DRS 1 filename1.htm Document

As confidentially submitted to the Securities and Exchange Commission on December 28, 2018
Registration No. 333-
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
____________________________________
WeWork Companies Inc.
(Exact name of registrant as specified in its charter)
____________________________________
Delaware
(State or other jurisdiction of incorporation or organization)
7380
(Primary Standard Industrial Classification Code Number)
46-2918595
(I.R.S. Employer Identification Number)
____________________________________
115 West 18th Street
New York, New York 10011
Telephone: (646) 491-9060

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
____________________________________
Jennifer Berrent
Chief Operating Officer and Chief Legal Officer
Jared DeMatteis
General Counsel
115 West 18th Street
New York, New York 10011
Telephone: (646) 491-9060
____________________________________
With copies to:
Graham Robinson
Ryan J. Dzierniejko
Skadden, Arps, Slate, Meagher & Flom LLP
4 Times Square
New York, New York 10036
Telephone: (212) 735-3000
Facsimile: (212) 735-2000
____________________________________
Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ¨
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
o
 
Accelerated filer
o
Non-accelerated filer
x
 
Smaller reporting company
o
 
 
 
Emerging growth company
x
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. o
____________________________________
CALCULATION OF REGISTRATION FEE
Title of Each Class of
Securities to Be Registered
Proposed
Maximum
Aggregate
Offering
Price(1)(2)
Amount of Registration Fee
Class A common stock, par value $0.001 per share
 
 
(1)
Includes                   shares of Class A common stock that the underwriters have the option to purchase to cover overallotments, if any.
(2)
Estimated solely for purposes of calculating the registration fee in accordance with Rule 457 under the Securities Act of 1933.
The Registrant hereby amends this Registration Statement on such date as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, or until this Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.


Subject to completion, dated December 28, 2018
The information in this preliminary prospectus is not complete and may be changed. The securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
Prospectus
          Shares
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WeWork Companies Inc.
Class A Common Stock
This is an initial public offering of Class A common stock by WeWork Companies Inc. The estimated initial public offering price is between $              and $            per share.
We intend to apply to list our Class A common stock on the            (the “          ”) under the symbol “WE”.
Upon completion of this offering, we will have two classes of authorized common stock: Class A common stock and Class B common stock, referred to together in this prospectus as our common stock. The rights of the holders of the shares of Class A common stock and Class B common stock are generally identical, except with respect to voting and conversion. Each share of Class A common stock is entitled to one vote per share. Each share of Class B common stock is entitled to ten votes per share and is automatically convertible into one share of Class A common stock under certain circumstances, including in connection with certain transfers to third parties. Holders of our Class A common stock and Class B common stock vote together as a single class on all matters presented to our stockholders for their vote or approval, except as otherwise set forth in this prospectus or as required by applicable law. Outstanding shares of Class B common stock will represent approximately          % of the total voting power of our outstanding capital stock upon completion of this offering (or approximately          % of the total voting power of our outstanding capital stock if the underwriters exercise in full their option to purchase additional shares of our Class A common stock). Adam Neumann, our Co-Founder and Chief Executive Officer, will hold or have the ability to control approximately          % of the total voting power of our outstanding capital stock upon completion of this offering (or approximately          % of the total voting power of our outstanding capital stock if the underwriters exercise in full their option to purchase additional shares of our Class A common stock).
We are an “emerging growth company” under the federal securities laws. As a result, we have elected to be subject to reduced public company reporting requirements.
Following this offering, we will be a “controlled company” within the meaning of the corporate governance rules of the        . See “Management – Director independence”.
Investing in our Class A common stock involves risks. See “Risk factors” beginning on page 16.
Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.
 
Per Share
 
Total
Initial public offering price
$
 
(1) 
Underwriting discounts and commissions(2)
$
 
(1) 
Proceeds to us, before expenses
$
 
(1) 
 
 
 
 
(1)
Assumes no exercise of the underwriters’ option to purchase additional shares of our Class A common stock described below.
(2)
See “Underwriting” for a description of compensation payable to the underwriters and estimated offering expenses.
We have granted the underwriters an option for a period of 30 days to purchase from us up to           additional shares of our Class A common stock at the initial public offering price, after deducting underwriting discounts and commissions. See “Underwriting”.
The underwriters expect to deliver the shares of Class A common stock against payment in New York, New York on          , 20   .
The date of this prospectus is             , 20    .



Table of contents
 
_____________________
You should rely only on the information contained in this prospectus or contained in any free writing prospectus that we have filed with the Securities and Exchange Commission (the “SEC”). Neither we nor the underwriters have authorized anyone to provide you with additional information or information different from that contained in this prospectus or in any free writing prospectus that we have filed with the SEC. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. We are offering to sell, and seeking offers to buy, our Class A common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or any sale of shares of our Class A common stock. Our business, financial condition, results of operations and prospects may have changed since that date.
For investors outside the United States: Neither we nor any of the underwriters have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the shares of Class A common stock and the distribution of this prospectus outside the United States.

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About this prospectus
Unless otherwise indicated or the context otherwise requires, all references in this prospectus to “we”, “our”, “us”, “the Company” and “our company” refer to WeWork Companies Inc. and its consolidated subsidiaries.
Any totals of the key performance indicators presented as of a period end reflect the count as of the first day of the last month in the period. First-of-the-month counts are used because the economics of those counts generally impact the results for that monthly period, and most move-ins and openings occur on the first of the month. Certain amounts, percentages and other figures presented in this prospectus have been subject to rounding adjustments. Accordingly, figures shown as totals, dollars or percentage amounts of changes may not represent the arithmetic summation or calculation of the figures that precede them.
This prospectus contains references to our trademarks, trade names and service marks and to those belonging to other entities. Solely for convenience, trademarks, trade names and service marks referred to in this prospectus may appear without the ® or ™ symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensor to these trademarks, trade names and service marks. We do not intend our use or display of other companies’ trademarks, trade names or service marks to imply a relationship with, or endorsement or sponsorship of us by, any other companies.
This prospectus contains industry, market and competitive position data that is based on industry publications and studies conducted by independent third parties that we believe to be reliable. However, we have not independently verified market and industry data from third-party sources and the accuracy and completeness of this information cannot be guaranteed. In some cases, we do not expressly refer to the sources from which this data is derived. In that regard, when we refer to a source of this type of data in any paragraph, you may assume that other data of this type appearing in the same paragraph is derived from the same sources, unless otherwise expressly stated or the context otherwise requires. Forecasts and projections are based on historical market data and other third-party sources, and forecasted or projected amounts may not be achieved. Forward-looking information obtained from third-party sources is subject to the same qualifications and the uncertainties regarding the other forward-looking statements in this prospectus. See “Risk factors” and “Cautionary note regarding forward-looking statements”.
Certain definitions
As used in this prospectus, unless the context otherwise requires, the following key terms are defined as follows:
“Desks” — The estimated number of desks available for sale and immediate use for any given date, plus the estimated capacity of “hot desks” (access to any available desk at a designated location) at each location. Desks represent management’s best estimate of desk capacity at a location based on our desk inventory management system and/or sales layouts and are not meant to represent actual counts of desks at our locations. Actual desks in a location can differ from management estimates for a number of reasons including, but not limited to, some Enterprise Members reconfiguring their offices to include fewer desks or conversions by Enterprise Members of their offices into a conference room they can use. Hot desk capacity is estimated on a location by location basis by a community manager based on the characteristics and distinct local personality of the relevant community, and a community manager in a given location may choose to change the hot desk capacity in that location at any time. Desks also may not be comparable from period to period as a result of changes in the use of space or changes in layouts and floor plans. As presented in this prospectus, “Desks” are rounded to the nearest thousand.
“Enterprise Member” — An organization with 1,000 or more full-time employees and at least one WeWork Membership. There is no minimum number of Desks that an organization needs to reserve in order to be considered an Enterprise Member.
“Enterprise Membership Percentage” — The percentage of our total WeWork Memberships attributable to Enterprise Members. Enterprise Membership Percentage is presented as a percentage of our total WeWork Memberships.

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“Locations” — The physical number of buildings (or group of buildings to the extent they are marketed as a single branded place) from which there is workspace available for sale to members. We assess the performance of our locations differently based on whether the revenues and expenses of the location are consolidated within our results of operations (“Consolidated Locations”) or whether the revenues and expenses of the location are not consolidated within our results of operations but we are entitled to a management fee for our advisory services (“Branded Locations”). The term “locations” includes only Consolidated Locations when used in “Management’s discussion and analysis of financial condition and results of operations—Consolidated results of operations” and includes both Consolidated Locations and Branded Locations when used elsewhere in this prospectus.
“Mature Locations” — Locations that have been open for member operations for more than 18 months. We assess the performance of these locations differently from the performance of locations that have been open for member operations for 18 months or less (“Non-Mature Locations”) and locations that have not yet opened for member operations (“Pre-Open Locations”).
“Memberships” — The cumulative number of WeWork Memberships and We Memberships. Memberships can differ from the number of individuals using WeWork’s space for a number of reasons, including members utilizing space for fewer individuals than the space was designed to accommodate. Memberships presented are shown rounded to the nearest thousand.
“Occupancy Rates” — WeWork Memberships divided by Desks in a Location. Occupancy Rates are a way of measuring how full our workspaces are. The occupancy rate for Mature Locations, Non-Mature Locations or Locations is calculated by dividing WeWork Memberships attributable to Mature Locations, Non-Mature Locations or Locations by the number of Desks in Mature Locations, Non-Mature Locations or Locations, respectively.
“WeWork Memberships” — Physical memberships that permit the beneficiary to occupy a designated area of space at a WeWork location. The space occupied could be a dedicated office area (i.e., a desk), a shared office area or a common area that is accessed on a first come, first served basis (i.e., a “hot desk”).
“We Memberships” — Virtual memberships which provide user login access to the WeWork member network on-line or through our mobile application as well as access to our service offerings and the right to reserve space on an à la carte basis, among other benefits. Each We Membership is considered to be one Membership.
Non-GAAP financial measures
To evaluate the performance of our business, we rely on both our results of operations recorded in accordance with GAAP and certain non-GAAP financial measures, including Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted EBITDA before Growth Investments, Adjusted EBITDA before Growth Investments Margin, Community Adjusted EBITDA and Community Adjusted EBITDA Margin. These measures, as defined below, are not defined or calculated under principles, standards or rules that comprise GAAP. Accordingly, the non-GAAP financial measures we use and refer to should not be viewed as a substitute for net loss or any other performance measure derived in accordance with GAAP or as a substitute for cash flows from operating activities as a measure of liquidity, and we encourage you not to rely on any single financial measure to evaluate our business, financial condition or results of operations. Our definitions of Adjusted EBITDA and the other metrics described below are specific to our business, and you should not assume that they are comparable to similarly titled financial measures of other companies.
In addition to helping us evaluate the performance of our business, we believe that these non-GAAP metrics are also used by our bondholders and other investors to measure the performance of our business. We are also required to report Adjusted EBITDA, Adjusted EBITDA before Growth Investments and Community Adjusted EBITDA to the holders of our senior notes under the indenture governing our senior notes. However, Adjusted EBITDA, Adjusted EBITDA before Growth Investments and Community Adjusted EBITDA have limitations as analytical tools and should not be considered in isolation or as a substitute for analyzing our results as reported under GAAP. Some of these limitations are:
•
they do not reflect changes in, or cash requirements for, our working capital needs;

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•
they do not reflect our interest expense, or the cash requirements necessary to service interest or principal payments on our debt;
•
they do not reflect our tax expense or the cash requirements to pay our taxes;
•
they do not reflect historical capital expenditures or future requirements for capital expenditures or contractual commitments;
•
although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and these metrics do not reflect any cash requirements for such replacements;
•
Adjusted EBITDA before Growth Investments and Community Adjusted EBITDA do not reflect our sales and marketing expenses, growth and new market development expenses, and pre-opening community expenses, although we will need to maintain some level of sales and marketing expenses even with respect to our Mature Locations, and all of these expenses are important to our ability to execute our strategy and grow our business; and
•
Community Adjusted EBITDA does not reflect our general and administrative expenses, although those expenses support all our operations, including at the level of each workspace community.
Adjusted EBITDA and Adjusted EBITDA Margin
Adjusted EBITDA is defined as net loss before income tax (benefit) provision, interest and other (income) expense, depreciation and amortization expense, Adjustments for Impact of Straight-lining of Rent (defined below), stock-based compensation expense and expense related to stock-based payments for services rendered by consultants. Adjusted EBITDA Margin is defined as Adjusted EBITDA as a percentage of total revenue.
Our most significant operating expense is rent expense. We evaluate rent expense recognized on a straight-line basis over the life of the lease term in accordance with GAAP based on three key components, including Rent Contractually Paid or Payable, Adjustments for Impact of Straight-lining of Rent and the Amortization of Lease Incentives as defined below. Adjusted EBITDA and all of our other non-GAAP metrics discussed below include the impact of Rent Contractually Paid or Payable and Amortization of Lease Incentives but add back Adjustments for Impact of Straight-lining of Rent.
•
“Rent Contractually Paid or Payable” for each period presented represents cash payments for base and contingent rent payable under our lease agreements, recorded on an accrual basis of accounting, regardless of the timing of when such amounts were actually paid. A substantial majority of our lease agreements contain provisions for rent holidays/free rent and rent escalation clauses.
•
“Adjustments for Impact of Straight-lining of Rent” represents the non-cash adjustment to record rent holidays and rent escalation clauses on a straight-line basis over the term of the lease.
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“Amortization of Lease Incentives” represents the amortization of cash received for tenant improvement allowances and broker commissions. Generally, a portion of the cost of leasehold improvements is reimbursed to us by our landlords as a tenant improvement allowance. We may also receive a broker commission for negotiating certain of the our leases. When contractually due to us, these amounts are recorded as deferred rent on the consolidated balance sheet and are amortized on a straight-line basis over the lease term as a credit/benefit to rent expense.
Rent expense excluding Adjustments for Impact of Straight-lining of Rent is referred to as “Adjusted Rent”.
Straight-line rent is added back in our non-GAAP metrics because our leases are all long term, typically in excess of 10 years, and this adjustment typically represents a significant non-cash expense in the earlier portion of the life of a lease and is not reflective of our leases’ current cash obligations, which also typically include step-ups in rent. Management believes that adding back this amount provides a useful supplemental measure of operating performance. Adjusted EBITDA does not deduct the benefit recognized from the Amortization of Lease Incentives

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as we view the lease incentives received, in connection with our asset-light strategy, as a financing decision. The cash we receive is used to offset the significant capital expenditure investments we make in building our communities. We have chosen to finance a portion of our capital expenditures through the advance of significant tenant improvement allowances from our landlords. Had we made the decision to instead finance that portion of our capital expenditures through a traditional loan or through drawings under our Senior Credit Facility, our monthly rent expense for that location would likely be reduced, and those payments could instead be used to pay down principal and interest on the loan, which payments would not have impacted our Adjusted EBITDA calculation. As a result, management believes including the Amortization of Lease Incentives results in a useful supplemental measure of operating performance that is neutral regarding the financing decisions made with respect to our capital expenditures. We believe the inclusion of Amortization of Lease Incentives also helps increase comparability when comparing locations across our portfolio, as in some cases we are not able to negotiate a tenant improvement allowance into the terms of our leases, and these types of arrangements are not as common in certain areas of the world where we are opening new locations.
When used in conjunction with GAAP financial measures, Adjusted EBITDA and Adjusted EBITDA Margin are supplemental measures of operating performance that we believe are useful measures to facilitate comparisons to historical performance and competitors’ operating results. Adjusted EBITDA is also a key metric used internally by our management to evaluate performance and develop internal budgets and forecasts.
Adjusted EBITDA before Growth Investments and Adjusted EBITDA before Growth Investments Margin
We also use Adjusted EBITDA before Growth Investments as an additional supplemental measure of our operating performance. Adjusted EBITDA before Growth Investments represents our Adjusted EBITDA further adjusted to remove other revenue and expenses (other than revenue that relates to management fee income from advisory services provided to Branded Locations) and what we refer to as “Growth Investments”, which are sales and marketing expenses, growth and new market development expenses and pre-opening community expenses. Adjusted EBITDA before Growth Investments Margin measures Adjusted EBITDA before Growth Investments as a percentage of total membership and service revenue and management fee income from advisory services provided to Branded Locations.
We use Adjusted EBITDA before Growth Investments to evaluate the core operating performance of our locations, inclusive of community support functions and our general and administrative expenses that support our current portfolio, without the additional Growth Investments that we believe will fuel our future growth and are more variable and discretionary in nature. Adjusted EBITDA before Growth Investments includes the impact of general and administrative expenses (other than stock-based compensation expense for our employees, stock-based payments for services rendered by consultants and Adjustments for Impact of Straight-lining of Rent). Given our existing footprint and our visibility into the size, quality and reach of our real estate pipeline, we have already established a strong corporate infrastructure, comprised primarily of our legal, finance, digital technology and human resources departments, to support our global expansion, and Adjusted EBITDA before Growth Investments includes the impact of these items. As WeWork continues to grow, we expect to achieve economies of scale within these departments and as a result expect our Adjusted EBITDA before Growth Investments Margin to increase over time.
Given the level of investments we have made in our expansion and marketing to support future growth and future increases in Desks, we believe Adjusted EBITDA before Growth Investments is a useful measure in evaluating our core operating performance because it removes the impacts of these significant Growth Investments. Additionally, because pre-opening community expenses are incurred with respect to a particular location prior to its opening for member operations, we believe they are not indicative of our ongoing core operating performance.
Community Adjusted EBITDA and Community Adjusted EBITDA Margin
We use Community Adjusted EBITDA and Community Adjusted EBITDA Margin as additional supplemental measures of performance. Community Adjusted EBITDA represents our Adjusted EBITDA before Growth Investments further adjusted to remove general and administrative expenses. Community Adjusted EBITDA Margin measures Community Adjusted EBITDA as a percentage of total membership and service revenue and management fee income from advisory services provided to Branded Locations. We use these metrics as a way of analyzing the

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core operating performance of our locations, inclusive of community support functions but excluding the impact of general and administrative expenses, which are not incurred at the location level and do not relate directly to the operation of our communities. We believe the use of these metrics enables greater comparability of the operating performance of our locations from period to period.

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Prospectus summary
This summary highlights selected information contained elsewhere in this prospectus. This summary does not contain all of the information that you should consider before deciding whether to purchase our Class A common stock in this offering. You should read the entire prospectus carefully, including the sections titled “Risk factors” and “Cautionary note regarding forward-looking statements”, before making an investment decision.
Our mission
Our mission is to create a world where people work to make a life, not just a living.
Who we are
WeWork is a global “Space-as-a-Service” platform, providing our members with beautiful, open spaces that increase productivity, innovation and connection. We believe we have reinvented the way physical space is utilized by turning office spaces into vibrant work environments that foster a sense of community, where companies and people can grow together. Our platform provides our members with a complete, one-stop solution for their space needs. The broad appeal of our platform and brand has attracted a diverse member base and has enabled us to achieve significant scale in a short period of time, with total memberships growing at a 140% compound annual growth rate (“CAGR”) from September 1, 2014 to September 1, 2018. As of September 1, 2018, we had approximately 319,000 memberships across 335 locations in 24 countries.
We believe there is a fundamental disconnect between the rigidity of traditional office environments and the evolving needs of today’s workforce. While companies are increasingly looking to create spaces that foster collaboration among their employees, these companies do not have the expertise to efficiently transform their spaces into dynamic environments for creativity, focus and connection.
We have pioneered the “Space-as-a-Service” category and have created a platform that provides a complete solution for our members’ space needs. We leverage our technology and core competencies in design, construction and community-building to allow our members to outsource all of their real estate needs to us. We deploy these competencies at scale to create dynamic, lively environments that offer a comprehensive suite of tools our members need to easily and affordably run their businesses. From design details to weekly networking events, our locations promote collaboration and a sense of community that are difficult to replicate.
Through our WeWork offering, we provide our members with a complete solution for the space, services and community they need to pursue their passions. We deliver an array of amenities, such as high-speed internet, conference rooms, printing, IT services and craft beverages on tap. Our members also have exclusive access to unique events and opportunities as well as a variety of services through our partners, which range from discounted rates on payroll services and health benefits to deals on clothing and gym memberships. We pride ourselves on providing solutions for all of our members, whether they are small startups looking for on-demand access to meeting rooms, medium-sized businesses looking for custom-designed headquarters, or Fortune 500 companies seeking our expertise in redesigning their existing office spaces. Through our platform, we are able to cater to the needs of our members across their business lifecycles.
We are relentlessly member-centric in everything we do. We aim to evolve our offerings beyond our core WeWork offering to foster a comprehensive, frictionless “human” experience across all aspects of our members’ lives. By serving hundreds of thousands of members from organizations all over the world and by leveraging our scale and technological capabilities, we have gathered valuable insights into our members’ needs, including those that extend beyond work. Through our WeWork Ventures, including in education, wellness and retail, we provide our members with opportunities to learn, congregate, grow and thrive professionally and personally.
As our platform and brand have evolved, we have been able to attract members at all stages of development, ranging from startups, freelancers and nonprofit organizations, to large multi-national enterprises. As of September 1, 2018, approximately 30% of the Global Fortune 500 were either existing Enterprise Members or had signed future commitments with us, and 29% of WeWork Memberships were attributable to Enterprise Members.

