Sonder Holdings Inc. (SOND) on Q4 2021 Results - Earnings Call Transcript

Operator: Thank you for standing by and welcome to Sonder Fourth Quarter and full-year 2021 financial results conference call. At this time, all participants are in a listen-only mode. After the speaker’s presentation, there will be a question-and-answer session. I would now like to hand the call over to Nicolas Chammas, VP of Strategic Finance and Investment Analysis. Nicolas Chammas: Thank you, Operator. Good morning, ladies and gentlemen. Thank you for joining us to discuss Sonder's Fourth Quarter and full-year 2021 financial results. Joining me on the call today are Francis Davidson, Co-Founder and Chief Executive Officer and Sanjay Banker, President and Chief Financial Officer. Full details of our results and additional management commentary are available in our fourth quarter and full-year 2021 shareholder letter, which can be found on the Investor Relations section of our website at investors.Sonder.com. Before we start, I'd like to remind you that the following discussion and the Q&A session at the end contain forward-looking statements, including the not limited to Sonder market opportunities and future financial and operating results that involve risks and uncertainties that may cause actual results to differ materially from those discussed here. Additional information about the factors that could cause our actual results to differ from those expressed or implied in any forward-looking statements can be found in Sonder's periodic and other SEC filings. The forward-looking statements and discussion of risks in this conference call, including responses to your questions. Are based on current expectations as of today. And Sonder assumes no obligation to update or revise them, whether as a result of new developments or otherwise, except as required by law. Also, the following discussion contains non - GAAP financial measures. For a reconciliation of these non - GAAP financial measures to the most directly comparable financial measure calculated and presented in accordance with GAAP, please see our shareholder letter posted to our Investor Relations website. Now, I will turn the call over to Francis Davidson Solder's Co-founder and CEO. Francis Davidson: Thanks, Nick. Good afternoon everyone and thank you for joining us today for our inaugural earnings call. I'm very pleased to be reporting on our strong fourth-quarter and full-year 2021 results. We ended 2021 with great momentum and became a Nasdaq listed company in January. We are really excited about reaching this milestone and entering 2022 with a strong balance sheet that will allow us to lean into the travel recovery and capitalize on the opportunities it opens up for our disruptive model. Despite another very challenging year for the hospitality sector, we accelerated year-over-year revenue growth three quarters in a row, from 151% in Q2 to 155% in Q3 and we finished the year with Q4 revenues growing 204% versus the prior year. In addition, our free cash flow burn improved meaningfully year-over-year from a 173% of revenue in Q4 2020 to 61% of revenue in Q4, 2021. We're encouraged by the progress we've made here as we continue on our path to profitability. Our mission is to instill a revolution in the world of hospitality. Travelers, in particular Millennial's and Gen Z, love our tech-enabled design forward accommodations and high-quality, consistent guest experience. We believe that a better, more modern, and more affordable guest experience paired with efficient operations and powered by proprietary technology is the way to win in this nearly $1 trillion industry. Throughout 2021, we pursued our ambitious growth strategy while focusing on five key levers, which we believe will drive long-term value for our shareholders. Our first lever is delivering an incredible guest experience. We have relentless focus on improving the guest experience through inspiring design, modern service, and consistent quality. Technology enabled us to consistently deliver an exceptional guest experience, even as we rapidly scale our global footprint. We made great strides in 2021, including rolling out new features and the Sonder app such as improved messaging to enable seamless communication with our guests, as well as an automated in-app early check-in and late checkout request, we also successfully rolled out metrics for internally tracking guest satisfaction and we are encouraged by early results. One metric we track as the proxy for the strength of our brand and guest’s loyalties, our direct bookings on sonder.com, despite minimal marketing spend sonder.com continues to be our largest single channel for bookings and accounted for 44% of total bookings in Q4 and 45% of total bookings in 2021. We believe delivering a better guest experience will translate the more direct bookings and increased customer loyalty, resulting in lower customer acquisition costs, higher lifetime value, improved RevPars, and higher cash flows to Sonder. Our second lever is securing high-quality properties at attractive economics. One of the major drivers of our top-line growth is our ability to source, sign, and open high-quality apartments and hotels in desirable locations with superior unit economics. In 2021, we added over 70 new properties to our live unit portfolio across more than 25 U.S. and international markets and top tourist destinations, including New York City, Nashville, Miami, Dubai, and Mexico City. Our total portfolio grew by over 6,000 units and we ended the year with 18,100 units, representing 51% year-over-year growth. And our pipeline of prospects of deals also continues to improve and grow as a result of our unique value proposition to Real Estate Owners, who partner with us to better monetize their