WeWork said Thursday that it was going to close roughly 40 “underperforming” locations in the United States and tempered its revenue forecast for the year, highlighting the challenges the coworking company still faces after its near collapse and subsequent bailout in 2019.
For the third quarter, WeWork said it lost $568 million, an improvement from the same period last year, when it lost $802 million. Revenue of $817 million in the latest quarter was more than 20% higher than the $661 million reported a year earlier.
WeWork doesn’t own its buildings but leases office space and parcels it out to its customers, which include individuals, small businesses and larger companies. Memberships rose in the third quarter. But occupancy was only slightly higher in WeWork’s 647 consolidated locations around the world, rising to 71% in the third quarter from 70% in the second.
The company said it expected revenue of $3.35 billion to $3.37 billion this year. The upper end of that forecast is lower than the forecast it issued last quarter, when the company projected up to $3.5 billion in 2022 revenue. One factor leading to the pared back forecast, the company said, was “slower than expected growth” in its operations in the United States, Canada and Japan.
WeWork said closing locations was likely to reduce revenue but would benefit the company by cutting costs. The company has lost more than $12 billion since the end of 2018.
Demand for office space has plummeted since companies started letting employees work from home during the pandemic. But WeWork considers this trend an opportunity. Because it offers space for shorter periods than traditional landlords, the company has claimed that it provides businesses more flexibility.
“The headwinds in the office sector are really benefiting the flex model,” Sandeep Mathrani, WeWork’s CEO, said Thursday on a call to discuss third-quarter results.
Still, large companies’ share of memberships has fallen, to 47% in the third quarter from 49% in the same period a year ago.
The enormous costs of WeWork’s office leases and the expenses involved in running the locations have led many investors to express skepticism about WeWork’s turnaround plan.
The company’s stock has lost nearly 80% of its value since WeWork went public last year, giving it a market capitalization of $1.6 billion, a fraction of the $47 billion value that private investors placed on the company in 2019. The stock was down 15% Thursday morning, even as the wider market soared.
The Japanese conglomerate SoftBank and a fund run by SoftBank have provided billions of dollars in financing to keep WeWork afloat, and now own nearly two-thirds of the company.
Despite cutting expenses and getting out of leases, WeWork is still going through a lot of cash.
In the first nine months of the year, WeWork used $915 million to invest in and operate its business, leaving it with $460 million in cash at the end of September. It had $625 million at the end of the second quarter.
If WeWork needs more money, it could draw on roughly $1 billion of financing backed by SoftBank. On Thursday, WeWork said it had extended the deadline to pay back $500 million of that financing, to 2025 from 2024, a move that buys the company more time. WeWork has not borrowed from the $500 million facility, but Mathrani said Thursday that the company anticipated doing so “in the next quarter or so.”
In a sign of its scaled back ambitions, WeWork recently reduced its space at Dock 72, the trophy building it helped develop in New York City’s Brooklyn borough.
This article originally appeared in The New York Times.
By Peter Eavis
c.2022 The New York Times Company
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