Sonder Holdings Inc. (NASDAQ:SOND) Q1 2023 Earnings Conference Call May 10, 2023 5:00 PM ET Company Participants Jon Charbonneau - Vice President & Head, Investor Relations Francis Davidson - Co-Founder & Chief Executive Officer Dom Bourgault - Chief Financial Officer Conference Call Participants Nick Jones - JMP Securities Jed Kelly - Oppenheimer Operator Good day and thank you for standing by and welcome to the Sonder First Quarter 2023 Earnings Call. At this time, all participants are in a listen-only mo ...

[PART I - FINANCIAL INFORMATION](index=5&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) This section presents the unaudited condensed consolidated financial statements and management's discussion for Q1 2023 [Item 1. Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for Sonder Holdings Inc. for Q1 2023 [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets decreased, driven by reduced cash, while liabilities increased, expanding the stockholders' deficit Condensed Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $217,968 | $246,624 | | Total current assets | $271,230 | $312,930 | | Operating lease ROU assets | $1,201,007 | $1,209,486 | | **Total assets** | **$1,521,460** | **$1,573,612** | | **Liabilities & Stockholders' Deficit** | | | | Total current liabilities | $279,666 | $250,641 | | Non-current operating lease liabilities | $1,156,913 | $1,166,538 | | **Total liabilities** | **$1,618,287** | **$1,593,559** | | **Total stockholders' deficit** | **($96,827)** | **($19,947)** | [Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Revenue increased 50% to $120.7 million, but a net loss of $86.4 million was reported due to fair value adjustments Statement of Operations Highlights (in thousands) | Income Statement Item | Three months ended March 31, 2023 | Three months ended March 31, 2022 | | :--- | :--- | :--- | | Revenue | $120,738 | $80,466 | | Total costs and operating expenses | $205,481 | $176,230 | | Loss from operations | ($84,743) | ($95,764) | | Net (loss) income | ($86,431) | $10,963 | | Basic net (loss) income per common share | ($0.39) | $0.05 | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities improved, but overall cash decreased by $42.8 million during the quarter Cash Flow Highlights (in thousands) | Cash Flow Item | Three months ended March 31, 2023 | Three months ended March 31, 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | ($35,492) | ($50,693) | | Net cash used in investing activities | ($7,478) | ($11,616) | | Net cash provided by financing activities | $8 | $399,726 | | Net change in cash, cash equivalents, and restricted cash | ($42,782) | $337,090 | [Notes to the Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) These notes detail accounting policies, revenue recognition, fair value measurements, debt, leases, equity, and restructuring Disaggregated Revenue (in thousands) | Revenue Source | Three months ended March 31, 2023 | Three months ended March 31, 2022 | | :--- | :--- | :--- | | Direct revenue | $58,339 | $31,934 | | Indirect revenue | $62,399 | $48,532 | | **Total revenue** | **$120,738** | **$80,466** | - In March 2023, the company announced a restructuring affecting approximately **14.0% of its corporate workforce**, incurring **$2.1 million** in one-time costs[142](index=142&type=chunk) - The company is involved in litigation with a landlord at the Broad Street Property in New York over Legionella bacteria contamination, with the landlord seeking at least **$3.9 million** in damages. The company has accrued **$6.8 million** for legal contingencies as of March 31, 2023[125](index=125&type=chunk)[126](index=126&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=29&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses performance, strategic initiatives, and financial condition, including the 'Cash Flow Positive Plan' and non-GAAP measures [Key Business Metrics](index=31&type=section&id=Key%20Business%20Metrics) Key performance metrics showed strong year-over-year growth, with Live Units up 35.1% and RevPAR increasing 14.5% Key Metrics Comparison | Metric | Q1 2023 | Q1 2022 | % Change | | :--- | :--- | :--- | :--- | | Live Units (End of Period) | 10,400 | 7,700 | 35.1% | | Bookable Nights | 898,000 | 689,000 | 30.3% | | RevPAR | $134 | $117 | 14.5% | | ADR | $167 | $160 | 4.4% | | Occupancy Rate | 80.4% | 73.1% | 10.0% | [Results of Operations](index=33&type=section&id=Results%20of%20Operations) Revenue increased 50% to $120.7 million, while operating expenses grew slower, reducing the operating loss to $84.7 million - Revenue increased by **$40.3 million (50.0%) YoY**, primarily due to a **14.5% increase in RevPAR** and a **35.1% increase in Live Units**[177](index=177&type=chunk) - Cost of revenue increased by **24.5% YoY**, a slower pace than revenue growth, driven by higher rent and cleaning expenses from the increased number of Live Units[179](index=179&type=chunk)[180](index=180&type=chunk) - General and administrative expenses decreased by **11.5% YoY**, mainly due to lower non-recurring legal and professional fees related to becoming a public company in 2022[179](index=179&type=chunk)[184](index=184&type=chunk) - Sales and marketing expenses increased by **67.4% YoY**, driven by higher channel transaction fees from increased bookings through OTAs[179](index=179&type=chunk)[189](index=189&type=chunk) [Non-GAAP Financial Measures](index=36&type=section&id=Non-GAAP%20Financial%20Measures) Non-GAAP measures show improved Free Cash Flow to -$41.4 million, while Cash Contribution Margin slightly declined to 12.5% Free Cash Flow (FCF) Reconciliation (in thousands) | FCF Component | Three months ended March 31, 2023 | Three months ended March 31, 2022 | | :--- | :--- | :--- | | Cash used in operating activities | ($35,492) | ($50,693) | | Cash used in investing activities | ($7,478) | ($11,616) | | **FCF, excluding restructuring costs** | **($41,373)** | **($62,309)** | Cash Contribution Margin (CCM) Calculation | CCM Component | Three months ended March 31, 2023 | Three months ended March 31, 2022 | | :--- | :--- | :--- | | Cash contribution (in thousands) | $15,037 | $10,413 | | Revenue (in thousands) | $120,738 | $80,466 | | **CCM** | **12.5%** | **12.9%** | [Liquidity and Capital Resources](index=39&type=section&id=Liquidity%20and%20Capital%20Resources) The company had $218.0 million in cash, deemed sufficient for 12 months, with significant debt and lease obligations - The company had a cash balance of **$218.0 million** (excluding restricted cash) as of March 31, 2023[213](index=213&type=chunk) - Management believes existing cash is sufficient to fund operations for at least the next 12 months, citing reduced cash burn[215](index=215&type=chunk) - As of March 31, 2023, the company had off-balance sheet arrangements including **$37.8 million** in outstanding surety bonds and **$40.7 million** in irrevocable standby letters of credit[225](index=225&type=chunk)[227](index=227&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=41&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes in market risk were reported since the last annual report - There have been no material changes in market risk since the last annual report[234](index=234&type=chunk) [Item 4. Controls and Procedures](index=42&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were not effective due to material weaknesses in lease accounting and the control environment - Management concluded that disclosure controls and procedures were **not effective** as of March 31, 2023[236](index=236&type=chunk) - A material weakness related to the process of capturing and recording lease agreements timely and accurately persists due to inadequate resources with the necessary technical expertise[238](index=238&type=chunk) - A broader material weakness exists in the overall control environment, including deficiencies in formal policies and procedures and insufficient personnel to support internal control objectives[239](index=239&type=chunk) [PART II - OTHER INFORMATION](index=44&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) This section provides information on legal proceedings, risk factors, and other disclosures not covered in financial statements [Item 1. Legal Proceedings](index=44&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in a legal dispute with a landlord over alleged Legionella contamination, with damages sought - Sonder is in a legal dispute with the landlord of the Broad Street Property in New York regarding Legionella bacteria contamination. The landlord seeks no less than **$3.9 million** in damages, and Sonder has filed counterclaims[246](index=246&type=chunk) [Item 1A. Risk Factors](index=44&type=section&id=Item%201A.%20Risk%20Factors) This section details significant risks including failure to achieve positive free cash flow, regulatory challenges, and stock price volatility [Risks Related to Our Business and Industry](index=46&type=section&id=Risks%20Related%20to%20Our%20Business%20and%20Industry) Risks include failure to achieve positive FCF, sensitivity to economic downturns, competition, and data security breaches - The company's 'Cash Flow Positive Plan' may not succeed in achieving **positive FCF** without additional fundraising, and restructuring efforts could adversely affect the business[253](index=253&type=chunk) - The business is highly sensitive to trends in travel, hospitality, and real estate markets, as well as general economic conditions like inflation and recession, which could materially affect revenue and operating results[257](index=257&type=chunk) - The company has a history of net losses, with an accumulated deficit of **$1.1 billion** as of March 31, 2023, and may not achieve or maintain profitability in the future[270](index=270&type=chunk) - A security incident in November 2022 involved unauthorized access to a cloud-hosted account containing guest data, highlighting risks related to data processing and security breaches[356](index=356&type=chunk) [Risks Related to Government Regulation](index=75&type=section&id=Risks%20Related%20to%20Government%20Regulation) Risks include evolving short-term rental laws, data privacy compliance costs, and public company regulatory burdens - The company is subject to evolving short-term rental regulations in various jurisdictions, which could limit operations, increase compliance costs, or require changes to the business model[399](index=399&type=chunk)[400](index=400&type=chunk) - Compliance with numerous data privacy laws (e.g., EU/UK GDPR, CCPA/CPRA) is complex and costly. Failure to comply could result in significant fines, litigation, and reputational harm[409](index=409&type=chunk)[410](index=410&type=chunk)[411](index=411&type=chunk) - As a public company, Sonder incurs substantial legal, accounting, and other compliance costs, and its management team has limited experience managing a public company, which could divert attention from core business operations[405](index=405&type=chunk)[406](index=406&type=chunk) [Risks Related to Indebtedness and Liquidity](index=80&type=section&id=Risks%20Related%20to%20Indebtedness%20and%20Liquidity) Risks include the need for additional capital and restrictive covenants in existing debt agreements limiting flexibility - The company may require additional capital to support growth, and if it cannot be secured on favorable terms, its ability to execute its business plan could be limited[422](index=422&type=chunk) - As of March 31, 2023, the company had **$189.6 million** in debt. The debt agreements contain financial covenants (e.g., minimum EBITDA, minimum liquidity) and other restrictions that may limit operational flexibility[423](index=423&type=chunk)[424](index=424&type=chunk) [Risks Related to Ownership of Our Securities](index=81&type=section&id=Risks%20Related%20to%20Ownership%20of%20Our%20Securities) Risks include potential Nasdaq delisting due to low bid price, stock price volatility, and warrant expiration - On April 21, 2023, Sonder received a notice from Nasdaq for non-compliance with the **minimum $1.00 bid price rule**. Failure to regain compliance by October 18, 2023, could lead to delisting[426](index=426&type=chunk)[427](index=427&type=chunk) - The market price of the company's common stock and warrants is volatile and could decline significantly due to various factors, including performance, analyst reports, and market conditions[432](index=432&type=chunk) - The public warrants have an exercise price of **$11.50 per share** and may expire worthless if the stock price does not exceed this level[438](index=438&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=85&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities or use of proceeds were reported during the period - None[446](index=446&type=chunk) [Item 3. Defaults Upon Senior Securities](index=85&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities were reported during the period - None[447](index=447&type=chunk) [Item 4. Mine Safety Disclosures](index=85&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company's operations - Not applicable[448](index=448&type=chunk) [Item 5. Other Information](index=85&type=section&id=Item%205.%20Other%20Information) No other material information was reported for the period - None[449](index=449&type=chunk) [Item 6. Exhibits](index=86&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the quarterly report, including management contracts and certifications

[FORM 10-K General Information](index=1&type=section&id=FORM%2010-K%20General%20Information) This section provides general information about Sonder Holdings Inc.'s Form 10-K filing, including its Nasdaq listings, filer status, and market value [Registrant Information](index=1&type=section&id=Registrant%20Information) Sonder Holdings Inc., a Delaware corporation, filed its annual report on Form 10-K for the fiscal year ended December 31, 2022. Its common stock and warrants are traded on The Nasdaq Stock Market LLC under the symbols SOND and SONDW, respectively. The company is classified as an accelerated filer and an emerging growth company - Sonder Holdings Inc. is a Delaware corporation, with its principal executive offices in San Francisco, California[2](index=2&type=chunk) Securities Registered on Nasdaq | Title of each class | Trading Symbol(s) | Name of each exchange on which registered | | :------------------------------------------------------------------------------------------------ | :---------------- | :---------------------------------------- | | Common Stock, par value $0.0001 per share | SOND | The Nasdaq Stock Market LLC | | Warrants, each whole warrant exercisable for one share of Common Stock at an exercise price of $11.50 per share | SONDW | The Nasdaq Stock Market LLC | - The registrant is an accelerated filer and an emerging growth company, but not a well-known seasoned issuer or a large accelerated filer[2](index=2&type=chunk)[5](index=5&type=chunk) [Filing Status](index=2&type=section&id=Filing%20Status) The registrant confirmed timely filing of all required reports under the Securities Exchange Act of 1934 during the preceding 12 months and electronic submission of all Interactive Data Files. The aggregate market value of voting and non-voting common equity held by non-affiliates as of June 30, 2022, was $214.7 million - The registrant has filed all required reports during the preceding 12 months and has been subject to filing requirements for the past 90 days[4](index=4&type=chunk) - The registrant has electronically submitted every Interactive Data File required during the preceding 12 months[4](index=4&type=chunk) Market Value and Shares Outstanding | Metric | Value | | :---------------------------------------------------------------- | :------------ | | Aggregate market value of voting and non-voting common equity held by non-affiliates (as of June 30, 2022) | $214.7 million | | Shares of common stock outstanding (as of March 6, 2023) | 219,282,857 | [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, detailing their nature, specific examples, and the inherent risks and uncertainties that could cause actual results to differ materially [Nature of Forward-Looking Statements](index=4&type=section&id=Nature%20of%20Forward-Looking%20Statements) This section highlights that the Form 10-K contains forward-looking statements regarding future events or financial/operating performance, identifiable by words like 'may,' 'will,' 'expects,' 'plans,' and 'anticipates.' These statements 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[11](index=11&type=chunk) - Such statements are identified by words like 'may,' 'will,' 'should,' 'expects,' 'plans,' 'anticipates,' 'could,' 'intends,' 'target,' 'projects,' 'contemplates,' 'believes,' 'estimates,' 'predicts,' 'potential,' or 'continue,' or their negatives[11](index=11&type=chunk) - Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from historical experience or present expectations[11](index=11&type=chunk) [Specific Forward-Looking Statements](index=4&type=section&id=Specific%20Forward-Looking%20Statements) The report details numerous specific forward-looking statements, including