assets. Through 2021, we've scaled the size of our Real Estate Team and have put new processes and systems in place to enable us to capture supply even faster clip in 2022 and beyond. Our third lever is our capacity to generate strong RevPars. And the near-term, our RevPars growth will benefit from travel, market recovery tailwinds, as well as our own initiatives to enhance guest demand generation and monetization. These pursuits include innovative revenue management tactics, improved distribution capabilities, expansion into new demand pools like corporate travel and ciliary revenue opportunities such as monetizing any unit upgrades and interstate cleanings. In the fourth quarter, we achieved RevPar growth of 92% year-over-year to a $142 per night. This was a major milestone as we surpassed pre -pandemic RevPar levels for the first time since the onset of the pandemic. Even more exciting is the runway still ahead of us on RevPar growth, given the broader market still lags pre -pandemic levels. According to one of our key performance benchmarks tracked by travel research, in 2021 U.S. upper upscale hotels recovered only 58% of 2019 RevPars. Meanwhile, we reached 82% of our 2019 RevPars in 2021. We attribute this out-performance to our unique value proposition and the success of our RevPar improvement initiatives combined with a stronger market dynamic for leisure travel. Importantly, we expect the overall market recovery to fuel our RevPar growth as STR project comparable hotels to grow RevPar by 56% in 2022. Despite strong sequential quarter-over-quarter momentum and travel demand during 2021, we acknowledge that the ever changing macro environment has the potential to make the overall travel recovery and our corresponding growth trajectory uneven. For example, we experienced dampening effects from Omicron beginning in late November, 2021, and into Q1 of this year. More recently, however, we've been encouraged by a resurgence of pre -Omicron booking patterns. Our fourth lever is to continue driving operating efficiencies. Our core philosophy has always been to use technology to cut inefficiencies from our operations. The sufficiency mindset allows us to increase service levels which boost RevPar, or directly reduce our cost structure. In 2021, we introduced several initiatives with the goal of improving property level cost efficiency. For example, we've piloted a re-architecture of our back-of-house operations to improve our room turnover productivity. We also expanded our rollout of Internet connected thermostats and we further shifted various guest support functions to lower-cost geographies. The rollout of additional self-service features on our mobile app has also increased app adoption and utilization by Sonder guests which has improved our service efficiencies. Our fifth and final lever is our people and culture we firmly believe that the people who work at Sonder and the culture that defines how we work set the tone for our innovation and execution. The onset of the pandemic tested our results, but our team bounced back impressively in 2021. Our front-line team is our key to delivering our exceptional guest experiences around the world. And we're committed to initiatives that support engagement and retention among those teams. And most recent internal survey is reveal the highly engaged team ready to meet historic pent-up demand for a successful 2022. One notable change to our human capital strategy in 2021, was our formal move to what we call our work choice model. It means that we allow our non front-line employees to work from anywhere they choose. At the end of the day, we care about results and trust that our team will do what's best for them, and in turn, bring their best selves to work at Sonder. Plus, allows our team the opportunity to explore additional Sonder markets and work directly from our spaces, a trend of nomadic work. We're very excited about our uniquely suited to serve. We believe our work choice model also broadens our talent pool as recruiting is no longer geographically constrained, which we believe will enable us to better attract and retain employees. In addition to executing against our five key levers, we also took important steps in 2021 to strengthen our governance. We appointed Janet Spears, formerly a managing director in Weston region head a Bank of America Merrill Lynch, to our board as audit committee chair. And we also named Hilda Perez-Alvarado global CEO of the hotel and hospitality group at JLL, to our Board. Both these women are phenomenal leaders who bring highly relevant industry and public company experience to our business. We're really proud of what we accomplished in 2021. We entered 2022 with a great depth experience to supply and growth engine that's coming. Demand generation capabilities that have consistently beat our benchmarks. Technology that allows us to operate more efficiently and engaged team, ready to make this year knockout success. And with that, I will turn the call over to our President and CFO, Sanjay Banker to provide you with further details on our recent financial performance and an update on our growth outlook. Sanjay Banker: Thank you, Francis. I'd also like to welcome all of you. And I look forward to working with you now that Sonder as a public company, so proud of our record results for the fourth quarter and full-year 2021. All while working tirelessly to enter the public markets, which took place on January 19th. This was both an important milestone in Sonder journey, and the major funding event in which we secured approximately $400 million in fresh capital to strengthen our balance sheet, enabling us to pursue our ambitious plans to revolutionize hospitality. Turning to our fourth quarter and full-year 2021 results are key operating metrics, including