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For the year ended December 31, 2017, we had membership and service revenue of $866.4 million, a net loss of $(933.5) million and Community Adjusted EBITDA of $233.1 million. See “—Summary consolidated financial and operating information—Other key financial measures” for a reconciliation of non-GAAP measures to the most comparable GAAP measures.
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Our opportunity
Several macro trends are driving a disruption in work environments globally, resulting in a large and growing opportunity for alternative real estate solutions. Our opportunity is being shaped by the following macro drivers:
Evolving workspaces.    Companies are increasingly focusing on the workplace as an important factor in employee productivity, collaboration and retention. Most companies, regardless of size, do not have expertise in the optimization and “humanization” of office space, and are increasingly turning to external providers that can offer a customized work environment for their needs.
Fixed cost reduction.    Real estate is a large fixed cost for most companies. Businesses of all sizes are looking for flexible, lower-cost workspaces that improve efficiency, with 51% of businesses reporting a desire to reduce occupancy costs according to a MindMetre survey published in a 2017 report by JLL Global Research. Flexible workspace arrangements allow organizations to enter into short-term arrangements and adjust their footprints over time to match their business needs. We expect companies will continue to explore solutions that turn more of the fixed cost of office space into a variable cost.
Urbanization.    Large populations, led primarily by millennials, are moving to major urban centers in pursuit of economic opportunities. According to a United Nations study, 55% of the world’s population today lives in urban areas, a proportion that is expected to increase to 68% by 2050. Increased population density puts pressure on urban infrastructure and resources, leading to higher real estate prices in many areas and rising demand for innovative solutions that can accommodate this ongoing shift.
Technology-enabled workspaces.    The workplace has changed dramatically in the past few decades as technology, management practices and the way people work have evolved. Today’s mobile- and technology-oriented workforce benefits from office spaces that serve as collaborative hubs, where employees can interact with one another spontaneously, yet efficiently. Modernizing the workplace requires deep knowledge around design, construction and

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operation of real estate, as well as technological tools that analyze space utilization and enable real-time alterations as needed.
We believe we are positioned to capture meaningful market share given our critical mass in key markets and our proven, highly scalable business model. As we expand our offerings to cater to a broader range of needs, we expect to broaden our total market beyond real estate as we enter adjacent markets.
Our platform
Our platform supports high-energy environments and promotes collaboration both within members’ organizations and across the broader WeWork community. Our unique environments foster a sense of belonging for our members, provide them with a complete solution for their space needs and empower them to do their best work.
Memberships
Memberships offer different levels of space access and include amenities, such as private phone booths, high-speed internet, printing and copying, mail and packaging handling, front desk services, 24/7 building access, fresh fruit and micro-roasted coffee.
We currently offer the following WeWork products:
Off-the-shelf
◦
Shared workspace: Either a flexible, unassigned “hot desk” in a common area, or a dedicated desk in a shared office; both options provide single location access.
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Private office: An enclosed, secure office that can accommodate teams of any size. Furnished with one or more desks along with chairs and filing cabinets.
Custom
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Office suite: An upgraded private office, often including dedicated private meeting rooms, lounges and executive offices accessible only by the member’s employees. These spaces can also include custom outfitting and branding.
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HQ by WeWork: A standalone, private office space with no shared space. These workspaces are often customized and branded to meet the needs of our members.
Global access
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We Membership: À la carte access to our network of workspaces without a dedicated desk or office on a pay-as-you-go basis. We Memberships include access to our member network, including to all community events, networking tools and standard amenities.

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summarytotalmembershipsb02.jpg
Note:   All amounts and calculations derived therefrom show Memberships rounded to the nearest thousand. See “Certain definitions” for further information on Memberships.
WeWork Ventures
These products and services complement our core space offerings and enhance our member experience:
Powered by We
In 2017, we launched Powered by We, a plug-and-play office solution that leverages our design, construction and building operation expertise for companies that are looking to “bring the WeWork experience in-house.” Companies choose this option because they already own or lease office space and want to leverage our know-how to develop a high-performance workplace. We conduct detailed diligence on our clients’ goals, existing office space, amenities and future needs before we design and build the floors. Once our client occupies the space, we often have a dedicated on-site community manager to ensure the workplace initiative is successful. We also continue to provide building management services and utilize our proprietary technology to enhance our clients’ experience.
Other WeWork Ventures
We seek to humanize all aspects of our members’ lives: how we work, live, love, congregate, grow and play. Having achieved great success with physical spaces, we aim to continue utilizing our data insights to extend our platform and elevate our member experience beyond work. By incubating or acquiring additional offerings, we enable our members to do what they love in every aspect of their lives. Our other WeWork Ventures include:
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The Flatiron School - Acquired in 2017, Flatiron is a software programming education platform that offers online and offline classes to professionals looking to further their careers in the technology sector.

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•
Meetup - Acquired in 2017, Meetup is a subscription-based online platform that facilitates in-person meetings, social gatherings, seminars and networking events across a variety of topics.
•
Conductor - Acquired in 2018, Conductor is a marketing technology platform that offers marketing intelligence and search engine optimization tools.
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WeLive - Launched in 2016, WeLive is residential shared living space.
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Rise by We - Launched in 2017, Rise by We is a health and wellness center.
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WeGrow - Launched in 2018, WeGrow is an entrepreneurial charter school.
Our WeWork members
We have grown from 7,000 memberships as of March 1, 2014, to approximately 319,000 memberships spanning 335 locations across 83 cities in 24 countries as of September 1, 2018. Our WeWork members represent a diverse range of industries, ages and geographies. Our workplaces are desirable options for companies of all sizes, from freelancers and small companies who benefit from our network and on-demand access to space, to mid-sized companies and Fortune 500 organizations that appreciate access to the amenities, events and services we offer as well as the ability to reduce their fixed costs. 
Through WeWork Labs, we offer services tailored to provide holistic, long-term support to startup companies. To enhance our offering for small-to-medium-sized businesses, we launched “HQ by WeWork” in August 2018. In addition, we have found that larger companies are looking for an efficient, flexible and scalable office space solution, and we intend to continue expanding our offerings to increase our penetration with these valuable Enterprise Members. As of September 1, 2018, approximately 30% of the Global Fortune 500, including companies like Microsoft, Facebook, Amazon and General Motors, were either existing Enterprise Members or had signed future commitments with us.
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5


Our strengths
First-mover advantage with globally recognized brand and critical mass in attractive markets. We have developed a strong global presence with a community spanning 335 locations, 83 cities, 24 countries and five continents as of September 1, 2018. Our widely renowned brand has enabled us to acquire members efficiently and benefit from favorable tenant improvement arrangements.
Diverse and expanding membership base. We have a broad base of memberships across geographies, industries and company sizes. We have rapidly grown our membership base from 7,000 as of March 1, 2014 to approximately 319,000 as of September 1, 2018. Enterprise Members have become our fastest growing member type and tend to sign longer term agreements with us across multiple locations, bolstering our visibility into revenue and cash flows.
Compelling value proposition for all types of members. We offer a range of space solutions that cater to members across the lifecycles of their businesses and allow for members and their businesses to grow with us. We provide tangible cost benefits to our members, as we believe the cost per employee at a WeWork location is lower than the cost per employee under a standard lease, and we partner with third-parties to offer value-add services at discounted rates.
Proprietary technology and focus on innovation. We have invested heavily in creating a tech-enabled infrastructure that allows us to scale efficiently and uniquely design and operate our workspaces. We use technology we have developed in-house, as well as tools we have acquired, to enable a better, more streamlined experience for our members.
Growing fleet combined with proven and highly scalable business model. Our scalable business model is a significant competitive advantage and allows for global expansion with minimal upfront capital expenditures. We strategically cluster our locations to achieve economies of scale and to fuel strong network effects. Once built, our buildings yield unit economics that continue to improve over time.
Positioned to serve the market in both expanding and contracting business cycles. We are very selective in choosing our locations and target areas that tend to be more conducive to scalability and more resilient to economic cycles. In addition, our ability to withstand a downturn is enhanced by the diversification of our member base with Enterprise Members, our fastest growing member group, who tend to sign longer term agreements for bulk memberships. Also, we believe that we have various levers we can pull to manage our costs, as many of our significant costs are variable and related to growth.
Founder-led management team with experience building large platforms. We are led by our visionary co-founder, Adam Neumann, and our management team has a proven track record of leading successful tech-enabled services businesses.
Our growth strategies
•
Continue to expand our global footprint and deepen our market penetration
•
Enhance and extend our service offerings
•
Continue to grow our Enterprise Member base
•
Seek out alternative partnerships with landlords
•
Continue to invest in technology to optimize the way we program space

6


Risk factors
Our business is subject to a number of risks and uncertainties, as more fully described under “Risk factors” in this prospectus. These risks could materially and adversely impact our business, financial condition, results of operations and prospects, which could cause the trading price of our Class A common stock to decline and could result in a loss of all or part of your investment. Some of these risks include:
•
the sustainability of our rapid growth and our ability to manage our growth effectively;
•
the success of our business strategy, including our plans to enter into regions and product and service markets in which we have little or no experience;
•
our ability to achieve profitability at a company level in light of our history of losses;
•
our ability to retain existing members and attract new members;
•
our ability to open new locations with satisfactory arrangements in sufficient numbers or at sufficient rates to continue the future growth of our member base and our business;
•
risks related to operating in foreign jurisdictions;
•
our ability to maintain the value and reputation of our brand; and
•
the success of our strategic partnerships.
Implications of being an emerging growth company
We currently qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). As an emerging growth company, we are permitted to rely on exemptions from certain disclosure and other requirements that are applicable to other public companies that are not emerging growth companies. In particular, in this prospectus, we have taken advantage of certain reduced disclosure obligations that apply to emerging growth companies regarding the provision of selected financial data and executive compensation arrangements. We will also take advantage of the extended transition period for complying with new or revised accounting standards available to emerging growth companies. Accordingly, the information contained in this prospectus may be different from the information you might receive from other public companies. Our status as an emerging growth company will end on the last day of the fiscal year in which we have $1.07 billion or more in annual revenue. We expect that our revenues for 2018 will be in excess of $1.07 billion. As a result, we expect that we will cease to qualify as an emerging growth company after the completion of this offering and will no longer be eligible for the exemptions from disclosure provided to an emerging growth company.
Our principal stockholder and our status as a controlled company
Following the completion of this offering, as a result of his share ownership, together with his voting arrangements with certain stockholders, Adam Neumann, our Co-Founder and Chief Executive Officer, will be able to exercise voting control with respect to an aggregate of              shares of our Class A common stock and             shares of our Class B common stock, representing approximately          % of the total voting power of our outstanding capital stock (or approximately           % of the total voting power of our outstanding capital stock if the underwriters exercise in full their option to purchase additional shares of our Class A common stock). Accordingly, Adam will continue to have the ability to control the outcome of matters submitted to our stockholders for approval, including the election of our directors.
Because Adam will control a majority of our outstanding voting power, we will be a “controlled company” under the corporate governance rules for           -listed companies. Therefore, we may elect not to comply with certain corporate governance standards, such as the requirement that our board of directors have a compensation committee composed entirely of independent directors. For at least some period following completion of this offering, we intend to take advantage of these exemptions.

7


Corporate information
Our predecessor was originally organized on March 23, 2010. On October 8, 2011, our predecessor transferred all of its assets to WeWork Companies LLC, a Delaware limited liability company. On May 30, 2013, WeWork Companies LLC converted into WeWork Companies Inc., a Delaware corporation and the issuer of the shares of Class A common stock being offered in this offering.
Our principal executive offices are located at 115 West 18th Street, New York, New York 10011, and our telephone number is (646) 491-9060. Our website address is www.wework.com. Information contained on, or accessible through, our website is not a part of this prospectus, and the inclusion of our website address in this prospectus is an inactive textual reference.

8


The offering
Shares offered by us in this offering:
 
 
 
Class A common stock
              shares.
 
 
Option to purchase additional shares of Class A common stock
              shares.
 
 
Shares to be outstanding upon completion of this offering:
 
 
 
Class A common stock
              shares (or              shares if the underwriters exercise in full their option to purchase additional shares of our Class A common stock).
 
 
Class B common stock
              shares.
 
 
Voting rights:
 
 
 
Class A common stock
One vote per share, representing, in the aggregate, approximately         % of the combined voting power of our capital stock outstanding upon completion of this offering (or         % if the underwriters exercise in full their option to purchase additional shares of our Class A common stock).
 
 
Class B common stock
10 votes per share, representing, in the aggregate, approximately          % of the combined voting power of our capital stock outstanding upon completion of this offering (or          % if the underwriters exercise in full their option to purchase additional shares of our Class A common stock).

Holders of our Class A common stock and Class B common stock vote together as a single class on all matters presented to our stockholders for their vote or approval, except as otherwise set forth in this prospectus or as required by applicable law. Adam Neumann, our Co-Founder and Chief Executive Officer, will hold or have the ability to control approximately          % of the total voting power of our outstanding capital stock upon completion of this offering (or approximately          % of the total voting power of our outstanding capital stock if the underwriters exercise in full their option to purchase additional shares of our Class A common stock) and will have the ability to control the outcome of matters submitted to our stockholders for approval, including the election of our directors. See “Description of capital stock”.
 
 
Conversion rights:
 
 
 
Class A common stock
Our Class A common stock is not convertible into any other class of shares, including our Class B common stock.
 
 

9


Class B common stock
Our Class B common stock is convertible into shares of our Class A common stock on a one-for-one basis at the option of the holder. In addition, each share of Class B common stock will convert automatically into one share of Class A common stock upon any transfer, except for certain transfers described in our restated certificate of incorporation. See “Description of capital stock—Class A common stock and Class B common stock—Conversion” for more information.
 
 
Use of proceeds
Assuming an initial public offering price of $           per share, which is the midpoint of the price range set forth on the cover page of this prospectus, we estimate that the net proceeds to us from the sale of our Class A common stock in this offering will be $              (or $              if the underwriters exercise in full their option to purchase additional shares of our Class A common stock), after deducting underwriting discounts and commissions and estimated offering expenses.
We currently intend to use the net proceeds of this offering for general corporate purposes, including, but not limited to, investments and capital expenditures in connection with our expansion into domestic and international markets and additional product and service offerings and for working capital purposes. Pending their use, we intend to invest the net proceeds of this offering in short term, investment grade, interest bearing instruments or hold them as cash. See “Use of proceeds”.
 
 
Dividends
We do not expect to pay dividends on our Class A common stock or our Class B common stock in the foreseeable future. See “Dividend policy” and “Description of indebtedness”.
 
 
Listing
We intend to apply to list our Class A common stock on the            under the trading symbol “WE”.
 
 
Risk factors
Investing in our Class A common stock involves risks. See “Risk factors” for a discussion of certain factors that you should carefully consider before making an investment decision.
The number of shares of Class A common stock and Class B common stock to be outstanding upon completion of this offering is based on               shares of Class A common stock and               shares of Class B common stock to be outstanding immediately prior to the completion of this offering. Unless otherwise noted, these references exclude:
•
              shares of Class A common stock issuable upon the exercise of stock options outstanding as of               , 2018 at a weighted average exercise price of $        per share;
•
              shares of Class B common stock issuable upon the exercise of stock options outstanding as of               , 2018 at a weighted average exercise price of $        per share;
•
              shares of Class A common stock issuable upon the exercise of warrants outstanding as of               , 2018 at an exercise price of $13.12 per share;

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•
              shares of Class A common stock issuable upon the exercise of warrants outstanding as of               , 2018 at an exercise price of $0.001 per share;
•
              shares of Class A common stock issuable upon the exercise of restricted stock units outstanding as of               , 2018 at a weighted average exercise price of $        per share; and
•
              shares of Class A common stock reserved for future issuance under the new equity incentive plan we intend to adopt prior to the completion of this offering. See “Executive and director compensation—WeWork Companies Inc. 2019 Omnibus Incentive Plan”.
Unless otherwise indicated, the information contained in this prospectus is as of the date set forth on the cover of this prospectus and assumes:
•
no exercise of the outstanding options or warrants described above;
•
the conversion of a convertible promissory note held by SB WW Holdings (Cayman) Limited into                shares of Class A common stock, which will occur upon completion of this offering;
•
the conversion of a convertible promissory note held by one of our other investors into                shares of Series C preferred stock, which will occur upon completion of this offering;
•
the conversion of all our outstanding Series A, Series B, Series C, Series D-1, Series D-2, Series E, Series F and Series G preferred stock (collectively, our “senior preferred stock”), and all of our Series AP-1 and Series AP-2 preferred stock (collectively, our “acquisition preferred stock”), into shares of Class A common stock, which will occur upon completion of this offering;
•
the conversion of all of our outstanding junior preferred stock into an aggregate of           shares of Class B common stock (based on an assumed initial offering price of $        per share, the midpoint of the price range set forth on the cover page of this prospectus), which will occur upon completion of this offering;
•
a        -for-one reverse split of our Class A common stock and Class B common stock, which will occur upon completion of this offering;
•
the filing of our restated certificate of incorporation and the effectiveness of our amended and restated bylaws in connection with this offering;
•
an initial public offering price of $        per share, which is the midpoint of the price range set forth on the cover page of this prospectus; and
•
that the underwriters’ option to purchase additional shares of our Class A common stock is not exercised.

11


Summary consolidated financial and operating information
The following summary consolidated financial information for the years ended December 31, 2016 and 2017 and as of December 31, 2017 has been derived from our audited consolidated financial statements included elsewhere in this prospectus. Our consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), and are presented in U.S. dollars. Our historical results are not necessarily indicative of the results to be expected for any future period.
The information presented below should be read in conjunction with the information under “Management’s discussion and analysis of financial condition and results of operations” and our consolidated financial statements and related notes appearing elsewhere in this prospectus.
 
Year Ended December 31,
(Amounts in thousands, except share and per share data)
2016
 
2017
Consolidated statement of operations information:
 
 
 
Revenue:
 
 
 
Membership revenue
$
414,531

 
$
822,092

Service revenue
19,824

 
44,346

Other revenue
1,744

 
19,566

Total revenue
436,099

 
886,004

Expenses:
 
 
 
Community operating expenses (1)
433,167

 
814,782

Other operating expenses (1)
—

 
1,677

Pre-opening community expenses
115,749

 
131,324

Sales and marketing
43,428

 
143,424

Growth and new market development
35,731

 
109,719

General and administrative expenses (2)
115,346

 
454,020

Depreciation and amortization
88,952

 
162,892

Total expenses
832,373

 
1,817,838

 
 
 
 
Loss from operations
(396,274
)
 
(931,834
)
Interest and other income (expense), net
(33,400
)
 
(7,387
)
Pre-tax loss
(429,674
)
 
(939,221
)
Income tax benefit (provision)
(16
)
 
5,727

Net loss
(429,690
)
 
(933,494
)
Net loss attributable to noncontrolling interests
—

 
49,500

Net loss attributable to WeWork Companies Inc.
$
(429,690
)
 
$
(883,994
)
Net loss per share attributable to Class A and Class B common stockholders: (3)
 
 
 
Basic
$
(2.66
)
 
$
(5.54
)
Diluted
$
(2.66
)
 
$
(5.54
)
Weighted-average shares used to compute net loss per share attributable to Class A and Class B common stockholders, basic and diluted
161,324,940

 
159,689,116

Pro forma net loss per share attributable to Class A and Class B common stockholders: (3)
 
 
 
Basic
$
(2.84
)
Diluted
$
(2.84
)
Weighted-average shares used to compute pro forma net loss per share attributable to Class A and Class B common stockholders, basic and diluted
311,203,941

 
 
 
 

12


(1)
Exclusive of depreciation and amortization shown separately below.
(2)
Includes stock-based compensation expense of $17.4 million and $260.7 million for the year ended December 31, 2016 and 2017, respectively.
(3)
See Note 18 to our consolidated financial statements included elsewhere in this prospectus for a description of how we compute basic and diluted net loss per share attributable to Class A and Class B common stockholders and pro forma basic and diluted net loss per share attributable to Class A and Class B common stockholders.
 