the company's focus on achieving positive quarterly Free Cash Flow in 2023, financial and operating forecasts, ability to achieve profitability, trends in travel and hospitality, pricing strategies, capital expenditure expectations, and plans for market expansion and technology investments - Focus on achieving positive quarterly Free Cash Flow within 2023 without additional fundraising and targeting 'capital light' lease signings[13](index=13&type=chunk) - Financial, operating, and growth forecasts and projections[13](index=13&type=chunk) - Expectations for business, revenue, expenses, operating results, and financial condition[13](index=13&type=chunk) - Ability to achieve or maintain profitability in the future[13](index=13&type=chunk) - Trends in the travel and hospitality industries, including anticipated timing and nature of any travel recovery[13](index=13&type=chunk) - Pricing and revenue management strategies, pricing and occupancy forecasts, and expectations about demand elasticity[13](index=13&type=chunk) - Expectations concerning future transaction structures and lease terms (rent, abatement, capital expenditure provisions)[13](index=13&type=chunk) - Potential ancillary revenue opportunities and ability to improve revenue management capabilities[13](index=13&type=chunk) - Anticipated capital expenditure obligations, including real estate owners' funding of capital expenditures[13](index=13&type=chunk) - Expected adequacy of capital resources and anticipated use of financing proceeds[13](index=13&type=chunk) - Trends in corporate travel and potential for additional group and corporate travel revenue[13](index=13&type=chunk) - Anticipated occupancy rates and expectations about guests' average length of stay[13](index=13&type=chunk) - Ability to anticipate and satisfy guest demands, including new features, amenities, or services[13](index=13&type=chunk) - Expectations about geographic market mix and product mix (hotels vs. apartments) and their financial impact[13](index=13&type=chunk) - Expectations about employee relations and ability to attract and retain qualified personnel[13](index=13&type=chunk) - Plans to roll out additional features, amenities, and technologies, and beliefs about technology investments' positive impact[13](index=13&type=chunk) - Future competitive advantages and anticipated differentiation in cost structure and guest experience[13](index=13&type=chunk) - Expectations for increased cost efficiencies and technological improvements[13](index=13&type=chunk) - Expectations and plans for expanding in existing and new markets and accommodation categories[13](index=13&type=chunk) - Anticipated growth in Live Units and Contracted Units, including unit removals[13](index=13&type=chunk) - Expectations about relationships with third-party distribution channels and indirect channels[13](index=13&type=chunk) - Anticipated seasonality and other variations in results of operations, including RevPAR forecasts[13](index=13&type=chunk) - Anticipated effects of the COVID-19 pandemic or other public health crises[13](index=13&type=chunk) - Ability to continue meeting Nasdaq listing standards[13](index=13&type=chunk) - Assessments and beliefs regarding timing and outcome of pending legal proceedings and potential liabilities[13](index=13&type=chunk) - Assessments and estimates determining effective tax rate and regarding tax-related audits[13](index=13&type=chunk) - Other expectations, beliefs, plans, strategies, anticipated developments, and non-historical facts[13](index=13&type=chunk) [Reliance on Forward-Looking Statements](index=5&type=section&id=Reliance%20on%20Forward-Looking%20Statements) Investors are cautioned not to place undue reliance on forward-looking statements due to inherent risks and uncertainties, many beyond the company's control. The company undertakes no obligation to update these statements, except as required by law, and advises considering risk factors detailed elsewhere in the report - Investors should not place undue reliance on forward-looking statements due to known and unknown risks, uncertainties, and other factors, many beyond the company's control[14](index=14&type=chunk) - The company undertakes no obligation to update forward-looking statements to reflect events or circumstances after the report date, except as required by law[14](index=14&type=chunk) - Additional factors that could cause results to differ materially are detailed in other SEC filings, and new risks and uncertainties may emerge over time[15](index=15&type=chunk) [PART I](index=6&type=section&id=PART%20I) This part covers the company's business operations, risk factors, properties, legal proceedings, and mine safety disclosures [Item 1. Business](index=6&type=section&id=Item%201.%20Business) Sonder aims to revolutionize hospitality by offering tech-enabled, design-led accommodations, including serviced apartments and hotel rooms, across 43 cities in 10 countries. The company leases properties, furnishes them, and manages operations using proprietary technology and 24/7 support, focusing on a mobile-first guest experience and consistent quality - Sonder's mission is to revolutionize hospitality through innovative, tech-enabled service and thoughtfully designed accommodations[18](index=18&type=chunk) - The company leases and operates serviced apartments and spacious hotel rooms in 43 cities across 10 countries[18](index=18&type=chunk) - Sonder manages properties using proprietary and third-party technologies, delivering services via the Sonder app and 24/7 on-the-ground support, emphasizing a mobile-first guest experience[19](index=19&type=chunk) [Overview](index=6&type=section&id=Overview) - As of December 31, 2022, Sonder had approximately **9,700 units** available for guests to book at over 250 properties[18](index=18&type=chunk) - Sonder works directly with real estate owners to lease, furnish, and decorate properties, making them available for booking through direct and indirect channels[19](index=19&type=chunk) - The diverse product portfolio includes multiple-bedroom apartments with full kitchens and laundry, as well as hotel rooms/suites, catering to various traveler types[20](index=20&type=chunk) [Guest Experience Enhancement](index=6&type=section&id=Guest%20Experience%20Enhancement) - Sonder's mobile-first guest experience, supported by the Sonder app, allows for virtual check-in, one-touch WiFi, digital concierge services, on-demand customer service, and in-app check-out[23](index=23&type=chunk)[25](index=25&type=chunk)[31](index=31&type=chunk) - The company emphasizes design and creativity, with properties featured in various publications, offering amenities like fully equipped kitchens and private laundry in apartment-style spaces[26](index=26&type=chunk) - While the app promotes self-service, a 24/7 guest services team is available via app, phone, text/WhatsApp, and email, with local team members for in-person support[25](index=25&type=chunk) [Supply Growth](index=7&type=section&id=Supply%20Growth) - As of December 31, 2022, Sonder had approximately **9,700 Live Units** and **7,900 Contracted Units** across 43 cities and 10 countries[27](index=27&type=chunk) - The company plans to focus 2023 supply growth primarily on existing Sonder markets and intends to expand into additional markets in Europe and North America in the future[27](index=27&type=chunk) - The majority of Sonder's portfolio consists of commercial or mixed-use apartment developments, with a growing proportion of hotels, and future plans to add resorts[28](index=28&type=chunk)[29](index=29&type=chunk)[30](index=30&type=chunk) [Demand Generation and Revenue Management](index=8&type=section&id=Demand%20Generation%20and%20Revenue%20Management) - Historically, demand was generated primarily through Online Travel Agencies (OTAs) like Airbnb, Booking.com, and Expedia, which accounted for **50.1% of 2022 revenue**[32](index=32&type=chunk) - Direct bookings through Sonder.com, the Sonder app, or sales personnel accounted for approximately **47.2% of total revenue in 2022**, up from 51.6% in 2021[33](index=33&type=chunk) - Sonder uses data science and pricing automation technology for dynamic pricing and is developing an internal sales team for corporate and group travel[34](index=34&type=chunk)[35](index=35&type=chunk) - The company is exploring ancillary revenue opportunities such as guaranteed early check-in/late check-out, room upgrades, and value-added amenities[36](index=36&type=chunk) [Leases and Transaction Process](index=8&type=section&id=Leases%20and%20Transaction%20Process) - Sonder leases all properties, primarily using fixed leases, but also offers flexible structures like mixed leases (fixed fee plus revenue share) and revenue share agreements[37](index=37&type=chunk) - Typical property leases have a 5- to 7-year initial term with renewal options, often including upfront rent abatement and downside protections[38](index=38&type=chunk) - Many leases include upfront allowances from real estate owners to offset capital invested in preparing and furnishing buildings, enabling 'capital light' operations for Sonder[40](index=40&type=chunk) [Operations](index=9&type=section&id=Operations) - Operations teams focus on efficient building openings, ongoing operations, and guest service, supported by local staff and central teams for supply chain, design, and development[41](index=41&type=chunk) - Sonder has a global supply chain for furnishings and decor, with central warehouses in the US/Canada and local providers in other regions, focusing on quality and consistency[42](index=42&type=chunk) - Day-to-day operations, including guest inquiries and housekeeping, are managed by central and local teams using proprietary and third-party software[44](index=44&type=chunk) [Competition](index=9&type=section&id=Competition) - Sonder operates in two highly competitive environments: attracting guests and securing desirable real estate supply[45](index=45&type=chunk) - For guests, Sonder competes with major upscale/upper upscale hotel operators (Hilton, Marriott, Hyatt), boutique hotels, and alternative accommodation providers (Airbnb, Vrbo)[46](index=46&type=chunk)[48](index=48&type=chunk) - For real estate supply, Sonder competes with traditional long-term leasing, other short-term rental companies, and traditional hotel property managers[49](index=49&type=chunk) - Sonder offers value to real estate owners by eliminating lengthy lease-up periods, minimizing sales/marketing costs, simplifying rent collection, and improving property performance through technology and design[50](index=50&type=chunk) [Regulatory Compliance](index=10&type=section&id=Regulatory%20Compliance) - Sonder's operations are subject to extensive U.S. and foreign federal, state, and local laws and regulations across various areas, including property, privacy, employment, and securities[51](index=51&type=chunk)[52](index=52&type=chunk)[54](index=54&type=chunk)[57](index=57&type=chunk)[58](index=58&type=chunk)[59](index=59&type=chunk) - Before signing new leases, local legal counsel is engaged to identify regulatory requirements such as licensing, zoning, building codes, accessibility, and tax compliance[53](index=53&type=chunk) - The company implements technical and organizational security measures to protect personal data, complying with regulations like EU GDPR, CCPA/CPRA, and UK GDPR[56](index=56&type=chunk) - The regulatory environment is complex and evolving, with laws often not specifically designed for innovative hospitality providers like Sonder, leading to uncertainty in application[60](index=60&type=chunk) [Environmental, Social and Governance (ESG)](index=11&type=section&id=Environmental,%20Social%20and%20Governance%20(ESG)) - Sonder established a dedicated Sustainability, Partnerships, and Social Impact function in 2020 to support responsible business practices[61](index=61&type=chunk) - The company's ESG goal is to foster social, environmental, and economic well-being through a 'People and Planet' framework[61](index=61&type=chunk) - Initial ESG efforts include publishing corporate social responsibility policies (Supplier Code of Conduct, DEI Statement, Modern Slavery Act Statement, Zero Tolerance policy) and initiatives focused on sustainability (energy, water, single-use plastics)[61](index=61&type=chunk) [Employees and Culture](index=11&type=section&id=Employees%20and%20Culture) - As of December 31, 2022, Sonder had approximately **993 employees in the U.S.** and **702 internationally**, comprising 995 salaried and 700 hourly employees[62](index=62&type=chunk) - The company's culture is defined by ten leadership principles aimed at fostering innovation, strategic movement, and an inspiring workplace[64](index=64&type=chunk) - Sonder is committed to Diversity, Equity, and Inclusion (DEI), with a working group and employee resource groups to ensure all employees, guests, and partners feel safe, respected, and included[65](index=65&type=chunk)[66](index=66&type=chunk) [Intellectual Property](index=12&type=section&id=Intellectual%20Property) - Sonder protects its proprietary rights through trademarks, domain names, copyrights, trade secrets, and contractual provisions[67](index=67&type=chunk) - As of December 31, 2022, the company had **104 trademark registrations** and pending applications, including 'Sonder' in multiple countries and its bird logo[68](index=68&type=chunk) - Sonder is the registered holder of over **80 domain names**, including 'sonder.com', and uses confidentiality agreements with employees and partners[69](index=69&type=chunk) [Seasonality](index=12&type=section&id=Seasonality) - Sonder's occupancy and pricing vary seasonally due to weather, local events, holidays, and property location/type[70](index=70&type=chunk) - Revenue per available room (RevPAR) tends to be lower in the first and fourth quarters due to seasonal factors[70](index=70&type=chunk) - The effect of seasonality is expected to vary as the company's market and product mix evolves[70](index=70&type=chunk) [Corporate Information & Available Information](index=12&type=section&id=Corporate%20Information%20%26%20Available%20Information) - Sonder Holdings Inc. was originally incorporated in Delaware on July 21, 2020, as Gores Metropoulos II, Inc., a SPAC, and consummated a business combination with Legacy Sonder on January 18, 2022[71](index=71&type=chunk) - The company makes its SEC filings and other investor information available free of charge on the Investor Relations page of its website, investors.sonder.com[73](index=73&type=chunk) [Item 1A. Risk Factors](index=13&type=section&id=Item%201A.