EDITOR'S COMMENT
Sonder was already in a tricky predicament even before announcing a significant reduction this week, as it gets set to exit or reduce rents in 105 buildings. The company has already agreed to exit 80 of these buildings and is looking to vacate the remaining units later this year as part of an ongoing "portfolio optimisation".
The San Francisco-based firm wants to achieve "estimated annualised run-rate free cash flow improvements of over $40 million" with less than $20 million in termination fees, which CEO Francis Davidson labelled as "decisive action to optimise our cost structure and deliver sustainable positive free cash flow as soon as possible". On top of this, Sonder has raised $10 million in financing as part of an amendment to its existing note and warrant purchase agreement, in order to “improve the company’s unrestricted liquidity”.
Despite claiming to have increased its fourth quarter revenue to $164 million in the space of 12 months, the truth is that little is known about Sonder's current portfolio size as it still has not posted either its Q4 2023 or Q1 2024 results - Sonder says that this is due to "non-cash accounting errors".
Its task to achieve profitability for the first time will not get any easier - in February, Sonder announced its fourth round of job cuts since 2020 after needing to cut costs due to an oversized portfolio and properties underperforming on their leases. It's clear that the company needed to make radical decisions to reach its profitability goal and that it is still feeling the effects of building for scale to fulfil demand at the end of the pandemic.
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