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Sonder Holdings Inc. (SOND)·Q4 2023 Earnings Summary

Executive Summary

  • Q4 2023 preliminary revenue was approximately $164.0 million, up versus Q3 2023 ($160.9 million) and Q4 2022 ($134.8 million), but slightly below prior Q4 guidance of $165–$175 million, indicating a modest miss versus management’s range .
  • Free Cash Flow (excluding restructuring and lease termination costs) was approximately $(34.97) million in Q4 2023, within the prior guidance range of $(39) to $(29) million; operating cash flow was approximately $(33.61) million .
  • Sonder announced accounting errors related to valuation and impairment of operating lease ROU assets for FY 2022 and 2023, delaying the Q4 and FY 2023 results; the company expects restatements to increase net loss and loss per share and warned of potential Nasdaq timely filing non-compliance .
  • Liquidity declined: total cash, cash equivalents and restricted cash fell to approximately $136.5 million at 12/31/2023 (from $207.2 million at 9/30/2023); management is engaging lenders for waivers and evaluating liquidity options, which are key stock reaction catalysts .

What Went Well and What Went Wrong

What Went Well

  • Sequential topline resilience: Q4 2023 revenue approx. $164.0 million vs. $160.9 million in Q3 2023; occupancy held at 82% for Q4 2023 with RevPAR approx. $150, supporting stable demand levels .
  • Network growth: Live Units reached 12,200 and Total Portfolio was 16,000 at year-end, positioning for future throughput benefits as units mature .
  • Management reiterated non-cash nature of identified errors (ROU valuation/impairment), stating they do not impact cash balances or statements of cash flows for affected periods, helping preserve liquidity analytics while the restatement proceeds .

What Went Wrong

  • Earnings delay and restatement: the company determined prior FY 2022 and 2023 quarterly financials should not be relied upon due to ROU impairment/valuation errors; restatements are expected to increase net loss and loss per share .
  • Nasdaq compliance and debt covenant risks: Sonder anticipates filing its FY 2023 10-K late, expects a Nasdaq notice of non-compliance, and is seeking lender waivers; failure to obtain waivers could trigger debt acceleration and materially impact operations .
  • Liquidity compression: total cash, cash equivalents and restricted cash fell to approximately $136.5 million at 12/31/2023 vs. $207.2 million at 9/30/2023, highlighting elevated cash burn into year-end .

Financial Results

Consolidated Metrics vs Prior Periods

MetricQ4 2022Q2 2023Q3 2023Q4 2023
Revenue ($USD Millions)$134.769 $157.403 $160.896 ~$164.0
Diluted EPS ($USD)$(0.25) $(0.21) $(5.86) N/A (not disclosed due to restatement)
Operating Cash Flow ($USD Millions)$(24.923) $(25.380) $(13.166) $(33.610)
Free Cash Flow excl. restructuring/lease termination ($USD Millions)$(29.592) $(26.837) $(15.783) $(34.965)
RevPAR ($USD)$158 $164 $153 ~$150
Occupancy Rate (%)83% 82% 83% 82%
Bookable Nights (units)852,000 957,000 1,048,000 1,092,000
Live Units (units)9,700 11,100 11,800 12,200
Total Portfolio (units)17,600 17,400 17,100 16,000
Cash, Cash Equivalents & Restricted Cash ($USD Millions)$289.186 $219.513 $207.233 ~$136.5 (incl. $40.7 restricted)

Notes:

  • Q4 2023 figures are preliminary and subject to change upon completion of restatements .

Margins (Reported)

Margin MetricQ4 2022Q2 2023Q3 2023Q4 2023
Operating Cash Flow Margin (%)(18)% (16)% (8)% N/A (not disclosed)
Free Cash Flow Margin (%)(22)% (17)% (10)% N/A (not disclosed)

Segment Breakdown

  • Not provided; company reports consolidated hospitality operations and KPI framework rather than GAAP segments .

KPI Focus

  • Definitions for RevPAR, ADR, Occupancy and Free Cash Flow are disclosed in filings; Q4 2023 ADR was not disclosed in the preliminary highlights .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent Guidance/PreliminaryChange
Revenue ($USD Millions)Q4 2023$165–$175 ~$164 (preliminary) Below guided range
Free Cash Flow ($USD Millions, excl. restructuring)Q4 2023$(39) to $(29) $(34.965) (preliminary) Maintained (within range)
CommentaryQ4 2023Guidance noted includes $4.3 million one-time prepayment interest penalty in Q4 No formal updated guidance provided alongside delay/restatement N/A

Earnings Call Themes & Trends

Q4 2023 earnings call transcript was not available due to the delay and restatement; themes below reference Q2–Q3 shareholder letters and Q4 8-K communications.

