Liquidity Public Startups

WeWork Files Its S-1: The Big Numbers

WeWork released its public S-1 today, bringing the co-working giant an important step closer to becoming a public company.

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As a private enterprise, WeWork has attracted huge sums of capital to its side while pursuing growth at the expense of profitability and liquidity. The company will now address the liquidity point through a public offering. How investors weigh its profitability will help determine what it is ultimately worth.

This post will contain high-level numbers, giving us a brief look at WeWork’s growth and health. Following, we’ll publish a longer look, digging more deeply into the grits of the document. Let’s go!

WeWork’s Revenue, Growth, And Losses

Let’s first observe WeWork’s revenue growth over time. We’ll begin by looking at full years. What follows are the company’s top-line results for the full years of 2016, 2017, and 2018:

  • WeWork 2016 revenue: $436.1 million
  • WeWork 2017 revenue: $886.0 million
  • WeWork 2018 revenue: $1.82 billion

As we can see, the company has managed greater than 100 percent revenue growth in each of its most recent two years. That torrid pace of revenue expansion helps explain how the co-working behemoth attracted so much capital to its shores.

Turning to the more recent, WeWork posted half-year results that are worth our time:

  • WeWork H1 2018 revenue: $763.8 million
  • WeWork H1 2019 revenue: $1.54 billion

Here, again, we see a greater than 100 percent growth rate from the company, an impressive feat at its size. Most companies see their revenue growth rate decline as they grow. It’s harder to grow at such percentage rates from a larger revenue base.

All that growth has come at a very steep cost. WeWork’s operating losses have scaled right along with its revenue. Here are its operating losses, for the same time periods. (We’re looking at operating loss at the company as it has a large “other income” bump in the first half of 2019, making its net loss appear far better than its operating results detail.)

  • WeWork 2016 operating loss: $396.3 million
  • WeWork 2017 operating loss: $931.8 million
  • WeWork 2018 operating loss: $1.69 billion
  • WeWork H1 2018 operating loss: $677.9 million
  • WeWork H1 2019 operating loss: $1.37 billion

The company’s unadjusted net losses were worse in 2016 ($429.7 million), 2017 ($933.5 million), 2018 ($1.93 billion), and the first half of 2018 ($722.9 million).

Cash

Let’s wrap this short WeWork S-1 overview with a look at cash.

First, how much cash does WeWork have? At the end of 2018, WeWork had $1.74 billion in cash and equivalents. That figure rose to $2.47 billion by the end of Q2 2019. Recall that WeWork raised $1 billion earlier this year. So, where did the extra money go? WeWork burned it.

There are two things to understand about how WeWork consumes cash. First, its operations once generated cash. In 2016 and 2017, WeWork’s operating activities generated cash ($176.9 million and $244.0 million, respectively). However, in 2018 that figure went negative, with the firm’s operations consuming $176.7 million in cash during the year.

And second, WeWork operations have become even-more cash hungry over time, with the firm putting up negative operating cash flow of $84.4 million in H1 2018, and $198.7 million in H1 2019.

Finally, for this short overview, as you expected WeWork’s investing is far more negative. (The company invests in setting up buildings, so we anticipated that it would have high investing cash flow costs.) Here are the marks:

  • WeWork 2016 negative investing cash flow: $818.5 million
  • WeWork 2017 negative investing cash flow: $1.38 billion
  • WeWork 2018 negative investing cash flow: $2.48 billion
  • WeWork H1 2018 negative investing cash flow: $888.2 million
  • WeWork H1 2019 negative investing cash flow: $2.36 billion

So WeWork is on pace to put up its biggest revenue number, operating loss, and negative operating and negative investing cash flow in 2019.

That is frankly about what I expected. But the company is balancing that great revenue growth, against an operating loss and negative free cash flow that will sum to a far greater figure. How do you price that?

Illustration: Li-Anne Dias.

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