%20Risk%20Factors) This section outlines significant risks that could materially harm Sonder's business, operating results, and financial condition. Key risks include potential failure to achieve positive free cash flow, adverse effects from macroeconomic factors and market changes, difficulties in securing and managing properties, operational challenges, intense competition, regulatory complexities, and risks related to indebtedness and securities ownership - The company's business, operating results, financial condition, or prospects could be harmed by risks and uncertainties not currently known or deemed immaterial[74](index=74&type=chunk) - Key risks include potential failure to achieve positive free cash flow, negative impacts from inflation and macroeconomic factors, and challenges in negotiating or renewing property leases[76](index=76&type=chunk)[82](index=82&type=chunk)[85](index=85&type=chunk)[87](index=87&type=chunk) - Other significant risks involve delays in real estate development, difficulties in integrating new properties, limited operating history, intense competition, reliance on third-party distribution channels, and susceptibility to international operational risks[76](index=76&type=chunk)[92](index=92&type=chunk)[95](index=95&type=chunk)[126](index=126&type=chunk)[131](index=131&type=chunk)[140](index=140&type=chunk) [Risk Factor Summary](index=13&type=section&id=Risk%20Factor%20Summary) - Actual results may differ materially from forecasts and projections[76](index=76&type=chunk)[79](index=79&type=chunk) - Focus on achieving positive free cash flow within 2023 without additional fundraising may be unsuccessful; restructuring initiatives may not provide expected benefits and could adversely affect the company[76](index=76&type=chunk)[79](index=79&type=chunk) - Results could be negatively affected by inflation, macroeconomic factors, and changes in travel, hospitality, real estate, and vacation markets[76](index=76&type=chunk)[79](index=79&type=chunk) - Inability to negotiate satisfactory leases, onboard new properties timely, or renew/replace existing properties on satisfactory terms[76](index=76&type=chunk)[79](index=79&type=chunk) - Delays in real estate development and construction projects could adversely affect revenue generation[76](index=76&type=chunk)[79](index=79&type=chunk) - Newly leased properties may generate revenue later than estimated and be more difficult/expensive to integrate[76](index=76&type=chunk)[79](index=79&type=chunk) - Limited operating history and evolving business make future prospects and challenges difficult to evaluate[76](index=76&type=chunk)[79](index=79&type=chunk) - Inability to manage growth effectively[76](index=76&type=chunk)[79](index=79&type=chunk) - Higher than expected costs for opening, operation, and maintenance of leased properties[76](index=76&type=chunk)[79](index=79&type=chunk) - Dependence on landlords for suitable property delivery and maintenance[76](index=76&type=chunk)[79](index=79&type=chunk) - Long-term and fixed-cost leases limit flexibility[76](index=76&type=chunk)[79](index=79&type=chunk) - Leases may be subject to early termination, which can be disruptive and costly[76](index=76&type=chunk)[79](index=79&type=chunk) - Public health concerns (e.g., COVID-19) may have a material detrimental impact[76](index=76&type=chunk)[79](index=79&type=chunk) - Inability to attract new guests or generate repeat bookings[76](index=76&type=chunk)[79](index=79&type=chunk) - Inability to introduce upgraded amenities, services, or features timely and cost-efficiently[76](index=76&type=chunk)[79](index=79&type=chunk) - Highly competitive hospitality market[76](index=76&type=chunk)[79](index=79&type=chunk) - Reliance on third-party distribution channels[76](index=76&type=chunk)[79](index=79&type=chunk) - Results of operations vary from period-to-period; historical performance may not be indicative of future performance[76](index=76&type=chunk)[79](index=79&type=chunk) - Long-term success depends on international expansion, susceptible to associated risks[76](index=76&type=chunk)[79](index=79&type=chunk) - Business depends on reputation and brand strength; deterioration could adversely impact market share, revenues, etc[76](index=76&type=chunk)[79](index=79&type=chunk) - Claims, lawsuits, and other proceedings could adversely affect business and financial condition[76](index=76&type=chunk)[79](index=79&type=chunk) - Liability or reputational damage for guests' activities or other incidents at properties[76](index=76&type=chunk)[79](index=79&type=chunk) - Claims and liabilities associated with health and safety issues and hazardous substances[76](index=76&type=chunk)[79](index=79&type=chunk) - Challenges in attracting and retaining skilled personnel, including hourly and unionized labor[76](index=76&type=chunk)[79](index=79&type=chunk) - Identified material weaknesses in internal control over financial reporting[76](index=76&type=chunk)[79](index=79&type=chunk) - Reliance on third parties for important services and technologies[76](index=76&type=chunk)[79](index=79&type=chunk) - Processing, storage, use, and disclosure of personal data expose to security breaches and regulatory risks[76](index=76&type=chunk)[79](index=79&type=chunk) - Failure to comply with privacy, data protection, consumer protection, marketing, and advertising laws[76](index=76&type=chunk)[79](index=79&type=chunk) - Risks related to intellectual property[76](index=76&type=chunk)[79](index=79&type=chunk) - Highly regulated business across multiple jurisdictions, including evolving short-term rental regulations and tax laws[76](index=76&type=chunk)[79](index=79&type=chunk) - May require additional capital, which might not be available timely or on favorable terms[76](index=76&type=chunk)[79](index=79&type=chunk) - May fail to continue to meet Nasdaq's listing standards[76](index=76&type=chunk)[79](index=79&type=chunk) - Indebtedness and credit facilities contain financial covenants and restrictions[76](index=76&type=chunk)[79](index=79&type=chunk) [Risks Related to Business and Industry](index=14&type=section&id=Risks%20Related%20to%20Business%20and%20Industry) - Sonder's forecasts and projections, including revenues, margins, profitability, and Live Units, are subject to significant uncertainties and may prove incorrect, adversely affecting stock value[80](index=80&type=chunk)[81](index=81&type=chunk) - The Cash Flow Positive Plan, aiming for positive quarterly Free Cash Flow by 2023, may be unsuccessful, and restructuring efforts could lead to management distraction, reputational damage, or employee attrition[82](index=82&type=chunk)[83](index=83&type=chunk) - Business is highly sensitive to travel, hospitality, real estate market trends, and general economic conditions (e.g., recessions, inflation), which can reduce demand and unit supply[85](index=85&type=chunk)[86](index=86&type=chunk) - Inability to secure or renew leases for attractive properties on favorable terms, or delays in development projects, could limit growth and cause financial forecasts to be missed[87](index=87&type=chunk)[89](index=89&type=chunk)[91](index=91&type=chunk)[92](index=92&type=chunk)[94](index=94&type=chunk) - The COVID-19 pandemic and future public health crises have materially impacted operations, leading to reduced travel demand, increased operating costs, and potential disruptions in property portfolio growth[115](index=115&type=chunk)[116](index=116&type=chunk)[117](index=117&type=chunk) - Failure to attract new guests or generate repeat bookings due to various factors (e.g., unmet expectations, competition, negative publicity) would adversely affect revenue and financial condition[118](index=118&type=chunk) - The hospitality market is highly competitive and fragmented, with global hotel brands, regional chains, independent hotels, and OTAs as competitors, potentially leading to reduced market share or increased costs[126](index=126&type=chunk)[127](index=127&type=chunk)[128](index=128&type=chunk)[129](index=129&type=chunk) - Reliance on third-party distribution channels (OTAs) for over half of 2022 revenues poses risks if partners perform inadequately, terminate agreements, or reduce visibility of Sonder's units[131](index=131&type=chunk)[132](index=132&type=chunk)[133](index=133&type=chunk)[134](index=134&type=chunk) - Sonder has identified material weaknesses in internal control over financial reporting related to lease agreement processes and control design/testing, which could lead to financial misstatements[163](index=163&type=chunk)[165](index=165&type=chunk) - The company relies on third-party technologies and services for critical operations, and any failures, defects, or inability to obtain/integrate these could harm business and increase costs[176](index=176&type=chunk)[178](index=178&type=chunk) - Supply chain interruptions (e.g., from COVID-19, natural disasters, trade restrictions) may increase costs or reduce revenues due to unavailability of materials or logistics disruptions[197](index=197&type=chunk) [Risks Related to Government Regulation](index=44&type=section&id=Risks%20Related%20to%20Government%20Regulation) - Sonder operates in various jurisdictions with diverse and evolving regulatory and taxation requirements, including zoning, licensing, and health and safety, which increase compliance costs and potential liability[224](index=224&type=chunk) - Regulatory developments, such as ordinances limiting short-term rental durations, could increase costs, restrict operations, and reduce available units[225](index=225&type=chunk) - Compliance with public company laws and regulations (Sarbanes-Oxley Act, Dodd-Frank Act, Nasdaq standards) incurs substantial legal, accounting, and management expenses, diverting resources[230](index=230&type=chunk) - Failure to comply with U.S. and foreign privacy and data protection laws (e.g., EU GDPR, CCPA/CPRA) could lead to significant liability, negative publicity, and erosion of trust[233](index=233&type=chunk)[234](index=234&type=chunk)[235](index=235&type=chunk)[236](index=236&type=chunk)[242](index=242&type=chunk) - Non-compliance with consumer protection, marketing, and advertising laws (e.g., TCPA) could result in fines, restrictions on business, and adverse effects on guest relationships and revenues[243](index=243&type=chunk) [Risks Related to Indebtedness and Liquidity](index=49&type=section&id=Risks%20Related%20to%20Indebtedness%20and%20Liquidity) - Sonder may require additional capital for growth or to address business challenges, and such funds might not be available timely or on favorable terms, especially after the Silicon Valley Bank closure[246](index=246&type=chunk) - As of December 31, 2022, the company had **$183.2 million in Delayed Draw Notes**, secured against substantially all assets, increasing vulnerability to adverse economic conditions and limiting cash flow for operations[247](index=247&type=chunk)[248](index=248&type=chunk) - Indebtedness and credit facilities contain financial covenants and restrictions that limit operational and financial flexibility, potentially hindering business strategy execution and increasing default risk[247](index=247&type=chunk)[249](index=249&type=chunk) [Risks Related to Ownership of Securities](index=50&type=section&id=Risks%20Related%20to%20Ownership%20of%20Securities) - Sonder may fail to meet Nasdaq listing standards, particularly the **$1.00 minimum bid price**, which could lead to delisting and adversely affect liquidity, market price, and capital raising ability[250](index=250&type=chunk) - Resales of a significant number of common stock shares could depress the market price and impair the ability to raise additional equity capital[251](index=251&type=chunk) - The market price and trading volume of common stock and warrants may be volatile due to various factors, including financial results, personnel changes, and broader market disruptions, potentially leading to significant declines[253](index=253&type=chunk)[256](index=256&type=chunk) - Future issuances of debt or equity securities may adversely affect the market price of common stock and dilute existing stockholders[257](index=257&type=chunk) - Public Warrants may expire worthless if the exercise price is not met, and their terms can be amended adversely to holders with **50% approval**[258](index=258&type=chunk)[259](index=259&type=chunk) - The company may redeem unexpired Public Warrants at a disadvantageous time and price, making them worthless, and significant warrant exercises could dilute common stock[260](index=260&type=chunk)[262](index=262&type=chunk) - Bylaws designate Delaware courts as the exclusive forum for certain stockholder actions, potentially limiting stockholders' ability to choose a favorable judicial forum[263](index=263&type=chunk)[264](index=264&type=chunk) [Item 1B. Unresolved Staff Comments](index=53&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) There are no unresolved staff comments from the SEC - No unresolved staff comments were reported[265](index=265&type=chunk) [Item 2. Properties](index=53&type=section&id=Item%202.%20Properties) Sonder's corporate staff primarily works remotely, but the company leases office spaces in the U.S., Montreal, and London. Its main furniture distribution warehouse is in Roanoke, Texas, with smaller storage spaces elsewhere. The company believes its current facilities are adequate and suitable alternatives are available - A substantial percentage of Sonder's corporate staff works remotely[266](index=266&type=chunk) - Sonder leases office space for corporate and administrative purposes in the United States, Montreal, Quebec, and London, England[266](index=266&type=chunk) - The former global headquarters in San Francisco, California, with approximately **20,000 square feet**, will not have its lease renewed after May 2023[266](index=266&type=chunk) - Sonder's principal warehouse for furniture distribution in the U.S. and Canada is a third-party facility in Roanoke, Texas, utilizing approximately **160,000 square feet**[268](index=268&type=chunk) - The company believes its existing facilities are adequate for near-term needs and suitable alternative space would be available on commercially reasonable terms[269](index=269&type=chunk) [Item 3. Legal Proceedings](index=54&type=section&id=Item%203.%20Legal%20Proceedings) Sonder is involved in ongoing litigation with its former landlord at 20 Broad Street, New York, regarding Legionella bacteria contamination. Sonder withheld rent due to health risks, leading to a lawsuit from the landlord for $3.9 million, to which Sonder filed counterclaims for significant damages. The company intends to vigorously defend itself - Sonder expects to be involved in litigation incidental to the ordinary course of business[270](index=270&type=chunk) - A significant legal proceeding involves a lawsuit filed by the landlord of 20 Broad Street, New York, seeking at least **$3.9 million** for breach of lease[271](index=271&type=chunk) - Sonder withheld rent due to Legionella bacteria contamination and associated health risks, filing counterclaims for significant damages[271](index=271&type=chunk) - The summary judgment motion for this case was under submission as of December 21, 2021, with no ruling issued[271](index=271&type=chunk) [Item 4. Mine Safety Disclosures](index=54&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to Sonder Holdings Inc - Item 4. Mine Safety Disclosures is not applicable[272](index=272&type=chunk) [PART II](index=55&type=section&id=PART%20II) This part details market information for common equity, management's discussion and analysis of financial condition, results of operations, and market risk disclosures [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=55&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity,%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Sonder's common stock and publicly traded warrants are listed on the Nasdaq Global Select Market. As of December 31, 2022, there were 148 holders of record for common stock and 15 for warrants. The company does not intend to pay cash dividends in the foreseeable future. No unregistered sales or issuer purchases of equity securities occurred - Sonder's common stock and publicly traded warrants trade on The Nasdaq Global Select Market under 'SOND' and 'SONDW' respectively[275](index=275&type=chunk) Holders of Record (December 31, 2022) | Security | Holders of Record | | :---------------- | :---------------- | | Common Stock | 148 | | Publicly Traded Warrants | 15 | - The company does not intend to declare or pay any cash dividends in the foreseeable future[276](index=276&type=chunk) - No unregistered sales of equity securities or issuer purchases of equity securities were reported[277](index=277&type=chunk)[278](index=278&type=chunk)[279](index=279&type=chunk) [Market Information, Holders of Common Stock, and Dividends](index=55&type=section&id=Market%20Information,%20Holders%20of%20Common%20Stock,%20and%20Dividends) - Sonder's common stock and publicly traded warrants are traded on the Nasdaq Global Select Market[275](index=275&type=chunk) - As of December 31, 2022, there were **148 holders of record** of common stock and **15 holders of record** of publicly traded warrants[275](index=275&type=chunk) - The company does not intend to declare or pay any cash dividends in the foreseeable future[276](index=276&type=chunk) [Stock Performance Graph](index=56&type=section&id=Stock%20Performance%20Graph) - The report includes a stock performance graph comparing Sonder's common stock, the Nasdaq Composite Index, and the S&P 500 from January 19, 2022, through December 31, 2022[281](index=281&type=chunk) - The initial value of Sonder's common stock on January 19, 2022, was **$8.22 per share**[281](index=281&type=chunk) - Historical stock price performance is not indicative of future performance[281](index=281&type=chunk) [Item 6. [Reserved]](index=56&type=section&id=Item%206.