[FORM 10-Q Filing Information](index=1&type=section&id=FORM%2010-Q) This section provides essential regulatory filing details for Sonder Holdings Inc [Registrant Information](index=1&type=section&id=Registrant%20Information) SONDER HOLDINGS INC. is a Delaware-incorporated company with its principal executive offices in San Francisco, California. Its Common Stock and Warrants are registered on The Nasdaq Stock Market LLC under symbols SOND and SONDW, respectively. The company is classified as a non-accelerated filer, smaller reporting company, and emerging growth company - **Registrant**: **SONDER HOLDINGS INC.**[2](index=2&type=chunk) - Incorporation: **Delaware**[3](index=3&type=chunk) Securities Class and Exchange | Securities Class | Trading Symbol(s) | Exchange | | :----------------- | :------------------ | :------- | | Common Stock, par value $0.0001 per share | SOND | The Nasdaq Stock Market LLC | | Warrants, each 20 whole warrants exercisable for one share of Common Stock at an exercise price of $230.00 per share | SONDW | The Nasdaq Stock Market LLC | - Filer Status: **Non-accelerated filer**, **Smaller reporting company**, **Emerging growth company**[3](index=3&type=chunk) - **Common Stock Outstanding** as of October 9, 2025: **13,308,481 shares**[5](index=5&type=chunk) [Special Note Regarding Forward-Looking Statements](index=4&type=section&id=SPECIAL%20NOTE%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) This section cautions investors about forward-looking statements, highlighting inherent risks and uncertainties [Nature of Forward-Looking Statements](index=4&type=section&id=Nature%20of%20Forward-Looking%20Statements) This section highlights that the report contains forward-looking statements concerning future events, financial, or operating performance, identifiable by words like 'may,' 'will,' 'expects,' 'plans,' etc. These statements inherently involve risks and uncertainties that could cause actual results to differ materially from expectations - **Forward-looking statements** relate to future events or expected future financial or operating performance[9](index=9&type=chunk) - Identifiable by words such as 'may,' 'will,' 'should,' 'expects,' 'plans,' 'anticipates,' 'could,' 'intends,' 'target,' 'projects,' 'contemplates,' 'believes,' 'estimates,' 'predicts,' 'potential,' or 'continue,' or their negatives[9](index=9&type=chunk) - Involve risks and uncertainties that could cause actual results to differ materially from historical experience or present expectations[9](index=9&type=chunk) [Key Areas of Forward-Looking Statements](index=4&type=section&id=Key%20Areas%20of%20Forward-Looking%20Statements) The forward-looking statements cover a broad range of topics, including the company's focus on achieving positive adjusted free cash flow, forecasts for business, revenue, expenses, and cash flows, expectations regarding the Marriott Agreement, portfolio optimization, capital resources, and the ability to continue as a going concern. They also touch upon trends in the hospitality industry, competitive advantages, guest demands, and internal control remediation efforts - Focus on achieving positive and sustainable **Adjusted FCF**[10](index=10&type=chunk) - Forecasts and projections, including cost-saving initiatives, restructuring, **portfolio optimization**, and the **Cash Flow Positive Plan**[10](index=10&type=chunk) - Expectations for business, revenue, expenses, results of operations, financial condition, and cash flows[10](index=10&type=chunk) - Anticipated benefits of the **Marriott Agreement** and related plans[10](index=10&type=chunk) - Management's conclusion regarding substantial doubt about the Company's ability to continue as a **going concern** and related mitigation plans[10](index=10&type=chunk) - Efforts to remediate **material weaknesses** in **internal controls over financial reporting**[10](index=10&type=chunk) [Disclaimer and Risk Factors](index=5&type=section&id=Disclaimer%20and%20Risk%20Factors) Investors are cautioned not to place undue reliance on forward-looking statements due to inherent risks and uncertainties beyond the company's control. The company does not undertake to update these statements, except as required by law. Material information is communicated via its investor relations website, SEC filings, press releases, and webcasts, and investors are encouraged to visit these channels. A discussion of risk factors is incorporated by reference from the Annual Report on Form 10-K - Investors should not place undue reliance on **forward-looking statements** due to known and unknown risks, uncertainties, and other factors beyond control[12](index=12&type=chunk) - The company undertakes no obligation to update **forward-looking statements**, except as required by law[12](index=12&type=chunk) - Material information is announced via the investor relations website (https://investors.sonder.com/), SEC filings, press releases, public conference calls, and webcasts[13](index=13&type=chunk) - **Risk factors** are discussed in the Annual Report on Form 10-K for the fiscal year ended December 31, 2024, which is incorporated by reference[14](index=14&type=chunk) [PART I - FINANCIAL INFORMATION](index=6&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) This part presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis [Item 1. Financial Statements](index=6&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for Sonder Holdings Inc. and its subsidiaries, including the balance sheets, statements of operations and comprehensive income (loss), statements of cash flows, and statements of stockholders' deficit, along with accompanying notes. These statements are prepared in conformity with GAAP and reflect all normal recurring adjustments for interim periods - Financial statements are unaudited and prepared in conformity with GAAP[29](index=29&type=chunk) - Includes **Condensed Consolidated Balance Sheets**, **Statements of Operations and Comprehensive Income (Loss)**, **Statements of Cash Flows**, and **Statements of Stockholders' Deficit**[7](index=7&type=chunk) [Condensed Consolidated Balance Sheets (unaudited)](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20(unaudited)) This section presents the company's unaudited condensed consolidated balance sheets, detailing assets, liabilities, and equity Condensed Consolidated Balance Sheets (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :---------------------------------- | :------------ | :------------------ | | **Assets** | | | | Total current assets | $97,163 | $99,846 | | Property and equipment, net | $4,387 | $5,933 | | Operating lease ROU assets | $882,139 | $1,013,854 | | Total assets | $1,004,807 | $1,137,177 | | **Liabilities, mezzanine equity and stockholders' deficit** | | | | Total current liabilities | $388,152 | $338,547 | | Non-current operating lease liabilities | $867,816 | $1,009,169 | | Long-term debt, net | $217,922 | $217,236 | | Total liabilities | $1,490,032 | $1,573,065 | | Mezzanine equity (Series A preferred stock) | $230,212 | $162,907 | | Total stockholders' deficit | $(715,437) | $(598,795) | | Total liabilities and stockholders' deficit | $1,004,807 | $1,137,177 | - **Total assets** decreased by **$132.37 million** (**11.6%**) from December 31, 2024, to June 30, 2025, primarily due to a decrease in **operating lease ROU assets**[18](index=18&type=chunk) - **Total liabilities** decreased by **$83.03 million** (**5.3%**) over the same period[18](index=18&type=chunk) - **Total stockholders' deficit** increased by **$116.64 million** (**19.5%**) from **$(598.8) million** to **$(715.4) million**[18](index=18&type=chunk) [Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (unaudited)](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20(Loss)%20(unaudited)) This section presents the company's unaudited condensed consolidated statements of operations and comprehensive income (loss) Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (in thousands, except share data) | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $147,085 | $164,601 | $265,941 | $298,080 | | Total costs and operating expenses | $153,965 | $196,300 | $336,462 | $397,440 | | Loss from operations | $(6,880) | $(31,699) | $(70,521) | $(99,360) | | Total non-operating expense (income), net | $37,823 | $(64,683) | $29,960 | $(82,044) | | Income (loss) before income taxes | $(44,703) | $32,984 | $(100,481) | $(17,316) | | Net income (loss) | $(44,523) | $32,747 | $(101,018) | $(17,740) | | Basic and diluted net income (loss) per common share | $(3.96) | $2.94 | $(8.44) | $(1.59) | | Comprehensive income (loss) | $(51,388) | $34,142 | $(111,082) | $(16,934) | - **Revenue** decreased by **10.6%** for the three months ended June 30, 2025, and by **10.8%** for the six months ended June 30, 2025, compared to the prior year periods[20](index=20&type=chunk) - **Net loss** for the three months ended June 30, 2025, was **$(44.5) million**, a significant decline from **net income** of **$32.7 million** in the prior year, primarily due to a **$43.8 million** loss on preferred stock issuance[20](index=20&type=chunk) - **Net loss** for the six months ended June 30, 2025, was **$(101.0) million**, compared to **$(17.7) million** in the prior year, also heavily impacted by the preferred stock issuance loss[20](index=20&type=chunk) [Condensed Consolidated Statements of Cash Flows (unaudited)](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20(unaudited)) This section presents the company's unaudited condensed consolidated statements of cash flows, detailing operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (in thousands) | Metric | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(23,971) | $(73,087) | | Net cash provided by (used in) investing activities | $5,297 | $(2,209) | | Net cash provided by financing activities | $17,480 | $8,917 | | Net change in cash, cash equivalents, and restricted cash | $(1,096) | $(67,374) | | Cash, cash equivalents, and restricted cash at end of period | $70,958 | $69,123 | - **Net cash used in operating activities** significantly decreased by **$49.1 million**, from **$(73.1) million** in 2024 to **$(24.0) million** in 2025, indicating improved operational cash management[22](index=22&type=chunk) - **Net cash provided by investing activities** improved from a use of **$(2.2) million** in 2024 to a provision of **$5.3 million** in 2025, primarily due to **Key Money** investment proceeds[22](index=22&type=chunk) - **Net cash provided by financing activities** increased by **$8.6 million**, from **$8.9 million** in 2024 to **$17.5 million** in 2025, driven by preferred stock issuance proceeds[22](index=22&type=chunk) [Condensed Consolidated Statements of Stockholders' Deficit (unaudited)](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Deficit%20(unaudited)) This section presents the company's unaudited condensed consolidated statements of stockholders' deficit, outlining changes in equity Condensed Consolidated Statements of Stockholders' Deficit (in thousands) | Metric | Balance at December 31, 2024 | Balance at June 30, 2025 | | :-------------------------------- | :--------------------------- | :----------------------- | | Common Stock (Shares) | 11,041,999 | 12,764,968 | | Common Stock (Amount) | $1 | $1 | | Additional Paid-in Capital | $977,112 | $971,552 | | Accumulated Deficit | $(1,583,268) | $(1,684,286) | | Total Stockholders' Deficit | $(598,795) | $(715,437) | - **Total stockholders' deficit** increased from **$(598.8) million** at December 31, 2024, to **$(715.4) million** at June 30, 2025, primarily due to **net losses** and paid-in-kind dividends on preferred stock[24](index=24&type=chunk) - Shares of **Common Stock** outstanding increased from **11,041,999** to **12,764,968**, partly due to conversions of preferred stock[24](index=24&type=chunk) [Notes to the Condensed Consolidated Financial Statements (unaudited)](index=11&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements%20(unaudited)) This section provides detailed explanations and disclosures for the accompanying unaudited condensed consolidated financial statements [Note 1. Basis of Presentation](index=11&type=section&id=Note%201.%20Basis%20of%20Presentation) Sonder Holdings Inc. provides short and long-term accommodations globally, operating as a leading brand of design-forward apartments and boutique hotels. The financial statements are prepared in accordance with GAAP, consolidating all subsidiaries. The company is an emerging growth company and a smaller reporting company. Nasdaq issued a delisting notice due to a filing delinquency, which was cured by this report. Substantial doubt exists about the company's ability to continue as a going concern due to historical losses and negative cash flows, with management pursuing strategic alternatives, cost optimization, lease portfolio review, and leveraging the Marriott Agreement to mitigate this risk. The company received the remaining $7.5 million Key Money from Marriott in April 2025 and amended the Marriott Agreement in August 2025 to defer certain fees - **Sonder Holdings Inc.** provides short and long-term accommodations in North America, Europe, and the Middle East, focusing on premium, design-forward apartments and boutique hotels[28](index=28&type=chunk) - The company received a **Nasdaq delisting notice** on August 20, 2025, for delinquent filing of the Q2 10-Q, but cured the deficiency by submitting this report[32](index=32&type=chunk)[33](index=33&type=chunk) - Substantial doubt exists about the company's ability to continue as a **going concern** due to a history of **net losses** and negative operating cash flows[34](index=34&type=chunk)[35](index=35&type=chunk) - Management's plans to address **going concern** include engaging financial advisors, **cost optimization**, lease portfolio review, and improving financial performance through the **Marriott Agreement**[36](index=36&type=chunk)[42](index=42&type=chunk) - Received the remaining **$7.5 million** of **Key Money** from Marriott on April 11, 2025, completing the **$15.0 million** investment[37](index=37&type=chunk) - Amended the **Marriott Agreement** on August 5, 2025, to defer certain fees and amounts owed for up to **12 months**[38](index=38&type=chunk) [Note 2. Recently Issued Accounting Standards](index=13&type=section&id=Note%202.%20Recently%20Issued%20Accounting%20Standards) This note provides detailed information regarding the company's recently issued accounting standards - No recently adopted accounting pronouncements are expected to have a material impact[45](index=45&type=chunk) - Evaluating ASU 2023-09 (Income Taxes), effective January 1, 2025, for disclosure impact[46](index=46&type=chunk) - Evaluating ASU 2024-03 (Expense Disaggregation Disclosures), effective January 1, 2026, for disclosure impact[47](index=47&type=chunk) [Note 3. Revenue](index=14&type=section&id=Note%203.%20Revenue) Revenue is primarily generated from accommodations. Direct revenue, historically from Sonder.com and the Sonder app, is now generated through Marriott.com and the Marriott Bonvoy® app as of April 2025, fully replacing Sonder's direct booking functionality by July 2025. Indirect revenue comes from third-party online travel agencies (OTAs). Total revenue decreased for both the three and six months ended June 30, 2025, compared to 2024 - Direct revenue is now generated from Marriott.com and the Marriott Bonvoy® app, fully replacing Sonder's direct booking functionality by July 2025[48](index=48&type=chunk) - Indirect revenue is generated from stays booked through third-party online travel agencies (OTAs)[48](index=48&type=chunk) Revenue Disaggregation (in thousands) | Revenue Type | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Direct revenue | $57,352 | $77,893 | $98,859 | $136,148 | | Indirect revenue | $89,733 | $86,708 | $167,082 | $161,932 | | Total revenue | $147,085 | $164,601 | $265,941 | $298,080 | - Three OTAs represented approximately **28%**, **18%**, and **11%** of revenues for the three months ended June 30, 2025[50](index=50&type=chunk) [Note 4. Balance Sheet Details](index=14&type=section&id=Note%204.%20Balance%20Sheet%20Details) This note provides detailed breakdowns of 'Other current assets,' 'Other non-current assets,' 'Accrued liabilities,' 'Other current liabilities,' and 'Other non-current liabilities' as of June 30, 2025, and December 31, 2024. Notable changes include an increase in non-income tax assets, long-term deposits from landlords, accrued legal expenses, and significant increases in NPA Warrants liability and Marriott key money liability Other Current Assets (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :------------------ | | Non-income tax assets | $10,254 | $8,150 | | Deposits due from landlords | $299 | $539 | | Other current assets | $1,052 | $1,044 | | Total | $11,605 | $9,733 | Accrued Liabilities (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :------------------ | | Accrued legal expenses | $20,284 | $18,540 | | Accrued compensation | $6,253 | $1,703 | | Accrued direct costs | $3,198 | $3,454 | | Accrued other liabilities | $6,432 | $8,924 | | Total | $36,167 | $32,621 | Other Current Liabilities (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :------------------ | | NPA Warrants liability | $12,615 | $— | | NPA Waiver Warrants liability | $1,345 | $1,585 | | Preferred Stock Participation Right | $2,590 | $1,284 | | Other | $3,272 | $2,644 | | Total | $19,822 | $5,513 | Other Non-Current Liabilities (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :------------------ | | Marriott key money liability | $14,559 | $7,344 | | Other | $1,583 | $769 | | Total | $16,142 | $8,113 | [Note 5. Fair Value Measurement and Financial Instruments](index=15&type=section&id=Note%205.%20Fair%20Value%20Measurement%20and%20Financial%20Instruments) This note details the fair value hierarchy (Levels 1, 2, 3) used for financial instruments and provides specific valuations for various liabilities. The Preferred Stock Participation Right, NPA Warrants, and NPA Waiver Warrants are classified as liabilities, with significant changes in their fair values during the period. The NPA Warrants, issued on April 11, 2025, had an initial fair value of $10.5 million, increasing to $12.6 million by June 30, 2025. The Earn Out Liability and SPAC Warrants were not significant or had minimal changes. The company uses the Black-Scholes Merton model for certain valuations, employing Level 3 inputs - **Fair value hierarchy** categorizes inputs into Level 1 (quoted prices in active markets), Level 2 (quoted prices for similar assets/liabilities or observable inputs), and Level 3 (unobservable inputs)[57](index=57&type=chunk)[59](index=59&type=chunk) - **Preferred Stock Participation Right** liability increased by **$1.3 million** for the three and six months ended June 30, 2025[61](index=61&type=chunk) - **NPA Warrants** were issued on April 11, 2025, with an initial fair value of **$10.5 million**, increasing by **$2.1 million** to **$12.6 million** by June 30, 2025[72](index=72&type=chunk)[74](index=74&type=chunk) - **NPA Waiver Warrants**, recharacterized from an obligation on December 30, 2024, had a fair value of **$1.6 million** at inception and changed by **$0.2 million** for the three and six months ended June 30, 2025[71](index=71&type=chunk) Recurring Fair Value Measurements (in thousands) - June 30, 2025 | Liability | Level 1 | Level 3 | Total | | :-------------------------- | :------ | :------ | :------ | | Preferred Stock Participation Right | $— | $2,590 | $2,590 | | NPA Warrants | $— | $12,615 | $12,615 | | NPA Waiver Warrants | $1,345 | $— | $1,345 | | Earn Out Liability | $— | $15 | $15 | | Public Warrants | $246 | $— | $246 | | Total | $1,591 | $15,220 | $16,811 | [Note 6. Debt](index=20&type=section&id=Note%206.