WeWork has warned that a “substantial doubt exists about the company’s ability to continue as a going concern” as a result of its losses, projected cash needs, increased member churn and current liquidity levels.
In its Q2 and H1 results, the flexible workspace company reported its revenue increased 7% to $844m year-on-year for H1 2023, however, it made a net loss of $397m – a $238m improvement year-on-year.
WeWork said its consolidated physical occupancy was just 72% at the end of Q2 and reported high member churn and softer demand than anticipated.
The company said its ability to continue as a going concern was contingent on the “successful execution of management’s plan to improve liquidity and profitability over the next 12 months, which includes, without limitation: reducing rent and tenancy costs via restructuring actions and negotiation of more favourable lease terms; increasing revenue by reducing member churn and increasing new sales; controlling expenses and limiting capital expenditures; and seeking additional capital via issuance of debt or equity securities or asset sales”. The company’s share price fell by nearly 24% off the back of the announcement.
David Tolley, WeWork’s interim chief executive officer, said: “In a difficult operating environment, we have delivered solid year-over-year revenue growth and dramatic profitability improvements. Excess supply in commercial real estate, increasing competition in flexible space and macroeconomic volatility drove higher member churn and softer demand than we anticipated, resulting in a slight decline in memberships.”
“We are confident in our ability to meet the evolving workplace needs of businesses of all sizes across sectors and geographies, and our long term company vision remains unchanged.
“Although we have more work to do, the talent and energy of the WeWork team is extraordinary and we are resolutely focused on delivering for our members for the long term. The company’s transformation continues at pace, with a laser focus on member retention and growth, doubling down on our real estate portfolio optimisation efforts, and maintaining a disciplined approach to reducing operating costs.”
On May 5, 2023, the company closed on its debt exchange and restructuring transactions. As of June 30, 2023, WeWork had $680m of liquidity, consisting of $205m of cash and $475m of capacity under its delayed draw, first lien notes, of which $175m were drawn in July 2023.
In May this year, it was announced that WeWork’s CEO Sandeep Mathrani was stepping down from his position and the company’s chief financial officer Andre Fernandez resigned as question marks grew over WeWork’s survival prospects.