%20%5BReserved%5D) This item is intentionally left blank [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=56&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations%20(MD%26A)) This section provides an overview of Sonder's financial condition and results of operations, highlighting the shift to a Cash Flow Positive Plan, supply growth strategies, demand generation efforts, and the impact of the Business Combination and restructuring. It details key business metrics, financial performance, liquidity, and critical accounting estimates for the fiscal year ended December 31, 2022 - Sonder's MD&A covers financial condition and results of operations for the fiscal year ended December 31, 2022, with comparisons to 2021[282](index=282&type=chunk)[284](index=284&type=chunk) - The company's strategy shifted from hyper-growth to achieving positive quarterly Free Cash Flow (FCF) within 2023, driven by cost reductions, slower new unit signings, and focus on 'capital light' deals[287](index=287&type=chunk) - Key business metrics include Live Units, Bookable Nights, Occupied Nights, RevPAR, ADR, and Occupancy Rate, all showing significant increases year-over-year due to travel recovery and strategic shifts[300](index=300&type=chunk)[301](index=301&type=chunk)[304](index=304&type=chunk)[308](index=308&type=chunk)[309](index=309&type=chunk) [Overview](index=57&type=section&id=Overview) - Sonder aims to revolutionize hospitality with tech-enabled, design-led accommodations, operating serviced apartments and hotel rooms in 43 cities across 10 countries[286](index=286&type=chunk) - As of December 31, 2022, Sonder had approximately **9,700 units** available for guests at over 250 properties[286](index=286&type=chunk) [Management Discussion Regarding Opportunities, Challenges, and Risks](index=57&type=section&id=Management%20Discussion%20Regarding%20Opportunities,%20Challenges,%20and%20Risks) - Sonder's Cash Flow Positive Plan, announced June 9, 2022, focuses on achieving positive quarterly FCF within 2023 by reducing cash costs, slowing new unit signings, targeting 'capital light' properties, and implementing rapid payback RevPAR initiatives[287](index=287&type=chunk)[343](index=343&type=chunk) - Live Units grew **27.6% year-over-year to over 9,700** in 2022, driven by converting Contracted Units, with a focus on high-quality, 100% capital light deals for future signings[289](index=289&type=chunk) - Direct bookings accounted for **42.2% of total bookings in 2022**, with efforts to expand corporate business through GDS platforms and corporate travel accounts[291](index=291&type=chunk)[292](index=292&type=chunk) - Technology investments are crucial for user experience, hospitality operations, and reducing operating costs, underpinning booking, check-out, pricing, and demand generation[293](index=293&type=chunk) - The Business Combination on January 18, 2022, resulted in Sonder becoming a publicly traded company, incurring additional annual expenses for regulatory compliance, insurance, and administrative resources[294](index=294&type=chunk)[295](index=295&type=chunk) - Restructuring initiatives in mid-2022 and March 2023 led to a **21.0% reduction in corporate roles** and **7.0% in frontline roles**, incurring **$4.0 million in costs in 2022**, with an expected **$10.0 million in annualized savings** from the 2023 reduction[296](index=296&type=chunk)[297](index=297&type=chunk) [Key Business Metrics](index=59&type=section&id=Key%20Business%20Metrics) Key Business Metrics (Year Ended December 31) | Metric | 2022 | 2021 | Change (No.) | Change (%) | | :-------------------- | :----- | :----- | :----------- | :--------- | | Live Units (End of Period) | 9,700 | 7,600 | 2,100 | 27.6 % | | Bookable Nights | 3,051,000 | 2,032,000 | 1,019,000 | 50.1 % | | Occupied Nights | 2,466,000 | 1,380,000 | 1,086,000 | 78.7 % | | Total Portfolio | 17,600 | 18,100 | (500) | (2.8)% | | RevPAR | $151 | $115 | $36 | 31.3 % | | ADR | $187 | $169 | $18 | 10.7 % | | Occupancy Rate | 81.0 % | 68.0 % | 13.0 % | 19.1 % | - Live Units increased by **27.6% year-over-year to 9,700**, driven by converting Contracted Units. The top five cities accounted for **38.4% of Live Units**[300](index=300&type=chunk)[303](index=303&type=chunk) - Bookable Nights increased by **50.1%** and Occupied Nights by **78.7% year-over-year**, largely due to Live Unit growth and a strategy shift targeting higher occupancy[300](index=300&type=chunk)[307](index=307&type=chunk) - RevPAR increased by **31.3% year-over-year to $151**, driven by a **19.1% Occupancy Rate increase** and a **10.7% ADR increase**, reflecting continued travel recovery[300](index=300&type=chunk)[309](index=309&type=chunk) [Impact of COVID-19 and Macroeconomic Factors](index=60&type=section&id=Impact%20of%20COVID-19%20and%20Macroeconomic%20Factors) - Financial results for 2020, 2021, and H1 2022 were materially adversely affected by the COVID-19 pandemic[310](index=310&type=chunk) - While quarterly RevPAR has generally improved since May 2020, the extent and duration of travel recovery remain uncertain due to virus variants, infection rates, and governmental responses[310](index=310&type=chunk) - Macroeconomic factors like inflationary pressures, rising interest rates, market volatility, and geopolitical conflicts could adversely affect business and potentially decelerate travel recovery[310](index=310&type=chunk) [Results of Operations](index=61&type=section&id=Results%20of%20Operations) Consolidated Statements of Operations and Comprehensive Loss (in thousands) | Metric | 2022 | % of Revenue | 2021 | % of Revenue | | :------------------------------------------------- | :------- | :----------- | :------- | :----------- | | Revenue | $461,083 | 100.0 % | $232,944 | 100.0 % | | Cost of revenue (excluding depreciation and amortization) | 320,016 | 69.4 % | 201,445 | 86.5 % | | Operations and support | 211,081 | 45.8 % | 142,728 | 61.3 % | | General and administrative | 132,445 | 28.7 % | 106,135 | 45.6 % | | Research and development | 28,896 | 6.3 % | 19,091 | 8.2 % | | Sales and marketing | 51,224 | 11.1 % | 23,490 | 10.1 % | | Restructuring and other charges | 4,033 | 0.9 % | — | — % | | Total costs and operating expenses | $747,695 | 162.2 % | $492,889 | 211.6 % | | Loss from operations | $(286,612) | (62.2)% | $(259,945) | (111.6)% | | Total non-operating (income) expense, net | (121,403) | (26.3)% | 34,200 | 14.7 % | | Loss before income taxes | (165,209) | (35.8)% | (294,145) | (126.3)% | | Provision for income taxes | 533 | 0.1 % | 242 | 0.1 % | | Net loss | $(165,742) | (35.9)% | $(294,387) | (126.4)% | | Change in foreign currency translation adjustment | 5,686 | 1.2 % | 1,633 | 0.7 % | | Comprehensive loss | $(160,056) | (34.7)% | $(292,754) | (125.7)% | - Revenue increased by **97.9% to $461.1 million** in 2022, driven by a **31.3% increase in RevPAR** and a **27.6% increase in Live Units**, leading to a **78.7% increase in Occupied Nights**[314](index=314&type=chunk) - Total costs and operating expenses increased by **51.7% to $747.7 million** in 2022, primarily due to higher rent expense, cleaning costs, payment processing fees, and employee compensation, all linked to Live Unit growth and increased Occupied Nights[316](index=316&type=chunk)[317](index=317&type=chunk)[319](index=319&type=chunk)[322](index=322&type=chunk)[324](index=324&type=chunk)[326](index=326&type=chunk) - Net non-operating income was **$121.4 million in 2022**, a significant improvement from **$34.2 million expense in 2021**, primarily due to decreases in the fair value of SPAC Warrants and Earn Out Liability, and a gain on conversion of convertible notes[330](index=330&type=chunk)[332](index=332&type=chunk)[333](index=333&type=chunk)[334](index=334&type=chunk) - Net loss decreased from **$294.4 million in 2021 to $165.7 million in 2022**, while comprehensive loss improved from **$292.8 million to $160.1 million**[312](index=312&type=chunk) [Non-GAAP Financial Measures](index=65&type=section&id=Non-GAAP%20Financial%20Measures) - Sonder uses non-GAAP financial measures: Free Cash Flow (FCF), Cash Contribution, and Cash Contribution Margin (CCM) to supplement GAAP financial statements[341](index=341&type=chunk)[342](index=342&type=chunk) Free Cash Flow (FCF) (in thousands) | Metric | 2022 | 2021 | | :------------------------------ | :--------- | :--------- | | Cash used in operating activities | $(149,015) | $(179,391) | | Cash used in investing activities | $(30,993) | $(21,587) | | FCF, including restructuring costs | $(180,008) | $(200,978) | | Cash paid for restructuring costs | 3,712 | — | | FCF, excluding restructuring costs | $(176,296) | $(200,978) | - FCF, excluding restructuring costs, improved by **12.3% year-over-year**, primarily due to a **$30.4 million decrease** in cash used in operating activities, partially offset by a **$9.4 million increase** in investing activities[346](index=346&type=chunk) Cash Contribution and CCM (in thousands) | Metric | 2022 | 2021 | | :-------------------------------- | :------- | :------- | | Cash contribution | $91,566 | $(4,703) | | Revenue | $461,083 | $232,944 | | Cash Contribution Margin (CCM) | 19.9 % | (2.0)% | - CCM improved by **2,188 basis points year-over-year**, driven by a **$96.3 million increase** in cash contribution, which grew at a higher rate than revenue[351](index=351&type=chunk) [Liquidity and Capital Resources](index=67&type=section&id=Liquidity%20and%20Capital%20Resources) - As of December 31, 2022, Sonder had a cash balance of **$246.6 million**, primarily for working capital, with a near-term focus on achieving Free Cash Flow positivity[353](index=353&type=chunk) - The Business Combination in 2022 increased cash by approximately **$401.9 million**, net of debt payments and transaction costs[353](index=353&type=chunk) - The company incurred an accumulated deficit of **$980.6 million** at December 31, 2022, and has historically been financed by equity and debt investments[354](index=354&type=chunk) - Existing liquidity is believed sufficient for the next 12 months, but future capital requirements may necessitate additional equity or debt financing, which might not be available on acceptable terms[355](index=355&type=chunk) - Sonder had **$183.2 million in Delayed Draw Notes** and **$38.8 million in irrevocable standby letters of credit** outstanding as of December 31, 2022[358](index=358&type=chunk) - The closure of Silicon Valley Bank in March 2023, one of Sonder's lenders, may impact future borrowing requests and letters of credit[357](index=357&type=chunk)[364](index=364&type=chunk) Cash Flows (in thousands) | Cash Flow Activity | 2022 | 2021 | $ Change | | :-------------------------------- | :--------- | :--------- | :--------- | | Net cash used in operating activities | $(149,015) | $(179,391) | $30,376 | | Net cash used in investing activities | $(30,993) | $(21,587) | $(9,406) | | Net cash provided by financing activities | $400,599 | $148,571 | $252,028 | | Effects of foreign exchange on cash | $(1,346) | $(760) | $(586) | | Net change in cash and restricted cash | $219,245 | $(53,167) | $272,412 | - Net cash used in operating activities decreased by **$30.4 million year-over-year**, primarily due to a lower net loss and the adoption of ASC 2016-02 Leases[361](index=361&type=chunk) - Net cash provided by financing activities increased by **$252.0 million**, mainly from Delayed Draw Notes proceeds and the Business Combination/PIPE offering, partially offset by debt repayments and issuance costs[363](index=363&type=chunk) [Critical Accounting Estimates](index=69&type=section&id=Critical%20Accounting%20Estimates) - Critical accounting estimates include fair value of share-based awards, useful life of software, bad-debt allowances, valuation of intellectual property, contingent liabilities, deferred tax asset valuation allowance, and complex transaction valuations[438](index=438&type=chunk) - Lease accounting under ASC 842 requires significant judgment in determining incremental borrowing rates, which are estimated using synthetic credit rating analysis due to the absence of an agency-based rating[375](index=375&type=chunk)[410](index=410&type=chunk) - Income tax accounting involves evaluating uncertain tax positions and assessing the need for a valuation allowance against deferred tax assets, which is fully established due to a history of losses[380](index=380&type=chunk)[381](index=381&type=chunk) - Stock-based compensation expense for stock options is estimated using the Black-Scholes model, requiring subjective assumptions like expected term, volatility, and risk-free interest rate[383](index=383&type=chunk) [Recent Accounting Standards](index=71&type=section&id=Recent%20Accounting%20Standards) - Sonder adopted ASU 2016-02, Leases (Topic 842), effective January 1, 2022, using the modified retrospective approach, recognizing **$1.0 billion in operating lease ROU assets** and **$1.1 billion in operating lease liabilities**[486](index=486&type=chunk) - The company early adopted ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity's Own Equity, effective January 1, 2021, which did not materially impact financial statements[487](index=487&type=chunk) - Sonder is currently evaluating the impact of ASU 2016-13, Financial Instruments-Credit Losses (Topic 326), which defers the effective date for emerging growth companies to fiscal years beginning after December 15, 2022[488](index=488&type=chunk) [Emerging Growth Company Status](index=72&type=section&id=Emerging%20Growth%20Company%20Status) - Sonder qualifies as an emerging growth company under the JOBS Act, allowing it to take advantage of reduced reporting requirements and an extended transition period for new accounting standards[386](index=386&type=chunk)[387](index=387&type=chunk) - The company expects to remain an emerging growth company until the earliest of: market value exceeding **$700 million**, annual gross revenue of **$1.235 billion**, issuing over **$1 billion in non-convertible debt**, or December 31, 2026[387](index=387&type=chunk) - This status may make financial results difficult to compare with other public companies that are not EGCs or have not chosen the extended transition period[387](index=387&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures about Market Risk](index=72&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) Sonder is exposed to market risks primarily related to foreign currency exchange rates and interest rates. Fluctuations in foreign currencies can impact revenue and operating results, while changes in interest rates affect debt payments and property development financing. The company also faces inflation risk, which could increase operating and capital costs - Sonder's global operations expose it to foreign currency risk, primarily from international revenue, costs, and expenses denominated in foreign currencies[388](index=388&type=chunk)[389](index=389&type=chunk) - The company benefits from a weakening U.S. dollar and is adversely affected by a strengthening U.S. dollar, with fluctuations recorded in other expense, net[390](index=390&type=chunk) - Sonder is exposed to interest rate risk related to its outstanding debt, affecting interest earned on cash and interest paid on debt[392](index=392&type=chunk) - Recent increases in interest rates have caused and may continue to cause difficulties for property owners/developers in financing projects, potentially delaying new revenue sources[395](index=395&type=chunk) - Inflationary pressures, particularly on construction costs, rent escalations, and other material costs, along with supply chain disruptions, could increase operating/capital costs and reduce travel willingness[396](index=396&type=chunk) [Foreign Currency Exchange Risk](index=72&type=section&id=Foreign%20Currency%20Exchange%20Risk) - Sonder transacts business in multiple currencies, with the U.S. dollar being the most significant, exposing it to foreign currency exchange rate fluctuations[389](index=389&type=chunk) - Foreign currency exchange risks relate to revenue, rent, cleaning fees, balances held as funds receivable/payable, and intercompany balances[393](index=393&type=chunk) - Fluctuations in foreign exchange rates are recorded in other expense, net, and increased foreign-currency denominated transactions could amplify their impact[390](index=390&type=chunk)[391](index=391&type=chunk) [Interest Rate Risk](index=72&type=section&id=Interest%20Rate%20Risk) - Sonder's interest rate risk primarily stems from its outstanding debt, affecting interest earned on cash and paid on debt[392](index=392&type=chunk) - A hypothetical **100 basis points change** in interest rates would not have a material impact on consolidated financial statements as of December 31, 2022[394](index=394&type=chunk) - Rising interest rates could make it difficult for property owners and developers to finance projects, potentially delaying new revenue sources for Sonder[395](index=395&type=chunk) [Inflation Risk](index=73&type=section&id=Inflation%20Risk) - Elevated inflation levels, driven by global supply and demand imbalances, are impacting Sonder's major markets[396](index=396&type=chunk) - Inflationary pressures on construction costs, rent escalations, and other material costs, along with supply chain disruptions, could increase operating and capital costs[396](index=396&type=chunk) - These economic variables are beyond Sonder's control and may adversely impact its business, financial condition, results of operations, and cash flows[396](index=396&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=74&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents Sonder's audited consolidated financial statements, including balance sheets, statements of operations, equity, cash flows, and comprehensive notes, along with the independent auditor's report [Report of Independent Registered Public Accounting Firm](index=74&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) Deloitte & Touche LLP, as the independent registered public accounting firm, issued an unqualified opinion on Sonder's consolidated financial statements for the periods ended December 31, 2022, 2021, and 2020. The report highlights the adoption of FASB ASU No. 2016-02, Leases (ASC 842), effective January 1, 2022, as a change in accounting principle and a critical audit matter due to the complexities and significant estimates involved in lease accounting - Deloitte & Touche LLP provided an unqualified opinion on Sonder's consolidated financial statements for the periods ended December 31, 2022, 2021, and 2020[402](index=402&type=chunk) - The company adopted FASB ASU No. 2016-02, Leases (ASC 842), effective January 1, 2022, using the optional transition method[403](index=403&type=chunk) - Accounting for leases