Sonder Holdings Inc. (SOND) on Q2 2023 Results - Earnings Call Transcript

Operator: Good day and thank you for standing by. Welcome to the Sonder Holdings Second Quarter 2023 Earnings Call. At this time all participants are in a listen-only mode. After the speakers' presentation, there will be a quarter-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Chris Berry, Senior Vice President and Chief Accounting Officer. Please go ahead. Chris Berry: Thank you, operator. Good afternoon, everyone. Thanks for joining us today to discuss Sonder's second quarter 2023 financial results. We have Francis Davidson, Co-Founder and CEO; and Dom Bourgault, Chief Financial Officer on the call with me this afternoon. Today, Sonder reported $157 million in revenue for the second quarter and a negative 27% operating margin, a 29-point improvement over the second quarter of 2022. Our free cash flow was a negative $27 million or a 40% improvement over Q2 of 2022 and another step closer to our goal of sustainable positive free cash flow. Full details of our second quarter results are available in our shareholder letter, which can be found on the Investor Relations section of our website, at investors.sonder.com. Our prepared remarks and Q&A session at the end of this call contain forward-looking statements, including, but not limited to, Sonder's strategies, market opportunities and estimated future financial and operating results. Our business involves risks and uncertainties that may cause actual results to differ materially from those discussed today and in our shareholder letter. 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 our SEC filings. The forward-looking statements and discussion of risks today are based on current expectations. Sonder assumes no obligation to update or revise them, whether as a result of new developments or otherwise, except as required by law. Also, our remarks contain certain non-GAAP financial measures. For a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measure, refer to our shareholder letter posted to our Investor Relations website. With that, I will turn the call over to Francis Davidson, Sonder's Co-Founder and CEO. Francis Davidson: Thanks, Chris. Good afternoon, everyone, and thank you for joining us today. First of all, I want to acknowledge and thank all of our Sonder employees, our guests and our partners for their efforts and their business as we strive to fulfill our mission to revolutionize hospitality through design and technology, making a world of better stays open to all. To provide a few highlights from the quarter that illustrate the remarkable progress we've had at Sonder, revenue grew 30% year-over-year, driven by a 32% increase in bookable nights on a 32% increase in overall live units, all while maintaining an occupancy rate of 82% and ADR relatively stable at $200. We also produced all of this growth with a 19% improvement in total overhead costs and a 6% improvement in total property level expenses per occupied night. These accomplishments resulted in a 40% improvement in our free cash flow compared to last year. I'm proud of the progress that we've made, but we still have much to do to reach our goal of sustainable positive free cash flow. We're committed to delivering on this objective, and we'll pull every lever we can to get there as quickly as possible. Dom will share more details with you in a few minutes about some of the cost drivers we're focused on. But first, I'll dive a bit deeper into our revenue and total portfolio growth. Across all of our Sonder properties, RevPAR declined 2% compared to the second quarter of 2022. We did see a moderate pressure on ADRs for our apartment products during the quarter, yet the opposite is true for hotels where ADRs increased year-over-year. Our live units comprises roughly 60% of apartment style units and 40% hotel units. Over the last year, our mix has shifted 8 points from apartments to hotels, lessening the impact of pricing pressure from the short-term rental apartment market in Q2. Year-over-year, RevPARs for our hotel properties were up mid-single-digit percentage points, while RevPAR for our apartment style properties were down a similar amount highlighting this issue. This is notable as just five years ago, Sonder do not operate any hotels. This diversification of property types is improving our overall economics, offering our guests a wider variety of stays and increasing our brand recognition. Breaking it down by geography, our North America properties experienced a 4.5% decline in RevPARs, while our properties in EMEA saw a 7% improvement in RevPAR year-over-year. Notably, according to AAA travel data, 8% more Americans traveled internationally, while 20% fewer international visitors arrived in the U.S., and that's in May compared to May of 2019. I recently returned from visiting several of our Sonder markets in Europe, and it's clear that the demand for leisure travel is still very strong, and our properties there are performing very well. In addition to some of these more macro factors, corporate sales grew slower than expected due to some turnover on our sales team, and we have experienced slow starts in a few of our recent North America property openings, particularly for properties that relied heavily on B2B demand before we took over their operations. It typically takes some time for new properties to ramp to system-wide average economics, but even so a few of our new larger properties have not met our expectations. Our operations, real estate, revenue, sales and finance teams are working together to address these challenges and come up with solutions to quickly improve the financial performance of these assets. Several of the RevPAR initiatives we've discussed in earlier calls