As of December 31, 2017
(Amounts in thousands)
Actual
 
Pro forma(1)
 
Pro forma as adjusted(2)
Consolidated balance sheet information:
 
 
 
 
 
Cash and cash equivalents
$
2,020,805

 
$
 
$
Total current assets
2,427,096

 
 
 
 
Property and equipment, net
2,337,092

 
 
 
 
Total assets
5,364,072

 
 
 
 
Total liabilities
2,406,511

 
 
 
 
Total convertible preferred stock
3,405,435

 
 
 
 
Total noncontrolling interests
854,577

 
 
 
 
Total equity
(1,302,451
)
 
 
 
 
 
 
 
 
 
 
(1)
The pro forma balance sheet information in this table gives effect to the conversion of a convertible promissory note held by SB WW Holdings (Cayman) Limited into shares of Class A common stock, the conversion of a convertible promissory note held by one of our other investors into shares of Series C preferred stock, the conversion of all of our outstanding senior preferred stock and acquisition preferred stock into shares of Class A common stock, the conversion of all of our outstanding junior preferred stock into shares of Class B common stock and the       -for-one reverse split of our Class A common stock and Class B common stock, each of which will occur upon completion of this offering. The pro forma balance sheet information in this table also gives effect to stock-based compensation expense of approximately $        million associated with restricted stock units, for which the portion of the service period had been rendered as of               ,        . This pro forma adjustment related to stock-based compensation expense of approximately $               million has been reflected as an increase to additional paid-in capital and accumulated deficit. See Note 2 to our consolidated financial statements included elsewhere in this prospectus.
(2)
The pro forma as adjusted balance sheet information in this table gives effect to the transactions described in note (1) above as well as the issuance by us of                shares of Class A common stock in this offering at an assumed initial public offering price of $          per share, the midpoint of the price range set forth on the cover page of this prospectus, and the application of the net proceeds therefrom as described in “Use of proceeds”.
Key performance indicators
In connection with the management of our WeWork offering, we identify, measure and assess a variety of operational metrics that we refer to as key performance indicators. The principal metrics we use in managing and evaluating our business are set forth below.
Any totals of the key performance indicators presented as of a period end reflect the count as of the first day of the last month in the period. First-of-the-month counts are used because the economics of those counts generally impact the results for that monthly period, and most move-ins and openings occur on the first of the month.

13


 
As of December 31,
 
 
 
 
 
2016
 
2017
 
Change
 
Change %
Consolidated Locations:
111

 
197

 
86

 
78
%
Desks
107,000

 
208,000

 
101,000

 
94
%
Desks added during the year ended
63,000

 
101,000

 
38,000

 
60
%
Memberships
87,000

 
183,000

 
96,000

 
110
%
Occupancy Rate
76
%
 
82
%
 
6
%
 
 
Enterprise Membership Percentage
11
%
 
22
%
 
11
%
 
 
Branded Locations:
—

 
3

 
3

 
N/M

Desks
—

 
6,000

 
6,000

 
N/M

Desks added during the year ended
—

 
6,000

 
6,000

 
N/M

Memberships
—

 
3,000

 
3,000

 
N/M

Occupancy Rate
—
%
 
57
%
 
57
%
 
 
Enterprise Membership Percentage
—
%
 
52
%
 
52
%
 
 
Total Locations:
111

 
200

 
89

 
80
%
Desks
107,000

 
214,000

 
107,000

 
100
%
Desks added during the year ended
63,000

 
107,000

 
44,000

 
70
%
Memberships
87,000

 
186,000

 
99,000

 
114
%
Occupancy Rate
76
%
 
81
%
 
5
%
 
 
Enterprise Membership Percentage
11
%
 
23
%
 
12
%
 
 
Mature Locations:
34

 
76

 
42

 
124
%
 
 
 
 
 
 
 
 
N/M = Not meaningful
Other key financial measures
 
Year Ended December 31,
(Amounts in thousands, except percentages and where noted) 
2016
 
2017
ARPPM (in ones) (1)
$
7,384

 
$
6,928

Adjusted EBITDA (2)
$
(94,322
)
 
$
(193,327
)
Adjusted EBITDA Margin
(21.6
)%
 
(21.8
)%
Adjusted EBITDA before Growth Investments (2)
$
1,055

 
$
49,444

Adjusted EBITDA before Growth Investments Margin
0.2
 %
 
5.7
 %
Community Adjusted EBITDA(2)
$
95,943

 
$
233,147

Community Adjusted EBITDA Margin
22.1
 %
 
26.9
 %
 
 
 
 
(1)
Average membership and service revenue per physical member (“ARPPM”) represents our membership and service revenue (other than membership and service revenue generated from the sale of WeLive memberships and related services) divided by the average of the number of WeWork Memberships associated with Consolidated Locations as of the first day of each month in the period. The total of WeLive membership and service revenue excluded was $4.9 million and $10.3 million for the years ended December 31, 2016 and 2017, respectively.

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(2)
The following table reconciles our net loss to Adjusted EBITDA, Adjusted EBITDA Before Growth Investments and Community Adjusted EBITDA for the periods presented:
 
Year Ended December 31,
(Amounts in thousands, except percentages) 
2016
 
2017
Net loss
$
(429,690
)
 
$
(933,494
)
Income tax (benefit) provision
16

 
(5,727
)
Interest and other (income) expense net
33,400

 
7,387

Depreciation and amortization
88,952

 
162,892

Adjustments for Impact of Straight-lining of Rent (a)
188,746

 
272,927

Stock-based compensation expense (b)
22,660

 
295,362

Stock-based payments for services rendered by consultants (b)
1,594

 
7,326

Adjusted EBITDA
(94,322
)
 
(193,327
)
Other revenue (c)
(1,744
)
 
(19,106
)
Other operating expenses (d)
—

 
1,322

Sales and marketing (d)
42,653

 
139,180

Growth and new market development (d)
33,245

 
98,336

Pre-opening community expenses (d)
21,223

 
23,039

Adjusted EBITDA before Growth Investments
1,055

 
49,444

General and administrative expenses(d)
94,888

 
183,703

Community Adjusted EBITDA
$
95,943

 
$
233,147

 
 
 
 
(a)
Represents the non-cash adjustment to record rent holidays and rent escalation clauses on a straight-line basis over the term of the applicable occupancy agreement. See “Non-GAAP financial measures—Adjusted EBITDA and Adjusted EBITDA Margin”.
(b)
Represents the non-cash expense of our equity compensation arrangements for our directors, executive officers, other employees and consultants. Although these expenses are non-cash expenses, we rely on equity compensation to compensate and incentivize these individuals, and we may continue to do so in the future.
(c)
Includes all other revenue presented in the consolidated statement of operations for the years ended December 31, 2016 and 2017, except for $0.5 million of management fee income for the year ended December 31, 2017 from advisory services provided to Branded Locations.
(d)
Represents the amounts as presented on our consolidated statements of operations, excluding amounts already added back above, see “Management’s discussion and analysis of financial condition and results of operations—Components of results of operations” for more information on the components of these expense amounts.

15


Risk factors
Investing in our Class A common stock involves a high degree of risk. You should consider and read carefully all of the risks and uncertainties described below, as well as the other information included in this prospectus, including our consolidated financial statements and related notes appearing elsewhere in this prospectus, before making an investment decision. The risks described below are not the only risks we face. The occurrence of any of the following risks or additional risks and uncertainties not presently known to us or that we currently believe to be immaterial could materially and adversely affect our business, financial condition, results of operations or prospects. In that case, the trading price of our Class A common stock could decline, and you may lose all or part of your original investment. This prospectus also contains forward-looking statements that involve risks and uncertainties. Please refer to “Cautionary note regarding forward-looking statements” for more information regarding forward-looking statements.
Risks relating to our business
Our business has grown rapidly, and we may fail to manage our growth effectively.
We have experienced rapid growth in our business, including in the number of locations that we operate and in the size of our community. This rapid growth has placed, and continues to place, a significant strain on our existing resources. Difficulties associated with our continued growth could result in the erosion of our brand image and could have a material adverse effect on our business, including our prospects for continued growth, and on our financial condition, results of operations and cash flows.
We expect our capital expenditures and operating expenses to increase on an absolute basis as we continue to invest in additional locations, launch additional product and service offerings, hire additional team members and increase our marketing efforts. In particular, we expect to invest in regional infrastructure to support our continued growth. As we decentralize and regionalize certain decision-making and risk management functions, we may discover that our internal processes are ineffective or inefficient. In particular, to manage our rapid growth, we will need to enhance our reporting systems and procedures and continue to improve our operational, financial, management, sales and marketing and information technology infrastructure. Continued growth could also strain our ability to maintain reliable service levels for our members. If we do not manage our growth effectively, increases in our capital expenditures and operating expenses could outpace any increases in our revenue, which could have a material adverse effect on our results of operations.
Our rapid growth may not be sustainable.
Our historical growth rates may not be indicative of future growth. The market for our WeWork offering or our WeWork Ventures may not continue to grow at the rate we expect or at all, and our total memberships may decline as a result of increased competition in the “Space-as-a-Service” sector or the maturation of our business. Additionally, as we grow, the ability of our management to source sufficient reasonably-priced real estate opportunities of the type we have historically targeted or to develop and launch additional product and service offerings may become more limited.
Our business strategy includes entering into new regions and product and service markets. This strategy is inherently risky, may not be successful and could be costly.
As part of our growth strategy, we intend to continue expansion into (i) new regions within the United States and throughout the world, including Europe, Latin America, Africa, China, Japan and the Pacific (Southeast Asia and Korea), (ii) new product and service markets, such as integrated design and construction services, search marketing, residential living and fitness and (iii) new strategic opportunities, including real estate acquisition. Such expansion efforts generally involve significant risks and uncertainties, including distraction of management from our existing locations and existing product and service markets. As we attempt to grow our foothold in an evolving industry and acquire new businesses that enhance value for our members, we may encounter issues and risks not discovered in our development or analysis of such expansion efforts.

16


Our expansion efforts have required, and we expect them to continue to require, substantial resources and management attention. We spend significant time, money, energy and other resources trying to understand our members’ needs and working to accommodate them, which may include exploring and negotiating for new product and service offerings. However, as we expand into new regions and new product and service markets, our members may not be satisfied with our product and service offerings, including any new offerings that we incubate and grow. The time, money, energy and other resources we dedicate to exploring and pursuing new product and service offerings may be greater than the short-term, and potentially the total, returns from these new offerings.
We will also face new operational risks and challenges as we enter into new regions and markets. Expansion into foreign jurisdictions subjects us to regulatory, economic and political risks that may be different from and additional to those that we face in jurisdictions where we currently operate, and we may operate at a disadvantage relative to competitors who are more familiar with local market practices and networks. Expansion into new product and service markets subjects us to similar risks as we compete with the many established participants in those markets, additional regulatory and legal risks, and execution risks as we implement new business practices and integrate a new mission into our existing range of offerings. To the extent the benefits of our expansion efforts do not meet our expectations, we may recognize a loss on our investment or gains that do not justify our investment. See “—We plan to continue expanding our business into markets outside the United States, which will subject us to risks associated with operating in foreign jurisdictions”.
Our success in this regard may increasingly depend on the financial success and cooperation of local partners and other third parties. For more information, see “—Our growth and success depends on our ability to maintain the value and reputation of our brand and the success of our strategic partnerships”.
We have a history of losses and we may be unable to achieve profitability at a company level (as determined in accordance with GAAP).
We had an accumulated deficit as of December 31, 2017 and had net losses for the years ended December 31, 2016 and 2017. Our accumulated deficit and net losses have historically resulted primarily from the substantial investments required to grow our business, including the significant increase in recent periods in the number of locations we operate. We expect that these costs and investments will continue to increase as we continue to grow our business. We also intend to invest in maintaining our high level of member service and support, which we consider critical to our continued success. These expenditures will make it difficult for us to achieve profitability, and we cannot predict whether we will achieve profitability in the near term or at all. We also expect to incur additional general and administrative expenses as a result of our growth. Our operating costs and other expenses may be greater than we anticipate, and our investments to make our business and our operations more efficient may not be successful. Increases in our costs, expenses and investments may reduce our margins and materially adversely affect our business, financial condition and results of operations. In addition, recently opened or future locations may not generate revenue and cash flow comparable to those generated by our existing mature locations and our mature locations may not be able to continue to generate those levels of revenue or cash flow. Occupancy rates in some of our mature and non-mature locations have declined in the last year, and if such declines in occupancy rates continue, it may harm our business. Further, our WeWork Ventures such as Powered by We, WeLive, Rise by We, WeGrow, The Flatiron School, Meetup, Conductor and additional WeWork Ventures that we may launch or acquire in the future may not generate the levels of revenue or cash flow that we expect them to generate. For any of these reasons, we may be unable to achieve profitability and may face challenges in growing our cash flows.
Our limited operating history and evolving business and operating model make it difficult to evaluate our current business and future prospects.
Our limited operating history and the pattern of growth of our business make it difficult to accurately assess our future prospects. It may not be possible to discern fully the economic and other business trends that we are subject to. Elements of our business strategy are new and subject to ongoing development as our operations mature. In addition, you may have difficulty evaluating our business because there are few other companies that offer the same or a similar range of product and service offerings as we do.

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We may not be able to continue to retain existing members of our WeWork workspaces, most of whom enter into membership agreements with short-term commitments, or continue to attract new members in sufficient numbers or at sufficient rates to sustain and grow our occupancy rates and to continue the future growth of our business or at all.
We principally generate revenues through the sale of memberships to our WeWork workspaces. We have in the past experienced, and expect to continue to experience, member churn. In many cases, our members may terminate their membership agreements with us at any time upon as little notice as one calendar month. Members leave our community for many reasons, including a perception that they do not make sufficient use of our available space and services, that they need to reduce their expenses or that alternative work environments may provide better value or a better experience.
We closely monitor our Occupancy Rates as one measure of the demand for our workspaces. This demand may be negatively affected by a number of factors, including the prevailing general and local economic conditions, geo-political uncertainty, competition and saturation in the markets where we operate. Our operations and profitability could be adversely affected by declines in our Occupancy Rate. Although our average Occupancy Rates at our mature locations are generally higher than those at our non-mature locations, we may be unable to grow our Occupancy Rates as locations mature for these or other reasons. Occupancy Rates in some of our mature and non-mature locations have declined in the last year, and if such declines were to continue, our results of operations could be adversely affected.
To sustain our growth, we must continually add new members both to replace departing members and to expand our current member base. We may not be able to attract new members in sufficient numbers to do so. Even if we are able to attract new members to replace departing members, these new members may not maintain the same level of involvement in our community. In addition, the revenue we generate from new members may not be as high as the revenue generated from departing members because of discounts we may offer to these new members, and we may incur marketing or other expenses to attract new members, which may further offset our revenues from these new members. We closely monitor average membership and service revenue per physical member (“ARPPM”) and other metrics in evaluating our performance, and we seek to sustain and grow our ARPPM over time and as locations mature. However, for these and other reasons, we could experience a decline in ARPPM, and any such trend could adversely affect our results of operations.
A high number of our members are concentrated in major metropolitan areas. An economic downturn in any of these areas may result in increased member churn and could adversely affect our results of operations.
A significant portion of our existing and target member base consists of small and mid-sized businesses and freelancers who may be disproportionately affected by adverse economic conditions. In addition, our concentration in specific cities magnifies the risk to us of localized economic conditions in those cities or the surrounding regions. For the year ended December 31, 2017, we generated the majority of our revenue from our workspaces in the United States and the United Kingdom. The majority of our United States revenue was generated from our WeWork spaces in the greater New York City, Los Angeles, San Francisco, Washington, D.C. and Boston markets. All of our workspaces in the United Kingdom are located in the greater London area. Economic downturns in these cities or regions may have a disproportionate effect on our member churn, occupancy rates and/or membership fees and thereby require us to expend time and resources on sales and marketing activities that may not be successful and could impair profitability. The severity and length of time of any downturn, as well as the timing, strength and sustainability of any recovery, are beyond our control. Recently, the United Kingdom’s proposed exit from the European Union, known as “Brexit,” and its impact on the United Kingdom and the European Union, as well as trade policy changes in the United States, have raised concerns globally regarding economic uncertainty. In addition, our business may be affected by generally prevailing economic conditions in the markets where we operate, which can result in a general decline in real estate activity, reduce demand for occupancy and our services and exert downward pressure on our membership fees.

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We may not be able to successfully negotiate satisfactory arrangements in respect of spaces that we occupy, or renew or replace existing spaces on satisfactory terms or at all, any of which will necessarily constrain our ability to grow our member base.
We currently lease real estate for the majority of our workspaces, and we are actively pursuing revenue-sharing agreements and other types of management agreements with real estate owners as part of our “asset-light” strategy. If we are unable to negotiate these lease and other arrangements on satisfactory terms, we may not be able to expand our location base.
While we negotiate renewal options in our favor in most of our occupancy agreements, these renewal options are typically tied to upward-only rent reviews, whereby rent for any given lease renewal term is equal to the greater of the rent in effect for the period immediately prior to the rent review date and the then-prevailing net effective rent in the open market. As a result, increases in rental rates in the markets in which we operate, particularly those markets where initial terms under our leases are shorter, could adversely affect our business, financial condition, results of operations and prospects.
In addition, our ability to negotiate favorable terms to extend an expiring occupancy agreement or in connection with an alternate location will depend on then-prevailing conditions in the real estate market, such as overall rental cost increases, competition from other would-be tenants for desirable leased spaces and our relationships with current and prospective building owners and landlords, and may depend on other factors that are not within our control. If we are not able to renew or replace an expiring occupancy agreement, we will incur significant costs related to vacating that space and redeveloping whatever alternative space we are able to find, if any. In addition, if we are forced to vacate a space, we could lose members who purchased memberships based on the design, location or other attributes of that particular space.
The average length of the initial term of our U.S. leases is approximately 15 years. As we expand our presence into certain international markets, including Europe, Latin America, China, Japan and the Pacific, local market practices may require us to enter into occupancy agreements that have shorter initial terms, which reduces the certainty of our future obligations with respect to these locations and the continued availability of our occupied spaces at these locations.
We are exposed to risks associated with the redevelopment and construction of the spaces we occupy.
Opening new locations subjects us to risks that are associated with redevelopment projects in general, such as delays in construction, contract disputes and claims, fines or penalties levied by government authorities relating to our construction activities. We may also experience delays opening a new space as a result of delays by the building owners or landlords in completing their base building work or as a result of our inability to obtain, or delays in our obtaining, all necessary zoning, land-use, building, occupancy and other required governmental permits and authorizations. We seek to open new spaces on the first day of a month and delays, even if the delay only lasts a few days, can cause us to defer opening a space by a full month. Failure to open a space on schedule may cost us the lost revenue from that space and may damage our brand and require that we rent and provide temporary space for our members.
In redeveloping our spaces, we generally rely on the continued availability and satisfactory performance of unaffiliated third-party general contractors and subcontractors to perform the actual construction work, and in many cases to select and obtain the related building materials. As a result, the timing and quality of the redevelopment of our occupied spaces depends on the performance of these third parties on our behalf.
We do not have long-term contractual commitments with general contractors, subcontractors or materials suppliers. The prices we pay for the labor or materials provided by these third parties, or other construction-related costs, could unexpectedly increase, which could have an adverse effect on the viability of the projects we pursue and on our results of operations and liquidity. Although we believe that our relationships with our general contractors, subcontractors and materials suppliers are good, skilled parties and high-quality materials may not continue to be available at reasonable rates and in the markets in which we pursue our construction activities.