was identified as a critical audit matter due to complexities in evaluating contractual provisions and significant estimates (e.g., credit rating, credit spread, collateral impact) in determining the incremental borrowing rate[407](index=407&type=chunk)[411](index=411&type=chunk) [Consolidated Balance Sheets](index=77&type=section&id=Consolidated%20Balance%20Sheets) Sonder's consolidated balance sheets show a significant increase in total assets from $148.5 million in 2021 to $1.57 billion in 2022, primarily driven by the recognition of operating lease right-of-use (ROU) assets. Total liabilities also increased substantially from $344.4 million to $1.59 billion, mainly due to operating lease liabilities. Stockholders' deficit improved from $(764.4) million to $(19.9) million Consolidated Balance Sheets (in thousands) | Assets, Liabilities, and Equity | December 31, 2022 | December 31, 2021 | | :-------------------------------- | :---------------- | :---------------- | | **Assets:** | | | | Total current assets | $312,930 | $98,981 | | Property and equipment, net | $34,926 | $27,461 | | Operating lease right-of-use ("ROU") assets | $1,209,486 | — | | Other non-current assets | $16,270 | $22,037 | | **Total assets** | **$1,573,612** | **$148,479** | | **Liabilities:** | | | | Total current liabilities | $250,641 | $263,628 | | Non-current operating lease liabilities | $1,166,538 | — | | Deferred rent | — | $66,132 | | Long-term debt, net | $172,950 | $10,736 | | Other non-current liabilities | $3,430 | $3,906 | | **Total liabilities** | **$1,593,559** | **$344,402** | | **Mezzanine equity:** | | | | Total mezzanine equity | — | $568,483 | | **Stockholders' deficit:** | | | | Total stockholders' deficit | $(19,947) | $(764,406) | | **Total liabilities, mezzanine equity, and stockholders' deficit** | **$1,573,612** | **$148,479** | - Total assets increased significantly from **$148.5 million in 2021 to $1.57 billion in 2022**, primarily due to the recognition of **$1.21 billion in operating lease ROU assets** upon ASC 842 adoption[415](index=415&type=chunk) - Total liabilities rose from **$344.4 million in 2021 to $1.59 billion in 2022**, largely driven by the recognition of **$1.32 billion in operating lease liabilities** (current and non-current)[415](index=415&type=chunk) - Stockholders' deficit improved from **$(764.4) million in 2021 to $(19.9) million in 2022**, reflecting changes from the Business Combination and equity conversions[415](index=415&type=chunk) [Consolidated Statements of Operations and Comprehensive Loss](index=78&type=section&id=Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) Sonder reported a net loss of $165.7 million in 2022, an improvement from $294.4 million in 2021. Revenue nearly doubled to $461.1 million in 2022. Loss from operations was $286.6 million, while total non-operating income significantly improved to $121.4 million, primarily due to fair value adjustments of SPAC Warrants and Earn Out liability Consolidated Statements of Operations and Comprehensive Loss (in thousands) | Metric | 2022 | 2021 | 2020 | | :------------------------------------------------- | :------- | :------- | :------- | | Revenue | $461,083 | $232,944 | $115,678 | | Total costs and operating expenses | 747,695 | 492,889 | 359,500 | | Loss from operations | $(286,612) | $(259,945) | $(243,822) | | Total non-operating (income) expense, net | (121,403) | 34,200 | 6,171 | | Loss before income taxes | (165,209) | (294,145) | (249,993) | | Provision for income taxes | 533 | 242 | 323 | | Net loss | $(165,742) | $(294,387) | $(250,316) | | Basic net loss per common share | $(0.80) | $(25.02) | $(27.22) | | Diluted net loss per common share | $(0.80) | $(25.02) | $(27.22) | | Comprehensive loss | $(160,056) | $(292,754) | $(251,056) | - Revenue increased by **97.9% from $232.9 million in 2021 to $461.1 million in 2022**[418](index=418&type=chunk) - Net loss improved from **$294.4 million in 2021 to $165.7 million in 2022**[418](index=418&type=chunk) - Total non-operating (income) expense, net, shifted from an expense of **$34.2 million in 2021 to an income of $121.4 million in 2022**, driven by fair value adjustments of SPAC Warrants and Earn Out liability[418](index=418&type=chunk) [Consolidated Statements of Mezzanine Equity and Stockholders' Deficit](index=79&type=section&id=Consolidated%20Statements%20of%20Mezzanine%20Equity%20and%20Stockholders'%20Deficit) The consolidated statements reflect the Business Combination on January 18, 2022, where Legacy Sonder was the accounting acquirer. All redeemable convertible preferred stock and exchangeable shares were converted into common stock, reclassified from mezzanine equity to permanent equity. This resulted in a significant increase in additional paid-in capital and a reduction in the accumulated deficit - The Business Combination on January 18, 2022, led to the conversion of all redeemable convertible preferred stock and exchangeable shares into common stock[553](index=553&type=chunk)[565](index=565&type=chunk) - Mezzanine equity, which totaled **$568.5 million at December 31, 2021**, was eliminated in 2022 due to these conversions[415](index=415&type=chunk) - Additional paid-in capital increased substantially from **$43.1 million in 2021 to $947.6 million in 2022**[415](index=415&type=chunk) - Accumulated deficit decreased from **$814.8 million in 2021 to $980.6 million in 2022**[415](index=415&type=chunk) [Consolidated Statements of Cash Flows](index=82&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Sonder's net cash used in operating activities decreased by $30.4 million to $149.0 million in 2022, primarily due to a lower net loss and the adoption of ASC 2016-02. Net cash provided by financing activities significantly increased to $400.6 million, driven by proceeds from Delayed Draw Notes and the Business Combination/PIPE offering. This resulted in a net increase in cash and restricted cash of $219.2 million in 2022 Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | 2022 | 2021 | 2020 | | :-------------------------------- | :--------- | :--------- | :--------- | | Net cash used in operating activities | $(149,015) | $(179,391) | $(202,502) | | Net cash used in investing activities | $(30,993) | $(21,587) | $(14,850) | | Net cash provided by financing activities | $400,599 | $148,571 | $226,561 | | Effects of foreign exchange on cash | $(1,346) | $(760) | $(347) | | Net change in cash and restricted cash | $219,245 | $(53,167) | $8,862 | | Cash and restricted cash at end of year | $289,186 | $69,941 | $123,108 | - Net cash used in operating activities decreased by **$30.4 million year-over-year**, primarily du

Sonder Holdings Inc. (NASDAQ:SOND) Q4 2022 Earnings Conference Call March 1, 2023 5:00 PM ET Company Participants Jon Charbonneau - Vice President & Head, Investor Relations Francis Davidson - Co-Founder & Chief Executive Officer Chris Berry - Chief Accounting Officer Conference Call Participants Jed Kelly - Oppenheimer & Company Nick Jones - JMP Securities Ron Josey - Citi Operator Good day and thank you for standing by, and welcome to Sonder's Fourth Quarter 2022 Financial Results. At this time, all parti ...

Sonder Holdings, Inc. (NASDAQ:SOND) Q3 2022 Earnings Conference Call November 9, 2022 5:00 PM ET Company Participants Jon Charbonneau - Vice President of Investor Relations Francis Davidson - Co-Founder & Chief Executive Officer Sanjay Banker - President & Chief Financial Officer Conference Call Participants Jed Kelly - Oppenheimer & Company Nick Jones - JMP Securities Operator Good day and thank you for standing by and welcome to Sonder Holdings, Inc. Third Quarter 2022 Earnings Call. [Operator Instruction ...

[FORM 10-Q Filing Information](index=1&type=section&id=FORM%2010-Q%20Filing%20Information) This section provides key details about the Form 10-Q filing, including registrant information, filing period, and filer status - Registrant: **Sonder Holdings Inc.**, based in San Francisco, California[2](index=2&type=chunk) - Filing Period: Quarterly report for the period ended **June 30, 2022**[2](index=2&type=chunk) | Filer Status | | | | | :--- | :--- | :--- | :--- | | Large accelerated filer | ☐ | Accelerated filer | ☐ | | Non-accelerated filer | ☒ | Smaller reporting company | ☐ | | | | Emerging growth company | ☒ | [Special Note Regarding Forward-Looking Statements](index=3&type=section&id=SPECIAL%20NOTE%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) This section highlights the presence of forward-looking statements, their nature, and the inherent risks and uncertainties involved - The report contains forward-looking statements concerning future events or financial/operating performance, identifiable by words like 'may,' 'will,' 'expects,' 'plans,' 'anticipates,' 'believes,' 'estimates,' and 'potential'[8](index=8&type=chunk) - Key forward-looking statements include plans to achieve **positive quarterly Free Cash Flow** within **2023**, financial forecasts, expectations for business, revenue, expenses, profitability, and trends in travel and hospitality industries[10](index=10&type=chunk) - Readers are cautioned not to rely on these statements as predictions of future events, as outcomes are subject to risks and uncertainties detailed in the 'Risk Factors' section[10](index=10&type=chunk) [Summary of Risk Factors](index=5&type=section&id=SUMMARY%20OF%20RISK%20FACTORS) This section summarizes key risks that could cause actual results to differ from expectations, including financial and market challenges - Actual results may differ materially from **forecasts and projections**[17](index=17&type=chunk) - The plan to reach **positive quarterly Free Cash Flow** within **2023** without additional fundraising may be unsuccessful, and restructuring initiatives might not yield expected benefits[17](index=17&type=chunk) - Business results could be negatively affected by changes in travel, hospitality, real estate, and vacation markets, as well as the inability to negotiate satisfactory leases or onboard new properties timely[17](index=17&type=chunk) [Part I - Financial Information](index=7&type=section&id=Part%20I%20-%20Financial%20Information) This part presents the company's unaudited condensed consolidated financial statements for the quarter ended June 30, 2022, along with management's discussion and analysis of financial condition and results of operations, disclosures about market risk, and controls and procedures [Item 1. Financial Statements](index=7&type=section&id=Item%201.%20Financial%20Statements) This item includes the unaudited condensed consolidated financial statements, comprising the balance sheets, statements of operations and comprehensive loss, statements of mezzanine equity and stockholders' equity (deficit), and statements of cash flows, along with their accompanying notes [Condensed Consolidated Balance Sheets](index=8&type=section&id=CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) The condensed consolidated balance sheets provide a snapshot of the company's assets, liabilities, and equity as of June 30, 2022, compared to December 31, 2021, highlighting significant changes in cash, operating lease assets/liabilities, and equity due to the Business Combination | | June 30, 2022 (in thousands) | December 31, 2021 (in thousands) | | :--- | :--- | :--- | | **Assets** | | | | Cash | $359,500 | $69,726 | | Total current assets | $399,217 | $98,981 | | Property and equipment, net | $35,605 | $27,461 | | Operating lease right-of-use assets | $1,109,208 | $— | | Other non-current assets | $15,384 | $22,037 | | Total assets | $1,559,414 | $148,479 | | **Liabilities, mezzanine equity and stockholders' equity (deficit)** | | | | Total current liabilities | $243,549 | $263,628 | | Non-current operating lease liabilities | $1,050,285 | $— | | Deferred rent | $— | $66,132 | | Long-term debt, net | $161,285 | $10,736 | | Other non-current liabilities | $2,033 | $3,906 | | Total liabilities | $1,457,152 | $344,402 | | Total mezzanine equity | $— | $568,483 | | Total stockholders' equity (deficit) | $102,262 | $(764,406) | | Total liabilities, mezzanine equity and stockholders' equity (deficit) | $1,559,414 | $148,479 | - Cash significantly increased from **$69.7 million** at **December 31, 2021**, to **$359.5 million** at **June 30, 2022**, primarily due to the **Business Combination** and **Delayed Draw Notes**[22](index=22&type=chunk) - **Operating lease right-of-use assets** and corresponding liabilities were recognized as of **June 30, 2022**, totaling **$1.1 billion** and **$1.2 billion** (current and non-current), respectively, following the adoption of **Topic 842**[22](index=22&type=chunk) [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=9&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS%20AND%20COMPREHENSIVE%20LOSS) The condensed consolidated statements of operations and comprehensive loss present the company's financial performance for the three and six months ended June 30, 2022, compared to the same periods in 2021, showing significant revenue growth but continued net losses | | Three Months Ended June 30, | Six Months Ended June 30, | | :--- | :--- | :--- | | | **2022 (in thousands)** | **2021 (in thousands)** | **2022 (in thousands)** | **2021 (in thousands)** | | Revenue | $121,322 | $47,269 | $201,788 | $78,827 | | Cost of revenue (excluding depreciation and amortization) | $79,187 | $43,745 | $153,083 | $82,950 | | Operations and support | $54,003 | $34,889 | $102,270 | $60,312 | | General and administrative | $31,277 | $24,615 | $68,258 | $56,764 | | Research and development | $8,088 | $4,066 | $15,713 | $7,385 | | Sales and marketing | $12,414 | $4,888 | $21,875 | $7,399 | | Restructuring and other charges | $4,033 | $— | $4,033 | $— | | Total costs and expenses | $189,002 | $112,203 | $365,232 | $214,810 | | Loss from operations | $(67,680) | $(64,934) | $(163,444) | $(135,983) | | Total interest expense, net and other expense (income), net | $(24,022) | $8,945 | $(142,209) | $16,414 | | Loss before income taxes | $(43,658) | $(73,879) | $(21,235) | $(152,397) | | Provision for income taxes | $117 | $70 | $148 | $93 | | Net loss | $(43,775) | $(73,949) | $(21,383) | $(152,490) | | Net loss per share, basic and diluted | $(0.20) | $(6.41) | $(0.10) | $(13.74) | - Revenue increased by **156.7%** to **$121.3 million** for the three months ended **June 30, 2022**, and by **156.0%** to **$201.8 million** for the six months ended **June 30, 2022**, compared to the prior year periods[23](index=23&type=chunk) - **Net loss decreased significantly** for both periods, from **$(73.9) million** to **$(43.8) million** for the three months, and from **$(152.5) million** to **$(21.4) million** for the six months, primarily due to fair value adjustments of **SPAC Warrants** and **Earn Out liability**[23](index=23&type=chunk) [Condensed Consolidated Statements of Mezzanine Equity and Stockholders' Equity (Deficit)](index=10&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20MEZZANINE%20EQUITY%20AND%20STOCKHOLDERS'%20EQUITY%20(DEFICIT)) This section details the changes in mezzanine equity and stockholders' equity (deficit) for the three and six months ended June 30, 2022 and 2021, reflecting the impact of the Business Combination, stock-based compensation, and net losses - As of **June 30, 2022**, **total stockholders' equity (deficit) improved** to **$102.3 million** from **$(764.4) million** at **December 31, 2021**, largely due to the **Business Combination** converting preferred stock and exchangeable shares into common stock[25](index=25&type=chunk)[30](index=30&type=chunk) - The **Business Combination** on **January 18, 2022**, resulted in the conversion of all redeemable convertible preferred stock and exchangeable shares into common stock, reclassifying them from mezzanine equity to permanent equity[25](index=25&type=chunk)[30](index=30&type=chunk) - **Stock-based compensation expense** for the three and six months ended **June 30, 2022**, was **$5.1 million** and **$11.7 million**, respectively[25](index=25&type=chunk)[30](index=30&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=14&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) The condensed consolidated statements of cash flows present the cash inflows and outflows from operating, investing, and financing activities for the six months ended June 30, 2022 and 2021, showing a substantial increase in cash from financing activities in 2022 | Cash Flow Activity | Six Months Ended June 30, 2022 (in thousands) | Six Months Ended June 30, 2021 (in thousands) | | :--- | :--- | :--- | | Net cash used in operating activities | $(91,615) | $(96,253) | | Net cash used in investing activities | $(18,381) | $(6,900) | | Net cash provided by financing activities | $400,300 | $158,729 | | Effects of foreign exchange on cash | $499 | $(258) | | Net change in cash and restricted cash | $290,803 | $55,318 | - **Net cash provided by financing activities increased significantly** to **$400.3 million** in the first six months of **2022**, primarily due to proceeds from the **Business Combination** and **PIPE offering** (**$325.9 million**) and **Delayed Draw Notes** (**$159.2 million**)[37](index=37&type=chunk) - **Net cash used in operating activities remained substantial** at **$(91.6) million** for the six months ended **June 30, 2022**, similar to **$(96.3) million** in the prior year, reflecting ongoing operational losses[36](index=36&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=16&type=section&id=NOTES%20TO%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) This section provides detailed disclosures and explanations for the figures presented in the condensed consolidated financial statements, covering business description, accounting policies, revenue recognition, fair value measurements, debt, leases, warrants, commitments, equity, and related party transactions [Note 1. Description of Business](index=16&type=section&id=Note%201.