continue to ramp and are contributing to our overall improving cash contribution margins. In the second quarter, we added another 18% of our total live units to our elevated visual merchandising platform with reimagined art direction and photography. We now have a third of our live units merchandised under this new program, and we've seen an uplift in conversion of over 10%. We expect over 50% live unit coverage by the end of the year. Our ancillary revenue initiatives rollout continues to progress well. In particular, rolling out our paid parking options has added an incremental 26 basis points to RevPAR in the second quarter. Although not significant on an individual basis, our team is pushing through several of these ancillary revenue programs, each of which is improving our overall property financial performance. On the supply side, our overall live units grew 32% year-over-year driven by strong conversions from our affected units to live units. Our total portfolio of live units plus contracted units did decline 7%, however, year-over-year as development cost uncertainty and persistent high interest rates remain a significant issue for developers and landlords. We felt it was prudent to exclude an additional number of contracted units with financing contingencies, which drove the decline. Even after excluding these units, we continue to have a notable backlog of contracted units, representing a strong growth pipeline of nearly 60% of our live units count. This quarter, we also publicly launched our new Powered by Sonder product. This is a collection of uniquely designed boutique hotels powered by Sonder's technology and operational expertise. These hotels are infused with local flare and have their own distinctive aesthetic. With our proprietary technology and our efficient operating model, we're able to provide compelling value to hotel owners. And in many cases, buildings in this product segment allow us to onboard and get to market more quickly. We have 23 Sonder hotels across 13 markets in this segment with new properties coming on board. Before turning it over to Dom, I want to highlight the accolades we received from our guests. We recently announced that over a third of our properties, 87 in total, received TripAdvisor's Travelers' Choice Awards in 2023, and this is a threefold increase from last year. We're very grateful for this recognition. Two of our properties, The Maisonneuve in Montreal and Do Placa Reial in Barcelona received the Best of the Best award representing the top 1% of all TripAdvisor accommodations. So a huge shout out to our teams in these award-winning properties. Thank you for taking great care of our guests. And with that, I'll turn over the call to our Chief Financial Officer, Dom Bourgault. Dom? Dom Bourgault: Thank you, Francis, and hello, everyone. After five months with Sonder, I continue to be impressed by the energy of the Sonder team and how dedicated they are to reaching our financial and operational goals. The team is united in our focus on achieving sustainable positive free cash flow in the near-term and industry-leading unit economics over the long-term. This quarter's results move us another step closer to achieving that goal. We still have a lot of work to do, but I'm pleased that our results demonstrate consistent progress on our path to becoming cash flow positive. With that said I will provide a brief overview of our second quarter financial results and then take you through guidance. We'll then open the call to questions. In the second quarter, we generated $157 million of revenue, representing a 30% increase compared to Q2 of 2022. As Francis mentioned, key top line performance metrics improved year-over-year, including live units, bookable nights, occupied nights, while we experienced a slight decline in the RevPar. We ended the quarter with approximately 11,100 live units, representing 32% growth year-over-year, and we have over 957,000 bookable nights, also an increase of 32% driven by the live unit growth. Occupancy remains strong at 82% in the second quarter, stable with Q2 of 2022 on the back of significant growth in bookable nights. In the second quarter, free cash flow before one-time restructuring costs total negative $27 million compared to negative $41 million in the first quarter of this year, and negative $45 million in the second quarter of 2022. Free cash flow margin also improved year-over-year reaching negative 17%, compared to negative 37% in the second quarter of 2022. Sonder continues to show consistent improvements in free cash flow, and we expect this trajectory to continue. Our pipeline of live unit growth combined with strong operating leverage in our cost base will lay the path to sustainable free cash flow that will strengthen as we scale and result in significant long-term value to our shareholders. Since Francis provided the details of our revenue performance, I’ll now focus my remarks on the cost savings. For Q2 2023, total cost in operating expenses increased by 6% year-over-year to $199 million, which is inclusive of $8 million of stock-based compensation expenses. The 6% increase in total cost on the back of a revenue increase of 30% illustrates the strong improvements we’ve been driving in our operating leverage. Property level costs grew by 24%, and our non-property level operating expenses were lower by 19% compared to prior year. Our commitment to positive free cash flow and cost leverage is driving fiscal discipline in our organization and the results are encouraging. That said, there are several areas of opportunities for further cost reduction that we are going to address over the next several months. I’d like to touch on a few of these today. First, we must get into the right real estate deals to