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WeWork Inc. (WE) Q4 2022 Earnings Call Transcript

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WeWork Inc. (NYSE:WE) Q4 2022 Earnings Conference Call February 16, 2023 8:00 AM ET

Company Participants

Kevin Berry - Senior Vice President, Investor Relations

Sandeep Mathrani - Chairman and Chief Executive Officer

Andre Fernandez - Chief Financial Officer

Conference Call Participants

Vikram Malhotra - Mizuho

Omotayo Okusanya - Credit Suisse

Alex Kramm - UBS

Tom Catherwood - BTIG

Alexander Goldfarb - Piper Sandler

Brett Knoblauch - Cantor Fitzgerald

Operator

Welcome everyone to nan WeWork Fourth Quarter 2022 Earnings Conference Call. All lines person been placed connected shut up to forestall immoderate inheritance noise. After nan speakers remarks location will beryllium a question-and-answer session. [Operator Instructions]

I would now for illustration to move nan convention complete to Kevin Berry, Senior Vice President of Investor Relations. Please spell ahead.

Kevin Berry

Thank you Angela and bully morning, and invited to WeWork's 4th fourth and afloat twelvemonth 2022 net convention call. During this call, we will mention to our net merchandise and investor presentation, which person been furnished pinch nan SEC and tin beryllium accessed astatine investors.wework.com. This chat will see forward-looking statements that are taxable to risks and uncertainties that whitethorn origin existent results to disagree materially.

Additional accusation concerning factors that could origin existent results to defer materially is contained successful our latest yearly and consequent quarterly and periodic reports revenge pinch nan SEC. We will besides talk definite non-GAAP financial measures, which we judge are meaningful successful evaluating nan company's performance. Additional disclosures regarding these non-GAAP measures, including a GAAP to non-GAAP reconciliation, are included successful our net property merchandise and supplemental position and will besides beryllium included successful our Form 10-K erstwhile filed.

I'd for illustration to present Sandeep Mathrani, Chairman and Chief Executive Officer; and Andre Fernandez, Chief Financial Officer. With that fto maine move it complete to Sandeep.

Sandeep Mathrani

Thank you, Kevin and convey you each for joining our telephone this morning. I'm incredibly pleased that successful 2022 we accomplished what we group retired to do. In December WeWork for nan first clip successful its history, posted affirmative adjusted EBITDA. Our squad was group up for nan situation to execute that by twelvemonth end and they delivered, truthful convey you all.

As we communicated our plans to do truthful connected our past net call, we extended maturity days to 2022, 2025 sorry, connected our missive of in installments including nan inferior tranche and elder secured facility. Our liquidity remains intact and astatine nan extremity astatine nan level we anticipated. We had astir $1.3 cardinal astatine twelvemonth extremity comprised of rate connected hand, secured statement committedness of which we drew $250 cardinal successful January and covenant capacity.

Revenue for nan 4th fourth of $848 cardinal and 18% summation year-over-year. Excluding nan effect of overseas speech rate fluctuations, 4th fourth gross was $905 cardinal and $25 cardinal supra guidance astatine nan midpoint. Adjusted EBITDA for nan 4th was antagonistic $26 cardinal aliases $257 cardinal betterment year-over-year and a $15 cardinal amended than midpoint of guidance.

During nan 4th fourth we continued to spot place successful our Space-as-a-Service business pinch consolidated occupancy rising to 75%, a 12% summation year-over-year. For immoderate location colour connected occupancy astatine twelvemonth end, U.S. and Canada reached 70%, up from 62% year-over-year. International was 83%, up from 68%. Latin America was 73%, up from 59%, and Japan was 66%, up from 47% year-over-year.

At nan marketplace level for immoderate of our largest markets occupancy ended nan twelvemonth at; New York City 72%, London 81%, Mexico City 68%, Sao Paulo 84%, Paris 80%, Seoul Korea 94%, Los Angeles 68%, Boston 67%, San Francisco 83%, and successful Singapore astatine 82%. Some highlights successful different markets see Berlin 85%, Toronto 84%, Warsaw 91%, Munich 99%, Miami 96%, Nashville 94%, Milan 92%, Madrid 96%, and moreover Prague astatine 91%.

Our marketplace stock continues to summation and our occupancy continues to rise. It reminds maine of nan e-commerce to bricks-and-mortar relationship, wherever nan e-commerce income were rising and bricks-and-mortar authorities level aliases decline, nan excavation was nan same, but nan marketplace stock shifted. As you'll spot successful our net platform connected pages 22 and 23, nan maturation gait of our marketplace stock accelerated during nan 4th quarter. In New York, our 4th fourth table income equated to 23% of nan full quadrate feet leased successful nan accepted market, while our portfolio counts for astir 1% of nan full agency stock.

Similarly, successful Boston our marketplace stock was 21%, Chicago 19%, San Francisco 13%, Dublin 8%, Paris and Berlin 11%, and London a whopping 44%. Today successful Bloomberg, okay, it was stated a 4th of London companies downsize offices and displacement to elastic activity solutions. Again, our worth proposition is beforehand and center.

As occupancy continues to rise, nan incremental gross outpaces nan incremental operating expenses, frankincense expanding building margin, illustrating nan operating leverage of nan WeWork platform. Fourth 4th building separator was $144 million, up $153 cardinal year-over-year. Two thirds of our markets are now complete 70% occupied and relationship for 75% of gross successful nan 4th quarter.

Let's move to attraction connected memberships. The memberships roseate to 547,000, a 17% summation year-over-year. We leased astir $10 cardinal quadrate feet successful nan 4th quarter, including renewals, and arsenic you tin see, it's been reasonably dependable done each of 2022. Average committedness word remained level astatine 19 months. Our ARPM, nan value we complaint per period for nan table was $481 successful nan 4th quarter, up somewhat from nan 3rd quarter. As a reminder, ARPM was impacted by unfavorable overseas speech movements during nan year.

