Morning markets: In today's boom is rarely the technological giant who makes money. And some lose a lot. And then there is WeWork.
WeWork, now styled as The We Company grew rapidly in 2018. The famous unicorn doubled revenues from $ 886 million in 2017 to around $ 1.8 billion in 2018. This growth stuck with rigid loss.
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. Reporting this week from Axios and CNBC and Bloomberg set the cost of WeWork's growth, including the fact that the company's net loss increased by nearly $ 1 billion by 2018 alone.
Let's quickly examine WeWorks results and try to come up with a bull case. The bear box, as we see, writes itself.
Ahead, here's the top line's figures showing how fast WeWork is growing and how much does the company cost in recent years:
- WeWorks 201
- WeWorks 2017 net loss: $ $ 933 million
- WeWorks 2018 revenue: $ 1.82 billion (+105.4 percent)
- WeWorks 2018 net loss: $ 1.9 billion (+103.6 percent)  net margin of -105.3 per cent in 2017, and -104.4 per cent in 2018. It is flat. So in 2018, WeWork failed to significantly increase profitability, despite the fact that revenues increased by more than 100 percent.
This trend does not seem to change. According to Axios, WeWorks president and chief executive officer Artie Minson says that both revenue and net loss figures continue to grow, as the latter is largely related to construction and long-term lease costs. "
So what we can see is not a company that sells $ 1 bills for $ .50. Instead, WeWork has sold them for just under $ 0.50 over the past two years, which is a great way to grow but a difficult way to achieve profitability.
Even adjusted profit measurements are struggling to grow as a percentage of revenue conditions, according to CNBC, WeWorks was very mocked "community-adjusted" pre-interest rate, tax, depreciation and amortization "28 percent in last year, up from 27 per cent the year before. "In the dollars, these figures represent a large gain as the income basis they are charged against doubled. But again we see the WeWork record flat profitability measurements with respect to the percentage of income despite great growth.
, the income scale does not add much to WeWork except net benefit scaling along with the growth, the WeWork initiative is unchanged in principle, it is simply bigger in practice.
Axios included one number of positive WeWork results in their details They include a 90 percent occupancy rate, 116 percent membership growth in 2018, and "32 percent of members come via corporate customers." This figure per CNBC was up from 23 percent in 2017.
WeWork manages to fill its spaces, and more stable corporate customers consist of almost one third of the seats. This provides some downward protection. Since WeWork is almost filled, there is more room for losing customers without having to close venues if demand is lost, and corporate customers are likely to be more stable than entrepreneurs and other participants in difficult economic times.
It's about how good news ends. If WeWork can slow down development and cut costs, the firm can grow into its existing cost structure. It would dampen unprofitability. But WeWork can hardly afford to stop growing, as the sky-high valuation is linked to income growth. (The more unprofitable a company is, the faster it needs to grow to keep investors content).
And that growth will lead to more losses. So we don't look at WeWork until it changes its tune. We look at the decacorn centerline.
I can't summarize the situation better than Winnie CEO and co-founder Sara Mauskopf's ] notes on WeWork's financial results in 2018:
Not exactly Sara. You will lose much less money on it than what WeWork is up to.
Illustration: Li-Anne Dias.