WeWork nabbed a fresh $1.1 billion in financing from SoftBank as the coworking giant's membership dropped
- WeWork's membership dropped by 81,000 in the second quarter, per financial information sent to employees on Thursday.
- The company's revenue increased 9% year-on-year to $882 million.
- SoftBank extended another $1.1 billion in debt financing in the second quarter, giving WeWork $4.1 billion in cash and unfunded cash commitments.
- For more WeWork stories, click here.
WeWork saw its membership number fall in the second quarter, but the coworking giant continued to add locations and nabbed a fresh $1.1 billion in financing from SoftBank.
The company lost 81,000 memberships over the second quarter, per financial highlights sent to employees on Thursday.
The company ended the second quarter with 612,000 memberships, down from 693,000 memberships at the start of the quarter. Now, WeWork's numbers are more in line with the third quarter of 2019, when it had 609,000 memberships.
"The numbers illustrate that similar to virtually every company around the world, COVID-19 has had an impact on our business," chief financial officer Kimberly Ross wrote in the Thursday email reviewed by Business Insider. "However, they also show our five year plan in action."
WeWork's revenue ticked up in the second quarter to $882 million, a 9% increase year-on-year, as it continues a long-term restructuring plan. WeWork's first-quarter revenue came in at $1.1 billion, up 45% year-over-year.
Ross wrote that WeWork's financial position is "strong," strengthened by the $1.1 billion in new debt financing from lead investor SoftBank.
"Though revenue is down from Q1 due to COVID-19-related business disruptions, our overall financial foundation as well as our sales pipeline continues to grow stronger," Ross wrote in the email.
WeWork did not provide information on occupancy rates at its vast network of offices spread in cities across 38 countries.
See more: Wells Fargo is ditching a 750-person WeWork space, while Citi inked a deal with the flex-office giant far from a big city. Here's a look at how financial firms are retooling their real estate.
Among the other data included in the WeWork email:
- Free cash outflow: $671 million, "an increase in outflows from Q1 but, notably, a nearly 50% improvement from our peak outflow of $1.3 billion in Q4'19." That cash outflow included $116 million in one-time restructuring costs, like severance for layoffs that affected at least hundreds of employees.
- Overall footprint: 843 locations across 150 cities and 38 countries; up from 828 locations across 149 cities and 38 countries the previous quarter.
- Total memberships: 612,000, a 16% year-over-year increase. Enterprise – companies with more than 500 employees – made up 48% of those memberships, versus 45% last quarter.
Enterprise customers like BlackRock can write bigger and more consistent checks than the entrepreneurs and freelancers who made up WeWork's original customer base.
See more: WeWork is ditching a major Manhattan office it hasn't even moved into yet — and it's the first big step in a turnaround that's put its entire real-estate portfolio under review
WeWork, like other real estate and flexible-office providers, is grappling with the global effects of the pandemic on its business.
The company has kept its US locations open and is reconfiguring spaces to include more sanitation and distance. It's eyed schools as one new customer base, offering more than 3,000 Chinese students at New York University the option to take fall classes in a Shanghai WeWork.
Earlier this month, WeWork starting allowing members to access any global location, as some customers look to return to an office, but perhaps not their home base.
The company is also in the process of bringing its New York employees back to the office, with a rolling plan that started in late June.
SoftBank has invested more than $10 billion in debt and equity in WeWork. At its height, the Japanese investor valued WeWork at $47 billion, but most recently valued the company at $2.9 billion.
SoftBank, WeWork, and some shareholders have been embroiled in a legal dispute for the last few months. As part of SoftBank's October bailout of WeWork, the investor agreed to a $3 billion stock buyback program and a $1.1 billion debt investment.
But SoftBank, citing multiple closing conditions that weren't met, backed out of the deal, which was set to close April 1.
Two WeWork board members representing minority investors and cofounder Adam Neumann sued SoftBank in litigation that's expected to take months to complete. Last month, WeWork asked a judge to dismiss the suit from the pair of board members, saying they didn't have authority to sue on behalf of WeWork.
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