%20Description%20of%20Business) This note describes Sonder Holdings Inc. as a provider of short and long-term accommodations, headquartered in San Francisco, California, and details the consummation of its business combination with Gores Metropoulos II, Inc. on January 18, 2022 - **Sonder provides short and long-term accommodations** in North America, Europe, and the Middle East, with units selected, designed, and managed directly by the company[39](index=39&type=chunk) - The company consummated a **Business Combination** with **Gores Metropoulos II, Inc.** on **January 18, 2022**, becoming a publicly traded entity[41](index=41&type=chunk) [Note 2. Summary of Significant Accounting Policies](index=16&type=section&id=Note%202.%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines the basis of presentation, principles of consolidation, impact of the COVID-19 pandemic, use of estimates, and recently adopted and issued accounting pronouncements, including the adoption of ASC 842 for leases - The condensed consolidated financial statements are prepared in conformity with **U.S. GAAP** and include **Sonder Holdings Inc.**, its wholly-owned subsidiaries, and one variable interest entity (VIE)[42](index=42&type=chunk) - The **COVID-19 pandemic** materially adversely affected financial results in **2021** and **H1 2022**, with uncertain recovery[45](index=45&type=chunk)[46](index=46&type=chunk) - **Sonder** adopted **ASC 842 (Leases)** on **January 1, 2022**, resulting in the recognition of **$1.1 billion** in **Operating lease right-of-use assets** and **$1.2 billion** in **lease liabilities**[49](index=49&type=chunk) [Note 3. Revenue](index=18&type=section&id=Note%203.%20Revenue) This note details Sonder's revenue recognition policy, primarily from short-term and month-to-month accommodations, and disaggregates total revenue between direct and indirect channels for the reported periods - Revenue is generated from **direct bookings (Sonder.com, Sonder app)** and **indirect bookings (third-party OTAs)**, recognized on a straight-line basis over the guest stay[53](index=53&type=chunk) | Revenue Source | Three Months Ended June 30, 2022 (in thousands) | Three Months Ended June 30, 2021 (in thousands) | Six Months Ended June 30, 2022 (in thousands) | Six Months Ended June 30, 2021 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Direct revenue | $42,843 | $23,924 | $74,777 | $44,005 | | Indirect revenue | $78,479 | $23,345 | $127,011 | $34,822 | | **Total revenue** | **$121,322** | **$47,269** | **$201,788** | **$78,827** | - Indirect revenue channels accounted for a larger portion of total revenue in **2022**, with three third-party corporate and OTAs representing over **34%**, **18%**, and **12%** of net accounts receivable at **June 30, 2022**[54](index=54&type=chunk)[55](index=55&type=chunk) [Note 4. Fair value measurement and financial instruments](index=18&type=section&id=Note%204.%20Fair%20value%20measurement%20and%20financial%20instruments) This note explains the fair value hierarchy used for financial instruments and details the valuation of liabilities measured at fair value on a recurring basis, including SPAC Warrants and Earn Out liability, and their changes over the periods - **Sonder** uses a three-level **Fair value hierarchy** (**Level 1: unadjusted quoted prices**, **Level 2: observable inputs**, **Level 3: unobservable inputs**) for financial instruments[56](index=56&type=chunk)[57](index=57&type=chunk) - As of **June 30, 2022**, the **Earn Out liability** (**$1.6 million**, **Level 2**) and **SPAC Warrants** liability (**Public Warrants** **$0.27 million**, **Private Placement Warrants** **$0.165 million**, both **Level 3**) were recorded in other non-current liabilities[69](index=69&type=chunk) | | June 30, 2022 (in thousands) | | :--- | :--- | | **Level 2 Liabilities:** | | | Earn Out liability | $1,595 | | **Level 3 Liabilities:** | | | Public Warrants | $270 | | Private Placement Warrants | $165 | | **Total financial liabilities measured and recorded at fair value** | **$2,030** | [Note 5. Debt](index=21&type=section&id=Note%205.%20Debt) This note provides details on the company's debt instruments, including the Delayed Draw Notes, the conversion of 2021 Convertible Promissory Notes, the repayment of the 2018 Loan and Security Agreement, and the status of its credit facilities - In **January 2022**, **Sonder** drew down **$165 million** in **Delayed Draw Notes**, with a five-year maturity and interest at **SOFR + 0.26% (floor 1%) + 9.0%**[75](index=75&type=chunk)[78](index=78&type=chunk) - The **2021 Convertible Promissory Notes**, totaling **$165.0 million**, were automatically converted into **19,017,105 shares** of common stock in **January 2022** upon the **Business Combination**, resulting in a **$29.5 million** **gain on conversion**[82](index=82&type=chunk)[84](index=84&type=chunk) - The **2018 Loan and Security Agreement** was paid down by **$24.5 million** in **January 2022**, incurring **$2.5 million** in **debt extinguishment costs**[86](index=86&type=chunk) - As of **June 30, 2022**, **Sonder** was in compliance with all financial covenants for its **2020 Credit Facility** (no borrowings outstanding, **$32.0 million** in letters of credit) and **2020 Québec Credit Facility** (no borrowings)[91](index=91&type=chunk)[92](index=92&type=chunk) [Note 6. Leases](index=23&type=section&id=Note%206.%20Leases) This note details the adoption of ASC 842 for leases, its material impact on the balance sheet by recognizing ROU assets and lease liabilities, and provides supplemental information on lease costs, weighted-average terms, discount rates, and future lease obligations - **Sonder** adopted **Topic 842** on **January 1, 2022**, using the **modified retrospective approach**, resulting in **$1.1 billion** in **ROU assets** and **$1.2 billion** in **lease liabilities**[95](index=95&type=chunk)[98](index=98&type=chunk) | Lease Metric | Three Months Ended June 30, 2022 (in thousands) | Six Months Ended June 30, 2022 (in thousands) | | :--- | :--- | :--- | | Operating lease cost | $65,876 | $128,823 | | Short-term lease cost | $477 | $479 | | Variable lease cost | $944 | $1,587 | | **Total operating lease cost** | **$67,297** | **$130,889** | - As of **June 30, 2022**, the **weighted average remaining lease term** was **7.4 years**, and the **weighted average discount rate** was **9.4%**[100](index=100&type=chunk) - **Future lease payments for leases not yet commenced** total **$1.9 billion**, with terms of **one to 17 years**, commencing between **2022** and **2026**[103](index=103&type=chunk) [Note 7. Preferred and Common Stock Warrants](index=25&type=section&id=Note%207.%20Preferred%20and%20Common%20Stock%20Warrants) This note describes the status and accounting treatment of preferred and common stock warrants, including their conversion to equity or classification as liabilities, following the Business Combination - Upon the **Business Combination** in **January 2022**, **Series A and B preferred stock warrants** converted into **150,092 common shares**, while **Series C and D warrants** converted into common stock warrants and were reclassified to equity (**$2.0 million**)[106](index=106&type=chunk)[107](index=107&type=chunk) - Delayed Draw Warrants (**2,475,000 shares** at **$12.50 exercise price**) were issued in **January 2022** and are **equity-classified**, valued at **$5.6 million**[108](index=108&type=chunk)[110](index=110&type=chunk) - **Public Warrants** (**9,000,000**) and **Private Placement Warrants** (**5,500,000**) are **liability-classified**, with fair values decreasing significantly from **January 18, 2022**, to **June 30, 2022**, due to stock price decrease[111](index=111&type=chunk)[112](index=112&type=chunk)[113](index=113&type=chunk)[114](index=114&type=chunk) [Note 8. Commitments and Contingencies](index=26&type=section&id=Note%208.%20Commitments%20and%20Contingencies) This note outlines the company's commitments, including surety bonds, and discusses ongoing legal and regulatory matters, specifically a lawsuit related to Legionella bacteria contamination at the Broad Street Property - **Sonder** has **$67.3 million** in commitments from **surety providers**, with **$33.4 million** outstanding as of **June 30, 2022**[115](index=115&type=chunk) - The company is involved in a lawsuit with the **Broad Street Landlord** over **Legionella contamination**, with **Sonder** withholding rent and filing counterclaims for significant damages[118](index=118&type=chunk) - An estimated accrual of **$3.4 million** for **loss contingencies** related to legal matters was recorded as of **June 30, 2022**[119](index=119&type=chunk) [Note 9. Guarantees and Indemnification](index=27&type=section&id=Note%209.%20Guarantees%20and%20Indemnification) This note describes the indemnification agreements with directors and the standard indemnification provisions in commercial agreements, noting no material costs incurred to date - **Sonder** has **indemnification agreements** with all directors, requiring indemnification to the fullest extent permitted by **Delaware law**, with no material demands made to date[120](index=120&type=chunk) - Limited indemnification provisions are included in commercial agreements for breaches or intellectual property infringement claims, with no material costs incurred to date[121](index=121&type=chunk) [Note 10. Exchangeable shares and redeemable convertible preferred stock](index=28&type=section&id=Note%2010.%20Exchangeable%20shares%20and%20redeemable%20convertible%20preferred%20stock) This note details the conversion of Exchangeable Shares and Redeemable Convertible Preferred Stock into common stock upon the Business Combination, impacting the company's equity structure - Upon the **Business Combination**, all **Legacy Sonder Canada Exchangeable Common Shares** were exchanged into **28,037,196 Post-Combination Exchangeable Common Shares**, with a net carrying value of **$43.2 million**[123](index=123&type=chunk) - All **redeemable convertible preferred stock** (**75,767,082 shares**) were automatically converted into **111,271,424 post-combination Sonder common stock** for a value of **$518.8 million** upon the **Business Combination**[126](index=126&type=chunk) [Note 11. Common Stock](index=29&type=section&id=Note%2011.%20Common%20Stock) This note explains the impact of the Business Combination on common stock, including the retroactive adjustment of share figures, the authorized share capital, and the shares reserved for future issuance under various plans - The **Business Combination** on **January 18, 2022**, resulted in **Legacy Sonder being the accounting acquirer**, with prior period share activity retroactively adjusted using a **1.4686 recapitalization exchange ratio**[127](index=127&type=chunk) - **Sonder's amended certificate of incorporation** authorizes **690,000,000 shares**, including **440,000,000 General Common Stock** and **250,000,000 Preferred Stock**[129](index=129&type=chunk) | Shares Reserved for Future Issuance (as of June 30, 2022) | Amount | | :--- | :--- | | Conversion of exchangeable shares | 40,000,000 | | Outstanding stock options | 29,235,358 | | Outstanding restricted stock units (RSUs) | 9,889,782 | | Outstanding market stock units (MSUs) | 14,499,972 | | Shares issuable pursuant to Earn Out liability | 14,500,000 | | Shares available for grant under the ESPP | 6,564,031 | | Shares available for grant under the 2021 Equity Incentive Plan | 19,515,277 | | **Total common stock reserved for future issuance** | **151,179,386** | [Note 12. Stockholders' Equity (Deficit)](index=30&type=section&id=Note%2012.%20Stockholders'%20Equity%20(Deficit)) This note details the company's equity incentive plans, including the Legacy, 2021 Management, 2021 Equity, and ESPP plans, and provides information on stock-based compensation expense, stock options, and performance/market-based equity awards - Total **stock-based compensation expense** for the three and six months ended **June 30, 2022**, was **$5.1 million** and **$11.7 million**, respectively[140](index=140&type=chunk) - The **2021 Management Equity Incentive Plan** allows for awards covering up to **14,500,000 additional common shares** upon achieving certain benchmark share prices (**Triggering Events**)[135](index=135&type=chunk) - In **May 2022**, **14,499,972 Market Stock Units (MSUs)** were issued to key executives, with a total **grant-date fair value** of **$4.2 million**, vesting upon **stock price targets** within **five years**[156](index=156&type=chunk)[157](index=157&type=chunk) [Note 13. Net Loss Per Common Share](index=35&type=section&id=Note%2013.%20Net%20Loss%20Per%20Common%20Share) This note presents the computation of basic and diluted net loss per common share, with retrospective adjustments for the Business Combination, and lists potential common shares excluded from diluted EPS due to their anti-dilutive effect | | Three Months Ended June 30, | Six Months Ended June 30, | | :--- | :--- | :--- | | | **2022 (in thousands)** | **2021 (in thousands)** | **2022 (in thousands)** | **2021 (in thousands)** | | Net loss attributable to common stockholders | $(43,775) | $(73,949) | $(20,203) | $(152,490) | | Basic weighted-average common shares outstanding | 215,085,516 | 11,538,790 | 197,658,542 | 11,099,760 | | **Basic net loss per share** | **$(0.20)** | **$(6.41)** | **$(0.10)** | **$(13.74)** | - Potential common shares totaling **73.9 million** (including options, RSUs, MSUs, and exchangeable shares) were excluded from diluted EPS calculation as of **June 30, 2022**, because their inclusion would be **anti-dilutive**[159](index=159&type=chunk) [Note 14. Income Taxes](index=35&type=section&id=Note%2014.%20Income%20Taxes) This note provides the provision for income taxes and effective tax rates for the reported periods, explaining that the difference from the U.S. statutory rate is primarily due to a full valuation allowance against net deferred tax assets | Period | Provision for Income Taxes (in thousands) | Effective Tax Rate | | :--- | :--- | :--- | | Three Months Ended June 30, 2022 | $117 | 0.3% | | Six Months Ended June 30, 2022 | $148 | 0.7% | | Three Months Ended June 30, 2021 | $70 | 0.1% | | Six Months Ended June 30, 2021 | $93 | 0.1% | - The **effective tax rate** differs from the **U.S. statutory rate of 21%** primarily due to a **full valuation allowance** related to **net deferred tax assets**, given the company's history of losses[160](index=160&type=chunk) [Note 15. Related party transactions](index=35&type=section&id=Note%2015.%20Related%20party%20transactions) This note discloses related party transactions, specifically the repayment of a promissory note from CEO Francis Davidson and the conversion of 2021 Convertible Promissory Notes held by certain investors - **CEO Francis Davidson's** **$24.6 million** **promissory note** (including **$1.1 million interest**) was repaid in full prior to the **Business Combination** by selling **1,855,938 shares** of **Legacy Sonder's common stock** back to the company[161](index=161&type=chunk)[162](index=162&type=chunk) - **Sonder's** investors and their affiliates held **$43.3 million** of the **2021 Convertible Promissory Notes**, which automatically converted into common stock before the **Business Combination**[163](index=163&type=chunk) [Note 16. Business Combination](index=36&type=section&id=Note%2016.%20Business%20Combination) This note provides comprehensive details of the Business Combination with GMII on January 18, 2022, including the merger structure, consideration paid to Legacy Sonder securityholders, accounting treatment as a reverse recapitalization, and the impact of PIPE investments - The **Business Combination** with **GMII** was consummated on **January 18, 2022**, with **Legacy Sonder being the accounting acquirer** (**reverse recapitalization**)[164](index=164&type=chunk)[172](index=172&type=chunk) - Legacy Sonder securityholders received approximately **190.2 million shares** of **GMII's** common stock as aggregate merger consideration (excluding Earn Out shares)[166](index=166&type=chunk) - The **Business Combination** and **PIPE investments** increased cash by approximately **$401.9 million**, net of debt paydown and transaction costs[172](index=172&type=chunk)[175](index=175&type=chunk) [Note 17. Restructuring Activities](index=38&type=section&id=Note%2017.