Good day, welcome to the WeWork First Quarter 2023 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by one on your telephone keypad. If you would like to withdraw your question, please press star one again. For operator assistance throughout the call, please press star zero. Finally, I would like to advise all participants that this call is being recorded. Thank you. I'd now like to welcome Kevin Berry to begin the conference. Kevin, over to you. Thank you, Gavin. Good morning, everyone, and welcome to WeWork's First Quarter 2023 Earnings Conference Call. During this call, we will refer to our earnings release and investor presentation, which have been furnished with the SEC. It can be accessed at investors.wework.com. This discussion will include forward-looking statements that are subject to risks and uncertainties that may cause actual results to differ materially. Additional information concerning factors that could cause actual results to differ materially is contained in our latest annual and quarterly and periodic reports filed with the SEC. We'll also discuss certain non-GAAP financial measures, which we believe are meaningful in evaluating the company's performance. Additional disclosures regarding these non-GAAP measures, including a GAAP to non-GAAP reconciliation, are included in our earnings release and supplemental presentation and will also be included in our Form 10-Q to be filed tomorrow. I'd like to introduce Sandeep Mathrani, Chairman and Chief Executive Officer, and Andre Fernandez, Chief Financial Officer. With that, let me turn it over to Sandy. Thank you, Kevin, and good morning, everyone. I'll review the trends we're seeing in the flex industry, our quarterly results, recent restructuring, and then Andre will provide further comments on the quarter and the outlook. First, I want to talk about flex industry trends and about why I think this is WeWork's moment. WeWork is all about flexibility across cost, time, and space. At a time when the commercial office industry is in flux and fundamentally changing for the long term, WeWork is not only solving for the needs of businesses of all sizes seeking a turnkey flexible solution, but we're also working to cement our product offerings as a long-term alternative to traditional office. Ironically, as I walked this morning down Fifth Avenue, I bumped into a CEO of a retail company who actually looked at me and said, "Aren't you glad you're on the right space in the commercial sector? The trend is coming your way." It is all over the industry that flexibility is the key for turnkey solutions and immediate occupancy. More than ever before, businesses are seeking a solution that is unique, complete, and doesn't require any capital investment. Pre-pandemic, HR departments could predict 10 years out what the headcount growth could be, and CFOs were okay taking on real estate to accommodate that growth. Today, that is unknown. Occupiers need to be able to manage agile decisions as their headcount and in-office plans change, and WeWork offers the flexibility to them on an immediate basis. We continue to read how different types of companies are either entering new markets, growing in their existing markets, or they have a return to work policy starting in May or June this year to space their employees now. Why you don't realize and why and what we see and feel firsthand is that in each cases, these companies are turning to WeWork for their solution. One recent example is we signed in April 2 separate locations in New York City, totaling 310,000 sq ft, for a large enterprise company that needed the space within 2 weeks in order to house employees by their mandatory return to office. This same client is now taking over 100,000 sq ft with us in London. This is the kind of flexibility we're able to offer that sets us apart from legacy commercial real estate. We provide turnkey solutions for immediate occupancy. As the trend continues, in New York, our first quarter desk equated to 23% of the total square footage leased in the traditional market, while our portfolio accounts for only 1% of the total office stock. Over the last few quarters, our share that we have taken of the market has steadily increased. Similarly, in Boston, our market share was 16%, Chicago 9%, Miami 17%, San Francisco 21%, Dublin 27%, Paris 12%, and Berlin 9%. We can now see over the last four quarters, each quarter we continue to take market share, demonstrating the trend towards flex and coworking. The other side of the equation that is important to remember is that WeWork is a tenant, which is a critical element of our business model that I think is sometimes underappreciated. We don't own the building, we're not handicapped by mortgages and lender covenants. In addition, we're not required to give concessions and allowances to grow occupancy. While there's undoubtedly uncertainty in the market, this creates opportunities as