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The people we engage in connection with a construction project are subject to the usual hazards associated with providing construction and related services on construction project sites, which can cause personal injury and loss of life, damage to or destruction of property, plant and equipment, and environmental damage. Although we carry insurance against many of these risks, our insurance coverage may be inadequate in scope or coverage amount to fully compensate us for any losses we may incur arising from any such events at a construction site we operate or oversee. Despite our detailed specifications and our inspection, project management and quality control procedures, in some cases, general contractors and their subcontractors may use improper construction practices or defective materials. Improper construction practices or defective materials can result in the need to perform extensive repairs to our spaces and, potentially, personal injury or death. We also can suffer damage to our reputation, and may be exposed to possible liability, if these third parties fail to comply with applicable laws.
We plan to continue expanding our business into markets outside the United States, which will subject us to risks associated with operating in foreign jurisdictions.
Expanding our operations into markets outside the United States has been an important part of our growth strategy. For example, for the year ended December 31, 2017, 69% of our revenue was attributable to our operations in the United States, and 31% of our revenue was attributable to our operations elsewhere, compared with 76% and 24% for the year ended December 31, 2016. We expect to continue substantially expanding our operations into markets outside the United States in the next few years.
Our success in these non-U.S. markets will depend on our ability to attract local members. However, we have limited experience in developing our business and community in markets outside the United States. Our WeWork offering may not appeal to residents of non-U.S. countries in the same way it appeals to our U.S. members. In addition, local and regional competitors may have a substantial competitive advantage over us in a given area because of their greater understanding of, and focus on, local customers, as well as their more established local infrastructure and brands. We may also be unable to hire, train, retain and manage the personnel we require in order to manage our international operations effectively, on a timely basis or at all, which may limit our growth in these markets.
Operating in international markets requires significant resources and management attention and subjects us to regulatory, economic and political risks that may be different from and incremental to those that we face in the United States, including:
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the need to adapt the design and features of our spaces and services to accommodate specific cultural norms and language differences;
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difficulties in understanding and complying with local laws and regulations in foreign jurisdictions, including local labor laws, tax laws, environmental regulations and rules and regulations related to occupancy of our workspaces;
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significant reliance on third parties with whom we may engage in joint ventures, strategic alliances or ordinary course contracting relationships whose interests and incentives may be adverse to or different from ours or may be unknown to us;
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varying laws, rules, regulations and practices regarding protection and enforcement of intellectual property rights, including trademarks;
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laws and regulations regarding consumer and data protection and security, privacy and encryption that may be more restrictive than comparable laws and regulations in the United States;
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corrupt or unethical practices in foreign jurisdictions that may subject us to compliance costs, including competitive disadvantages, or exposure under applicable anticorruption and antibribery laws;
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compliance with applicable export controls and economic sanctions, such as those administered by the United States Office of Foreign Assets Control;
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fluctuations in currency exchange rates; and

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unpredictable disruptions as a result of security threats or political or social unrest and economic instability.
Finally, continued expansion in markets outside the United States will require significant financial and other investments. These investments include property sourcing and leasing, marketing to attract and retain new members, developing localized infrastructure and services, developing relationships with local partners and third-party service providers, further developing corporate capabilities able to support operations in multiple countries, and potentially entering into strategic transactions with or even acquiring companies based outside the United States and integrating those companies with our existing operations. If we invest substantial time and resources to expand our operations outside the United States but cannot manage these risks effectively, the costs of doing business in those markets, including the investment of management attention, may be prohibitive, or our expenses may increase disproportionately to the revenue generated in those markets.
Our growth and success depends on our ability to maintain the value and reputation of our brand and the success of our strategic partnerships.
Our brand is integral to our business as well as to the implementation of our strategies for expanding our business. Maintaining, promoting and positioning our brand will depend largely on our ability to provide a consistently high quality member experience and on our marketing and community-building efforts. To the extent our locations, community, or product or service offerings are perceived to be of low quality or otherwise are not compelling to new and existing members, our ability to maintain a positive brand reputation may be adversely affected.
In addition, failure by third parties on whom we rely but whose actions we cannot control, such as general contractors and construction managers who oversee our construction activities, to uphold a high standard of workmanship, ethics, conduct and legal compliance could subject us to reputational harm based on their association with us and our brand. As we pursue our growth strategy of entering into joint ventures, revenue-sharing arrangements and other business relationships with local partners in non-U.S. jurisdictions, such as through our regional businesses in greater China, Japan and the Pacific (“ChinaCo”, “JapanCo” and “PacificCo”, respectively), we become increasingly dependent on third parties whose actions we cannot control.
We receive a high degree of media coverage domestically and internationally and we believe that much of our reputation depends on word-of-mouth and other non-paid sources of opinion, including on the internet. Unfavorable publicity or consumer perception or experience of our spaces, practices, or product or service offerings could adversely affect our reputation, resulting in difficulties in attracting and retaining members and business partners, and limiting the success of our community-building efforts and the range of products and services we are able to offer.
Historically, many of our members have joined our community because of positive word-of-mouth referrals by existing members, which has reduced our need to rely on traditional marketing efforts. To the extent that we are unable to maintain a positive brand reputation organically, we may need to rely more heavily on traditional marketing efforts to attract new members, which would increase our marketing expenses both in absolute terms and as a percentage of our member acquisition costs.
If our pricing and related promotional and marketing plans are not effective, our business and prospects may be negatively affected.
Our business and prospects depend on the impact of pricing and related promotional and marketing plans and our ability to adjust these plans to respond quickly to economic and competitive conditions. If our pricing and related promotional and marketing plans are not successful, or are not as successful as those of competitors, our sales, membership count, occupancy and market share could decrease, thereby impairing profitability.
We may be unable to adequately protect or prevent unauthorized use of our trademarks and other proprietary rights.
To protect our trademarks and other proprietary rights, we rely and expect to continue to rely on a combination of protective agreements with our team members and third parties (including local or other strategic partners we may do business with), physical and electronic security measures, and trademark, copyright, patent and trade secret protection laws. In certain jurisdictions, rights in trademarks are derived from registration of the trademark. We may

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not have trademark rights in a jurisdiction where our trademarks are not registered. We have obtained a strategic set of trademark, copyright and patent applications or registrations in the United States and other jurisdictions and have filed, and we expect to file from time to time, additional trademark and patent applications. Nevertheless, these applications may not proceed to registration or issuance and in any event may not be comprehensive (particularly with respect to non-U.S. jurisdictions), third parties may challenge any trademarks, copyright or patents issued to or held by us, the agreements (including license agreements with local or other strategic partners) and security measures we have in place may be inadequate or otherwise fail to effectively accomplish their protective purposes, third parties may infringe or misappropriate our intellectual property rights and we may not be successful in asserting intellectual property rights against third parties. Third parties may also take the position that we are infringing their rights, and we may not be successful in defending these claims. Additionally, we may not be able to enforce and defend our proprietary rights or prevent infringement or misappropriation, particularly in non-U.S. jurisdictions, without substantial expense to us and a significant diversion of management time and attention from our business strategy.
We currently hold various domain names relating to our brand, most importantly wework.com, we.co, wegrow.com and welive.com, as well as several other @wework social media handles. Competitors and others could attempt to capitalize on our brand recognition by using domain names or social media handles similar to those we hold. We may be unable, without significant cost or at all, to prevent third parties from acquiring domain names that are similar to, infringe upon or otherwise decrease the value of our trademarks and other proprietary rights in our domain names.
If the measures we have taken to protect our proprietary rights are inadequate to prevent unauthorized use or misappropriation by third parties or such rights are diminished or we are prevented from using intellectual property due to successful challenges, the value of our brand and other intangible assets may be diminished and our business and results of operations may be adversely affected.
We rely on a combination of proprietary and third-party technology systems to support our business and member experience, and, if these systems experience difficulties, our business, financial condition, results of operations and prospects may be materially adversely affected.
We use a combination of proprietary technology and technology provided by our third-party service providers to support our business and our member experience. For example, the WeWork app, which we developed in-house but which incorporates third-party and open source software where appropriate, connects local communities and develops and deepens connections among our members, both at particular spaces and across our global network.
We also use technology of third-party service providers to help manage the daily operations of our business. For example, we rely on our own internal systems as well as those of third-party service providers to process membership payments and other payments from our members. Our products and services may not continue to be supported by the applicable third-party service providers on commercially reasonable terms or at all, and we may not be able to attract and retain sufficiently skilled and experienced product managers and third-party contractors to operate and maintain these technologies and systems. Moreover, we may be subject to claims by third parties who maintain that our service providers’ technology infringes the third party’s intellectual property rights. Although our agreements with our third-party service providers often contain indemnities in our favor with respect to these eventualities, we may not be indemnified for these claims or we may not be successful in obtaining indemnification to which we are entitled.
To the extent we experience difficulties in the operation of technologies and systems we use to manage the daily operations of our business or that we make available to our members, our ability to operate our business, retain existing members and attract new members may be impaired. We may not be able to attract and retain sufficiently skilled and experienced product managers and third-party contractors to operate and maintain these technologies and systems, and our current product and service offerings may not continue to be, and new product and service offerings may not be, supported by the applicable third-party service providers on commercially reasonable terms or at all. Also, any harm to our members’ personal computers or other devices caused by our software, such as the WeWork app, or other sources of harm, such as hackers or computer viruses, could have an adverse effect on the member experience and our reputation.

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Our reputation, competitive advantage and relationships with our members could be harmed and our business could be materially adversely affected if our proprietary information and/or member data we collect and store, particularly billing and personal data, were to be accessed by unauthorized persons.
We generate significant amounts of proprietary, sensitive and otherwise confidential information relating to our business and operations, and we collect and store personal data regarding our members, including member names and billing data. The collection, protection and use of personal data are governed by privacy laws and regulations enacted in the United States and other jurisdictions around the world. These laws and regulations continue to evolve and on occasion may be inconsistent from one jurisdiction to another. Compliance with applicable privacy laws and regulations may increase our operating costs and adversely impact our ability to conduct our business and market our products and services to our members and potential members. Any failure or perceived failure by us or our third-party service providers to comply with applicable privacy laws, privacy policies or privacy-related contractual obligations may result in governmental enforcement actions, fines, litigation, other claims and adverse publicity.
Similar to other companies, our information technology systems face the threat of cyber-attacks, such as security breaches, phishing scams, malware and denial-of-service attacks. Our systems or the systems of third-parties that we rely upon could experience unauthorized intrusions or inadvertent data breaches, which could result in the exposure or destruction of our proprietary information and/or members’ data. This data is maintained on our own systems as well as the systems of third-party service providers. With respect to billing data, such as credit card numbers, we generally rely on third-party licensed encryption and authentication technology to store and secure this information. Although we expect to become Payment Card Industry Data Security Standard (PCI DSS) compliant in 2019, our practices with respect to this type of information are evolving and do not yet fully comply with that industry standard and other applicable guidelines.
Because techniques used to obtain unauthorized access to systems or sabotage systems change frequently and may not be known until launched against us or the third parties we rely on, we and they may be unable to anticipate these attacks or implement adequate preventative measures. In addition, any party who is able to illicitly obtain identification and password credentials could potentially gain unauthorized access to our systems or the systems of third parties we rely on. If any such event occurs, we may have to spend significant capital and other resources to mitigate the impact of the event and to develop and implement protections to prevent future events of that nature from occurring. From time-to-time, employees make mistakes with respect to security policies that are not always immediately detected by compliance policies and procedures. These can include errors in software implementation or a failure to follow protocols and patch systems. Employee errors, even if promptly discovered and remediated, may disrupt operations or result in unauthorized disclosure of confidential information.
If a cybersecurity incident occurs, or is perceived to occur, we may be the subject of negative publicity and the perception of the effectiveness of our security measures and our reputation may be harmed, which could damage our relationships and result in the loss of existing or potential members. In addition, even if there is no compromise of member information, we could incur significant fines or lose the opportunity to support electronic payments from members, which would limit the full effectiveness and efficiency of our payment processing.
Our business and our reputation may be harmed if our employees, members of our community or other people who enter our spaces act badly.
Our emphasis on our values makes our reputation particularly sensitive to allegations of violations of community rules or applicable laws by employees, members, or other people who enter our spaces. If employees, members or other people violate our policies or engage in illegal or unethical behavior, or are perceived to do so, we may be the subject of negative publicity and our reputation may be harmed. These bad acts may also encourage existing members to leave our locations, which would adversely impact occupancy and revenue for the affected location.
Our future success depends in large part on the continued service of Adam Neumann, our co-founder and chief executive officer, which cannot be ensured or guaranteed.
Adam Neumann, our Co-Founder and Chief Executive Officer, is critical to the overall management of our company as well as the development of our culture and our strategic direction. We cannot assure you that Adam will continue to work for us or serve our interests in any capacity.

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Adam Neumann will control a majority of our voting stock upon completion of this offering and may also pursue corporate opportunities independent of us that could present potential conflicts with our and our stockholders’ interests.
Following the completion of this offering, as a result of his share ownership, together with his voting arrangements with certain stockholders, Adam Neumann, our Co-Founder and Chief Executive Officer, will be able to exercise voting control with respect to an aggregate of           shares of our Class A common stock and           shares of our Class B common stock, representing approximately           % of the total voting power of our outstanding capital stock (or approximately           % of the total voting power of our outstanding capital stock if the underwriters exercise in full their option to purchase additional shares of our Class A common stock). As a result, Adam will continue to have the ability to control significant corporate activities, including:
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the election of our board of directors and, through our board of directors, decision-making with respect to our business strategy and company policies, and the appointment and removal of our corporate officers;
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acquisitions and dispositions of businesses and assets, mergers and other business combinations;
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issuances of shares of our capital stock; and
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payment of dividends.
Adam’s voting control will limit the ability of other stockholders to influence corporate activities and, as a result, we may take actions that stockholders other than Adam do not view as beneficial. Adam’s voting control may also inhibit transactions involving a change of control of our company, including transactions in which you as a holder of our Class A common stock might otherwise receive a premium for your shares. As a stockholder, even a controlling stockholder, Adam is entitled to vote his shares, and shares over which he has voting control as a result of voting arrangements, in his own interests, which may not always be in the interests of our stockholders generally. For a description of the voting arrangements affecting our capital stock, see “Description of capital stock—Voting arrangements”.
We are a “controlled company” as defined in the            rules, and are able to rely on exemptions from certain corporate governance requirements that provide protection to stockholders of companies that are not controlled companies.
Upon completion of this offering, Adam Neumann will own or control more than 50% of the total voting power of our capital stock and, as such, we will be a controlled company under the rules of the            . As a controlled company, we may take advantage of exemptions under the rules of the           with respect to certain corporate governance requirements, such as the requirements that (1) a majority of our board of directors be independent directors and (2) we have a compensation committee composed entirely of independent directors.
For so long as we are a controlled company, you will not have the same protections afforded to stockholders of companies that are subject to these and all of the other corporate governance requirements of the rules of the           .
Supply chain interruptions may increase our costs or reduce our revenues.
We depend on the effectiveness of our supply chain management systems to ensure reliable and sufficient supply, on reasonably favorable terms, of materials used in our construction and development and operating activities, such as furniture, lighting, millwork, wood flooring, security equipment and consumables. The materials we purchase and use in the ordinary course of our business are sourced from a wide variety of suppliers in countries around the world. Disruptions in the supply chain may result from weather-related events, natural disasters, trade restrictions, tariffs, border controls, acts of war, terrorist attacks, third-party strikes or ineffective cross dock operations, work stoppages or slowdowns, shipping capacity constraints, supply or shipping interruptions or other factors beyond our control. In the event of disruptions in our existing supply chain, there can be no assurance that the labor and materials we rely on in the ordinary course of our business will be available at reasonable rates or at all. In some cases, we may rely on a single source for procurement of construction materials or other supplies in a given region. Any disruption in the supply of certain materials could disrupt operations at our existing locations or significantly delay our opening of a new location, which may cause harm to our reputation and brand.

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Some of the counterparty risks we face with respect to our members are heightened in the case of Enterprise Members.
The greater amount of available space generally occupied by any individual Enterprise Member relative to our other members means that the time and effort required to execute a definitive agreement is greater than our ordinary-course membership agreements. In some instances, we agree to varying levels of customization of the space we license to these Enterprise Members. Enterprise Members may nevertheless delay commencement of their membership agreements, fail to make membership fee payments when due, or declare bankruptcy or otherwise default on their obligations to us. Any of these events could result in the termination of that Enterprise Member’s agreement with us and, potentially, sunk costs and transaction costs that are difficult or impossible for us to recover. Enterprise Members often sign membership agreements with longer terms and for a greater number of Desks than some of our other members. Enterprise Members generally account for a high proportion of our revenue at a particular location, and a default by an Enterprise Member under its agreement with us could cause a significant reduction in the operating cash flow generated by the location where that Enterprise Member is situated. Our top 25 Enterprise Members, as of December 1, 2017, accounted for 7.4% of our membership and service revenue for the year ended December 31, 2017. We would also be responsible for most, if not all, of the costs we incur following an unexpected vacancy by an Enterprise Member.
We face risks arising from strategic transactions such as acquisitions and investments that we evaluate, pursue and undertake.
From time to time, we evaluate potential strategic acquisition or investment opportunities, and from time to time we pursue and undertake certain of those opportunities. We have expanded rapidly, including through acquisitions of companies engaged in a variety of businesses, including Meetup (a subscription-based online platform that facilitates “in real life” meet-ups), The Flatiron School (a software programming education platform) and Conductor (a suite of tools that enable companies to modernize their digital marketing). As our WeWork offering continues to grow, we plan to continue or accelerate our investments in similar real estate vehicles. For instance, in 2017, together with the Rhone Group, we formed WeWork Property Advisors, a real estate investment joint venture that advises on investments primarily in properties that would benefit from WeWork occupancy. We may continue to invest in similar real estate acquisition vehicles.
Any transactions that we enter into could be material to our financial condition and results of operations. The process of acquiring and integrating another company or technology could create unforeseen operating difficulties and expenditures and could entail unforeseen liabilities that are not recoverable under the relevant transaction agreements or otherwise.
The integration of acquisitions involves a number of significant risks which may include but are not limited to:
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the assimilation and retention of personnel, including management personnel, in the acquired businesses;
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accounting, tax, regulatory and compliance issues that could arise;
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expenses and difficulties in the transition and integration of operations and systems;
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unanticipated expenses incurred or charges to earnings based on unknown circumstances or liabilities;
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failure to realize the synergies and other benefits we expect from the acquisition, at the pace we anticipate or at all;
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general economic conditions in the markets in which the acquired business operates; and
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difficulties encountered in conducting business in markets where we have limited experience and expertise.
If we are unable to successfully complete and integrate our strategic acquisitions in a timely manner, our business, growth strategies and results of operations could be adversely affected.

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If we are unable to accept credit cards or access electronic transaction processing networks, whether because of changes in (or any noncompliance with) applicable rules or relevant business practices, our competitive position would be critically impaired.
We collect and process membership fees and other revenues in thousands of daily transactions around the world. Credit card associations and bank payment networks could adopt new operating rules or interpretations of existing rules that we might find difficult or even impossible to comply with. In such an event, we could lose the ability to give members the option to make electronic payments. Losing these electronic processing services could result in the loss of existing or potential members and adversely affect our business, competitive position and results of operations.
Our business will suffer if we are unable to hire, develop, retain and motivate highly skilled team members.
We strive to attract and motivate team members who share a dedication to the member community and our vision, but may not be successful in doing so. For example, competing to fill technical positions in the New York City area is particularly challenging. In addition, our U.S.-based team members, including most of our senior management, work for us on an at-will basis. Other companies, including competitors, may be successful in recruiting and hiring team members away from us, and it may be difficult for us to find suitable replacements on a timely basis, on competitive terms or at all.
We may not be able to compete effectively with others.
Our WeWork business has few barriers to entry. While we consider ourselves to be a leader in the “Space-as-a-Service” sector, with core competencies in sourcing, design and operating new locations, our reported success may encourage people to launch competing flexible workspace offerings. If new companies decide to launch competing solutions in the markets in which we operate, we may face increased competition for members.
In addition, some of the business services we provide or plan to provide are served by one or more large, national or international companies, as well as by regional and local companies of varying sizes and resources, some of which may have accumulated substantial goodwill in their markets. Some of our competitors may also be better capitalized than we are, have access to better lease terms than we do, have operations in more jurisdictions than we do or be able or willing to provide services at a lower price than we are. Our inability to compete effectively in securing new or repeat business could hinder our growth or adversely impact our operating results.
Certain of the measures we use to evaluate our financial and operating performance may be impacted by subjective community-driven determinations and not necessarily by changes in our business.
Certain of the key performance indicators and other key financial measures that we use to assess the performance of our business, such as Occupancy Rate, are derived from the estimated number of Desks or the change in the estimated number of Desks over a given period of time. We define “Desks” for any given date as the estimated number of desks available for sale and immediate use, plus the estimated capacity of “hot desks” at each location. Hot desk capacity is determined on a location by location basis, with the determination made by a community manager based on the needs of the particular community. Although the overall number of Desks is primarily impacted by new location openings and expanding our presence in existing locations through phased openings, the number of available Desks in each location may also change as a result of reasons unrelated to any change in the space offered, such as an increase in the hot desk capacity at that location. Hot desk capacity is determined by each community manager based on the characteristics and distinct local personality of the relevant community. Our core competency is in evaluating and programming the space available for efficient use, and we encourage community managers to actively consider what would be best for their community. A community manager in a given location may choose to change the hot desk capacity in that location at any time, which would impact the comparability of certain of the key performance indicators that we use to assess the performance of our business across multiple periods.