begin with and hold our portfolio of live units to high standards of performance. Our total live units generated 18% in cash contribution margin over the past 12 months, while roughly three quarters of our properties are positive contributors to this performance. Some of our properties do have negative cash margins. For example, certain properties and markets such as Phoenix have struggled to perform. We are taking a deep dive onto these underperforming properties, looking at a set of improvement actions including targeted marketing and corporate sales efforts, RevPAR initiatives, and partnering with our landlords for creative ways to restructure leases. Rapidly improving the financial performance of these properties represent a sizeable opportunity to solidify and accelerate the achievement of our sustainable free cash flow goal. Second, we must achieve better leverage on our property level costs. For example, our utility costs are approximately $30 million annually and growth for partnering with utility management companies to gather a complete data set of our utility providers and costs across our portfolio in order to better manage the rising cost of energy. We’re also taking action to be more efficient in our buildings and reduce waste. These actions will both reduce costs and our overall carbon footprint, a win-win for all our stakeholders. We’re also addressing payment processing fees and commissions. We have been inefficient historically in how we float funds, especially with cross border transactions. Recently, we have partnered with our payment processors to more effectively process foreign currency transactions and expect to save over $1 million in commissions on an annualized to run rate basis from improvements made to date with more opportunities ahead. And third, we can do more on non-property level operating costs. As a reminder, we have reduced our corporate workforce approximately 30% on a net basis since going public in early 2022, resulting in approximately $30 million of annualized savings, but we are not stopping there. For instance, we have been combining through all of our software contracts aiming to eliminate duplicate solutions, renegotiate terms with vendors, and establish new processes to ensure we have solid ROI metrics before we enter into new contracts or renew existing ones. These are only a few examples of the actions we are taking internally to drive cost reduction in our operating model and ultimately help us achieve positive free cash flow. Trailing 12 months cash contribution margin was 18% versus 13% at the end of Q2 of 2022. We know that cash contribution margin can make it difficult to compare us with our competitors. As the company matures and our unit economics become more comparable to the industry, we’re looking to transition to more traditional earnings metrics like EBITDA or EBITDAR [ph] over the next year. EBITDAR in particular is commonly used by other organizations in the industry that operate lease properties as it allows management and investors to assess the financial performance of the business, excluding the costs of financing those properties. Turning to the balance sheet. As of June 30, we had $220 million in cash, cash equivalents and restricted cash, and $187 million in total debts. Restricted cash increased sequentially in Q2 due to the dynamics stemming from the failure of SVD [ph] and from certain amendments that were financial covenant requirements, leading us to collateralize certain new letter of credit issuances under our facility with First Citizens. We are working with First Citizens and our other financial partners on solutions to provide the right form of financing that will allow for the issuance of uncollateralized letters of credit. As a reminder, there are no financial covenants by our term loan, and we are not contractually obligated to pay cash interest until January of 2024. Looking ahead for the third quarter of 2023, we expect revenue between $160 million and $170 million and free cash flow, excluding one-time restructuring costs between negative $25 million and negative $15 million, which at the midpoint is a $19 million or nearly 50% improvement versus the third quarter of 2022. For the second half of 2023, based on our current projections of RevPAR and live unit growth, we expect revenue between $335 million and $355 million, which is a slight decline from the range of $345 million to $375 million from our last quarter call due to the headwinds that Francis alluded to earlier. For free cash flow, we expect between negative $65 million and negative $35 million in the second half of 2023, reflecting the lower revenue guide partially offset by continued progress on cost reductions from initiatives such as the ones we mentioned earlier. At the midpoint of the guidance ranges provided, this translates to $63 million or 36% improvement in free cash flow for the full year of 2023. With that, we’re now happy to take your questions. Operator? Q - Jake Hallac: Hi. Thanks for taking my question. This is Jake on for Ron. So I just had two questions. First, this is really Powered By Sonder. That's really great to hear about this new initiative. Could you maybe speak a little bit more about the motivation behind it? And then also how the economics might differ from the business? And then just thinking out like two, three years from now, like how would you see this evolving over time? And then second is really on RevPAR. Really great to get the color on this current quarter and the breakdown we found that really helpful. Could you speak to how you're thinking about as you look at the back half of the year, whether the various factors you highlighted in your prepared remarks, do you expect those to persist? Is that implied in your