flexibility and agility become even more important as companies consider their office footprints. I believe this is our moment more than ever. Turning to our first quarter results. Revenue in the quarter was $849 million, which is in line with our guidance range. Occupancy increased 6% from the first quarter last year and was down slightly from year-end. As we said on the call for the last quarter, we typically see higher churn in December, resulting in a slower start of the year. This quarter, the decline in memberships was a function of known enterprise churn, the planned closure of some of our locations, and franchising of South Africa. The known enterprise churn was to be replaced, you know, which fell from the end of March to the beginning of April with the 300,000 sq ft enterprise client I mentioned a little earlier. In April, we saw a reversal in enterprise demand as we saw net sales in the US turn positive for the first time in 12 months. International has been carrying the day, as I've mentioned over and over again on these calls, and we are pleased to see the U.S. finally turn the corner. We move forward, we continue to see demand pick up, particularly as I mentioned, more companies are executing mandatory return to office dates for employees and need space immediately. As I have mentioned in the past, with all the headlines of all the layoffs, many of these companies still have more employees today than they did pre-pandemic and are in need for space to house their employees. Adjusted EBITDA attributable to WeWork $17 million, an improvement of $169 million over the first quarter last year due to continued revenue growth and expense reduction. Free Cash Flow was -$343 million in the quarter and also came in $18 million better than we expected. Our ARPM ticked up a little bit to $490. All Access memberships increased to 75,000. The trend continues, as we've mentioned over and over again, to increase our All Access by about 1,000 members or so a month. This time around, it's up about 5,000 over the last quarter, so slightly over 1,000 a month. While All Access memberships are not included in either our membership count or our occupancy total, it represents an additional utilization and monetization of our space and contributed $59 million of revenue this quarter. The trend of the All Access membership also has a tremendous impact on our ancillary revenue as our utilization of conference rooms and private offices improves. Our WeWork Workplace solution, which we launched in partnership with Yardi, continues to grow with 63,000 licenses sold since launch to approximately 370 companies throughout the world. For the second quarter, we expect revenue to be between $840 million and $865 million and Adjusted EBITDA to be between - $10 million and + $15 million. Our second quarter projected Adjusted EBITDA made in connection with our debt restructuring was better than this range, partially due to approximately $30 million of lower costs on a GAAP basis. We will realize the benefit of the same $30 million on a cash basis. I'm running this business, you know, for revenue and increase in cash flow. We expect our cash and cash equivalents at the end of the second quarter to be consistent with or slightly better than our original projections. Activities and decisions to reduce our expense structure have been occurring since I became CEO in early 2020 and continue. We've been very diligent in right-sizing the organization and streamlining the portfolio. This process never ends. We're grateful to our landlord partners for agreeing to reduce our rent obligations for the near term, which is what's assisted in providing the gains on a cash basis through the second quarter and through the end of the year. In addition, as part of our restructuring, we've guided to approximately $620 million of SG&A and indirect location operating expenses this year. We expect that to come in closer to $575 million. Turning to the global portfolio, as of quarter end, WeWork had 781 locations system-wide, 617 consolidated. Memberships as of quarter end were 664,000 system-wide, 527,000 consolidated. As mentioned earlier, occupancy increased 6% from the first quarter last year and was down slightly from year-end. Looking at our major regions, both the United States and Canada and international were up 5% year-over-year. Interestingly, Japan finally rebounded and was up 16% year-over-year. As mentioned previously, we're constantly re-reviewing the portfolio in the interest of increasing its overall quality. Since the beginning of this year, we have agreed to exit or partially exit an additional eight locations in the U.S. and six outside the U.S. Of those additional locations, all members of those spaces have been notified. We continue to pursue asset-like growth opportunities throughout the world. In March, we signed a franchise agreement with SiSebenza, a pan-African real estate