WeWork, the New York-based workspace-sharing company, is warning of “substantial doubt” that it can stay in business over the 12 months, according to its second-quarter earnings release on Aug. 8.
“As a result of the Company’s losses and projected cash needs, combined with increased member churn and current liquidity levels, substantial doubt exists about the Company’s ability to continue as a going concern,” the release says.
The company reported a net loss of $397 million in the second quarter, which is better in comparison to the same three months a year earlier when the company lost $635 million. As for the first six months ending in June, the company reported a net loss of $696 million, an improvement from the net loss of $1.14 billion in the same period in 2022.
To stay in operation, the company said it is “contingent upon successful execution of management’s plan to improve liquidity and profitability over the next 12 months.”
The company aims to take certain actions to improve its financial outlook, including negotiating more favorable lease terms to lower rents, reducing member churn, increasing new sales, limiting capital expenditures, and seeking additional capital through the issuance of debt or equity securities or asset sales, according to the release.
“In a difficult operating environment, we have delivered solid year-over-year revenue growth and dramatic profitability improvements,” WeWork’s interim CEO, David Tolley, said in a statement. “Excess supply in commercial real estate, increasing competition in flexible space, and macroeconomic volatility drove higher member churn and softer demand than we anticipated, resulting in a slight decline in memberships.”
Mr. Tolley sounded an optimistic note about the company’s future.
“We are confident in our ability to meet the evolving workplace needs of businesses of all sizes across sectors and geographies, and our long term company vision remains unchanged,” he said.
He added, “The company’s transformation continues at pace, with a laser focus on member retention and growth, doubling down on our real estate portfolio optimization efforts, and maintaining a disciplined approach to reducing operating costs.”
In March, WeWork struck a series of agreements to cut its debt by approximately $1.5 billion and extended the date of about $1.6 billion in remaining maturities to preserve cash.
There has been turnover at the company’s senior executive levels this year, including the resignation of CEO Sandeep Mathrani and CFO Andre Fernande.
On Tuesday, WeWork named four new board members after three members stepped down.
“These new director appointments bring a fresh perspective and renewed commitment to the Board and our company,” Mr. Tolley said in a statement about the new appointments. “The deep financial expertise and robust business experience that each of our new directors bring to the table will add immense value as we double down on sustainably reducing costs, continuing to grow memberships and revenue, and strengthening our balance sheet.”
The announcement also said that the company will continue its search for a permanent CEO.
Following WeWork’s announcement that it could go out of business, its stock plummeted 27 percent in extended trading on Tuesday.