%20Debt) This note details the company's debt arrangements, including Note Purchase Agreements (NPAs), a Loan Agreement with Marriott, and an Equipment Financing Agreement (EFA). The Sixth NPA Amendment in April 2025 resulted in a troubled debt restructuring, reducing the 2021 Notes' principal by 15% and lowering the interest rate, and also involved the issuance of NPA Warrants. Subsequent events in August 2025 include a new $24.54 million 2025 Purchase Agreement and a Loan Agreement with Marriott to defer fees, both senior secured notes maturing July 2026. The 2022 Loan and Security Agreement was terminated in August 2025. The effective interest rate for Delayed Draw Notes decreased from 16.7% to 4.7% due to restructuring - **Sixth NPA Amendment** (April 11, 2025) constituted a **troubled debt restructuring**, reducing 2021 Notes principal by **15%** and lowering the effective interest rate from **16.7%** to **4.7%**[85](index=85&type=chunk)[87](index=87&type=chunk)[89](index=89&type=chunk) - In connection with the **Sixth NPA Amendment**, the company issued **NPA Warrants** to purchase up to **5 million shares** of **Common Stock** at **$1.00 per share**[86](index=86&type=chunk) - August 2025 Financing: Issued **$24.54 million** in **senior secured promissory notes** (2025 Notes) and warrants (2025 Warrants) with a **$1.50** exercise price, maturing July 4, 2026, and accruing **15.0%** PIK interest[90](index=90&type=chunk)[91](index=91&type=chunk) - **Loan Agreement with Marriott International** (August 5, 2025): Provides **senior secured Lender Notes** to defer certain fees owed to Marriott for up to **12 months**, maturing July 4, 2026, with interest at prime rate + **3.00%** PIK[92](index=92&type=chunk)[93](index=93&type=chunk) - The 2025 Notes and **Lender Notes** rank pari passu in right of payment and senior to the 2021 Notes[93](index=93&type=chunk) - The **2022 Loan and Security Agreement** was terminated on August 5, 2025[105](index=105&type=chunk) Long-term Debt, Net (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :-------------------------------------- | :------------ | :------------------ | | Delayed Draw Notes, including capitalized PIK interest | $205,631 | $229,996 | | EFA | $1,250 | $1,500 | | Add (Less): unamortized debt premium (discount) | $12,041 | $(13,260) | | Total debt, net | $218,922 | $218,236 | | Less: current portion of long-term debt | $(1,000) | $(1,000) | | Total long-term debt, net | $217,922 | $217,236 | [Note 7. Redeemable Preferred Stock](index=24&type=section&id=Note%207.%20Redeemable%20Preferred%20Stock) This note details the issuance and terms of Series A Preferred Stock. The August 2024 Preferred Financing involved 43.3 million shares for $43.3 million, resulting in an $83.8 million loss on preferred stock issuance due to the fair value exceeding proceeds. The April 2025 Preferred Financing issued an additional 17.98 million shares for $17.98 million, leading to a $43.8 million loss on preferred stock issuance. Holders of Series A Preferred Stock have a liquidation preference, cumulative PIK dividends (15% until August 2025, then decreasing), and conversion rights into common stock. They also have a Preferred Stock Participation Right to purchase up to 25% of future equity offerings at a 75% discount. During the six months ended June 30, 2025, 1.59 million shares of Series A Preferred Stock were converted to common stock - August 2024 Preferred Financing: Issued **43.3 million shares** of **Series A Preferred Stock** for **$43.3 million**, resulting in an **$83.8 million** loss on preferred stock issuance[108](index=108&type=chunk)[109](index=109&type=chunk) - April 2025 Preferred Financing: Issued **17.98 million shares** of **Series A Preferred Stock** for **$17.98 million**, resulting in a **$43.8 million** loss on preferred stock issuance[114](index=114&type=chunk)[126](index=126&type=chunk) - **Series A Preferred Stock** has a liquidation preference of **$1.00 per share** and cumulative PIK dividends at **15%** (until August 2025), **10%** (until August 2027), and **5%** (until August 2028)[119](index=119&type=chunk)[120](index=120&type=chunk) - Holders have a **Preferred Stock Participation Right** to purchase up to **25%** of any subsequent equity offering at **75%** of the purchase price[112](index=112&type=chunk)[118](index=118&type=chunk) - During the six months ended June 30, 2025, **1.59 million shares** of **Series A Preferred Stock** were converted into **Common Stock**[128](index=128&type=chunk) [Note 8. Leases](index=27&type=section&id=Note%208.%20Leases) This note provides detailed information regarding the company's leases - Company leases buildings for guest usage and warehouses under noncancellable operating lease agreements expiring through **2045**[129](index=129&type=chunk) Operating Lease Costs (in thousands) | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Operating lease cost | $57,581 | $72,266 | $132,747 | $154,380 | | Short-term lease cost | $1,109 | $3 | $1,651 | $38 | | Variable lease cost | $2,151 | $2,176 | $3,663 | $2,441 | | Total operating lease cost | $60,841 | $74,445 | $138,061 | $156,859 | - Cash payments for **operating leases** decreased from **$77.5 million** to **$65.7 million** for the three months, and from **$159.0 million** to **$138.2 million** for the six months ended June 30, 2025[133](index=133&type=chunk) - **Weighted-average remaining lease term** was **6.7 years** and **weighted-average discount rate** was **9.5%** at June 30, 2025[133](index=133&type=chunk) - Future lease payments for leases not yet commenced total **$630.0 million**, commencing between 2025 and 2026[134](index=134&type=chunk) - Four properties were abandoned, resulting in full amortization of **$10.4 million** in ROU assets, with **$16.7 million** in remaining lease liabilities[135](index=135&type=chunk) [Note 9. Warrants and Stockholders' Deficit](index=29&type=section&id=Note%209.%20Warrants%20and%20Stockholders'%20Deficit) This note details the company's warrants and equity structure. It covers Preferred Stock Warrants, Common Stock Warrants (including former Series C and D, Delayed Draw, and SPAC Warrants), and Exchangeable Stock. SPAC Warrants are accounted for as liabilities due to certain terms, with a fair value of $0.2 million at June 30, 2025. The company's authorized capital stock increased to 462,921,255 shares, including 212,921,255 common stock and 250,000,000 preferred stock. A significant number of common shares are reserved for future issuance under various equity plans and warrants - **SPAC Warrants** are accounted for as liabilities, with a fair value of **$0.2 million** at June 30, 2025 and December 31, 2024[141](index=141&type=chunk) - Company's **authorized capital stock** increased to **462,921,255 shares**, comprising **212,921,255 Common Stock** and **250,000,000 preferred stock**[144](index=144&type=chunk) Common Stock Reserved for Future Issuance | Category | June 30, 2025 | December 31, 2024 | | :------------------------------------------ | :------------ | :------------------ | | Post-Combination Exchangeable Common Shares | 550,959 | 551,072 | | Outstanding stock options | 1,812,654 | 2,129,040 | | Outstanding restricted stock units ("RSUs") | 1,605,782 | 236,985 | | Outstanding performance stock units ("PSUs") | 1,774,525 | — | | Outstanding market stock units ("MSUs") | 58,498 | 531,996 | | Outstanding Public Warrants liability | 724,997 | 724,997 | | Shares issuable pursuant to Earn Out Liability | 725,000 | 725,000 | | Outstanding former Series C and D preferred stock warrants liability | 21,281 | 21,281 | | Shares available for grant under the Employee Stock Purchase Plan | 463,930 | 463,930 | | Shares available for grant under the 2021 Equity Incentive Plan | 5,780,494 | 8,092,529 | | Shares available for grant under the 2023 Inducement Equity Incentive Plan | 258,201 | 326,677 | | Total common stock reserved for future issuance | 13,776,321 | 13,803,507 | [Note 10. Equity Incentive Plans and Stock-Based Compensation](index=30&type=section&id=Note%2010.%20Equity%20Incentive%20Plans%20and%20Stock-Based%20Compensation) This note details the stock-based compensation expense recognized under various equity incentive plans. Total stock-based compensation expense was $(1.47) million for the three months and $0.8 million for the six months ended June 30, 2025, compared to $1.78 million and $4.79 million for the same periods in 2024, respectively. The decrease is largely due to reversals from executive departures and changes in MSU valuations. The company uses the Black-Scholes model for stock options and Monte Carlo simulation for MSUs, with key assumptions like expected volatility and risk-free interest rates Total Stock-Based Compensation Expense (in thousands) | Category | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Operations and support | $576 | $771 | $1,330 | $1,629 | | General and administrative | $(2,346) | $705 | $(1,101) | $2,550 | | Research and development | $275 | $264 | $508 | $527 | | Sales and marketing | $29 | $39 | $66 | $82 | | Total stock-based compensation expense | $(1,466) | $1,779 | $803 | $4,788 | - **Stock-based compensation expense** from **stock options** was **$0.2 million** and **$0.8 million** for the three and six months ended June 30, 2025, respectively[147](index=147&type=chunk) - Recognized **$(1.9) million** and **$(1.7) million** in **stock-based compensation expense** from **MSUs** for the three and six months ended June 30, 2025, respectively, compared to **$0.2 million** and **$0.4 million** in 2024[155](index=155&type=chunk) - The decrease in general and administrative **stock-based compensation** is primarily due to reversals from the departure of certain executives[249](index=249&type=chunk) [Note 11. Net Loss per Common Share](index=32&type=section&id=Note%2011.%20Net%20Loss%20per%20Common%20Share) This note presents the computation of basic and diluted net loss per common share. For periods with net losses, diluted net loss per share is the same as basic net loss per share because potentially dilutive securities are anti-dilutive. The net loss per common share was $(3.96) for the three months and $(8.44) for the six months ended June 30, 2025, compared to net income of $2.94 and net loss of $(1.59) for the same periods in 2024, respectively. A significant number of common stock equivalents were excluded from diluted EPS calculation due to their anti-dilutive effect Net Income (Loss) per Common Share | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) attributable to common stockholders | $(53,482) | $32,747 | $(112,623) | $(17,740) | | Weighted average basic and diluted common shares outstanding | 13,506,695 | 11,150,682 | 13,339,076 | 11,167,172 | | Basic and diluted net income (loss) per common share | $(3.96) | $2.94 | $(8.44) | $(1.59) | - Potentially dilutive securities, including convertible preferred stock, options, RSUs, PSUs, **MSUs**, and exchangeable shares, were excluded from diluted EPS computation due to their anti-dilutive effect during periods of **net loss**[156](index=156&type=chunk)[158](index=158&type=chunk) [Note 12. Commitments and Contingencies](index=33&type=section&id=Note%2012.%20Commitments%20and%20Contingencies) This note outlines the company's commitments and contingencies, including operating leases, surety bonds, and various legal and regulatory matters. The company has accrued $23.2 million for legal loss contingencies as of June 30, 2025. Significant legal cases include the New York City Litigation with a landlord over Legionella contamination, which is ongoing with a recent court order granting the landlord's motion to amend its complaint to assert $37.0 million in damages. Several stockholder derivative lawsuits (Versen, Akcayli, Hunter) were dismissed without prejudice in September 2025. Tax contingencies include a VAT dispute with HMRC in the UK, for which $14.8 million is accrued as of June 30, 2025, following an adverse Upper Tribunal ruling that the company is appealing. The company also has indemnification agreements with directors and officers - **Accrued liability for legal loss contingencies** was **$23.2 million** as of June 30, 2025[162](index=162&type=chunk) - **New York City Litigation**: Broad Street Landlord sued Sonder for breach of lease; court granted summary judgment on liability against Sonder, and on October 9, 2025, granted the landlord's motion to amend its complaint to assert **$37.0 million** in damages[163](index=163&type=chunk)[164](index=164&type=chunk) - **Sonder Stockholder Litigation**: Putative securities class action (Dufaydar) was dismissed with prejudice on August 27, 2025. Several stockholder derivative lawsuits (Versen, Akcayli, Hunter) were voluntarily dismissed without prejudice on September 17, 2025[165](index=165&type=chunk)[170](index=170&type=chunk) - **Tax Contingencies**: Accrued **$14.8 million** for **VAT dispute with HMRC** in the UK as of June 30, 2025, following an adverse Upper Tribunal ruling that the company is appealing[173](index=173&type=chunk)[174](index=174&type=chunk) - The company has commitments from six **surety providers** totaling **$38.3 million**, with **$14.6 million** outstanding as of June 30, 2025[160](index=160&type=chunk) [Note 13. Income Taxes](index=36&type=section&id=Note%2013.%20Income%20Taxes) This note provides detailed information regarding the company's income taxes Provision (Benefit) for Income Taxes (in thousands) | Period | 2025 | 2024 | | :-------------------------- | :----- | :----- | | Three months ended June 30, | $(180) | $237 | | Six months ended June 30, | $537 | $424 | - A full valuation allowance is recorded against deferred tax assets due to a history of **losses**[178](index=178&type=chunk) - Assessing the impact of the **One Big Beautiful Bill Act (OBBBA)**, enacted July 4, 2025, on consolidated financial statements[179](index=179&type=chunk) [Note 14. Restructuring Activities](index=36&type=section&id=Note%2014.%20Restructuring%20Activities) This note provides detailed information regarding the company's restructuring activities - Completed a **reduction in force** in April 2025, with approximately **$4.5 million** in associated **restructuring costs**, expected to be paid in 2025[181](index=181&type=chunk) - Previous **reduction in force** in February 2024 incurred approximately **$3.0 million** in **restructuring costs**, primarily for employee severance and benefits[180](index=180&type=chunk) [Note 15. Subsequent Events](index=37&type=section&id=Note%2015.%20Subsequent%20Events) This note details significant events occurring after June 30, 2025. On August 5, 2025, the company entered into a $24.54 million Note and Warrant Purchase Agreement (2025 Purchase Agreement) for senior secured notes and warrants, and a Loan Agreement with Marriott International to defer certain fees for up to 12 months. Both new debt instruments mature on July 4, 2026, accrue 15.0% PIK interest (for 2025 Notes) or prime + 3.00% PIK (for Lender Notes), and rank senior to the 2021 Notes. The 2025 Purchase Agreement includes a covenant to raise at least $32.5 million by November 15, 2025, and requires stockholder approval for warrant issuance. The 2022 Loan and Security Agreement was terminated on August 5, 2025 - August 2025 **Note and Warrant Purchase Agreement**: Issued **$24.54 million** in **senior secured promissory notes** (2025 Notes) and warrants (2025 Warrants) on August 5, 2025[182](index=182&type=chunk) - 2025 Notes mature July 4, 2026, accrue **15.0%** PIK interest, and are **senior secured**[183](index=183&type=chunk) - **Loan Agreement with Marriott International** (August 5, 2025): Provides **senior secured Lender Notes** to defer certain fees owed to Marriott for up to **12 months**[192](index=192&type=chunk) - **Lender Notes** mature July 4, 2026, accrue interest at prime rate + **3.00%** PIK, and rank pari passu with 2025 Notes, senior to 2021 Notes[193](index=193&type=chunk) - Both the **2025 Purchase Agreement** and **Loan Agreement** include an event of default if the company fails to raise **$32.5 million** by November 15, 2025[185](index=185&type=chunk)[195](index=195&type=chunk) - The **2022 Loan and Security Agreement** was terminated on August 5, 2025[198](index=198&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=40&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition, results of operations, and future outlook. It covers the business model, recent developments, key business metrics, and a detailed analysis of financial performance for the three and six months ended June 30, 2025, compared to 2024. The discussion also includes non-GAAP financial measures, liquidity and capital resources, and critical accounting estimates. A primary focus is the Cash Flow Positive Plan, leveraging the Marriott Agreement and cost optimization initiatives to achieve sustainable positive Adjusted FCF - **Sonder** is a global brand of premium, design-forward apartments and boutique hotels, with approximately **8,300 units** in **37 cities** across **nine countries** as of June 30, 2025[201](index=201&type=chunk) - Full integration with Marriott's digital channels and platform was completed in Q2 2025, with direct bookings now exclusively through Marriott.com and the Marriott Bonvoy® app[201](index=201&type=chunk) - Primary focus is on achieving sustainable positive **Adjusted FCF** through the '**Cash Flow Positive Plan**'[221](index=221&type=chunk) - Implemented a **portfolio optimization program**, exiting **85 buildings** (**3,300 units**) by June 30, 2025, to mitigate **losses** from underperforming properties[222](index=222&type=chunk) - Anticipates **$50 million** of annualized **cost savings** from **cost reduction initiatives**, including headcount reductions and software savings, in conjunction with the **Marriott integration**[224](index=224&type=chunk) [Overview](index=40&type=section&id=Overview) This section provides a high-level overview of Sonder's business, operations, and recent strategic developments - **Sonder** is a leading global brand of premium, design-forward apartments and intimate boutique hotels[201](index=201&type=chunk) - Operates in **37 cities**, **nine countries**, and **three continents**, with approximately **8,300 units** available as of June 30, 2025[201](index=201&type=chunk) - Completed full integration with Marriott's digital channels and platform in Q2 2025; direct bookings now exclusively through Marriott.com and the Marriott Bonvoy® app[201](index=201&type=chunk) [Sonder's Business Model](index=40&type=section&id=Sonder's%20Business%20Model) This section describes Sonder's operational model, including property leasing, guest services, and revenue generation channels - Leases properties from real estate owners, furnishes them, and makes them available for booking through direct channels (Marriott.com, Marriott Bonvoy® app, sales personnel) and indirect channels (OTAs)[202](index=202&type=chunk) - Offers diverse accommodations from multi-bedroom apartments to hotel rooms, managed with proprietary and third-party technologies, and guest services via the **Sonder** app[203](index=203&type=chunk) - Benefits from upfront allowances from real estate owners to offset capital invested in property preparation[204](index=204&type=chunk) - All **Sonder** properties are available on Marriott's digital channels under the 'Sonder by Marriott Bonvoy' collection, benefiting from Marriott's sales organization and loyalty platform[205](index=205&type=chunk) [Recent Developments](index=41&type=section&id=Recent%20Developments) This section