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| Statement |
|---|
| We're pleased to report our best free cash flow quarter to date as a public company, demonstrating continued progress on our path to achieving sustainable positive free cash flow in the near term and industry-leading unit economics over the long term |
| We feel confident it will improve the trajectory meaningfully |
| And frankly, I think that we have room for improvement on our pricing strategy |
| We also produced all of this growth with a 14% improvement in total overhead costs and a 9% improvement in total property level expenses per occupied nights |
| These accomplishments resulted in a 60% improvement in our free cash flow compared to last year from negative $39 million to negative $16 million and a 21% improvement in free cash flow margin from negative 31% to negative 10% |
| I'm incredibly proud of the progress we're making toward our goal of sustainable positive free cash flow |
| Unit economics, so reducing property level costs, including improving the rent profile of these properties and then controlling preopening costs and overhead as we have in the past |
| As Francis just talked about, there's a lot of embedded growth in the model that we feel good about |
| And so we think that this industry-leading growth is actually quite exciting, and the growth rate is not an issue for the business at this point |
| I also want to point out that we've got still nearly 50% embedded growth, which we think is really exciting, frankly |
| So we're pleased with the success we've seen so far and the progress we've made on the cost side |
| In terms of the cost structure of the business, we continue to see our EBITDA margin improving, our cost per unit coming down |
| In terms of geographic performance, we're continuing to see strong demand for our properties in Europe and the Middle East growing comparable properties RevPAR 14% year-over-year in those markets, while our North American comparable properties RevPAR remained flat |
| At the midpoint of the guidance range provided, this translates to $58 million or 33% year-over-year improvement in free cash flow for the full year of 2023 |
| We remain relentlessly focused on driving efficiencies across our property level costs, where we've outperformed our cost targets for the first three quarters of 2023, due to the success of multiple direct cost-reduction initiatives |
| This operating leverage improvement, in turn, drove our trailing 12-month cash contribution margin to 19% in the most recent quarter compared to 17% in Q3 of 2022 |
| The 17% increase in total costs on the back of a revenue increase of 29% and bookable nights growth of 33% illustrates the strong improvements we've been driving in our operating leverage |
| Success in our corporate sales segment should enable us to bolster RevPAR in our primarily urban markets and in particular, during weekdays |
| And finally, this quarter, we leaned into a pricing strategy that focuses on building a better base of occupancy earlier in the booking window and enables us to have greater pricing power over the rest of the booking window |
| Overall, our experimentation and early results suggest this approach should yield higher ADR |
| Occupancy remained strong at 83% in the third quarter, a slight decline from the 84% in Q3 of 2022 even as we saw significant growth in bookable nights |
| We're pleased to report our live units grew 31% year-over-year driven by continued strong conversion from our contracted units to live units |
| Even after excluding these units, we continue to have a notable backlog of contracted units, representing a strong growth pipeline of nearly 50% of our live unit count |
| Free cash flow margin also improved year-over-year, reaching negative 10% compared to negative 31% in the third quarter of 2022 |
| And then on the live unit growth side, we just posted, in this third quarter, a 31% year-over-year growth of live units and so we're really happy with that pace, and we'll keep on focusing the team on improving the free cash flow performance of the business in the near term |
| And that's the recipe for us to continue to improve free cash flow |
| And right now, that's how we're framing '24 at a high level, continued improvements in the trajectory and working on the key levers to deliver that, but no formal guidance at this point |
| We see also the sustained progress we've been making on the free cash flow front |
| And we actually think that's not the right approach and building a base of occupancy earlier into the booking window, but then holding price as we approach that data arrival is actually a better strategy to drive stronger ADRs and stronger RevPARs |
| For the fourth quarter of 2023, we expect revenue between $165 million and $175 million, which, at the midpoint, represents a $148 million or 32% year-over-year improvement for full year 2023, and a $35 million or 26% improvement versus the fourth quarter of 2022 |
| Statement |
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| Across all of our Sonder properties, RevPAR declined 3% year-over-year |
| Our RevPAR was also negatively impacted by some slower starts in a few of our recent North American property openings |
| Additionally, we're seeing challenges in properties in Mexico City, which make up over 10% of the cohort of units that went live in the last year |
| I think there are some dates where we've been selling out a little bit too early, and that's caused our capacity to yield optimally to be impaired |
| All else equal, the shift towards hotel properties had a roughly 1% negative impact on our year-over-year RevPAR growth |
| In terms of the gross margins, I think this is mostly driven by the RevPAR coming in just a little bit lower than where it was last year and from what our expectations were |
| Note that while Q1 2023 free cash flow sequentially worsened compared to Q4 of 2022, we do not expect this pattern to repeat itself going into 2024 |
| It came in a little bit lower than expected in the quarter |
| Properties that have been live for less than a year had average RevPAR approximately 30% lower than our mature units in Q3 |
| While the majority of our properties are profitable, some of our properties do have negative margins |
| However, our total portfolio of live units plus contracted units did decline 10% year-over-year and 2% sequentially |
| This implies a slight decline from the previous revenue range for the second half of the year, provided at our last quarter call due to the factors that Francis mentioned earlier |
| In the third quarter, free cash flow before one-time restructuring costs totaled negative $16 million compared to negative $27 million in the second quarter of this year and negative $39 million in the third quarter of 2022 |
| Similar to last quarter, as development cost uncertainty and persistent high interest rates remain a significant issue for developers and landlords, we felt it was prudent to exclude a number of contracted units with financing contingencies, which drove the year-over-year and sequential declines |
| While our hotel RevPAR growth outpaced that of our apartment product, RevPAR for our hotel properties tends to be slightly lower than our apartment style properties |
| For free cash flow, we expect between negative $39 million and negative $29 million in the fourth quarter |
| It's never the intent for an operation to underperform, but in today's challenging marketplace, we must appreciate that a proactive approach to asset management is more important than ever |
| It typically takes time for new properties to ramp up, but this is a larger drag than we've seen in the past, primarily due to a greater proportion of properties that rely heavily on B2B sales |
| One, just as we think about the total portfolio versus the live units, I know that total portfolio number is coming down for kind of -- you're pulling some of the properties out of that |
| As you saw, the revenue results came in a little bit towards the low end of the range |
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