Hospitality company Sonder says it felt the effects of the omicron variant in the first quarter of 2022, noting in its earnings report that “the financial results we posted from March 2020 until March 2022 are not representative of the power and full potential of our business.”
Founded in 2014, Sonder made its debut on the public markets via a special purpose acquisition company (SPAC) created through a business combination with Gores Metropoulos II in January of this year.
For Q1 2022, Sonder revenue was $80.5 million, a 155% increase compared to Q1 2021, fueled by year-over-year RevPAR and live unit growth. However, the figure is down from revenue of $87 million the previous quarter. The company says Q1 2022 revenue was impacted by RevPAR compression “in excess of our typical seasonality patterns due to the emergence of the omicron variant.”
The revenue impact also impacted its profitability measures in Q1 2022 – adjusted EBITDA for the period was negative $83.5 million - but the company “continued to demonstrate year-over-year progress in our profitability margins,” with property level profit margin improving by 3,300 bps and adjusted EBITA margin improving by 6,400 pbs year-over-year.
RevPAR for the period was $117, a 52% improvement over the first quarter of 2021.
Net income was $22.4 million, with net income margin improving to 28% in Q1 2022 compared to negative 249% in Q1 2021. Adjusted EBITDA margin improved to negative 104% in the first quarter of 2022 from negative 167% in Q1 2021.
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Operating cash flow margin improved to negative 66% in Q2 2022 compared to negative 128% in Q1 2021. Free cash flow margin improved to negative 81% for the quarter compared to negative 136% for the same period last year.
“Our path to cash flow positivity depends on: 1. Our capacity to increase operating cash flow margins as the travel market recovers and we improve our RevPAR and direct cost efficiency; 2. Our capacity to open our signed properties and keep adding more high quality signings; and 3. Our disciplined growth on other operative expenses and net capex,” says Sonder co-founder and CEO Francis Davidson in a letter to shareholders.
“With visibility into attractive operating cash flow margins as the market recovers and as we build more capabilities, with a large portfolio of contracted units and a pipeline of prospective deals bigger than we’ve ever had, and with our focus on careful spend growth, we have high conviction in our ability to seize this unique market opportunity in a financially disciplined way.”
Sonder’s total portfolio of live and contracted units grew to about 19,300 units in the first quarter of 2022, an increase of 48% year-over-year. Live units grew by 54% year-over-year to more than 7,700 units in 39 live markets across 10 countries.
The company more than doubled corporate travel accounts to nearly 250 in Q1 2022, compared to 100 accounts in Q4 2021. Drivers include corporate transient growth with travel management companies as well as traction with group and corporate housing bookings, the company says.
Sales and marketing expenses for the quarter rose by 277% year-over-year to $9.5 million, driven by higher channel transaction fees due to an increase in total bookings.
Looking ahead, the company says: “Given the most recent uptick we’ve seen in forward booking trends as we’ve entered Q2, we continue to believe the time is right to responsibly pursue our growth strategy.”