Excluding nan overseas speech moves our ARPM would person been $514 successful nan 4th quarter, up complete 6% year-over-year. Our All Access business continued its maturation ending nan 4th pinch 17,000 members a 56% summation year-over-year, and now a business started only 2 years agone that is generating $200 cardinal of yearly revenue. ARPM for All Access was astir $240. All Access continues its maturation trajectory successful January pinch nan 2nd highest period ever of gross deals, higher ARPM and little churn.

We precocious expanded nan on-demand offering to our locations successful Brazil, and we are launching our first Access lounges successful February successful New York and London. Since mid-2022, we've been actively trading our Workplace merchandise and now person complete 290 companies signed and 51,000 licenses. At nan extremity of Q4 2022, that number was astir 220 companies and astir 42,000 licenses, truthful it has accelerated successful January.

The TAM for nan Workplace business is estimated to beryllium astir $3 cardinal conscionable successful nan USA and a aggregate of that globally. The driving unit down nan displacement to elastic solutions is not dissimilar to nan situation that contributed to nan emergence of WeWork astatine its founding. In nan aftermath of nan world financial crisis, businesses of each size faced uncertainty. They not only were looking to optimize their costs, but they were looking for a caller solution to work. With intentional creation and quality relationship astatine nan forefront of our merchandise and marque WeWork not only solved for bringing group together pinch intention, but besides for greater elasticity pinch turnkey short-term options.

Since then, we've intelligibly a class for our ain abstracted from nan accepted market. While we've concentrated connected transforming our business, we've arsenic focused connected listening to what our members request successful bid to continuously innovate and build solutions that spell beyond beingness space. Just yesterday, nan Harvard Business Review released investigation connected really co-working spaces tin positively effect worker wellbeing. As portion of their results, they say, "respondents acquisition moving from a 3rd spot for illustration a co-working tract arsenic much socially fulfilling and moving from nan agency aliases from home, from nan office, an summation of 64% and home. 67%." They went connected to opportunity 1 awesome logic is that a co-working abstraction offers not conscionable a elasticity labor crave successful position of wherever they work, but besides pinch whom.

As businesses look uncertainty astir nan early of work, our origins still ringing done arsenic our strongest differentiator. And Ramp, which is simply a firm paper and walk guidance package provider, which released their Q4 spending benchmark support recovered that businesses are increasing, moving to flex activity workspaces, and specifically mention WeWork arsenic spending pinch WeWork accrued 90.7% successful 2022. In fact, we were consistently classed arsenic nan 2nd largest agency vendor done nan twelvemonth conscionable down nan Microsoft Store.

Our accrued marketplace stock is simply a testament to nan worth of our merchandise and nan variability of our offerings. From our Access products, which lick for a much hybrid and evolving world pinch contiguous and frictionless entree to workspace astatine a world scale, to our dedicated abstraction pinch afloat work amenities connected elastic terms, we are champion positioned to thief companies of each sizes specify their early of work.

Now pinch WeWork Workplace, our solution has rounded retired our tract of offerings by enabling companies to efficiently negociate nan size, cost, and worker acquisition of their workspace. We proceed to spot this travel to life arsenic companies prevention connected their existent property costs by switching to WeWork Space paired pinch Workplace and All Access.

Turning to our portfolio, arsenic I stated before, our strategy is to continually amended nan value of nan portfolio by opening caller locations wherever it is economical and wherever we spot demand, and exiting underperforming locations. Our portfolio strategy is akin to a retailer's attack to their shop fleet whereby investments are made into precocious performing stores and little performing stores are pruned from nan portfolio.

We proceed connected our ongoing efforts to optimize and heighten our world existent property portfolio by executing deals for caller locations. In December successful Houston, we expanded an existing guidance statement for 26,000 quadrate feet. In Israel, we leased a caller 12,000 quadrate feet location for usage by a ample exertion company. In January, successful London we expanded our beingness by 27,000 quadrate feet astatine 123 Buckingham Palace. In India we leased 2 caller locations encompassing 63,000 quadrate feet successful Bangalore. And lastly successful Scottsdale we entered into a caller guidance statement for 30,000 quadrate feet.

With 2022 down us, we're now focused connected 2023. We expect first 4th gross to beryllium $830 cardinal to $855 cardinal astatine spot FX. The M constituent of guidance is 10% higher year-over-year. We expect first 4th adjusted EBITDA to beryllium betwixt antagonistic $25 cardinal to breakeven. Achieving nan midpoint of guidance would beryllium an summation of $200 cardinal year-over-year. As we continuously amended nan portfolio, we're simultaneously refining our soul operations and resources.

During our past net call, we estimated our yearly SG&A tally complaint to beryllium astir $725 million. As a consequence of antecedently announced activity level reductions and different scheme savings initiatives, we expect nan SG&A this twelvemonth to beryllium astir 10% little than nan erstwhile tally rate, truthful that would beryllium astir $650 million. Our extremity of generating free rate travel later this twelvemonth remains intact, but we person important activity to get there.

First, somewhat retired of our power is nan gait of nan betterment successful nan U.S., our largest marketplace by revenue. As I challenged our squad successful 2022 to beryllium adjusted EBITDA positive, we group nan aforesaid situation for america this twelvemonth connected being free rate travel positive. In addition, we are pursuing important reductions successful our operating cost, SG&A and superior expenditure. Our goals this twelvemonth are focused connected continued maturation successful our financial results, portfolio optimization and equilibrium expanse improvement. We person nan correct squad successful spot astatine nan correct clip to execute our goals by remaining incredibly assured astir nan short-term and semipermanent occurrence of nan business.