highlights key recent events, including amendments to the Marriott Agreement and new financing arrangements - **Marriott License Agreement** amended on August 5, 2025, to defer certain fees owed to Marriott for up to **12 months**[207](index=207&type=chunk) - April 2025 Securities Purchase Agreements: Issued **17.98 million shares** of **Preferred Stock** for **$17.98 million** gross proceeds[208](index=208&type=chunk) - **Sixth NPA Amendment** (April 11, 2025): Modified the 2021 Purchase Agreement, including waivers, **15%** principal cancellation of 2021 Notes, interest rate reduction, and issuance of **NPA Warrants**[209](index=209&type=chunk)[210](index=210&type=chunk) - **2022 Loan and Security Agreement** terminated on August 5, 2025[213](index=213&type=chunk) - August 2025 **Note and Warrant Purchase Agreement**: Issued **$24.54 million** in **senior secured promissory notes** and warrants[214](index=214&type=chunk)[215](index=215&type=chunk) - **Loan Agreement with Marriott International** (August 5, 2025): Provides **senior secured notes** to replace certain fees owed to Marriott for up to **12 months**[216](index=216&type=chunk)[217](index=217&type=chunk) [Management Discussion Regarding Opportunities, Challenges and Risks](index=44&type=section&id=Management%20Discussion%20Regarding%20Opportunities,%20Challenges%20and%20Risks) This section discusses management's strategic focus on achieving positive adjusted free cash flow and addressing operational challenges - Primary focus is the '**Cash Flow Positive Plan**' to achieve sustainable positive **Adjusted FCF**[221](index=221&type=chunk) - Implemented a **portfolio optimization program** in November 2023, resulting in the exit of **85 buildings** (**3,300 units**) by June 30, 2025[222](index=222&type=chunk) - **Marriott Agreement** is expected to deliver significant revenue opportunities and operating efficiencies, including substantial uplift in **RevPAR** and customer acquisition cost savings[224](index=224&type=chunk) - Implementing **cost reduction initiatives** in April 2025, expected to deliver approximately **$50 million** of annualized **cost savings**[224](index=224&type=chunk) - **Live Units** decreased by **19.4%** from June 30, 2024, to June 30, 2025, to approximately **8,300 units**, due to **portfolio optimization** and lease terminations[227](index=227&type=chunk) - Direct revenue as a percentage of **total revenue** decreased from **47%** (Q2 2024) to **39%** (Q2 2025)[229](index=229&type=chunk) - Completed full Marriott integration in Q2 2025, making all **Sonder** properties available on Marriott's digital channels[231](index=231&type=chunk) - Completed a **reduction in force** in April 2025 with approximately **$2.8 million** in associated **restructuring costs**[234](index=234&type=chunk) [Key Business Metrics](index=45&type=section&id=Key%20Business%20Metrics) This section presents key operational metrics used to evaluate the company's performance, including Live Units, RevPAR, and Occupancy Rate Key Business Metrics | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Change (No.) | Change (%) | | :-------------------- | :------------------------------- | :------------------------------- | :----------- | :--------- | | Live Units (end of period) | 8,300 | 10,300 | (2,000) | (19.4)% | | Bookable Nights | 798,000 | 1,011,000 | (213,000) | (21.1)% | | Occupied Nights | 682,000 | 801,000 | (119,000) | (14.9)% | | Total Portfolio | 8,990 | 12,200 | (3,210) | (26.3)% | | RevPAR | $184 | $163 | $21 | 12.9% | | ADR | $216 | $205 | $11 | 5.4% | | Occupancy rate | 85.5% | 79.3% | 6.2% | 7.8% | - **Live Units** decreased by **19.4%** due to the **portfolio optimization program** and lease terminations[239](index=239&type=chunk) - **Bookable Nights** and **Occupied Nights** decreased by **21.1%** and **14.9%** respectively, primarily due to the **portfolio optimization program**[241](index=241&type=chunk) - **RevPAR** increased by **12.9%** and **ADR** by **5.4%** for the three months ended June 30, 2025, driven by the **portfolio optimization program**, lease terminations, and pricing strategies[243](index=243&type=chunk) [Results of Operations](index=48&type=section&id=Results%20of%20Operations) This section analyzes the company's financial performance for the three and six months ended June 30, 2025, compared to prior periods [Three months ended June 30, 2025 compared to three months ended June 30, 2024](index=48&type=section&id=Three%20months%20ended%20June%2030,%202025%20compared%20to%20three%20months%20ended%20June%2030,%202024) For the three months ended June 30, 2025, revenue decreased by 10.6% to $147.1 million, primarily due to a 21.1% decrease in Bookable Nights, partially offset by a 12.9% increase in RevPAR. Total costs and operating expenses decreased by 21.6% to $154.0 million, driven by reductions in rent expense, employee compensation, legal fees, and performance marketing. However, integration costs of $2.1 million and restructuring charges of $4.5 million were incurred. The company reported a net loss of $(44.5) million, a significant shift from net income of $32.7 million in the prior year, largely due to a $43.8 million loss on preferred stock issuance Revenue (in thousands) | Period | 2025 | 2024 | Change ($) | Change (%) | | :-------------------------- | :----- | :----- | :--------- | :--------- | | Three months ended June 30, | $147,085 | $164,601 | $(17,516) | (10.6)% | - **Revenue** decrease primarily due to a **21.1%** decrease in **Bookable Nights** and a **14.9%** decrease in **Occupied Nights**, partially offset by a **12.9%** increase in **RevPAR**[246](index=246&type=chunk) Total Costs and Operating Expenses (in thousands) | Category | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Change ($) | Change (%) | | :------------------------------------------ | :------------------------------- | :------------------------------- | :--------- | :--------- | | Cost of revenue (excluding depreciation and amortization) | $80,975 | $94,652 | $(13,677) | (14.4)% | | Operations and support | $37,996 | $46,411 | $(8,415) | (18.1)% | | General and administrative | $6,740 | $29,272 | $(22,532) | (77.0)% | | Research and development | $3,863 | $4,393 | $(530) | (12.1)% | | Sales and marketing | $17,707 | $21,572 | $(3,865) | (17.9)% | | Integration costs | $2,143 | $— | $2,143 | 100.0% | | Restructuring and other charges | $4,541 | $— | $4,541 | 100.0% | | Total costs and operating expenses | $153,965 | $196,300 | $(42,335) | (21.6)% | - General and administrative expenses decreased by **77.0%**, primarily due to **$7.0 million** in **stock-based compensation expense** reversals from executive departures[249](index=249&type=chunk) - **Net loss** of **$(44.5) million**, compared to **net income** of **$32.7 million** in Q2 2024, largely due to a **$43.8 million** loss on preferred stock issuance[20](index=20&type=chunk)[256](index=256&type=chunk) [Six months ended June 30, 2025 compared to six months ended June 30, 2024](index=51&type=section&id=Six%20months%20ended%20June%2030,%202025%20compared%20to%20six%20months%20ended%20June%2030,%202024) For the six months ended June 30, 2025, revenue decreased by 10.8% to $265.9 million, driven by a 21.1% decrease in Bookable Nights, partially offset by a 12.9% increase in RevPAR. Total costs and operating expenses decreased by 15.3% to $336.5 million, with significant reductions in rent expense, employee compensation, and sales and marketing. However, integration costs of $3.7 million and restructuring charges of $4.5 million were incurred. The net loss widened to $(101.0) million from $(17.7) million in the prior year, primarily due to the $43.8 million loss on preferred stock issuance and a decrease in lease adjustment gains Revenue (in thousands) | Period | 2025 | 2024 | Change ($) | Change (%) | | :-------------------------- | :----- | :----- | :--------- | :--------- | | Six months ended June 30, | $265,941 | $298,080 | $(32,139) | (10.8)% | - **Revenue** decrease primarily due to a **21.1%** decrease in **Bookable Nights** and a **14.9%** decrease in **Occupied Nights**, partially offset by a **12.9%** increase in **RevPAR**[261](index=261&type=chunk) Total Costs and Operating Expenses (in thousands) | Category | Six months ended June 30, 2025 | Six months ended June 30, 2024 | Change ($) | Change (%) | | :------------------------------------------ | :----------------------------- | :----------------------------- | :--------- | :--------- | | Cost of revenue (excluding depreciation and amortization) | $177,824 | $195,015 | $(17,191) | (8.8)% | | Operations and support | $76,028 | $96,391 | $(20,363) | (21.1)% | | General and administrative | $33,557 | $53,557 | $(20,000) | (37.3)% | | Research and development | $7,801 | $9,064 | $(1,263) | (13.9)% | | Sales and marketing | $33,029 | $40,821 | $(7,792) | (19.1)% | | Integration costs | $3,682 | $— | $3,682 | 100.0% | | Restructuring and other charges | $4,541 | $2,592 | $1,949 | 75.2% | | Total costs and operating expenses | $336,462 | $397,440 | $(60,978) | (15.3)% | - **Net loss** of **$(101.0) million**, compared to **$(17.7) million** in H1 2024, primarily due to a **$43.8 million** loss on preferred stock issuance and a decrease in lease adjustment gains from **$(95.0) million** to **$(16.5) million**[20](index=20&type=chunk)[271](index=271&type=chunk) [Non-GAAP Financial Measures](index=53&type=section&id=Non-GAAP%20Financial%20Measures) This section defines and reconciles non-GAAP financial measures, including Adjusted Free Cash Flow, Adjusted EBITDA, and Adjusted EBITDAR [Adjusted Free Cash Flow (Adjusted FCF)](index=54&type=section&id=Adjusted%20Free%20Cash%20Flow%20(Adjusted%20FCF)) Adjusted FCF is a non-GAAP measure defined as cash used in operating activities plus cash used in investing activities, excluding specific non-operational charges. For the six months ended June 30, 2025, Adjusted FCF was $(24.4) million, a 54.2% improvement from $(53.2) million in the prior year. This improvement is primarily attributed to better working capital management and improved property profitability from portfolio optimization and cost savings - **Adjusted FCF** is a non-GAAP measure, defined as **cash used in operating activities** plus **cash used in investing activities**, excluding lease terminations, restructuring, and non-recurring professional fees[277](index=277&type=chunk) Adjusted FCF (in thousands) | Metric | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :---------------------------------------------------------- | :----------------------------- | :----------------------------- | | Cash used in operating activities | $(23,971) | $(73,087) | | Cash provided by (used in) investing activities | $5,297 | $(2,209) | | FCF, including cash paid for lease terminations, restructuring, and professional fees | $(18,674) | $(75,296) | | Cash received from key money investment | $(7,500) | $— | | Cash received for lease terminations | $(3,750) | $— | | Cash paid for lease termination costs | $1,325 | $12,769 | | Cash paid for restructuring costs | $2,693 | $2,439 | | Cash paid for non-recurring professional fees | $— | $6,877 | | Cash paid for integration costs | $1,555 | $— | | Adjusted FCF | $(24,351) | $(53,211) | - **Adjusted FCF** improved by **54.2%** (**$28.9 million**) for the six months ended June 30, 2025, primarily due to improved working capital and property profitability from **portfolio optimization** and **cost savings**[221](index=221&type=chunk)[280](index=280&type=chunk) [Adjusted EBITDA](index=55&type=section&id=Adjusted%20EBITDA) Adjusted EBITDA is a non-GAAP measure used to evaluate core operating performance, excluding interest, taxes, depreciation, amortization, stock-based compensation, lease adjustment gains, integration costs, preferred stock issuance loss, restructuring charges, non-recurring professional fees, and foreign exchange gains. For the three months ended June 30, 2025, Adjusted EBITDA was $(2.6) million, an improvement from $(17.6) million in the prior year. For the six months, it was $(59.3) million, an improvement from $(73.8) million in the prior year - **Adjusted EBITDA** is a non-GAAP measure that adjusts **net income (loss)** for interest, taxes, depreciation, amortization, **stock-based compensation**, lease adjustment gains, integration costs, preferred stock issuance loss, **restructuring charges**, non-recurring professional fees, and foreign exchange gains[282](index=282&type=chunk) Adjusted EBITDA (in thousands) | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) | $(44,523) | $32,747 | $(101,018) | $(17,740) | | EBITDA | $(41,060) | $45,992 | $(84,798) | $7,988 | | Adjusted EBITDA | $(2,628) | $(17,567) | $(59,324) | $(73,837) | - **Adjusted EBITDA** improved by **$14.9 million** for the three months and **$14.5 million** for the six months ended June 30, 2025, compared to the prior year periods[282](index=282&type=chunk) [Adjusted EBITDAR](index=57&type=section&id=Adjusted%20EBITDAR) Adjusted EBITDAR is a non-GAAP measure that further adjusts Adjusted EBITDA by adding back operating lease related rent charges. For the three months ended June 30, 2025, Adjusted EBITDAR was $58.6 million, a slight increase from $58.0 million in the prior year. For the six months, it was $79.8 million, a decrease from $84.3 million in the prior year - **Adjusted EBITDAR** is a non-GAAP measure that adjusts **Adjusted EBITDA** for **operating lease** related rent charges[290](index=290&type=chunk) Adjusted EBITDAR (in thousands) | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Adjusted EBITDA | $(2,628) | $(17,567) | $(59,324) | $(73,837) | | Operating lease related rent charges | $61,261 | $75,580 | $139,080 | $158,162 | | Adjusted EBITDAR | $58,633 | $58,013 | $79,756 | $84,325 | - **Adjusted EBITDAR** increased by **$0.6 million** for the three months ended June 30, 2025, but decreased by **$4.6 million** for the six months ended June 30, 2025, compared to the prior year periods[290](index=290&type=chunk) [Liquidity and Capital Resources](index=57&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's financial liquidity, capital structure, going concern considerations, and cash flow management [Going Concern Considerations](index=57&type=section&id=Going%20Concern%20Considerations) Management has concluded that substantial doubt exists about the company's ability to continue as a going concern for at least one year from the issuance date of this report. This is due to a history of net losses and negative operating cash flows, despite recent financing arrangements and cost optimization initiatives. The timing of anticipated improvements from the Marriott Agreement cannot be guaranteed to ensure sufficient liquidity - Substantial doubt exists about the Company's ability to continue as a **going concern** for at least **one year** from the date of issuance of this Quarterly Report on Form 10-Q[294](index=294&type=chunk) - Reasons include a history of **net losses** and negative operating cash flows, and uncertainty regarding the timing of liquidity improvements from the **Marriott Agreement**[294](index=294&type=chunk) - Management's plans to address this include engaging financial advisors, **cost optimization**, lease portfolio review, and improving financial performance through the **Marriott Agreement**[295](index=295&type=chunk)[296](index=296&type=chunk) [Sources and Uses of Cash](index=58&type=section&id=Sources%20and%20Uses%20of%20Cash) As of June 30, 2025, the company had $27.1 million in cash, excluding restricted cash. The primary focus is achieving sustainable positive Adjusted FCF, which is expected to be the main source of liquidity. Operations have historically been financed by equity investments and debt. The existing cash and anticipated Adjusted FCF may be insufficient for the next 12 months, necessitating additional financing. Cash constraints have arisen from changes in payment timing due to the Marriott integration, shifting from upfront payments to check-in payments - **Cash balance** (excluding restricted cash) was **$27.1 million** at June 30, 2025[297](index=297&type=chunk) - Primary focus is reaching sustainable positive **Adjusted FCF**, which is expected to be the principal source of liquidity[297](index=297&type=chunk) - Existing cash and anticipated **Adjusted FCF** may be insufficient to fund operations and debt obligations for at least the next **12 months**[299](index=299&type=chunk) - Cash constraints related to Marriott integration due to a change in timing of cash receipts from customers (shifting from booking to check-in)[297](index=297&type=chunk) [Debt Arrangements](index=58&type=section&id=Debt%20Arrangements) Debt arrangements, including credit facilities and Delayed Draw Notes, have been a source of cash. The 2022 Loan and Security Agreement was terminated on August 5, 2025. Prior to termination, the company was required to cash collateralize its obligations due to non-compliance with the minimum consolidated adjusted EBITDA covenant - **Debt arrangements**, such as credit facilities and **Delayed Draw Notes**, have been a source of cash[301](index=301&type=chunk) - The **2022 Loan and Security Agreement** was terminated on August 5, 2025[302](index=302&type=chunk) - Prior to termination, the company was required to cash collateralize obligations under the **2022 Loan and Security Agreement** due to non-compliance with financial covenants[302](index=302&type=chunk) [Future Cash Availability and Obligations](index=58&type=section&id=Future%20Cash%20Availability%20and%20Obligations) Recent financing arrangements and cost optimization initiatives in 2025 are expected to improve the company's financial condition and liquidity. As of June 30, 2025, total debt obligations were $229.9 million ($1.0 million short-term, remainder long-term), with interest payable in cash after December 31, 2026. Irrevocable standby letters of credit totaled $40.9 million, fully collateralized by restricted cash. Operating lease liabilities were $162.3 million current and $0.9 billion long-term. Additionally, $630.0 million in future lease payments for uncommenced leases are not yet on the balance sheet - Recent financing arrangements and **cost optimization initiatives** are expected to improve financial condition and liquidity[303](index=303&type=chunk)[304](index=304&type=chunk) - **Total debt obligations** (including PIK interest) were **$229.9 million** at June 30, 2025, with **$1.0 million** short-term[305](index=305&type=chunk) - Interest on **debt obligations** is payable in cash after December 31, 2026[305](index=305&type=chunk) - **Outstanding irrevocable standby letters of credit** totaled **$40.9 million**, fully collateralized by restricted cash[305](index=305&type=chunk) - **Operating lease liabilities** were **$162.3 million** (current) and **$0.9 billion** (long-term) at June 30, 2025[305](index=305&type=chunk) - Future lease payments for uncommenced leases total **$630.0 million**, not yet recorded on the balance sheet[306](index=306&type=chunk) [Cash Flow Information](index=59&type=section&id=Cash%20Flow%20Information) For the six months ended June 30, 2025, net cash used in operating activities significantly decreased by $49.1 million to $(24.0) million, primarily due to improved working capital. Net cash provided by investing activities increased by $7.5 million to $5.3 million, mainly from key money investment proceeds. Net cash provided by financing activities increased by $8.6 million to $17.5 million, driven by preferred stock issuance proceeds Cash Flows (in thousands) | Metric | Six months ended June 30, 2025 | Six months ended June 30, 2024 | Change ($) | | :------------------------------------------ | :----------------------------- | :----------------------------- | :--------- | | Net cash used in operating activities | $(23,971) | $(73,087) | $49,116 | | Net cash provided by (used in) investing activities | $5,297 | $(2,209) | $7,506 | | Net cash provided by financing activities | $17,480 | $8,917 | $8,563 | | Net change in cash, cash equivalents, and restricted cash | $(1,096) | $(67,374) | $66,278 | - **Net cash used in operating activities** decreased by **$49.1 million**, primarily due to improved working capital[308](index=308&type=chunk) - **Net cash provided by investing activities** increased by **$7.5 million**, mainly from **Key Money** investment proceeds[309](index=309&type=chunk) - **Net cash provided by financing activities** increased by **$8.6 million**, primarily from preferred stock issuance proceeds[310](index=310&type=chunk) [Off-Balance Sheet Arrangements](index=60&type=section&id=Off-Balance%20Sheet%20Arrangements) As of June 30, 2025, the company had $40.9 million in irrevocable standby letters of credit outstanding, collateralized by restricted cash. Additionally, $14.6 million of surety bonds were outstanding, supporting a portion of its leases - **Outstanding irrevocable standby letters of credit** totaled **$40.9 million**, collateralized by restricted cash[311](index=311&type=chunk) - **Outstanding surety bonds** amounted to **$14.6 million**, supporting a portion of leases[312](index=312&type=chunk) [Effect of Exchange Rates](index=60&type=section&id=Effect%20of%20Exchange%20Rates) This note provides detailed information regarding the company's effect of exchange rates - Foreign exchange effect on cash for the six months ended June 30, 2025, was not significant[314](index=314&type=chunk) [Critical Accounting Estimates](index=60&type=section&id=Critical%20Accounting%20Estimates) This note provides detailed information regarding the company's critical accounting estimates - No material changes to critical accounting policies and estimates from the Annual Report[315](index=315&type=chunk) [Recent Accounting Standards](index=60&type=section&id=Recent%20Accounting%20Standards) This note provides detailed information regarding the company's recent accounting standards - Refer to Note 2 for details on recently adopted and issued accounting standards[31