slide units, total portfolio, bookable nights, occupied nights, and RevPar. Improved meaningfully year-over-year and versus prior quarters. There isn't a testament to our differentiated offering, proprietary technology and operational excellence. In the fourth quarter 2021, we delivered our 3rd consecutive record revenue quarter with $87 million in total revenue, representing an increase of 204% year-over-year for the full-year 2021 our revenues more than doubled versus the prior year to $233 million, an increased 63% versus 2019. Our growth was fueled by the ongoing rebounding Global Leisure Travel strong live unit growth driving a large increase in bookable nights and early traction from various RevPars improvement initiatives such as our mid-2021 corporate travel launch, In addition, our adjusted EBITDA margin improved year-over-year from a 207% loss in Q4 2020, to 67% loss in Q4, 2021. On the supply side our year-end 2021 live units and total portfolio grew year-over-year by 69% and 51% respectively. We considered total portfolio growth to be our most important supply side metric as it provides the best forward-looking view of contracted future supply. Our total portfolio grew to 18,100 units as of December 31st, which we believe will drive strong live unit growth over the next two years. In addition, we ended 2021 with over 7,600 live units, which our guests can an increasingly do book directly on the Sonder Mobile App or website or on an OTA partners sites. As a result of our live unit growth, at Q4 2021 bookable nights increased by 59% year-over-year and contributed to over two million bookable nights in 2021. On the demand side, we saw a strong occupancy rates of 69% in Q4 and 68% for full-year 2021, representing a 300 basis point improvement from full-year 2020. In addition, our Q4 average daily rates or ADRs were $206, and 89% increase versus the prior year. Our strong occupancy rate and ADRs led to RevPar of $142 in Q4 2021, representing an increase of 92% year-over-year. Importantly, Q4 RevPar reached 112% of our Q4 2019 levels and was fueled by market recovery, our outperformance versus the market, and the traction we're seeing with our RevPar improvement initiatives. Lastly, our full year 2021 RevPar increased 55% year-over-year to $115. As Francis mentioned, we did see some measurable Omicron impact very late last year and into Q1 of this year. The impacts of Omicron on our business were greater in geographies affected by new travel restrictions, suggesting that the inability to travel played a larger role in consumer’s unwillingness to travel. Despite the surge in Omicron cases in December, pent-up travel demand was evident in our New Year's eve performance while we exceeded 2019 levels in both ADR and RevPar, and nearly doubled the ADR and RevPar we delivered on the same day in 2020. We maintained a five-night average length of stay in the fourth quarter which was in line with 2019. In addition, our 30-day plus extended stay bookings helped us offset typical seasonality and slower leisure travel recovery in markets like New York, Dubai, London, Minneapolis, Chicago, Boston, and Houston. In terms of profitability, our fourth quarter property level loss improved by $13 million versus the prior year to a loss of $6 million. Our fourth quarter adjusted EBITDA loss improved by approximately $1 million year-over-year to a loss of $58 million. In addition, our free cash flow burn as a percentage of revenue improved meaningfully year-over-year from 173% in Q4 2020 to 61% in Q4, 2021. These improvements were primarily fueled by strong RevPar recovery and revenue growth combined with improved operational efficiency. For full-year 2021, property level loss improved by 32% to a loss of $42 million driven primarily by RevPar improvement. Our RevPar for full-year 2021 was $115, a 55% improvement versus 2020, that's still meaningfully below pre -pandemic levels. Our 2021 adjusted EBITDA loss was a loss of $217 million, which represented a 3% decline compared to 2020, despite an increase in pre -opening costs associated with rapid expansion of our live unit portfolio. Additional guest experience investments, and the incremental costs required to operate as a public company. Total costs and expenses increased by 64% year-over-year to a $155 million in Q4, 2021, inclusive of $5.1 million of stock-based compensation expense in the quarter. Total cost and expenses were driven by additional investments in research and development primarily focused on enhancing the Sonder app for our guests. Additional investments in sales and marketing as we build out our corporate travel capabilities, G and A expenses related to our ongoing needs of the public company and operations costs related to the rapid expansion of our live unit portfolio. Moreover, our global head count increased 60% year-over-year to almost 1600 employees to support the rapid growth of our large unit portfolio and prepare for our expected growth in 2022 and beyond. As of December 31st 2021, we had $70 million of cash and restricted cash subsequent to year-end. In conjunction with taking the company public in January, we raised approximately $400 million in net proceeds. Our current balance sheet gives us the confidence to continue to invest in improving the guest experience through technology while growing prudently with the goal of generating consistently high free cash flow for our shareholders. Turning to our outlook, we entered this year with strong momentum and we are optimistic about our trajectory and the large market opportunity ahead of us. In the first quarter of 2022, we anticipate revenue of more than $75 million, representing a 138% year-over-year growth, versus $32 million in the first quarter of 2021. Primarily due to growth in bookable night