Sonder Holdings Inc.

Good day, and thank you for standing by, and welcome to Saunders Holding, Inc., third quarter 2022 earnings call. At this time, our participants are in a listen-only mode. After the speaker's presentation, there will 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. Vice President of Investor Relations. You may begin.

Thank you, Operator. Good afternoon, ladies and gentlemen. Thank you for joining us to discuss Sanjay's third 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 third 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 contained 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 statements can be found in Sonder's FDC 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, 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 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, Saunders co-founder and CEO.

Thanks, John. Good afternoon, everyone, and thank you for joining us today. I'm happy to report on our strong third quarter 2022 results. Our remarks today will cover three areas. First, I'll provide a quick overview of our financial performance, Second, I'll provide an update on our cash flow positive plan announced on June 9th. And third, I'll provide a couple of quick updates on our board. We're excited to report strong third quarter results highlighted by sequential improvement in free cash flow before one-time restructuring costs to negative 39 million versus negative 45 million for the previous quarter. FDF margin also improved, reaching negative 31% compared to negative 37% in the second quarter of 2022 and negative 66% in the third quarter of 2021. The sequential improvement was driven by continued improvements in our cost base, somewhat muted by an expected sequential decline in REF PAR. On a year-over-year basis, our REF PAR grew by 25% to $158, and revenue grew by 85% to $125 million. Sanjay will provide additional detail on our third quarter financial performance a little later on in the call. Now, I'd like to provide an update on the progress of our cash flow positive plan, which includes four key levers. The first lever is to reduce cash costs by approximately 85 million on an annualized basis before one-time restructuring costs. This includes a restructuring plan we began executing in June, which will result in nearly 55 million in annualized cost savings versus Q1 2022 costs. We expect to largely see the run rate benefit of these cost savings in 2023. This also includes 30 million in expected annualized cash cost savings from reduced pre-opening costs and net capex associated with incremental units going live given our focus on signing 100% capital-like units going forward. So the second lever is proactively reducing our planned signings pace, with growth in the near term primarily driven by opening previously contracted units. As a reminder, this enables us to lower headcount growth across the board, lower pre-opening costs and net capex, cut back on planned geographic expansion, and simplify the business. This will likely result in lower quarterly new signings versus what was planned prior to the cash flow positive plan, as it did in the third quarter. Additionally, we believe findings are impacted by continued macro uncertainty. This is impacting real estate developers, given the substantial increase in interest rates this year, especially in the U.S., and development cost uncertainty. At the same time, even if we find no additional units or saw no incremental REF PAR improvements, The embedded supply growth from our previously contracted units that are expected to go live over time implies an approximate doubling of revenue in the coming years. This brings me to our third lever, which is increasing our already high threshold for incremental unit signings by only targeting 100% capital-like deals. We're pleased to report the vast majority of Q3 signed deals met this more stringent criteria, and the goal is to achieve 100% in the fourth quarter. Our fourth and final lever is focusing efforts on improving free cash flow through rapid payback RevPAR initiatives. Given our fixed land board payments, a small increase in RevPAR translates to a much larger increase in cash contribution margin. As a result, we remain focused on several rapid payback RevPAR initiatives, including growing our new corporate travel offering. We ended Q3 with approximately 600 accounts versus 400 last quarter and 100 in Q4 of 2021. While we're still in the early stages of our corporate travel offerings, We've gained traction each quarter since its launch, and we're incredibly excited about this as an opportunity to drive incremental RevPAR. We also remain focused on building out several ancillary revenue offerings, which we believe will further benefit RevPAR in 2023 and beyond. To summarize, we remain committed to reaching positive quarterly free cash flow within 2023 without additional fundraising and while preserving a robust cash cushion. Before turning the call over to Sanjay, I would like to highlight a few very exciting recent additions to our board of directors. A few weeks ago, we announced that Sean Agarwal has joined the board. Sean is currently the chair of the board of directors at Lyft and brings a deep understanding of both the real estate and technology sectors. In August, we also added Michelle Freimaurer to our board. Michelle served as the CEO of CWT, one of the world's largest travel management platforms, providing business travel, meetings, and event management for some of the world's biggest global companies. We believe Michelle's wealth of experience in the travel industry will bring strong contributions to our future development as a global hospitality leader. And finally, we recently announced that Sanjay will transition from his role as president and CFO to join the board at the beginning of next year. In his time as president and CFO over the past four years, Sanjay provided critical leadership for the company. He led us through multiple rounds of funding, helped stabilize and navigate the business through the COVID pandemic, and also led a successful public listing earlier this year. I believe his wealth of knowledge on our strategy and operations will make him a huge asset to the board. I also couldn't be more excited about the level of talent, industry expertise, and public company experience we've assembled on our board. Separately, we've launched a formal search process for the next CFO, and Sanjay will continue to remain in the role through the end of the year to ensure an orderly transition and support the recruitment of a new CFO. In closing, our focus remains on the execution of our cash deposit plan to drive sustainable long-term value for all our shareholders and continue to revolutionize hospitality. With that, I will 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 guidance. Sanjay.