WeWork Cos. on Monday said its loss last year doubled to nearly $2 billion, as the nine-year-old company spent heavily in an effort to rapidly expand its network of shared offices around the world.
The New York-based company’s revenue more than doubled to $1.82 billion, mostly from leasing office space. But heavy expansion costs led to a loss of $1.93 billion.
WeWork executives said the losses are reflective of investments required to build out new offices, and that once locations are open and well-leased, they make far more money than the cost to operate. The company has plowed into its business billions of dollars in capital raised by SoftBank Group Corp. and its tech-focused Vision Fund.
The company said as of December it had more than 400,000 members who rented desks in 100 cities, and has increasingly signed up larger corporate clients, who make up about one-third of membership.
“We can offer you everything from a desk to an office to your headquarters or an entire fleet of buildings,” said Artie Minson, the company’s president and chief financial officer.
Still, there were several questionable figures in WeWork’s results that could spell trouble for the company if they continue. WeWork isn’t required to disclose its financial results publicly, but since it took on bond debt last year, it has provided to media outlets its financial presentation given to bond investors.
WeWork said its occupancy rate at the end of last year fell to about 80% from 84% in the third quarter, while another metric watched closely by WeWork—the average revenue each member creates per year—continued a gradual fall to $6,360. It is now down 13.5% from the start of 2016.
WeWork said occupancy is down because it increased its pace of expansion at the end of the year, and new offices traditionally take up to 18 months to fill. It has previously said its revenue per user has been falling, in part because it is expanding to lower-cost markets.
The company rebranded as the We Company in January to emphasize its other offerings, including a nascent elementary school called WeGrow and other acquisitions such as coding academy Flatiron School.
But the results show the vast majority of the company’s sales are in its core business of real estate. Membership revenue and services provided to those business made up about 93% of total revenue.
While WeWork executives years ago predicted the company would be profitable by now, losses have continued to mount, fueled by the enormous interest from investors willing to keep funding its losses.
There are signs that interest could be easing somewhat. In January, SoftBank backed out of a planned $16 billion deal that included $6 billion of new funding, instead opting for a $2 billion deal with $1 billion of new funding.
That came after SoftBank’s main backers of its Vision Fund—wealth funds from Saudi Arabia and Abu Dhabi—were reluctant to put more money in WeWork, people familiar with the matter have said, raising concerns about where WeWork will be able to keep finding new investment.
The company is likely watching the spurt of initial public offerings planned by Lyft Inc. and Uber Technologies Inc. closely, as both ride-hailing companies also have posted large losses while betting the public markets will be impressed with their rapid revenue growth.
Michael Gross, the company’s vice chairman, suggested WeWork doesn’t plan to slow down anytime soon.
“We’re sitting on well north of $6 billion in cash,” he said. “We have access to a lot of capital in a lot of pockets and we have a big opportunity ahead.”
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