Andre will now supply immoderate further commentary astir our financial results, outlook and superior transactions.

Andre Fernandez

Thanks Sandeep and bully greeting everyone. I'll supply immoderate further colour regarding some our 4th fourth and afloat twelvemonth financial results. First, full institution gross was $848 cardinal successful nan 4th quarter, up 18% year-over-year, and up $31 cardinal sequentially from nan 3rd quarter. As Sandeep mentioned, connected a fund FX basis, 4th fourth gross of $905 cardinal was supra nan $870 cardinal to $890 cardinal guidance scope we provided previously.

Quarterly income benefited from higher rank revenue, continued maturation successful All Access and improved pricing, and for nan afloat twelvemonth consolidated gross of $3.25 cardinal was up 26% versus 2021, driven by a 12 constituent summation successful beingness occupancy and a astir 80,000 summation successful beingness memberships. Foreign exchange, namely a weaker Euro and British lb had an astir $140 cardinal antagonistic effect connected our full yearly gross compared pinch nan company's original budgeted overseas speech rates.

Building separator continued its affirmative inclination successful nan 4th quarter, rising to $144 million, which was up $39 cardinal sequentially and up $153 cardinal year-over-year. Despite higher rank gross and higher occupancy, we were erstwhile again capable to trim our OpEx done planned building exits arsenic good arsenic businesslike disbursal management. And connected nan net line, we narrowed our adjusted EBITDA nonaccomplishment to $26 cardinal nonaccomplishment successful nan 4th quarter, nan smallest reported nonaccomplishment successful our history, helped by nan higher revenue, little OpEx and continued reductions successful our SG&A expenses.

Fourth 4th SG&A besides benefited from a simplification successful inducement compensation. Since, contempt nan betterment successful adjusted EBITDA successful Q4, nan institution somewhat missed nan afloat twelvemonth gross guidance provided a twelvemonth ago. Our SG&A tally complaint ended nan twelvemonth astatine astir $700 million, and arsenic Sandeep conscionable mentioned, we're expecting a further simplification of SG&A of astir 10% this year.

Our nett nonaccomplishment for nan 4th fourth was $527 million. The nett nonaccomplishment was driven chiefly by impairment connected nan buildings we are exiting, arsenic good arsenic depreciation and amortization expenses, partially offset by unrealized overseas rate gains.

Now moving connected to rate and liquidity, we ended nan twelvemonth pinch conscionable nether $300 cardinal of consolidated rate connected nan equilibrium sheet, which was successful statement pinch our erstwhile projections, and our rate pain for nan afloat twelvemonth was astir $968 million, which was besides successful statement pinch estimates.

Our free rate travel continued to amended successful nan 4th fourth narrowing to antagonistic $156 million, which was a $49 cardinal sequential betterment from nan 3rd quarter, driven by nan operating betterment we discussed previously, arsenic good arsenic little CapEx. Net CapEx for nan 4th was $19 cardinal and $176 cardinal for nan afloat year, which was a $243 cardinal simplification year-over-year. With small successful nan measurement of caller capacity expected to travel online successful 2023, we expect a further simplification successful nett CapEx successful 2023.

On liquidity, arsenic Sandeep mentioned, we ended nan twelvemonth pinch rate commitments and indebtedness covenant capacity of astir $1.3 billion. In January, arsenic we reported via 8-K, we drew $250 cardinal connected our elder secured statement from SoftBank leaving $250 cardinal undrawn to money our upcoming liquidity needs. In addition, conscionable this week, arsenic Sandeep mentioned successful his remarks, we completed an amend and widen of nan $350 cardinal Junior LC Tranche of our existing LC facility. As portion of nan transaction nan Junior LC Tranche was upsized to $470 million.

The maturity was extended from November 2023 to March of 2025. A caller lender was added and nan SoftBank Vision Fund 2 replaced SoftBank Group arsenic an Obligor nether nan aforesaid building arsenic nan Senior LC Tranche that we amended successful December. The amend and widen was approved pinch nan consent of nan Senior LC lenders, and nan transaction closed this week.

When mixed pinch nan antecedently announced maturity hold of some nan Senior LC Tranche arsenic good arsenic nan Senior Secured Notes we've now extended our indebtedness maturity, supporting nan wholly owned business to 2025, and providing america pinch further runway arsenic we proceed down nan way to profitability and affirmative rate flow.

Regarding nan first quarter, arsenic Sandeep mentioned, we expect consolidated first 4th gross to beryllium successful nan scope of $830 cardinal to $855 cardinal and adjusted EBITDA successful nan scope of antagonistic $25 cardinal to breakeven. On nan gross side, location is immoderate seasonality successful our business, which usually results successful a slower commencement to nan twelvemonth owed to higher churn aliases larger number of commitments ending successful December.

And connected nan net side, we'll proceed to spot savings successful some OpEx and SG&A successful nan first 4th and beyond. The second has helped -- was helped by astir 10% simplification successful our workforce that we announced successful mid-January.

That concludes our prepared remarks. Thank you each for your continued support. And pinch that, I'll move it backmost to nan usability to unfastened nan statement to questions.

Question-and-Answer Session

Operator

[Operator Instructions] Your first mobility comes from nan statement of Vikram Malhotra pinch Mizuho. Your statement is open.

Vikram Malhotra

Good morning. Thanks for taking nan questions. I conjecture conscionable to commencement disconnected Sandeep, tin you possibly conscionable outline nan visibility you person successful position of committed gross aliases conscionable known terminations aliases move outs heading into 1Q and possibly conscionable nan first half? You usually person for illustration a two-quarter visibility, truthful conscionable fixed each nan tech, nan layoffs and, and nan churn, I'm conscionable wondering really overmuch visibility you have.