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If our employees were to engage in a strike or other work stoppage or interruption, our business, results of operations, financial condition and liquidity could be materially adversely affected.
Some of our employees outside of the United States are represented by a labor union or workers’ council. Although we believe that our relations with our employees are good, if disputes with these employees arise, or if our workers engage in a strike or other work stoppage or interruption, we could experience a significant disruption of, or inefficiencies in, our operations or incur higher labor costs, which could have a material adverse effect on our business, results of operations, financial condition and liquidity.
Our business could be adversely affected by natural disasters, public health crises, political crises or other unexpected events for which we may not be sufficiently insured.
Natural disasters and other adverse weather and climate conditions, public health crises, political crises such as terrorist attacks, war and other political instability, or other unexpected events could disrupt our operations, damage one or more of our locations, or prevent short- or long-term access to one or more of our locations. Many of our spaces are located in the vicinity of disaster zones, including flood zones in New York City and potentially active earthquake faults in the San Francisco Bay Area and Mexico City. Although we carry comprehensive liability, fire, extended coverage and business interruption insurance with respect to our spaces, there are certain types of losses that we do not insure against because they are either uninsurable or not insurable on commercially reasonable terms. Should an uninsured event or a loss in excess of our insured limits occur, we could lose some or all of the capital invested in, and anticipated future revenues from, the affected spaces, and we may nevertheless continue to be subject to obligations related to those spaces.
Risks relating to our financial condition
Our ability to draw amounts under our Senior Credit Facility depends on our compliance with certain financial covenants and on our level of unrestricted and unencumbered cash.
Our Bank Facilities (as defined herein) are important sources of our liquidity. Our ability to draw amounts and to issue letters of credit under the Senior Credit Facility depends on our compliance with certain financial covenants and our maintenance of minimum levels of total consolidated cash.
We may not be able to generate sufficient cash to service all of our indebtedness and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.
Our ability to make scheduled payments on or refinance our debt obligations depends on our financial condition and operating performance, which are subject to prevailing economic and competitive conditions and to certain financial, business, legislative, regulatory and other factors beyond our control. We may be unable to maintain a level of cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness.
If our cash flows and capital resources are insufficient to fund our debt service obligations, we could face substantial liquidity problems and could be forced to reduce or delay investments and capital expenditures or to dispose of material assets or operations, seek additional debt or equity capital or restructure or refinance our indebtedness. We may not be able to effect any such alternative measures, if necessary, on commercially reasonable terms or at all and, even if successful, those alternative actions may not allow us to meet our scheduled debt service obligations. The agreements that govern our indebtedness restrict our ability to dispose of certain assets and use the proceeds from those dispositions and may also restrict our ability to raise debt or certain types of equity capital to be used to repay other indebtedness when it becomes due. We may not be able to consummate those dispositions or to obtain proceeds in an amount sufficient to meet any debt service obligations then due. See “Description of indebtedness.”
In addition, we conduct a substantial portion of our operations through our subsidiaries. Accordingly, repayment of our indebtedness is dependent on the generation of cash flow by our subsidiaries and their ability to make such cash available to us, by dividend, debt repayment or otherwise. In the event that we do not receive distributions from our subsidiaries, we may be unable to make required principal and interest payments on our indebtedness.

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If we cannot make scheduled payments on our debt, we will be in default and, as a result, lenders under any of our existing and future indebtedness could declare all outstanding principal and interest to be due and payable, the lenders under our debt instruments could terminate their commitments to loan money, our secured lenders could foreclose against the assets securing such borrowings and we could be forced into bankruptcy or liquidation.
The long-term and fixed cost nature of our leases may limit our operating flexibility and could adversely affect our liquidity and results of operations.
We currently lease a significant majority of our locations under long-term leases that, with very limited exceptions, do not contain early termination provisions. Our obligations to landlords under these agreements extend for periods that significantly exceed the length of our membership agreements with our members, which may be terminated by our members upon as little notice as one calendar month. Our leases generally provide for fixed monthly payments that are not tied to member usage or the size of our member base, and all of our leases contain minimum rental payment obligations. As a result, if members at a particular space terminate their membership agreements with us and we are not able to replace these departing members, our rent expense may exceed our revenue. In addition, in an environment where cost for real estate is decreasing, we may not be able to lower our fixed monthly payments under our leases at rates commensurate with the rates at which we would be pressured to lower our monthly membership fees, which may also result in our rent expense exceeding our revenue. In any such event, we would not have the ability to reduce our rent under the lease or otherwise terminate the lease in accordance with its terms.
If we experience a prolonged reduction in revenues at a particular space, our results of operations in respect of that space would be adversely affected unless and until either the lease expires, we are able to assign the lease or sublease the space to a third party, or we default under the terms of the lease and cease operations at the leased spaces. Our ability to assign a lease or sublease the space to a third party may be constrained by provisions in the lease that restrict these transfers without the prior consent of the landlord. Additionally, we could incur significant costs if we decide to assign or sublease unprofitable leases, as we may incur transaction costs associated with finding and negotiating with potential transferees, and the ultimate transferee may require upfront payments or other inducements. A default under a lease could expose us to breach of contract and other claims which could result in direct and indirect costs to us, and could result in operational disruptions that could harm our reputation and brand.
In addition, while our leases are often held by special purpose entities, our consolidated financial condition depends on the ability of our subsidiaries to perform their obligations under these leases over time. Although the limited duration of many of our parent guarantees of the leases may enhance our negotiating position with landlords in certain circumstances, our business reputation, financial condition and results of operations depend on our subsidiaries’ ongoing compliance with their leases. We may determine that it is necessary to fund the lease payments of our subsidiaries beyond the terms of our parent guarantees, and any difficulty of our subsidiaries in performing their obligations under our leases in a given region could affect our liquidity in that region or on a consolidated basis.
We are pursuing strategic alternatives to pure leasing arrangements, including revenue-sharing agreements and management agreements with respect to certain spaces. These arrangements are generally more flexible and require less direct capital expenditures than a traditional lease arrangement. However, some of our revenue-sharing agreements contain penalties that are payable in the event we terminate the arrangement. In addition, we have limited experience to date with these types of transactions, and we may not be able to successfully complete additional transactions on commercially reasonable terms or at all.
We incur significant costs related to the redevelopment of our spaces, which we may be unable to recover in a timely manner or at all.
At each of our locations, we create beautiful spaces that inspire our members to create, collaborate and connect. Redevelopment of a space typically takes several months from the date we take possession of the space under the relevant occupancy agreement to the opening date. During this time, we incur substantial upfront costs without recognizing any revenues from the space. If we are unable to complete our redevelopment and construction activities for any reason, or conditions in the real estate market or the broader economy change in ways that are unfavorable, we may be unable to recover these costs in a timely manner or at all.

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Our redevelopment activities are also subject to cost and schedule overruns as a result of many factors, some of which are beyond our control and ability to foresee, including increases in the cost of materials and labor. In addition, while the majority of our existing occupancy agreements provide for reimbursement by the landlord or building owner of a portion of the construction and development expenses we incur, our landlords or building owners may not reimburse us for these expenses in a timely manner and we may not continue to be granted these provisions in future occupancy agreements that we negotiate. To be eligible for reimbursement of these development expenses, we are also required to compile invoices, lien releases and other paperwork from our contractors, which is a time-consuming process that requires the cooperation of third parties over whom we have limited control. We may make errors in pursuing these reimbursement entitlements in accordance with the strict requirements of the landlords or building owners we deal with. In addition, we are subject to counterparty risk with respect to these landlords and building owners.
We incur costs relating to the maintenance, refurbishment and remediation of our spaces.
The terms of our occupancy agreements generally require that we ensure that the spaces we occupy are kept in good repair throughout the term of the occupancy agreement, that certain non-standard alterations carried out with respect to the spaces are removed at the end of the term of the occupancy agreement, and that we perform any repair work related to these obligations. The terms of our international occupancy agreements may also require that we return the space to the landlord at the end of the term of the occupancy agreement in the same condition it was delivered to us, which, in such instances, will require removing all fixtures and improvements to the space. The costs associated with this maintenance, removal and repair work may be significant.
We also anticipate that we will be required to periodically refurbish our spaces to keep pace with the changing needs of our members. Extensive refurbishments may be more costly and time-consuming than we expect and may adversely affect our results of operations and financial condition. Our member experience may be adversely affected if extensive refurbishments disrupt our operations at our locations.
Fluctuations in exchange rates may adversely affect us.
We vary our pricing to align with local market conditions, and our international businesses typically earn revenue and incur expenses in local currencies, primarily the British Pound, Euro and Israeli Shekel. For example, for the year ended December 31, 2017, approximately 69%, 17%, 3%, 2% and 9% of our revenue was earned by subsidiaries whose functional currency was the U.S. dollar, British Pound, Euro, Israeli Shekel and other foreign currencies, respectively, compared with 76%, 19%, 2%, 2% and 1%, respectively, for the year ended December 31, 2016. As foreign currency exchange rates change, translation of the statements of operations of our international businesses into U.S. dollars affects year-over-year comparability of our operating results.
Risks relating to laws and regulations affecting our business
Our extensive foreign operations and contacts with landlords and other parties in a variety of countries subject us to risks under U.S. and other anti-corruption laws, as well as applicable export controls and economic sanctions.
Under the Foreign Corrupt Practices Act (the “FCPA”) and similar anti-corruption laws and local laws prohibiting certain corrupt payments to government officials or agents, we may become liable for the actions of our directors, officers, employees, agents or other strategic or local partners or representatives over whom we may have little actual control. We are continuously engaged in sourcing and negotiating new locations around the world, and certain of the landlords, real estate agents or other parties with whom we interact may be government officials or agents, even without our knowledge. As we increase our international sales and business operations, our contacts with foreign public officials, and therefore our potential exposure to liability under laws such as the FCPA, are likely to increase.
Additionally, as we pursue our growth strategy of entering into joint ventures, revenue-sharing arrangements and other business relationships with local partners in non-U.S. jurisdictions, our use of intermediaries, and therefore our potential exposure to liability under laws such as the FCPA, are likely to increase.

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Similarly, our international sales and business operations expose us to potential liability under a wide variety of U.S. and international laws and regulations relating to economic sanctions and export control, such as those administered by the U.S. Office of Foreign Assets Control. Failure to comply with these laws and regulations could result in substantial fines, sanctions, civil or criminal penalties, competitive or reputational harm, litigation or regulatory action and other consequences that might adversely affect our results of operations and our financial condition.
Our business is subject to a variety of U.S. and non-U.S. laws, many of which are evolving and could limit or otherwise negatively affect our ability to operate our business.
Laws and regulations are continuously evolving, and compliance is costly and can require changes to our business practices and significant management time and effort. It is not always clear how existing laws apply to our business model. Further, fragmentation of longstanding regulatory frameworks create uncertainty with regard to future regulation, such as in the case of Brexit. We strive to comply with all applicable laws, but the scope and interpretation of the laws that are or may be applicable to us is often uncertain and may conflict across jurisdictions.
Changes in tax laws and unanticipated tax liabilities could adversely affect the taxes the Company pays and therefore its financial condition and results of operations.
As a global company, we are subject to taxation in numerous countries, states and other jurisdictions. Tax laws, regulations, and administrative practices in various jurisdictions may be subject to significant change, with or without notice, due to economic, political, and other conditions, and significant judgment is required in applying the relevant provisions of tax law. If such law changes were to be adopted or if the tax authorities in the jurisdictions where we operate were to challenge our application of relevant provisions of applicable tax laws, we could be adversely affected.
Risks relating to this offering and ownership of our Class A common stock
The dual class structure of our common stock has the effect of concentrating voting control with holders of our Class B common stock and limiting your ability to influence corporate matters.
Our Class B common stock has ten votes per share, whereas our Class A common stock, which is being offered by us in this offering, has one vote per share. When this offering is completed, our outstanding Class B common stock will represent           % of the total voting power of our outstanding capital stock (or           % of the total voting power of our outstanding capital stock if the underwriters exercise in full their option to purchase additional shares of our Class A common stock). Due to the ten-to-one voting ratio between our Class B common stock and Class A common stock, the holders of our Class B common stock collectively will continue to control a majority of the combined voting power of our capital stock, even when the outstanding shares of Class B common stock represent a small minority of the economic interest in our capital stock. This concentrated control will significantly limit your ability to influence corporate matters.
Future transfers by holders of Class B common stock will generally result in those shares converting to Class A common stock, subject to limited exceptions. The conversion of Class B common stock to Class A common stock will have the effect, over time, of increasing the relative voting power of those holders of Class B common stock who retain their shares in the long term. See “Description of capital stock” for descriptions of our Class A common stock and our Class B common stock and the rights associated with each.
The difference in the voting rights of our Class A common stock and our Class B common stock may harm the value and liquidity of our Class A common stock.
The difference in the voting rights of our Class A common stock and Class B common stock could harm the value of our Class A common stock to the extent that any investor or potential future purchaser of our Class A common stock ascribes value to the right of the holders of our Class B common stock to ten votes per share. The existence of two classes of common stock with voting rights could also result in less liquidity for either class of stock than if there were only one class of our common stock.

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Purchasers in this offering will experience immediate and substantial dilution in the book value of their investment.
The initial public offering price of our Class A common stock is substantially higher than the pro forma net tangible book value per share of our Class A common stock outstanding prior to this offering. Therefore, if you purchase our Class A common stock in this offering, you will incur an immediate substantial dilution of $           in pro forma net tangible book value per share from the price you paid (calculated based on the assumed initial public offering price of $           per share, which represents the midpoint of the estimated offering price range set forth on the cover of this prospectus). For additional information about the dilution that you will experience immediately upon completion of this offering, see “Dilution”.
There has been no prior public market for our Class A common stock, the price of our Class A common stock may be volatile or may decline regardless of our operating performance, and you may not be able to resell your shares at or above the initial public offering price.
Prior to this offering, there has been no public market for shares of our Class A common stock. The initial public offering price of our Class A common stock was determined through negotiation between us and the underwriters. This price does not necessarily reflect the price at which investors in the market will be willing to buy and sell shares of our Class A common stock following completion of this offering. In addition, the market price of our Class A common stock following completion of this offering may be higher or lower than the initial public offering price. The market price of our Class A common stock following completion this offering will depend on a number of factors, many of which are beyond our control and may not be related to our operating performance. These fluctuations could cause you to lose part of your investment in our Class A common stock since you might be unable to sell your shares at or above the price you paid in this offering. Factors that could cause fluctuations in the market price of our Class A common stock include the following:
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actual or anticipated changes in our operating results;
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actual or anticipated developments in our industry or our business, our competitors’ businesses or the competitive landscape generally;
•
rumors and market speculation involving us or other companies in our industry;
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additions or departures of key management or other personnel;
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litigation or disputes involving us, our industry or both, or investigations by regulators into our operations or those of our competitors;
•
announced or completed acquisitions of businesses or technologies by us or our competitors;
•
new laws or regulations or new interpretations of existing laws or regulations applicable to our business;
•
changes in accounting standards, policies, guidelines, interpretations or principles;
•
sales of shares of our stock by us, our insiders or our other stockholders;
•
the failure of securities analysts to maintain coverage of us, changes in financial estimates by securities analysts who follow our company or our failure to meet these estimates or the expectations of investors; and
•
general economic conditions and slow or negative growth in any of our significant markets.
The stock markets have experienced extreme volatility in recent years that has been unrelated to the operating performance of particular companies. These broad market fluctuations may adversely affect the market price of our Class A common stock. In the past, following periods of volatility in the market price of a company’s securities, class action litigation has often been instituted against the company. Any litigation of this type brought against us could result in substantial costs and a diversion of management’s attention and resources.

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Our quarterly operating results may fluctuate, which could cause our stock price to decline.
Our quarterly operating results may fluctuate for a variety of reasons, many of which are beyond our control, including:
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our success in retaining existing members and attracting new members, including our ability to adapt to rapidly evolving market trends and member preferences;
•
fluctuations in revenue generated from our members, including as a result of variability in our occupancy levels and use of our product and service offerings;
•
the amount and timing of our operating expenses;
•
the timing and success of openings of new spaces;
•
the impact of competitive developments in the markets in which we operate and our response to those developments;
•
economic and market conditions, particularly those affecting our industry; and
•
other risks and factors described in this “Risk factors” section.
The occurrence of any one of the events contemplated above, or the cumulative effect of the occurrence of one or more of such factors, could cause our quarterly results to fluctuate significantly. As a result, quarterly comparisons of results may not be meaningful and you should not rely on the historical results of one quarter as an indication of future performance, and interim period results are not necessarily indicative of the results for the full year.
An active trading market for our Class A common stock may never develop or be sustained.
We intend to apply to list our Class A common stock on the            under the symbol “WE”. However, we cannot assure you that an active trading market for our Class A common stock will develop on that exchange or elsewhere or, if developed, that any market will be sustained. Accordingly, we cannot assure you of the likelihood that an active trading market for our Class A common stock will develop or be maintained, the liquidity of any trading market, your ability to sell your shares of our Class A common stock when desired or the prices that you may obtain for your shares. An inactive market may also impair our ability to raise capital by selling shares and may impair our ability to acquire other companies or technologies using our shares as consideration.
If equity research analysts publish unfavorable commentary or downgrade our Class A common stock, the price and trading volume of our Class A common stock could decline.
The trading market for our Class A common stock could be affected by whether equity research analysts publish research or reports about us and our business. We cannot predict at this time whether any research analysts will publish research and reports on us and our Class A common stock. If one or more equity analysts do cover us and our Class A common stock and publish research reports about us, the price or trading volume of our Class A common stock could decline if one or more securities analysts downgrade our Class A common stock or if those analysts issue other unfavorable commentary or cease publishing reports about us or our business.
We are an emerging growth company and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our Class A common stock less attractive to investors.
We are an emerging growth company as defined in the JOBS Act. For as long as we continue to be an emerging growth company, we intend to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies including reduced disclosure obligations regarding the provision of selected financial data and executive compensation arrangements. We could be an emerging growth company for up to five years following the completion of this offering, although we expect to not be an emerging growth company sooner. Our status as an emerging growth company will end on the last day of the fiscal year in which we have $1.07 billion or more in annual revenue; we expect our revenue for 2018 to exceed $1.07 billion. However, if our revenues

