and technological improvements;

• expectations and plans for expanding in existing and new markets and accommodation categories;

• the anticipated growth in our portfolio of Live Units and Contracted Units, including the anticipated scope and timing of any removals of units from our portfolio;

• expectations about our relationships with third-party distribution channels and indirect channels, and the percentage of future revenue attributable to bookings through indirect channels;

• anticipated seasonality and other variations in our results of operations from period-to-period, including statements about anticipated Revenue per Available Room (“RevPAR”) in specified quarters;

• the anticipated effects of the COVID-19 pandemic or other public health crises;

• our ability to continue meeting the listing standards of Nasdaq;

• our assessments and beliefs regarding the timing and outcome of pending legal proceedings and any liability that we may incur as a result of those proceedings;

• our assessments and estimates that determine our effective tax rate and regarding any tax-related audits or other tax proceedings; and

• other expectations, beliefs, plans, strategies, anticipated developments, and other matters that are not historical facts.

We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q.

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You should not place undue reliance on our forward-looking statements because the matters they describe are subject to known and unknown risks, uncertainties, and other factors, many of which are beyond our control. Neither we nor any other person assumes responsibility for the accuracy and completeness of any of these forward-looking statements. Moreover, the forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law.

For a discussion of our risk factors, see the section entitled “Risk Factors” herein. Additional factors that could cause results or performance to materially differ from those expressed in our forward-looking statements are detailed in other filings we may make with the Securities and Exchange Commission (“SEC”), copies of which are available from us at no charge. Please consider our forward-looking statements in light of those risks as you read this report. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. We cannot assure you that the results, events and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.

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PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

SONDER HOLDINGS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share information)

(Unaudited)


	September 30, 2022		December 31, 2021
Assets
Current assets:
Cash	$	317,324	$	69,726
Restricted cash	1,131		215
Accounts receivable, net of allowance of $1,194 and $4,127 at September 30, 2022 and December 31, 2021, respectively	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 ("ROU") 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

Commitments and contingencies (Note 10)

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

See accompanying notes to unaudited condensed consolidated financial statements.

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SONDER HOLDINGS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In thousands, except share and per share information)

(Unaudited)


	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021
Revenue	$	124,526	$	67,454	$	326,314	$	146,281
Costs and operating expenses:
Cost of revenue (excluding depreciation and amortization)	76,884		52,402		229,967		135,352
Operations and support	55,586		36,592		157,856		96,904
General and administrative	33,016		21,694		101,274		78,458
Research and development	6,936		5,443		22,649		12,828
Sales and marketing	13,372		6,724		35,247		14,123
Restructuring and other charges	—		—		4,033		—
Total costs and operating expenses	185,794		122,855		551,026		337,665
Loss from operations	(61,268)		(55,401)		(224,712)		(191,384)

Interest expense, net	4,112		13,279		16,696		29,628
Change in fair value of SPAC Warrants	1,305		—		(36,329)		—
Change in fair value of Earn Out liability	2,223		—		(94,299)		—
Change in fair value of share-settled redemption feature and gain on conversion of convertible notes	—		—		(29,512)		—
Other expense (income), net	5,175		(4,229)		14,050		(4,164)
Total non-operating expenses (income), net	12,815		9,050		(129,394)		25,464
Loss before income taxes	(74,083)		(64,451)		(95,318)		(216,848)
Provision for income taxes	416		133		564		226
Net loss	$	(74,499)	$	(64,584)	$	(95,882)	$	(217,074)
Less: Net loss attributable to convertible and exchangeable preferred stockholders	—		—		(3,886)		—
Net loss attributable to common stockholders	$	(74,499)	$	(64,584)	$	(91,996)	$	(217,074)

Basic net loss per common share	$	(0.35)	$	(5.29)	$	(0.45)	$	(18.92)
Diluted net loss per common share	$	(0.35)	$	(5.29)	$	(0.45)	$	(18.92)

Other comprehensive loss:
Net loss	$	(74,499)	$	(64,584)	$	(95,882)	$	(217,074)
Change in foreign currency translation adjustment	4,833		(1,120)		11,916		1,714
Comprehensive loss	$	(69,666)	$	(65,704)	$	(83,966)	$	(215,360)

See accompanying notes to unaudited condensed consolidated financial statements.