TopicQ2 2023 (Previous Mentions)Q3 2023 (Previous Mentions)Q4 2023 (Current Period)Trend
Cash Flow Positive PlanEmphasis on cost discipline; FCF margin improved to (17)%; launched “Powered By Sonder” for rapid-payback supply .Continued cost discipline; FCF margin improved to (10)%; portfolio optimization focus to exit/reshape underperformers .Preliminary FCF within guided range amid restatement; liquidity became central risk factor .Shift from operational progress to liquidity/filing risk management.
RevPAR/OccupancyRevPAR $164; Occupancy 82%; corporate travel and pricing initiatives cited .RevPAR $153; Occupancy 83%; noted y/y RevPAR softness and actions on pricing/merchandising .RevPAR approx $150; Occupancy 82% (stable); ADR not disclosed in prelim .Slight RevPAR downtick; occupancy stable.
Portfolio OptimizationCapital-light signings; focus on property-level economics .Explicit plan to work with property owners to optimize leases and accelerate path to positive cash flow .Continued reference to lease changes and potential impairments linked to ROU assets .From proactive optimization to remediation/restatement of lease accounting.
Internal Controls/RestatementNo restatement mentions; standard risk disclosures .Standard forward-looking risks; no non-reliance .Non-reliance on 2022 and 2023 quarterly financials due to ROU errors; material weaknesses anticipated .Significant deterioration in control environment disclosures.
Liquidity/Debt/Nasdaq ComplianceNoted Nasdaq listing risk among boilerplate risks .Boilerplate listing risks .Anticipated Nasdaq timely filing non-compliance; lender waivers sought; acceleration risk disclosed .Elevated listing and financing risks now central.

Management Commentary

  • “The Company recently identified accounting errors related to the valuation and impairment of operating lease right of use assets and related items for the fiscal years 2022 and 2023... The foregoing ... errors are non-cash in nature and will not impact the Company’s reported cash balances or statements of cash flows... [and] will increase the Company’s overall net loss and loss per share in the impacted periods.” .
  • “The Company anticipates that it will not timely file its Annual Report on Form 10-K for the fiscal year ended December 31, 2023... and expects to receive a notice from The Nasdaq Stock Market that it is not in compliance with the timely filing requirement...” .
  • “The Company is engaging in discussions with its lenders to seek waivers of any noncompliance... If such waivers are not obtained... lenders [could] accelerate our outstanding debt obligations... [which] could immediately adversely affect our business, cash flows, results of operations and financial condition.” .
  • Prior quarter strategic tone: “Our cash flow positive plan is in full swing... cost discipline... Powered By Sonder... optimize our portfolio [to] accelerate our timeline to sustainable cash flow positivity.” .

Q&A Highlights

  • No Q4 2023 earnings call transcript or Q&A session was available due to the delayed results and restatement announcement .

Estimates Context

  • Wall Street consensus (S&P Global) for Q4 2023 EPS and revenue could not be retrieved at this time due to a request limit issue; we will update when available. Values would be retrieved from S&P Global.

Key Takeaways for Investors

  • Q4 revenue was resilient sequentially but modestly below management’s prior guidance range; FCF (excl. restructuring) landed within guidance, suggesting operational execution against cash objectives despite year-end pressures .
  • The restatement and non-reliance determination materially elevate governance and controls risk; monitor timing, scope, and impact of the corrections on covenant calculations and listing status .
  • Liquidity compression into year-end (cash and restricted cash down to ~$136.5 million) and lender waiver outcomes are critical near-term catalysts; risk of acceleration requires close tracking .
  • Occupancy remained stable at 82% with RevPAR approx. $150 in Q4, indicating sustained demand, but ADR trends were not disclosed in the preliminary highlights; watch RevPAR trajectory as portfolio optimization proceeds .
  • Prior initiatives (Powered By Sonder, cost discipline) drove FCF margin improvements through Q3; near term focus shifts to remediation, lender negotiations, and filing completion before re-accelerating operational narratives .
  • Trading setup: headlines around restatement progress, Nasdaq compliance, and debt waivers will dominate sentiment; any resolution or liquidity-enhancing actions can re-rate risk premiums quickly .
  • Medium-term thesis hinges on portfolio optimization and maturing unit cohorts to stabilize RevPAR and cash contribution while restoring control environment credibility .