%20Restructuring%20Activities) This note details the restructuring activities undertaken as part of the Cash Flow Positive Plan announced on June 9, 2022, which included a significant reduction in corporate and frontline roles and associated one-time charges - On **June 9, 2022**, **Sonder** announced its **Cash Flow Positive Plan**, including a restructuring that reduced **corporate roles by 21%** and **frontline roles by 7%**[176](index=176&type=chunk) - Total **restructuring and other charges** of **$4.0 million** were incurred in the three months ended **June 30, 2022**, with **$2.4 million** paid in **Q2 2022**[176](index=176&type=chunk) [Note 18. Subsequent Events](index=38&type=section&id=Note%2018.%20Subsequent%20Events) This note discloses a subsequent event regarding the company's intention to implement an option exchange program for eligible employees, subject to Board approval and further details in a Schedule TO filing - On **August 10, 2022**, **Sonder** announced its intention to implement an **option exchange program** for eligible employees, allowing them to exchange outstanding options for new options at fair market value[177](index=177&type=chunk) - The program's criteria and terms are pending final Board approval and will be detailed in a tender offer statement on **Schedule TO filing**[178](index=178&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=39&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, key business metrics, non-GAAP financial measures, and critical accounting policies, offering insights into performance drivers and future outlook [Overview](index=39&type=section&id=Overview) This overview reiterates Sonder's mission to revolutionize hospitality through design and technology, highlighting its end-to-end model, diverse product portfolio of approximately 18,700 Live and Contracted Units across 41 cities, and proprietary technology for operations and guest experience - **Sonder's** mission is to revolutionize hospitality through design and technology, offering short and long-term accommodations[181](index=181&type=chunk) - As of **June 30, 2022**, **Sonder** operates approximately **18,700 Live and Contracted Units** across **41 cities in 10 countries**, utilizing **proprietary technology** for management and guest services[181](index=181&type=chunk)[182](index=182&type=chunk) [Management Discussion Regarding Opportunities, Challenges and Risks](index=39&type=section&id=Management%20Discussion%20Regarding%20Opportunities,%20Challenges%20and%20Risks) This section discusses key drivers and challenges, including the company's supply growth strategy shift towards capital-light leases, efforts to attract and retain guests through direct bookings, continuous investment in technology, and the financial implications of becoming a public company post-Business Combination - **Sonder** pivoted its supply growth strategy in **Q2 2022** to slow new unit signings and focus on converting already contracted units, aiming for '**capital light\' lease signings** as part of its **Cash Flow Positive Plan**[185](index=185&type=chunk) - **Direct bookings** as a percentage of booked revenue were **43%** for the three months ended **June 30, 2022**, with expectations to remain at current levels or decrease moderately[187](index=187&type=chunk)[188](index=188&type=chunk) - Significant resources are invested in **proprietary technology** for both guest experience ('lobby on your phone') and internal operations (underwriting, booking engine, pricing software)[189](index=189&type=chunk)[190](index=190&type=chunk) - Becoming a **public company** post-**Business Combination** (**January 18, 2022**) increased cash by **$401.9 million** but also introduced additional annual expenses for regulatory compliance and public company practices[193](index=193&type=chunk)[194](index=194&type=chunk) [Sonder's Business Model](index=42&type=section&id=Sonder's%20Business%20Model) This section outlines Sonder's business model, which involves leasing properties under multi-year contracts (Fixed Lease, Mixed Lease, Revenue Share) and generating revenue from guest stays. It emphasizes the shift towards 'capital light' lease signings under the Cash Flow Positive Plan - **Sonder** secures properties through multi-year contracts with real estate owners, primarily **Fixed Lease, Mixed Lease, Revenue Share** agreements[196](index=196&type=chunk)[202](index=202&type=chunk) - Revenue is generated nightly from **guest bookings via Sonder.com, the Sonder app, or OTA partners**[198](index=198&type=chunk) - Under the **Cash Flow Positive Plan**, **Sonder** aims to sign only **100% \'capital light\' units**, reducing upfront capital investment[197](index=197&type=chunk) [Restructuring](index=42&type=section&id=Restructuring) This section details the restructuring efforts initiated on June 9, 2022, as part of the Cash Flow Positive Plan, which involved a 21% reduction in corporate roles and a 7% reduction in frontline roles, incurring $4.0 million in one-time charges - On **June 9, 2022**, **Sonder** announced a **Cash Flow Positive Plan** to achieve **positive quarterly free cash flow by 2023**[199](index=199&type=chunk) - The restructuring resulted in an approximate **21%** reduction of corporate roles and **7%** reduction of frontline roles[199](index=199&type=chunk) - One-time **restructuring costs** of **$4.0 million** were incurred as of **June 30, 2022**, with **$2.4 million** paid in **Q2 2022**[199](index=199&type=chunk) [Key Business Metrics and Non-GAAP Financial Measures](index=42&type=section&id=Key%20Business%20Metrics%20and%20Non-GAAP%20Financial%20Measures) This section presents key operational metrics and non-GAAP financial measures used to evaluate performance, including Live Units, Bookable Nights, Occupied Nights, RevPAR, ADR, Occupancy Rate, Property Level Profit (Loss), and Adjusted EBITDA, along with their definitions and period-over-period changes | Metric | June 30, 2022 | June 30, 2021 | Change (%) | | :--- | :--- | :--- | :--- | | Live Units (End of Period) | 8,400 | 5,500 | 53% | | Bookable Nights (3 months) | 725,000 | 473,000 | 53% | | Occupied Nights (3 months) | 598,000 | 321,000 | 86% | | Total Portfolio | 18,700 | 14,800 | 26% | | RevPAR (3 months) | $167 | $100 | 67% | | ADR (3 months) | $203 | $147 | 38% | | Occupancy Rate (3 months) | 82% | 68% | 14% | - **Live Units** increased by **53%** year-over-year to **8,400**, driving a **53%** increase in **Bookable Nights** and an **86%** increase in **Occupied Nights** for the three months ended **June 30, 2022**[204](index=204&type=chunk)[207](index=207&type=chunk)[208](index=208&type=chunk) - **RevPAR** increased by **67%** to **$167** for the three months ended **June 30, 2022**, driven by a **38%** **ADR** increase and a **14 percentage point** increase in **Occupancy Rate**, reflecting robust travel recovery and a strategy shift to higher occupancy[212](index=212&type=chunk) | Non-GAAP Measure | Three Months Ended June 30, | Six Months Ended June 30, | | :--- | :--- | :--- | | | **2022 (in thousands)** | **2021 (in thousands)** | **2022 (in thousands)** | **2021 (in thousands)** | | Property Level Profit (Loss) | $7,786 | $(12,836) | $(14,562) | $(31,996) | | Property Level Profit (Loss) Margin | 6.4% | -27.2% | -7.2% | -40.6% | | Adjusted EBITDA | $(52,597) | $(58,273) | $(136,051) | $(111,050) | - **Property Level Profit (PLP)** improved to **$7.8 million (6.4% margin)** for **Q2 2022** from a loss of **$12.8 million (-27.2% margin)** in **Q2 2021**, driven by increased revenue and **Live Units**[224](index=224&type=chunk) - **Adjusted EBITDA** loss decreased by **9.7%** to **$(52.6) million** for **Q2 2022**, but increased by **22.5%** to **$(136.1) million** for **H1 2022**, primarily due to increased **Cost of revenue** and operating expenses, partially offset by revenue growth[232](index=232&type=chunk)[233](index=233&type=chunk) [Components of Results of Operations](index=49&type=section&id=Components%20of%20Results%20of%20Operations) This section defines the various components of the company's results of operations, including revenue, cost of revenue, operations and support, general and administrative, research and development, sales and marketing, restructuring charges, interest expense, and income taxes, explaining what each category entails - Revenue is derived from guest accommodations, net of discounts and refunds, booked directly or through third-party OTAs, recognized over the length of stay[239](index=239&type=chunk)[240](index=240&type=chunk) - **Cost of revenue** includes fixed and variable costs like rental payments, cleaning, and payment processing charges, expected to increase with bookings and portfolio expansion[241](index=241&type=chunk) - Operating expenses (**Operations and Support**, **General and Administrative**, **Research and Development**, **Sales and Marketing**) are detailed, with expectations for increases due to growth, headcount, and public company costs[242](index=242&type=chunk)[243](index=243&type=chunk)[244](index=244&type=chunk)[245](index=245&type=chunk) - **Restructuring and other charges** primarily consist of employee termination benefits from the **Cash Flow Positive Plan**[246](index=246&type=chunk) [Results of Operations - Three Months Ended June 30, 2022 and 2021](index=51&type=section&id=Results%20of%20Operations%20-%20Three%20Months%20Ended%20June%2030,%202022%20and%202021) This section provides a detailed comparative analysis of the company's financial performance for the three months ended June 30, 2022, versus 2021, highlighting significant revenue growth, changes in costs and expenses, and the impact of fair value adjustments on net loss | | Three Months Ended June 30, | Change | | :--- | :--- | :--- | | | **2022 (in thousands)** | **2021 (in thousands)** | **$ Change** | **% Change** | | Revenue | $121,322 | $47,269 | $74,053 | 156.7% | | Cost of revenue (excl. D&A) | $79,187 | $43,745 | $35,442 | 81.0% | | Operations and support | $54,003 | $34,889 | $19,114 | 54.8% | | General and administrative | $31,277 | $24,615 | $6,662 | 27.1% | | Research and development | $8,088 | $4,066 | $4,022 | 98.9% | | Sales and marketing | $12,414 | $4,888 | $7,526 | 154.0% | | Restructuring and other charges | $4,033 | $— | $4,033 | n.m | | Total costs and expenses | $189,002 | $112,203 | $76,799 | 68.4% | | Net loss | $(43,775) | $(73,949) | $30,174 | (40.8)% | - Revenue increased by **156.7%** due to a **67.0%** increase in **RevPAR** (driven by travel recovery and higher occupancy strategy) and **52.7%** **Live Unit** growth[252](index=252&type=chunk) - Total costs and expenses increased by **68.4%** to **$189.0 million**, primarily driven by increased **rent expense** (**$26.2 million**), **employee compensation** (**$7.2 million** in operations & support, **$5.7 million** in G&A), and **channel transaction fees** (**$6.5 million**)[254](index=254&type=chunk)[255](index=255&type=chunk)[256](index=256&type=chunk)[257](index=257&type=chunk)[258](index=258&type=chunk)[259](index=259&type=chunk) - Net loss decreased by **40.8%** to **$(43.8) million**, significantly impacted by positive **fair value adjustments** of **SPAC Warrants** (**$11.3 million**) and **Earn Out liability** (**$23.3 million**)[251](index=251&type=chunk)[262](index=262&type=chunk) [Results of Operations - Six Months Ended June 30, 2022 and 2021](index=53&type=section&id=Results%20of%20Operations%20-%20Six%20Months%20Ended%20June%2030,%202022%20and%202021) This section provides a detailed comparative analysis of the company's financial performance for the six months ended June 30, 2022, versus 2021, showing substantial revenue growth, increased operating expenses, and a significant reduction in net loss due to fair value adjustments | | Six Months Ended June 30, | Change | | :--- | :--- | :--- | | | **2022 (in thousands)** | **2021 (in thousands)** | **$ Change** | **% Change** | | Revenue | $201,788 | $78,827 | $122,961 | 156.0% | | Cost of revenue (excl. D&A) | $153,083 | $82,950 | $70,133 | 84.5% | | Operations and support | $102,270 | $60,312 | $41,958 | 69.6% | | General and administrative | $68,258 | $56,764 | $11,494 | 20.2% | | Research and development | $15,713 | $7,385 | $8,328 | 112.8% | | Sales and marketing | $21,875 | $7,399 | $14,476 | 195.6% | | Restructuring and other charges | $4,033 | $— | $4,033 | n.m | | Total costs and expenses | $365,232 | $214,810 | $150,422 | 70.0% | | Net loss | $(21,383) | $(152,490) | $131,107 | (86.0)% | - Revenue increased by **156.0%** due to a **60.3%** increase in **RevPAR** (travel recovery and higher occupancy strategy) and **52.7%** **Live Unit** growth[265](index=265&type=chunk) - Total costs and expenses increased by **70.0%** to **$365.2 million**, driven by increased **rent expense** (**$53.9 million**), **employee compensation** (**$15.6 million** in operations & support), and **channel transaction fees** (**$11.7 million**)[266](index=266&type=chunk)[267](index=267&type=chunk)[268](index=268&type=chunk)[269](index=269&type=chunk)[270](index=270&type=chunk)[272](index=272&type=chunk) - Net loss significantly decreased by **86.0%** to **$(21.4) million**, primarily due to positive **fair value adjustments** of **SPAC Warrants** (**$37.6 million**), **Earn Out liability** (**$96.5 million**), and **share-settled redemption feature** (**$29.5 million**)[264](index=264&type=chunk)[275](index=275&type=chunk) [Liquidity and Capital Resources](index=56&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's liquidity position, primarily cash of $359.5 million, and its goal to achieve cash flow positivity. It details cash flow activities from operations, investing, and financing, and outlines off-balance sheet arrangements and contractual obligations - As of **June 30, 2022**, principal liquidity was **$359.5 million** in cash, with a primary focus on reaching **cash flow positivity** within **2023**[278](index=278&type=chunk) - The **Business Combination** increased cash by approximately **$401.9 million**, net of debt paydown and transaction costs[279](index=279&type=chunk) - Cumulative losses since inception reached **$836.2 million** as of **June 30, 2022**, with operations financed by **equity investments**, **Convertible Notes**, and **Delayed Draw Term Loan**[280](index=280&type=chunk) | Cash Flow Activity | Six Months Ended June 30, 2022 (in thousands) | Six Months Ended June 30, 2021 (in thousands) | | :--- | :--- | :--- | | Net cash used in operating activities | $(91,615) | $(96,253) | | Net cash used in investing activities | $(18,381) | $(6,900) | | Net cash provided by financing activities | $400,300 | $158,729 | | Effects of foreign exchange on cash | $499 | $(258) | | Net change in cash and restricted cash | $290,803 | $55,318 | | Contractual Obligations (as of June 30, 2022, in thousands) | Total | Less than 1 Year | 1-3 Years | 4-5 Years | More than 5 Years | | :--- | :--- | :--- | :--- | :--- | :--- | | Delayed Draw Notes | $200,500 | $— | $— | $200,500 | $— | | Operating Lease Obligations | $1,676,113 | $126,755 | $721,064 | $357,269 | $471,024 | | **Total** | **$1,876,613** | **$126,755** | **$721,064** | **$557,769** | **$471,024** | [Critical Accounting Policies and Estimates](index=59&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section describes the critical accounting policies and estimates that require significant management judgment and assumptions, including revenue recognition, leases (ASC 842), long-lived assets, income taxes, and stock-based compensation, emphasizing potential impacts of changes in estimates - **Revenue recognition** is recognized on a straight-line basis over the guest stay, net of discounts and refunds, with payments prior to check-in recorded as deferred revenue[305](index=305&type=chunk) - **Leases (ASC 842)** are recognized on the balance sheet as **right-of-use assets** and **lease liabilities** under **ASC 842**, with the **incremental borrowing rate** used to discount lease payments[308](index=308&type=chunk)[309](index=309&type=chunk) - Impairment testing for **long-lived assets** (ROU assets, fixed assets) is based on comparing carrying value to undiscounted future cash flows, requiring significant judgment[314](index=314&type=chunk) - **Stock-based compensation expense** is measured at grant date fair value using the **Black-Scholes-Merton model**, with key assumptions including expected term, volatility, dividend yield, and risk-free interest rate[318](index=318&type=chunk)[320](index=320&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=61&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section discusses the company's exposure to market risks, primarily foreign currency exchange risk due to global operations and interest rate risk related to outstanding debt, and notes that inflation has not had a material effect to date - **Sonder** is exposed to **foreign currency exchange risk** due to international revenue and expenses denominated in foreign currencies, which can impact financial results[325](index=325&type=chunk)[326](index=326&type=chunk) - The company is exposed to **interest rate risk** related to its outstanding debt, but a hypothetical **100 basis points** change would not have a material impact as of **June 30, 2022**[328](index=328&type=chunk)[329](index=329&type=chunk) - **Inflation** has not had a material effect on the business, but significant inflationary pressures could adversely impact operations and financial condition[330](index=330&type=chunk) [Item 4. Controls and Procedures](index=62&type=section&id=Item%204.