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exceed $1.07 billion prior to the completion of this offering, we will continue to be treated as an emerging growth company for certain purposes until the date on which we complete this offering.
We will incur increased costs and regulatory burden and devote substantial management time as a result of being a public company.
Prior to this offering, we were not subject to the continuous disclosure requirements of U.S. securities laws and the rules, regulations and policies of the                     . As a public company, we will incur increased legal, accounting and other costs not incurred as a private company. We will be subject to, among other things, the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the corporate governance requirements found in the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) and related rules and regulations of the SEC, as well as the rules and regulations implemented by the                     . We expect that compliance with these requirements will increase our legal, accounting and financial compliance costs and will make some activities more difficult, time consuming and costly. In addition, we expect that our management and other personnel will need to divert attention from operational and other business matters to devote substantial time to these public company requirements.
We have not yet determined whether our existing disclosure controls and internal controls over financial reporting are compliant with Section 404 of the Sarbanes-Oxley Act. Additionally, our current internal control systems and procedures may not be adequate to support our rapid growth. Any failure of our internal systems, controls and procedures could have an adverse effect on our stated results of operations and harm our reputation.
Pursuant to Section 404 of the Sarbanes-Oxley Act (“Section 404”) and the related rules adopted by the SEC and the Public Company Accounting Oversight Board, our management will be required to report on the effectiveness of our disclosure controls and internal control over financial reporting, and our auditor will be required to deliver an attestation report on the effectiveness of our disclosure controls and internal control over financial reporting, starting with the second annual report that we file with the SEC after the completion of this offering. Because we are not currently required to comply with Section 404, we are not currently required to make an assessment of the effectiveness of our internal controls, or to deliver a report that assesses the effectiveness of our internal control over financial reporting. We have not yet determined whether our existing internal controls over financial reporting are compliant with Section 404. This process will require the investment of substantial time and resources, including by our Chief Financial Officer and other members of our senior management. In addition, we cannot predict the outcome of this determination and whether we will need to implement remedial actions. Management’s assessment of our internal control systems and procedures may identify weaknesses and conditions that need to be addressed or other matters that may raise concerns for investors. The determination and any remedial actions required could result in us incurring additional costs that we did not anticipate. Additionally, any actual or perceived weakness or condition that needs to be addressed in our internal control systems may have an adverse impact on our business.
Irrespective of compliance with Section 404, as we mature, we will need to further develop our internal control systems and procedures to keep pace with our rapid growth. Our current controls and any new controls that we develop may become inadequate because of changes in conditions in our business. We are in the process of developing and implementing an enterprise risk management framework, but this development and implementation may not proceed smoothly or on our projected timetable and this framework may not fully protect us against operational risks and losses.
We have made, and will continue to make, changes to our financial management control systems and other areas to manage our obligations as a public company, including corporate governance, corporate controls, disclosure controls and procedures and financial reporting and accounting systems. However, we cannot assure you that these and other measures that we might take will be sufficient to allow us to satisfy our obligations as a public company on a timely basis. If we fail to maintain effective systems, controls and procedures, including disclosure controls and internal controls over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable regulations and prevent fraud could be adversely impacted. We may also experience higher than anticipated operating expenses, as well as higher independent auditor fees, during and after the implementation of these changes.
If we are unable to implement any of the changes to our internal control over financial reporting effectively or efficiently or are required to do so earlier than anticipated, it could adversely affect our operations, financial

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reporting and results of operations. Additionally, we do not expect that our internal control systems, even if timely and well established, will prevent all errors and all fraud. Internal control systems, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met.
Our management will have broad discretion over the use of the proceeds we receive from this offering and might not use them effectively, which could affect our results of operations and cause our share price to decline.
Our management will have broad discretion to use our net proceeds from this offering, and you will be relying on the judgment of our management regarding the application of these proceeds. Our management might not apply our net proceeds from this offering in ways that increase the value of your investment. Our management might not be able to yield a significant return, if any, on any investment of these net proceeds. You may not agree with the decision of our management and will not have the opportunity to influence our decisions on how to use our net proceeds from this offering.
Future sales, or the perception of future sales, of our Class A common stock may depress the price of our Class A common stock.
The market price of our Class A common stock could decline significantly as a result of sales of a large number of shares of our stock in the market after this offering. The perception that these sales might occur could depress the market price of Class A common stock. These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate.
Upon completion of this offering, we will have outstanding                 shares of Class A common stock (or                 shares if the underwriters exercise in full their option to purchase additional shares of our Class A common stock) and                  shares of Class B common stock. The shares of Class A common stock offered in this offering will be freely tradable without restriction under the Securities Act of 1933, as amended (“the “Securities Act”), except for any shares of Class A common stock that may be held or acquired by our directors, executive officers and other affiliates, as that term is defined in the Securities Act, which will be restricted securities under the Securities Act. Restricted securities may not be sold in the public market unless the sale is registered under the Securities Act or an exemption from registration is available.
In connection with this offering, we, each of our executive officers and directors and holders of substantially all of our Class A common stock (including securities convertible into or exchangeable for shares of our Class A common stock) have entered into lock-up agreements under which they have agreed not to sell or otherwise transfer their shares for a period of        days after the date of this prospectus. These lock-up provisions are subject to certain exceptions and may be waived by           at any time. Although we have been advised that there is no present intention to do so,           may, in its sole discretion and without notice, release all or any portion of the shares from the restrictions in any of the lock-up agreements described above. See “Underwriting”.
We have also issued securities in connection with investments or acquisitions and may do so again in the future. The number of shares of our capital stock issued in connection with an investment or acquisition could constitute a material portion of the then outstanding shares of our Class A common stock.
We do not expect to declare any dividends in the foreseeable future.
We do not anticipate declaring or paying any dividends on our Class A common stock or Class B common stock for the foreseeable future. Instead, we anticipate that all of our future earnings will be retained to support our operations and to finance the growth and development of our business. Consequently, investors may need to rely on sales of their Class A common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investment. Investors seeking cash dividends should not purchase our Class A common stock. Any future determination relating to our dividend policy will be made by our board of directors and will depend on a number of factors. See “Dividend policy” and “Description of indebtedness”.

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Provisions in our restated certificate of incorporation and amended and restated bylaws or Delaware law may discourage, delay or prevent a change of control of our company or changes in our management and, therefore, depress the trading price of our Class A common stock.
Delaware corporate law contains, and we expect that our restated certificate of incorporation and amended and restated bylaws will contain, provisions that could discourage, delay or prevent a change in control of our company or changes in our management that the stockholders of our company may deem advantageous.
Any provision of our restated certificate of incorporation, our amended and restated bylaws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our Class A common stock, and could also affect the price that some investors are willing to pay for our Class A common stock.


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Cautionary note regarding forward-looking statements
This prospectus contains forward-looking statements that reflect our current views with respect to, among other things, future events and our future business, financial condition, results of operations and prospects. These statements are often, but not always, made through the use of words or phrases such as “may”, “should”, “could”, “predict”, “potential”, “believe”, “will likely result”, “expect”, “continue”, “will”, “anticipate”, “seek”, “estimate”, “intend”, “plan”, “projection”, “would” and “outlook”, or the negative version of those words or phrases or other comparable words or phrases of a future or forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry as well as certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. These forward-looking statements are subject to a number of known and unknown risks, uncertainties and assumptions, including those described in “Risk factors” and other cautionary statements included in this prospectus, which you should consider and read carefully. We operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for us to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the future events and trends discussed in this prospectus, and our future levels of activity and performance, may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. As a result, you should not regard any of these forward-looking statements as a representation or warranty by us or any other person or place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made, and we do not undertake any obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law.
You should read this prospectus and the documents that we reference in this prospectus and have filed as exhibits to the registration statement of which this prospectus forms a part completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by the cautionary statements contained in this section and elsewhere in this prospectus.

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Use of proceeds
We estimate that our net proceeds from this offering will be approximately $               (or $                if the underwriters exercise in full their option to purchase additional shares of our Class A common stock), based on an assumed initial public offering price of $         per share (the midpoint of the price range set forth on the cover page of this prospectus) after deducting underwriting discounts and commissions and estimated offering expenses payable by us.
We currently intend to use the net proceeds from this offering for general corporate purposes, including, but not limited to, investments and capital expenditures in connection with our expansion into domestic and international markets and additional product and service offerings, and for working capital purposes. Our management will have broad discretion in the application of the net proceeds of this offering, and investors will be relying on the judgment of our management in this regard. The timing and amount of our actual expenditures will be based on many factors, including cash flows from operations and the anticipated growth of our business. Pending their use, we intend to invest the net proceeds of this offering in short-term, investment grade, interest-bearing instruments or hold them as cash.
A $1.00 increase (decrease) in the assumed initial public offering price of $       per share would increase (decrease) the net proceeds to us from this offering by $               after deducting underwriting discounts and commissions and estimated offering expenses payable by us, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same. Similarly, each increase (decrease) of one million shares in the number of shares of Class A common stock offered by us would increase (decrease) the net proceeds to us from this offering by $               after deducting underwriting discounts and commissions and estimated offering expenses payable by us, assuming that the initial public offering price remains the same.

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Dividend policy
We have never declared or paid any dividends on our capital stock. We do not intend to pay dividends on our Class A common stock or our Class B common stock for the foreseeable future. Instead, we anticipate that all of our future earnings will be retained to support our operations and to finance the growth and development of our business. Any future determination relating to our dividend policy will be made by our board of directors and will depend on a number of factors, including:
•
our historic and projected financial condition, liquidity and results of operations;
•
our capital levels and needs;
•
tax considerations;
•
any acquisitions or potential acquisitions that we may consider;
•
statutory and regulatory prohibitions and other limitations;
•
general economic conditions; and
•
other factors deemed relevant by our board of directors.
The agreements governing our Bank Facilities and the indenture governing our senior notes also impose certain restrictions on distributions by us to our stockholders, and the terms of any credit agreements or other borrowing arrangements we enter into in the future may restrict our ability to pay cash dividends. See “Description of indebtedness”.
As a Delaware corporation, we are subject to certain restrictions on the payment of dividends under the Delaware General Corporation Law (the “DGCL”). Generally, a Delaware corporation may only pay dividends either out of surplus or out of the current or the immediately preceding year’s net profits. Surplus is defined as the excess, if any, at any given time, of the total assets of a corporation over its total liabilities and statutory capital. The value of a corporation’s assets can be measured in a number of ways and may not necessarily equal their book value.

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Capitalization
The following table shows our cash and cash equivalents and capitalization as of                ,       :
•
on an actual basis;
•
on a pro forma basis to give effect to the conversion of a convertible promissory note held by SB WW Holdings (Cayman) Limited into shares of Class A common stock, the conversion of a convertible promissory note held by one of our other investors into shares of Series C preferred stock, the conversion of all of our outstanding senior preferred stock and acquisition preferred stock into shares of Class A common stock, the conversion of all of our outstanding junior preferred stock into shares of Class B common stock and the       -for-one reverse split of our Class A common stock and Class B common stock, each of which will occur upon completion of this offering; and
•
on a pro forma as adjusted basis to give effect to the transactions described above as well as the issuance by us of                 shares of Class A common stock in this offering at an assumed initial public offering price of $           per share, the midpoint of the price range set forth on the cover page of this prospectus, and the application of the net proceeds therefrom as described in “Use of proceeds”.
The pro forma and pro forma as adjusted information below is illustrative only, and our cash and cash equivalents and total capitalization following the completion of this offering will be adjusted based on the actual initial public offering price and other terms of our initial public offering determined at pricing.
You should read the following table in together with “Selected historical consolidated financial and operating information” and “Management’s discussion and analysis of financial condition and results of operations” and our audited consolidated financial statements and related notes appearing elsewhere in this prospectus.
 
As of                ,
 
Actual
 
Pro forma
 
Pro forma as adjusted(1)
 
(in thousands)
Cash and cash equivalents:
 
 
 
 
 
Total cash and cash equivalents
$
 
$
 
$
Long-term debt and capital lease obligations:
 
 
 
 
 
Bank facilities
$
 
$
 
$
Capital lease obligations
 
 
 
 
 
Senior notes due 2025, net
 
 
 
 
 
Total long-term debt and capital lease obligations
 
 
 
 
 
Convertible preferred stock, $0.001 par value(2)
 
 
 
 
 
Noncontrolling interests
 
 
 
 
 
Equity:
 
 
 
 
 
Class A common stock, $0.001 par value(3)
 
 
 
 
 
Class B common stock, $0.001 par value(4)
 
 
 
 
 
Additional paid-in capital (5)
 
 
 
 
 
Additional other comprehensive income (loss)
 
 
 
 
 
Retained earnings (accumulated deficit) (5)
 
 
 
 
 
Total equity
 
 
 
 
 
Total capitalization
$
 
$
 
$
 
 
 
 
 
 
(1)
A $1.00 increase (decrease) in the assumed initial public offering price of $       per share (the midpoint of the price range set forth on the cover page of this prospectus) would increase (decrease) each of cash and cash equivalents, total equity and total capitalization by

39


$               after deducting underwriting discounts and commissions and estimated offering expenses payable by us, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same. If the underwriters’ option to purchase additional shares of our Class A common stock is exercised in full, the pro forma as adjusted amount of each of cash and cash equivalents, total equity and total capitalization would increase by approximately $               , after deducting underwriting discounts and commissions and estimated expenses payable by us.
(2)
Actual: Series A Convertible Preferred Stock –                shares authorized, issued and outstanding; Series B Convertible Preferred Stock –                shares authorized, issued and outstanding; Series C Convertible Preferred Stock –                shares authorized and                shares issued and outstanding; Series D-1 Convertible Preferred Stock –                shares authorized, issued and outstanding; Series D-2 Convertible Preferred Stock –                shares authorized, issued and outstanding; Series E Convertible Preferred Stock –                shares authorized, issued and outstanding; Series F Convertible Preferred Stock –               shares authorized and                shares issued and outstanding; Series G Convertible Preferred Stock –                shares authorized and                shares issued and outstanding; Acquisition Preferred Stock –                shares authorized and                shares issued and outstanding; and Junior Non-Voting Preferred Stock –                shares authorized, issued and outstanding. Pro forma and pro forma as adjusted: no shares authorized, issued or outstanding.
(3)
Actual:                 shares authorized,           shares issued and outstanding. Pro forma:           shares authorized and           shares issued and outstanding. Pro forma as adjusted:                shares authorized and                shares issued and outstanding.
(4)
Actual:                 shares authorized and           shares issued and outstanding. Pro forma and pro forma as adjusted:           shares authorized and           shares issued and outstanding.
(5)
Pro forma and pro forma as adjusted gives effect to stock-based compensation expense of approximately $        million associated with restricted stock units, for which the portion of the service period had been rendered as of               , 2018. This pro forma adjustment related to stock-based compensation expense of approximately $               million has been reflected as an increase to additional paid-in capital and accumulated deficit. See Note 2 to our consolidated financial statements included elsewhere in this prospectus.
The number of shares of Class A common stock and Class B common stock to be outstanding on a pro forma and pro forma as adjusted basis excludes:
•
              shares of Class A common stock issuable upon the exercise of stock options outstanding as of               , 2018 at a weighted average exercise price of $        per share;
•
              shares of Class B common stock issuable upon the exercise of stock options outstanding as of               , 2018 at a weighted average exercise price of $        per share;
•
              shares of Class A common stock issuable upon the exercise of warrants outstanding as of               , 2018 at an exercise price of $13.12 per share;
•
              shares of Class A common stock issuable upon the exercise of warrants outstanding as of               , 2018 at an exercise price of $0.001 per share;
•
              shares of Class A common stock issuable upon the exercise of restricted stock units outstanding as of               , 2018 at a weighted average exercise price of $        per share; and
•
              shares of Class A common stock reserved for future issuance under the new equity incentive plan we intend to adopt prior to the completion of this offering.

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Dilution
If you invest in our Class A common stock, your ownership interest will be diluted to the extent that the initial public offering price per share of our Class A common stock exceeds the pro forma as adjusted net tangible book value per share of our Class A common stock immediately following the completion of this offering.
Our historical net tangible book value per share as of                     , 2018 was $            , or $          per share. Net tangible book value per share is determined as of any date by subtracting our total liabilities from the total book value of our tangible assets (equal to our total assets less intangible assets) and dividing the difference by the number of shares of Class A common stock and Class B common stock deemed to be outstanding as of that date.
Our pro forma net tangible book value per share as of                     , 2018 was $            , or $          per share. Pro forma net tangible book value per share is determined as of any date by subtracting our total liabilities from the total book value of our tangible assets (equal to our total assets less intangible assets) and dividing the difference by the number of shares of Class A common stock and Class B common stock deemed to be outstanding as of that date, after giving effect to the conversion of all of our outstanding senior preferred stock and acquisition preferred stock into shares of Class A common stock, the conversion of all of our outstanding junior preferred stock into shares of Class B common stock and the       -for-one reverse split of our Class A common stock and Class B common stock, but not the completion of this offering.
After giving effect to our sale of              shares of Class A common stock in this offering at an assumed initial public offering price of $        per share, the midpoint of the price range set forth on the cover page of this prospectus, after deducting underwriting discounts and commissions and estimated offering expenses payable by us, our pro forma as adjusted net tangible book value as of                     , 2018 would have been $            , or $         per share. This amount reflects an immediate increase in pro forma as adjusted net tangible book value of $          per share to our existing stockholders and an immediate dilution in pro forma as adjusted net tangible book value of $        per share to new investors purchasing shares of Class A common stock in this offering. The following table illustrates this dilution on a per share basis:
Assumed initial public offering price per share
 
 
 
Pro forma net tangible book value per share at                     , 2018
 
 
 
Increase in pro forma net tangible book value per share attributable to this offering
 
 
 
Pro forma as adjusted net tangible book value per share upon completion of this offering
 
 
 
Dilution per share to new investors in this offering
 
 
 
 
 
 
 
The dilution information discussed above is illustrative only and will change based on the actual initial public offering price and other terms determined at the time of pricing of this offering. A $1.00 increase (decrease) in the assumed initial public offering price of $         per share, the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) pro forma as adjusted net tangible book value per share immediately following the completion of this offering by $         per share and increase (decrease) the dilution to new investors by $         per share, in each case after deducting underwriting discounts and commissions and estimated offering expenses payable by us, assuming the number of shares of Class A common stock offered by us, as set forth on the cover page of this prospectus, remains the same.
If the underwriters exercise in full their option to purchase additional shares of Class A common stock, the pro forma as adjusted net tangible book value immediately following the completion of this offering would be $          per share and the dilution to new investors would be $           per share, in each case assuming an initial public offering price of $           per share, the midpoint of the range set forth on the cover of this prospectus.
The following table summarizes, as of                     , 2018, on a pro forma as adjusted basis as described above, the difference between existing stockholders and new investors in this offering with respect to the aggregate number of

41


shares of common stock purchased and with respect to the total consideration and the average price per share paid to us by our existing stockholders and to be paid to us by the new investors in this offering.
 
Shares purchased
 
Total consideration
 
Average price per
 
Number
 
Percent
 
Amount
 
Percent
 
share
Existing stockholders
 
 
%

 
$
 
%

 
$
New investors
 
 
 
 
 
 
 
 
 
Total
 
 
100.0
%
 
$
 
100.0
%
 
$
 
 
 
 
 
 
 
 
 
 
If the underwriters exercise in full their option to purchase additional shares of Class A common stock, the number of shares held by existing stockholders upon completion of this offering would be reduced to        % of the total number of shares outstanding upon completion of this offering, and the number of shares held by new investors would increase to              shares, or        % of the total number of shares outstanding upon completion of this offering.
The foregoing discussion assumes no exercise of (i) options to purchase       shares of Class A common stock at a weighted average exercise price of $        per share, (ii) options to purchase        shares of Class B common stock at a weighted average exercise price of $        per share, (iii) warrants to purchase         shares of Class A common stock at an exercise price of $13.12 per share, (iv) warrants to purchase         shares of Class A common stock at an exercise price of $0.001 per share and (v) restricted stock units exercisable for            shares of Class A common stock at a weighted average exercise price of $        per share, and excludes             shares of Class A common stock reserved for future issuance under the new equity incentive plan we intend to adopt prior to the completion of this offering, as described in “Executive and director compensation—WeWork Companies Inc. 2019 Omnibus Incentive Plan”. To the extent that options or warrants are exercised, new awards are issued under our new equity incentive plan or we issue additional shares of common stock in the future, in each case that have an exercise or purchase price that is less than the offering price of the shares of Class A common stock in this offering, new investors in this offering will experience further dilution.

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Selected historical consolidated financial and operating information
The following selected historical consolidated financial information as of and for the years ended December 31, 2016 and 2017 has been derived from our audited consolidated financial statements included elsewhere in this prospectus. Our consolidated financial statements have been prepared in accordance with GAAP and are presented in U.S. dollars. Our historical results are not necessarily indicative of the results to be expected for any future period.
The information presented below should be read in conjunction with the information under “Management’s discussion and analysis of financial condition and results of operations” and our consolidated financial statements and related notes appearing elsewhere in this prospectus.
 
