WeWork Reports Fourth Quarter and Fiscal Year 2022 Results

Fourth Quarter Revenue Increases 18% Year-over-Year

WeWork Inc. (NYSE: WE) ("WeWork"), the leading global flexible space provider, disclosed financial results today for the three months, and fiscal year ended December 31, 2022. Fourth quarter, full-year and other recent highlights include:

• Revenue for the fourth quarter was $848 million, an increase of 18% year-over-year. Revenue using the Company’s budgeted foreign exchange rates was $905 million, an increase of 26% year-over-year, exceeding the Company’s previous revenue guidance of $870- $890 million.
• Physical Memberships increased by 17% year-over-year on a consolidated basis.
• Consolidated physical occupancy increased to 75% at the end of the fourth quarter.
• All Access and On-Demand consolidated memberships grew to approximately 70,000 in the fourth quarter, an increase of 56% year-over-year.
• In February 2023, the Company extended the maturity of the Junior Tranche of its LC Facility from November 2023 to March 2025 and increased the facility from $350 million to $470 million.

“Our fourth quarter results demonstrate that we accomplished what we set out to do in fiscal year 2022 by staying focused on reducing expenses, optimizing our portfolio, growing revenue, and increasing occupancy. As a result, we crossed a historic milestone of achieving Adjusted EBITDA profitability in December - a testament to the hard work of our employees and the enduring value of our products,” said Sandeep Mathrani, CEO and Chairman of WeWork. “As we move forward, we remain committed to building on this momentum while also enhancing our balance sheet.”

Fourth Quarter 2022 Consolidated Results

• Revenue for the fourth quarter was $848 million, an increase of 18% year-over-year. Revenue using the Company’s budgeted foreign exchange rates was $905 million, an increase of 26% year-over-year.
• Consolidated physical occupancy was 75% at the end of the fourth quarter.
• Net loss for the fourth quarter was $527 million. Net loss includes approximately $348 million related to non-cash expenses⁽¹⁾.
• Adjusted EBITDA was negative $26 million, a 75% improvement quarter-over-quarter, and a $257 million improvement year-over-year.

Company Debt Transactions:

In January 2023, the Company issued $250 million of Senior Secured Notes due 2025 to an affiliate of Softbank Group Corp. (“SBG”) pursuant to its existing Senior Secured Notes commitment.

In addition, in February 2023, the Company extended the maturity of the Junior Tranche of its LC Facility from November 2023 to March 2025 and increased the facility from $350 million to $470 million.

Space-as-a-Service:

• Systemwide revenue was $973 million in the fourth quarter.
• As of December 31, 2022, WeWork's systemwide real estate portfolio consisted of 779 locations across 39 countries, supporting approximately 906,000 workstations and 682,000 physical memberships, equating to 75% physical occupancy, and an increase in physical memberships of 16% year-over-year.
• Systemwide gross workstation sales totaled 206,000 in the fourth quarter, or the equivalent of 12.3 million square feet sold⁽³⁾. Systemwide new workstation sales were 75,000 in the fourth quarter or the equivalent of 4.5 million square feet sold⁽²⁾.
• As of December 31, 2022, WeWork’s consolidated real estate portfolio consisted of 622 locations across 34 countries, which supported approximately 731,000 workstations and 547,000 physical memberships, equating to physical occupancy of 75%, and an increase in physical memberships of 17% year-over-year.
• On a consolidated basis, gross workstation sales totaled 165,000 in the fourth quarter of 2022, which equates to approximately 9.9 million square feet sold⁽²⁾. Consolidated new workstation sales were 62,000 in the fourth quarter, or the equivalent of 3.7 million square feet sold⁽²⁾.
• Average revenue per physical member ("ARPM") was $481 in Q4, 2022. ARPM using the Company's budgeted foreign exchange rates was $514, an increase of 6% year-over-year.

WeWork Access:

All Access and On-Demand consolidated memberships grew to approximately 70,000 in the fourth quarter, an increase of 56% year-over-year. WeWork Access products generated $50 million of revenue in the fourth quarter, an increase of 72% year-over-year. Growth in All Access memberships yielded annual run rate revenue of approximately $200 million.