in live units, as well as improved RevPar. In terms of RevPar seasonality the first quarter is typically our weakest due to less leisure travel at the start of the year. Moreover, we expect the first quarter of this year to be further impacted by a temporary slowdown in bookings due to Omicron related concerns and travel restrictions. Specifically, we began to experience some impact from Omicron in late November 2021, where we saw a slowdown in forward bookings. The impact on revenue, however, wasn't felt until January and February, which are typically our weakest seasonal months. As a result, we expect Q1 2022 RevPar to decline versus Q4 2021, but still meaningfully improve year-over-year versus Q1 2021. We also therefore expect adjusted EBITDA losses to increase in Q1 to a loss of approximately 90 million as RevPar remains in recovery mode. And as we continue to rapidly expand our live unit portfolio and scale our G&A operations functions to support our expected portfolio growth this year. This represents an expected improvement in our adjusted EBITDA loss margin from a 167% in Q1 2021 to 120% in Q1 2022. As a reminder, our presentation of adjusted EBITDA straight-line the upfront benefits we received in the form of initial rent abatement periods and owner funded CapEx allowances over the life of the lease in accordance with GAAP. These benefits can be substantial and result to landlord payments lower than GAAP rents during periods of live unit growth. Therefore, as a management team we take into account the rent abatement and owner funded CapEx allowance in the period where we actually received the benefits when calculating our year end internal measure of adjusted EBITDA as we believe it presents the closer approximation of cash from operations. These factors are accounted for by adding back our GAAP rent to landlord payments, adjustments, and FF&E allowance realized adjustments. We expect a positive benefit from these adjustments in the first quarter of 2022. Turning to our full-year 2022 outlook, we're encouraged by the positive trends we saw over the last several quarters. Specifically, the rebound of leisure travel and its impact on ADR and RevPars. However, forecasting several quarters out remains challenging given continued COVID, related uncertainties. We're cautiously optimistic that favorable macro trends will continue. And combined with our visibility on growth in live units and bookable night, we expect to increase full-year revenue by between 100% to 110% as compared to full-year 2021. In terms of adjusted EBITDA, we're implementing a number of new revenue and cost improvement initiatives in 2022. So the magnitude of impact from these efforts is uncertain and will in part be driven by the pace of COVID recovery. Is therefore challenging to forecast full-year 2022 Adjusted EBITDA with sufficient precision. That said we expect full-year 2022 Adjusted EBITDA losses to the lower than 2021 on a percentage of revenue basis but higher on a dollar basis. We expect both cost of revenue and property level costs will be meaningfully higher versus 20201 on a dollar basis. And will increase roughly in line with our expected unit growth, as cost of revenues mainly comprised of GAAP rent to Landlords, which is directly related to increases in live units. Finally, we expect our other operating expenses, which include pre -opening costs related to opening new units, to be meaningfully lower in 2022 on a percent of revenue basis, albeit higher on a dollar basis. More specifically, pre -opening costs are expected to grow generally in line with increases in live units, where we expect a benefit from significant operating leverage in both G&A and operations expenses, which we expect will increase at a meaningfully slower pace than our expected revenue increase as we benefit from economies of scale. I'll now pass the mic back to Francis before we open the call to questions. Francis Davidson: Thank you, Sanjay. Before concluding my prepared remarks, I wanted to thank all Sonder employees across the globe who work tirelessly every single day to ensure seamless stays for our guests across all our properties. We'd also like to thank our real estate partners everywhere for their trust and confidence in our business as well as both historic and new investors who have partnered with us to support our long-term growth as a public company. Our mission to revolutionize hospitality is ambitious but we're strongly positioned to continue innovating by driving amazing guest experiences through tech-enabled spaces that inspire. Sonder's the future of hospitality and we have every confidence in our ability to drive sustainable, long-term value for our shareholders as we enter our next phase of growth. Thank you again for joining us this afternoon. With that, we look forward to answering your questions. Operator: As a reminder to Please stand by while we compile the Q&A roster. Our first question comes from the line of Jed Kelly of Oppenheimer. Your line is open. Jed Kelly: Hey, Great, great. Thanks for taking my question and congrats on becoming your company and your first earnings call. So you spoke earlier on the call to your occupancy and RevPar out performance through the pandemic versus peers, noting that this was driven largely by our internal initiatives. Can you speak to the key initiatives implemented and how this growth in RevPar flows through your property level margins as well? Francis Davidson: Yes, absolutely. Thanks so much for your question, Jed. RevPar is probably the most important variable to look at when it comes to the profit potential of this business. And as you mentioned, we've done a lot over the last couple of years to outperform the market. I think the first thing I want to highlight is our extended stay campaign. So