Sonder Holdings Inc.

Your hand is raised. To withdraw your question, please press star 11 again. 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.

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 Don Burgle, 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 risk 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 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 Frances Davidson, Sonder's co-founder and CEO.

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 product during the quarter, yet the opposite is true for hotels, where ADRs increased year over year. Our live units comprises roughly 60% apartment-style units and 40% hotel units. Over the last year, our mix has shifted eight points from apartments to hotels, lessening the impact of pricing pressure from the short-term rental apartment market in Q2. Year over year, rev pars for our hotel properties were up mid-single-digit percentage points, while RevPars for our apartment-style properties were down a similar amount, highlighting this issue. This is notable as just five years ago, Saundra did 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 RevPars year over year. Notably, according to AAA travel data, 8% more Americans traveled internationally, while 20% fewer international visitors arrived in the US. 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 REFPAR 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 conversion from our contracted 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 unit count. This quarter, we also publicly launched our new Powered by Saunders product. This is a collection of uniquely designed boutique hotels, powered by Saunders technology and operational expertise. These hotels are infused with local flair 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 Saunders hotels across 13 markets in this segment, with new properties coming on board. Before turning it over to Don, 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 Traveler's Choice Awards in 2023, and this is a three-fold increase from last year. We're very grateful for this recognition. Two of our properties, the Maisonneuve in Montreal and Duc La Salle Real 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, Don Bergo. Don.