In these times, double down — on your skills, on your knowledge, on you. Join us Aug. 8-10 at Inman Connect Las Vegas to lean into the shift and learn from the best. Get your ticket now for the best price.
WeWork managed to narrow its losses significantly during the first quarter of 2023, but remains deep in the red, according to a Tuesday morning earnings call from the coworking space provider.
The commercial real estate giant posted a net loss of $299 million in the first quarter, a $205 million improvement from the first quarter of 2022 when its losses stood at $504 million, according to earnings data. Revenue increased 11 percent year over year to $849 million, in line with its projections of $840 million to $865 million.
“Over the past quarter we’ve continued to improve the fundamentals of our business while working to meet the needs of current and future members who seek turnkey, cost-efficient solutions for their office needs,ˮ WeWork CEO Sandeep Mathrani said in a statement Tuesday.
The improvement came as the company completed a debt restructuring that brought in a wave of new funding, eliminating $1.4 billion in corporate debt and extending the maturity of the remaining $1.6 billion until 2027. WeWork’s free cash flow rose to $343 million, an $18 million improvement from an initial projection made in connection with its debt restructuring.
It also instituted significant cost-cutting measures over the past two quarters, shuttering 40 underperforming locations in the United States in November and laying off 300 employees In January.
“Critically, following our debt restructuring, we now have a strengthened balance sheet and liquidity position that gives us the runway to deliver against our plan,” Mathrani said. “Our debt restructuring was backed by a large majority of bondholders and investors, demonstrating their conviction in the WeWork business model and our future.ˮ
WeWork membership dropped from 617,000 worldwide in the fourth quarter of 2022 to 602,000 in Q1, a decline Mathrani attributed to client turnover, the closure of multiple locations and the franchising of its South African locations.
All-access consolidated memberships rose 36 percent year over year to approximately 75,000, while consolidated physical occupancy hovered at 73 percent at the end of the first quarter, up year over year when occupancy clocked in at just 67 percent.
Shares of WeWork dropped 1.19 percent Tuesday as markets opened.
“The slight decline in memberships was a function of known enterprise client churn, the closure of some of our locations and the franchising of our South Africa business. April saw a reversal in enterprise demand resulting in USC’s first positive net sales month in twelve months,” he said.
The company projected its second-quarter revenue would be between $840 million and $865 million.
The debt restructuring deal was struck in March with SoftBank, WeWork’s biggest investor, along with other investors to reduce WeWork’s debt to less than $2.4 billion.
Following that restructuring though, ratings agency S&P Global downgraded WeWork’s credit to default status, calling the restructuring “tantamount to a default because we believe lenders will receive less than originally promised.”
“WeWork is pursuing this transaction because its capital structure is unsustainable and the company has limited options to reduce its debt burden and improve its cash flow organically,” the agency added.
WeWork has not commented on the rating — which came one day after WeWork disclosed that it would be pursuing a reverse stock split in order to bolster its share price to avoid being delisted by the New York Stock Exchange.
It was just the latest hiccup for WeWork, which became the poster child for startup excess and poor corporate management in 2019 when its attempt at an initial public offering proved disastrous and the company had to be bailed out to the tune of billions by 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.
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.
Neumann has since launched a new venture — Fl0w — which has been described by some observers as a WeWork-style residential rental startup. Neumann has pitched it as a shared housing concept with four pillars: an investment arm that buys buildings, a tech arm that manages them, a financial services arm that can collect rent and offer other unknown services and an equity sharing arm.
