Sonder(US:SOND)2024-11-04 21:39Portfolio and Operations - As of March 31, 2024, Sonder had approximately 11,900 Live Units, representing a 14.4% increase from 10,400 units as of March 31, 2023[182]. - The total portfolio decreased by 15.9% to 15,300 units from 18,200 units, indicating a strategic focus on optimizing the property portfolio[182]. - A portfolio optimization program was implemented in November 2023, resulting in agreements to exit or reduce rent for approximately 4,300 units across 105 buildings[170]. - The five largest cities accounted for approximately 34.5% of Live Units, indicating a concentrated market presence[185]. Financial Performance - Revenue for the three months ended March 31, 2024, was $133,479,000, representing an 11.7% increase from $119,503,000 in the same period of 2023[192]. - Cost of revenue (excluding depreciation and amortization) increased to $100,363,000, a 9.3% rise from $91,813,000 year-over-year[194]. - Total operating expenses were $201,140,000, slightly down by 0.4% from $201,973,000 in the previous year[194]. - Loss from operations improved to $(67,661,000), a reduction from $(82,470,000) in the prior year, reflecting a 17.9% decrease in operational losses[194]. - Net loss for the period was $(50,487,000), compared to $(81,865,000) in the same quarter of 2023, indicating a 38.3% improvement[194]. - Adjusted EBITDA for the three months ended March 31, 2024, was $(56.1) million, compared to $(63.9) million for the same period in 2023, indicating a reduction in losses[217]. Cash Flow and Financing - The company aims to achieve sustainable positive free cash flow (FCF), with adjusted FCF improving to $(28.5) million for Q1 2024, a $12.1 million improvement from $(40.3) million in Q1 2023[173]. - Free Cash Flow (FCF) adjusted was $(28,519,000), showing a 29.8% improvement compared to $(40,597,000) in the previous year[210]. - Cash balance as of March 31, 2024, was $40.8 million, held for working capital purposes[222]. - The company expects to achieve annualized run-rate free cash flow improvements of over $40 million from lease renegotiations affecting approximately 4,300 units[221]. - Total debt obligations as of March 31, 2024, amounted to $196.1 million, with $1 million classified as short-term[228]. - The company has incurred net cash used in operating activities of $40.3 million for the three months ended March 31, 2024, compared to $35.3 million for the same period in 2023[233]. - The company has received $16 million in financing from existing noteholders during June and July 2024[221]. Cost Management - A reduction in force plan was announced on February 20, 2024, affecting 106 corporate roles (17% of the workforce), expected to yield $11 million in annualized cost savings[171]. - Operating lease related rent charges for the three months ended March 31, 2024, were $82.6 million, up from $75.8 million in the same period in 2023[217]. - Interest expense, net increased by 28.3% to $7,323,000 from $5,707,000 year-over-year[200]. - The provision for income taxes rose significantly to $187,000, a 233.9% increase from $56,000 in the prior year[204]. Internal Controls and Legal Matters - The company continues to face material weaknesses in internal control over financial reporting, particularly related to lease agreements and asset impairments[246][249]. - The Broad Street Landlord is seeking $36.9 million in alleged damages related to a breach of lease, with a trial date yet to be set[253]. Strategic Initiatives - Direct revenue as a percentage of total revenue stabilized above 40%, reaching 43.6% for the three months ended March 31, 2024[179]. - The strategic licensing agreement with Marriott announced in summer 2024 is expected to enhance technology integration and guest experience[165]. - The company is focused on achieving sustainable positive FCF as part of its Cash Flow Positive Plan[208]. - Foreign exchange fluctuations negatively impacted cash, decreasing the total cash balance by $0.3 million in Q1 2024[238].