guidance? Thanks so much. Francis Davidson: Thanks very much. I'll – Francis here. I'll get started on the first question, and I'll let Dom step in for the question on RevPAR or the RevPAR guide. So listen, we're really excited by Powered By Sonder. So thank you for calling out that really important initiative. The motivation for it, frankly, is multifold. It starts with just the mission of this business. I mean our mission starts with the words to revolutionize hospitality. And we've been very careful not to say to revolutionize short-term rentals or apartments, hospitality is a broader category, and we hope to be successful across a variety of asset classes starting with apartments, but also with hotels and with a few bets that we have in resorts. But over time, adding a plethora of accommodation categories, we think, is the most appealing brand value proposition. So we want to do it for the customers. But there are several other reasons why we decided to launch Powered By. One is that it's really a good business in that often we identify independent hotels. They're really like beloved by their guests, but they don't have the technology that we've built, maybe the operational wherewithal to really maximize the value of the asset. And so in conversations with these owners, it makes a lot of sense for Sonder to be the operator for these assets. Well, under our current brand Construct, it's not possible for us to take on properties that have a different design aesthetic or at least prior to the launch of Powered By Sonder. So Powered By Sonder allows us to operate these hotels, to bring in our technology, to bring in our operations, but without having to redesign the whole thing, if it already is really interesting and distinctive and beautiful and has its own identity. And so it's allowed us to really expand the range of supply that we can take on at really attractive economics. Another one of the benefits is that those properties could become live quite rapidly. So when you're talking about a multifamily development project, you might be two, three years out. And especially in the financing environment right now, it could take a while for these properties to actually deliver. There's some risk that they might not get financed at all. Whereas when we're talking about an independent hotel and Powered By Sonder property, they can be turned over to us relatively rapidly and with minimal investment on our part or on the owner's part. And so we're talking about rapid payback periods and pretty rapid conversion of signed to live units. So that hopefully answers the question a little bit on economics as well in that those are capital-light deals. We used the same hurdles internally for these Powered By properties as we do for other deals that we sign, meaning that we pay attention to the cash contribution margin that the asset is expected to generate. We do a very robust underwriting. And so both on payback on profitability, on minimum deal size, we're looking at similar variables now – up until now and the performance has been very strong. So lastly, let me comment briefly on how we see it evolving over time over the next couple of years. So we announced that we had 23 properties to launch this brand segment across, I believe, a dozen markets, and we've got more that are signed. So this is a relatively new initiative for us. We we're just getting started here, but we see that there's a vast, vast opportunity, especially in markets with the deep supply of independent properties. I'm talking about Continental European capitals like Paris or Barcelona or New York City with just a really deep supply of independent hotels that could be converted to Powered By Sonder. So I'll leave it here on the question of Powered By and let Dom step in for the second question. Dom Bourgault: Thanks, Francis. And Jay, to your question on the RevPAR dynamics we've seen and how we forecasted that. So essentially, just to reiterate what Francis touched on in terms of the trends we've seen in Q2. Strengthening EEA across the board, but offset by weakness in North America, in particular, in alternative accommodation and also slower corporate bookings. So what we do in our RevPAR forecast is we integrate those latest [indiscernible] range around that. The range, of course, is meant to incorporate the – different volatility of the RevPAR in the market, even how dynamic it is and the range is constructed to give us over the room and absorb some of these movements. Yes, and again, just to reiterate, I think what you saw in Q2 is how we think about the rest of the year and try to incorporate that in the guidance. Jake Hallac: Thanks so much. Operator: Please standby for the next question. The next question comes from Jed Kelly with Oppenheimer. Your line is open. Unidentified Analyst: Hi, guys. Thank you for taking our question. This is Josh calling for Jed. Just wondering if you could speak to about balancing occupancy in ADRs and talk about the progress around revenue management? And then I have a quick follow up. Francis Davidson: Okay. I'm going to jump in, Francis here. Just I think what I understood here is the balance between occupancy and ADR. So the audio didn't come in super clearly, but let me maybe just provide a quick commentary on how we think about occupancy and balancing that with ADR. So one thing to note is just how strong Sonder’s occupancy rate has been for the last several quarters. I think for 10 quarters in a row here we’ve outperformed industry peers. So we’re talking about low 80s occupancy rates. And it just speaks to the value proposition of the Sonder brand, right, which is to offer a really elevated accommodation, a really modern service experience, but doing so at a price point that’s reasonably