The New WeWork Numbers

Morning Report: Here’s the latest set of financial results from WeWork, a coworking giant.

Good morning we have a treat for you this Friday: fresh performance numbers from WeWork, a company that has become synonymous with both coworking and the unicorn era.

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WeWork has raised huge sums of money from a global set of investors (details here) while creating a run-rate north of one billion dollars, coupled to huge losses (older figures here). Today, we have new numbers that measure WeWork’s growth and path to profitability.

Reuters secured a number of WeWork financial metrics that detail revenue and loss growth. Here are the key figures:

• Q2’18 revenue: $421.6 million, up 112.6 percent from $198.3 million;
• H1’18 (calendar) net loss: $723 million, up 369.5 percent from $154 million;
• Per Reuters: “Operating margins, stripping out expenses, rose to 28 percent from 26 percent, the New York-based company said.”
• A run rate of $1.8 billion, reaching $2.3 billion by the end of the year.

For context, the company reached a $1.5 billion run rate in June of 2018 (give or take) and a $1 billion run rate in June of 2017. So, in about 14 months, the company’s run rate has grown 80 percent.

You can compare WeWork’s Q2’18 revenue result of $421.6 million to its Q1’18 revenue result of $342 million. The firm grew just under 24 percent in the second quarter compared to the first. At its scale, that’s impressive.

Unprofitability

WeWork’s 2017 net loss came to $934 million. It lost $732 million in the first half of 2018. Which is worse?

We can get a sort of answer. In 2017, WeWork’s full-year loss was 105.4 percent of its revenue of $886 million. In the first half of 2018, the company’s revenue result of $763.6 million was 105.6 percent of its net loss.

So, WeWork now has more revenue than net loss in the first half of 2018, a test that it failed in calendar 2017. A -100 percent margin normally isn’t a threshold you want to cross when your revenue is north of a billion dollars, given that your firm will need to raise staggering sums to keep going.

Which WeWork has done.

The new WeWork numbers paint yet another picture of a deeply unprofitable company that continues to post quick revenue growth. If that revenue growth can sustain in a less-exuberant market, which could dampen occupancy rates, is a question that the coworking company will eventually have to answer. After all, it’s going to take years to get the firm to anything close to profitability. And no bull market lasts forever.

From The Crunchbase Daily:

Unicorn funding on path to record high in 2018

• Global unicorn funding this year is on track to surpass record levels set in 2017. An analysis of Crunchbase data shows investors put at least $73 billion into startups and growth-stage companies valued at $1 billion or more. An estimated 65 companies joined the unicorn list for the first time.

WeWork raises $1B, reveals wider losses

• Speaking of unicorns gobbling up more capital, WeWork just secured another $1 billion from SoftBank. The co-working giant also revealed some updated financials showing sharp growth in revenues and an even bigger rise in losses.

Early stage SaaS deals pick up

• After slowing down for a couple of years, venture investment in software-as-a-service companies worldwide is mostly back to 2015 levels. The first half of this year saw a particularly big jump in seed and early-stage SaaS investment.

Social media giants strike out

• Social media giants are zero for three this earnings season. First, Facebook and Twitter struggled to impress investors with their second quarter reports. Now Snap has weighed in too with Q2 results showing falling cash flow and a decline in daily active users.

Illustration Credit: Li Anne