Introduction & Company Overview Sonder announced Q2 2025 results, detailed its global hospitality brand, and completed Marriott partnership integration [Announcement of Q2 2025 Financial Results](index=1&type=section&id=1.1%20Announcement%20of%20Q2%202025%20Financial%20Results) Sonder Holdings Inc. announced its financial results for the second quarter ended June 30, 2025, and filed the related Quarterly Report on Form 10-Q - Sonder Holdings Inc. (Nasdaq: **SOND**) announced **Q2 2025** financial results for the period ended June 30, 2025[1](index=1&type=chunk) - The company filed its Quarterly Report on **Form 10-Q** for **Q2 2025**[1](index=1&type=chunk) [About Sonder](index=1&type=section&id=1.2%20About%20Sonder) Sonder is a leading global brand offering premium, design-forward apartments and boutique hotels in 37 cities across nine countries, providing tech-enabled service for modern travelers - Sonder is a **leading global brand** of premium, design-forward apartments and intimate boutique hotels serving the modern traveler[5](index=5&type=chunk) - Sonder properties are located in **37 cities**, spanning **nine countries**, and **three continents**[5](index=5&type=chunk) - The company offers thoughtfully designed accommodations and innovative, **tech-enabled service**[5](index=5&type=chunk) [Strategic Partnerships](index=1&type=section&id=1.3%20Strategic%20Partnerships) Sonder completed the full integration of its long-term strategic licensing agreement with Marriott International in Q2 2025, making all Sonder properties available on Marriott's digital channels under the 'Sonder by Marriott Bonvoy' collection - Sonder entered into a long-term strategic licensing agreement with **Marriott International** in **August 2024**[4](index=4&type=chunk) - The full Marriott integration was completed in the **second quarter of 2025**[4](index=4&type=chunk) - As of **June 2025**, **all Sonder properties** are available for booking on Marriott's digital channels and participate in the **Marriott Bonvoy®** travel platform[4](index=4&type=chunk) Financial Highlights Sonder's Q2 and year-to-date 2025 financial performance is summarized, covering key revenue, profitability, and operational metrics [Second Quarter 2025 Financial Highlights](index=1&type=section&id=2.1%20Second%20Quarter%202025%20Financial%20Highlights) For Q2 2025, Sonder reported a 13% increase in RevPAR to $184 and a 6 percentage point increase in Occupancy Rate to 86%. Revenue decreased by 11% to $147.1 million, and Net Loss significantly widened to $44.5 million. Adjusted EBITDA improved by 83% to $(2.6) million Second Quarter 2025 Key Financial Highlights | Metric | Q2 2025 Value | YoY Change | | :-------------------------------- | :-------------- | :--------- | | RevPAR | $184 | +13% | | Occupancy Rate | 86% | +6 percentage points | | Bookable Nights | 798,000 | -21% | | Revenue | $147.1 million | -11% | | Net Loss | $(44.5) million | -236% | | Adjusted EBITDA | $(2.6) million | +83% | | Adjusted EBITDAR | $58.6 million | +1% | | Cash Used In Operating Activities | $(19.6) million | +40% improvement | | Adjusted Free Cash Flow | $(17.5) million | -29% | | Total Cash, Cash Equivalents and Restricted Cash | $71.0 million | (as of June 30, 2025) | | Live Units | ~8,300 | (as of June 30, 2025) | | Total Portfolio | ~8,990 | (as of June 30, 2025) | - The **21% decrease** in **Bookable Nights** was driven by the Company's **Portfolio Optimization Program**[9](index=9&type=chunk) [Year-to-Date Financial Highlights](index=1&type=section&id=2.2%20Year-to-Date%20Financial%20Highlights) For the six months ended June 30, 2025, RevPAR increased by 13% to $161, and Occupancy Rate rose by 7 percentage points to 84%. Revenue decreased by 11% to $265.9 million, and Net Loss was $101.0 million, a 469% decrease year-over-year. Adjusted EBITDA showed a 20.3% increase year-over-year, reaching $(59.3) million Year-to-Date June 30, 2025 Key Financial Highlights | Metric | YTD 2025 Value | YoY Change | | :-------------------------------- | :-------------- | :--------- | | RevPAR | $161 | +13% | | Occupancy Rate | 84% | +7 percentage points | | Bookable Nights | 1,656,000 | -21% | | Revenue | $265.9 million | -11% | | Net Loss | $(101.0) million | -469% | | Adjusted EBITDA | $(59.3) million | +20.3% | | Adjusted EBITDAR | $79.8 million | -5% | | Cash Used In Operating Activities | $(24.0) million | +67% improvement | | Adjusted Free Cash Flow | $(24.4) million | -54.2% | - The **21% decrease** in **Bookable Nights** year-to-date was due to the Company's **Portfolio Optimization Program**[9](index=9&type=chunk) Condensed Consolidated Financial Statements This section presents condensed consolidated balance sheets, statements of operations, and cash flows for the reported periods [Condensed Consolidated Balance Sheets](index=2&type=section&id=3.1%20Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2025, total assets were $1,004.8 million, down from $1,137.2 million at December 31, 2024. Total liabilities also decreased to $1,490.0 million from $1,573.1 million. The company reported a total stockholders' deficit of $(715.4) million, worsening from $(598.8) million Condensed Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2025 | December 31, 2024 | Change | | :----------------------------------- | :-------------- | :---------------- | :----- | | Total assets | $1,004,807 | $1,137,177 | $(132,370) | | Total liabilities | $1,490,032 | $1,573,065 | $(83,033) | | Total stockholders' deficit | $(715,437) | $(598,795) | $(116,642) | | Cash and cash equivalents | $27,130 | $20,786 | $6,344 | | Restricted cash | $43,828 | $51,268 | $(7,440) | | Total cash, cash equivalents and restricted cash | $70,958 | $72,054 | $(1,096) | [Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)](index=4&type=section&id=3.2%20Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20%28Loss%29) For Q2 2025, revenue was $147.1 million, down from $164.6 million in Q2 2024. The company reported a net loss of $(44.5) million, a significant decline from a net income of $32.7 million in the prior year. Year-to-date, revenue was $265.9 million, and net loss was $(101.0) million. A significant loss on preferred stock issuance of $43.8 million was recorded in both periods Condensed Consolidated Statements of Operations Highlights (in thousands) | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $147,085 | $164,601 | $265,941 | $298,080 | | Loss from operations | $(6,880) | $(31,699) | $(70,521) | $(99,360) | | Net income (loss) | $(44,523) | $32,747 | $(101,018) | $(17,740) | | Basic and diluted net income (loss) per common share | $(3.96) | $2.94 | $(8.44) | $(1.59) | | Loss on preferred stock issuance | $43,842 | $— | $43,842 | $— | - Revenue decreased by **11%** for both the three and six months ended June 30, 2025, compared to the prior year periods[13](index=13&type=chunk) - Net loss significantly increased, primarily due to a **$43.8 million loss** on **preferred stock issuance** in 2025[13](index=13&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=5&type=section&id=3.3%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2025, net cash used in operating activities improved to $(24.0) million from $(73.1) million in the prior year. Net cash provided by investing activities was $5.3 million, a significant improvement from a net use of $(2.2) million. Net cash provided by financing activities was $17.5 million, up from $8.9 million, primarily due to proceeds from preferred stock issuance Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Metric | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :----------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(23,971) | $(73,087) | | Net cash provided by (used in) investing activities | $5,297 | $(2,209) | | Net cash provided by financing activities | $17,480 | $8,917 | | Net change in cash, cash equivalents, and restricted cash | $(1,096) | $(67,374) | | Proceeds from preferred stock issuance | $17,980 | $— | - **Operating cash flow** showed a **67% improvement** year-over-year for the six months ended June 30, 2025[9](index=9&type=chunk)[15](index=15&type=chunk) Non-GAAP Financial Measures & Reconciliations This section reconciles key non-GAAP financial measures: Adjusted Free Cash Flow, Adjusted EBITDA, and Adjusted EBITDAR [Reconciliation of Adjusted Free Cash Flow](index=6&type=section&id=4.1%20Reconciliation%20of%20Adjusted%20Free%20Cash%20Flow) Adjusted Free Cash Flow (FCF) for Q2 2025 was $(17.5) million, an improvement from $(24.7) million in Q2 2024. Year-to-date, Adjusted FCF was $(24.4) million, also an improvement from $(53.2) million in the prior year, reflecting reduced cash used in operating activities and investing activities Adjusted Free Cash Flow Reconciliation (in thousands) | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Cash used in operating activities | $(19,618) | $(32,778) | $(23,971) | $(73,087) | | Cash provided by (used in) investing activities | $6,256 | $(1,493) | $5,297 | $(2,209) | | Adjusted FCF | $(17,493) | $(24,692) | $(24,351) | $(53,211) | - **Adjusted FCF** improved by **29%** for **Q2 2025** and **54.2%** **year-to-date**, indicating progress towards **financial sustainability**[9](index=9&type=chunk)[17](index=17&type=chunk) [Reconciliation of Adjusted EBITDA](index=6&type=section&id=4.2%20Reconciliation%20of%20Adjusted%20EBITDA) Adjusted EBITDA for Q2 2025 was $(2.6) million, a significant improvement from $(17.6) million in Q2 2024. Year-to-date, Adjusted EBITDA was $(59.3) million, improving from $(73.8) million in the prior year, despite a substantial net loss Adjusted EBITDA Reconciliation (in thousands) | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) | $(44,523) | $32,747 | $(101,018) | $(17,740) | | EBITDA | $(41,060) | $45,992 | $(84,798) | $7,988 | | Adjusted EBITDA | $(2,628) | $(17,567) | $(59,324) | $(73,837) | | Loss on preferred stock issuance | $43,842 | $— | $43,842 | $— | - **Adjusted EBITDA** improved by **83%** for **Q2 2025** and **20.3%** **year-to-date**, reflecting better **core operating performance** despite a higher net loss[9](index=9&type=chunk)[18](index=18&type=chunk) [Reconciliation of Adjusted EBITDAR](index=7&type=section&id=4.3%20Reconciliation%20of%20Adjusted%20EBITDAR) Adjusted EBITDAR for Q2 2025 increased slightly to $58.6 million from $58.0 million in Q2 2024. Year-to-date, Adjusted EBITDAR decreased to $79.8 million from $84.3 million in the prior year Adjusted EBITDAR Reconciliation (in thousands) | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Adjusted EBITDA | $(2,628) | $(17,567) | $(59,324) | $(73,837) | | Operating lease related rent charges | $61,261 | $75,580 | $139,080 | $158,162 | | Adjusted EBITDAR | $58,633 | $58,013 | $79,756 | $84,325 | - **Adjusted EBITDAR** saw a **1% increase** in **Q2 2025** but a **5% decrease** **year-to-date**, indicating varied performance when considering operating lease rent charges[9](index=9&type=chunk)[20](index=20&type=chunk) Definitions This section defines key operational performance indicators and non-GAAP financial measures used by Sonder [Key Performance Indicators (KPIs)](index=7&type=section&id=5.1%20Key%20Performance%20Indicators%20%28KPIs%29) This section defines key operational metrics used by Sonder, including Revenue Per Available Room (RevPAR), Average Daily Rate, Occupancy Rate, Bookable Nights, Occupied Nights, Live Units, and Total Portfolio - **RevPAR** (**Revenue Per Available Room**) represents the average revenue earned per available night[20](index=20&type=chunk) - **Bookable Nights** exclude nights lost to full building closures of greater than 30 nights[20](index=20&type=chunk) - **Total Portfolio** consists of **Live Units** (available for guests to book) and **Contracted Units** (signed real estate contracts, not yet available)[21](index=21&type=chunk) [Non-GAAP Financial Measures Definitions](index=7&type=section&id=5.2%20Non-GAAP%20Financial%20Measures%20Definitions) This section provides detailed definitions and rationale for Sonder's non-GAAP financial measures: Adjusted EBITDA, Adjusted EBITDAR, and Adjusted Free Cash Flow. These measures are used internally to evaluate core operating performance, assess performance independent of operating leases, and track progress towards financial sustainability - **Adjusted EBITDA** is net income (loss) adjusted for net interest expense, income taxes, depreciation and amortization, stock-based compensation, lease adjustment gains, integration costs, loss on preferred stock issuance, restructuring charges, and non-recurring professional fees[22](index=22&type=chunk) - **Adjusted EBITDAR** is defined as **Adjusted EBITDA** adjusted for **operating lease related rent charges**[23](index=23&type=chunk) - **Adjusted Free Cash Flow** is **cash used in operating activities** plus **cash provided by (used in) investing activities**, excluding specific non-operational charges, and is a **primary liquidity measure** for evaluating progress towards **financial sustainability**[24](index=24&type=chunk) Forward-Looking Statements This section clarifies forward-looking statements are based on current expectations, subject to risks detailed in SEC filings [Forward-Looking Statements](index=8&type=section&id=6.1%20Forward-Looking%20Statements) This section clarifies that the press release contains forward-looking statements based on current expectations and assumptions, which are subject to risks and uncertainties detailed in SEC filings. The company does not undertake to update these statements - The press release contains **forward-looking statements** regarding **financial performance**, **key performance metrics**, **operational and strategic initiatives**, and the **Marriott agreement**[26](index=26&type=chunk) - These statements are **not guarantees of future performance** and actual results could differ materially due to various **risks and uncertainties** described in **SEC filings**[26](index=26&type=chunk) - The Company **does not undertake any obligation to update or revise** its forward-looking statements after the date of the press release[26](index=26&type=chunk)

Core Insights - Sonder Holdings Inc. reported its financial results for Q2 2025, highlighting a strategic partnership with Marriott International and a focus on premium accommodations for modern travelers [1][4]. Financial Highlights for Q2 2025 - Revenue was $147.1 million, an 11% decrease year-over-year [7]. - Net loss was $44.5 million, a 236% decrease year-over-year [7]. - RevPAR (Revenue Per Available Room) was $184, a 13% increase year-over-year [7]. - Occupancy rate was 86%, a six percentage point increase year-over-year [7]. - Bookable nights were 798,000, a 21% decrease year-over-year due to the Portfolio Optimization Program [7]. Year-to-Date Financial Highlights - Revenue for the six months ended June 30, 2025, was $265.9 million, an 11% decrease year-over-year [7]. - Net loss for the same period was $101.0 million, a 469% decrease year-over-year [7]. - Adjusted EBITDA was $(59.3) million, a 20.3% increase year-over-year [7]. - Total cash, cash equivalents, and restricted cash amounted to $71.0 million as of June 30, 2025 [7]. Strategic Developments - Sonder completed the full integration with Marriott in Q2 2025, allowing all Sonder properties to be booked through Marriott's platforms [4]. - The partnership enhances Sonder's visibility and access to a broader customer base through Marriott's digital channels [4]. Operational Metrics - Live units were approximately 8,300 as of June 30, 2025, while the total portfolio was approximately 8,990 [7]. - Cash used in operating activities was $19.6 million, a 40% improvement year-over-year [7]. - Adjusted Free Cash Flow was $(17.5) million, a 29% decrease year-over-year [7].

Core Viewpoint - Sonder Holdings Inc. reported its financial results for Q1 2025, highlighting a strategic licensing agreement with Marriott and ongoing compliance issues with Nasdaq [1][4][5]. Financial Highlights - Revenue for Q1 2025 was $118.9 million, a decrease of 11% year-over-year [9]. - Net loss for the quarter was $56.5 million, representing a 12% increase compared to the same period in 2024 [9]. - Adjusted EBITDA was $(56.7) million, a slight decrease of 1% year-over-year [9]. - RevPAR (Revenue Per Available Room) increased by 13% to $139 [9]. - Occupancy rate improved to 83%, up by seven percentage points year-over-year [9]. - Bookable nights decreased by 21% to 858,000 due to the Portfolio Optimization Program [9]. Compliance and Regulatory Issues - Sonder received a deficiency notification from Nasdaq for failing to timely file its Q2 2025 Form 10-Q [5][6]. - The company had previously received a notice for non-compliance regarding its 2024 Form 10-K filing [6]. - A compliance plan was submitted to Nasdaq, allowing up to 180 days to regain compliance [7]. Strategic Developments - Sonder completed the integration with Marriott in Q2 2025, with all properties now bookable through Marriott's platforms [4]. - The partnership with Marriott enhances Sonder's visibility and access to a broader customer base [4]. Cash Flow and Liquidity - Cash used in operating activities improved by 89% year-over-year to $4.4 million [9]. - Total cash, cash equivalents, and restricted cash amounted to $66.5 million as of March 31, 2025 [9]. - Adjusted Free Cash Flow was $(6.9) million, a 76% increase year-over-year [9].