investor for our South African business. Throughout this partnership, SiSebenza will operate WeWork's existing locations in South Africa and will hold exclusive rights to grow and operate WeWork franchises in Ghana, Kenya, Mauritius, and Nigeria. Additionally, we continue to see growth across our portfolio with nine new locations, including a few expansions, closed so far this year, primarily outside the U.S. Turning to our balance sheet, we are very pleased with the tremendous support from my investors to strengthen WeWork's balance sheet to provide the company with a sound financial footing aligned with its outlook. The restructuring significantly improved our liquidity by providing $1 billion of cash, reduced outstanding debt by over $1.2 billion, reduced annual cash interest expense by $90 million, and extended the maturities to 2027. We now have the runway we need to grow our business and go on the offense versus being on the defense. This transaction is evidence of our investors' strong conviction in the WeWork business model. On behalf of my colleagues, we're grateful and humbled with a strong showing of support. Andre will now provide some additional perspective on the quarter and our financial condition. Thanks, Sandeep. Good morning, everyone. Consolidated revenue in the first quarter was $849 million, which was up 11% year-over-year, essentially flat to the fourth quarter of last year and at the high end of our guidance range. Revenue was also helped by foreign exchange, namely a stronger euro and stronger British pound. As Sandeep mentioned, occupancy increased 6% from the first quarter of last year, though was down sequentially due to higher than anticipated customer churn. Consolidated physical membership, ARPM, rose to $490, also helped by FX, and marking two consecutive quarters of pricing growth. Year-over-year, ARPM was 1% better than the first quarter of last year. Our first quarter Building Margin of $138 million was up $104 million year-over-year, though declined slightly versus the fourth quarter due to higher operating costs associated with a few building openings in Europe and FX. Despite this increase, we continued to mitigate the overall increase in our location operating expenses through planned building exits. Of the building exits we announced last fall, we've been able to retain approximately 70% of our revenue through member relocation efforts. On the earnings line, Adjusted EBITDA in the first quarter was - $29 million, slightly lower than the fourth quarter and just outside of our EBITDA guidance range. Excluding non-controlling interests, Adjusted EBITDA attributable to WeWork was - $17 million. While our rent reduction conversations to date with our landlord partners have been fruitful and are yielding material cash savings on a cash basis for 2023 and 2024, the impact on EBITDA in the first quarter was minimal as the cash savings we are achieving are straight-lined over the life of the lease. As a result, while we remain confident in our full year savings assumptions on a cash basis, which is in excess of $100 million, the full year EBITDA impact is expected to be less due to the straight-lining of leases. We'll continue to quantify this impact as we get deeper into the year and have a greater number of these reductions executed. Our Adjusted EBITDA also benefited from sequentially lower SG&A, helped by the headcount actions we took at the end of January. Since many of those actions, particularly internationally, were not effective until March, we expect to see further sequential improvement in SG&A for the remainder of this year. When comparing the fourth quarter of last year to the first quarter of this year, recall that fourth quarter of last year's SG&A benefited from a partial reversal of incentive compensation due to lower annual bonuses as well as known terminations. On a normalized basis, a sequential SG&A decline from the fourth quarter to the first quarter was even greater. Below the EBITDA line, our net loss for the first quarter was $299 million, driven by several significant non-cash items, including impairment of leasehold improvements of buildings we are exiting and DA&A, partially offset by restructuring gains on those same exited buildings as we wrote off previously impaired assets and their related liabilities from the balance sheet. Moving on now to cash and liquidity. We ended the first quarter with $306 million of consolidated cash on the balance sheet, which included $82 million of restricted and held for sale cash. Free Cash Flow for the quarter was -$343 million, which beat our plan published in connection with the debt restructuring and was helped by lower net CapEx. First quarter cash burn was higher than the fourth quarter due to the payout of our annual bonuses, the timing of cash interest payments, and other working capital, all of which were planned. Consistent with our published projections, we