The embattled co-working startup WeWork reported its financial results for the first quarter of 2022 on Thursday, showing an increase in revenues as commercial office space slowly rebounds from the pandemic.
WeWork reported revenues of $765 million, a seven percent increase from the previous quarter and a 28 percent increase from the first quarter of 2021, the company said in a statement Thursday morning.
Its losses improved as well, with a net loss of $504 million reported, a 37 percent improvement from the fourth quarter of 2021. Its losses included $147 million of interest, a gain of $130 million primarily from lease expirations, $91 million due to building exits, and stock-based compensation of $13 million.
Its adjusted EBITDA was at negative $212 million, a $71 million improvement from the previous quarter and a $234 million improvement from the first quarter of 2021. Its operating cash flow was at negative $338 million and its free cash flow was negative $412 million.
“Our first quarter results underscore the long-term value of WeWork’s holistic offerings that are tailored to a new era for the office market. Having built a more sound and disciplined operating model, WeWork is well-positioned to capture demand, grow occupancy, and achieve revenue goals established at the beginning of 2022,” Sandeep Mathrani, CEO and chairman of WeWork said in a statement.
Mathrani told investors on a conference call Thursday morning that the company’s creative office designs were drawing companies looking to experiment with a hybrid work model and draw employees back to the office after years of working from home.
“While we have seen new workplace models and trends emerge from the pandemic we are beginning to see these strategies shift from short-term covid solutions to the future of work,” Mathrani told investors. “We’ve seen a shift in tenant demand towards high-quality designed spaces. We’ve seen companies looking for space that is well designed, engaging, and amenitized. In short, a place where their employees want to spend time.”
The company has seen higher occupancy rates in international markets, with international occupancy nearing 80 percent and occupancy in the U.S. still below 70 percent but with sales ramping faster than in international markets, Mathrani said.
It has also seen a number of large international companies take the dramatic step of shuttering their headquarters and moving into WeWork buildings as they reevaluate their office space needs, including the bank Santander, which closed its New York headquarters and moved into a WeWork building at 437 Madison Avenue in Manhattan, and State Street Bank of Kansas City, Missouri, which gave up their 250,000 square foot corporate headquarters to move into a 25,000 square foot Kansas City WeWork. Such transformations were unthinkable before the pandemic, Mathrani argued.
“We’ve never really seen large companies close corporate headquarters and relocate,” Mathrani said. “It’s all about optimizing their real estate, providing the hybrid flexible solution.”
Mathrani said the company projects revenues of between $800 and $850 million in the second quarter and expects its adjusted EBITDA to break even by the end of 2022, and be positive by the first quarter of 2023. To slim down its losses, the company said it would invest more in automation.
“Our plan presuming the trajectory as we see it today is to hit break even by end of year,” he said.
The improving earnings outlook comes more than two years after WeWork became the poster child for startup excess and poor corporate management. Its attempt at an initial public offering proved disastrous and the company had to be bailed out by its chief public banker SoftBank.
The first quarter earnings call was the first call since the premiere of HBO’s WeCrashed, the miniseries starring Jared Leto as Neumann that dramatized the founder’s rise and highly publicized fall, as well as the financial woes he plunged the company into.