Q1 2022 WeWork Inc Earnings Call
Almost all of our membership agreements for LIFO inflation indexing, thereby functioning as offset to any inflation linked adjustments direct.
As for other building level of expenses consumables, which are the operating expenses most impacted by inflation represents less than 1% of direct location operating expenses. So even a 25% increase in consumables would impact building margin by less than a quarter of a percentage point based on our Q1 financials.
Similarly, utilities, which may reference, which may be impacted by oil prices.
<unk> represents 2% of our direct location operating expenses, so a 25% increase in utility expenses would impact building margin by just half a percentage point in this way our cost between rent and tenancy and direct location Opex are resilient to inflation and many of the macro challenges the loyalty space.
Today, creating a tailwind for our business model as our cost structure gives us a competitive advantage.
Finally, as it relates to current foreign exchange rate environment. Our business is naturally hedged as we generally collect revenue and expenses in the same currency. Therefore, while revenue may be impacted by exchange rate volatility the impact on EBITDA will be more muted.
With that I'll turn to our Q1 results.
First quarter performance reaffirms the transformation of the traditional office market landscape and we look value proposition looking.
Looking at our space as a service business. Our first quarter results continued the positive momentum that we saw in 2021.
On a system wide basis, we ended the quarter with 916000 workstations across 765 locations and 626000 physical memberships are consolidated operations accounted for 746000 workstations across 633 locations and 500.
1000, physical memberships as of March this membership growth, representing 7% quarter over quarter increase and 30% year over year increase.
<unk> gross debt sales, which includes new desk sales as well as renewals with 211000 in the first quarter or the equivalent of 12 seven.
7 million square feet sold.
On a consolidated basis gross debt sales were the highest sales reported since Q1 2020 with 166000 deaths are the equivalent of 10 million square feet sold in the first quarter.
System wide, new sales 106000 in the fourth quarter and consolidated new sales were 83000 in the first quarter equating to $6 3 million and 5 million square feet sold respectively.
Similar to 2021, we will continue to represent an outsized share of market demand in the first quarter. In Q1, we work represented approximately half a percent of all commercial office space in both the U S and European markets, yet so the equivalent of 9% and <unk>.
10%, respectively of total square feet leased in the quarter.
At the market level, we look to Q1 2022 gross sales in Manhattan, and San Francisco were equivalent to 17% of the traditional office market leasing on a square foot basis, while we will explore the full use of 5 million square feet in New York, and 2 million square feet in San Francisco account for approximately.
Maybe 1% of total office stock in the two cities.
We look at leasing activity represented 25% of Boston pick up 8% of Miami's, despite representing 2% or less of the total office stock in each of those markets.
While Miami easing also represent an outsized portion of demand in the quarter or 92% occupancy levels creates natural leasing limits, giving low inventory available to be sold.
We works gross sales equate to 39% of London's traditional office leasing a market that is leading the shift reflects 13% of Dublin's leasing 8% of Paris with leasing and 15% of Berlin's leasing despite representing approximately 1% or less of the total office stock.
In each of those markets.
The average commitment.
Small and medium businesses was 14 months in the first quarter and the average commitment term for enterprise was 26 months across all physical memberships are average commitment length was 20 months.
Monthly churn continued to decrease for the third consecutive quarter, reaching 3% in the first quarter versus three 5% in the prior quarter.
Physical occupancy was 67% as of the end of the quarter, a four percentage point increase from Q4, driven by the strength in our international markets, especially across Europe .
Include the incremental 19000 net memberships that were already contracted to move in a physical occupancy, including signed but not occupied memberships was 70% as of the end of the quarter.
Turning to pricing.
Physical memberships ARPA for the first quarter held steady at $484 unchanged from the prior quarter.
The prior quarter.
Pricing for new contracts signed in the quarter, a leading indicator of future ARPA as.
As prior commitment sold off increased by mid to high single digits on a consolidated basis quarter over quarter and also increase in each of our four regions, the United States, and Canada International Latin America and Japan.
We also saw a similar increase in renewal prices versus prior contract levels across both the United States and Canada and international regions.
This increase will be reflected in the awesome in the next quarter or two.
We will access offerings continued to find traction both as a highly flexible standalone solution and as a complement to members dedicated office space.
Companies use all access and a variety of ways to provide greater flexibility in order to attract and retain talent.
