WeWork’s survival at stake as Q2 2023 financial report reveals mixed bag of results

New York-based WeWork, a real estate company that provides shared workspaces, recently announced its financial results for Q2 2023, shedding light on its ongoing struggle in an increasingly competitive and turbulent market. 

The financial report reveals a mixed bag of results, showcasing both signs of improvement and persistent challenges.

Revenue growth amidst headwinds

WeWork reported consolidated revenue of $844M for Q2 2023, reflecting a 4 per cent increase compared to the same period the previous year. 

This uptick was mirrored in the year-to-date numbers, with a 7 per cent increase in revenue for the first half of 2023, compared to the previous year. 

Narrowing losses and improved EBITDA

The company reported a net loss of $(397)M for Q2 2023, which marks a substantial improvement of $238M compared to the same period in the previous year.

For the first half of 2023, the net loss also saw an encouraging improvement of $443M year-over-year. 

Additionally, the adjusted EBITDA for the second quarter of 2023 stood at $36M, signifying a year-over-year improvement of $98 million. 

For the first half of 2023, the adjusted EBITDA saw an improvement of $281M year-over-year.

These signs of financial progress provide a glimmer of hope for WeWork’s recovery efforts.

Membership decline and physical occupancy challenges

However, the report also underscores the continuing struggles WeWork faces in terms of membership retention and physical occupancy. 

At the end of the second quarter of 2023, the consolidated physical occupancy rate was 72%, a marginal increase from the 70% occupancy rate recorded at the end of the second quarter of 2022. 

This incremental growth in occupancy is overshadowed by a decline in physical memberships of 1 per cent year-over-year. 

Moreover, the consolidated real estate portfolio, comprising 610 locations across 33 countries, experienced a 3 per cent decrease in physical memberships compared to the previous year.

“In a difficult operating environment, we have delivered solid year-over-year revenue growth and dramatic profitability improvements,” says David Tolley, Interim Chief Executive Officer of WeWork.

“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,” he adds.

WeWork’s ability to continue as a going concern

The financial report also unveiled a concerning aspect of WeWork’s financial situation. 

In the quarterly report, the company revealed that due to mounting losses, projected cash needs, increased member churn, and existing liquidity levels, there is substantial doubt about its ability to continue as a going concern. 

The report highlighted that WeWork’s path forward depends on executing a strategy to enhance liquidity and profitability over the next 12 months. It involves measures such as: 

• Reducing rent costs through restructuring
• Boosting revenue by reducing member churn and increasing sales, controlling expenses
• Seeking additional capital through debt or equity issuance or asset sales

“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,” says Tolley. 

“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,” he adds.