'We fell short in Q4': WeWork only hit 73% of an internal enterprise growth target for 2019, leaked memo shows

• WeWork only hit 73% of a key growth target, according to internal data obtained by Business Insider.
• The company is betting on enterprise customers - companies with more than 500 employees - as a more stable and profitable customer base than small businesses.
• WeWork added 108,000 enterprise desks last year, which was only 73% of its target.
• For more stories about WeWork, click here.

WeWork is focused on inking deals with big companies, betting that working with Fortune 500 businesses like IBM and BlackRock will provide more stability and value than small startups and freelancers.

But the embattled office company came in under target for adding desks with big businesses last year, according to data obtained by Business Insider.

"While we fell short in Q4, you never gave up," one executive wrote to employees in communications reviewed by Business Insider.

Because the company has not released its fourth-quarter financials to bondholders - last year's numbers came in late March - it's not yet possible to get a full accounting of WeWork's bottom line. But the leaked numbers, along with third-party data, provide key indicators of the company's economic picture.

The following figures come from the North American enterprise team, which focuses on leases with companies with over 500 employees. They are unaudited.

• 2019: 108,000 new desks for enterprise clients in North America, representing 73% of the target.
• 2019: $1.9 billion in "committed revenue" - noncancelable contracts that will turn into revenue - which represented 113% of the goal.
• Fourth quarter: 21,000 desks added, with more than $240 million in committed revenue.

Committed revenue is an important metric that WeWork tracks in quarterly reports to bondholders. In its third-quarter presentation reviewed by Business Insider, the company had a total of $4.3 billion in committed revenue backlog in the third quarter.

"WeWork signed fewer new leases in the fourth quarter of 2019 as we put in place our go-forward strategy that's focused on profitable growth," a spokeswoman for WeWork said in a statement. She declined to comment on the numbers leaked to Business Insider.

WeWork added a total of 253,000 new desks through the third quarter of 2019, compared with 140,000 over the same time period in 2018, per investor documents reviewed by Business Insider. The company did not break out how many of those desks were for enterprise customers.

Overall, enterprise made up 43% of WeWork's third-quarter memberships - up from 34% a year ago.

Overall, the company lost $1.3 billion in the third quarter, compared with $500 million in the third quarter of 2018, according to its third-quarter financials reviewed by Business Insider.

In the spring, Artie Minson, who is now one of WeWork's co-CEOs, told Business Insider that WeWork was "really just getting started" with enterprise clients.

"From an employer standpoint, WeWork is a better experience for their employees and meaningfully cheaper on a per-employee basis" than traditional office space, Minson, then WeWork's copresident and chief financial officer, said. "The CEOs like us and the CFOs like us."

WeWork, in turn, likes those clients back. Big businesses sign average commitments of 23 months, compared with 14 months for non-enterprise clients, per an October WeWork investor presentation.

Money-losing deals with Sprint and Bank of America

Some of WeWork's enterprise deals were done at a loss last year, according to the person familiar with the deals, including Sprint and Bank of America. A representative for Sprint declined to comment, and a representative for Bank of America did not respond to a request for comment.

Bank of America was one of the nine banks working on WeWork's initial public offering, which was ultimately shelved. WeWork signed deals with a number of those banks for office renovations or memberships, including UBS and Citi. It's common for companies set to go public to do business with IPO advisers, including banks and law firms.

Adam Neumann, who was ousted as CEO in September, often pushed for deals to be done regardless of the economics, said multiple people who worked closely with him.

WeWork chairman Marcelo Claure, who SoftBank installed in September to right the company, was the CEO of SoftBank-owned Sprint until May 2018. SoftBank is WeWork's largest investor.

In November, Claure brought in Publicis, the ad agency holding company, to WeWork, and tapped Publicis chairman Maurice Levy as interim chief marketing officer. Publicis was the ad agency for Sprint during Claure's tenure.

Leases show fourth-quarter slowdown

Another fourth-quarter metric indicates a future slowdown in WeWork's activity. Per real estate company CBRE, WeWork signed just four new US leases with landlords in the fourth quarter. Those leases represented a 93% drop from an average of 2.54 million square feet leased over the previous four quarters. Real estate data is notoriously opaque; data from another major real estate company, JLL, says that WeWork had no new leases in the fourth quarter.

As WeWork inks fewer deals with landlords, the company will have less space to then sublease in the future.

All flexible office companies surveyed by CBRE saw a slowdown in the fourth quarter, but WeWork had the most significant change.

Knotel leased 80% less space in the fourth quarter than its one-year average, per CBRE. On Friday, the company laid off 7% of its staff in a restructuring first reported by The Real Deal.

"Knotel has grown from two employees in one city to 500+ people in 17 cities over the past four years to become the leading global flexible workspace platform, and our business will continue to evolve and change to best meet the needs of our customers," a Knotel representative said in a statement to Business Insider.

CBRE called the industry slowdown "expected" after WeWork decided to slow its rapid expansion.

On Friday, Business Insider published 58 pages of correspondence between the SEC and WeWork about the coworking company's IPO filing and questions or concerns the agency had about the document.

Have a WeWork tip? Contact this reporter via encrypted messaging app Signal at +1 (646) 768-1627 using a non-work phone, email at mmorris@businessinsider.com, or Twitter DM at @MeghanEMorris. (PR pitches by email only, please.) You can also contact Business Insider securely via SecureDrop.