[PART I - FINANCIAL INFORMATION](index=6&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) This section presents the company's unaudited condensed consolidated financial statements, including balance sheets, statements of operations, cash flows, and detailed notes, along with management's discussion and analysis of financial condition, results of operations, market risk, and internal controls [Item 1. Financial Statements](index=6&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations and comprehensive loss, cash flows, and stockholders' deficit, along with detailed notes explaining the company's accounting policies, financial instruments, debt, equity, leases, and recent events [Condensed Consolidated Balance Sheets (unaudited)](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20(unaudited)) This table presents the company's unaudited condensed consolidated balance sheets, detailing assets, liabilities, and stockholders' deficit as of March 31, 2025, and December 31, 2024 **Condensed Consolidated Balance Sheets (in thousands):** | Metric | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $23,329 | $20,786 | | Restricted cash | $43,191 | $51,268 | | Total current assets | $88,477 | $99,846 | | Total assets | $1,032,729 | $1,137,177 | | Total current liabilities | $384,544 | $338,547 | | Total liabilities | $1,526,041 | $1,573,065 | | Total stockholders' deficit | $(656,746) | $(598,795) | [Condensed Consolidated Statements of Operations and Comprehensive Loss (unaudited)](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss%20(unaudited)) This table presents the company's unaudited condensed consolidated statements of operations and comprehensive loss, detailing revenue, expenses, and net loss for the three months ended March 31, 2025, and 2024 **Condensed Consolidated Statements of Operations and Comprehensive Loss (in thousands, except share data):** | Metric | Three months ended March 31, 2025 | Three months ended March 31, 2024 | Change ($k) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenue | $118,856 | $133,479 | $(14,623) | (11.0)% | | Total costs and operating expenses | $182,497 | $201,140 | $(18,643) | (9.3)% | | Loss from operations | $(63,641) | $(67,661) | $4,020 | (6.0)% | | Net loss | $(56,495) | $(50,487) | $(6,008) | 11.9% | | Basic and diluted net loss per common share | $(4.85) | $(4.58) | $(0.27) | 5.9% | | Comprehensive loss | $(59,694) | $(51,076) | $(8,618) | 16.9% | [Condensed Consolidated Statements of Cash Flows (unaudited)](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20(unaudited)) This table presents the company's unaudited condensed consolidated statements of cash flows, detailing cash used in operating, investing, and financing activities for the three months ended March 31, 2025, and 2024 **Condensed Consolidated Statements of Cash Flows (in thousands):** | Metric | Three months ended March 31, 2025 | Three months ended March 31, 2024 | Change ($k) | | :--- | :--- | :--- | :--- | | Net cash used in operating activities | $(4,353) | $(40,309) | $35,956 | | Net cash used in investing activities | $(959) | $(716) | $(243) | | Net cash used in financing activities | $(250) | $(250) | $0 | | Net change in cash, cash equivalents, and restricted cash | $(5,534) | $(41,619) | $36,085 | | Cash, cash equivalents, and restricted cash at end of period | $66,520 | $94,878 | $(28,358) | [Condensed Consolidated Statements of Stockholders' Deficit (unaudited)](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Deficit%20(unaudited)) This table presents the company's unaudited condensed consolidated statements of stockholders' deficit, detailing changes in equity from December 31, 2024, to March 31, 2025 **Changes in Total Stockholders' Deficit (in thousands):** | Metric | December 31, 2024 | March 31, 2025 | | :--- | :--- | :--- | | Balance at period start | $(598,795) | $(598,795) | | Net loss | $(56,495) | $(56,495) | | Paid-in-kind dividend on preferred stock | $(5,885) | $(5,885) | | Stock-based compensation | $2,269 | $2,269 | | Change in cumulative translation adjustment | $(3,199) | $(3,199) | | **Balance at period end** | **$(656,746)** | **$(656,746)** | [Notes to the Condensed Consolidated Financial Statements (unaudited)](index=11&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements%20(unaudited)) [Note 1. Basis of Presentation](index=11&type=section&id=Note%201.%20Basis%20of%20Presentation) This note outlines Sonder's business as a global provider of short and long-term accommodations, its financial reporting basis, and critical going concern issues. It details Nasdaq delisting notices, the company's mitigation plans, and the strategic Marriott Agreement, including key money receipt and fee deferrals - Sonder Holdings Inc. provides short and long-term accommodations in North America, Europe, and the Middle East, focusing on design-forward apartments and boutique hotels with tech-enabled service[31](index=31&type=chunk) - The company received Nasdaq delisting notices for delinquent 2024 Form 10-K and Q1 2025 10-Q filings, which were subsequently cured. A new notice was received for the Q2 2025 10-Q delinquency[35](index=35&type=chunk)[36](index=36&type=chunk)[37](index=37&type=chunk) - Management has substantial doubt about the company's ability to continue as a going concern due to a history of net losses and negative operating cash flows[38](index=38&type=chunk) - Mitigation plans include engaging a financial advisor, cost optimization initiatives, a portfolio optimization program, and improving financial performance through the Marriott Agreement integration[39](index=39&type=chunk)[44](index=44&type=chunk) - The company received the remaining **$7.5 million of Key Money** from Marriott on April 11, 2025, completing the **$15.0 million investment**. The Marriott Agreement was amended on August 5, 2025, to defer certain fees for up to 12 months[40](index=40&type=chunk)[41](index=41&type=chunk) [Note 2. Recently Issued Accounting Standards](index=13&type=section&id=Note%202.%20Recently%20Issued%20Accounting%20Standards) This note discusses two recently issued accounting standards, ASU No. 2023-09 (Income Taxes) and ASU 2024-03 (Expense Disaggregation Disclosures), which the company is currently evaluating for their potential disclosure impact on its consolidated financial statements, with effective dates in 2025 and 2026, respectively - ASU No. 2023-09 (Income Taxes) requires enhanced disclosures for effective tax rate reconciliation and income taxes paid, effective for annual periods beginning January 1, 2025[49](index=49&type=chunk) - ASU 2024-03 (Expense Disaggregation Disclosures) requires additional information about specific expense categories in financial statement notes, effective for annual periods beginning January 1, 2026[50](index=50&type=chunk) [Note 3. Revenue](index=14&type=section&id=Note%203.%20Revenue) This note disaggregates the company's revenue into direct and indirect channels, showing an 11.0% decrease in total revenue for the three months ended March 31, 2025, primarily driven by a 28.7% decline in direct revenue, while indirect revenue saw a slight increase **Total Revenues Disaggregated (in thousands):** | Category | Three months ended March 31, 2025 | Three months ended March 31, 2024 | Change ($k) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Direct revenue | $41,507 | $58,254 | $(16,747) | (28.7)% | | Indirect revenue | $77,349 | $75,225 | $2,124 | 2.8% | | **Total revenue** | **$118,856** | **$133,479** | **$(14,623)** | **(11.0)%** | - Three Online Travel Agencies (OTAs) represented approximately **28%**, **19%**, and **15%** of revenues for the three months ended March 31, 2025[53](index=53&type=chunk) [Note 4. Balance Sheet Details](index=14&type=section&id=Note%204.%20Balance%20Sheet%20Details) This note provides detailed breakdowns of specific balance sheet accounts, including other current assets, other non-current assets, accrued liabilities, and other non-current liabilities, highlighting changes between March 31, 2025, and December 31, 2024 **Other Current Assets (in thousands):** | Category | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Non-income tax assets | $7,785 | $8,150 | | Deposits due from landlords | $841 | $539 | | Other current assets | $1,159 | $1,044 | | **Total other current assets** | **$9,785** | **$9,733** | **Accrued Liabilities (in thousands):** | Category | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Accrued legal expenses | $23,617 | $18,540 | | Accrued compensation | $2,893 | $1,703 | | Accrued direct costs | $1,590 | $3,454 | | Accrued other liabilities | $6,363 | $8,924 | | **Total accrued liabilities** | **$34,463** | **$32,621** | **Other Non-Current Liabilities (in thousands):** | Category | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Marriott key money liability | $7,250 | $7,344 | | Other | $820 | $769 | | **Total other non-current liabilities** | **$8,070** | **$8,113** | [Note 5. Fair Value Measurement and Financial Instruments](index=15&type=section&id=Note%205.%20Fair%20Value%20Measurement%20and%20Financial%20Instruments) This note details the company's fair value measurements for financial instruments, categorizing them into a three-level hierarchy. It provides specific valuations for Preferred Stock Participation Rights, NPA Waiver Warrants, Earn Out Liability, and Public Warrants, noting changes in their fair values - The fair value hierarchy classifies inputs into Level 1 (quoted prices in active markets), Level 2 (quoted prices for similar assets/liabilities), and Level 3 (unobservable inputs)[61](index=61&type=chunk) **Liabilities Measured at Fair Value (in thousands):** | Category | Level 1 (Mar 31, 2025) | Level 3 (Mar 31, 2025) | Total (Mar 31, 2025) | Total (Dec 31, 2024) | | :--- | :--- | :--- | :--- | :--- | | Preferred Stock Participation Rights | $— | $1,313 | $1,313 | $1,284 | | NPA Waiver Warrants | $995 | $— | $995 | $1,585 | | Earn Out Liability | $— | $15 | $15 | $15 | | Public Warrants | $203 | $— | $203 | $203 | | **Total liabilities measured at fair value** | **$1,198** | **$1,328** | **$2,526** | **$3,087** | - The change in fair value of the NPA Waiver Warrants for the quarter ended March 31, 2025, was **$0.6 million**[69](index=69&type=chunk) [Note 6. Debt](index=18&type=section&id=Note%206.%20Debt) This note details the company's debt instruments, including Delayed Draw Notes, an Equipment Financing Agreement, and the 2022 Loan and Security Agreement (terminated in August 2025). It also covers subsequent financing activities in April and August 2025, including new notes and warrants, and a loan agreement with Marriott - The effective interest rate of the Delayed Draw Notes was **16.7%** at both March 31, 2025, and December 31, 2024. The maturity date was extended to December 10, 2027, with PIK interest payments extended through March 31, 2025 (with an option to extend through December 31, 2026)[77](index=77&type=chunk)[79](index=79&type=chunk) **Long-Term Debt, Net (in thousands):** | Category | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Delayed Draw Notes Purchase Agreement, including capitalized PIK interest | $237,977 | $229,996 | | Equipment Financing Agreement (EFA) | $1,250 | $1,500 | | Less: debt discount related to NPA Waiver Obligation, net of amortization | $(1,158) | $(1,272) | | Less: debt discount related to Delayed Draw Warrants, net of amortization | $(3,880) | $(4,263) | | Less: unamortized deferred issuance costs | $(7,028) | $(7,725) | | **Total debt, net** | **$227,161** | **$218,236** | | Less: current portion of long-term debt | $(1,000) | $(1,000) | | **Total long-term debt, net** | **$226,161** | **$217,236** | - The 2022 Loan and Security Agreement was amended on April 11, 2025, reducing the revolving line of credit and letter of credit sublimit from **$60.0 million/$45.0 million to $35.0 million/$35.0 million**. This agreement was subsequently terminated on August 5, 2025[94](index=94&type=chunk)[177](index=177&type=chunk)[197](index=197&type=chunk) - On August 5, 2025, the company issued **$24.54 million** of units, comprising senior secured promissory notes (Investor Notes) and warrants. The Investor Notes mature on July 4, 2026, and accrue interest at **15.0% per annum**, payable in kind quarterly[80](index=80&type=chunk)[81](index=81&type=chunk)[181](index=181&type=chunk)[182](index=182&type=chunk) - On August 5, 2025, the company entered into a Loan Agreement with Marriott International, Inc. for senior secured Lender Notes to replace certain fees owed. These notes mature on July 4, 2026, and accrue interest at the prime rate plus **3.00% per annum**, payable in kind monthly[82](index=82&type=chunk)[83](index=83&type=chunk)[190](index=190&type=chunk)[191](index=191&type=chunk) [Note 7. Redeemable Preferred Stock](index=21&type=section&id=Note%207.%20Redeemable%20Preferred%20Stock) This note details the Series A Preferred Stock, including its issuance through August 2024 and April 2025 Securities Purchase Agreements. It outlines the conversion rights, cumulative dividend terms (15% through August 2025), and special participation rights granted to holders in future equity offerings - The August 2024 Preferred Financing involved the issuance of **43.3 million Series A Preferred Stock shares** for approximately **$43.3 million**, resulting in an **$83.8 million loss** on preferred stock issuance[98](index=98&type=chunk)[99](index=99&type=chunk) - On April 11, 2025, the company issued an additional **17.98 million shares of Series A Preferred Stock** for **$17.98 million** in the April 2025 Preferred Financing[168](index=168&type=chunk) - Holders of Series A Preferred Stock are entitled to cumulative dividends, payable in cash or PIK, at a rate of **15.00%** from August 13, 2024, through August 13, 2025, then decreasing rates thereafter. The company paid a **$5.9 million PIK dividend** for the three months ended March 31, 2025[107](index=107&type=chunk)[108](index=108&type=chunk) - The Series A Preferred Stock is convertible into common stock at the holders' option, with an initial conversion price of the lower of **$1.00** or a **10% discount** to the lowest daily VWAP, but not less than **$0.50**[109](index=109&type=chunk) - Purchasers of Series A Preferred Stock have the right to purchase up to **25%** of any equity offering within the next five years at **75%** of the purchase price of other investors[102](index=102&type=chunk) [Note 8. Leases](index=24&type=section&id=Note%208.%20Leases) This note details the company's operating lease agreements, including the components of lease expense, cash payments, and remaining maturities. It highlights a decrease in operating lease costs and ROU assets, primarily due to lease terminations and the portfolio optimization program **Total Operating Lease Cost (in thousands):** | Category | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :--- | :--- | :--- | | Operating lease cost | $75,166 | $82,114 | | Short-term lease cost | $542 | $35 | | Variable lease cost | $1,512 | $265 | | **Total operating lease cost** | **$77,220** | **$82,414** | **Supplemental Operating Lease Information (in thousands):** | Metric | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :--- | :--- | :--- | | Cash payments for operating leases | $72,506 | $81,505 | | Operating ROU assets obtained in exchange for operating lease liabilities, net of adjustments | $(60,063) | $(81,886) | | Early lease terminations gains | $11,138 | $23,901 | **Remaining Maturities for Operating Lease Liabilities (March 31, 2025, in thousands):** | Period | Amount | | :--- | :--- | | Remaining 2025 | $194,858 | | 2026 | $252,684 | | 2027 | $225,388 | | 2028 | $198,696 | | 2029 | $152,657 | | Thereafter | $434,529 | | **Gross lease payments** | **$1,458,812** | | Less: imputed interest | $(382,795) | | **Total operating lease liabilities, net** | **$1,076,017** | - As of March 31, 2025, the company had **$543.5 million** in future lease payments for leases that have not yet commenced, with terms ranging from five to 20 years[118](index=118&type=chunk) [Note 9. Warrants and Stockholders' Deficit](index=25&type=section&id=Note%209.%20Warrants%20and%20Stockholders'%20Deficit) This note provides details on various warrants and exchangeable stock, including SPAC Warrants, NPA Waiver Warrants, and Post-Combination Exchangeable Common Stock. It outlines their accounting treatment, fair values, and the total common stock reserved for future issuance - SPAC Warrants are accounted for as liabilities, with a fair value of **$0.2 million** at both March 31, 2025, and December 31, 2024[126](index=126&type=chunk) - NPA Waiver Warrants, issued for **500,000 shares** at an exercise price of **$0.01**, are accounted for as liabilities, with a change in fair value of **$0.6 million** for the quarter ended March 31, 2025[69](index=69&type=chunk) **Post-Combination Exchangeable Common Stock (in thousands, except per share amounts):** | Metric | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Shares issued and outstanding | 550,959 | 551,072 | | Issuance price per share | $30.80 | $30.80 | | Net carrying value | $16,970 | $16,973 | **Common Stock Reserved for Future Issuance (March 31, 2025):** | Category | Shares | | :--- | :--- | | Convertible preferred stock | 42,633,000 | | Outstanding stock options | 2,199,839 | | Outstanding restricted stock units ("RSUs") | 2,472,335 | | Outstanding performance stock units ("PSUs") | 4,163,851 | | Outstanding market stock units ("MSUs") | 531,996 | | Outstanding Public Warrants liability | 724,997 | | Shares issuable pursuant to Earn Out Liability | 725,000 | | Outstanding former Series C and D preferred stock warrants liability | 21,281 | | Shares available for grant under the Employee Stock Purchase Plan | 463,930 | | Shares available for grant under the 2021 Equity Incentive Plan | 2,166,767 | | Shares available for grant under the 2023 Inducement Equity Incentive Plan | 228,864 | | **Total common stock reserved for future issuance** | **14,249,819** | [Note 10. Equity Incentive Plans and Stock-Based Compensation](index=27&type=section&id=Note%2010.%20Equity%20Incentive%20Plans%20and%20Stock-Based%20Compensation) This note details the stock-based compensation expense for various equity awards, including stock options, PSUs, RSUs, and MSUs, for the three months ended March 31, 2025, and 2024, showing a decrease in total expense. It also outlines the key assumptions used for valuing stock options **Total Stock-Based Compensation Expense (in thousands):** | Category | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :--- | :--- | :--- | | Operations and support | $754 | $858 | | General and administrative | $1,245 | $1,845 | | Research and development | $233 | $263 | | Sales and marketing | $37 | $43 | | **Total stock-based compensation expense** | **$2,269** | **$3,009** | - Stock option expense was approximately **$0.5 million** for Q1 2025, down from **$1.1 million** in Q1 2024. Key assumptions for fair value in Q1 2025 included an expected term of **5.04-8.44 years**, expected volatility of **51.5%**, and a risk-free interest rate of **3.96%-4.21%**[131](index=131&type=chunk)[135](index=135&type=chunk) - RSU expense was approximately **$1.0 million** for Q1 2025, down from **$1.3 million** in Q1 2024[138](index=138&type=chunk) - PSU expense was approximately **$0.4 million** for Q1 2025, compared to zero in Q1 2024[137](index=137&type=chunk) - MSU expense was approximately **$0.2 million** for both Q1 2025 and Q1 2024[141](index=141&type=chunk) [Note 11. Net Loss per Common Share](index=29&type=section&id=Note%2011.%20Net%20Loss%20per%20Common%20Share) This note presents the computation of basic and diluted net loss per common share, which are identical for both periods due to the company's net losses making all potentially dilutive securities anti-dilutive. It also lists the common stock equivalents excluded from the diluted EPS calculation **Net Loss per Common Share (in thousands, except share data):** | Metric | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :--- | :--- | :--- | | Net loss attributable to common stockholders | $(59,141) | $(50,487) | | Weighted average basic and diluted common shares outstanding | 12,183,604 | 11,031,861 | | **Basic and diluted net loss per common share** | **$(4.85)** | **$(4.58)** | **Anti-Dilutive Potential Common Shares Excluded (March 31, 2025):** | Category | Shares | | :--- | :--- | | Convertible preferred stock | 42,633,000 | | Options to purchase common stock | 2,199,839 | | Common stock subject to repurchase or forfeiture | 74,942 | | Outstanding RSUs | 2,472,335 | | Outstanding PSUs | 4,163,851 | | Outstanding MSUs | 531,996 | | Exchangeable shares | 550,959 | | **Total common stock equivalents** | **52,626,922** | [Note 12. Commitments and Contingencies](index=30&type=section&id=Note%2012.%20Commitments%20and%20Contingencies) This note outlines the company's commitments and contingencies, including operating leases, surety bonds, and various legal and regulatory matters. It details ongoing litigation such as the New York City property dispute and multiple stockholder lawsuits, as well as tax contingencies related to VAT - The company had commitments from six surety providers totaling **$38.3 million**, with **$14.6 million** outstanding as of March 31, 2025[145](index=145&type=chunk) **Accrued Legal and Tax Liabilities (in thousands):** | Category | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Accrued liability for legal matters | $25,400 | $23,500 | | Accrued liability for tax matters | $14,400 | $15,300 | - The New York City litigation involves a breach of lease claim by the Broad Street Landlord, seeking no less than **$3.9 million** in damages, with a motion to amend the complaint to assert **$37.0 million** in damages. The appellate court affirmed liability but allowed discovery on damages[148](index=148&type=chunk)[149](index=149&type=chunk) - Multiple putative stockholder class action and derivative lawsuits were filed in 2024-2025, alleging false and misleading statements and breach of fiduciary duties. The company believes these allegations are without merit and intends to defend vigorously[150](index=150&type=chunk)[151](index=151&type=chunk)[152](index=152&type=chunk)[153](index=153&type=chunk) - The company favorably settled two lawsuits related to property leases for a total of **$7.5 million**, received in three tranches through January 2025[156](index=156&type=chunk) - The Upper Tribunal ruled against Sonder Europe in January 2025 regarding VAT accounting under the Tour Operators' Margin Scheme, requiring VAT on the full value of supplies. The company filed an appeal in March 2025[158](index=158&type=chunk) [Note 13. Income Taxes](index=33&type=section&id=Note%2013.%20Income%20Taxes) This note reports the provision for income taxes for the three months ended March 31, 2025, and 2024, explaining that the difference from the U.S. statutory rate is primarily due to a full valuation allowance against deferred tax assets. It also mentions the recent enactment of the One Big Beautiful Bill Act (OBBBA) and its potential impact **Provision for Income Taxes (in thousands):** | Metric | Three months ended March 31, 2025 | Three months ended March 31, 2024 | Change ($k) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Provision for income taxes | $717 | $187 | $530 | 283.4% | - The difference between the company's effective tax rate and the U.S. statutory rate of **21.0%** is primarily due to a full valuation allowance related to its net deferred tax assets[164](index=164&type=chunk) - The One Big Beautiful Bill Act (OBBBA) was enacted on July 4, 2025, including significant tax provisions. The company is currently assessing its impact on consolidated financial statements[165](index=165&type=chunk) [Note 14. Restructuring Activities](index=33&type=section&id=Note%2014.%20Restructuring%20Activities) This note details the company's restructuring activities, including a workforce reduction in February 2024 that affected 17% of the corporate workforce and incurred $3.0 million in costs. A subsequent reduction in force in April 2025 incurred $2.8 million in costs, expected to be paid in 2025 - In February 2024, the company completed a reduction in force affecting **17%** of its corporate workforce, incurring approximately **$3.0 million** in restructuring costs, primarily for employee severance and benefits, which were substantially paid in Q1 2024[166](index=166&type=chunk) - In April 2025, the company completed another reduction in force, with approximately **$2.8 million** in associated restructuring costs, all expected to be paid out in the year ended December 31, 2025[167](index=167&type=chunk) [Note 15. Subsequent Events](index=33&type=section&id=Note%2015.