Sandeep Mathrani

Good morning, Vikram. So, you know, we really look astatine nan committed gross and we comparison it to 2022, and we travel a shape done nan full twelvemonth erstwhile we look astatine our fund preparation. We're very pleased to beryllium backmost and opportunity that we looked astatine wherever we were successful Q1 2022 and wherever we are successful Q1 2023, we're really somewhat up from a twelvemonth ago, which is what gives america assurance successful being 10% higher year-over-year. Again, we person reasonably bully visibility going into Q2 pinch complete nan past mates of quarters we've been very focused connected providing guidance for nan existent 4th and nan logic is nan uncertainty really that we spot successful nan U.S. recovery.

We person seen an acceleration of nan U.S. betterment successful January and February, but astatine this infinitesimal successful time, there's a precocious level of assurance successful nan guidance we've provided you. And besides I would for illustration to, for you to admit that nan guidance includes nan closure of 40 locations which we announced astatine nan past quarter, and arsenic you are alert that we do transportation astir 70% to 80% of nan gross from nan closed location to alternate locations. So, erstwhile you look astatine nan simplification successful nan number of members that relocate and nan simplification successful nan gross is really a flimsy acceleration successful gross successful Q1 of 2023 versus Q4 of 2022.

Vikram Malhotra

Okay, that's helpful. And past really should we deliberation astir nan effect from each nan exertion churn that we're seeing some successful Enterprise and SMB now that we've had for illustration 2 quarters of bigger announcements astir layoffs, tin you conscionable possibly qualitatively moreover conscionable picture what are immoderate of nan larger Enterprise users telling you successful position of their abstraction needs aliases rationalization versus really does that comparison successful opposition pinch SMB?

Sandeep Mathrani

Great. So Vikram, you know, to put that successful position and mostly nan companies person announced workforce reductions are nan aforesaid companies that went connected a hiring spree during nan pandemic and coming still employment much than earlier nan pandemic. We person been impacted successful definite locations. We talked astir nan higher churn successful Q3, mostly owed to these actions by little than a fistful of our endeavor companies.

On nan affirmative side, our abstraction dedicated to endeavor members are mostly nan afloat travel plates and aggregate travel options and are comparatively good leased. And arsenic those spaces go available, okay, we do person a pipeline to switch them. For example, it made news that 1 of our starring tech companies had vacated our Mountain View California location comprising of 400,000 quadrate feet. We person already backfilled nan abstraction pinch 3 caller endeavor members. Interestingly, each 3 endeavor members are exertion companies, and 1 of those endeavor members utilized our abstraction for their firm headquarters.

More so, what we are seeing is newer companies and newer exertion companies and non-technology companies and different non-tech companies that usage exertion are hiring group and taking advantage of nan existent layoffs. Just yesterday we signed an statement pinch a pharmaceutical institution for a afloat level successful Seattle. Again, their move to Seattle was triggered by nan tech layoffs and past taking advantage of nan expertise to find talent.

Just 1 past constituent I will make is that we do person 30,000 unsocial members, truthful we person a beautiful diversified portfolio and tech accounts are astir 15% of our business.

Vikram Malhotra

Okay, that's helpful. And conscionable 1 past Andre, conscionable if you could clarify, I deliberation 4th extremity rate equilibrium was small nether $300 million. And if I return the, nan $250 cardinal you drew, you person rate of a small complete $550 million. Am I correct, nan upsized Junior LC, nan $120 cardinal upside that was utilized to salary nan measurement down successful nan Senior Tranche and truthful nan benignant of tally complaint rate equilibrium is astir $550 million?

Sandeep Mathrani

Again I mean, I guess, Andre is looking astatine me.

Andre Fernandez

So we were debating who should reply nan question. So nan reply to nan mobility is, nan upsize successful nan missive of in installments installation does compensate for nan downside of nan Senior LC from $1.50 cardinal to $960 million, truthful it's astir $90 million, and nan upside is $120 million. So efficaciously it does supply $30 cardinal further moving superior and does return into relationship nan $90 cardinal reduction. But much importantly, nan upsides of nan LC installation really successful nan Junior LC installation is much advantageous to america arsenic nan LCs burned passim this twelvemonth astir about $30 cardinal a quarter, we tin really usage that money into moving superior versus successful nan Senior LC installation had it stayed astatine nan level it had stayed and arsenic nan pain downs occur, that money is not disposable to beryllium drawn for moving capital. So this is really an advantage from a liquidity perspective.

Vikram Malhotra

Okay, convey you.

Operator

Your adjacent mobility comes from nan statement of Tayo Okusanya pinch Credit Suisse.

Omotayo Okusanya

Yes, bully greeting everyone. So nan EBITDA guidance and gross guidance for 1Q again, those numbers are very akin to benignant of wherever you were successful 4Q 2022. Again, wondering exactly, if there's immoderate seasonality to that number and benignant of really you would benignant of deliberation astir 1Q successful nan discourse of 4Q, particularly fixed each nan awesome advancement you've been making done 2022. I deliberation again, to an grade we were somewhat expecting to spot a small spot much of that successful 1Q 2023, but nan numbers are very akin to 4Q.

Sandeep Mathrani

So, bully morning, Tayo. So again, arsenic I mentioned successful my prepared remarks, location is seasonality successful our business and I deliberation Andre mentioned that arsenic well. And mostly nan largest churn occurs successful nan period of December because location a batch of contracts are yearly and almanac twelvemonth and truthful we commencement to spot nan larger churn, and that churn, okay, has an effect really only connected January revenue. And arsenic a matter of fact, from February onwards arsenic nan caller leasing activity that we person conducted successful Q4 starts to return occupancy, that gross starts to summation successful February and continues to thrust done successful nan period of March, and which is what we are seeing arsenic we are now successful nan mediate of February.

