Sonder(SOND) - 2025 Q2 - Quarterly Report

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