Photo by Patrick T. Fallon / AFP) (Photo by PATRICK T. FALLON/AFP via Getty Images
- WeWork warned Tuesday that it had "substantial doubt" about its ability to keep operating.
- The company reported a loss and a decline in memberships in its second-quarter earnings.
- Still, its CEO said WeWork is confident it can continue to meet the needs of its customers.
Co-working company WeWork is apparently in troubled waters.
In its second quarter earnings report on Tuesday, the company said there's "substantial doubt" about its ability to keep going as a business.
The company issued what's known as a "going-concern" warning. Publicly traded companies typically issue these when they're worried, broadly speaking, that they don't have the money to pay their bills over the next year, an S&P Global report on the topic explains.
As for WeWork, its statement pointed to "losses and projected cash needs, combined with increased member churn and current liquidity levels."
The company's stock tanked nearly 25% in after-hours trade following the release. (It closed normal-hours trade at just 21 cents — down more than 95% over the past year.)
Still, WeWork said in a statement to Insider that it's confident it can execute on a turnaround plan.
"Although we have more work to do, the talent and energy of the WeWork team is extraordinary and we are resolutely focused on delivering for our members for the long term," David Tolley, the company's interim CEO, said in a statement. "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."
He pointed to what he called "excess supply" in commercial real estate, along with increased competition when it comes to offering flexible work space, as challenges for the business that led to higher member turnover and softer-than-expected demand. The company also reported a decline in memberships.
The warning doesn't mean anything immediately changes for WeWork customers. "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," Tolley said.
WeWork reported a net loss of $397 million on consolidated revenue of $844 million for the quarter.
It also outlined a plan for the coming year that it said will include reducing rental costs, raising capital, and increasing revenue by improving sales and reducing the number of canceled memberships.
WeWork's warning of its uncertain future comes after several months of tumult.
In May, the company saw the departure of its CEO, Sandeep Mathrani, who stepped into the role in 2020.
In April, the company was asked to issue a press release saying it was in danger of being delisted from the NYSE because its stock had been trading at less than $1 per share for too long.
And in March, the company struck a deal with some of its creditors, including Softbank, to cut its debt by $1.5 billion, according to Bloomberg.