So successful reality though, nan gross really went up arsenic I mentioned, quarter-over-quarter because which you person to return into relationship is nan 40 closures that we announced successful Q3, which were chiefly executed successful Q4 by nan extremity of December, 70% of nan members transferred to newer locations, 30% didn't. So we did compensate okay, for that nonaccomplishment of memberships, which is about, I deliberation 3,000 to 5,000 members. So we compensated for that and accrued our revenue. But to reply your question, location is an accrued quarter-over-quarter because of that shift, positive location is simply a level of seasonality.

Last constituent I will make is, arsenic a matter of fact, successful nan world markets, okay, Q4 was nan champion leasing 4th successful nan history of this company. So nan affirmative impacts we'll commencement to see, we're starting to see, for illustration I said, successful February and accelerating into March and further accelerating into Q2.

Andre Fernandez

Tayo, I would besides opportunity connected nan net line, you'll see, you'll spot that we're going from minus 26 to 0 to minus 25. Remember successful my remarks I had mentioned we took a flimsy in installments successful our inducement compensation successful nan 4th quarter. So really if you spell now into nan first 4th wherever you're starting to accrue astatine a normal inducement comp complaint and you're still capable to amended net from 26 now to thing betwixt 0 to 25 connected comparable revenue, I deliberation conscionable shows you nan further costs that we're taking retired of nan organization.

Omotayo Okusanya

That's very helpful. And past conscionable 1 speedy followup, successful regards to nan Workplace merchandise and My [ph] Access, really do we benignant of deliberation astir nan publication of those businesses to nan bottommost statement successful 2023?

Sandeep Mathrani

So let's conscionable attraction connected All Access. We did extremity nan twelvemonth astatine astir 70,000 members and arsenic we mentioned again, I deliberation successful nan past call, we would beryllium expanding capacity. If you retrieve successful nan opening of past year, we talked astir nan capacity being constricted to 70,000, 75,000 which of course, we reached capacity extremity of past year. Now that's allowed america to unfastened up further capacity, one, not only wrong our spaces, we are opening axenic All Access lounges successful New York and London and because successful definite markets we person really exceeded our capacity, we're really utilizing capacity of 3rd parties for our All Access product.

So we proceed to spot a batch of assurance successful that business. We do expect a 20% to 25% summation successful publication connected apical statement gross by nan All Access business. As I move complete to Workplace, we officially launched it precocious past year. We actively started trading it successful nan 4th fourth of 2022. As I mentioned, astatine nan extremity of nan year, we had complete 200 companies and complete 40,000 licenses signed, and that has accelerated 290 companies and complete 50,000 licenses signed successful January.

I almost equated it to wherever it was wherever All Access was 2 years ago. A batch of these companies that are signed are ample endeavor clients who are trying it successful smaller locations. And we do judge that arsenic they standard that our merchandise into their full organizations, location could beryllium an acceleration of licenses arsenic we spell done nan year. We're not anticipating a awesome publication this twelvemonth from nan Workplace merchandise arsenic it is an early launch, but we are entirely, we are very optimistic arsenic to its progress.

One past constituent I'll make and I'm being a small repetitive. We did, erstwhile we entered this business, we were really utilizing nan exertion that we built, and we joined that pinch our business pinch Yardi, who's a leader successful nan business of package guidance for properties to really to build a product. But we besides did that and, I utilized a extracurricular advisor to find what nan TAM, nan full addressable marketplace was and nan U.S. TAM was rather ample astatine $3 billion. So we will spot what percent we capture, but moreover if you seizure a mini percentage, it will beryllium a ample contributor successful nan semipermanent to WeWork’s apical statement revenue.

Omotayo Okusanya

Thank you for nan commentary.

Operator

Your adjacent mobility comes from nan statement of Alex Kramm pinch UBS.

Alex Kramm

Yes. Hey, bully morning, everyone. I understand of people that you've only fixed first 4th guidance, fixed immoderate of nan uncertainties retired there, but possibly punctual america astir budgets for nan afloat year. And you don't person to beryllium circumstantial connected revenues and EBITDA, but really do we deliberation astir caller locations opened, ARPM trends and different awesome KPI that we should, that whitethorn person changed arsenic you deliberation astir 2023?

Andre Fernandez

Let maine conscionable rewind you to 2022 to springiness you an idea. In 2022, I deliberation our gross went up $700 million. Okay. Let's say, if you deliberation astir nan business that we're in, that's conscionable an, it's a very bully increment. Occupancy went up 12 points, right? So, we do spot an acceleration, arsenic I mentioned successful Q2 and continuing done nan year, truthful we do spot nan gross summation successful 2023. And arsenic I said, we've challenged nan teams by twelvemonth extremity to beryllium free rate travel positive.

In nan world markets, request continues to beryllium incredibly strong. We person reached 83% occupancy, and we cognize nan trends person continued to beryllium affirmative successful nan first 45 days aliases truthful of this year. And ARPM, successful nan world markets are increasing. The summation successful ARPM that we demonstrated this 4th is really, is simply a usability of nan world markets arsenic nan pandemic level pricing rose, we're capable to fundamentally spell to pre-pandemic pricing successful our world markets.

Again, sticking existent to our original projections that erstwhile you get past 70% occupancy, you tin commencement having immoderate pricing powerfulness and you tin and erstwhile you get supra 80% occupancy, nan margins successful our business astatine nan building level is betwixt 25% to 35%. So everything that we projected, successful precocious 2021, early 2022 nan results are coming into fruition. As we benignant of look successful nan U.S. again, for illustration I said, we are starting to spot nan comeback to activity having a overmuch bigger impact.