%20Subsequent%20Events) This note describes significant events occurring after March 31, 2025, including April 2025 and August 2025 financing transactions, amendments to debt agreements (Sixth and Seventh NPA Amendments), the SVB Amendment, and the termination of the 2022 Loan and Security Agreement. It also notes the completion of Marriott Key Money receipt - On April 11, 2025, the company issued **17.98 million shares of Series A Preferred Stock** for **$17.98 million** in the April 2025 Preferred Financing[168](index=168&type=chunk) - The Sixth NPA Amendment (April 11, 2025) modified the 2021 Purchase Agreement, including a **15% cancellation** of principal/accrued interest, interest rate reduction, and extension of the PIK option. It also led to the issuance of NPA Warrants to purchase up to **5 million shares** at **$1.00 per share**[175](index=175&type=chunk)[176](index=176&type=chunk) - The SVB Amendment (April 11, 2025) reduced the revolving line of credit and letter of credit sublimit from **$60.0 million/$45.0 million to $35.0 million/$35.0 million**. The 2022 Loan and Security Agreement was terminated on August 5, 2025[177](index=177&type=chunk)[197](index=197&type=chunk) - On April 11, 2025, the company received the remaining **$7.5 million of Key Money** under the Marriott Agreement, completing the **$15.0 million investment**[180](index=180&type=chunk) - On August 5, 2025, the company entered into a Note and Warrant Purchase Agreement, issuing **$24.54 million** in units (senior secured promissory notes and warrants). The Investor Notes mature July 4, 2026, with **15.0% PIK interest**[181](index=181&type=chunk)[182](index=182&type=chunk) - On August 5, 2025, the company entered into a Loan Agreement with Marriott International, Inc. for senior secured Lender Notes to replace certain fees owed. These notes mature July 4, 2026, with prime rate + **3.00% PIK interest**[190](index=190&type=chunk)[191](index=191&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=38&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides an overview of Sonder's business model, recent developments, and management's discussion of opportunities, challenges, and risks. It highlights the company's focus on achieving sustainable positive Adjusted Free Cash Flow (FCF) through a portfolio optimization program, the strategic Marriott integration, and cost reduction initiatives, while also presenting key business metrics and financial performance for the period - Sonder's business model involves leasing, furnishing, and operating properties for short and long-term stays, distributed through direct and indirect channels. Full integration with Marriott's digital channels and Bonvoy program was completed in Q2 2025[200](index=200&type=chunk)[203](index=203&type=chunk) - A primary focus is the 'Cash Flow Positive Plan' to achieve sustainable positive Adjusted FCF. Adjusted FCF improved significantly to **$(6.9) million** for Q1 2025, compared to **$(28.5) million** for Q1 2024[222](index=222&type=chunk)[260](index=260&type=chunk) - The portfolio optimization program, initiated in November 2023, aims to mitigate losses from underperforming properties. By June 30, 2025, **85 buildings (3,300 units)** with finalized exit agreements were exited[223](index=223&type=chunk) - The Marriott Agreement is anticipated to deliver significant revenue opportunities and operating efficiencies, including substantial uplift in RevPAR and customer acquisition cost savings through improved distribution and loyalty program access[224](index=224&type=chunk) - Cost reduction initiatives announced in April 2025 are expected to deliver approximately **$50 million of annualized cost savings**, primarily from headcount reductions, software savings, and other efficiencies related to the Marriott integration[224](index=224&type=chunk) **Key Business Metrics (Three months ended March 31):** | Metric | 2025 | 2024 | Change (No.) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Live Units (end of period) | 9,400 | 11,900 | (2,500) | (21.0)% | | Bookable Nights | 858,000 | 1,081,000 | (223,000) | (20.6)% | | Occupied Nights | 712,000 | 821,000 | (109,000) | (13.3)% | | Total Portfolio | 10,050 | 15,300 | (5,250) | (34.3)% | | RevPAR | $139 | $123 | $16 | 13.0% | | ADR | $167 | $163 | $4 | 2.5% | | Occupancy rate | 83.0% | 75.9% | 7.1% | 9.4% | **Results of Operations (in thousands, except percentages):** | Metric | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :--- | :--- | :--- | | Revenue | $118,856 (100.0%) | $133,479 (100.0%) | | Total costs and operating expenses | $182,497 (153.5%) | $201,140 (150.7%) | | Loss from operations | $(63,641) (53.5%) | $(67,661) (50.7%) | | Net loss | $(56,495) (47.5%) | $(50,487) (37.8%) | | Comprehensive loss | $(59,694) (50.2%) | $(51,076) (38.3%) | **Non-GAAP Financial Measures (in thousands):** | Metric | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :--- | :--- | :--- | | Adjusted FCF | $(6,858) | $(28,519) | | Adjusted EBITDA | $(56,696) | $(56,270) | | Adjusted EBITDAR | $21,123 | $26,311 | - Management concludes there is substantial doubt about the company's ability to continue as a going concern for at least one year from the report's issuance date, despite recent financing and cost optimization initiatives[276](index=276&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=54&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section states that there have been no material changes to the company's quantitative and qualitative disclosures about market risk since the Annual Report - There have been no material changes in the company's market risk from the information provided in the Annual Report[300](index=300&type=chunk) [Item 4. Controls and Procedures](index=55&type=section&id=Item%204.%20Controls%20and%20Procedures) This section reports that the company's disclosure controls and procedures were not effective as of March 31, 2025, due to identified material weaknesses in internal control over financial reporting. These weaknesses relate to leases, asset impairment, preferred stock transactions, and overall control activities, environment, and communication. Remediation plans are ongoing - The company's disclosure controls and procedures were not effective as of March 31, 2025, due to material weaknesses in internal control over financial reporting[301](index=301&type=chunk) - Identified material weaknesses include control deficiencies in the process to capture and record lease agreements timely and accurately, lack of design and effective controls for asset impairment identification and valuation, and insufficient precision in management's review of preferred stock transactions[306](index=306&type=chunk)[307](index=307&type=chunk)[308](index=308&type=chunk) - Additional COSO material weaknesses were identified in control activities (formal policies/procedures), control environment (sufficient personnel), and information & communication (timely financial information flow)[309](index=309&type=chunk) - Remediation plans are ongoing, focusing on hiring experienced talent, implementing control design changes for leases, improving policies and procedures, utilizing external subject matter professionals for asset impairment, and enhancing review processes for preferred stock[310](index=310&type=chunk)[312](index=312&type=chunk)[314](index=314&type=chunk)[315](index=315&type=chunk)[316](index=316&type=chunk) [PART II - OTHER INFORMATION](index=58&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) This section covers legal proceedings, risk factors, unregistered sales of equity, defaults on senior securities, mine safety disclosures, other information, and a list of exhibits [Item 1. Legal Proceedings](index=58&type=section&id=Item%201.%20Legal%20Proceedings) This section incorporates by reference the detailed information regarding legal proceedings from Note 12, "Commitments and Contingencies," in Part I, Item 1 of this Quarterly Report on Form 10-Q - Information regarding legal proceedings is incorporated by reference from Note 12, "Commitments and Contingencies," in Part I, Item 1 of this Quarterly Report on Form 10-Q[320](index=320&type=chunk) [Item 1A. Risk Factors](index=58&type=section&id=Item%201A.%20Risk%20Factors) This section outlines key risk factors, including the company's ineligibility to use certain registration statements due to delayed SEC filings, the ongoing need for additional capital, and the potential adverse effects of its indebtedness, credit facilities, and the special rights associated with its outstanding preferred stock on its financial and operational flexibility - Delayed SEC filings render the company ineligible to use Form S-3 for securities registration, requiring the use of Form S-1, which is more time-consuming and costly. This also suspended Form S-8 availability for equity incentive plans, negatively impacting employee morale and recruitment[321](index=321&type=chunk)[322](index=322&type=chunk) - The company may require additional equity or debt financing to support business growth, which could result in significant dilution for existing stockholders or impose restrictive covenants on its operations[323](index=323&type=chunk) - Indebtedness and credit facilities contain financial covenants and restrictions that limit the company's operational flexibility. Non-compliance could lead to acceleration of obligations, severely impacting its business and financial condition[325](index=325&type=chunk) - Outstanding Series A Preferred Stock ranks senior to common stock, has a liquidation preference, cumulative dividends (**15%** through August 13, 2025), and grants holders the right to purchase up to **25%** of future equity offerings at a discounted price[326](index=326&type=chunk)[327](index=327&type=chunk)[328](index=328&type=chunk)[329](index=329&type=chunk)[330](index=330&type=chunk) - The exercise or conversion of outstanding securities, including Preferred Stock, Public Warrants, and other Warrants (totaling **60,113,000 Preferred Stock**, **724,997 Public Warrants**, and **26,717,683 other Warrants**), could significantly dilute existing stockholders' ownership interests and depress common stock prices[332](index=332&type=chunk)[337](index=337&type=chunk) [Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities](index=60&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities,%20Use%20of%20Proceeds,%20and%20Issuer%20Purchases%20of%20Equity%20Securities) This section confirms that there were no unregistered sales of equity securities, use of proceeds from unregistered sales, or issuer purchases of equity securities during the reporting period - No unregistered sales of equity securities, use of proceeds, or issuer purchases of equity securities occurred during the period[333](index=333&type=chunk) [Item 3. Defaults Upon Senior Securities](index=60&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section states that the company did not experience any defaults upon senior securities during the reporting period - There were no defaults upon senior securities during the reporting period[334](index=334&type=chunk) [Item 4. Mine Safety Disclosures](index=60&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section indicates that the disclosures related to mine safety are not applicable to the company's operations - Mine safety disclosures are not applicable to the company[335](index=335&type=chunk) [Item 5. Other Information](index=60&type=section&id=Item%205.%20Other%20Information) This section reports that no directors or Section 16 officers adopted or terminated any Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements during the quarter ended March 31, 2025 - No directors or Section 16 officers adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter ended March 31, 2025[336](index=336&type=chunk) [Item 6. Exhibits](index=61&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of this report or incorporated by reference, including organizational documents, warrant agreements, and certifications, providing a comprehensive record of supporting legal and financial documents - The exhibits include Amended and Restated Certificate of Incorporation, Certificate of Amendment, Certificate of Designation for Series A Preferred Stock, Amended and Restated Bylaws, Specimen Stock/Warrant Certificates, and Certifications of Principal Executive Officer and Principal Financial Officer[339](index=339&type=chunk) [SIGNATURES](index=63&type=section&id=SIGNATURES) This section contains the official signatures certifying the accuracy and completeness of the report - The report was signed on behalf of Sonder Holdings Inc. by Rahul Thumati, Interim Chief Accounting Officer, on August 25, 2025[343](index=343&type=chunk)

[Financial Performance Overview](index=1&type=section&id=Financial%20Performance%20Overview) [Fourth Quarter 2024 Financial Highlights](index=1&type=section&id=Fourth%20Quarter%202024%20Financial%20Highlights) In Q4 2024, Sonder's revenue saw a slight decrease of 2% year-over-year to $161 million, primarily due to an 18% reduction in Bookable Nights from its portfolio optimization program. However, the company achieved a significant turnaround in profitability, reporting a Net Income of $31 million compared to a loss in the prior year, heavily influenced by a $92 million positive change in the fair value of a forward contract. Key operational metrics showed strength, with RevPAR increasing by 19% to $180 and Occupancy Rate rising by three percentage points to 85% Q4 2024 Key Financial Metrics (vs. Q4 2023) | Metric | Q4 2024 | YoY Change | | :--- | :--- | :--- | | Revenue | $161 million | -2% | | RevPAR | $180 | +19% | | Occupancy Rate | 85% | +3pp | | Bookable Nights | 897,000 | -18% | | Net Income | $31 million | +128% | | Adjusted EBITDA | $(20) million | +51% | | Adjusted Free Cash Flow | $(26) million | +30% | | Live Units (as of Dec 31) | ~9,900 | N/A | - The significant increase in **Net Income to $31 million** was primarily driven by a **$(92) million change** in the fair value of a forward contract related to a preferred stock transaction[6](index=6&type=chunk) [Full Year 2024 Financial Highlights](index=1&type=section&id=Full%20Year%202024%20Financial%20Highlights) For the full year 2024, Sonder reported a 3% increase in revenue to $621 million, supported by a 5% rise in RevPAR to $159. The company demonstrated improved profitability, narrowing its Net Loss by 24% to $224 million. This result includes significant non-cash items such as a $93 million gain from lease adjustments, an $84 million loss on preferred stock issuance, and a $29 million change in the fair value of a forward contract. Adjusted EBITDA and Adjusted Free Cash Flow also showed substantial year-over-year improvements Full Year 2024 Key Financial Metrics (vs. FY 2023) | Metric | FY 2024 | YoY Change | | :--- | :--- | :--- | | Revenue | $621 million | +3% | | RevPAR | $159 | +5% | | Net Loss | $(224) million | +24% (improvement) | | Adjusted EBITDA | $(105) million | +38% (improvement) | | Adjusted Free Cash Flow | $(90) million | +25% (improvement) | | Cash Used in Operating Activities | $129 million | +17% (increase in use) | - The full-year **Net Loss of $224 million** was impacted by several significant items, including a **$93 million gain** on lease adjustments, an **$84 million loss** on preferred stock issuance, and a **$29 million change** in the fair value of a forward contract[6](index=6&type=chunk) [Strategic and Operational Updates](index=1&type=section&id=Strategic%20and%20Operational%20Updates) [Long-Term Strategic Licensing Agreement with Marriott International](index=1&type=section&id=Long-Term%20Strategic%20Licensing%20Agreement%20with%20Marriott%20International) Sonder has entered into a long-term strategic licensing agreement with Marriott International. The integration was completed in Q2 2025, making all Sonder properties available for booking on Marriott's digital platforms, including Marriott.com and the Marriott Bonvoy® app, under the new 'Sonder by Marriott Bonvoy' collection. This partnership also allows Sonder properties to participate in the Marriott Bonvoy® travel program - Sonder entered into a **long-term strategic licensing agreement** with Marriott in August 2024[4](index=4&type=chunk) - As of **June 2025**, all Sonder properties are **fully integrated** and bookable on Marriott's digital channels and participate in the **Marriott Bonvoy® travel platform**[4](index=4&type=chunk) [Portfolio Optimization Program](index=1&type=section&id=Portfolio%20Optimization%20Program) Initiated in November 2023, the portfolio optimization program aims to reduce losses from underperforming properties. As of December 31, 2024, Sonder had signed agreements to exit or reduce rent for approximately 110 buildings, totaling 4,500 units. Of these, finalized exit agreements were in place for 85 buildings (3,300 units), with the full exit of these properties completed by June 30, 2025 - The program targets **mitigating losses** from underperforming properties by **exiting or renegotiating rents**[5](index=5&type=chunk) - By the end of 2024, agreements were signed for **~110 buildings (4,500 units)**[5](index=5&type=chunk) - As of **June 30, 2025**, the company had completed the exit of all **85 buildings (3,300 units)** with finalized exit agreements[7](index=7&type=chunk) [Consolidated Financial Statements](index=3&type=section&id=Consolidated%20Financial%20Statements) [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) As of December 31, 2024, Sonder's total assets stood at $1.14 billion, a decrease from $1.52 billion at the end of 2023, largely driven by a reduction in operating lease right-of-use assets. Total liabilities also decreased to $1.57 billion from $1.90 billion. The company's cash position (including restricted cash) declined to $72.1 million from $136.5 million year-over-year, while long-term debt increased significantly to $217.2 million Selected Balance Sheet Data (in thousands) | Account | Dec 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Total cash, cash equivalents and restricted cash | $72,054 | $136,497 | | Total current assets | $99,846 | $161,207 | | Total assets | $1,137,177 | $1,521,267 | | Total current liabilities | $338,547 | $506,236 | | Total liabilities | $1,573,065 | $1,897,968 | | Total stockholders' deficit | $(598,795) | $(376,701) | [Consolidated Statements of Operations](index=5&type=section&id=Consolidated%20Statements%20of%20Operations) For the year ended December 31, 2024, Sonder's revenue increased to $621.3 million from $602.1 million in 2023. The company significantly reduced its loss from operations to $182.6 million from $278.0 million in the prior year, aided by lower operating expenses and impairment losses. The net loss for the year improved to $224.1 million, or $(20.69) per share, compared to a net loss of $295.7 million, or $(27.04) per share, in 2023 Selected Statement of Operations Data (in thousands) | Account | Year Ended Dec 31, 2024 | Year Ended Dec 31, 2023 | | :--- | :--- | :--- | | Revenue | $621,272 | $602,066 | | Total costs and operating expenses | $803,889 | $880,108 | | Loss from operations | $(182,617) | $(278,042) | | Net loss | $(224,087) | $(295,668) | | Basic and diluted net loss per common share | $(20.69) | $(27.04) | [Consolidated Statements of Cash Flows](index=6&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For the full year 2024, net cash used in operating activities increased to $129.2 million from $110.9 million in 2023. Investing activities provided $5.7 million in cash, a reversal from a $12.4 million use of cash in the prior year, mainly due to proceeds from a Key Money investment. Financing activities provided $59.9 million, driven by proceeds from preferred stock and debt issuance. Overall, the company's cash, cash equivalents, and restricted cash decreased by $64.4 million during the year Consolidated Cash Flow Data (in thousands) | Cash Flow Category | Year Ended Dec 31, 2024 | Year Ended Dec 31, 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | $(129,222) | $(110,904) | | Net cash provided by (used in) investing activities | $5,729 | $(12,362) | | Net cash provided by (used in) financing activities | $59,851 | $(32,232) | | Net change in cash, cash equivalents, and restricted cash | $(64,443) | $(152,689) | | Cash, cash equivalents, and restricted cash at end of year | $72,054 | $136,497 | [Non-GAAP Financial Measures and Reconciliations](index=7&type=section&id=Non-GAAP%20Financial%20Measures%20and%20Reconciliations) [Reconciliation of Non-GAAP Financial Measures](index=7&type=section&id=Reconciliation%20of%20Non-GAAP%20Financial%20Measures) The company provides reconciliations for its key non-GAAP metrics, showing significant year-over-year improvements. Adjusted Free Cash Flow improved by 25% to $(89.5) million, Adjusted EBITDA improved by 38% to $(105.5) million, and Adjusted EBITDAR improved by 30% to $196.1 million for the full year 2024. These figures adjust for items like stock-based compensation, impairment losses, and non-recurring fees to provide a clearer view of core operating performance [Adjusted Free Cash Flow (FCF) Reconciliation](index=7&type=section&id=Adjusted%20Free%20Cash%20Flow%20(FCF)%20Reconciliation) Adjusted Free Cash Flow for FY 2024 was $(89.5) million, a 25% improvement from $(119.6) million in FY 2023. The calculation starts with cash used in operating activities and adjusts for investing activities and specific non-recurring items such as a Key Money investment, professional fees, and restructuring costs Adjusted FCF Reconciliation (in thousands) | Metric | Year Ended Dec 31, 2024 | Year Ended Dec 31, 2023 | | :--- | :--- | :--- | | Cash used in operating activities | $(129,222) | $(110,904) | | Adjusted FCF | $(89,513) | $(119,601) | [Adjusted EBITDA Reconciliation](index=7&type=section&id=Adjusted%20EBITDA%20Reconciliation) Adjusted EBITDA for FY 2024 improved by 38% to $(105.5) million from $(169.4) million in FY 2023. The reconciliation from Net Loss adjusts for interest, taxes, depreciation, stock-based compensation, lease adjustment gains, impairment losses, and other non-recurring charges Adjusted EBITDA Reconciliation (in thousands) | Metric | Year Ended Dec 31, 2024 | Year Ended Dec 31, 2023 | | :--- | :--- | :--- | | Net loss | $(224,087) | $(295,668) | | Adjusted EBITDA | $(105,483) | $(169,412) | [Adjusted EBITDAR Reconciliation](index=8&type=section&id=Adjusted%20EBITDAR%20Reconciliation) Adjusted EBITDAR, which further adjusts Adjusted EBITDA for operating lease rent charges, increased by 30% to $196.1 million for FY 2024, up from $150.8 million in FY 2023. This metric is used to assess operating performance independent of operating lease costs Adjusted EBITDAR Reconciliation (in thousands) | Metric | Year Ended Dec 31, 2024 | Year Ended Dec 31, 2023 | | :--- | :--- | :--- | | Adjusted EBITDA | $(105,483) | $(169,412) | | Adjusted EBITDAR | $196,095 | $150,840 | [Definitions of Key Metrics and Non-GAAP Measures](index=8&type=section&id=Definitions%20of%20Key%20Metrics%20and%20Non-GAAP%20Measures) This section provides definitions for key operational and non-GAAP financial metrics used by Sonder. It clarifies terms like RevPAR, Live Units, and Total Portfolio, and explains the composition and management's rationale for using Adjusted EBITDA, Adjusted EBITDAR, and Adjusted Free Cash Flow to measure performance and liquidity [Key Metrics Definitions](index=8&type=section&id=Key%20Metrics%20Definitions) The report defines key operational metrics: RevPAR (Revenue Per Available Room) is the average revenue per available night. Live Units are units available for booking. Total Portfolio includes both Live Units and Contracted Units not yet available for booking - **RevPAR (Revenue Per Available Room):** Represents the average revenue earned per available night, calculated by dividing revenue by Bookable Nights[22](index=22&type=chunk) - **Live Units & Total Portfolio:** Live Units are those available for guest booking, while Total Portfolio includes both Live Units and contracted units not yet open[23](index=23&type=chunk) [Non-GAAP Measures Definitions](index=8&type=section&id=Non-GAAP%20Measures%20Definitions) Sonder defines its primary non-GAAP measures as follows: Adjusted EBITDA is Net Loss adjusted for interest, taxes, depreciation, and other specific items to evaluate core operating performance. Adjusted EBITDAR further removes operating lease rent charges from Adjusted EBITDA. Adjusted Free Cash Flow is a liquidity measure derived from operating and investing cash flows, excluding certain non-recurring items, and is central to the company's Cash Flow Positive Plan - **Adjusted EBITDA:** Defined as net income (loss) adjusted for interest, taxes, depreciation, amortization, and other specified items to measure core operating performance[24](index=24&type=chunk) - **Adjusted EBITDAR:** Defined as Adjusted EBITDA further adjusted for operating lease related rent charges to assess performance independent of lease costs[25](index=25&type=chunk) - **Adjusted Free Cash Flow (Adjusted FCF):** A primary liquidity measure defined as cash from operating and investing activities, excluding the impact of specific items like the Key Money investment and restructuring charges[26](index=26&type=chunk)

Core Viewpoint - Sonder Holdings Inc. announced the resignation of Chief Financial Officer Michael Hughes, effective August 15, 2025, while the search for a new CEO is ongoing, with expectations to appoint a permanent successor by the end of 2025 [1][2]. Company Overview - Sonder is a leading global brand offering premium, design-forward apartments and boutique hotels, catering to modern travelers since its launch in 2014 [2]. - The company operates in over 40 markets across nine countries and three continents, providing tech-enabled services and self-service features through the Sonder app [2]. Leadership Transition - The interim CEO, Janice Sears, expressed gratitude for Michael Hughes' contributions and emphasized the importance of identifying world-class executives to maximize Sonder's growth potential [2]. - The new CEO will be actively involved in the search for a new CFO as part of the long-term leadership succession plan [1][2].