To be more deliberate and tailoring space solutions to the needs of mobile Workforces and to help employees navigate hybrid work models by providing a productive and energizing goods space and a location proximate to employ homes.
Our all access product also represents a more affordable alternative than a traditional physical space coming in at about 50% of the price of a traditional physical space in this way the product provides in excess of the entry point to the <unk> platform and creates the opportunity to upgrade to longer term membership options.
On the business side, all access represents another way to monetize our existing physical footprint, we have talked about the calories of this product to the airplane and gym membership model in that we're able to oversell all access memberships as we leverage our booking system and capacity algorithms as.
As of the first quarter, all access memberships had grown to 55000, an increase of 22% quarter over quarter and equivalent to one seven times, our current available all access capacity.
From that perspective, and taking into account the conference room booking and other service fees paid by all access members.
Our all access product.
Already monetizing our existing space at approximately the same rate as our space as a service solution and has room to grow.
55000, all access members, representing an additional seven percentage points of occupancy on top of our physical occupancy.
All access revenue for the quarter was $36 million based on 55000, all access memberships at the Q1 ARPA of $235, yielding an annual run rate revenue of $155 million as of March.
The strong increase in physical memberships combined with a stable RPM and continued increase in all access revenue resulted in the total revenue of $765 million in the first quarter, which exceeded the high end of our $740 to $760 million prior.
And by $15 million from the midpoint of $750 million.
This represents a 7% increase from Q4 revenue of $718 million and a 28% increase year over year.
We continued to grow revenue, while tightly managing a building level costs, thus leading to significant building margin improvements in the first quarter.
<unk> margin was $34 million in the first quarter, representing our first quarter of positive building margin since Q1 2020.
Our building margin in the first quarter represented a $43 million improvement quarter over quarter, and a $243 million improvement year over year.
As of the first quarter, our international region was building margin profitable, reaching 75% physical occupancy.
Our U S and Canada regions at 64% physical occupancy and we also expect the region to become building margin profitable in the next quarter.
Together these two regions comprise our wholly owned businesses and represent 86% of our revenue in the first quarter.
Finally, we announced a partnership with you already a leading provider of real estate management and property management software for commercial real estate owners and operators across 12 billion square feet.
100000 commercial properties globally.
The partnership will combine our broad network of over 32000 member organizations and an accurate understanding of these members' needs with the already has 40 years of experience and proven expertise in creating real estate management platforms to develop an end to end solution for real estate management needs. The solution will include <unk>.
Booking and capacity management solutions as.
As well as you all these lease administration and real estate management tools. We're excited to begin commercially selling by July of 2022.
Lastly, and before I turn it over to Ben I wanted to touch on our go forward franchising efforts on a square footage basis, 37% of our portfolio is comprised of franchises or joint ventures. As we have said previously we expect to expand our franchise model.
As part of our asset light growth strategy.
Our market is currently operating under franchise or joint venture arrangements demonstrate the value of this model and prove that experienced well capitalized local partners can optimize our business and region will also charting towards market growth.
India and Israel are both adjusted EBITDA positive.
This morning, we look India signed an agreement for 660000 square feet with the Photonics group in Noida partnering with me will allow us commercial landlords to diversify the offerings.
Landlords will be able to deliver flexible space themselves rather than simply leasing the space to a flex space, operator, giving them the opportunity to capitalize on the growing demand for these versatile office basis.
Although landlords of ball.
Absorb the cost of the fit outs they receive a greatest share the revenue and reduce the risk of leasing to a single tenant.
Linda <unk> CEO of Colliers, India in Q1, 2022 flex operators accounted for 15% of the total leasing and we see this number only going higher now I'd like to turn it over to Ben to walk through our first quarter financial results.
Thank you Sandeep.
First quarter revenue of $765 million increased $47 million or 7% quarter over quarter, and 28% year over year, driven by a 7% increase in physical memberships at 24% increase in access revenue versus the fourth quarter.
Building margin was positive $34 million in the first quarter, a $43 million improvement.
After over quarter at $243 million improvement year over year.
As Dan mentioned, we are pleased to report that quarterly building margin. It was positive for the first time since the beginning of the COVID-19 pandemic.
SG&A was $196 million in the first quarter, a decrease of $35 million quarter over quarter, and excludes $11 million of stock based compensation and $1 million of other nonrecurring expenses.
