About a month ago, WeWork announced it would cut back about 7% of its workforce, claiming however that funds were not a motivator behind the decision. Recent leaked documents to Bloomberg prove the company is making cuts on its staff, its spendings, and its projections.
According to the leaked documents and videos, WeWork’s forecast for the year isn’t as bright as it was only a few months ago. Their internal financial review for the month of April showed that they slashed their 2016 profit forecast by 78%, their revenue estimate by 14%, and reported a 63% surge in negative cash flow.
Bloomberg cites that “the lower revenue projection was due to building openings that were delayed, some by more than six months.” And added that the review also showed “higher spending on construction and lower-than-expected remodeling subsidies from landlords, particularly outside the U.S.”
The documents leaked to Bloomberg were stolen by an employee, and prior to the story being published, WeWork employees received the below email from CEO Adam Neumann:
“We regret to inform you that we have identified a case of significant corporate theft of electronic materials. Because of security measures our team has implemented, we have identified the person responsible, and are taking appropriate actions. There may be stories in the press that include information from the stolen materials or refers to the legal actions we are taking. When possible we will always try to communicate information like this internally before it becomes public.“
Nonetheless, the leaked documents show that the coworking company was too optimistic in its predictions, much like many in the flexible workspace speculated they were. In October last year, Frank Cottle, CEO of ABCN shared with OT that he believed WeWork was “wildly forecasting workstation revenues hugely higher than the current or historic markets.”
Cottle was to a certain point right, considering WeWork’s latest review shows how the coworking company cut its expected 2016 revenue from $620 million to $532 million. Even more shocking is the cut made on its adjusted earning before interest, tax, depreciation, and amortization, which went from $65 million to $14 million.
Still, CEO Adam Neumann continues to be optimistic about WeWork’s operations and future, telling Bloomberg that “Our business is performing incredibly well and is stronger than ever.” He furthered his statement by saying that June was WeWork’s best sales month ever, with over 7,000 desks sold, and that the company is looking forward to opening over 10,000 desks in August.
WeWork’s rapid growth and high valuation has been a topic of debate in the flexible workspace industry, with many worried about its long-term sustainability. WeWork is signing long-term leases with buildings and landlords with no guarantee that the demand and price inflation will allow them to continue growing and filling desks. Only time will tell whether theirs is a sustainable agenda, but the leaked documents prove that worry and skepticism about them is not without foundation.
To read the full Bloomberg story and more on the leaked documents, click here.