Year Ended December 31,
(Amounts in thousands, except share and per share data)
2016
 
2017
Consolidated statement of operations information:
 
 
 
Revenue:
 
 
 
Membership revenue
$
414,531

 
$
822,092

Service revenue
19,824

 
44,346

Other revenue
1,744

 
19,566

Total revenue
436,099

 
886,004

Expenses:
 
 
 
Community operating expenses (1)
433,167

 
814,782

Other operating expenses (1)
—

 
1,677

Pre-opening community expenses
115,749

 
131,324

Sales and marketing
43,428

 
143,424

Growth and new market development
35,731

 
109,719

General and administrative expenses (2)
115,346

 
454,020

Depreciation and amortization
88,952

 
162,892

Total expenses
832,373

 
1,817,838

 
 
 
 
Loss from operations
(396,274
)
 
(931,834
)
Interest and other income (expense), net
(33,400
)
 
(7,387
)
Pre-tax loss
(429,674
)
 
(939,221
)
Income tax benefit (provision)
(16
)
 
5,727

Net loss
(429,690
)
 
(933,494
)
Net loss attributable to noncontrolling interests
—

 
49,500

Net loss attributable to WeWork Companies Inc.
$
(429,690
)
 
$
(883,994
)
Net loss per share attributable to Class A and Class B common stockholders: (3)
 
 
 
Basic
$
(2.66
)
 
$
(5.54
)
Diluted
$
(2.66
)
 
$
(5.54
)
Weighted-average shares used to compute net loss per share attributable to Class A and Class B common stockholders, basic and diluted
161,324,940

 
159,689,116

Pro forma net loss per share attributable to Class A and Class B common stockholders: (3)
 
 
 
Basic
$
(2.84
)
Diluted
$
(2.84
)
Weighted-average shares used to compute pro forma net loss per share attributable to Class A and Class B common stockholders, basic and diluted
311,203,941

 
 
 
 
(1)
Exclusive of depreciation and amortization shown separately below.

43


(2)
Includes stock-based compensation expense of $17.4 million and $260.7 million for the year ended December 31, 2016 and 2017, respectively.
(3)
See Note 18 to our consolidated financial statements included elsewhere in this prospectus for a description of how we compute basic and diluted net loss per share attributable to Class A and Class B common stockholders and pro forma basic and diluted net loss per share attributable to Class A and Class B common stockholders.
 
As of December 31,
(Amounts in thousands)
2016
 
2017
Consolidated balance sheet information:
 
 
 
Cash and cash equivalents
$
506,597

 
$
2,020,805

Total current assets
621,355

 
2,427,096

Property and equipment, net
1,451,897

 
2,337,092

Total assets
2,238,519

 
5,364,072

Total liabilities
1,281,784

 
2,406,511

Total convertible preferred stock
1,678,301

 
3,405,435

Total noncontrolling interests
—

 
854,577

Total equity
(721,566
)
 
(1,302,451
)
 
 
 
 
 
Year Ended December 31,
(Amounts in thousands)
2016
 
2017
Consolidated cash flow information:
 
 
 
Net cash provided by operating activities
$
176,905

 
$
243,992

Net cash used in investing activities
(849,723
)
 
(1,453,433
)
Net cash provided by financing activities
727,908

 
2,724,315

Effects of exchange rate changes on cash and cash equivalents
(2,261
)
 
(666
)
Net increase in cash and cash equivalents
$
52,829

 
$
1,514,208

 
 
 
 

44


Management’s discussion and analysis of financial condition and results of operations
The following discussion and analysis of our financial condition and results of operations should be read together with our audited consolidated financial statements and the related notes and the other financial information included elsewhere in this prospectus. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results, performance and achievements could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those discussed below and elsewhere in this prospectus, particularly under “Risk factors”. Our historical results are not necessarily indicative of the results to be expected for any future period.
Overview
WeWork has pioneered the “Space-as-a-Service” category. We have developed core competencies in design, construction and community-building at scale to create high-energy environments that promote productivity, innovation and collaboration. We believe we have reinvented the way physical space is utilized and created a thriving community of members around the world.
Our business has evolved from its origins as a flexible, community-oriented workspace for entrepreneurs and small companies to a one-stop global solution for companies of all sizes, including many of the Fortune 500. The broad appeal of our platform and brand has attracted a diverse member base and enabled us to achieve significant scale in a short period of time.
We opened our first shared workspace location in 2010 in downtown Manhattan and have since become a globally scaled platform centered around flexibility and collaboration. As of September 1, 2018, our 335 locations served approximately 319,000 memberships across 24 countries. For the year ended December 31, 2017, we generated a net loss of $(933.5) million, Community Adjusted EBITDA of $233.1 million, Adjusted EBITDA before Growth Investments of $49.4 million and Adjusted EBITDA loss of $(193.3) million.
We primarily generate revenue from membership fees and ancillary service revenue. Through our WeWork offering, we provide our members with a complete, one-stop solution for their space needs, strategically designed to maximize collaboration and productivity. Our memberships offer access not only to beautifully designed, shared spaces, but also to amenities, services and events, as well as our global network.
Our platform
Members join the WeWork platform by entering into flexible membership agreements with us, which can range from month-to-month to multi-year arrangements. As our platform and brand have evolved, we have been able to attract members across a range of industries and at all stages of development, ranging from startups to large multi-national enterprises.
WeWork Memberships
We derive substantially all of our revenue from the fees associated with memberships.
Members can choose from a variety of products that address a range of needs. Our off-the-shelf solutions allow our members access to space and amenities or private offices within our shared workspaces. We also offer custom solutions for members that seek upgraded private office suites in premium locations, or customized build-outs with separate private spaces within a WeWork location.
Powered by We
In 2017, we launched a new WeWork Venture, Powered by We, a plug-and-play office solution that leverages our design, construction and building operation expertise for companies that are looking to “bring the WeWork

45


experience in-house.” We build custom offices that foster creativity, community and collaboration, and then continue to provide building management services and utilize our proprietary technology to enhance our clients’ experience.
Other WeWork Ventures
We seek to humanize all aspects of our members’ lives - how we work, learn, live and grow - by incubating or acquiring additional offerings. These developing products and services complement our core workspace offerings and provide our members with valuable tools for personal and professional growth.
Our current WeWork Ventures include:
•
The Flatiron School - a software programming education platform
•
Meetup - an online platform that brings people together offline
•
Conductor - a marketing technology platform
•
WeLive - residential shared living spaces
•
Rise by We - a health and wellness offering
•
WeGrow - an entrepreneurial charter school for children
Our established and growing portfolio of global locations
As of September 1, 2018, we operate 335 locations across 83 cities spanning 24 countries. We generally generate enough revenue to cover our community operating expenses at an occupancy rate, on average, of approximately 60% across our locations. As of September 1, 2018, our locations operated at an average occupancy rate of 84%. In addition to expanding to new locations, part of our strategy is to open new locations near existing locations to drive economies of scale and benefit from existing brand awareness and strong network effects.
We monitor our portfolio by Mature and Non-Mature Locations, based on the number of months they have been in operation. We believe our Mature Locations, defined as Locations that have been open for member operations for more than 18 months, are representative of our steady-state performance. Mature Locations comprised 41% of our locations as of September 1, 2018. Mature Locations have continued to grow and demonstrate increasingly strong performance, with 89% occupancy as of September 1, 2018.
Key performance indicators and financial measures
In connection with the management of our WeWork offering, we identify, measure and assess a variety of operational metrics that we refer to as key performance indicators. The most important metrics we use in managing and evaluating our business are Memberships and Desks.
•
Memberships include WeWork Memberships and We Memberships. Total memberships are indicative of our scale and growth.
•
Desks are defined as the estimated number of desks available for sale and immediate use for any given date, plus the estimated capacity of “hot desks” (access to any available desk at a designated location) at each location. Desks represent management’s best estimate of desk capacity at a location based on our desk inventory management system and/or sales layouts and are not meant to represent actual counts of desks at our locations.

46


To evaluate the performance of our business, we monitor both financial metrics recorded in accordance with GAAP and certain non-GAAP financial measures detailed below. When evaluating our business using non-GAAP financial measures, we think about the performance of our business in three categories, including (i) the day-to-day operation of our existing portfolio of core WeWork buildings/communities that provide “Space-as-a-Service” to our members, (ii) our investment in the global and regional infrastructure that supports our current portfolio and serves as the foundation for our future growth, and (iii) current investments in future desk delivery and the expansion of our global community and the services we can provide to that expanded community.
•
Community Adjusted EBITDA. We define Community Adjusted EBITDA as membership and service revenue plus management fee income from advisory services provided to Branded Locations minus community operating expenses. Community operating expenses, our largest category of expenses, are the costs associated with servicing members in our locations and consist primarily of rent and tenancy expenses, core operating expenses such as utilities and internet, and the cost of creating a dynamic and vibrant community in our buildings, including salaries of our building staff and the cost of amenities. We believe Community Adjusted EBITDA is a supplemental indicator of the day-to-day operations of our existing portfolio of core locations.
•
Adjusted EBITDA before Growth Investments. We define Adjusted EBITDA before Growth Investments as Community Adjusted EBITDA minus general and administrative expenses. We believe this is an effective measure to evaluate our global and regional infrastructure investments that support our current portfolio and serve as the foundation for our future growth.
•
Adjusted EBITDA. We define Adjusted EBITDA as Adjusted EBITDA before Growth Investments minus Growth Investments. Growth Investments, which consist of pre-opening community expenses, sales and marketing expenses and growth and new market development expenses, which all primarily relate to entering new markets and opening new buildings, represent our current investment in future desk delivery and the expansion of our global community.
We also evaluate ARPPM, which represents our membership and service revenue (other than membership and service revenue generated from the sale of WeLive memberships and related services) divided by the average of the number of WeWork Memberships associated with Consolidated Locations as of the first day of each month in the period. We derive the majority of our revenue through the sale of WeWork Memberships. Changes in membership and service revenue are primarily impacted by new location openings and changes in ARPPM and Occupancy Rates. Revenues generated from the sale of We Memberships and WeLive memberships and additional services provided to these members are also included in membership and service revenue. Revenues generated from our other product offerings, sponsorships and other strategic events are excluded from membership and service revenue and included in Other revenue, as discussed below.
Key factors affecting our performance
Global footprint expansion
We have embarked on a strategic worldwide expansion program, opening locations in new cities as well as opening new locations in cities where we previously operated workspaces. We have grown from 44,000 Desks as of December 1, 2015 to 354,000 Desks as of September 1, 2018.
While the majority of our Desks are located in the United States and Canada, we have invested heavily in corporate infrastructure, sales and marketing and new market development to support and accelerate our international expansion. Our expansion into new international markets impacts our ARPPM, as revenue per member from the mix of members in new cities may be lower than in core cities that are more developed. Our ability to grow our global footprint efficiently may impact our financial performance.
Membership growth
We believe that macroeconomic trends including urbanization of the workforce and evolving work culture have led to increased demand for WeWork Memberships. Despite our Desks increasing from 214,000 as of December 1, 2017 to 354,000 as of September 1, 2018, our Occupancy Rate increased from 81% as of December 1, 2017 to 84% as of

47


September 1, 2018. Our membership base, which consisted of approximately 319,000 memberships as of September 1, 2018, has also grown commensurate with our physical expansion. Moving forward, the growth of our membership base may impact our ability to increase revenue and our visibility into future revenue.
Enterprise growth
Our recent success with Enterprise Members has fueled growth while increasing diversification of our member mix. The percentage of our total WeWork Memberships attributable to Enterprise Members has increased from approximately 8% as of December 1, 2015 to approximately 29% as of September 1, 2018. As of September 1, 2018, companies representing approximately 30% of the Global Fortune 500, including companies like Microsoft, Facebook, Amazon and General Motors, were either existing Enterprise Members or had signed future commitments with us. We plan to continue to invest in sales, design and development teams dedicated to Enterprise Members. Enterprise Members often sign longer-term membership agreements for a greater number of Desks relative to some of our other members, providing us increased revenue visibility. If our ability to acquire more Enterprise Members at favorable terms were to change, it would impact our revenue visibility.
Additional service and product offerings
We have recently launched or acquired new products and services that enhance value to our members and further our mission of fostering community. We believe these WeWork Ventures, including Powered by We, have the potential to become substantial revenue streams in the future. We expect to continue making significant investment into products and services that support our core WeWork offering. If these efforts do not scale successfully, it may impact our growth prospects and our ability to achieve profitability.
Components of results of operations
Membership revenue
Membership revenue represents license fees, net of discounts, from sales of our WeWork Memberships, We Memberships and WeLive memberships. The price of each membership is variable, based on the particular characteristics and geographical location of the space occupied by the member and any monthly allowances for conference room hours and prints/copies included in the base membership license fee. All memberships include access to the WeWork member network. Membership revenue is recognized monthly, on a ratable basis, over the life of the agreement, as access to office space is provided.
Service revenue
Service revenue primarily includes additional billings to WeWork members, We members and WeLive members for ancillary services in excess of the monthly allowances included in membership revenue. Services offered to members include access to conference rooms, printing, photocopies, initial set-up fees, phone and IT services, parking fees and other services.
Service revenue also includes commissions earned by the Company for various services and benefits provided to our members by third parties. Our services partnerships range from deals on clothing and gym memberships to below-market rates for personal and business services. Service revenue is recognized on a monthly basis as the services are provided.
Service revenue does not include any revenue recognized by WeWork Ventures. For example, services provided by Meetup and The Flatiron School are not included in our service revenue, even if those services have been delivered to a WeWork member. All revenue recognized by our consolidated companies not providing “Space-as-a-Service” are included in Other revenue as discussed below.
Other revenue
Other revenue includes income generated from sponsorships and ticket sales from WeWork branded events. Other revenue also includes any revenue generated by any new products or services not directly related to the operation of our WeWork and WeLive offerings, such as revenue generated by WeWork Ventures (other than WeLive). We

48


recognize revenue from design and development services performed under Powered by We contracts using the percentage-of-completion method based primarily on contract cost incurred to date compared to total estimated contract cost.
Community operating expenses
Community operating expenses include the costs required to operate an open member community location on a day-to-day basis and exclude pre-opening costs, depreciation and amortization and general sales and marketing, which are separately recorded.
Rent expense
Our most significant community operating expense is rent expense. We evaluate rent expense recognized on a straight-line basis over the life of the lease term in accordance with GAAP based on three key components, including Rent Contractually Paid or Payable, Adjustments for Impact of Straight-lining of Rent and Amortization of Lease Incentives.
Tenancy costs
Community operating expenses also include our share of real estate and related taxes and common area maintenance charges (“CAM”) relating to our leased locations used for member community operations. Real estate and related taxes and CAM are collectively referred to as tenancy costs. Adjusted Rent and tenancy costs are collectively referred to as lease costs.
Other community operating expenses
Other community operating expenses typically include utilities, cleaning expenses, office expenses, security expenses, credit card processing fees, and food and beverage costs. Community operating expenses also include personnel and related costs for the teams managing our community operations, including member relations, sales and occupancy maintenance and facilities management, as well as costs for corporate functions that directly support the operations of our communities, such as personnel costs associated with our billings, collections, purchasing and accounts payable functions. As our global community continues to expand, we expect to achieve further economies of scale on these community support functions, which is expected to have a positive impact on our future margins.
Other operating expenses
Other operating expenses relate to costs of operating and providing goods and services by other developed businesses not directly attributable to the operation of our WeWork and WeLive offerings and not related to other early-stage product offerings or business lines. For the year ended December 31, 2017, other operating expenses relate to the operation of Meetup and The Flatiron School for the periods subsequent to their acquisitions.
Growth Investments
Pre-opening community expenses, sales and marketing expenses and growth and new market development expenses, collectively, are referred to as “Growth Investments” and represent investments in the business that we believe will support our ability to continue to grow our flexible, collaborative workspace and service offerings.
Pre-opening community expenses
Pre-opening community expenses include all expenses for Consolidated Locations incurred before the locations open for member operations. The primary components of pre-opening community expenses are rent expense, our share of real estate and related taxes, common area maintenance charges, utilities, cleaning, personnel and related expenses, and other costs of opening our Consolidated Locations. Personnel expenses are included in pre-opening costs as we staff our locations prior to their opening to help ensure a smooth opening and a successful member move-in experience.

49


Sales and marketing expenses
Sales and marketing expenses consist primarily of expenses related to our general sales and marketing efforts, including advertising costs, member referral fees, personnel and related expenses related to our sales, marketing, branding, public affairs and events teams, and other costs associated with strategic marketing events. Strategic events, such as our WeWork Creator Awards program and our annual Summer Camp gathering, are investments we make in the continued expansion of our global community of creators. We have also made investments in our sales and marketing organization that is responsible for quickly achieving stabilized occupancy at new locations and proactively targeting our enterprise sales channel. Our sales and marketing efforts are primarily focused on new location openings, as once a location reaches maturity, its occupancy has tended to be self-sustaining.
Growth and new market development
To execute on our growth opportunities, we have established dedicated real estate, construction and design departments that are responsible for identifying, sourcing and managing the construction of our new locations and researching, exploring and initiating new regions and product or service offerings.
Growth and new market development expenses consist primarily of non-capitalized development, warehousing and logistics-related expenses, non-capitalized personnel and related expenses and stock-based compensation expense related to our development, design, product, research and real estate teams, cost of goods sold in connection with our Powered by We office design and development solutions, and expenses incurred operating our other WeWork Ventures that are not directly related to the operation of our WeWork and WeLive offerings.
General and administrative expenses
General and administrative expenses consist primarily of personnel and related expenses and stock-based compensation expense related to corporate employees, consulting, legal and other professional services expenses, occupancy costs for our corporate offices and various other costs we incur to manage and support our business.
Our general and administrative expenses include our investment in a leadership team with seasoned entrepreneurs and experienced leaders who have deep expertise in the real estate, hospitality, media and technology industries and who support our mission. As the extent of our global community of creators continues to expand, we expect to achieve further economies of scale on these investments, which we expect will have a positive impact on our future margins.
Interest and other income (expense)
Interest and other income (expense) is comprised of interest income, interest expense, earnings from equity method and other investments, and foreign currency gain (loss). Interest expense primarily includes non-cash interest expense associated with the accretion of asset retirement obligations and the amortization of deferred financing costs, interest expense recorded in connection with capital lease liabilities and interest expense relating to our outstanding letters of credit issued under our Senior Credit Facility and our Letter of Credit Facility, as required by our various leases.

50


Consolidated results of operations
The following tables set forth our consolidated statements of operations and other key metrics for the years ended December 31, 2016 and 2017:
(Amounts in thousands, except percentages and where noted)
Year Ended
December 31,
 
Change
 
Change
2016
 
2017
 
$
 
%
Consolidated statement of operations information:
 
 
 
 
 
 
 
Revenue:
 
 
 
 
 
 
 
Membership revenue
$
414,531

 
$
822,092

 
$
407,561

 
98.3
 %
Service revenue
19,824

 
44,346

 
24,522

 
123.7

Other revenue
1,744

 
19,566

 
17,822

 
N/M

Total revenue
436,099

 
886,004

 
449,905

 
103.2

Expenses:
 

 
 

 
 

 
 

Community operating expenses(1)
433,167

 
814,782

 
381,615

 
88.1

Other operating expenses(1)
—

 
1,677

 
1,677

 
N/M

Pre-opening community expenses
115,749

 
131,324

 
15,575

 
13.5

Sales and marketing
43,428

 
143,424

 
99,996

 
230.3

Growth and new market development
35,731

 
109,719

 
73,988

 
207.1

General and administrative expenses
115,346

 
454,020

 
338,674

 
293.6

Depreciation and amortization
88,952

 
162,892

 
73,940

 
83.1

Total expenses
832,373

 
1,817,838

 
985,465

 
118.4

Loss from operations
(396,274
)
 
(931,834
)
 
(535,560
)
 
135.1

Interest and other income (expense), net
(33,400
)
 
(7,387
)
 
26,013

 
(77.9
)
Pre-tax loss
(429,674
)
 
(939,221
)
 
(509,547
)
 
118.6

Income tax benefit (provision)
(16
)
 
5,727

 
5,743

 
N/M

Net loss
(429,690
)
 
(933,494
)
 
(503,804
)
 
117.2

Net loss attributable to noncontrolling interests
—

 
49,500

 
49,500

 
N/M

Net loss attributable to WeWork Companies Inc.
$
(429,690
)
 
$
(883,994
)
 
$
(454,304
)
 
105.7
 %
Key performance indicators and other key financial measures:
 

 
 

 
 

 
 
Desks
107,000

 
214,000

 
107,000

 
100.0
 %
Memberships
87,000

 
186,000

 
99,000

 
114.0
 %
ARPPM (in ones)
$
7,384

 
$
6,928

 
$
(456
)
 
(6.2
)%
Adjusted EBITDA(2)
$
(94,322
)
 
$
(193,327
)
 
$
(99,005
)
 
105.0
 %
Adjusted EBITDA Margin
(21.6
)%
 
(21.8
)%
 
(0.2
)%
 
 
Adjusted EBITDA before Growth Investments(2)
$
1,055

 
$
49,444

 
$
48,389

 
4,586.6
 %
Adjusted EBITDA before Growth Investments Margin
0.2
 %
 
5.7
 %
 
5.5
 %
 
 
Community Adjusted EBITDA(2)
$
95,943

 
$
233,147

 
$
137,204

 
143.0
 %
Community Adjusted EBITDA Margin
22.1
 %
 
26.9
 %
 
4.8
 %
 
 
 
 
 
 
 
 
 
 
N/M = Not meaningful
(1)
Exclusive of depreciation and amortization shown separately on the Depreciation and amortization line item.