Adjusted EBITDA showed further improvement in the first quarter driven both by increases in revenue and continued management of our cost structure, demonstrating the operating leverage in the business.
Adjusted EBITDA loss was $212 million, driven by $47 million revenue improvement and a $43 million of expense reduction for a total of $71 million improvement relative to the prior quarter.
Also represents a $234 million improvement relative to Q1 $4 million in the quarter, which was an improvement relative to the prior quarter and first quarter of 2021.
Key components bridging from net loss to adjusted EBITDA in the first quarter include $171 million of depreciation and amortization $147 million of interest and other expenses and $13 million of stock based compensation.
We offset by a $39 million net gain for restructuring and impairment expenses related to the write off of lease right of use assets associated with our portfolio.
Utilization activities.
We recorded free cash flow of negative $412 million, which was a $66 million improvement compared to the prior operating cash flow was negative $3 38.
$338 million in gross capital expenditures were $74 million for the fourth quarter.
Mix was $31 million in the first.
Quarter, as we collected $43 million in tenant improvement in member Capex.
Turning to our capital structure, we ended the first quarter with approximately $1 6 billion in cash and commitments, which includes $519 million of available cash on hand, and $550 million available of senior secured notes that we can issue.
$550 million of capacity under a letter of credit facility.
Today, we are pleased to announce.
The amendment of <unk> $175 billion letter of credit facility, which is now subdivided into a $350 million junior LC tranche and a $1 $25 billion senior LC tranche Brook.
Brookfield asset management and its affiliates pursuits, all participations under the junior LC tranche the letter of credit under the junior ELT tranche gate, we weren't immediate access to $350 million for general corporate purposes through November 2023.
<unk> provides a more efficient use of our previous $500 million in unused letter of credit capacity that would have expired nine months earlier in February 2023.
Now I'll turn it back over to Sandy for some comments before we open the line for Q&A.
Thanks, Ben looking forward, we would like to update our revenue guidance for the second quarter and full year and also provided adjusted EBITDA guidance.
Guidance for the same period, we expect the second quarter revenue to be between 800 $825 million, which is a tightening of the range of $7 75 to $8 25.
We provided on our Q4 earnings call, hence, taking the midpoint up by $12 5 billion from 800 million to $812 5 million.
And also expected adjusted EBITDA of between negative $125 million and negative $175 million.
In connection with this we're also updating our full year 2022 revenue guidance to $3 4 billion to $3 5 billion, which is higher at the midpoint to 345 billion compared to will be announced at.
The Q4 call of the range between 335 billion and $3 5 billion.
In addition, we are tightening our EBITDA guidance to negative 400.
A negative $475 million from earlier guidance of 400 to 500.
$100 million I would note that our guidance excludes impact of any foreign exchange fluctuation and again want to reiterate that our business is naturally hedged as we generally collect revenue and <unk> expenses in the same currency. So we obviously as we have increased visibility to the end of the year.
As an update on committed revenue.
For the balance of the year over 98% of the midpoint of our updated Q2 revenue guidance is committed.
And approximately 85% of our full year updated revenue guidance I mean, actualized and are committed to date I.
I have confidence that with our current revenue visibility and continued management of our cost structure, we are well positioned to meet our targets with that operator. Please open the line to questions.
At this time I would like to remind everyone in order to ask a question. Please press star one our first question comes from the line of Vikram <unk>.
<unk>.
Your line is open.
Good morning. Thanks, so much for taking my question and congrats on a good quarter I know, there's a lot of work that goes into this.
Maybe just to elaborate on your last comment.
Around the revenue visibility can you maybe break it up into like what's the visibility you have now and QQ I'm, assuming it's higher like close to 90%, but what's the visibility into <unk> and can you provide us any stats on how April has trended.
So as I mentioned in my last comment again like Q2's second 98% committed so you could say it's.
It's fairly fairly well behind US let me just talk about April for a minute April continued to have strength.
Okay.
It actually may have been.
The way that we are <unk>.
Sales work is the first month of a quarter is the weakest month of the quarter, but it turned out to be an incredibly incredibly strong quarter.
Which I would say if you were to take the.
Big deal the amount of <unk>.
A desk sold in Q1 and divided by three.