PART I [Item 1. Business](index=7&type=section&id=Item%201.%20Business) Sonder operates a tech-enabled hospitality model, leasing and managing design-focused properties, recently partnering with Marriott and optimizing its portfolio, while addressing going concern uncertainties - Sonder operates a tech-enabled hospitality model, leasing, designing, and managing apartments and hotels for modern travelers, available through direct and indirect channels[20](index=20&type=chunk)[21](index=21&type=chunk)[22](index=22&type=chunk) - A strategic licensing agreement with Marriott was announced in **August 2024**, with full integration completed in **Q2 2025**, making all Sonder properties bookable on Marriott's digital channels[21](index=21&type=chunk)[31](index=31&type=chunk) Portfolio Snapshot (as of Dec 31, 2024) | Metric | Value | | :--- | :--- | | Live Units | Over 9,900 | | Contracted Units | Over 800 | | Cities | 41 | | Countries | 9 | | Concentration (Top 5 Cities) | 37% of Live Units | | Concentration (Top 10 Cities) | 60% of Live Units | - The company implemented a portfolio optimization program in **November 2023**, resulting in agreements to exit or reduce rent for approximately **110 buildings (4,500 units)**, with about **3,200 units across 80 buildings** exited as of **December 31, 2024**[30](index=30&type=chunk) - Management has concluded there is **substantial doubt** about the Company's ability to continue as a going concern due to a history of net losses and negative operating cash flows, with mitigation plans including financing and cost optimization[63](index=63&type=chunk)[64](index=64&type=chunk) [Item 1A. Risk Factors](index=14&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks including failure to achieve positive cash flow, forecast inaccuracies, macroeconomic impacts, and material weaknesses in internal controls, alongside going concern doubts - A primary risk is the potential failure to achieve **positive and sustainable Adjusted Free Cash Flow (Adjusted FCF)**, as restructuring and portfolio optimization initiatives are not guaranteed to yield expected benefits[70](index=70&type=chunk) - The company's forecasts and projections are subject to **significant uncertainty** and may differ materially from actual results if underlying assumptions prove incorrect[72](index=72&type=chunk) - There is **substantial doubt** about the company's ability to continue as a going concern, potentially affecting its stock price, capital raising, and stakeholder relationships[69](index=69&type=chunk)[216](index=216&type=chunk) - **Material weaknesses** in internal controls over financial reporting have been identified, potentially leading to material misstatements and impacting the ability to produce timely and accurate reports[69](index=69&type=chunk)[140](index=140&type=chunk) - The company is **not in compliance** with Nasdaq's listing requirements due to delinquent SEC filings, which could result in the delisting of its common stock and warrants[69](index=69&type=chunk)[224](index=224&type=chunk)[225](index=225&type=chunk) [Item 1B. Unresolved Staff Comments](index=52&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments from the Securities and Exchange Commission - There are **no unresolved staff comments**[245](index=245&type=chunk) [Item 1C. Cybersecurity](index=52&type=section&id=Item%201C.%20Cybersecurity) Sonder manages cybersecurity risks through a NIST-guided program with Board oversight and executive management, utilizing third-party consultants and insurance - The company's cybersecurity risk management and strategy is guided by the **National Institute of Standards and Technology (NIST) framework**, including risk assessments, network security, and employee training[247](index=247&type=chunk) - Board oversight for cybersecurity is administered by the Board and Audit Committee, with day-to-day management led by the **VP, Technical Product Management** and **Senior Director, Information Technology Compliance and Information Security**[251](index=251&type=chunk)[253](index=253&type=chunk) [Item 2. Properties](index=53&type=section&id=Item%202.%20Properties) Sonder's corporate staff primarily works remotely, with a main 170,000 sq ft warehouse in Fort Worth, Texas, deemed adequate for near-term needs - A substantial percentage of corporate staff works remotely, with leased office spaces being **immaterial to operations**[256](index=256&type=chunk) - The principal warehouse is a **170,000 sq. ft.** third-party facility in Fort Worth, Texas, with a lease expiring on **December 31, 2026**[257](index=257&type=chunk) [Item 3. Legal Proceedings](index=53&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in various legal proceedings, including landlord disputes, a securities class action, and stockholder derivative lawsuits, which it intends to vigorously defend - The company is involved in litigation with the landlord of its **20 Broad Street, NY property**, over alleged Legionella contamination and breach of lease, with the landlord seeking damages[617](index=617&type=chunk) - A putative securities class action lawsuit was filed in **April 2024**, alleging false and misleading statements regarding financial results and asset valuation between **March 2023 and March 2024**[618](index=618&type=chunk) - Several stockholder derivative lawsuits have been filed based on similar allegations as the class action, naming current and former officers and directors as defendants[620](index=620&type=chunk)[621](index=621&type=chunk)[622](index=622&type=chunk) [Item 4. Mine Safety Disclosures](index=53&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[259](index=259&type=chunk) PART II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=54&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Sonder's common stock and warrants trade on Nasdaq, with **135** record holders as of **July 7, 2025**, and no plans for future cash dividends or equity repurchases - Common stock (**SOND**) and Public Warrants (**SONDW**) are traded on the Nasdaq Global Select Market[261](index=261&type=chunk) - The company does not intend to declare or pay any **cash dividends** in the foreseeable future[262](index=262&type=chunk) [Item 6. [Reserved]](index=54&type=section&id=Item%206.%20%5BReserved%5D) This item is reserved [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=55&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Sonder's **2024** revenue increased to **$621.3 million** with a narrowed net loss, driven by RevPAR growth and portfolio optimization, while focusing on achieving positive Adjusted FCF and leveraging the Marriott partnership Key Financial Results (Year Ended Dec 31) | Metric | 2024 | 2023 | | :--- | :--- | :--- | | Revenue | $621.3M | $602.1M | | Net Loss | $(224.1)M | $(295.7)M | | Loss from Operations | $(182.6)M | $(278.0)M | | Adjusted FCF (Non-GAAP) | $(89.5)M | $(119.6)M | | Adjusted EBITDA (Non-GAAP) | $(105.5)M | $(169.4)M | Key Business Metrics (Year Ended Dec 31) | Metric | 2024 | 2023 | Change | | :--- | :--- | :--- | :--- | | Live Units (End of Period) | 9,900 | 12,200 | (18.9)% | | RevPAR | $159 | $151 | +5.3% | | ADR | $196 | $184 | +6.5% | | Occupancy Rate | 80.9% | 82.0% | (1.1) p.p. | - The company's primary focus is its **"Cash Flow Positive Plan,"** aiming for sustainable positive Adjusted FCF, with a **$30.1 million improvement** in **2024** Adjusted FCF compared to **2023**[279](index=279&type=chunk) - The portfolio optimization program, initiated in **November 2023**, has led to agreements to exit or reduce rent at approximately **110 buildings (4,500 units)**, improving property-level profitability despite decreasing Live Units[280](index=280&type=chunk)[285](index=285&type=chunk) - Subsequent to year-end, in **April 2025**, the company raised **$17.98 million** through preferred stock financing, amended debt agreements, and received the final **$7.5 million** from its Marriott agreement[273](index=273&type=chunk)[274](index=274&type=chunk)[277](index=277&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=78&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Sonder faces market risks including foreign currency exchange, interest rate, and inflation, which could impact operating costs, revenue, and consumer demand - The company faces **foreign currency exchange risk** from international revenue and expenses denominated in currencies other than the U.S. dollar[394](index=394&type=chunk)[395](index=395&type=chunk) - **Interest rate risk** primarily affects the company's debt, with management not anticipating material risks from current changes, though rising rates could hinder property development financing[397](index=397&type=chunk)[398](index=398&type=chunk) - **Inflation risk** could increase operating costs, construction expenses, and rent, while potentially dampening consumer demand for travel[399](index=399&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=79&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the audited consolidated financial statements for **2024** and **2023**, with the auditor highlighting going concern uncertainty and critical audit matters related to leases, asset impairment, and preferred stock valuation - The independent auditor's report from **Deloitte & Touche LLP** expresses a fair presentation opinion but highlights **substantial doubt** about the Company's ability to continue as a going concern[405](index=405&type=chunk)[406](index=406&type=chunk) - Critical Audit Matters identified by the auditor include accounting for leases, impairment of long-lived assets, and the fair value of redeemable preferred stock, all involving **significant estimates and judgments**[410](index=410&type=chunk)[414](index=414&type=chunk)[421](index=421&type=chunk) Consolidated Balance Sheet Summary (As of Dec 31, 2024) | Account | Amount (in thousands) | | :--- | :--- | | **Total Assets** | **$1,137,177** | | Total Current Assets | $99,846 | | Operating Lease ROU Assets | $1,013,854 | | **Total Liabilities** | **$1,573,065** | | Total Current Liabilities | $338,547 | | Non-current Operating Lease Liabilities | $1,009,169 | | **Total Stockholders' Deficit** | **$(598,795)** | [Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosures](index=136&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosures) The company reports no changes in or disagreements with its accountants on accounting and financial disclosure matters - None[658](index=658&type=chunk) [Item 9A. Controls and Procedures](index=136&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal controls were ineffective as of **December 31, 2024**, due to material weaknesses in lease accounting, asset impairment, preferred stock transactions, and COSO framework components, with remediation plans underway - Management concluded that as of **December 31, 2024**, the company's disclosure controls and procedures and internal controls over financial reporting were **not effective**[659](index=659&type=chunk)[662](index=662&type=chunk) - **Material weaknesses** were identified in processes for capturing and recording lease agreements, asset impairment evaluation, and reviewing preferred stock transactions[666](index=666&type=chunk)[667](index=667&type=chunk)[668](index=668&type=chunk) - Broader **material weaknesses** were identified related to the COSO framework, specifically in control activities, control environment, and information & communication components[669](index=669&type=chunk) - The company is implementing remediation plans, including hiring expertise, improving processes, and enhancing training, but these enhancements have not yet been fully remediated[670](index=670&type=chunk)[671](index=671&type=chunk)[673](index=673&type=chunk) [Item 9B. Other Information](index=139&type=section&id=Item%209B.%20Other%20Information) An immaterial misstatement in **Q3 2024** interim financials related to preferred stock valuation was corrected in the annual report, and the **2025** Annual Meeting of Stockholders is scheduled for **November 6, 2025** - An **immaterial correction** was made to the **Q3 2024** interim financial statements regarding Series A Preferred Stock valuation and a forward contract liability, now reflected in the annual financials[678](index=678&type=chunk)[679](index=679&type=chunk) - The **2025 Annual Meeting of Stockholders** is scheduled for **November 6, 2025**, with updated deadlines for stockholder proposals due to the date change[686](index=686&type=chunk) [Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=142&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) This item is not applicable to the company - Not applicable[690](index=690&type=chunk) PART III [Item 10. Directors, Executive Officers and Corporate Governance](index=143&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) This section details the company's directors and executive officers as of **July 7, 2025**, including Board structure, committee compositions, and the adopted Code of Business Conduct and Ethics - As of **July 7, 2025**, **Janice Sears** serves as Interim Chief Executive Officer and Chairperson of the Board, and **Michael Hughes** serves as Chief Financial Officer[692](index=692&type=chunk) - The Board of Directors consists of **seven members** and is divided into **three classes** with staggered three-year terms[718](index=718&type=chunk)[721](index=721&type=chunk) - The Board has four standing committees: **Audit, Compensation, Investment, and Nominating**, with detailed composition and primary oversight responsibilities[720](index=720&type=chunk)[726](index=726&type=chunk)[728](index=728&type=chunk)[730](index=730&type=chunk) - A **Code of Business Conduct and Ethics** has been adopted, applying to all employees and directors, and is available on the company's investor relations website[717](index=717&type=chunk) [Item 11. Executive Compensation](index=150&type=section&id=Item%2011.%20Executive%20Compensation) Sonder's executive compensation program for **2024** and **2025** includes base salary, bonuses, and equity awards, with details on named executive officers, outstanding awards, and non-employee director compensation 2024 Summary Compensation Table | Name and Principal Position | Year | Salary ($) | Option Awards ($) | Total ($) | | :--- | :--- | :--- | :--- | :--- | | Francis Davidson (Former CEO) | 2024 | 360,000 | — | 362,469 | | Dominique Bourgault (Former CFO) | 2024 | 477,865 | — | 477,865 | | Martin Picard (Chief Real Estate Officer) | 2024 | 378,708 | — | 381,791 | | Katherine E. Potter (Former CLO) | 2024 | 450,865 | — | 451,582 | - In **March 2025**, the executive compensation program was revised to include an annual cash bonus plan (**STIP**) and a revised long-term incentive plan (**LTIP**) granting a mix of performance stock units (**PSUs**) and restricted stock units (**RSUs**)[751](index=751&type=chunk)[752](index=752&type=chunk)[753](index=753&type=chunk) - Due to delayed financial filings, the company's Form S-8 registration statement was not effective, leading to a **suspension of equity award grants and exercises** in **April 2024**[748](index=748&type=chunk) - Non-employee director compensation includes annual cash retainers and equity awards, with the policy amended in **December 2024** to adjust retainer amounts and equity grant values[777](index=777&type=chunk)[779](index=779&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=160&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) This section details beneficial ownership of Sonder's voting securities as of **July 7, 2025**, including **5%** stockholders and a summary of securities authorized under equity compensation plans - As of **July 7, 2025**, significant beneficial owners (over **5%**) of voting securities include entities affiliated with **Atreides Foundation Master Fund LP**, **Polar Asset Management Partners Inc.**, **iNovia Growth Capital Inc.**, and **BlackRock Inc.**[794](index=794&type=chunk)[795](index=795&type=chunk) - All current directors and executive officers as a group beneficially own approximately **11.9%** of outstanding common stock and **3.7%** of Series A Preferred Stock[794](index=794&type=chunk) Equity Compensation Plan Information (as of Dec 31, 2024) | Plan Category | Securities to be Issued Upon Exercise () | Weighted-Average Exercise Price ($) | Securities Remaining for Future Issuance () | | :--- | :--- | :--- | :--- | | Approved by Stockholders | 2,724,698 | 27.88 | 8,749,463 | | Not Approved by Stockholders | 173,323 | 12.19 | 326,677 | [Item 13. Certain Relationships and Related Transactions, and Director Independence](index=164&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) This section describes related party transactions since **2024**, including preferred stock financings involving key affiliates and executives, and outlines the Audit Committee's review policy and director independence determinations - Key related party transactions include the **August 2024** and **April 2025 Preferred Stock financings**, involving significant shareholders, former CEO **Francis Davidson**, and director **Sanjay Banker**[809](index=809&type=chunk)[812](index=812&type=chunk) - The company has a written Related Person Transaction Policy requiring Audit Committee review and approval for transactions exceeding **$120,000** where a related person has a material interest[814](index=814&type=chunk)[816](index=816&type=chunk) - The Board has determined that all directors are independent under Nasdaq listing standards, except for **Sanjay Banker** and **Francis Davidson**[819](index=819&type=chunk) [Item 14. Principal Accountant Fees and Services](index=167&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) This section details fees paid to **Deloitte & Touche LLP** for **2024** and **2023**, totaling approximately **$3.88 million** and **$4.48 million** respectively, all pre-approved by the Audit Committee Accountant Fees (in thousands) | Fee Type | 2024 | 2023 | | :--- | :--- | :--- | | Audit Fees | $3,525 | $4,350 | | Audit-Related Fees | $348 | $131 | | Tax Fees | $0 | $0 | | All Other Fees | $4 | $2 | | **Total** | **$3,877** | **$4,483** | - The Audit Committee has a policy to **pre-approve all audit and permissible non-audit services** performed by the independent registered public accounting firm[826](index=826&type=chunk) PART IV [Item 15. Exhibits and Financial Statement Schedules](index=169&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists all financial statements and an extensive array of exhibits filed as part of the Annual Report on Form 10-K, including governance and material contracts - This item lists all financial statements and exhibits filed with the **10-K**, including governance documents, material contracts, and certifications[830](index=830&type=chunk)[831](index=831&type=chunk) [Item 16. Form 10-K Summary](index=184&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company has not provided a summary for this item - None[843](index=843&type=chunk)

