Sonder(US:SOND)2023-11-14 21:14PART I - FINANCIAL INFORMATION Overview of the company's financial statements, management's discussion, market risk, and internal controls Financial Statements Presents Sonder's unaudited condensed consolidated financial statements, including balance sheets, income statements, cash flows, and detailed notes Condensed Consolidated Balance Sheets Total assets increased to $1.72 billion, liabilities grew to $1.91 billion, and cash decreased to $166.0 million, widening the stockholders' deficit | Account | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | Change (in thousands) | | :--- | :--- | :--- | :--- | | Assets | | | | | Cash and cash equivalents | $166,045 | $246,624 | ($80,579) | | Total current assets | $233,258 | $312,930 | ($79,672) | | Operating lease ROU assets | $1,439,572 | $1,209,486 | $230,086 | | Total assets | $1,716,337 | $1,573,612 | $142,725 | | Liabilities & Stockholders' Deficit | | | | | Total current liabilities | $329,266 | $250,641 | $78,625 | | Non-current operating lease liabilities | $1,382,693 | $1,166,538 | $216,155 | | Long-term debt, net | $196,398 | $172,950 | $23,448 | | Total liabilities | $1,909,025 | $1,593,559 | $315,466 | | Total stockholders' deficit | ($192,688) | ($19,947) | ($172,741) | - A 1-for-20 reverse stock split became effective on September 20, 2023, and prior period balances have been adjusted to reflect this change1643 Condensed Consolidated Statements of Operations and Comprehensive Loss Q3 2023 revenue grew 29.2% to $160.9 million, with net loss improving to $64.3 million, while the nine-month net loss widened to $196.0 million | Metric (in thousands, except per share) | Q3 2023 | Q3 2022 | 9 Months 2023 | 9 Months 2022 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $160,896 | $124,526 | $439,037 | $326,314 | | Loss from operations | ($56,930) | ($61,268) | ($183,685) | ($224,712) | | Net loss | ($64,276) | ($73,689) | ($196,034) | ($108,392) | | Basic and diluted net loss per common share | ($5.86) | ($6.83) | ($17.97) | ($10.70) | Condensed Consolidated Statements of Cash Flows Net cash used in operating activities improved to $74.0 million, while financing activities provided minimal cash, leading to an $82.0 million decrease in cash | Cash Flow Activity (in thousands) | Nine months ended Sep 30, 2023 | Nine months ended Sep 30, 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | ($74,038) | ($124,092) | | Net cash used in investing activities | ($12,105) | ($26,089) | | Net cash provided by financing activities | $2,758 | $400,555 | | Net change in cash, cash equivalents, and restricted cash | ($81,953) | $248,514 | Notes to the Condensed Consolidated Financial Statements Notes detail a 1-for-20 reverse stock split, revenue disaggregation, debt, lease obligations, restructuring charges, and ongoing legal matters - On September 19, 2023, the company filed for a 1-for-20 reverse stock split of its common stock, which became effective on September 20, 2023. All share and per-share data have been retroactively adjusted4398 | Revenue Source (in thousands) | Nine months ended Sep 30, 2023 | Nine months ended Sep 30, 2022 | | :--- | :--- | :--- | | Direct revenue | $210,444 | $149,010 | | Indirect revenue | $228,593 | $177,304 | | Total revenue | $439,037 | $326,314 | - The company is undertaking a portfolio optimization program to renegotiate leases at underperforming properties, which may result in contract modifications, terminations, and potential material expenses136 - Restructuring charges of $2.1 million were incurred in the first nine months of 2023 due to a 14% reduction in the corporate workforce, following a $4.0 million charge in 2022 for a previous restructuring148149 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's 'Cash Flow Positive Plan,' focusing on revenue growth, improved free cash flow, and liquidity position - The company's primary focus is its 'Cash Flow Positive Plan,' aiming to achieve sustainable positive Free Cash Flow (FCF) without additional fundraising. FCF improved by $62.7 million for the nine months ended Sep 30, 2023, compared to the same period in 2022161 | Key Metric | Q3 2023 | Q3 2022 | Change | 9 Months 2023 | 9 Months 2022 | Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Live Units (End of Period) | 11,800 | 9,000 | +31.1% | 11,800 | 9,000 | +31.1% | | Bookable Nights | 1,048,000 | 786,000 | +33.3% | 2,904,000 | 2,200,000 | +32.0% | | RevPAR | $153 | $158 | -3.2% | $151 | $148 | +2.0% | | ADR | $185 | $189 | -2.1% | $185 | $185 | 0.0% | | Occupancy Rate | 82.8% | 84.0% | -1.2 p.p. | 81.9% | 80.0% | +1.9 p.p. | - Revenue for Q3 2023 increased by 29.2% to $160.9 million, primarily due to a 31.1% increase in Live Units and a 31.3% increase in Occupied Nights188 - The company believes its existing cash of $166.0 million is sufficient to fund operations and debt obligations for at least the next 12 months, given significant reductions in cash burn239241 Quantitative and Qualitative Disclosures About Market Risk No material changes in the company's market risk from previously provided information in its Annual Report on Form 10-K - There have been no material changes in the company's market risk since the fiscal year ended December 31, 2022260 Controls and Procedures Management concluded that disclosure controls and procedures were not effective due to material weaknesses in internal control over financial reporting - The principal executive officer and principal financial officer concluded that disclosure controls and procedures were not effective as of the end of the period261 - Material weaknesses related to the process for recording lease agreements, control activities, and the control environment, as disclosed in the 2022 Form 10-K, still existed as of September 30, 2023262263264 - A remediation plan is underway, including process improvements and additional training, but the controls have not operated for a sufficient period to be considered effective265266 PART II - OTHER INFORMATION Details on legal proceedings, risk factors, equity sales, defaults, mine safety, and other disclosures Legal Proceedings The company is involved in a legal dispute over withheld rent and a previously filed class action lawsuit was dismissed - Sonder is in a legal dispute with the landlord of its 20 Broad Street, NY property regarding withheld rent payments. On October 13, 2023, a court granted summary judgment on liability against Sonder, which filed a notice of appeal on November 13, 2023271 - A class action lawsuit filed against the company in August 2023 concerning a November 2022 data security incident was voluntarily dismissed with prejudice by the plaintiff on October 30, 2023272 Risk Factors No material changes to previously disclosed risk factors, including achieving positive free cash flow and maintaining Nasdaq listing - There have been no material changes to the risk factors disclosed in the company's Annual Report on Form 10-K for the fiscal year ended December 31, 2022274 - Key risks highlighted include: - Potential failure to achieve positive, sustainable Free Cash Flow without additional fundraising - Negative effects from inflation and other macroeconomic factors - Inability to negotiate satisfactory leases for new properties or renew existing ones - Potential failure to maintain compliance with Nasdaq's minimum bid price rule276 Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities No unregistered sales of equity securities, use of proceeds, or issuer purchases of equity securities were reported - None278 Defaults Upon Senior Securities No defaults upon senior securities were reported - None279 Mine Safety Disclosures This item is not applicable to the company - Not applicable280 Other Information No directors or Section 16 officers adopted or terminated any Rule 10b5-1 trading arrangements during the quarter - No directors or Section 16 officers adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter ended September 30, 2023281 Exhibits This section lists the exhibits filed as part of the quarterly report, including certifications and XBRL data files - A list of exhibits filed with the report is provided, including officer certifications and interactive data files283284