expect our Free Cash Flow to improve in the second quarter as revenue and earnings continue to improve, as cash rent reductions are achieved, and as net CapEx continues to decline to a more maintenance level of spend. As Sandeep mentioned, we couldn't be more pleased with the results of our recently closed debt restructuring transaction and the support received throughout, both from SoftBank, our largest shareholder, as well as our bondholders. As we disclosed last week, as part of the exchange offer, 75.8% of the aggregate principal amount of old 7.875% Senior Notes outstanding and 98.3% of the old 5.00% Notes outstanding were tendered. We've included pro forma debt and equity cap tables on pages 20 and 21 of our investor presentation. As Sandeep mentioned, the transaction reduces our net debt, provides us with additional capital, lowers our annual interest cost, cash interest cost, and extends the bulk of our debt maturities to 2027. As you can see on page 19, we prepared a simple pro forma view of our cash and commitments as if the debt restructuring had closed on March 31st. On that basis, you will see our as adjusted cash and commitments were just under $900 million at the end of the 1st quarter, and providing us with sufficient liquidity to fund the business plan we produced in connection with the transaction. In addition, the cleansing materials we published on March 17th in connection with the launch of the debt restructuring contain additional assumptions, including cash projections pro forma for the new capital structure. While certain assumptions and exclusions are footnoted in the same, we provide many key metrics, including Free Cash Flow, net CapEx, cash interest, and other relevant data. Regarding the second quarter, we expect consolidated Q2 revenue to be in the range of $840 million-$865 million and Adjusted EBITDA in the range of - $10 million to + $15 million. Our revenue estimate is tempered by higher than expected customer churn we've experienced in the first few months of the year, though we are likewise encouraged by positive net sales growth realized in our U.S. business in the month of April. On the earnings side, our Q2 EBITDA guide will be impacted by the lower book rent savings that I mentioned previously as the cash savings are straight-line. Overall, we'll continue to see sequential reductions in our cash rents, SG&A, and CapEx, as we outlined in the debt transaction. That concludes our prepared remarks. Once again, thanks again to all of our investors for your continued support and of course to our employees for your tireless dedication to our success. With that, I'll turn it back to the operator to open the line to questions. At this time, I would like to remind everyone in order to ask a question, please press star then the number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. Your first question comes from the line of Vikram Malhotra from Mizuho. Your line is open. Maybe just to start off, Sandeep, can you talk about, you know, the occupancy trajectory into April? You know, it dipped obviously sequentially. You've talked about, higher sales in U.S. and Canada. The dip was sort of more broad-based in the U.K. and in Europe as well. If you can give us some flavor on what's going on in those markets and how the occupancy trajectory is likely into the second quarter, as well as relative to your business plan. Good morning, Vikram. Again, we saw sequentially, in the month of April, occupancy tick up, in the international markets to above 80%, from 79%. Again, that's a function of timing. Again, as I mentioned, the large enterprise client, predominantly 1 client in 1 building, in London, took the occupancy down, which was an enterprise client. That place is being replaced, in the month of May, as I mentioned in my comments, with a 100,000 sq ft enterprise client. The good news is it's more, you know, off by 1 month in timing than it is something, a change in, you know, market sentiment. It's more timing related than demand related. Okay. Just to clarify, based on the business plan, are you still hoping the trajectory trends towards that 82% at year-end? You know, again, as I've mentioned. You know, we have a projection for each quarter, or we feel pretty comfortable that on a sequential basis, occupancy will continue to improve with Q1 being the floor. We do see a trajectory from here to have occupancy improve sequentially quarter-over-quarter from here to year-end. Okay. We are hopeful that we achieve that 80% golden number by year-end. Makes sense. Just one on just cash flow or EBITDA and ultimately Free Cash Flow. If I heard you correctly, adjustment between EBITDA and cash EBITDA is about $30 million or so, if I heard that correct. Can you sort of bridge the cash you have on hand today relative to sort of the burn, assuming occupancy remains, you know, flattish. Is there a need for additional cash earlier than