Sonder on Marriott deal, financial uncertainty

While RevPAR and ADR rose, net losses widened significantly, raising concerns about the company’s long-term viability

Sonder Holdings, a provider of apartment-style accommodations, filed its delayed third-quarter earnings report, revealing key financial challenges and strategic moves. The report highlighted a licensing deal with Marriott International, ongoing financial struggles, and efforts to streamline operations. Despite revenue growth, the company reported a significant net loss and expressed concerns about its ability to continue operating in the coming year.

Key takeaways

• Marriott licensing deal: Marriott agreed to pay Sonder $15 million as part of a 20-year licensing agreement, allowing Sonder’s inventory to be bookable through Marriott’s channels. The remaining $7.5 million of the payment is due by March 31, 2025. Sonder will also pay an undisclosed royalty fee;
• Financial uncertainty: Sonder acknowledged "substantial doubt" about its ability to remain a going concern due to continued net losses and negative cash flow;
• Portfolio reduction: The company exited 70 buildings (2,800 units) by September 30, with plans to exit 10 more. Systemwide, live bookable units declined over 14% year-over-year to 10,100;
• Regulatory compliance: Sonder filed the delayed Q3 report after addressing prior accounting errors, ensuring compliance with Nasdaq listing standards;
• Revenue and losses: Q3 revenue rose 1% year-over-year to $162.1 million. However, net losses surged to $179.4 million from $57.6 million in the previous year, impacted by a $58 million loss on preferred stock issuance and an $87 million fair value change in a forward contract;
• Operational performance: Revenue per available room and average daily rate increased by 22% year-over-year, but total occupied nights fell nearly 10% due to the downsizing of its portfolio;
• CEO’s statement: Co-founder and CEO Francis Davidson described Q3 as a "pivotal" period, emphasizing revenue growth and cost efficiency improvements.

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