We were able to accomplish that in the month of April saw strength continued which actually would mean that may and June should be slightly better and therefore Q2, just slightly slightly better than Q1 on total sales perspective.
And the last question I think you asked was do we have visibility into Q3 and Q4 yet.
Yes, I mean, what 85% of Q3 and Q4 revenue is now committed which is about which is slightly higher than where we were.
Last quarter for Q2, so we are actually doing better.
That's what's given us confidence to ray.
As our revenue guidance is it you saw.
<unk> reduced our loss of a negative EBITDA.
Okay. That's helpful. And then two more quick ones. So can you just maybe give us a bit more color on your comments around <unk>.
<unk> from <unk> in the back half.
Can you maybe break it down by market like what are you seeing in terms of your strong markets with both occupancy and pricing and kind of how is that netting out you actually anticipate the ARPA to increase sequentially.
Yes, I think we feel they are pretty much on track and the <unk>.
International markets like I said, 75% occupied as of.
Q at.
At the end of Q1 and as a matter of fact at the end of April .
In the high <unk>. So we've got some more traction in April and when you get to those levels you start to see it.
Increase in <unk> and as I mentioned, we are seeing increases in our boom of mid to high single digits and it did.
Cause 80% of our revenue is derived within 60 days of signing an agreement you'll generally see a lag of a quarter or two before you see the increase in ARPA. So.
So we should be able to demonstrate that for Q2 and then we are still on target to end the year with the outbound with about $500, which is what we had said.
Beginning of the year.
Okay, Great and then.
And just last question would be restructured LC facility.
Brookfield.
And then you in <unk> drawing on that.
I guess two parts to it one.
Does this mean you would not need any more near term capital assuming like we're not going through a deep recession in the next six months.
But is it safe to say that can we assume you have not seen any more capital this year.
Number two how did this come about.
Have any implications for other capital provider potentially down the road.
So let me answer the first question.
We do not have any need of capital.
We will work to bend is going to walk you through the liquidity and its going to demonstrate that actually we end the year with higher liquidity than you said.
The Q1.
And the only reason to have drawn on the money was we sit in volatile times and my prior experience. It tells me that LC facility should be drawn on in volatile times.
To hold onto the cash.
But.
Why don't we walk you through the liquidity and you'll actually see that Timna, we're sitting in a stronger position.
And even if there is a deep recession, let me just answer that question actually recessions are generally good for the flex business provides certain more more uncertainty.
Makes people not too long term deals of the flex product actually goes up in occupancy and as a matter of fact, the need to collaborate innovate be productive increases.
So the demand for space actually tends to go up and if you think about <unk>.
We started 2010 recession.
And actually got it got it.
But as the go to stock during that period of time, so in a recessionary environment the demand for our space actually goes out.
And the need for people to come back.
And due to meet each other to collaborate and be productive increases as well. So we view that to be a good thing and again because our revenues are committed 85% in Q3 and Q4.
We don't have a need for additional liquidity, which is why we've actually.
Increased revenue forecast.
And reduced cash burn.
So it is all in on in our cases, all sort of trending in a positive direction.
And so as we announced today, we had $1 6 billion of cash and cash commitments at the end of Q1 that includes our unused LC capacity for <unk>.
Laura for the <unk> Amendment.
<unk> decreased by $500 million of unused LC capacity, but it was.
Mostly offset by our immediate access under that junior LC tranche of the $350 million, arriving at our pro forma liquidity balance of $1 5 billion for Q1.
Additionally, as a result of the LC Amendment, we had lost $500 million of senior.
I'm sorry, our secured debt capacity that had previously been allocated to unused LC capacity, bringing us to a total pro forma balance of one point almost $2 billion.
Adjusting.
Almost $2 billion for a negative $225 million of adjusted EBITDA $200 million of cash interest and $175 million of net Capex. We now expect to have approximately $1 $4 billion in total liquidity at the end of 2022.
That's very helpful. Thank you so much.
Our next question comes from Alexander Goldfarb with Piper Sandler Your line is open.
Hey.
Good morning, good morning down there.
So Ben ease of continuing on and on.
Vikram <unk> last question, if we look in your presentation and I hate to do pages, but I'm going to do it on page 13, you guys have a great liquidity chart that you publish every quarter. So can you just based on what you. Just said can you just tie it back to this chart you had like you had about 900.