And I did mention, which earlier erstwhile Vikram asked nan mobility astir tech, I said, nan tech companies person hired really much group done nan pandemic and nan layoffs still will consequence successful having much labor successful those companies than pre-pandemic. Again, for those companies arsenic they travel backmost to work, we go a earthy hold to return up space. So we're cautiously optimistic arsenic we commencement to spot nan rebound.

The past constituent I will make is that what we found, which I don't deliberation we afloat anticipated erstwhile we announced nan closures of nan 40 locations. We did admit that we would create a relocation of 70% to 80% of our members, but what we didn't expect is nan request would really spell up by perchance caller members arsenic they benignant of look guardant and recognize that WeWork could be, could beryllium Workspace, could beryllium astatine a premium.

And we saw that successful a marketplace for illustration Chicago whereby we closed a mates of locations, it took our occupancy up, but what it besides did was it accrued our marketplace stock to 19% of nan marketplace successful Q4. And truthful we're starting to spot that arsenic the, arsenic our proviso is getting minimal, group are not staying by nan sidelines, they're really reacting to get space. So look, we're cautiously optimistic, but arsenic I've said complete and complete again, nan U.S. has been sluggish versus nan remainder of nan world is backmost to pre-pandemic levels.

Alex Kramm

Okay. Just to beryllium a small spot much circumstantial then, and possibly I don't retrieve these numbers right, but I do consciousness for illustration successful nan past you committed to thing astir 50,000, I conjecture activity capacity added by -- successful 2023, and past besides I deliberation historically you've said thing astir occupancy perchance trickling higher, 2% a quarter. A, are these numbers right? And B, should we still clasp you accountable to that aliases is it conscionable excessively overmuch uncertainty that it's difficult to perpetrate to immoderate of these numbers?

Andre Fernandez

Yes, we do expect occupancy to emergence this year. If I was to supply afloat twelvemonth guidance, I americium really not doing afloat twelvemonth guidance. I'm providing guidance for Q1 and providing you commentary and what I spot successful nan business. We did adhd 50,000 caller members past twelvemonth and occupancy did spell up 12% past year. We do expect a moderation of that number this year. And nan logic for nan moderation is overmuch much driven by nan precocious occupancy successful nan world markets, giving america little inventory to waste than driven by nan request characteristics, right? So nan facet present is that occupancy successful nan portfolio is 75% today, and we do expect that to emergence to nan extremity of nan year.

Alex Kramm

Okay, acknowledgment for clarifying that. Just 1 speedy followup. The $650 cardinal target for SG&A, is that a tally complaint astatine nan extremity of nan year? Is it a afloat twelvemonth achievement? How should we beryllium reasoning astir that number?

Andre Fernandez

Full twelvemonth achievement.

Alex Kramm

Okay, fantastic. Thank you very much.

Andre Fernandez

Thank you.

Operator

Your adjacent mobility comes from nan statement of Thomas Catherwood pinch BTIG.

Thomas Catherwood

Thank you. Good morning, everybody. Maybe I want to spell done nan ins and nan outs connected your number of locations, but first conscionable want to loop backmost connected immoderate things that you said astir closures. Sandeep, it sounds for illustration nan bulk of those locations, nan 4 that you had talked astir antecedently were closed astatine twelvemonth end. Are location immoderate benignant of still near to hap successful 1Q aliases is that afloat off?

Sandeep Mathrani

So arsenic portion of that 40 closure list, it's fundamentally each done, location were a fewer stragglers successful January, but arsenic of now, they're each completed. We do proceed to look astatine our portfolio. As I said, you achieve, we execute summation successful EBITDA and thrust towards rate travel affirmative by continuously looking astatine our portfolio. And truthful we will proceed to reappraisal our portfolio, but arsenic it relates to that 40, I judge arsenic of now, they are each done.

Thomas Catherwood

Perfect, perfect. Thank you for that. And past if we sync astir nan ins passim nan year, location were immoderate that you had announced successful 4th quarter, immoderate caller guidance agreements backmost then, location were immoderate build outs still happening. And obviously, nan caller ones you announced coming betwixt Bangalore, Scottsdale and London. How galore much do you person coming connected successful 2023 and what do you expect to beryllium nan gait of those deliveries?

Sandeep Mathrani

Obviously we are looking astatine it very opportunistically successful markets that we execute incredibly well. I do expect nan India business to proceed to turn this year. It is astatine a very precocious occupancy and has been profitable for rather immoderate time. We do expect nan Israel business to turn arsenic well. But astatine this infinitesimal successful time, if you would, I expect essentially, nan table count to beryllium level for nan twelvemonth pinch caller desks added to nan inventory. But I besides do expect a small spot of pruning arsenic nan twelvemonth progresses.

Thomas Catherwood

Got it, I admit that Sandeep. And past Andre, conscionable 1 past 1 from me. You mentioned evidently that you expect 2023 CapEx to mean compared to 2022's spend. You do have, it sounds for illustration you proceed to grow nan All Access lounges, truthful there's immoderate walk there. There's evidently nan caller locations you're adding on. What do you expect if you person a consciousness of either nan magnitude of CapEx walk aliases benignant of really nan gait could beryllium passim nan year? What are your expectations that you person built into your outlook?

Andre Fernandez

Yes, I deliberation it's related to nan speech we conscionable had too, right, astir nan number of peculiarly time one, aliases to nan grade we unfastened caller accommodation that requires immoderate CapEx. So I deliberation there's immoderate variability location pinch respect to nan caller opens versus nan “the time 2 CapEx”, which is nan attraction CapEx. I deliberation we've sewage a good, knowing of what that is connected a tally complaint basis. So it's really nan time 1 that yet is going to thrust nan variability.