affordable. And so that translates into quite a lot of occupancy and an ADR, which was last quarter around $200. We have a lot of data internally. We’ve run many tests on elasticity to kind of figure out what is profit maximizing for us? And it’s clear that our customer demographic responds quite strongly to changes in price. And so this is a benefit in terms of our capacity to generate strong occupancy, but it also makes it a little bit harder for us to just increase ADRs while preserving that occupancy. So that partly motivates our strategy to invest more in B2B travel and our sales teams so that we can get less price sensitive customers to generate demand during weekdays in particular. So that’s generally how we think about occupancy and ADR, but we’re very happy with the strong occupancy results we’ve seen today. Unidentified Analyst: Great. And then could you maybe talk about the progress around your revenue management? Francis Davidson: Yes, so on revenue management, there’s a series of initiatives that our team has been working on. One of the very important metrics is the booking curve or the price trajectory, the so-called price trajectory. And so typically it’s preferable to increase price closer to the day of arrival because these customers tend to be more inelastic and so there can – you can yield stronger RevPAR by having lower prices initially and raising them. But those dynamics are very different depending on season, depending on markets. And so our data science team has been doing quite a lot of work to figure out what is the optimal booking trajectory by market, by season, by asset, by even room type to try and figure out how we can maximize yield. So that’s one thing that we’ve been working on an update in the backend. Another one is our compacting algorithm. So this is something that our technology team has delivered in the past quarter that’s quite exciting, which allows us, actually, it’s part of the answer I should have mentioned on occupancy rate is this sort of Tetris game with the calendar to ensure that we can maximize the quantity of bookings that can happen in a given property, especially given that we tend to have a pretty broad distribution of length of stay. So to take a simple example, if a guest wants to stay with us for four weeks, of course the average length of stay is four nights. But suppose that someone wants to stay for four weeks and they need a place starting on Friday a couple days from now, well, if we’re not careful about how we allocate the significant number of bookings that we already have on the books, we might have nothing available. But by properly putting the right reservations in the right units, we can actually open up more availability. So there’s a pretty complex math problem here that’s applied where our team has been able to update the algorithms and generate incremental compacting, incremental occupancy, which is particularly valuable for the high season, and demand constraint, supply constrained markets and properties. So those are just a couple of examples. Maybe the last one I should mention is an update to our fixed pattern length of stay formula. So I alluded to this in a prior earnings call, but for those that weren’t on the fixed pattern length of stay implies basically making the price per night a function of the length of stay and doing though in a continuous fashion. So a three night or a four night stay will actually have a different price per night that depends on the cost to serve that specific guest. So this is something that’s quite innovative in the hospitality industry to kind of have our cost to serve by length of stay feed into our pricing model. And so our teams have updated and improved those formalized in a way that’s allowed us, we believe to increase the contribution profit at the asset level by just optimizing this kind of discount curve. Unidentified Analyst: Great. Thanks for all the color. Then just like a quick follow up, 3Q guidance looks like it implies revenue acceleration that being driven more by the unit count or RevPAR? Francis Davidson: Yes, sorry, I think we lost the last part of that question. So you mentioned Q3 guidance, revenue acceleration, and then we lost the rest of that question. Unidentified Analyst: 3Q guidance implies to revenue acceleration, is that being driven more by unit count or RevPAR? Francis Davidson: Okay, so the question as we understand it, is it – was it more unit counts or RevPAR that is driving the revenue increase in the guide for Q3? So Dom, I’ll let you answer that. Dom Bourgault: Thanks, Francis. It is basically all RevPAR, we – from a volume standpoint, our forecast has been very stable. So yes, most of it is from a slight reduction in RevPAR for the same drivers we mentioned earlier. Francis Davidson: Oh, so, Dom, I think maybe the question was misunderstood here. So I think let me just reiterate it. So from Q2 to Q3, we’re seeing a step up in our revenue guide, right? So revenue came in Q2 157, we’re guiding one 160 to 170 here. Is it mostly RevPAR bookable nights? And obviously it’s a combination of both. And we don’t break down specifically what is RevPAR versus what is bookable nights. But last quarter we saw about 850 live units open and we’ve got quite a lot of units that are set to open this quarter as well. So we should see an increase in bookable nights into Q3, but the exact split we haven’t broken out like it seems like Dom’s having a little bit of an issue with the audio. So I’m going to cover for him on this one. But hopefully that answers the question. Unidentified Analyst: Thank you. Operator: [Operator Instructions] I show no further questions at this time. This concludes today’s conference call. 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.