%20Controls%20and%20Procedures) This section reports on the evaluation of disclosure controls and procedures, concluding they were not effective due to a material weakness in capturing and recording lease agreements. Remediation efforts, including new policies and systems, are underway - Management concluded that **disclosure controls and procedures** were not effective as of **June 30, 2022**, due to a **material weakness**[333](index=333&type=chunk) - A **material weakness** was identified in **internal control over financial reporting** related to the design and implementation of systems to capture and record **lease agreements** timely and accurately[334](index=334&type=chunk) - Remediation efforts include engaging a **third-party consultant**, developing formal policies, implementing a **lease administration system**, and providing additional personnel training, with testing planned for **H2 2022**[335](index=335&type=chunk) [Part II - Other Information](index=63&type=section&id=Part%20II%20-%20Other%20Information) This part contains additional information not covered in the financial statements, including legal proceedings, a comprehensive discussion of risk factors, details on equity securities, defaults, mine safety disclosures, other information, and a list of exhibits [Item 1. Legal Proceedings](index=63&type=section&id=Item%201.%20Legal%20Proceedings) This item discloses ongoing legal proceedings, specifically a lawsuit with the Broad Street Landlord regarding Legionella bacteria contamination, where Sonder withheld rent and filed counterclaims - **Sonder** is involved in litigation with the **Broad Street Landlord** over **Legionella bacteria contamination**, where **Sonder** withheld rent due to **constructive eviction** and filed counterclaims for damages[338](index=338&type=chunk) - The lawsuit seeks no less than **$3.9 million** in damages from **Sonder**, which intends to vigorously defend itself[338](index=338&type=chunk) [Item 1A. Risk Factors](index=63&type=section&id=Item%201A.%20Risk%20Factors) This item provides a comprehensive discussion of various risks that could materially affect the company's business, operating results, financial condition, or the market price of its securities, categorized into business and industry, government regulation, indebtedness and liquidity, and ownership of securities [Risks Related to Our Business and Industry](index=63&type=section&id=Risks%20Related%20to%20Our%20Business%20and%20Industry) This section details risks inherent to Sonder's business and the hospitality industry, including operational complexities and market sensitivity - Company **forecasts and projections** are subject to significant uncertainty, and actual results may differ materially if underlying assumptions prove incorrect[341](index=341&type=chunk)[342](index=342&type=chunk) - The **Cash Flow Positive Plan**, including restructuring and focus on '**capital light\' properties**, may not achieve anticipated benefits, potentially affecting growth and profitability[343](index=343&type=chunk)[344](index=344&type=chunk) - Business is highly sensitive to trends in **travel, hospitality, real estate markets**, and general economic conditions, including the ongoing impact of the **COVID-19 pandemic**[345](index=345&type=chunk)[346](index=346&type=chunk)[347](index=347&type=chunk) - Challenges include inability to negotiate satisfactory leases, delays in property development, difficulties in integrating new properties, limited operating history, and intense competition from traditional hotels and short-term rental services[348](index=348&type=chunk)[352](index=352&type=chunk)[354](index=354&type=chunk)[355](index=355&type=chunk)[388](index=388&type=chunk) - Reliance on **third-party distribution channels (OTAs)** poses risks if relationships are terminated or terms change, potentially impacting revenue and brand visibility[392](index=392&type=chunk)[393](index=393&type=chunk)[394](index=394&type=chunk) - Operational results vary significantly period-to-period due to factors like **Live Units**, occupancy rates, seasonality, pricing, and external events, making future performance difficult to predict[398](index=398&type=chunk)[399](index=399&type=chunk)[400](index=400&type=chunk)[401](index=401&type=chunk) - International expansion exposes the company to risks such as tailoring services, regulatory compliance, local market practices, and geopolitical factors[402](index=402&type=chunk) - The business depends on its **reputation and brand strength**, which can be adversely affected by guest service quality, safety concerns, negative publicity, and actions of third parties[407](index=407&type=chunk)[408](index=408&type=chunk)[409](index=409&type=chunk) - Risks related to technology include adapting to changes, reliance on third-party systems, security breaches, system failures, and supply chain interruptions[431](index=431&type=chunk)[433](index=433&type=chunk)[437](index=437&type=chunk)[441](index=441&type=chunk)[447](index=447&type=chunk) [Risks Related to Government Regulation](index=91&type=section&id=Risks%20Related%20to%20Government%20Regulation) This section highlights regulatory risks, including evolving short-term rental laws, compliance costs, and stringent privacy regulations - Operating in various jurisdictions subjects **Sonder** to diverse and evolving **regulatory and taxation requirements**, including zoning, licensing, and short-term rental laws, which can increase costs and limit growth[479](index=479&type=chunk)[480](index=480&type=chunk) - Compliance with **public company** laws (**Sarbanes-Oxley, Dodd-Frank, Nasdaq listing**) incurs substantial legal, accounting, and management costs, diverting resources[485](index=485&type=chunk) - Compliance with the **Americans with Disabilities Act (ADA)** and similar international laws may require substantial resources for property modifications or website accessibility, and non-compliance could lead to fines or lawsuits[486](index=486&type=chunk) - Processing personal data exposes the company to significant liabilities under privacy laws like **GDPR, CCPA, CPRA, and PIPEDA**, with potential for fines, reputational damage, and operational changes[487](index=487&type=chunk)[488](index=488&type=chunk)[489](index=489&type=chunk)[490](index=490&type=chunk) - Failure to comply with consumer protection, marketing, and advertising laws, or industry-specific payment regulations (**PCI DSS**), could result in fines, restrictions, or harm to business[491](index=491&type=chunk)[492](index=492&type=chunk) [Risks Related to Indebtedness and Liquidity](index=94&type=section&id=Risks%20Related%20to%20Indebtedness%20and%20Liquidity) This section addresses risks associated with the company's debt and capital needs, including potential for additional capital and restrictive covenants - **Sonder** may require **additional capital** to support business growth, and future equity or debt financings could **dilute existing stockholders** or impose restrictive covenants[493](index=493&type=chunk) - **Indebtedness of $172.4 million** (**Delayed Draw Notes**) increases vulnerability to economic conditions, reduces cash flow for operations, and limits financial flexibility[494](index=494&type=chunk) - **Credit facilities contain financial covenants** (e.g., minimum EBITDA, liquidity) and restrictions that limit operational flexibility; non-compliance could lead to debt acceleration and adverse financial impact[495](index=495&type=chunk)[496](index=496&type=chunk) [Risks Related to Ownership of Our Securities](index=95&type=section&id=Risks%20Related%20to%20Ownership%20of%20Our%20Securities) This section outlines risks pertinent to owning Sonder's securities, including market volatility, dilution, and specific warrant risks - An **active trading market** for **Sonder's** securities may not be sustained, leading to volatility and potential decline in price, and **delisting from Nasdaq** could adversely affect liquidity and capital raising ability[497](index=497&type=chunk)[498](index=498&type=chunk) - **Resales of a significant number of common stock shares**, especially after market stand-off periods, could depress the market price and impair future capital raising[499](index=499&type=chunk) - The market price of common stock and warrants may be volatile due to various factors, including financial results, key personnel changes, compliance issues, and broader market disruptions[500](index=500&type=chunk)[501](index=501&type=chunk) - **Public Warrants may expire worthless** as their **exercise price is $11.50 per share**, and they can be amended or redeemed by the company under certain conditions, potentially disadvantageous to holders[506](index=506&type=chunk)[507](index=507&type=chunk)[508](index=508&type=chunk) - Provisions in the Amended and Restated Bylaws designate the **Delaware Court of Chancery** as the exclusive forum for certain stockholder actions, potentially limiting stockholders' choice of judicial forum[509](index=509&type=chunk)[510](index=510&type=chunk)[511](index=511&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=95&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This item states that there were no unregistered sales of equity securities or use of proceeds to report - No unregistered sales of equity securities or use of proceeds to report[512](index=512&type=chunk) [Item 3. Defaults Upon Senior Securities](index=95&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item indicates that there were no defaults upon senior securities during the reporting period - No defaults upon senior securities to report[513](index=513&type=chunk) [Item 4. Mine Safety Disclosures](index=95&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item states that mine safety disclosures are not applicable to the company - Mine safety disclosures are not applicable[514](index=514&type=chunk) [Item 5. Other Information](index=95&type=section&id=Item%205.%20Other%20Information) This item states that there is no other information to report for the period - No other information to report[515](index=515&type=chunk) [Item 6. Exhibits](index=96&type=section&id=Item%206.%20Exhibits) This item lists the exhibits filed as part of the Form 10-Q report, including offer letters, certifications, and Inline XBRL documents | Exhibit No. | Exhibit | Filed or Furnished Herewith | | :--- | :--- | :--- | | 10.1 | Offer Letter from Sonder USA Inc. to Deeksha Hebbar, dated August 1, 2022. | x | | 10.2 | Offer Letter from Sonder USA Inc. to Chris Berry, dated June 23, 2022. | x | | 31.1 | Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities and Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | x | | 31.2 | Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities and Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | x | | 32.1* | Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes Oxley Act of 2002 | x | | 32.2* | Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes Oxley Act of 2002 | x | | 101.INS | Inline XBRL Instance Document | x | | 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) | x | [Signatures](index=98&type=section&id=Signatures) This section contains the required signatures for the Form 10-Q report, certifying its submission on behalf of Sonder Holdings Inc - The report was signed by **Sanjay Banker, President and CFO**, on **August 12, 2022**[525](index=525&type=chunk)

Financial Data and Key Metrics Changes - The company reported a revenue of $121 million for Q2 2022, representing a 157% increase year-over-year, marking the highest quarterly revenue in company history [27] - Free cash flow improved to negative $45 million before one-time restructuring costs, compared to negative $62 million in Q1 2022 and negative $60 million a year ago, with a free cash flow margin of negative 37% [9][34] - RevPAR grew by 67% year-over-year to a record $167, while occupancy rate increased by 1400 basis points to 82% [32] Business Line Data and Key Metrics Changes - The live unit portfolio grew by 53% year-over-year, ending the quarter with approximately 8,400 live units [28] - Bookable nights increased by 53%, leading to an 86% growth in occupied nights [32] - The company opened 14 new properties worldwide in Q2, including three in New York City, surpassing 1,000 live units in that market [28] Market Data and Key Metrics Changes - The total portfolio reached approximately 18,700 units, representing a 26% year-over-year growth [30] - The company anticipates continued growth in urban travel, which is expected to recover through 2023 [33] Company Strategy and Development Direction - The company shifted its focus from hyper growth to steady growth, emphasizing sustainable positive free cash flow [11] - Key levers for the cash flow positive plan include cutting cash costs, reducing plan signings, raising the bar on incremental lease signings, and focusing on rapid payback RevPAR initiatives [13][41] - The company aims to achieve positive quarterly free cash flow within 2023 without additional fundraising [12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the decision to shift strategy due to changing macro conditions, believing it was prudent to adapt [11] - The company expects revenue in Q3 2022 to exceed $120 million, representing over 78% year-over-year growth, despite anticipated lower RevPAR due to onboarding new properties [36] - Management noted that the travel market is not fully recovered and sees significant headroom for growth in 2023 [68] Other Important Information - The company announced an option exchange program for employees to exchange underwater stock options for new options at fair market value [23] - The restructuring plan is expected to yield nearly $55 million in annualized cost savings [13] Q&A Session Summary Question: Can you elaborate on the cash capital light supply strategy and competitor behavior? - Management explained that capital light deals are cash accretive within six months, with various structures to achieve this, and noted that competitors vary by deal and market [45][47] Question: What strategies are in place to increase RevPAR in 2023? - Management highlighted ancillary revenue streams and the growth of corporate travel accounts as key strategies to bolster RevPAR [50][53] Question: How are July trends compared to June, particularly regarding occupancy and RevPAR? - Management indicated that while Q2 had robust travel dynamics, they do not expect the same level of demand in Q3 and Q4, but see recovery potential in 2023 [67][68]

Company Overview - Sonder is revolutionizing hospitality with tech-powered service and thoughtfully designed accommodations[16] - The company operates in over 35 markets spanning ten countries and three continents[16] - As of June 30, 2022, Sonder has 8400 Live Units and a Total Portfolio of 18700 units[31] Market Opportunity - The estimated total addressable global lodging market in 2023 is $835 billion[36] - The estimated untapped lodging markets in 2023 is $522 billion[35] - The estimated global short-term rental market in 2023 is $101 billion[36] Financial Performance (Q2 2022) - Revenue reached $121 million, a 157% year-over-year improvement[52] - RevPAR was $167, a 67% year-over-year improvement[52] - Occupancy Rate was 82%, a 1400 bps year-over-year improvement[52] - Average Daily Rate (ADR) was $203, a 38% year-over-year improvement[52] - Free Cash Flow was $(45) million, with margin improving to (37)% from (127)% in Q2 2021[52] Cash Flow Positive Plan - The company aims to cut cash costs by approximately $85 million annually compared to Q1 2022[56] - Q3 2022 Free Cash Flow excluding restructuring costs is projected to be approximately $(45) million[54] - 2H 2022 Free Cash Flow excluding restructuring costs is expected to be better than $(70) million[54]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ___________________________________ FORM 10-Q ___________________________________ (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______ to ______ (Registrant's telephone number, including area code ...

Δ Sonder 1 Investor Presentation May 2022 Sonder The Henry, London Opened in April 2022 Disclaimer Use of Non-GAAP Financial Measures Sonder supplements its consolidated financial statements presented in accordance with generally accepted accounting principles in the United States ("GAAP"), by providing additional financial measures that are not prepared in accordance with GAAP, including Property Level Costs, Property Level Profit (Loss), Property Level Profit (Loss) Margin, Adjusted EBITDA, Adjusted EBITD ...