WeWork can beat its competitors by providing young professionals around the world with a popular lifestyle and trying to get people to work longer with them.
According to foreign media reports, as the company’s operating scale has expanded to more than 200 office buildings worldwide, WeWork, a space-based New York office, said the expansion of operating scale will further help companies reduce the daily costs of glass, wood flooring, aluminum and lighting fixtures. Although critics believe the combined office valuation is overvalued, early signs of improving financial performance for the company are encouraging.
Artie Minson, WeWork’s president and chief financial officer, said the company generated about $ 900 million in revenue last year, largely from its main business of renting desks and offices for small and large companies. The company also reduced the recurring costs of building and operating offices, in part because it received discounts on bulk purchases.
“This is a very important sector and we are building a global supply chain that, frankly, allows you to build less than anyone else.”
WeWork does not need to report its financial information to the public, but agreed to provide some financial data when interviewed by Bloomberg.
WeWork has just been in business for eight years and is one of the richest private technology companies that has raised $ 4.75 billion in financing for its operations and affiliates. But company co-founder and chief executive Adam Neumann has been trying to change the internal funding position within the headquarters for the past few years. When the company lowered its revenue and profit forecasts in 2016, he severely criticized the “consumer culture” of employees.
As a private company, WeWork is rewarded for its revenue growth and ambitious planning. Another publicly traded company, IWG, will announce its annual results next month and expect the company to have revenues of $ 3.2 billion in 2017, more than tripled WeWork’s revenue over the same period. But its market capitalization of only 2.97 billion US dollars, and the valuation of 20 billion US dollars WeWork completely out of the same order of magnitude.
Investors say WeWork can beat its rivals by offering a youthful lifestyle to young professionals around the world and trying to get people to work longer with it. In addition to the office space, WeWork also attempts to provide dormitory-style living, community gatherings, gyms and education.
WeWork is cheaper to build
The joint office giant said it will get more favorable prices on production materials due to its expansion.
Minton said that since about 2 years ago, WeWork has cleaned up the list of expenses one by one, such as expenses of desks, office chairs and networking services to ensure that they enjoy the lowest prices.
Last year, WeWork reduced total capital expenditures (including construction refurbishments) per desk from $ 14,144 to $ 9,504. WeWork declined to say what the specific losses were last year, though the company said it was profitable last year, excluding “growth investments” such as entering new markets and developing new products.
WeWork also reduced operating expenses per desk associated with the locations of operations, including staffing costs for managing and cleaning desks. These calculations do not include the cost of acquiring new customers through promotions such as rent-free or discounts. As the company’s office buildings grow larger, with more than 3,000 customers in some office buildings, Minsen said, WeWork can use the same number of employees to serve more customers.
Although WeWork is actively controlling its costs, it still has high expectations for its future: the company currently has 200,000 members, but it plans to double the total number of members by the end of this year. The company expects next year’s revenue will reach at least 2.3 billion US dollars. The company also plans to double the number of its office buildings this year to more than 400.
Currently, about a quarter of the company’s revenue comes from big companies such as Microsoft, Facebook and General Electric, which often sign long-term leases compared to start-up customers. WeWork also actively explored the business in Asia last year in Japan, China and Southeast Asia set up three subsidiaries. In a round of financing last summer, Softbank invested 3 billion U.S. dollars in WeWork and 1.4 billion U.S. dollars in its Asian subsidiary.
Mingson said despite these increases, the company did not have an immediate initial public offering (IPO) plan. He said: “We run all the business a listed company may operate, but the company has no plans to go public.” At least one IPO pressure has been eliminated, as part of the Softbank financing, the company closed a ‘yes Meaningful ‘second-level sales program that allows all shareholders and employees who have been working with the company for at least a year to sell some shares.