anticipated, meaning to draw on the delayed notes? We don't anticipate any of that. We anticipate, you know, achieving the revenue numbers and reducing the, you know, operating expenses. Even if we took our revenue down by $25 million-$50 million in the second and the third and the fourth quarter, sorry, and ran the sensitivities, there would be no need to draw the delayed notes. Okay, great. We have- Sorry, go ahead. Yeah. We had assumed about starting the second quarter, about 30 million in the cleansing materials. About $30 million of both cash and EBITDA savings a quarter. I think the point that we're saying is, hey, we're achieving the cash savings, but we're getting a cash savings only over 2023 and 2024, more or less. When you straight line that, you get a lower EBITDA impact than 30. The cash is there, so we're feeling confident about the cash. Okay. Then just last one to clarify the ultimately the cash, you know, you're obviously close to hitting EBITDA, you know, at least Adjusted EBITDA neutral, but ultimately the Free Cash Flow or cash flow breakeven positive. Is that based on your business plan, it sounds like that is a year-end 2024 objective now? Can you just clarify that? I would say if you look in the cleansing materials, you'll see a projection of the pro forma cash flow. You get close to it briefly at the end of this year, but a lot of that is just timing of interest payments. You get to Free Cash Flow break even in the second half of 2024. Great. Thank you. Your next question comes from line of Omotayo Okusanya from Credit Suisse. Your line is open. Yes. Good morning, everyone. Sandeep, I guess, you know, when you kind of look at post the debt restructuring event, you have a stock that's kind of dropped below $1. You know, clearly the transaction was dilutive to current shareholders. I mean, what exactly is the message to that group of shareholders who've kind of gone through this now, this kind of dilution? When they ask you questions about again, the stock's really done worse, like, and kind of what they should expect going forward, what exactly is the message to them? Good morning. I would sort back and say that I don't think we all contemplated that the stock would drop below $1 or more importantly, drop below where it was pre-transaction. Effectively what you are doing is replacing the equity value, the debt for the equity value, right? Effectively, if you took $1.2 billion of debt off, it should really reflect back in $1.2 billion of equity. It is I don't think we expected it because our business continues to perform. At this moment in time, the volatility in the stock is driven by a very small float. I mean, the float is about 40 million shares. You only have about 143 million shares, you know, that are not owned by either SoftBank or the, what I would say, the insiders or people who are in the pipe. You only have 143 million shares, and of the 143 million shares, about 100 million shares are owned by large institutional investors. The float is very small, and the volatility is very high. It's I don't think it's representative of where the business is or what the anticipation of the equity to debt conversion would have done to the stock price. Okay, that's helpful. Andre, just kind of going back to the, like the five-year business plan, that was kind of put in the documents back in March. Again, you did full year Adjusted EBITDA of almost $250 million in fiscal year 2023. First half of the year based on your 1Q and your projected 2Q numbers are basically flattish. Could you just kind of talk about this kind of delta that needs to happen in the back half of 2023 to kind of get to this $247 million projected Adjusted EBITDA in the five-year business plan? Again, I'm gonna echo the words of Andre and my words and my commentary. The Adjusted EBITDA is a GAAP basis, okay, versus a cash basis. We will bridge the gap on cash, which is really, you know, because of the, you know, the reductions in tenancy costs and operating costs in 2023 and 2024 get straight-lined. Again, GAAP straight-lines it over the term of the lease. You know, cash is current. We feel fairly good on our cash basis that we will achieve, you know, we will be better than the cash and cash equivalents we projected through 2023. Okay. That's fair. One more from me, if you may indulge me. Again, the delisting notice from the stock exchange. Could you just talk a little bit about what you intend to kind of do over the next 6 months to kind of address that and prevent the stock from being possibly delisted? Well, one, I can assure you that we will make sure the stock is not delisted. There are alternatives as we have, you know, for the last, you know, for the next six months. We'll see how the stock reacts based on our performance over the next quarter. We have filed a proxy to be able to do a reverse split. I'm often reminded of great companies like PayPal, who did a reverse