Cash in the fourth quarter that dropped to a little over 500, a little over $500 million now.
And then total liquidity and unused commitments of one six now and with the fourth quarter was $2 million. So can you just tie your comments that you said simply that we can visualize how this chart relates to what you were saying about unused capacity or removing secured whatever and then.
And how this relates to that $1 $4 billion that you talked about for a year end.
Liquidity goal.
Yes, absolutely. Thanks. Thanks for the question I think if you look at that slide 13, we end at that $1 $6 billion of cash and cash cash and commitments at the end of Q1, and so pro forma for the LCD Amendment. If we wanted to make that adjustment. This amount decreases by 500 billion of unused LC capacity, which was mostly offset by immediate <unk>.
Access under the junior ELT tranche of the $350 million that gets you to the one point I guess $1.469 billion for Q1 2022. Additionally, as a result of the LCM that we unlocked $500 million of secured debt capacity that was previously unallocated.
Had it been allocated to unused LC capacity. This brings us to that pro forma balance of $1 $1 billion $969 million or roughly $2 billion.
Okay. So what's missing from this chart is that incremental $500 million ish of I guess sort of tucked away capacity that now you have access to.
That's right that's what we unlocked and then again just reiterating the point I made earlier, so if we take that going forward adjusting that almost $2 billion of AR.
Of our pro forma liquidity and capacity you then look at 225 billion negative adjusted EBITDA for the balance of the year as well as $200 million of cash interest and $175 million in that Capex that means we now expect to have approximately $1 $4 billion in total liquidity at the end of 2022.
Okay, and then continuing on this line to the year end at one 4 billion of liquidity just so people don't freak out it sounds like FX is mostly a non event, but obviously there will be some translation impact to free cash flow, where do you think cash balance will I mean are we going to see <unk>.
Cash drop another $500 million in the second quarter or whereas cash you're going to go because I think there's going to be a lot of focus on cash versus your unused running up the credit line. So how do we think about cash the rest of the year.
Yeah. So so really as Sandy mentioned earlier were naturally hedged and so like we said any impact that we see on revenue we will actually be very muted. When you look at EBITDA and Thats really what flows through to cash flow. So similarly, our cash will be very minimally impacted by FX movements.
But what about cash like where do you think cash will go if that $1 4 billion as your goal for year end, where should we expect for cash balance like I'm, assuming that we don't want to surprise investors just kind of like $500 million of cash go down to like $100 million and the FERC and the second quarter or maybe that's what's going to happen.
So I'm trying to focus on your actual cash balance expectations.
It should be.
Actual cash balance at the end of the year. If you take the $1 4 billion take out the $500 million unused capacity they got $350 million of the of the junior tranche is about $500 million.
Okay, Okay, and then sandeep on the on the users the enterprise seems to be sort of flat, it's actually gone down a few ticks. So is there something thats holding back.
Enterprise users or are you seeing just outpaced growth of small business, that's driving more of your new revenue towards small business versus enterprise.
So let me just give you the math right. So Q1 2021, we had 182000 enterprise members in Q1 of 2022, you have 240000 enterprise members.
On the small and medium businesses Q1, 2021, we had 190000 small medium businesses and Q1 2022, we have 282000.
Small and medium businesses. So they both actually went up from a membership perspective, but generally SMB small medium businesses tend to come back faster as you come through things like a recession and a pandemic and if you look at the United States.
B. The offices are just starting to open in April and May of the larger companies and so we should start to see that trend.
Salary with the enterprise clients continue to go.
Even during the last year enterprise membership went up by 58000.
Okay, and then just final question.
Had spoke about some additional cost cuts. This year I think there may have been something like 30, if memory serves like $30 million.
Quarterly G&A I think you guys were targeting but overall what are your cost cut expectations for this year into next.
I mean, if youre talking about SG&A, we're completely on track and as Ben said in his notes.
We actually revenue increase by I think you said $47 million.
The expense structure went down by $43 million and of course some of that is the SG&A cost. So we are sort of on track to get to that SG&A run rate by Q4, which is <unk>.
Between $750 $800 million.
Okay. Thank you. Thank you.
Our next question comes from the line of Tyler Langton with Jefferies. Your line is open.
Good morning, so when we look at getting to that 500.
Box per average revenue per member.
