NEW YORK (NYT) – WeWork reported its first quarterly results as a public company on Monday, revealing that its co-working business is still racking up big losses and haemorrhaging cash.
But WeWork pointed to an uptick in customer leasing activity in the quarter as evidence that it was positioned to do well in office space markets that had been upended by the pandemic.
WeWork, which became public through a merger last month with a special purpose acquisition company, reported a net loss of US$802 million (S$1.1 billion) in the third quarter, an improvement on the loss of US$941 million in the same period a year earlier. WeWork’s revenue, however, declined to US$661 million in the latest third quarter, from US$811 million a year earlier. The company reduced its loss by cutting its expenses significantly.
WeWork leases huge amounts of office space and then charges its customers – large companies, small businesses and individuals – to use it. Customers might prefer being in a WeWork space because the lease agreements are shorter than for traditional office space, allowing for more flexibility. But the drawback for WeWork is that its customers can move out on short notice.
WeWork was on the brink of bankruptcy in 2019 after it decided to call off an initial public offering, but the company was bailed out by SoftBank, the Japanese conglomerate, which is now its largest shareholder. In the debacle, co-founder Adam Neumann stepped down as chief executive and left the company, but he remains a shareholder. Mr Neumann spoke about his role in the imbroglio last week.
WeWork spent much of the pandemic trying to cut costs and reduce the size of its network. It did so in part by negotiating lower cost leases with its landlords and by getting out of certain properties. Its operating expenses in the third quarter were US$542 million lower than in the year-earlier quarter.
Even so, WeWork’s business is still using up significant amounts of cash, rather than producing positive cash flows.
The work-from-home trend ushered in by the pandemic has led many companies to curb their appetite for office space under traditional leases. WeWork hopes that these companies will use its space when they do want workers to get together. And WeWork believes flexible office space will grow in the coming years to account for a much larger share of the overall market.
WeWork’s stock was 3 per cent higher in afternoon trading.