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Bangalore: we work Inc. forecast fourth-quarter revenue below estimates and said it would exit approximately 40 underperforming U.S. locations, as the workspace provider deals with higher expenses and a stronger U.S. dollar.
Shares of the company jumped 7.6 percent to $2.61 in afternoon trading.
The New York-based company, which offers workstations, private offices and customized flooring, had enjoyed a pandemic-induced shift to flexible work outside of traditional offices, but this year’s spurt in inflation is starting to weigh on business spending. .
“A slowdown is going to impact WeWork’s operations materially as SMEs (small and medium-sized enterprises) are going to cut costs. This could lead to an increase in WFH (work-from-home) set-ups ,” said Third Bridge analyst Max Georgiou.
WeWork expects fourth-quarter revenue between $870 million and $890 million, below the Wall Street target of $923.8 million.
It did not disclose which US locations he would exit.
WeWork chief executive Sandeep Mathrani said the remaining rent payments on the leases are expected to cost about $200 million, while contributing about $140 million to annual adjusted core income.
“These locations are those that do not meet our design criteria, are obsolete or have an oversupply in the market.”
The company is working to curb its real estate footprint and reduce headcount due to long-term lease obligations of $15.57 billion at the end of September. In contrast, some of its tenants are only on short-term leases.
WeWork went public in 2021 after a two-year struggle and currently has a market cap of about $1.77 billion. Its pre-IPO valuation was estimated at around $50 billion.
It reported third-quarter revenue of $817 million, below market expectations of $865 million, according to a Refinitiv survey of five analysts.
It has extended the maturity date of $500 million senior secured notes from February 2024 to March 2025. The notes were withdrawn at the end of the quarter.
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