Is it going to be certainly I understand that.
Lag with contracts, but is this going to be all kind of fourth quarter weighted that we get to that level or should we see kind of incremental improvements here in the second and third quarter as well.
Oh, you are definitely going to see incremental improvements in the second and third quarter.
Okay.
And then again, 98% of the second quarter is committed so we do have an idea of what the ARPA number is and it is an improvement.
Okay. So it is an improvement there.
And then when.
We talk about SG&A.
Certainly understanding that we're doing the cost cuts were growing our top line without really increasing that but.
Would it be.
Sufficient Andy.
Annualize this quarter's run rate and carry that forward in terms of the expense needed to run this business.
Sure.
Actually this is a very.
I took over a very unique company.
Really the only company, taking over where I've been able to reduce the cost and even though all through 2023 and the remainder of 2022 revenue is to go up because we can continue to optimize.
Our SG&A by automation actually our SG&A will continue to go down in 2023.
June of 50 ish million.
Okay.
And then just lastly, as we finish the year.
With the.
$1 $4 billion of liquidity 500, or so of cash are we still feeling that we can achieve breakeven EBITDA by the end of fourth quarter early first quarter of next year.
Yes, we feel by the future was end of Q4 first quarter of next year.
Okay. Thank you very much guys I appreciate it.
Thank you.
Again, if you would like to ask a question. Please press star one. Our next question comes from the line of Sam Mcgovern with Credit Suisse. Your line is open.
Hey, guys. Good morning, with regard to the liquidity Bridge you provided as you go from the 1469 to the 190 <unk> that incremental $500 million of debt capacity are you guys planning to raise a new facility and if so in what.
What form some sort of revolver or term loan or how are you guys thinking about what you might we don't feel there's a necessity to raise any additional debt.
Got it.
The guidance you guys.
EBITDA in the second half versus the first half how should we think about the cadence of the cash burn over the course of 2000.
Two.
I think Ben sort of provided that a little bit.
And his nose and you said that effectively.
The remainder of the year, there is a 225 million.
Adjusted EBITDA.
And so so essentially again with the negative EBITDA guidance I provided for Q2.
And I think in the last call I said that effectively and we will get to that 343 5 billion of.
Revenue for the full year, which sort of equally institutes sort of that 900 million to a $1 billion of revenue in Q3 and Q4.
So again, if you just do the math.
It's about $50 million to $75 million or better.
Each quarter.
And therefore by Q4 or early Q1 for you Joel Woods will be at adjusted EBITDA breakeven.
Okay, great. Thanks, so much I'll pass along.
Our next question comes from Vikram Malhotra with Mizuho. Your line is open.
Thanks for taking the clarification I just wanted to clarify your prior response you.
To use someone else's awards adjusted EBITDA pumps, they have been <unk> 23.
I just wanted to make sure you had earlier said back half of this year at <unk> is that still you arent Bull forgetting what other words are used to.
On track to hit breakeven by year end.
Yeah. Our plan is like I said I'm using other words Q4, Q1, but our plan assuming.
The trajectory as we see it today is to hit breakeven by end of the year.
Okay, and then can you just made.
Maybe share any anecdotes or color of just how larger users enterprise users are not are today thinking about utilizing co working space any specific.
Sectors are examples you can give of recent enterprise tenants.
That may have come into the rework family.
Yes, I mean recently I'll just quote some of the transactions that are more public data in the news.
In the UK, we had a FTSE 100 company both countries.
That essentially closed their corporate headquarters relocated completely into <unk> and <unk>.
Really belies this hybrid flexible solution to their employee base.
We've never really seen large companies close.
The scope of headquarters and relocate and that was an interesting example.
We just saw in Kansas City.
Think state Street Bank gave up I think 250000 square feet of their regional headquarters and moved into a 25000 square feet, we look in Kansas City.
So this is all about optimizing the real estate, providing the hybrid flexible solution combining it with the all access gone to provide the ultimate.
In our solution and even in New York City and there are several examples.
Samples Banco Santander <unk> moved their headquarters in New York City.
437, Madison, which is a newer building and theyre going to be nimble and offer opinion.
Period of five years of the assigned a five year commitment with us.
Talent as New York City headquarters.
About 120000 square feet is that we work so.
So the examples of enterprise clients.
