Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2023

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Note 2. Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation — The accompanying unaudited Condensed Consolidated Financial Statements and notes to the unaudited Condensed Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP” or "GAAP") for interim financial reporting. In accordance with such rules and regulations, certain information and accompanying note disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted, although the Company believes the disclosures included herein are adequate to make the information presented not misleading. In the opinion of management, the accompanying unaudited Condensed Consolidated Financial Statements reflect all normal recurring adjustments, which are considered necessary for the fair presentation of the financial position of the Company at June 30, 2023 and the results of operations for the interim periods presented. The operating results for the periods presented are not necessarily indicative of the results that may be expected for the year ending December 31, 2023. The accompanying unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2022, included in WeWork Inc.'s Annual Report on Form 10-K for the year ended December 31, 2022, filed on March 29, 2023 (the "2022 Form 10-K").

Other than the changes described below, no material changes have been made to the Company's significant accounting policies disclosed in Note 2, Summary of Significant Accounting Policies, in the 2022 Form 10-K. Certain terms not otherwise defined in this Form 10-Q have the meanings specified in the 2022 Form 10-K.

The Company operates as a single operating segment. See Note 20 for further discussion on the Company's segment reporting.

The accompanying unaudited Condensed Consolidated Financial Statements include the accounts of the Company, its majority‑owned subsidiaries and variable interest entities ("VIEs") for which the Company is the primary beneficiary. All intercompany accounts and transactions have been eliminated in consolidation.

The Company is required to consolidate entities deemed to be VIEs in which the Company is the primary beneficiary. The Company is considered to be the primary beneficiary of a VIE when the Company has (i) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (ii) the obligation to absorb losses or receive benefits that could potentially be significant to the VIE.

JapanCo, LatamCo, WeCap Manager, and WeCap Holdings Partnership (each as defined in Note 8) are the Company's only consolidated VIEs as of June 30, 2023. See Note 8 for discussion of the consolidated VIE transactions during the three and six months ended June 30, 2023 and 2022. See Note 9 for discussion of the Company’s non-consolidated VIEs.

Liquidity and Going Concern — The accompanying unaudited Condensed Consolidated Financial Statements are prepared in accordance with U.S. GAAP applicable to a going concern. This presentation contemplates the realization of assets and the satisfaction of liabilities in the normal course of business and does not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of the uncertainties described below.

Pursuant to ASC 205-40, Presentation of Financial Statements — Going Concern (“ASC 205-40”), management must evaluate whether there are conditions and events, considered in aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for one year after the date that these Condensed Consolidated Financial Statements are issued. In accordance with ASC 205-40, management’s analysis can only include the potential mitigating impact of management’s plans that have not been fully implemented as of the issuance date if (a) it is probable that management’s plans will be

effectively implemented on a timely basis, and (b) it is probable that the plans, when implemented, will alleviate the relevant conditions or events that raise substantial doubt about the Company’s ability to continue as a going concern.

Evaluation in conjunction with the issuance of the June 30, 2023 unaudited Condensed Consolidated Financial Statements

The Company has incurred net losses of $0.7 billion, $2.3 billion, $4.6 billion, and $3.8 billion, for the six months ended June 30, 2023 and the years ended December 31, 2022, 2021, and 2020, respectively, and negative cash flow from operating activities of $0.5 billion, $0.7 billion, $1.9 billion, and $0.9 billion, respectively for the same periods. The recent macroeconomic environment has caused higher member churn and weaker demand than contemplated under the Company's business plan, specifically in the second quarter of 2023. Consequently, membership as of June 30, 2023 was less than planned, resulting in a reduction in projected revenue and cash flows for the twelve-month period included in the going concern evaluation.

As of June 30, 2023, the Company had $205 million in cash and cash equivalents, including $46 million held at its consolidated VIEs, and $475 million in delayed draw note commitments, resulting in total liquidity of $680 million. The Company issued $175 million of the delayed draw notes in July 2023. See Note 12 for discussion of the delayed draw notes.

As a result of our losses and our projected cash needs, which have been impacted by the recent increases in member churn, combined with our current liquidity level, substantial doubt exists about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is contingent upon successful execution of management’s intended plan over the next twelve months to improve the Company’s liquidity and profitability, which includes, without limitation:

•Reducing rent and tenancy expense by taking additional restructuring actions and negotiating more favorable lease terms.

•Increasing revenue by reducing member churn and increasing new sales.

•Controlling expenses and limiting capital expenditures.

•Seeking additional capital through the issuance of debt or equity securities, or the sale of assets.

The consolidated financial statements do not include any adjustments that may result from the outcome of this going concern uncertainty.

Use of Estimates — The preparation of the unaudited Condensed Consolidated Financial Statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amount of revenues and expenses during the reporting periods.

