In WeWork’s decade of operating, it has yet to make a profit. After the company’s pre-IPO filing, worries about whether the company could ever become profitable came to a head.
[bctt tweet=”WeWork provided a chart for investors in its S-1 filing that claim its workspaces will be profitable several months after opening, but its financials do not support this pattern. Instead, as its revenues grow, so do its losses.” username=”allwork_space”]
It is clear that the We Company’s revenues are indeed rising. In Q2 2019, the firm had $807 million in revenues. Despite this, We’s losses also continue to climb.
Also questionable is the company’s use of the EBITDA metric, which takes the firm’s losses and backs out any non-cash charges, such as compensation for rewarding executives.
Typically, companies are given grace when running at a loss in the early years so long as it generates positive cashflow, but there is no clear pattern to WeWork’s cashflow.
For example, WeWork was cashflow positive for its first two years, but from 2016 to 2018, the company experienced negative cashflow.
“Although we do not currently believe our net loss will increase as a percentage of revenue in the long term, we believe that our net loss may increase as a percentage of revenue in the near term and will continue to grow on an absolute basis,” according to the filing.