51


(2)
See “Prospectus summary—Summary consolidated financial and operating information—Other key financial measures” for a reconciliation to the most comparable GAAP measure.
Operations as a percentage of revenue
The following table sets forth our consolidated statements of operations information as a percentage of revenue for the years ended December 31, 2016 and 2017.
 
Year Ended December 31,
 
2016
 
2017
Revenues:
 
 
 
Membership revenue
95.1
 %
 
92.8
 %
Service revenue
4.5

 
5.0

Other revenue
0.4

 
2.2

Total revenue
100.0

 
100.0

Expenses:
 
 
 
Community operating expenses (1)
99.3

 
92.0

Other operating expense (1)
—

 
0.2

Pre-opening community expenses
26.5

 
14.8

Sales and marketing
10.0

 
16.2

Growth and new market development
8.2

 
12.4

General and administrative expenses
26.4

 
51.2

Depreciation and amortization
20.4

 
18.4

Total expenses
190.8

 
205.2

Loss from operations
(90.8
)
 
(105.2
)
Interest and other income (expense), net
(7.7
)
 
(0.8
)
Pre-tax loss
(98.5
)
 
(106.0
)
Income tax benefit (provision)
—

 
0.6

Net loss
(98.5
)
 
(105.4
)
Net loss attributable to noncontrolling interests
—

 
5.6

Net loss attributable to WeWork Companies Inc.
(98.5
)%
 
(99.8
)%
 
 
 
 
(1)
Exclusive of depreciation and amortization shown separately on the Depreciation and amortization line item.
Comparison for the years ended December 31, 2016 and 2017
Membership revenue
Membership revenue increased $407.6 million, or 98.3%, to $822.1 million for the year ended December 31, 2017 from $414.5 million for the year ended December 31, 2016. The growth in membership revenue was primarily driven by growth in our membership community, including growth within existing locations, growth from new locations and growth in We Memberships. The WeWork community has grown to approximately 171,000 WeWork Memberships as of December 31, 2017 from 81,000 as of December 31, 2016 and to approximately 12,000 We Memberships as of December 31, 2017 from 6,000 as of December 31, 2016. As of December 31, 2017, there were 197 locations compared to 111 as of December 31, 2016. Additionally, the Company opened two WeLive locations during 2016. The increase in revenue attributable to new locations and the increase in Memberships was offset by a decline in the average membership revenue per WeWork Membership of $(476) to $6,576 for the year ended December 31, 2017 from $7,052 for the year ended December 31, 2016. The average membership revenue per WeWork Membership has experienced a decline, as we have expanded into many different global markets with

52


different pricing structures and have used discounts to assist in driving initial occupancy levels as we open new locations at a faster rate.
Membership revenue with respect to the approximately 3,000 memberships associated with our Branded Locations in India as of December 31, 2017 is not included within membership revenue and the calculation of average membership revenue per WeWork Membership as those Branded Locations are not consolidated. See “Other revenue” below for the impact to results of operations driven by the results of our Branded Locations.
Service revenue
Service revenue increased $24.5 million, or 123.7%, to $44.3 million for the year ended December 31, 2017 from $19.8 million for the year ended December 31, 2016. The growth in the WeWork community, as described above, is the primary driver of the increase in service revenue. As our memberships have grown, the services we have sold to new members has increased across all service categories. Our largest service revenue category was conference room revenue, which is generated when members purchase additional conference room space in excess of the monthly allowances included in membership revenue. Conference room revenue in 2017 increased $10.0 million, or 110.5% year-over-year from 2016. Initial set-up fee revenue in 2017 increased $4.1 million, or 218.2% year-over-year from 2016, as we have grown our memberships. Revenue generated from the sale of parking spaces increased $3.3 million, or 201.7%, and all other service revenues increased a total of $7.1 million, or 97.7%, for the year ended December 31, 2017, compared to the year ended December 31, 2016. Average service revenue per WeWork Membership has increased $20 per WeWork Membership to $352 for the year ended December 31, 2017, compared to $332 for the year ended December 31, 2016, as we have been successful in selling an expanding line of services to our members.
Other revenue
Other revenue increased $17.9 million, to $19.6 million for the year ended December 31, 2017 from $1.7 million for the year ended December 31, 2016. In 2017 we launched Powered by We, a plug-and-play office solution that leverages our design, construction and building operation expertise for companies, which represented $13.7 million of the increase in other revenue during the year ended December 31, 2017. During 2017, we also acquired several companies under WeWork Ventures. The collective revenue earned by these companies for the periods subsequent to their acquisitions during the year ended December 31, 2017 contributed $3.7 million of the increase.
We have also invested in a business that provides “Space-as-a-Service” under the WeWork brand. The revenue and expenses from these locations, which we refer to as Branded Locations, are not consolidated within our results of operations. During the year ended December 31, 2017, we earned $0.5 million in management fee income from advisory services provided to three Branded Locations in India as of December 31, 2017. No Branded Locations existed during 2016.
Community operating expenses
Community operating expenses increased $381.6 million to $814.8 million for the year ended December 31, 2017. As a percentage of total revenue, community operating expenses for the year ended December 31, 2017 was 92.0%, which represented a decrease of 7.3% as compared to 99.3% for the year ended December 31, 2016.

53


Community operating expenses includes the following:
 (Amounts in thousands, except percentages)
Year Ended December 31,
 
Change
 
Change
2016
 
2017
 
$
 
%
Rent expense
$
241,588

 
$
458,521

 
$
216,933

 
89.8
%
Tenancy costs
41,880

 
76,194

 
34,314

 
81.9

Employee compensation and benefits (excluding stock-based compensation)
61,409

 
102,801

 
41,392

 
67.4

Stock-based compensation
2,032

 
18,718

 
16,686

 
N/M

Other community operating expenses
86,258

 
158,548

 
72,290

 
83.8

Total community operating expenses
$
433,167

 
$
814,782

 
$
381,615

 
88.1
%
 
 
 
 
 
 
 
 
N/M = Not meaningful
Our most significant community operating expense is rent expense, which includes the following components and changes:
(Amounts in thousands, except percentages)
Year Ended December 31,
 
Change
 
Change
2016
 
2017
 
$
 
%
Rent Contractually Paid or Payable
$
171,330

 
$
347,305

 
$
175,975

 
102.7
%
Adjustments for Impact of Straight-lining of Rent
92,723

 
162,313

 
69,590

 
75.1

Amortization of Lease Incentives
(22,465
)
 
(51,097
)
 
(28,632
)
 
127.5

Total rent expense
$
241,588

 
$
458,521

 
$
216,933

 
89.8
%
 
 
 
 
 
 
 
 
The following table includes the components of rent expense included in community operating expenses as a percentage of total revenue:
 
Year Ended December 31,
2016
 
2017
Rent Contractually Paid or Payable
39.3
 %
 
39.3
 %
Adjustments for Impact of Straight-lining of Rent
21.3

 
18.3

Amortization of Lease Incentives
(5.2
)
 
(5.8
)
Total rent expense
55.4
 %
 
51.8
 %
 
 
 
 
The $176.0 million increase in Rent Contractually Paid or Payable, which is paid after locations open for business and after the expiration of any rent holiday, was primarily driven by the 86 new location openings that occurred throughout the year ended December 31, 2017 and the 58 new location openings that occurred during the year ended December 31, 2016. The increase in Rent Contractually Paid or Payable for the period is also impacted by escalations in base rent payments. As a percentage of total revenue, Rent Contractually Paid or Payable for the period was consistent at 39.3% for the year ended December 31, 2017 and the year ended December 31, 2016.
The $69.6 million increase in Adjustments for Impact of Straight-lining of Rent was primarily driven by rent holidays and rent escalations given the majority of our leases are in the first half of the life of the lease. The impact of straight-line rent typically increases rent expense in the first half of the life of a lease, when rent expense recorded in accordance with GAAP exceeds cash payments made, and then decreases rent expense in the second half of the life of the lease when rent expense is less than the cash payments required.

54


The $28.6 million increase in Amortization of Lease Incentives benefit was also primarily driven by the new locations that opened during the year ended December 31, 2017, and locations that were only open for a portion of the year ended December 31, 2016.
The increase in the number of open locations and the growth in our global community also resulted in a $34.3 million, or 81.9%, increase in total tenancy costs (including real estate and related taxes and common area maintenance charges) as compared to the year ended December 31, 2016.
Employee compensation and benefits expense increased $41.4 million, or 67.4% compared to the year ended December 31, 2016. To support the operations of our growing community, we made significant personnel investments in teams that run the day-to-day building operations and functions such as billings, collections, purchasing and accounts payable, that support our buildings.
Stock-based compensation expenses increased $16.7 million in the year ended December 31, 2017 from 2016, mainly driven by a secondary stock offering in October 2017, through which common shares were acquired from WeWork employees at a price greater than the fair market value of the shares (the “2017 Secondary Offering”), resulting in additional stock-based compensation expense of $12.2 million during the year ended December 31, 2017. The remaining $4.5 million increase in stock-based compensation expense is attributable to the increase in personnel, who have received new grants, and additional grants to existing employees, both at a stock price higher than those of previous grants.
The growth in our global community was also the primary driver of the remaining $72.3 million total increase in all other community operating expenses. As a percentage of total revenue, all other community operating expenses for the period declined slightly to 17.9% for the year ended December 31, 2017, compared to 19.8% for the year ended December 31, 2016.
Other operating expenses
Other operating expenses increased to $1.7 million for the year ended December 31, 2017 from nil for the year ended December 31, 2016. Other operating expenses related to costs of operating and providing goods and services by other developed WeWork Ventures not related to early-stage product offerings or business lines. For the year ended December 31, 2017, other operating expenses relate to the operation of Meetup and The Flatiron School for the periods subsequent to their acquisitions during the year ended December 31, 2017.
Pre-opening community expenses
Pre-opening community expenses increased $15.6 million, or 13.5%, to $131.3 million for the year ended December 31, 2017 from $115.7 million for the year ended December 31, 2016. We opened 86 and 58 new locations during the years ended December 31, 2017 and 2016, respectively, and there were 62 and 35 locations where we had taken possession of the new leased spaces but the location had not yet opened for member operations as of December 31, 2017 and 2016, respectively. The increase in pre-opening costs were mitigated through the refinement of our design and construction processes, including investments in new technology, which help us to quickly and efficiently redevelop a space, typically resulting in only four to six months from the date we take possession of the space under the lease agreement to the opening date.
Pre-opening community expenses includes the following key components and changes:
(Amounts in thousands, except percentages)
Year Ended 
December 31,
 
Change
 
Change
2016
 
2017
 
$
 
%
Rent expense
$
103,613

 
$
112,851

 
$
9,238

 
8.9
%
Tenancy costs
5,357

 
11,684

 
6,327

 
118.1

Other pre-opening community expenses
6,779

 
6,789

 
10

 
0.1

Total pre-opening community expenses
$
115,749

 
$
131,324

 
$
15,575

 
13.5
%
 
 
 
 
 
 
 
 

55


Our most significant pre-opening community expense is rent expense for the period before a location is open for member operations, which includes the following components and changes:
(Amounts in thousands, except percentages)
Year Ended 
December 31,
 
Change
 
Change
2016
 
2017
 
$
 
%
Rent Contractually Paid or Payable
$
10,822

 
$
6,973

 
$
(3,849
)
 
(35.6
)%
Adjustments for Impact of Straight-lining of Rent
94,526

 
108,285

 
13,759

 
14.6

Amortization of Lease Incentives
(1,735
)
 
(2,407
)
 
(672
)
 
38.7

Total rent expense
$
103,613

 
$
112,851

 
$
9,238

 
8.9
 %
 
 
 
 
 
 
 
 
The $(3.8) million decline in Rent Contractually Paid or Payable and the increase in amortization of lease incentive benefit of $(0.7) million is generally the result of our ability to negotiate leases with more favorable lease terms, including improved lease rates, longer free rent periods, long-term revenue-sharing agreements with building owners and/or larger tenant improvement allowances. Rent Contractually Paid or Payable represented only 6.2% of the total pre-opening rent expense recorded in accordance with GAAP for the year ended December 31, 2017, compared to 10.4% for the year ended December 31, 2016.
The $13.8 million increase in Adjustments for Impact of Straight-lining of Rent included in pre-opening community expense is primarily driven by straight-line rent expense during rent holidays provided for a limited time before our locations open for operations. During this period, rent expense recorded in accordance with GAAP exceeds cash payments required to be made. As the number of location openings and the number of pre-open locations at the end of each period has increased as described above, so too have Adjustments for Impact of Straight-lining of Rent relating to those pre-open locations.
Tenancy costs increased $6.3 million period over period, primarily driven by the increase in pre-open locations throughout the year.
Sales and marketing
Sales and marketing expenses increased $100.0 million, or 230.3%, to $143.4 million for the year ended December 31, 2017 from $43.4 million for the year ended December 31, 2016. As a percentage of total revenue, sales and marketing expenses increased from 10.0% for the year ended December 31, 2016, to 16.2% for the year ended December 31, 2017.
Sales and marketing expenses included the following:
(Amounts in thousands, except percentages)
Year Ended 
December 31,
 
Change
 
Change
2016
 
2017
 
$
 
%
Employee compensation and benefits (excluding stock-based compensation)
$
14,048

 
$
38,920

 
$
24,872

 
177.1
%
Stock-based compensation
775

 
4,244

 
3,469

 
447.6

Advertising
14,786

 
40,945

 
26,159

 
176.9

WeWork Creator Awards
—

 
16,083

 
16,083

 
N/M

Other strategic events
5,711

 
12,225

 
6,514

 
114.1

Member referral fees
5,441

 
15,957

 
10,516

 
193.3

Other
2,667

 
15,050

 
12,383

 
464.3

Total sales and marketing expenses
$
43,428

 
$
143,424

 
$
99,996

 
230.3
%
 
 
 
 
 
 
 
 

56


Sales and marketing employee compensation and benefits increased $24.9 million due to our investment in additional and more experienced sales and marketing personnel.
The $3.5 million increase in stock-based compensation expense period over period included $2.9 million relating to the 2017 Secondary Offering, resulting in additional stock-based compensation expense during the year ended December 31, 2017.
The increase in sales and marketing was also driven by higher spend on advertising of $26.2 million. Community events, such as the WeWork Creator Awards program, annual Summer Camp gathering and weekly networking sessions, are important in fostering connectivity across our global community and serve as effective marketing tools. The costs associated with these efforts increase as the number of members grows and contributed $22.6 million to the increase in sales and marketing expenses.
The remaining $22.8 million increase in all other sales and marketing expenses described above represent our investment in efforts to increase sales. These sales and marketing efforts helped drive the 103.2% increase in total revenue growth over the comparative period. Excluding the impact of the WeWork Creator Awards program and other strategic events, sales and marketing expenses represented 13.0% of total revenue for the year ended December 31, 2017, compared to 8.6% for the year ended December 31, 2016.
Growth and new market development
Growth and new market development expenses increased $74.0 million, or 207.1%, to $109.7 million for the year ended December 31, 2017 from $35.7 million for the year ended December 31, 2016. Overall, our investment in growth and new market development-related expenses as a percentage of total revenues increased 4.2% to 12.4% for the year ended December 31, 2017, compared to 8.2% for the year ended December 31, 2016, as we continued to make investments in our future growth and expansion.
The increase was primarily the result of a $23.8 million increase in compensation and related benefits, including stock-based compensation, driven by our investment in additional personnel to strengthen our real estate, construction and design departments. The increase included $8.5 million of stock-based compensation relating to the 2017 Secondary Offering.
We also incurred an additional $8.1 million in consulting and other professional fees and travel costs associated with our expansion in existing markets as well as researching, exploring and initiating new regions and product or service offerings. During 2017, we expanded into certain key markets, such as Asia and Latin America. Our overall growth and expansion into new markets was also a primary contributing factor to a $19.1 million increase in overall warehousing, storage and other shipping costs.
During the year ended December 31, 2017, we also incurred $12.7 million in direct external construction costs relating to Powered by We, an office space offering that we launched in 2017, and a $2.9 million one-time payment for talent acquisition, both of which did not occur during year ended December 31, 2016. The remaining $7.4 million increase relates to various other costs associated with our growth.
General and administrative expenses
General and administrative expenses increased $338.7 million, or 293.6%, to $454.0 million for the year ended December 31, 2017 from $115.3 million for the year ended December 31, 2016. General and administrative expenses as a percentage of total revenues increased to 51.2% for the year ended December 31, 2017 from 26.4% for the year ended December 31, 2016. The increase was primarily driven by stock-based compensation expenses and our investment in corporate personnel and an expanded global leadership team to support our current and future growth.
Our most significant general and administrative expense was compensation and related benefits. Stock-based compensation was $260.7 million for the year ended December 31, 2017, compared to $17.4 million for the year ended December 31, 2016. The increase was primarily related to the 2017 Secondary Offering. Excluding the impact of stock-based compensation expense, general and administrative expenses as a percentage of total revenues

57


remained relatively consistent at 21.8% for the year ended December 31, 2017, compared to 22.5% for the year ended December 31, 2016.
The total of all other compensation and related benefits also increased $42.4 million to $80.5 million for the year ended December 31, 2017 from $38.1 million for the year ended December 31, 2016. This increase was primarily driven by our investment in additional corporate personnel and an expanded global leadership team to support our current and future anticipated growth. General and administrative expenses were also impacted by expenses related to stock issued for services rendered by consultants of $7.3 million and $1.6 million for the years ended December 31, 2017 and 2016, respectively.
Depreciation and amortization expenses
Depreciation and amortization expenses increased $73.9 million, or 83.1%, to $162.9 million for the year ended December 31, 2017 from $89.0 million for the year ended December 31, 2016 driven by the increase in leasehold improvements, furniture and equipment primarily associated with the 86 new location openings in 2017 and the 58 new location openings that occurred throughout the year ended December 31, 2016, as well as continued expansion of previously opened locations.
Interest and other income / expense, net
Interest and other income/expense, net decreased $26.0 million to $7.4 million net expense for the year ended December 31, 2017 from $33.4 million net expense for the year ended December 31, 2016. The change included a net increase in foreign currency gains of $52.6 million primarily driven by the increase in foreign currency-denominated intercompany transactions that are not of a long-term investment nature as a result of our international expansion and currency fluctuations against the dollar. There were 74 international locations as of December 31, 2017, compared with 31 international locations as of December 31, 2016. The change was offset by a $30.5 million increase in loss from equity method investments.
Interest income also increased by $7.0 million, primarily driven by our 2017 capital raising activities and the resulting increase in interest income earned on our increased balance of cash and cash equivalents held. Interest expense increased by $3.1 million primarily related to an increase in interest expense due to an increase in outstanding letters of credit issued under our Senior Credit Facility.
Income tax benefit/provision
Income tax benefit was $5.7 million for the year ended December 31, 2017 compared to a $16 thousand provision for the year ended December 31, 2016. This net benefit increase included $2.3 million of current tax expense in foreign jurisdictions, offset by $8.0 million of deferred tax benefit related to U.S. federal, state and foreign juris