WeWork Workplace:

In July 2022, the Company launched its software solution, WeWork Workplace, to enable companies of all sizes to manage their space and workforce through one universal platform. Since its debut, over 220 companies have signed onto WeWork Workplace, comprising over 42,000 licenses sold.

Liquidity:

WeWork ended the fourth quarter of 2022 with liquidity of approximately $1.3 billion. This includes available cash and cash equivalents, unissued Senior Secured Notes, and secured debt covenant capacity.

In January 2023, the Company issued $250 million of Senior Secured Notes to an affiliate of SBG. The notes mature in March 2025 and bear interest at 7.5% per annum payable in cash (with a step-up to 11.00%, payable in-kind, from and after February 2024).

In February 2023, the Company amended the junior tranche of its LC Facility, increasing the tranche from $350 million to $470 million and extending its maturity from November 2023 to March 2025.

Outlook:

The Company expects its first quarter 2023 revenue to be $830 million to $855 million and Adjusted EBITDA to be $(25 million) to breakeven.

Source: We Work

Category: Investor Relations, Earnings

About WeWork

WeWork Inc. (NYSE: WE) was founded in 2010 with the vision to create environments where people and companies come together and do their best work. Since then, we’ve become the leading global flexible space provider committed to delivering technology-driven turnkey solutions, flexible spaces, and community experiences. For more information about WeWork, please visit us at wework.com.

Forward-Looking Statements

Certain statements made in this press release may be deemed “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. These forward looking statements generally are identified by the words “believe,” “project,” “expect,” “anticipate,” “estimate,” “intend,” “strategy,” “future,” “opportunity,” “plan,” “pipeline,” “may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. Forward-looking statements are predictions, projections and other statements about future events that are based on current expectations and assumptions and, as a result, are subject to risks and uncertainties. Although WeWork believes the expectations reflected in any forward-looking statement are based on reasonable assumptions, it can give no assurance that its expectations will be attained, and it is possible that actual results may differ materially from those indicated by these forward-looking statements due to a variety of risks, uncertainties and other factors. Such factors include, but are not limited to, WeWork’s ability to refinance, extend, restructure or repay outstanding debt; its outstanding indebtedness; its liquidity needs to operate its business and execute its strategy, and related use of cash; its ability to raise capital through equity issuances, asset sales or the incurrence of debt; WeWork’s expectations regarding its ability to continue as a going concern; WeWork’s preparation of its financial statements for the year ended December 31, 2022; retail and credit market conditions; higher cost of capital and borrowing costs; impairments; its current and projected liquidity needs; changes in general economic conditions, including as a result of the COVID-19 pandemic and the conflict in Ukraine; WeWork’s expectations regarding its exits of underperforming locations, including the timing of any such exits and our ability to retain our members; delays in customers and prospective customers returning to the office and taking occupancy, or changes in the preferences of customers and prospective customers with respect to remote or hybrid working, as a result of the COVID-19 pandemic leading to a parallel delay, or potentially permanent change, in receiving the corresponding revenue; the impact of foreign exchange rates on WeWork’s financial performance; and WeWork's inability to implement its business plan or meet or exceed its financial projections. Forward-looking statements speak only as of the date they are made. WeWork discusses these and other risks and uncertainties in its annual and quarterly periodic reports and other documents filed with the U.S. Securities and Exchange Commission. WeWork undertakes no duty or obligation to update or revise these forward-looking statements, whether as a result of new information, future developments, or otherwise, except as required by law.