early in the pandemic, there's something that is actually really amazing on the part of our team. In mid-March, we launched sales initiatives and a landing page and a methodology for us to be able to generate strong extended stay demand. Given that there was substantially less back in March 2020 short-term demand in the market. So we thought, "Hey, 14 days plus stays are going to be a source of demand for us to fill our properties. And what we didn't realize at the time, that initially was very successful, it allowed us to get back to pre -pandemic levels of occupancy but really the realization came afterwards that this is a really important capability for the business and something that goes much beyond a moment of a difficulty in the industry, but something that could booster our demand generation capabilities even in fully recovered department. So corporate housing as an example, or internships, relocations, those are all sources of demand that are -- did have to what we were capable of doing prior to the pandemic. So it's standard to say that first piece, that's been really crucial for our success. The second piece is revenue management. So we've built really impacted technology in order to be able to price our algorithmically the properties and maximize the yield that we can generate off of these available unit. So of course this is pricing elasticity tests that we've run to understand this trade-off between occupancy and price, and seeing how we can get a disproportionate benefit in one of the two, there's other things that we've done on revenue management such as rate plans, non-refundable rates, fully flexible, fully refundable rates, a little bit more subtlety when it comes to pricing differentially by length of stay. So series of initiatives there that we've done that really make us feel great about the innovation that has occurred the last couple of years, even though we see quite a lot of ideas that could be bear fruit in the coming years as well. The , Sorry, that's the third piece I want to mention is the corporate travel demand. So we've launched in mid-2021, like Sanjay mentioned earlier, a corporate travel program, like where 100 partners will rely now on all the GDS systems. And this is all incremental revenue, more eyes looking at our supply, if more people invited to the auction so to speak. And we think there's going to be a lot of change in the corporate travel sector going forward post-pandemic, and we're uniquely positioned to answer some of these changes and, really nimble and adapt ourselves and particularly the workforce that isn't tethered to an office, folks that can work from anywhere. There's going to be a lot of important changes and were ready to take advantage of them as the market recovers. Last thing I want to mention is the monetization of add-on. So those are things like monetizing early check-in or late checkouts, mid-state cleanings, or upgrades, things that require very little no expense at all to service but the fruits of the topline revenue that we can generate first day while enhancing the quality and guest experience. For the second part of your question though, and how this ties into the property level profit margins. I'll hand it over to Sanjay to kind of break that down. Sanjay Banker: Thanks, Francis. And thanks for the question. So for the second part of question about how RevPar filters down to PLP margins. As Francis the pointed out, RevPar is obviously the key for us to get to our long-term full potential PLP margins. And within RevPar market recovery is the biggest driver for which we're cautiously optimistic, given the expected travel rebound in 2022. But there are many ways that we can outperform market RevPars as Francis outlined, as we've also demonstrated over the last several quarters. For the past few quarters, most of our RevPar growth has come through ADR. And the benefit there obviously is it mostly drops through straight through to PLP. But there's also occupancy growth which drop-through net of marginal direct costs. Given this dynamic, we evaluate all of our perspective, RevPar, enhancing initiatives based on their potential profitability impact, and not just their RevPar impact. and so all RevPar levers are evaluated based on the impact that can have on our margins. It's also worth reiterating what I mentioned a few minutes ago that are PLP margin is shown on a GAAP basis which requires us to straight line the upfront benefits of rent abatements on our new leases as well as straight-line the impact of future annual rent escalations. As a result, our cash rents are much lower and a more accurate reflection of our PLP would add back the adjustment for GAAP to cash landlord payments. Jed Kelly: Got it. Thanks. And then just -- can you talk about one, how is March RevPar trending maybe relative to the 4Q and as we've gotten past this Omicron wave? And then can you talk about your property pipeline outlook for 2022 and how we can tie it back to how you were thinking about it, maybe back in November? Francis Davidson: Yes, absolutely, Jed. Thanks for the follow-up. So Q1 ADR we see as being down quarter-to-quarter, but up year-over-year, meaningfully. Right. And the quarter-over-quarter dynamics is explained by one being just generally a weaker seasonal quarter for us. And secondly, the effects of Omicron that we've mentioned where we saw booking patterns start to slow down end of November, mainly hitting the P&L and stays that occur in January and February, though like you mentioned the March bookings, our seeing stronger surge on. Right and so the Omicron wave was the case counts increased really rapidly but decreased just as rapidly and travel behavior, booking behavior on our platform in our channels has been that trend. On the second question on the