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SONDER HOLDINGS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF MEZZANINE EQUITY AND

STOCKHOLDERS’ EQUITY (DEFICIT)

Nine months ended September 30, 2022

(In thousands, except share information)

(Unaudited)


	Redeemable Convertible Preferred Stock			Exchangeable Preferred Stock			Common Stock			Exchangeable Series AA Stock			Post-Combination Exchangeable Common Stock			Additional Paid-in Capital		Accumulated Translation Adjustment		Accumulated Deficit		Total Stockholders’ Equity (Deficit)
	Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount
Balance at December 31, 2021	75,767,082	$	518,750	12,570,228	$	49,733	8,684,246	$	1	9,421,190	$	—	—	$	—	$	43,106	$	7,299	$	(814,812)	$	(764,406)
Retroactive adjustment to reflect the exchange ratio due to business combination	35,504,342	—		5,890,381	—		4,067,416	—		4,414,740	—		—	—		—		—		—		—
Balance at December 31, 2021, as adjusted	111,271,424	$	518,750	18,460,609	$	49,733	12,751,662	$	1	13,835,930	$	—	—	$	—	$	43,106	$	7,299	$	(814,812)	$	(764,406)
Exercise of common stock options	—	—		—	—		362,943	—		—	—		—	—		873		—		—		873
Conversion of Sonder Legacy Warrants from liabilities to equity	—	—		—	—		—	—		—	—		—	—		2,111		—		—		2,111
CEO promissory note settlement	—	—		—	—		(2,725,631)	—		—	—		—	—		—		—		—		—
Conversion of Sonder Legacy Warrants	—	—		—	—		155,239	—		—	—		—	—		1,243		—		—		1,243
Conversion of convertible note	—	—		—	—		19,017,105	1		—	—		—	—		159,172		—		—		159,173
Conversion of preferred stock	(111,271,424)	(518,750)		—	—		111,271,424	11		—	—		—	—		518,750		—		—		518,761
Conversion of exchangeable stock	—	—		(18,460,609)	(49,733)		—	—		(13,835,930)	—		32,296,539	—		49,733		—		—		49,733
Issuance of common stock in connection with business combination and PIPE offering	—	—		—	—		43,845,835	7		—	—		—	—		267,355		—		—		267,362
Assumption of SPAC Warrants upon consummation of business combination	—	—		—	—		—	—		—	—		—	—		(38,135)		—		—		(38,135)
Earn Out liability recognized upon consummation of business combination	—	—		—	—		—	—		—	—		—	—		(98,117)		—		—		(98,117)
Issuance of Delayed Draw Warrants	—	—		—	—		—	—		—	—		—	—		5,598		—		—		5,598
Stock-based compensation	—	—		—	—		—	—		—	—		—	—		6,680		—		—		6,680
Components of comprehensive loss:	—	—		—	—		—	—		—	—		—	—		—		—		—
Net income	—	—		—	—		—	—		—	—		—	—		—		—		22,392		22,392
Change in cumulative translation adjustment	—	—		—	—		—	—		—	—		—	—		—		1,999		—		1,999
Balance at March 31, 2022	—	$	—	—	$	—	184,678,577	$	20	—	$	—	32,296,539	$	—	$	918,369	$	9,298	$	(792,420)	$	135,267

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SONDER HOLDINGS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF MEZZANINE EQUITY AND

STOCKHOLDERS’ EQUITY (DEFICIT) (continued)

Nine months ended September 30, 2022 (continued)

(In thousands, except share information)

(Unaudited)


