NEW YORK–(BUSINESS WIRE)–WeWork, one of the leading global flexible space providers, today reported financial results for its second quarter ending on June 30, 2021.
Company Operating Results
- As of June 30, WeWork’s global real estate portfolio included 763 locations across 38 countries, supporting approximately 937,000 workstations and 517,000 total memberships
- Consolidated new desk sales totaled 98,000 in the second quarter, including new desk sales of 21,000 in April, 29,000 in May, and 48,000 in June
- Consolidated Enterprise memberships accounted for 51% of total memberships
- Overall average commitment length increased to 22 months, while Enterprise average commitment length increased to approximately 30 months
- Q1 desk sales translated into occupancy gains in Q2 as total occupancy reached 52%. Including the incremental 40,000 net memberships that are already contracted to move in by year end, total occupancy would increase to 57%
Company Consolidated Financial Results2
- Revenue of $593 million in the second quarter was in-line with Q1. Revenue increased sequentially each month in the quarter after reaching a trough in April: April revenue was $187 million, May revenue was $197 million and June revenue was $209 million. Preliminary July revenue is expected to be approximately $215 million
- Adjusted EBITDA loss of $449 million for the quarter, which is in line with the prior quarter and year
- Net loss of $923 million in the quarter, which included $474M of non-cash and non-recurring expenses, which is primarily Depreciation, Amortization, and Impairments.
- Free Cash Flow used in operations was $649 million, which is an improvement of nearly $15 million as compared to the prior quarter and an improvement of $22 million compared to Q2’ 2020
- WeWork ended the second quarter with $1.6 billion in cash and unfunded cash commitments including $844 million of available cash on hand and $750 million currently available under our Senior Secured Notes facility. WeWork also extended the availability of its $1.1 billion Senior Secured Notes facility through the end of September 2021
Sandeep Mathrani, CEO of WeWork said: “Regardless of how companies are thinking about the future of work, access to a space to collaborate, innovate, mentor and build culture remains critical. The demand from businesses of all sizes accelerated through the quarter and steadily continued into July, delivering strong sales momentum that will drive occupancy and revenue growth. WeWork’s broad spectrum of flexible solutions has made our value proposition more apparent than ever and we are well positioned to provide companies around the world with the flexibility to adapt to the changing needs of the hybrid workforce.”
Space-as-a-Service Sales Update:
In Q2, WeWork saw the U.S. come back with renewed strength as companies actioned their return to work strategies quickly and decisively, leading to an increase in win rates, shorter sales cycles, and a much larger portion of deals created and closed within the same quarter.
The company’s consolidated new desk sales of 98,000 equates to 5.9 million square feet sold in the second quarter. Consolidated net desk sales turned positive in March 2021, a leading indicator of future positive member adds and revenue increases, and has been positive for the four consecutive months since. As it historically takes 1-3 months for a desk sale to convert into a revenue-generating membership, positive net desk sales in March translated into our first month-over-month increase in revenue one month later, in May. The net desk sales ramp from 5,000 in April to 13,000 in May and then 30,000 in June will continue to reflect an increase in revenues through the end of the year.
Small and medium businesses continued to comprise two-thirds of new desk sales in the second quarter, while Enterprise demand accelerated as notable companies such as Goldman Sachs, Klarna, Contentsquare and FabFitFun took space with WeWork in markets around the world.
WeWork’s total consolidated membership inclusive of All Access increased to 406,000 and total occupancy increased to 52% as of the end of the quarter. This does not include the incremental 40,000 net memberships that are already contracted to move in by year end, bringing total sold memberships to date of 446,000, which equates to a total occupancy of 57%.
All Access:
WeWork’s All Access offering — which includes both pay-as-you-go and monthly subscription products — continues to see demand as companies leverage All Access as a critical tool for enacting their flexible work strategies. WeWork has continued to partner with companies with broad customer networks, most recently with American Airlines, American Express, Brex, Y Combinator-backed startups, and Uber to engage new audiences and drive member growth. All Access and other virtual memberships were over 20,000 at the end of June. Revenue for our All Access and other Marketplace and Events products was $5.3 million in the month of June, a run rate of $60 million per year.
Platform – Asset-light Model:
Recently, WeWork has taken the first steps towards expanding its workplace experience management platform through a first-of-its-kind deal with HBC. HBC has long been at the forefront of reinventing retail, and this time is no different. WeWork will work with HBC to support the launch of “SaksWorks”, their new membership club product offering with stylish work and meeting spaces, artisanal cafes, retail, fitness studios and programmed events all under one roof. SaksWorks’ first four locations across the Tri-State Area are being powered by WeWork’s proprietary technology, hospitality-driven community, and sales resources.
Cushman & Wakefield Strategic Partnership Announcement:
On August 9, WeWork announced a strategic partnership with Cushman & Wakefield that would integrate WeWork’s flex space offerings into Cushman’s global occupier portfolio. The partnership would combine WeWork’s proprietary platform of workplace experience management software and hospitality experience with Cushman & Wakefield’s industry-leading asset and facilities management services. In addition, Cushman & Wakefield, WeWork and BowX Acquisition Corp (“BowX”) are in discussions regarding a potential transaction where Cushman & Wakefield would provide up to $150,000,000.00 in a non-dilutive backstop equity facility on mutually agreeable terms. This potential transaction underscores the confidence from the market in WeWork’s business and brand, while providing a new channel of distribution as their sales and leasing will offer WeWork’s offerings and capabilities to clients around the globe. The material terms of the partnership are non-binding and subject to finalization of definitive documentation.
Portfolio Optimization and Cost Savings Initiatives Update:
WeWork has continued to optimize its real estate portfolio through strategic lease terminations and amendments. On a global basis, WeWork terminated 30 leases and executed 80 lease amendments during the second quarter, totaling over 150 full lease exits and more than 350 lease amendments and partial exits since the beginning of 2020. WeWork estimates it has achieved approximately $400 million in annualized rent savings as a direct result of these strategic optimization efforts, including full and partial lease terminations. As WeWork’s portfolio optimization efforts come to an end, the company will continue to proactively manage its portfolio sustainably.
Additionally, SG&A3 through the first 6 months of 2021 was $420 million, less than half the amount recorded during the first 6 months of 2020, further highlighting efficiencies gained through strategic rationalization of SG&A expenses over the past 18 months.
Outlook:
The duration and scope of the COVID-19 pandemic, including the emergence of the Delta variant, has been unpredictable and resulted in a slower than expected timing of recovery for the first half of the year from when we established our initial financial projections. As a result of these recent developments and other factors, the Company has prepared current projections based on the best and most recent information available, including reducing expectations around timing of the recovery of average revenue per member, particularly in the United States and Canada, in 2021 and 2022 in light of the delay in the recovery of the business from the COVID-19 pandemic. The Company’s initial projections were not materially changed for 2023 and 2024. The current projections will be disclosed in the next filing of the BowX registration statement on Form S-4.
The Company has seen a continuation of sequentially improving revenue trends, with preliminary July revenue expected to be approximately $215 million, which puts WeWork in a position to achieve $650 – 700 million in the third quarter.
About WeWork
WeWork was founded in 2010 with the vision to create environments where people and companies come together and do their best work. Since opening our first location in New York City, we’ve grown into a global flexible space provider committed to delivering technology-driven flexible solutions, inspiring spaces, and unmatched community experiences. Today, we’re constantly reimagining how the workplace can help everyone, from freelancers to Fortune 500s, be more motivated, productive, and connected. For more information about WeWork, please visit us at https://wework.com.