Estimates inherent in the current financial reporting process inevitably involve assumptions about future events. Actual results could differ from those estimates. This includes the net operating income assumptions in the Company's long-lived asset impairment testing, the timing of capital expenditures and fair value measurement changes for assets and liabilities that the Company measures at fair value and its assessment of its ability to continue to meet its obligations as they come due.

The Company's net operating assumptions and liquidity forecasts are based upon continued execution of its operational restructuring program and also includes management's best estimate of the currently evolving macroeconomic landscape, including a potential economic recession, rising interest rates, inflation, and the slower than expected recovery in certain markets from the impact of the COVID-19 pandemic. These macroeconomic factors may continue to have an impact on WeWork's business and its liquidity needs; however, the extent to which the Company's future results and liquidity needs are further

affected will largely depend on the extent to which our members renew their membership agreements, the effect on demand for WeWork memberships, any permanent shifts in working from home and the Company's ongoing lease negotiations with its landlords, among others.

Reclassifications — Certain reclassifications have been made to prior years' financial information to conform to the current year presentation. These reclassifications include the inclusion of 5.00% Senior Notes in Long-term debt, net, and the inclusion of Warrant liabilities, net in Other liabilities for all periods presented on the Condensed Consolidated Balance Sheets. These reclassifications also include the aggregation of Income (loss) from equity method and other investments, Interest income, and Gain (loss) from change in fair value of warrant liabilities into one financial statement line item, "Other income (expense), net" on the Condensed Consolidated Statements of Operations.

Income Taxes — The Company calculates its quarterly income tax provision pursuant to Accounting Standard Codification ("ASC") 740-270, Income Taxes — Interim Reporting, which provides that a Company cannot recognize a tax benefit in its annual effective tax rate for any jurisdiction with a pre-tax book loss and full valuation allowance (“excluded jurisdictions”). For the three months ended June 30, 2023 and 2022, the Company recorded an income tax provision of $5 million and $3 million, respectively, resulting in effective tax rates of 1.28% and 0.47%, respectively. For the six months ended June 30, 2023 and 2022, the Company recorded an income tax provision of $2 million and $2 million, respectively, resulting in effective tax rates of 0.29% and 0.18%, respectively. As of June 30, 2023 and December 31, 2022, the Company had net deferred income tax assets of $8 million and $2 million, respectively, which were included within other assets on the accompanying Condensed Consolidated Balance Sheets.

The Company analyzed its various tax positions and did not identify any material uncertain tax positions for the three months ended June 30, 2023 and 2022.

Tax Asset Preservation Plan

In April 2023, the Company entered into a Tax Asset Preservation Plan with Continental Stock Transfer & Trust Company, as rights agent (the “Tax Asset Preservation Plan”). The purpose of the Tax Asset Preservation Plan is to facilitate the Company’s ability to preserve its NOLs and its other tax attributes in order to be able to offset potential future income taxes for federal income tax purposes. In connection therewith, the Company’s Board declared a dividend of (a) one Class A Right (a “Class A Right”) in respect of each share of Class A Common Stock of the Company and (b) one Class C Right (a “Class C Right” and, together with the Class A Rights, the “Rights”) in respect of each share of Class C Common Stock of the Company. As further set forth in the Tax Asset Preservation Plan, each Class A Right initially represents the right for the holder to purchase from the Company one ten-thousandth (a “Unit”) of a share of Class A common stock for a purchase price equal to the quotient of (x) $8.00 divided by (y) ten thousand, and each Class C Right initially entitles its holder to purchase from the Company, one Unit of a share of Class C common stock for a purchase price equal to the quotient of (x) $8.00 divided by (y) ten thousand, in each case, subject to adjustment pursuant to the terms of the Tax Asset Preservation Plan. The Tax Asset Preservation Plan had no impact on the consolidated financial statements as of June 30, 2023.

Debt modifications and extinguishments — When the Company modifies, exchanges or extinguishes debt, it first evaluates whether such modification, exchange or extinguishment qualifies as a troubled debt restructuring. To qualify as a troubled debt restructuring in accordance with ASC 470-60, Debt — Troubled Debt Restructuring, the debtor must experience a financial difficulty and the creditor must grant a concession to the debtor for economic or legal reasons related to the debtor's financial difficulties. If a troubled debt restructuring has occurred, the Company recognizes a gain on extinguishment of debt equal to the carrying amount of the extinguished debt, net of unamortized deferred financing costs, in excess of the fair value of the assets transferred and undiscounted cash flows specified by the new instruments.

If a troubled debt restructuring is not determined to have occurred, the Company evaluates the modification in accordance with ASC 470-50, Debt — Modifications and Exchanges. In accordance with ASC 470-50 if the modifications are considered to be substantial, the modification is accounted for as an extinguishment of debt.