property pipeline. So yes, we saw really strong expansion of our pipeline. The this is the reason why we've managed to grow our portfolio, our total contracted units by such a meaningful amount in 2021. And so there's a few things that the results in the growth of our pipeline. First is what we call the flywheel effect for the on the supply side, like the more properties we have to show for, the more properties we have to tour the case studies of the financial improvements and guest experience improvements that we'll be able to deliver for these assets, the easier it is to then go across the street and convince another property owner to work with us. The stronger, of course, our balance sheet is, and the more into the recovery we are, the stronger financial performance business, the larger the set of guests that we have, the easier it is for us to make the case that working with Sonder is the highest and best use of that asset. And then the second driver is really just as straightforward as growing our Real Estate Team. Having more boots on the ground, it turns out that there's a lot of real estate, a lot more than we can handle and so part of generating supply growth for us in 2021 and then adding more folks to our Real Estate Team and ensuring that they remain productive. And so these two things combined really give us a lot of optimism when it comes to our capacity to keep adding high-quality supply to our portfolio. Jed Kelly: Got it. And then I guess just one more. Any change. I mean, I saw you guided for I guess, a 100, 110% revenue growth for 2022. Any change to the five-year outlook you provided at your Investor Day back in the fall or how we should be thinking about it? Sanjay Banker: Thank Jed, for that question. So obviously provided 2022 outlook -- in terms of longer-term outlook, I'd say we remain confident, optimistic. The continued market recovery and all the levers that we're pulling to do better than the market both this year and beyond. I'd add that our book of signed, not yet live properties and our deep pipeline of prospective properties that will deliver in 2023 and beyond make us very excited about the future growth prospects, but of course we're not going to provide outlook for 2023 year and future years as yet. Jed Kelly: Thank you. Operator: Thank you. Our next question comes from Andrew Boon of JMP Securities. Your line is open. Andrew Boone: Hi, good afternoon guys. And thanks for taking my questions. I want to go back to the 2022 revenue guide. You guys provided a really helpful bridge to investors during the November update of contracted units, new units, and then RevPar initiatives to get to 2022 revenue. Can you talk about just what changed between November and now? Is that just new unit slipping in terms of units coming online? Is there any change in the pipeline? Or is RevPar just weaker because of Omicron and its just conservatism? Just help us with that bridge. Thank you so much. Sanjay Banker: Yes. Thanks for your question, Andrew. The bridge is directionally similar. The majority of the change is due to timing of delivery of expected forthcoming buildings plus the impact on Q1 of the Omicron and the fact that it will take time to recover back to the expected RevPar trajectory that we had planned to be on. So it is the combination of those two factors. On the former, it's really a timing issue. We still have those signed properties that will go live, but the schedule with which they go live evolves partly due to the well-documented supply chain and labor shortage issues that have led to building deliveries being slowed but we still expect those buildings to go live but the changes in those calendars and schedules are what drive changes to the volume forecast. Nonetheless, I'd underscore that we're still incredibly excited about 100% plus year-on-year revenue growth, which is a remarkable annual revenue growth target and one that we're very proud of all of our teams to help deliver. Andrew Boone: That makes sense. And then let me try different kind of macro question that's related. But given a very strong rental market within apartments, as well as a rising interest rate environment. How do we think about those things impacting developers and their ability to work with Sonder? Francis Davidson: Yes. Thanks so much for considered jumping in. The value proposition still holds right across the board for both the independent hotel owners that choose to work with us and also the property developers that are building new buildings specifically for Sonder. And what's really important to understand here is how they make the economic calculation of whether it's worth that to work with us. And the benefit of our model is really our capacity to operate a meaningfully lower cost structures and deliver really strong net operating income at the asset level. And so the technology that we've built, the manual labor that we've managed to streamline, and the fact that this doesn't come at the compromise of our capacity, which are really strong revenue. That kind of combination makes it extremely attractive for an owner to work with us, right? It's important to understand that the market is moving in lockstep, right? In markets where there is strong rent growth, there is also really impressive RevPar, right? And so, the question for us is, are we capable of capturing these RevPar, as demand comes back? And I think we've shown that we've been able to outperform even the market and so as you see this has translated really strong total portfolio growth. Even as those dynamics that you mentioned it's been a play for the last several months. Andrew Boone: Thanks so much guys. Operator: Our next question comes from Stephen Grambling of Goldman Sachs. Your question, please. Stephen Grambling: Thanks for taking the