Sonder Holdings Inc.

Good day, and thank you for standing by. And welcome to Sondra's second quarter 2022 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you'll need to press star 1-1 on your telephone. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, John Charbonneau, VP, Head of Investor Relations. You may begin.

Thank you, operator. Good afternoon, ladies and gentlemen. Thank you for joining us to discuss Sondra's second quarter 2022 financial results. Joining me on the call today are Francis Davidson, co-founder and CEO, and Sanjay Banker, president and CFO. Full details of our results and additional management commentary are available in our second quarter 2022 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 of this call contain forward-looking statements, including but not limited to Sonder's strategies, 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 statement can be found in Sonder's periodic and other SEC filings. The forward-looking statement and discussion of risks in this conference call, including responses to your questions, are based on current expectations as of today. 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'll turn the call over to Francis Davidson, co-founder and CEO.

Thanks, John. Good afternoon, everyone, and thank you for joining us today. I'm very pleased to be reporting on our strong second quarter 2022 results. My remarks today will cover two areas. First, I'll provide a quick overview of our financial performance for the second quarter. And then I'll provide an update on our cash flow positive plan announced on June 9th. We're excited to report strong second quarter results highlighted by improving free cash flow, achieving negative $45 million for one-time restructuring costs compared to free cash flow of negative $62 million last quarter and negative $60 million a year ago. This also yielded significant improvements in our free cash flow margin, which improved to negative 37% versus negative 77% last quarter and negative 127% a year ago. In addition, cash contribution margin, excluding restructuring costs, which is an important metric to look at since it isolates property level performance, improved to 18% versus 13% in Q1. On a year-over-year basis, our rev par grew by 67%, and revenue grew by 157% to $121 million, driven by a strong snapback in travel demand during the quarter. Sanjay will provide additional details on our second quarter financial performance a little later on the call. In June, we announced our cash flow positive plan, which shifted our focus from hyper growth to steady growth with strong emphasis on rapidly achieving sustainable positive free cash flow. To be clear, this shift was not due to lack of growth opportunities. Instead, broader market conditions had materially changed, and therefore we believed it was prudent to shift our strategy to adapt to the changing macro environments. We firmly believe that this was the right decision and are fully committed to achieving positive quarterly free cash flow within 2023. Successfully executing our plan will enable us to more rapidly achieve positive free cash flow without additional fundraising and while preserving a robust cash cushion. We focused on four key levers for our cash flow positive plan, including cutting cash costs, reducing planned signings pace, raising the bar on incremental lease signings, and focusing on rapid payback ref bar initiatives. The first lever is to reduce cash costs by approximately $85 million on an annualized basis before one-time restructuring costs. More specifically, in June, we executed a restructuring plan, which will result in nearly $55 million in annualized cost savings versus Q1 2022 costs. Separately, we also expect $30 million in annualized cash cost savings from reduced pre-opening costs and net capex associated with incremental units going live, given our focus on finding 100% capital light units going forward. The second lever is proactively reducing our plan signings pace. This enables us to lower headcount across the board, lowering pre-opening costs and net capex, cut back on plan geographic expansion and simplify the business. We will continue to scale our live units by opening already contracted units, as well as signing incremental deals that meet our high bar for signings. As a result, Our existing contracted unit portfolio will be cash accretive as they come live, given the upfront costs to originate and sign these deals were already incurred and a majority of these deals are capital light. This brings me to our third lever, which is increasing our already high threshold for incremental unit signings. Prior to announcing our cash flow positive plan, our leases commonly included upfront renovations to help offset the cost and revenue ramp up period associated with onboarding live units. In addition, In the vast majority of leases, we have been successful in negotiating upfront allowances paid for by the landlord to help us offset the capital invested to prepare and furnish the building as well as individual units. And now we have further raised the bar, aiming to only sign units that are 100% capital light. This will set us up so new deals signed after our cash deposit plan won't consume cash as they come live. We're excited about our healthy late-stage pipeline of deals that fit this even more stringent profile. Further, we're also only focusing on countries where we already have operations or contracted units in order to leverage fixed costs more effectively. Our fourth lever and final lever is focusing efforts on improving free cash flow through rapid payback REVPAR initiatives. Given our fixed landlord payments, a small increase in REVPAR translates to a much larger increase in cash contribution margins. As such, we're focusing on several rapid payback RevPAR initiatives, including our higher occupancy strategy, which was implemented in Q1 and includes, among other things, marketing bookings further in advance. This helped drive a significant increase in occupancy rate to 82% in Q2 versus 68% a year ago, enabling us to take advantage of demand elasticity to drive higher RevPARs. Additionally, we remain focused on growing our new corporate travel offering, and ended Q2 with nearly 400 active accounts versus 250 last quarter and 100 in Q4 of 2021. While we're still in the early stages of our corporate travel offering, we have continued to gain traction each quarter since its launch, and we're incredibly excited about this as an opportunity to drive incremental RevPAR. Lastly, we're also focused on building out several ancillary revenue offerings during the second half of the year, which should further benefit RevPAR, especially in 2023 and beyond. Beyond our focus on these four key levers, we are continuing to deliver our signature tech-enabled design forward experience to our guests around the world and look to attracting a growing share of travelers across both business and leisure segments. Separately, I would also like to briefly discuss another 8K we filed today, after market close, which outlines our intention to launch an option exchange program for our current employees. This will provide employees a voluntary one-time opportunity to exchange existing underwater stock options for new stock options with the same terms at a strike price equal to fair market value. We strongly believe our team members are our most valuable asset, and this is a critical one-time event to properly incentivize and retain them. To finish, I'd like to reiterate that we remain laser-focused on the execution of our cash flow positive plan to drive sustainable long-term value for all our shareholders and continue to revolutionize hospitality for all. I'd like to thank our employees across the world for their tireless work and express my gratitude to our partners and investors for their ongoing support. With that, I'll turn over the call to President and CFO Sanjay Banker to provide you with further details on our recent financial performance and an update on our outlook. Sanjay.