Sonder Holdings Inc. Q2 FY2023 earnings call

• Revenue grew 30% y-o-y, driven by 32% increase in live units and bookable nights, with 82% occupancy and $200 ADR. • Total overhead costs improved 19% and property level expenses per occupied night improved 6%. • Free cash flow improved 40% y-o-y. • Mix shifted 8 points from apartments to hotels over a year. • North America RevPAR down 4.5%, EMEA up 7% y-o-y. • Corporate sales grew slower due to sales team turnover; some new North America properties underperformed. • RevPAR initiatives like elevated visual merchandising (3rd of live units merchandised, 10% conversion uplift) and ancillary revenue (paid parking added 26 basis points to RevPAR) ongoing. • Launched Powered by Sonder, a collection of boutique hotels using Sonder's tech/operations. • Over 957,000 bookable nights, 11,100 live units as of quarter end.

Sonder reported $157 million in revenue for the second quarter. Operating margin was negative 27% but improved 29 points from Q2 2022. Free cash flow was negative $27 million, a 40% improvement over Q2 2022. Revenue was driven by 32% growth in live units and bookable nights. Revenue contribution isn't broken down by distinct product segments, but mix shifted 8 points from apartments to hotels over a year, with hotel RevPAR up mid-single digits and apartment RevPAR down similarly.

• Third quarter 2023 revenue expected between $160 million and $170 million; free cash flow (excluding one-time restructuring costs) between negative $25 million and negative $15 million (midpoint 50% improvement vs Q3 2022). • Second half 2023 revenue expected between $335 million and $355 million (slight decline from prior guidance due to headwinds); free cash flow between negative $65 million and negative $35 million. • Full year 2023 free cash flow midpoint $63 million, 36% improvement vs prior year.

• Corporate sales growth slower due to sales team turnover. • Slow starts in some recent North America property openings, especially those relying on B2B demand. • Development cost uncertainty and persistent high interest rates affecting contracted units. • Foreign currency transaction inefficiencies leading to payment processing fee issues. • Utility cost management challenges. • Need for further cost reduction in non-property level operating costs. • Underperforming properties in certain markets like Phoenix.

Q: Could you speak more about the motivation behind Powered By Sonder and how economics differ, and on RevPAR outlook for the back half?

A: Francis Davidson discussed Powered By Sonder as a way to expand hospitality offerings, leveraging Sonder's tech/operations for independent hotels with existing distinct aesthetics, allowing rapid rollout. Dom Bourgault noted RevPAR forecast incorporates trends like EMEA strength offsetting North America weakness.

Q: Talk about balancing occupancy and ADR and revenue management progress, and what's driving Q3 revenue acceleration?

A: Francis Davidson mentioned strong occupancy (80s% for 10+ quarters) and ADR around $200, with revenue management initiatives like optimal booking trajectory, compacting algorithm, and fixed pattern length of stay formula. Dom Bourgault stated Q3 revenue acceleration is mostly from RevPAR with stable unit count growth.