[Sonder Holdings Inc. Third Quarter 2024 Financial Results](index=1&type=section&id=Sonder%20Holdings%20Inc.%20Third%20Quarter%202024%20Financial%20Results) [Third Quarter 2024 Financial Highlights](index=1&type=section&id=Third%20Quarter%202024%20Financial%20Highlights) The company reported a 14% YoY RevPAR increase and improved Adjusted EBITDA, though Net Loss widened due to non-cash charges - CEO Francis Davidson highlighted pivotal progress in Q3, citing a **14% year-over-year RevPAR growth**, a **69% improvement in Adjusted EBITDA**, and a **33% improvement in Adjusted Free Cash Flow**, driven by portfolio and cost optimization efforts[3](index=3&type=chunk) Q3 2024 Key Financial & Operational Metrics (YoY) | Metric | Q3 2024 | YoY Change | | :--- | :--- | :--- | | Revenue | $162 million | +1% | | RevPAR | $176 | +14% | | Occupancy Rate | 85% | +2pp | | Bookable Nights | 922,000 | -12% | | Net Loss | $(179) million | +211% | | Adjusted EBITDA | $(12) million | +69% (Improvement) | | Adjusted Free Cash Flow | $(11) million | +33% (Improvement) | | Total Cash & Equivalents | $76 million | N/A | | Live Units | ~10,100 | N/A | [Operational and Strategic Updates](index=1&type=section&id=Operational%20and%20Strategic%20Updates) The company advanced its portfolio optimization, Marriott partnership, balance sheet strengthening, and European expansion [Portfolio Optimization Program](index=1&type=section&id=Portfolio%20Optimization%20Program) The company is actively reducing losses from underperforming properties by exiting a targeted set of buildings - As of September 30, 2024, the company has exited approximately **70 buildings (2,800 units)** as part of its program to mitigate losses from underperforming properties[4](index=4&type=chunk) - The optimization program initially targeted approximately **80 buildings, or 3,200 units**, with finalized exit agreements as of June 10, 2024[4](index=4&type=chunk) [Long-Term Strategic Licensing Agreement with Marriott International](index=1&type=section&id=Long-Term%20Strategic%20Licensing%20Agreement%20with%20Marriott%20International) Sonder is integrating its properties into Marriott's digital channels, with the first phase completed in October 2024 - Sonder's properties will be integrated with Marriott's digital channels, including Marriott.com and the Marriott Bonvoy app, as a new collection called **"Sonder by Marriott Bonvoy"**[5](index=5&type=chunk) - The **first phase of integration was completed in October 2024**, giving Marriott Bonvoy members early access to earn and redeem points on Sonder.com[8](index=8&type=chunk) - **Full integration** with Marriott's digital channels is anticipated to occur in **2025**[8](index=8&type=chunk) [Strengthened Balance Sheet](index=2&type=section&id=Strengthened%20Balance%20Sheet) The company enhanced its liquidity profile by approximately $146 million to support long-term growth and Marriott integration - Sonder enhanced its liquidity profile by approximately **$146 million** to support long-term growth and integration efforts with Marriott[9](index=9&type=chunk) - The company now has access to a majority of this additional liquidity and expects to access the remaining **$12.5 million in 2025**[9](index=9&type=chunk) [Property Expansion in Europe](index=2&type=section&id=Property%20Expansion%20in%20Europe) Sonder expanded its European portfolio in Q3 2024 by opening three new properties in Madrid, Milan, and Paris - New properties opened in Q3 2024 include The Sofia in Madrid (36 units), The Manzoni in Milan (38 units), and The Yvette in Paris (61 keys)[16](index=16&type=chunk) [Executive Leadership & Board of Directors Appointments](index=2&type=section&id=Executive%20Leadership%20&%20Board%20of%20Directors%20Appointments) Sonder appointed a new CFO and a new Board member, and also transitioned to an independent Board Chairperson - **Michael Hughes**, formerly CFO of Spirit Realty Capital, joined Sonder as Chief Financial Officer[10](index=10&type=chunk) - **Erin Wallace**, with extensive experience at The Walt Disney Company and Great Wolf Resorts, was appointed to the Board of Directors[11](index=11&type=chunk) - The company enhanced corporate governance by appointing Lead Independent Director **Janice Sears as Chairperson of the Board**[12](index=12&type=chunk) [Reconciliation of Non-GAAP Financial Measures](index=3&type=section&id=Reconciliation%20of%20Non-GAAP%20Financial%20Measures) This section reconciles non-GAAP financial measures such as Adjusted EBITDA to their comparable GAAP counterparts [Reconciliation of Cash Used in Operating Activities to Adjusted Free Cash Flow](index=3&type=section&id=Reconciliation%20of%20Cash%20Used%20in%20Operating%20Activities%20to%20Adjusted%20Free%20Cash%20Flow) The company reconciled its GAAP Cash Used in Operating Activities of $(17.4) million to its non-GAAP Adjusted Free Cash Flow of $(10.7) million for Q3 2024 Adjusted Free Cash Flow Reconciliation (in thousands) | | Three months ended September 30, | | :--- | :--- | :--- | | | **2024** | **2023** | | Cash used in operating activities | $(17,364) | $(12,988) | | Cash provided by (used in) investing activities | 114 | (3,086) | | **Adjusted FCF** | **$(10,735)** | **$(16,074)** | [Reconciliation of Net Loss to Adjusted EBITDA](index=3&type=section&id=Reconciliation%20of%20Net%20Loss%20to%20Adjusted%20EBITDA) Sonder reconciled its GAAP Net Loss of $(179.4) million to a non-GAAP Adjusted EBITDA of $(12.4) million for Q3 2024 Adjusted EBITDA Reconciliation (in thousands) | | Three months ended September 30, | | :--- | :--- | :--- | | | **2024** | **2023** | | Net loss | $(179,391) | $(57,630) | | Adjustments (Interest, Taxes, D&A, etc.) | 166,994 | 4,943 | | **Adjusted EBITDA** | **$(12,397)** | **$(39,366)** | [Reconciliation of Adjusted EBITDA to Adjusted EBITDAR](index=3&type=section&id=Reconciliation%20of%20Adjusted%20EBITDA%20to%20Adjusted%20EBITDAR) The company reconciled its Adjusted EBITDA of $(12.4) million to an Adjusted EBITDAR of $60.2 million for Q3 2024 Adjusted EBITDAR Reconciliation (in thousands) | | Three months ended September 30, | | :--- | :--- | :--- | | | **2024** | **2023** | | Adjusted EBITDA | $(12,397) | $(39,366) | | Operating lease related rent charges | 72,614 | 83,845 | | **Adjusted EBITDAR** | **$60,217** | **$44,479** | [Definitions](index=4&type=section&id=Definitions) This section defines key performance indicators and non-GAAP financial measures used to evaluate the company's performance [Key Performance Indicators (KPIs)](index=4&type=section&id=Key%20Performance%20Indicators%20(KPIs)) The report defines key operational metrics including RevPAR, Live Units, and Total Portfolio - **RevPAR (Revenue Per Available Room):** Represents the average revenue earned per available night, calculated by dividing revenue by Bookable Nights[20](index=20&type=chunk) - **Live Units & Total Portfolio:** Live Units are those available for guest booking, while Total Portfolio includes both Live Units and Contracted Units that are not yet available for booking[21](index=21&type=chunk) [Non-GAAP Financial Measures](index=4&type=section&id=Non-GAAP%20Financial%20Measures) The company defines its non-GAAP measures to assess core operating performance and progress towards sustainable cash flow - **Adjusted EBITDA:** Defined as net income (loss) adjusted for interest, taxes, depreciation, amortization, and other specified items to evaluate core operating performance[22](index=22&type=chunk) - **Adjusted EBITDAR:** Defined as Adjusted EBITDA further adjusted for operating lease-related rent charges to assess performance independent of lease obligations[23](index=23&type=chunk) - **Adjusted Free Cash Flow (Adj. FCF):** Represents cash from operating and investing activities, excluding the impact of specific non-operational charges like lease terminations and restructuring, to measure liquidity[24](index=24&type=chunk) [Forward-Looking Statements](index=5&type=section&id=Forward-Looking%20Statements) This section cautions that the press release includes forward-looking statements that are not guarantees of future performance - The press release contains forward-looking statements regarding financial performance, portfolio optimization, and the Marriott integration, which are not guarantees of future performance[25](index=25&type=chunk) - Readers are advised that actual results could differ materially and should refer to the 'Risk Factors' section in the company's SEC filings for a full list of risks and uncertainties[25](index=25&type=chunk)

PART I [Item 1. Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) Q3 2024 financial statements show widened net loss, decreased cash, increased stockholders' deficit, and going concern doubts [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet as of September 30, 2024, reflects a significant decrease in cash and a widened stockholders' deficit Condensed Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | September 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $26,957 | $95,763 | | Total current assets | $106,121 | $161,207 | | Total assets | $1,218,036 | $1,521,267 | | Total current liabilities | $473,281 | $506,236 | | Total liabilities | $1,754,978 | $1,897,968 | | Total stockholders' deficit | $(596,467) | $(376,701) | [Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20%28Loss%29) Q3 2024 operations show slightly increased revenue but a significantly widened net loss due to non-operating charges Q3 Statement of Operations Highlights (in thousands) | Metric | Q3 2024 | Q3 2023 | | :--- | :--- | :--- | | Revenue | $162,114 | $160,896 | | Loss from operations | $(33,923) | $(50,841) | | Loss on preferred stock issuance | $59,490 | $0 | | Change in fair value of forward contract | $86,570 | $0 | | Net loss | $(179,391) | $(57,630) | | Basic and diluted net loss per common share | $(17.82) | $(5.26) | Nine Months Statement of Operations Highlights (in thousands) | Metric | Nine Months 2024 | Nine Months 2023 | | :--- | :--- | :--- | | Revenue | $460,194 | $437,802 | | Loss from operations | $(133,283) | $(174,897) | | Lease adjustment (gains), net | $(95,579) | $(8,576) | | Net loss | $(197,131) | $(183,679) | | Basic and diluted net loss per common share | $(19.85) | $(16.84) | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Nine-month cash flow shows increased cash used in operations, decreased investing, and increased financing, resulting in a net cash decrease Cash Flow Summary (Nine Months Ended Sep 30, in thousands) | Cash Flow Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | $(90,451) | $(72,537) | | Net cash used in investing activities | $(2,095) | $(12,436) | | Net cash provided by financing activities | $32,287 | $2,758 | | Net change in cash, cash equivalents, and restricted cash | $(60,598) | $(81,953) | [Notes to the Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) Notes detail going concern doubt, Marriott agreement, preferred stock impacts, portfolio optimization gains, and legal proceedings - Management concluded **substantial doubt** about the Company's ability to continue as a going concern for at least one year[32](index=32&type=chunk) - Mitigation plans include new financing (e.g., **$15 million** Marriott Agreement, **~$28.6 million** Series A Preferred Stock second tranche), operational improvements, and cost-cutting[33](index=33&type=chunk) - On August 13, 2024, the company entered a license agreement with Marriott, integrating Sonder properties into the "Sonder by Marriott Bonvoy" system[37](index=37&type=chunk) - In August 2024, agreements were made to sell **$43.3 million** in Series A Preferred Stock in two tranches, with the first **$14.7 million** tranche closing in August[93](index=93&type=chunk) - The company recognized a **$58.2 million** loss on preferred stock issuance and an **$86.6 million** change in fair value of a forward contract liability in Q3 2024[94](index=94&type=chunk)[95](index=95&type=chunk) - The 2024 portfolio optimization initiative generated **$95.6 million** in early lease termination gains for the nine months ended September 30, 2024[110](index=110&type=chunk) - The company is involved in a putative securities class action lawsuit alleging false and misleading statements from March 2023 to March 2024[143](index=143&type=chunk) - A February 2024 reduction in force affected **17%** of the corporate workforce, incurring approximately **$3 million** in one-time restructuring costs[156](index=156&type=chunk)[157](index=157&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=34&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management focuses on positive Adjusted FCF through portfolio optimization, Marriott agreement, and new financing, despite going concern doubts - The company's primary focus is achieving sustainable positive **Adjusted Free Cash Flow (FCF)** via its "Cash Flow Positive Plan"[184](index=184&type=chunk) - As of June 10, 2024, the portfolio optimization program secured agreements to exit or reduce rent for approximately **105 buildings (4,300 units)**[178](index=178&type=chunk) - Management reiterates **substantial doubt** about the Company's ability to continue as a going concern, with existing cash potentially insufficient for the next 12 months[259](index=259&type=chunk)[263](index=263&type=chunk) [Key Business Metrics](index=39&type=section&id=Key%20Business%20Metrics) Q3 2024 Live Units decreased due to optimization, but RevPAR, ADR, and occupancy rates significantly improved Key Business Metrics (Q3 2024 vs Q3 2023) | Metric | Q3 2024 | Q3 2023 | % Change | | :--- | :--- | :--- | :--- | | Live Units (end of period) | 10,100 | 11,800 | (14.4)% | | Bookable Nights | 922,000 | 1,048,000 | (12.0)% | | RevPAR | $176 | $154 | 14.3% | | ADR | $207 | $185 | 11.9% | | Occupancy rate | 84.9% | 82.8% | 2.5% | [Results of Operations](index=41&type=section&id=Results%20of%20Operations) Q3 2024 revenue slightly increased, operating loss narrowed, but surging non-operating expenses led to a larger net loss - Q3 2024 revenue increased **0.8%** year-over-year, driven by a **14.3%** RevPAR increase, partially offset by a **12.0%** decrease in Bookable Nights due to portfolio optimization[204](index=204&type=chunk) - Q3 2024 cost of revenue decreased **10.0%** year-over-year, primarily due to a **$10.9 million** reduction in rent expense from portfolio optimization[205](index=205&type=chunk) - For the nine months ended September 30, 2024, lease adjustment gains significantly increased to **$95.6 million** from **$8.6 million** due to portfolio optimization lease terminations[234](index=234&type=chunk)[236](index=236&type=chunk) [Non-GAAP Financial Measures](index=50&type=section&id=Non-GAAP%20Financial%20Measures) Nine-month non-GAAP metrics show improved Adjusted FCF, narrowed Adjusted EBITDA loss, and increased Adjusted EBITDAR Adjusted FCF Reconciliation (Nine Months Ended Sep 30, in thousands) | Metric | 2024 | 2023 | | :--- | :--- | :--- | | Cash used in operating activities | $(90,451) | $(72,537) | | Cash used in investing activities | $(2,095) | $(12,436) | | **FCF** | **$(92,546)** | **$(84,973)** | | Adjustments (lease termination, restructuring, etc.) | $28,600 | $2,150 | | **Adjusted FCF** | **$(63,946)** | **$(82,823)** | Adjusted EBITDA (in thousands) | Period | Q3 2024 | Q3 2023 | Nine Months 2024 | Nine Months 2023 | | :--- | :--- | :--- | :--- | :--- | | **Adjusted EBITDA** | **$(12,397)** | **$(39,366)** | **$(85,176)** | **$(127,747)** | [Liquidity and Capital Resources](index=53&type=section&id=Liquidity%20and%20Capital%20Resources) Q3 2024 cash balance is **$27.0 million**; management expresses substantial doubt about 12-month liquidity, relying on new financing and strategic initiatives - As of September 30, 2024, the company's cash balance was **$27.0 million**[261](index=261&type=chunk) - Management secured financing providing access to approximately **$139 million** in additional liquidity, including **~$43 million** from Series A Preferred Stock and **~$83 million** from noteholder agreements[260](index=260&type=chunk) - Future cash obligations as of September 30, 2024, include **$1.0 million** in short-term debt, **$1.1 billion** in long-term operating lease obligations, and **$760.0 million** for leases not yet commenced[266](index=266&type=chunk)[267](index=267&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=52&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company reports no material changes to its market risk disclosures from the Annual Report on Form 10-K - There have been no material changes in the company's market risk from disclosures in the Annual Report[281](index=281&type=chunk) [Item 4. Controls and Procedures](index=52&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were ineffective due to persistent material weaknesses in internal control over financial reporting - Disclosure controls and procedures were concluded to be ineffective by principal officers as of the period end[282](index=282&type=chunk) - Material weaknesses in internal control over financial reporting persist in Leases, Control Activities and Environment, and Asset Impairment[283](index=283&type=chunk)[284](index=284&type=chunk)[285](index=285&type=chunk)[287](index=287&type=chunk) PART II [Item 1. Legal Proceedings](index=54&type=section&id=Item%201.%20Legal%20Proceedings) Information regarding legal proceedings is incorporated by reference from Note 12 of the financial statements - Information regarding legal proceedings is incorporated by reference from Note 12, "Commitments and Contingencies"[292](index=292&type=chunk) [Item 1A. Risk Factors](index=54&type=section&id=Item%201A.%20Risk%20Factors) No material changes to the company's risk factors have been reported from the Annual Report on Form 10-K - There have been no material changes to the risk factors from those provided in the Annual Report[292](index=292&type=chunk) [Other Items (Items 2, 3, 4, 5, 6)](index=54&type=section&id=Other%20Items%20%28Items%202%2C%203%2C%204%2C%205%2C%206%29) The company reports no unregistered equity sales, senior security defaults, mine safety disclosures, or Rule 10b5-1 trading arrangement changes - The company reports "None" for Unregistered Sales of Equity Securities (Item 2) and Defaults Upon Senior Securities (Item 3)[293](index=293&type=chunk)[294](index=294&type=chunk) - Mine Safety Disclosures (Item 4) are not applicable[295](index=295&type=chunk)