Monday, January 30, 2023

WeWork to close 40 locations across US amid otherwise promising Q3

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The coworking space lost $568 million in Q3, an improvement from the same period last year when it lost $802 million, according to earnings on Thursday. Its revenue hovered at $817 million, a 24 percent lift from 2021.

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WeWork will close 40 “underperforming” office locations across the United States, company representatives said during its third-quarter earnings call on Thursday, highlighting the challenges still faced by the multinational commercial real estate firm following its 2019 bailout.

The company did not specify which locations or in which cities it would be closing.

WeWork lost $568 million in the third quarter, it said in a news release, an improvement from the third quarter of 2021 when it lost $802 million. Its revenue clocked in at $817 million, a 24 percent increase from the previous year and a $2 million increase from the previous quarter when the company’s revenue stood at $215 million.

The company said closing locations would likely bring revenue down in the short term but aid WeWork in the long term by cutting costs and contributing $140 million to its adjusted EBITDA.

“As evidenced by our growth in revenue, reduced costs, optimized portfolio and reinforced balance sheet, we are leveraging all the tools at our disposal to continue executing against our goals,” WeWork CEO Sandeep Mathrani said in a statement.

The company said it expects fourth-quarter revenue to come in at between $870 and $890 million, and for its full year revenue to clock in between $3.35 billion and $3.37 billion. Its full year revenue outlook has been adjusted from between $3.4 billion and $3.5 billion due to slower than expected growth in the United States, Canada and Japan.

Membership grew in the third quarter, with 8,000 physical memberships and 7,000 workstations across the quarter, bringing occupancy to 71 percent, the company said in its earnings report.

As of September 30, the company’s portfolio consisted of 777 locations across 38 countries, with about 917,000 desks and 685,000 memberships. The company does not own its real estate but rents it out and parcels out individual offices and desks to members.

The third quarter report marks more than two years since WeWork became the poster child for startup excess and poor corporate management. Its attempt at an initial public offering proved disastrous and the company had to be bailed out by its chief public banker SoftBank.

Its eccentric founder Adam Neumann resigned in September 2019 and the company finally went public in October 2021. WeWork’s first earnings call as a public company was in November 2021.

As evidenced by the cost-cutting measures the company’s challenges are far from over even as its revenues improve. Its stock has lost three-quarters of its value since going public in 2021, bringing its worth to $1.9 billion, a fraction of the $47 billion valuation first placed on the company in 2019.

The startup’s saga was the subject of a dramatized miniseries earlier this year,  HBO’s WeCrashed — which starred Jared Leto as Neumann. It dramatized the founder’s rise and highly publicized fall, as well as the financial woes he plunged the company into.

Email Ben Verde

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