Sonder Holdings Inc.

Thank you for standing by and welcome to Saunders' fourth quarter and full year 2021 financial results conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's call may be recorded. Should you require any further assistance, please press star 0. I would now like to hand the call over to Nicholas Chamas, VP of Strategic Finance and Investment Analysis.

Thank you, operator. Good morning, ladies and gentlemen. Thank you for joining us to discuss Saunders' fourth quarter and full year 2021 financial results. Joining me on the call today are Frances 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's 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 Sondra'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 Sondra 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 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'll turn the call over to Frances Davidson Saunders co-founder and CEO.

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're 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 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 millennials 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 empowered 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 a relentless focus on improving the guest experience through inspiring design, modern service, and consistent quality. Technology enables 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 in 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 check-out request. We also successfully rolled out metrics for internally tracking guest satisfaction and were encouraged by early results. One metric we track as a proxy for the strength of our brand and guest loyalties are 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 to 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 US 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 prospective 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 an even faster clip in 2022 and beyond. Our third lever is our capacity to generate strong REVPARs. In the near term, our REVPAR 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 ancillary revenue opportunities such as monetizing in-unit upgrades and interstate cleanings. In the fourth quarter, we achieved rough part growth of 92% year-over-year to $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 Smith Travel Research, in 2021, US upper upscale hotels recovered only 58% of 2019 RevPARs. Meanwhile, we reached 82% of our 2019 RevPARs in 2021. We attribute this outperformance to our unique value proposition and the success of our RevPAR improvement initiatives, combined with the stronger market dynamics for leisure travel. Importantly, we expect the overall market recovery to fuel our RevPAR growth, as STR projects comparable hotels to grow RevPAR by 56% in 2022. Despite strong sequential quarter-over-quarter momentum in 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 letter is to continue driving operating efficiencies. Our core philosophy has always been to use technology to cut inefficiencies from our operations. This efficiency mindset allows us to increase service levels, which boosts RASPAR, or directly reduce our cost structure. In 2021, we introduced several initiatives with the goal of improving property-level cost efficiency. For example, we 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 founder guests which has improved our service efficiency. 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 sets the tone for our innovation and execution. The onset of the pandemic tested our resolve, but our team bounced back impressively in 2021. Our frontline teams are key to delivering our exceptional guest experiences around the world, and we're committed to initiatives that support engagement and retention among those teams. Our most recent internal surveys reveal a 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-frontline 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 Saunders. Plus, it allows our team the opportunity to explore additional standard markets and work directly from our spaces, a trend of nomadic work we are very excited about and are 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 Janice Sears, formerly Imagining Director and Western Region Head at Bank of America Merrill Lynch, to our board as Audit Committee Chair. And we also named Hilda Perez Alvarado, Global CEO of the Hotels 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 guest experience, a supply and growth engine that's humming, demand generation capabilities that have consistently beat our benchmarks, technology that allows us to operate more efficiently, and an engaged team ready to make this year a 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.