Use of Non-GAAP Financial Measures and Other Performance Indicators

This press release includes certain financial measures not presented in accordance with generally accepted accounting principles in the United States (“GAAP”): Adjusted EBITDA, Free Cash Flow, and non-GAAP financial measures of foreign exchange (including on a forward-looking basis). These financial measures are not measures of financial performance in accordance with GAAP and may exclude items that are significant in understanding and assessing our financial results. Therefore, these measures should not be considered in isolation or as an alternative to net loss or other measures of profitability, liquidity or performance under GAAP. You should be aware that WeWork’s presentation of these measures may not be comparable to similarly titled measures used by other companies, which may be defined and calculated differently. WeWork believes that these non-GAAP measures of financial results (including on a forward-looking basis) provide useful supplemental information to investors about WeWork. WeWork’s management uses forward-looking non-GAAP measures to evaluate WeWork’s projected financials and operating performance. Additionally, to the extent that forward-looking non-GAAP financial measures are provided, they are presented on a non-GAAP basis without reconciliations of such forward-looking non-GAAP measures due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliations. In addition, this press release includes annual run rate revenue, which we believe if a key indicator of future revenue potential. We calculate annual run rate revenue as (A) the revenue from memberships in the quarter, multiplied by (B) 4. We believe that annual run rate revenue is a key indicator of our future revenue potential. However, annual run rate revenue should be viewed independently of revenue, and does not represent our GAAP revenue on an annualized basis, as it is an operating metric that can be impacted by the term of the agreement as well as renewal rates. Annual run rate revenue is not intended to be a replacement or forecast of revenue.

Non-GAAP Financial Definitions

Adjusted Earnings Before Interest Expense, Income Tax, Depreciation, and Amortization (“Adjusted EBITDA”)

We supplement our GAAP results by evaluating Adjusted EBITDA, a non-GAAP measure. We define "Adjusted EBITDA" as net loss before income tax (benefit) provision, interest and other (income) expense, net depreciation and amortization, stock-based compensation expense, expense related to stock-based payments for services rendered by consultants, income or expense relating to the changes in fair value of assets and liabilities remeasured to fair value on a recurring basis, expense related to costs associated with mergers, acquisitions, divestitures and capital raising activities, legal, tax and regulatory reserves or settlements, significant legal costs incurred by WeWork in connection with regulatory investigations and litigation regarding WeWork's 2019 withdrawn initial public offering and the related execution of the SoftBank Transactions, as defined in Note 1 of the Notes to the Consolidated Financial Statements included in our Annual Report for the year ended December 31, 2022, net of any insurance or other recoveries, significant non-ordinary course asset impairment charges and, to the extent applicable, any impact of discontinued operations, restructuring charges, and other gains and losses on operating assets.

Free Cash Flow

We also supplement our GAAP results by evaluating Free Cash Flow, a non-GAAP measure. Free Cash Flow is defined as net cash provided by (used in) operating activities less purchases of property, equipment and capitalized software, each as presented in the Company's consolidated statements of cash flows and calculated in accordance with GAAP. Free Cash Flow is both a performance measure and a liquidity measure that we believe provides useful information to management and investors about the amount of cash generated by or used in the business. Free Cash Flow is also a key metric used internally by our management to develop internal budgets, forecasts, and performance targets.

Non-GAAP Financial Measures of Foreign Exchange

We supplement our GAAP financial results by evaluating our performance excluding the effect of foreign exchange, or by assessing our performance using the foreign exchange rates that we used to calculate certain forward-looking financial information, to facilitate period over period comparisons. We believe that the disclosure of our financial results on a budgeted foreign exchange basis is a useful supplemental measure of operating performance because it facilitates comparison of our current performance to our guidance provided by excluding the effects of foreign currency volatility. We calculate our budgeted foreign exchange results by translating the current quarter and full-year functional currency results at our budgeted foreign exchange rates, which is an estimated forward rate for each of our functional currencies determined during the fourth quarter of the prior fiscal year as part of our annual budgeting process. The presentation of financial results on a budgeted foreign exchange basis should be considered in addition to, but not a substitute for, measures of financial performance reported in accordance with U.S. GAAP.

Preliminary Financial Information

We report our financial results in accordance with U.S. generally accepted accounting principles. All projected financial information and metrics in this press release are preliminary. These estimates are not a comprehensive statement of our financial position and results of operations. There is no assurance that we will achieve our forecasted results within the relevant period or otherwise. As part of the Company's financial statement closing process it is performing its going concern analysis, which will be concluded when the Company's audited financial statements for the year ended December 31, 2022 are finalized.

A reconciliation of net loss, the most comparable GAAP measure, to Adjusted EBITDA is set forth below:

A reconciliation of net cash provided by (used in) operating activities, the most comparable GAAP measure, to Free Cash Flow is set forth below:

A reconciliation of total revenue, the most comparable GAAP measure, to budgeted foreign exchange revenue is set forth below:

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