Morning Report: WeWork is back in the news with financial results. Let’s take a peek, and then figure out what market comps can tell us about the sanity of its valuation.
One nice thing about the unicorn era is that some private companies become so large that they become almost de-facto public companies, at least when it comes to disbursement of information regarding their financial performance. The method isn’t surprising. The larger a private company is, the more folks are going to care about how it’s doing.
And so we WeWork recently sent out some new financial results that quickly made their way to Axios’ Dan Primack. From his excellent piece this morning, here are the details in order from top line to bottom:
- ARR pace based off March revenue (x12): $1.5 billion.
- Q1’18 revenue: $342 million (+110 percent YoY).
- Community-adjusted EBITDA (a profit metric that strips out more costs than even the very non-GAAP EBITDA metric): +$95 million (+121 percent YoY).
That is just a snapshot. From prior coverage, here’s some other stuff that we’ve known about the company’s performance:
- Reached $1 billion run rate in June 2017.
- 2017 revenue: $886 million.
- 2017 net loss: -$934 million.
So the company managed to reach an ARR pace 50 percent greater in March of 2018 than it managed in June of 2017. That’s not bad. In doing so, it managed to greatly expand its highly-adjusted profit metrics.
But, as we can see in the next set of numbers, the company’s business is a loss-creating conflagration. Given those recent losses, it seems unlikely that the company is close to profitability today.
Returning to the only profit metric that we have for Q1 ’18, let’s keep in mind what community-adjusted EBITDA, the company’s seemingly preferred profitability metric, is. Here’s my favorite explanation via the Wall Street Journal:
While many companies typically offer “adjusted” earnings, WeWork offered three different layers of adjustments [in its bond offering documentation].
It called the fully adjusted number “community adjusted Ebitda,” by which it subtracted not only interest, taxes, depreciation and amortization, but also basic expenses like marketing, general and administrative, and development and design costs. Those earnings were $233 million, WeWork said.
To understand the company’s actual profitability we can subtract marketing, G&A, development and design costs, and depreciation and amortization from the company’s $95 million in positive community-adjusted EBIDTA. You can quickly see that the firm lost a truckload of money in the first quarter.
All this matters as the company is looking for fresh capital at a new, higher valuation. That means more financial disclosures for us and more risk for its investors.
After all, if we slap the revenue multiple of its key public comp, IWG, on WeWork’s March-based ARR the company is worth less than $2 billion. Not $35 billion or what have you.
From The Crunchbase Daily:
Co-working giant WeWork is seeking to raise fresh funding at a reported $35 billion valuation. Recently obtained financial documents also showed that the company posted first quarter revenue of $342 million, up 110% year-over-year.
Silicon Valley technology VC True Ventures has filed to raise $650 million across two new funds. The first is a planned $325 million flagship fund, its sixth and largest to date. The second is a $325 million investment vehicle to back later stage rounds in existing portfolio companies.
Toyota will invest $1 billion in Southeast Asian ridesharing leader Grab at a reported $10 billion valuation. Meanwhile, in other automaker-related startup news, LiDAR developer Luminar Technologies announced a partnership with Volvo to work on the automaker’s autonomous driving efforts.
Samsung announced that is running a new fund focused on AI: the Samsung NEXT Q Fund. The move comes a year-and-a-half after the firm rolled out another internal fund, the Samsung NEXT Fund, to invest in categories including AI, the internet of things, and virtual reality.