The cherish the flexibility and those clients, who take space at that scale generally take space generally for three year term actual leases are longer than that 26 months.
Average term.
<unk>.
And so it's.
And again you have to appreciate that all of our locations.
400 locations are over 50000 square feet and 130 locations to over 100000 square feet for enterprise clients, who want flexible space at scale today.
Today, we are the only player in the market and can provide that.
Great and then just last clarification can.
Can you maybe give us some thoughts on just how competitive the market is today.
In terms of actually landlords.
Looking to partner with you in management agreements or actually create their own <unk>.
Working brand.
So I have maintained is that if you look at.
CBRE Ngls projection at the end of the decade maintained that flex basis clinical from the current two 5% to 15% to 30%.
So it's going to go up five extra tenex, where it is today.
On the way youre going to achieve.
That sort of.
Growth is at the landlords start to participate at scale. So far the landlords have started to enter the co working business by focusing on small and medium business is in smaller footprints, but I do believe they'll graduate to them.
The larger footprint and I do believe that you know what.
What has happened in India, and I think I gave the example of we look India signing of 660000 square feet 25 storey building in the <unk> group as a pure management agreement is where we will be part of the ecosystem and by providing that.
But the environment that we look at it's been a quite famous will providing its.
Which you would sort of fosters collaboration and innovation and again I think it's hard for people not to appreciate our top of the funnel from a leasing perspective is incredibly strong we had 32000 unique members in the top of the funnel.
And if you think about.
Our e-commerce business selling to the small medium businesses.
Generally we do but.
Almost 2000 deaths a week, so I do think that they.
There will be some who are going to do it independently and they will be a handful that will partner with us like the company in India has done and like we are doing.
Seven locations in the United States and actually in Germany right now.
Great. Thank you so much.
Sandeep just curious I think you said international markets are 75% average occupancy U S is like six to eight what do you think is causing the difference isn't that maybe in the U S people have bigger homes bigger apartments, better Wi Fi the work from home is is easier or.
Our company is doing something different with their overseas with their international workforce versus what managers are doing here in the U S.
Actually.
I think the reason, it's 75% Youre right. It actually went up into the high <unk> in April I think I mentioned that to that growth has continued in the month of April and in the U S. C. At 64% again trending up and as I mentioned, we expect to be building margin positive in the USC.
In the next quarter, so effectively the delay in to come back to office in the U S, which is actually exactly a quarter behind.
Is causing that.
I don't think its a slower take up although we did gain 20 points of occupancy over the last for the last 12 months, but I would say it's quite large.
But we do see the demand are quite good picking up and as a matter of fact I would use April as a as a barometer April net sales in the U S. C far exceeded Europe , so youre starting to see the United States bounce back as people come back to work.
Thank you.
Our next question comes from.
<unk> <unk> with Mizuho Your line is open.
Hi, good morning.
You have a sense of how much revenue the workspace product can generate this year.
We're not we're not making any projections.
For what that what that will be this year.
And.
I think we'll have a better idea once we start to launch the product in July .
So if we were having this call in Q4.
For Q3 results.
It gives you an indicator, but we do I will say this that we have well over 100 clients, who we've given dentals too so.
So the need for the box seems quite large.
According to Bain consulting.
The Tam total addressable market in the United States for the product is about $3 billion.
And so.
So essentially there is a large tam.
Available for the product and I think we will have a better idea.
As we start to go to market.
With the product.
Great. Thanks.
We have reached the end of the question and answer session I'll turn the call back over to Sandy for closing remarks.
Thank you shouldn't out in closing I want to express how pleased I am with outperformance in all we have accomplished in the first quarter. We are confident in our goals this year as we.
<unk> started the year by beating revenue projections and welcoming the highest gross sales in a quarter since the beginning of 2020.
Our progress to date would not have been possible without the tremendous work of our colleagues and the support of our global community. We are extremely proud to report that we work was named.
A great place to work across our United States, Australia, and simpler Singapore employee base.
<unk> on earnings call before and I wholeheartedly believe in the same culture eats strategy for breakfast and this certification reinforces and we work has an incredible incredible employee led culture, enabling us to confidently execute against our business strategy without distraction I'm very grateful.
For our team. Thank you, everyone and have a great day.
This concludes today's conference call you may now disconnect.
Okay.
Yes.
Okay.