split, and we all know what happened to that company. There is obviously the option to do a reverse split and be able to not be in violation of the rules of the New York Stock Exchange. Okay. Thank you. Comes to the line of Alexander Goldfarb from Piper Sandler. Your line is open. Hey, morning. I just wanna go back to the Free Cash Flow, Sandeep. In previous calls, it's been, you know, sort of a steady question for me and others on pace of Free Cash Flow and breaking even. Yeah. You know, a few calls ago, there was some FX headwinds. Instead of being, you know, sort of middle of this year, it was gonna be towards the end of this year. Now, you know, you guys are laying out that it's gonna be second half of 2024. I just wanna make sure that we're talking apples to apples because, you know, I think our expectation and what, you know, what we have forecast, you know, for over a year, has been early 2024. You guys have continuously been emphasizing that you'll be ahead of that, whether initially it was middle of 2023, then it was late 2023 because of FX. Now you're saying it's second half of 2024. I just wanna make sure we're talking apples to apples. Also, if it is the case, why is Free Cash Flow being, you know, delayed that far if you're saving $90 million of cash interest? Okay. This is Andre. Listen, I think we had these projections out for at least 2 months, for the last 2 months. We've been consistent that the Free Cash Flow break-even point is some time in the second half of 2024. You know, recall, listen, I think you've seen there, we've got some pretty significant uses of cash just below EBITDA. Obviously, we're getting some cash interest savings, but nonetheless, the interest is a pretty significant burden on the company. We also have, as you know, we've got cash lease expense in excess of book expense is also a considerable use of cash burn. As you can see, I think that's been pretty consistent. I think it's been, you know, difficult for us to time it, but we've always known it's been more or less, you know, sometime in 2024, midyear, 3rd quarter. We've also got some restructuring because we're, as you know, we're exiting a number of leases, and that requires cash payments to get out of those leases, but on a cash basis, it makes sense for us. I think we've been at least certainly for the last couple of quarters, I think pretty consistent about when we believe the cash flow, the Free Cash Flow break-even point is. Okay. Andre, I'm gonna just, you know, go back. It hasn't been consistent. This has been a topic that, you know, you guys know I regularly ask and focus on. This is the first earnings call since the recap. It's the first time we've had a chance to publicly ask about the Free Cash Flow. This is a change from what you guys laid out before, and it's a little troubling because the $90 million of cash interest savings was supposed to be an acceleration. As far as paying to get out of leases, you guys have said that you would exit leases when your corporate guarantee, the, you know, the letters of credit burned off. I hadn't really heard much conversation of you guys paying to terminate those. I'm a little bit, you know, confused on that point. Maybe you can elaborate? Yeah. I can answer the question. I think let me go back and say what Andre got to was you do get to Free Cash Flow, okay, towards the end of this year, okay? You have additional costs in Q1 and Q2, then you get back into Free Cash Flow. Yeah, we could sort of answer the question and say you get to Free Cash Flow. The point is, are you gonna be consistently Free Cash Flow quarter-over-quarter? That you start to see more towards next year. You do get, you know, the part of being Free Cash Flow at the end of this year, I might just add. Just Sandeep. Alex, let me just finish. I'll ask you a second question. Yeah, yeah. Okay. We're not paying for the terminations in the sense. What we've said is that we will pay on a monthly basis as if we were paying rent, okay, and we've generally exited the deals with about 12 months or less of rent payment. It's still in payment. It goes from being in the rent and tenancy line item, okay, to below the line. Effectively, it is still the cash to be projected, okay? You are paying to get out of leases, and generally, you paid no more than 12 months rent to exit leases. If I actually look at just Q4 as an example of this year, okay, the below the line termination fee, which is nothing more than the rent payment, so it was always in cash, was it would be $40 million. If I take the $40 million out, which is a one-time cost, and just focused on, "Hey, what does the recurring business look like?" You'll be in Free Cash Flow then. Okay. So Sandeep, let me ask you this. Going back to Vikram's question on the delayed draw term loan, what you guys are saying is even with this negative cash and especially in the first part of next year to exit some of these