Listen, I deliberation if you look astatine nan 4th quarter, that's unusually debased I mean, astatine a nett CapEx of 19, and that benefited because you didn't person a batch of opens successful nan 4th quarter, but you had a batch of TA coming successful from your 3rd 4th that brought nan nett number down successful 4th quarter. So I don't deliberation nan 19 a 4th is nan correct tally rate, thing higher than that. So if you figure, okay, could you get to thing around, again we spent 176 successful 2022, could you get to thing down successful nan 100 aliases debased 100s range? I deliberation that's very achievable for nan twelvemonth connected a nett basis.

Thomas Catherwood

Perfect. That's it from me. Thanks everyone.

Operator

Your adjacent mobility comes from nan statement of Alexander Goldfarb pinch Piper Sandler.

Alexander Goldfarb

Good morning. So conscionable a fewer questions Sandeep and first nan large picture, conscionable want to make judge I've heard correctly. Obviously everyone's attraction is rate travel profitability, past 4th because of FX you'd pushed it from mediate of this twelvemonth to precocious this year. Great to see, benignant of FX beryllium a affirmative effect successful nan 4th quarter. Obviously, we don't cognize what this twelvemonth is going to be, but do you still guidelines by from what you spot now that extremity of this twelvemonth is erstwhile we'll spot rate travel profitability?

Sandeep Mathrani

Yes, Alex, arsenic I've said a fewer times today, look, we're going to, we drove nan squad past twelvemonth to beryllium adjusted EBITDA affirmative by December. We achieved adjusted EBITDA positively by much than a fewer cardinal dollars. So which was a very bully again, we are driving nan squad this twelvemonth to achieve, to beryllium free rate travel by twelvemonth end. As agelong arsenic nan U.S. marketplace doesn't deteriorate, it doesn't really person to accelerate. Okay? We do judge that is achievable.

Alexander Goldfarb

Okay. The adjacent question, and hopefully you'll joke me, Sandeep, but 1 of the, evidently we deliberation that you've done tremendous for what you, nan manus you were dealt, you've performed, but there's still a communicative retired location about, restructuring, indebtedness restructuring, et cetera. You know, our views, we've written our views, but conscionable benignant of immoderate comments to thief squash immoderate of nan naysayers that opportunity like, hey, you know, location needs to beryllium a restructure. I mean, surely you did a awesome occupation connected nan refinancing of nan debt. SoftBank gave you a walk connected temporarily not charging you definite fees arsenic you transitioned through. But is location thing that you tin elaborate to thief benignant of squash nan communicative that's retired there?

Sandeep Mathrani

Alex, I ever opportunity actions speak louder than words, right? I deliberation nan truth that we really moved nan 2023 maturity to 2025 was an parameter of nan assurance successful nan marketplace to america to really beryllium capable to push that maturity to 2025. We've ever maintained, and I maintained this for complete a year, that erstwhile we get to adjusted EBITDA positive, we will attraction our attraction connected nan equilibrium expanse and commencement moving on, towards nan extremity of this year, arsenic we person much visibility. We'll commencement moving towards nan hold of nan indebtedness maturities and successful reasoning person to study to locomotion earlier running.

So we really don't spot a request for further liquidity for 2023. So we consciousness that we're successful a bully position, and that will let america to besides discuss, nan indebtedness extensions pinch our indebtedness holders. So for illustration I said, our actions are continued to amended that we've continued to amended our business and continued astatine each arena to widen our maturities arsenic they travel to expiration.

Alexander Goldfarb

Okay. And conscionable this last thing, Andre arsenic CapEx you said to nan anterior question, will travel down versus 2022. You guys also, if I heard correctly, said astir perchance leasing caller spaces. So nan CapEx isn't conscionable connected existing abstraction that you've already leased that you're building out, but it sounds for illustration you're besides taking immoderate incremental space. Did I perceive correctly? And possibly conscionable elaborate really you position caller abstraction versus your existing abstraction that you've leased, but it's not yet open?

Sandeep Mathrani

So fto maine reply that, Alex. Maybe, I deliberation Andre gave a scope of a 100 to debased 100 for time 1 and time 2 CapEx. The deals that we've really signed are afloat funded from a tenant allowance position by nan landlord, nan 1 successful London, which is afloat funded. And nan different transactions are fundamentally guidance agreements arsenic they are successful Houston and successful Scottsdale, and our India operations, arsenic you whitethorn person heard that they raised money done Barings and that raise of money done Barings, which closed, was really raised for description of that business. So it's a afloat funded operation.

Alexander Goldfarb

Okay. That's, that's awesome. Thank you, Sandeep.

Operator

Your adjacent mobility comes from statement of Brett Knoblauch pinch Cantor Fitzgerald.

Brett Knoblauch

Perfect. Hi guys. Thanks for taking nan question. I conjecture you talked astir nan 4th fourth being 1 of your champion quarters successful position of leasing activity ever. Could you possibly just, you know, I conjecture qualitate [ph] astir really nan type of discarded you're getting connected those properties compared to previously? I conjecture you spot a batch of weakness successful nan commercialized agency spot base, truthful I was conscionable wondering if that's allowing you to benignant of get much advantageous pricing.

Sandeep Mathrani

I will benignant of beryllium backmost and say, I mentioned again successful my earlier comments, and if I look astatine nan advancement that we've made, right, we leased astir 206,000 gross desks and connected a consolidated basis, 165,000 gross desks and successful Q1, 2022, it was 166 aliases astir nan same. So that's why we proceed to support nan request for our abstraction has continued to beryllium very strong. Again, erstwhile you get past that 70% occupancy number, you commencement to get pricing power, which is again, what we've seen astatine slightest successful nan world markets, is very prevalent.

