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WeWork Reportedly Cuts Projections as CEO Pulls Back on ‘Spending Culture’

WeWork CEO Adam Neumann at Fortune's Brainstorm Tech conference. WeWork CEO Adam Neumann at Fortune's Brainstorm Tech conference.
WeWork CEO Adam Neumann at Fortune's Brainstorm Tech conference. PHOTOGRAPH BY STUART ISETT/Fortune Brainstorm TECH

The free-spending days are over at WeWork, the buzzy startup that rents out office space by the desk to other companies.

Despite raising a new $430 million in March, WeWork is pulling back on its “spending culture” and has lowered its forecasts for the year, according to a document and videos of company meetings obtained by Bloomberg. According to an internal financial review document, WeWork has slashed its 2016 profit forecast by 78%, its revenue estimate by 14%, and added a 63% jump in projected negative cash flow.

Specifically, WeWork cut its expected 2016 revenue from $620 million to $532 million, and its adjusted earnings before interest, tax, depreciation, and amortization from $65 million to $14 million. WeWork says the document, which was stolen by a former employee, was prepared for “for scenario planning purposes,” but declined to elaborate further on whether its figures represent the company’s actual finances.

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“Our business is performing incredibly well and is stronger than ever,” WeWork said in a statement. “We achieved our best sales month ever in June with over 7,000 desks sold, and in August we will open over 10,000 desks, the most in the company’s history. Occupancy levels for buildings open more than 12 months average 97%.”

On Friday, WeWork filed a lawsuit in New York Supreme Court against a former employee it claims stole the document, as news site The Real Deal reported and WeWork confirmed to Fortune. In the lawsuit, WeWork claims that former employee Joanna Stranger used the username and password of David Fano, the company’s new chief development officer, to access confidential documents, which she leaked to Bloomberg.

In the video of all-hands meeting at the company obtained by Bloomberg, WeWork co-founder and CEO Adam Neumann urged the company to cut back on spending. “We did not use to be this way,” he said. “We used to fight for every dollar. We did not spend.”

WeWork confirmed the authenticity of the remarks to Fortune.

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One way the company is cutting back on its spending is by negotiating lower prices for its building costs like electrical work, drywall, appliances, and plumbing fixtures such as toilets, according to the document.

The company also confirmed at Fortune‘s Brainstorm Tech conference in Aspen, Colo. this week that it’s cutting about 7% of its staff, as Bloomberg reported in June, though it says it plans to hire 500 new employees by the end of the year. The cuts are not a result of business downsizing, WeWork told Fortune. The company currently has about 1,500 employees.

WeWork is also experiencing delays in opening some of its locations, according to the document. Some $90 million of lost revenue comes from “desk slippage,” which happens when desks are rented out later than expected because of these building delays, according to Bloomberg. WeWork told Fortune that these delays are mostly due to the company taking possession of a building from the landlord later than expected.

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However, the company added that revenue from delayed buildings can still make it into the fiscal year if, for example, building originally slated to open in the first or second quarter, instead open during the third or fourth quarter. The document reflects similar scenarios, according to the report.

Still, as Bloomberg points out, Neumann appears to remain positive about the company’s outlook, but it will require more financial discipline. “What scares me is in 10 years to look back and say we could have done more. We could have made a bigger difference. Because that’s painful. ‘Cause time is the only thing you don’t get back,” he reportedly said.

In Aspen, Neumann said he plans to take his company public, though declined to provide a timeline.

The story has been updated with information about a lawsuit WeWork has filed against a former employee it believes stole and leaked company documents.