things, even with that, this new projection, which is new from what was previously outlined, you guys do not see a need to access additional term loan or additional capital, right? Correct. Okay. Basically, investors can rest easy that you guys can achieve this cash profitability break even without the company increasing the debt that it's already taken on. Correct. Okay. When you look at the cleansing deck, it's laid out and we're saying we're confident we're gonna hit the projections in the cleansing deck. You'll also see when we exactly plan to draw. Even at the low point of Free Cash Flow, which we're saying is sometime in the second half of 2024, what's still the available liquidity is at that point, which is still north of $400 million at the low point. Right. Hopefully you guys can appreciate how us on the outside who have heard one message, now it's being pushed out a year. Hopefully, you know, that also. I think the bigger message is, you know, and I appreciate you feeling that it's been pushed out a year. The bigger message is you'll have variations in quarters, okay, just like any industry does. Like I said, Q4, you'll actually see, you know, daylight. Q1 and Q2, you know, because of the cyclicality of the churns in December and then the lower occupancy in January, which happens every year, you're gonna start to see a dip and you start to see it come back. The question at hand, the bigger question is, will 2024 be a Free Cash Flow year? The answer is yes. Thank you, Sandeep. Your next question comes the line of Thomas Catherwood from BTIG. Your line is open. Thank you, and good morning, everybody. kind of sticking with that, the OpEx topic there. A little confused on some things, see if you can just help me understand it. Andre, it sounds like, and correct me if I'm wrong, you came up with agreements with landlords to lower rent. That's cash basis, and it's being straight-lined, so GAAP, it's not reflected necessarily. It sounded like that was shorter term, just a benefit in 2023 and 2024. kind of first question is, does that then step back up in 2025? The second part to it is, Sandeep, what you were saying about paying for the year's worth of rent as the, you know, de facto termination fee. You had previously commented that that rolls off at the beginning of 2024 for those leases you exited in the fourth quarter. Is that still the case? You kind of effectively- Yes. Some of it comes out in cash, but some of it just rolls off completely because those leases are no longer there. Correct. Your answer to your second question is correct, which is why, you know, 2023 will be the year that we continue to pay for the 40 terminations we did in December of 2022. You know, we did exit some locations in the beginning of 2023, as I said in my prepared remarks. The bulk of the termination fee, if you will, which we're paying monthly, rolls off by year-end. All that is correct. Tom, on your first question, the savings are not just. Some of the savings go beyond 23 and 24. They just don't go for the full life of the lease. There is some point at which the savings drop, but it's more than just a 2-year savings on a number of these renegotiations. I'll add one more thing. As I've mentioned over and over again, what I do like about the business is that the expense line item will continue to decline over time. The reason for that is, albeit that you get these cash savings in 2023 and 2024, over time, the corporate guarantees and the letter of credits continue to decline. You know, we've now been in business for over 10 years, so our leases are coming towards, you know, renewals. When they do come towards renewals, you know, we do believe that we will be able to decrease our rent and tenancy costs, going forward, just simplistically because, you know, our corporate guarantee and letter of credits, continue to burn down and our lease terms come to an end. Got it. Appreciate that. Just, can you give us a magnitude of the savings when the expenses on those 40 locations burn off? You know, it's too early because we've only concluded about maybe a quarter of these. I think once we're deeper in, I think I said that in prepared remarks, we'll give you a sense for exactly what the savings you can expect over the next few years. But again, only a small portion have been concluded. Got it. They'll go out beyond. Again, we said, assumed in the model is $100+ million of savings in each of 2023 and 2024. Once we get deeper, we'll update that and also give you a sense for what goes beyond 2024 as well. Got it. Appreciate that, Andre. Then last one from me. Kind of struggling to align some of the positive commentary you have on demand with occupancy and desk sales. You know, Sandeep, I know you said it's more timing related than demand related, but maybe Are occupancy gains from here primarily going to be driven by leasing with enterprise members, or how much can you pick up with