questions on the growth in the contracted rooms how does the markets and underwritten RevPar compared to the core as you think about the mix impact in 2022. Francis Davidson: Thanks so much for your question maybe I'll ask you to repeat the question on the mix in the core. I just want to make sure that we touched on the right points here. Stephen Grambling: Yes. As you think about the contracted rooms, are those generally in markets that are similar to the core and so RevPar should be comparable or is it could it be a tailwind or a headwind from RevPar for what's being signed. And maybe as a related follow-up, how did these deals compare, contrast the existing as we think about the structure of the contracts. Specifically, RevPar being asked abatements versus history or other CapEx . Sanjay Banker: Yeah. No, it's a great question. And thank you for that, Stephen, on the first about mix effects, there are a couple of different mix effects and you highlight one of them, which is what we'll call market mix. Generally speaking, while market mix quarter-to-quarter, it can vary, generally speaking. The market makes us moving in our favor. Meaning we are increasingly getting to better higher RevPar markets and it's a concerted strategy as well as we become a more sophisticated counterparty and better capitalized counterparty, we're also more effective in landing and closing deals in those one, what we call internally the call are A markets and so we think market mixes got a really attractive tailwind as we move towards markets also, as we increase the mix towards Europe, which is not as big as our North American portfolio. That is also a tailwind to market mix in terms of weighted average RevPars. The other driver of market mix is the balancing effect. multi-family versus hotels. And as we balanced towards hotels, while they tend to have like-for-like lower RevPar than a comparable multi-family unit. They tend to also be in the better markets. The higher RevPar markets. And so that sense, I'd say it's a push. And then the last drivers building quality. And that is every year getting better and better. And so we're signing better quality deals which can generate higher RevPar. And so I'd say for all three of those reasons, our mix is improving over time should be a tailwind to RevPar. The second part of your question is the deal quality. We're seeing -- our track record as Francis mentioned earlier -- more ability to show proven case studies to our perspective property owner partners is helping us get better deals. This transaction itself has allowed us to create more visibility, transparency, confidence in the company, which allows us to get better deals, and so period-to-period, quarter-to-quarter, the market side may emphasize different things, but we're seeing a broad tailwind and that's what Francis described as the flywheel effect. Stephen Grambling: And maybe one other clarification. On the delays that you're seeing in terms of the contracted rooms or contracted units, is that primarily because of new-builds or is there also just procurement issues of getting FF&E, or other things that are impacting that? Sanjay Banker: Yes. It's a good question. It's probably a spectrum, but that spectrum obviously skews more towards the newbuilds, but as it happens, heavy renovations -- the things where the heavy renovation and a newbuild can be maybe a distinctual difference in terms of this point. And then light renovations are much less of an issue. And there are definitely assets that we take over more or less as is. We keep a stock of FF&E supplied. And so that shouldn't be the main delay. It's much more around construction and building materials than it would be around FF&E. Stephen Grambling: Got it. Thank you. Sanjay Banker: Thank you for the question. Operator: At this time, I would like to turn the call back over to Francis Davidson for closing remarks, sir? Francis Davidson: Well, thanks so much, everyone for tuning in today on our inaugural earnings call as a public company. I really appreciate the engagement, the question. I just want to close off with a huge thank you to our team that's worked tirelessly to make this business a success to-date, and couldn't be happier to be working alongside you to revolutionize hospitality. So thanks so much for everyone who called in and for all of our employees for taking on this great. Operator: This concludes today's conference call and thank you for participating you may now disconnect.
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Sonder Holdings Inc. Partners with Marriott International to Enhance Hospitality Offerings

  • Sonder Holdings Inc. (NASDAQ: SOND) announces a strategic licensing agreement with Marriott International, Inc. (NASDAQ: MAR), aiming to integrate over 9,000 Sonder units into the Marriott portfolio by the end of 2024.
  • The partnership is expected to leverage Marriott's extensive network, boosting Sonder's market appeal and operational efficiencies.
  • Sonder secures a significant liquidity boost of approximately $146 million, including around $43 million in convertible preferred equity investment, to support growth initiatives and improve operational efficiencies.

Sonder Holdings Inc. (NASDAQ: SOND) operates in the competitive hospitality sector, offering a modern twist on traditional accommodations by providing premium, design-forward apartment-style lodgings. This innovative approach caters to a broad spectrum of travelers, from leisure tourists to digital nomads and professionals seeking temporary or longer-term stays. With a significant presence across North America, Europe, and the Middle East, Sonder has established itself as a notable player in the industry, competing with both traditional hotels and newer, tech-driven hospitality companies.