	Redeemable Convertible Preferred Stock			Exchangeable Preferred Stock			Common Stock			Exchangeable Series AA Stock			Post-Combination Exchangeable Common Stock			Additional Paid-in Capital		Accumulated Translation Adjustment		Accumulated Deficit		Total Stockholders’ Equity (Deficit)
	Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount
Balance at March 31, 2022	—	$	—	—	$	—	184,678,577	$	20	—	$	—	32,296,539	$	—	$	918,369	$	9,298	$	(792,420)	$	135,267
Exercise of common stock options	—	—		—	—		375,891	—		—	—		—	—		574		—		—		574
Vesting of restricted stock units	—	—		—	—		29,742	—		—	—		—	—		57		—		—		57
Conversion of exchangeable stock	—	—		—	—		4,259,343	—		—	—		(4,259,343)	—		—		—		—		—
Stock-based compensation	—	—		—	—		—	—		—	—		—	—		5,054		—		—		5,054
Components of comprehensive loss:
Net loss	—	—		—	—		—	—		—	—		—	—		—		—		(43,775)		(43,775)
Change in cumulative translation adjustment	—	—		—	—		—	—		—	—		—	—		—		5,085		—		5,085
Balance at June 30, 2022	—	$	—	—	$	—	189,343,553	$	20	—	$	—	28,037,196	$	—	$	924,054	$	14,383	$	(836,195)	$	102,262
Exercise of common stock options	—	—		—	—		159,329	—		—	—		—	—		129		—		—		129
Vesting of restricted stock units	—	—		—	—		503,742	—		—	—		—	—		—		—		—		—
Conversion of exchangeable stock	—	—		—	—		7,203,032	1		—	—		(7,203,032)	—		—		—		—		1
Stock-based compensation	—	—		—	—		—	—		—	—		—	—		6,405		—		—		6,405
Components of comprehensive loss:	—	—		—	—		—	—		—	—		—	—		—		—		—		—
Net loss	—	—		—	—		—	—		—	—		—	—		—		—		(74,499)		(74,499)
Change in cumulative translation adjustment	—	—		—	—		—	—		—	—		—	—		—		4,833		—		4,833
Balance at September 30, 2022	—	$	—	—	$	—	197,209,656	$	21	—	$	—	20,834,164	$	—	$	930,588	$	19,216	$	(910,694)	$	39,131

See accompanying notes to unaudited condensed consolidated financial statements.

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SONDER HOLDINGS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF MEZZANINE EQUITY AND

STOCKHOLDERS’ EQUITY (DEFICIT) (continued)

Nine months ended September 30, 2021

(In thousands, except number of shares and par amount information)

(unaudited)


	Redeemable Convertible Preferred Stock			Exchangeable Preferred Stock			Common Stock			Exchangeable Series AA Stock			Post-Combination Exchangeable Common Stock			Additional Paid-in Capital		Accumulated Translation Adjustment		Accumulated Deficit		Total Stockholders’ Deficit
	Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount
Balance at December 31, 2020	75,664,679	$	517,730	12,579,755	$	49,733	7,169,758	$	1	9,437,358	$	—	—	$	—	$	13,898	$	5,666	$	(520,425)	$	(500,860)
Retroactive adjustment to reflect the exchange ratio due to business combination	35,456,366	—		5,894,873	—		3,359,582	—		4,422,311	—		—	—		—		—		—		—
Balance at December 31, 2020, as adjusted	111,121,045	$	517,730	18,474,628	$	49,733	10,529,340	$	1	13,859,669	$	—	—	$	—	$	13,898	$	5,666	$	(520,425)	$	(500,860)
Issuance of Series E Convertible Preferred Stock	136,390	1,020		—	—		—	—		—	—		—	—		—		—		—		—
Exercise of common stock options	—	—		—	—		379,462	—		—	—		—	—		746		—		—		746
Stock-based compensation	—	—		—	—		—	—		—	—		—	—		14,153		—		—		14,153
Components of comprehensive loss:	—	—		—	—		—	—		—	—		—	—		—		—		—
Net loss	—	—		—	—		—	—		—	—		—	—		—		—		(78,541)		(78,541)
Change in cumulative translation adjustment	—	—		—	—		—	—		—	—		—	—		—		1,145		—		1,145
Balance at March 31, 2021	111,257,435	$	518,750	18,474,628	$	49,733	10,908,802	$	1	13,859,669	$	—	—	$	—	$	28,797	$	6,811	$	(598,966)	$	(563,357)
Exercise of common stock options	—	—		—	—		938,128	—		—	—		—	—		1,377		—		—		1,377
Exercise of common stock warrants	—	—		—	—		82,352	—		—	—		—	—		120		—		—		120
Stock-based compensation	—	—		—	—		—	—		—	—		—	—		2,448		—		—		2,448
Components of comprehensive loss:
Net loss	—	—		—	—		—	—		—	—		—	—		—		—		(73,949)		(73,949)
Change in cumulative translation adjustment	—	—		—	—		—	—		—	—		—	—		—		1,689		—		1,689
Balance at June 30, 2021	111,257,435	$	518,750	18,474,628	$	49,733	11,929,282	$	1	13,859,669	$	—	—	$	—	$	32,742	$	8,500	$	(672,915)	$	(631,672)
Exchange of Series AA stock to common stock	—	—		—	—		23,744	—		(23,744)	—		—	—		—		—		—		—
Exercise of common stock options	—	—		—	—		489,014	—		—	—		—	—		956		—		—		956