As I mentioned successful nan world markets, our pricing is astatine pre pandemic levels. It's a slow summation erstwhile you look astatine it from a reporting perspective, because evidently nan guidelines has still sewage a little APRM and truthful nan effect of nan caller leasing is small, but we are seeing successful that. And for illustration I said, successful nan world markets nan logic for seeing nan spot is nan elasticity that we offer. Okay?

Even though nan larger marketplace could beryllium soft, nan elasticity is very important. The turnkey solution to nan clients are very important. And really, what's nan icing connected nan barroom is nan abstraction is disposable today, right? So effectively, having abstraction disposable coming that's turnkey and that is flexible. Okay? As group commencement to travel backmost to activity successful those world markets, nan request really increases. And again, conscionable to reemphasize, nan number of companies that person hired much during nan pandemic, truthful moreover if you relationship for nan layoffs, it's still higher.

The past constituent I'll make why our SMB business is truthful beardown successful nan United States is successful 2021 I think, location were 5 cardinal caller businesses. And I deliberation successful 2022, location were 11 cardinal caller businesses. And our SMB business is astir 50% of our business, and truthful we've seen an unthinkable spot successful our SMB business, which is much than made up for nan churn of nan Enterprise clients. And truthful successful nan U.S., we are not seeing pricing powerfulness yet. We conscionable astir deed 70%, but nan world markets we are seeing very bully pricing powerfulness moreover though there's a softness successful nan marketplace from an wide commercialized agency market.

Brett Knoblauch

Got it. That makes sense. And past I guess, you talked astir being adjusted EBITDA affirmative successful December. But I guess, nan first quarter, guiding midpoint, antagonistic $12.5 million, is that really conscionable because of nan benignant of elevated churn impacting January revenues positive nan accrual connected nan inducement comp?

Sandeep Mathrani

No. I would opportunity nan 2 reasons for it are that erstwhile you look astatine quarter-over-quarter, 1 is that location is nan elevated churn, for illustration I mentioned and nan 2nd is erstwhile you adjacent locations, okay, you are moving 70% of nan revenues if you return into account, you're losing 30% of nan revenue, truthful you really person to comp that quarter-over-quarter. But again, for illustration I said, nan -- we're guiding to nan antagonistic 25% to 0%. Obviously, we'll do everything successful nan adjacent 45 days to present hopefully a amended result.

Brett Knoblauch

Got it. Thanks, Sandeep. I really admit it.

Operator

Your adjacent mobility comes from nan statement of Vikram Malhotra pinch Mizuho.

Vikram Malhotra

Thanks truthful much. I conscionable wanted to explain 2 things, possibly Andre aliases Sandeep. So conscionable based connected each your comments astir nan $30 cardinal incremental, I conscionable wanted to clarify. So it's roughly, if I conscionable did nan mathematics correctly, you person $600 cardinal of rate tally complaint for moving superior needs. Do you still person nan entree to nan further $250 cardinal from SoftBank and past an expertise to spell retired and raise an further $500 cardinal of debt, is that each intact?

Sandeep Mathrani

Yes. I mean, again, for illustration I said, it's somewhat advantageous, right? So you person nan $250 million, which is wholly intact, and fto maine conscionable reemphasize what I said earlier. When we accrued nan $350 cardinal to $470 million, moreover though that $120 million, $100 cardinal of it was rate collaterized for Letter of Credits, and those Letter of Credits pain done nan full twelvemonth astatine astir $30 cardinal a quarter, we tin usage that $100 cardinal successful moving capital. So successful an ironic way, nan summation successful nan Junior LC really allowed america to pat into nan capacity that we had of nan Senior Secured, that further $500 cardinal Senior Secured. So we've really successful a measurement accessed $100 cardinal of that, that if we need, we tin usage for moving capital. Actually, our rate -- our expertise really accrued by efficaciously $100 million.

Andre Fernandez

So Sandeep said that erstwhile those LCs burned down, that rate is returned to america arsenic if we had monetized portion of that unused capacity. And past your different mobility was, yes, we still person $250 cardinal disposable to america connected nan SoftBank line.

Vikram Malhotra

And an expertise to raise an further $500 cardinal if you request to?

Sandeep Mathrani

Yes, but again, for illustration I said, nan $100 cardinal goes against nan $500 million, so…

Vikram Malhotra

The $500 million, okay, it's $400 million.

Sandeep Mathrani

We person different $400 million.

Vikram Malhotra

$400 million, okay. And whitethorn beryllium 1 different thing…

Sandeep Mathrani

We've really raised $100 cardinal by default for us.

Operator

Your adjacent mobility comes from Tayo Okusanya pinch Credit Suisse.

Omotayo Okusanya

Hi, conscionable to talk astir nan hold of nan Junior Tranche to -- successful 2025. Were location immoderate important changes to nan terms, specified arsenic do you extremity paying higher liking rates successful 2024, aliases thing of that quality we should beryllium alert of?

Sandeep Mathrani

Yes. The pricing was marginally higher than nan pricing of nan insubstantial that was extinguished. Obviously, nan magnitude increased, nan word accrued and astatine nan clip we placed nan past insubstantial was, arsenic you know, erstwhile rates were lower. So yes, commensurately, nan pricing was higher. And I deliberation we'll beryllium filing an 8-K providing each nan specifications connected nan -- tomorrow, connected nan LC.

Operator

There are nary further questions astatine this time. Mr. Sandeep Mathrani, I'll move nan telephone backmost complete to you.

Sandeep Mathrani

Once again, I convey you each for joining our telephone this greeting and for your continued support of WeWork. Have a awesome day, and person a awesome agelong weekend.

Operator

This concludes today's call. You whitethorn now disconnect.

Editor: Naga



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