Despite the lack of change in the consensus price target for Sonder, indicating a potential stagnation in analyst coverage or updates, the company has not remained static. On August 19, 2024, Sonder announced a groundbreaking strategic licensing agreement with Marriott International, Inc. (NASDAQ: MAR), a titan in the global hospitality industry. This partnership is expected to significantly enhance Sonder's business model by integrating more than 9,000 of its units into the Marriott portfolio by the end of 2024, with an additional 1,500 contracted units to follow. This move not only expands Sonder's reach but also aligns it with a globally recognized brand, potentially boosting its market appeal and operational efficiencies.

The collaboration with Marriott International is a strategic leap for Sonder, aiming to leverage Marriott's extensive network and brand strength to tap into new customer segments and revenue streams. By bringing a substantial portion of its inventory under the Marriott umbrella, Sonder is poised to benefit from Marriott's robust booking system, loyalty programs, and marketing prowess. This partnership could significantly impact Sonder's visibility and financial performance, offering a promising avenue for growth and market penetration.

In addition to the strategic partnership, Sonder has bolstered its financial position through a substantial liquidity boost of approximately $146 million. This includes around $43 million in convertible preferred equity investment, aimed at strengthening its balance sheet. This financial reinforcement is crucial for Sonder as it navigates the competitive and capital-intensive hospitality industry, providing it with the resources to invest in growth initiatives, improve operational efficiencies, and enhance guest experiences.

The strategic alliance with Marriott International marks a pivotal moment for Sonder, potentially transforming its operational and financial trajectory. This partnership, coupled with the recent financial injection, positions Sonder to capitalize on new opportunities and navigate the challenges of the hospitality sector more effectively. Investors and market watchers should closely monitor Sonder's integration into the Marriott portfolio and the subsequent impacts on its business operations and financial health.

Sonder Holdings Inc. Faces Legal Challenges Ahead of Earnings Report

  • Sonder Holdings Inc. is set to release its quarterly earnings report on June 5, 2024, with analysts expecting an EPS of -3.08 and projected revenue of $170 million.
  • The company is embroiled in a class action lawsuit for allegedly providing false and misleading statements regarding its financial health and business operations.
  • Financial ratios present a mixed picture, with a price-to-sales ratio (TTM) of 0.069 and an enterprise value-to-sales ratio (TTM) of 2.88, indicating potential undervaluation but also raising concerns about cash flow and short-term obligations.

NASDAQ:SOND, Sonder Holdings Inc., is gearing up for its quarterly earnings report, set to be released on Wednesday, June 5, 2024, before the market opens. Analysts are eyeing an earnings per share (EPS) estimate of -3.08, with projected revenue for the quarter around $170 million. This anticipation comes amidst a backdrop of legal challenges for Sonder, as the company faces allegations of providing materially false and misleading statements regarding its business operations and financial health.

Sonder Holdings Inc. finds itself embroiled in a class action lawsuit, with accusations that it failed to fully disclose issues related to its internal controls. Specifically, the lawsuit alleges significant errors in the accounting for the valuation and impairment of operating lease right of use assets in its financial statements for the 2022 Annual Report and the interim periods ending March 31, June 30, and September 30, 2023. As a result, Sonder is expected to restate its previously issued financial statements for these periods, casting a shadow over its upcoming earnings report.

The legal challenges do not stop there for Sonder. The Schall Law Firm, a national shareholder rights litigation firm, has issued reminders to investors about the class action lawsuit for alleged violations of the Securities Exchange Act of 1934. This lawsuit targets investors who acquired Sonder's securities between March 16, 2023, and March 15, 2024, urging those who have incurred losses to come forward before the June 10, 2024, deadline. These legal proceedings highlight significant concerns regarding Sonder's transparency and financial reporting practices.

Financially, Sonder's metrics present a mixed picture. With a price-to-sales ratio (TTM) of approximately 0.069, Sonder's shares appear to be valued relatively low compared to its sales, potentially indicating an undervaluation by the market. However, the enterprise value to sales ratio (TTM) of 2.88 suggests the market values the company at nearly three times its sales revenue. On the flip side, the negative enterprise value to operating cash flow ratio (TTM) of -16.70 and a current ratio (TTM) of 0.71 raise concerns about Sonder's ability to generate sufficient cash flow from its operations and cover its short-term obligations with its short-term assets, respectively.

As Sonder Holdings Inc. (NASDAQ:SOND) approaches its quarterly earnings report, investors and analysts alike will be keenly watching how these financial and legal challenges play out. The combination of anticipated earnings, revenue projections, and the backdrop of legal issues provides a complex scenario for Sonder, reflecting both the potential financial opportunities and the risks associated with its current situation.