your small and medium business members from here, and how has demand been trending with that segment? You know, again, over the last three quarters, you know, the SMB, small and medium businesses, have been driving occupancy, not enterprise. Enterprise is actually, as you know, and I've said it over and over again, has created churn in 2022. You know, finally in the month of April, that was, I think, the first month almost we had a 50/50 split between enterprise and SMB, and that's the first time we've seen enterprise clients come back. And we're seeing it globally. But I do think in the near term, it's the SMB clients, because that'll drive occupancy. Why do I feel that? You can think of, and I often give this comparison, you know, the one to nine person office or a 10 to 49 person office is a commodity, and you can price to clear like an apartment. We can drive occupancy in the SMB sector pretty aggressively from now to the end of the year because it's more, like I said, a commodity driven price aspect. The combination of that with now watching net desk sales positive in the U.S. in April, and we're gonna continue to see that same momentum in May, because we do see the enterprise client base in May to be, again, almost an all-time high that we've ever experienced in the history of this company in the U.S. gives us confidence that sequentially we'll continue to see, you know, occupancy gains from now to the end of the year. Got it. Appreciate the commentary. Thanks, everyone. Your next question comes on the line of Brett Knoblauch of Cantor Fitzgerald. Your line is open. Hi, guys. Thank you for taking my question. I guess similar to the last line of questioning, I guess can you just help me parse through your next quarter guide, you know, kind of flat sequentially on a growth perspective despite U.S. turning a quarter, despite a lot of large enterprises, you know, to pretty much execute these return to office initiatives? It seems like demand for flex space based on prepared remarks is only accelerating. Yet we're not quite seeing that flow through in your guidance. You know, again, as I mentioned, you are seeing sequentially occupancy gains. I might just add, you know, and I'm very appreciative of the conversation. You know, when you look at how many square feet was leased in this quarter, okay, it's about 8 million sq ft. I think we should take a little, you know, acceptance of that number. 8 million sq ft is, I think, more than, you know, most companies combined in the office sector. What you are seeing is you are seeing a shift towards flex. One other point I'll make is that the denominator is not getting bigger. We're taking market share, right? Even if you look at New York City, as I mentioned in my remarks, I think last quarter we took 16% or 18% market share. In Q1, we took 23%. We continue to take market share. There's a continuously shift from traditional to flex coworking. We do view Q1 to be the trough, and we do see occupancy gains quarter-to-quarter. I do think you'll see that. These numbers are quite large when you look at the amount of leasing activity done during Q1. Again, we watch you know, April being very strong and May being a follow on. I guess a follow-up to that, I mean, your system-wide gross and consolidated gross organization sales are down call it, you know, 15%-17% just from the last quarter. I guess should we expect those trends to reverse, or is that more of a function of the kind of weak commercial market, at least for the? No. I larger enterprise guys? Actually, it's a function of two things. We actually think two things. Once you get above 80% occupancy, which is where we are in the international markets or markets like Korea, which are over 90% occupied, or Southeast Asia in the mid-80s occupancy, you just have less to sell. Fundamentally, you know, it's not a function of demand, it's a function of space. You know, where you'll continue to see occupancy gains rapidly is more in the United States because you still have space available to sell. It's more a function of two things, and more a function of space in the international markets than demand in the international markets. Just naturally, you have less space to lease and you lease less space. That's fundamentally the, you know, more than half the reason of the dip is not a demand issue, it's a space issue. Okay, got it. That makes sense. And then just one follow-up. I just wanna clarify here. You said you would expect your kind of ending cash balance in the second quarter to be near that $422 million adjusted cash balance that you kind of put in your presentation? Exactly. I think you're looking at the pro forma and Q2 cash balance of $427. I think we're referring to that. Perfect. Thanks. Appreciate it. Yep. This now concludes today's conference. I would like to thank our speakers for today's presentation, and thank you all for joining us. You may now disconnect.