Global flexible workspace provider WeWork narrowed its loss in the first quarter after cutting expenses, benefiting from improved occupancy and seeing added demand from large U.S. customers as more businesses institute return-to-office mandates.

It's unclear whether the performance could end up lifting New York-based WeWork's share price enough to avoid a delisting from the New York Stock Exchange, with the stock dropping Tuesday on the results.

Physical occupancy at WeWork's consolidated locations worldwide rose to 73% in the first quarter from 67% in the year-earlier perid. The occupancy rate in the United States and Canada rose 5 percentage points to 69%, and those countries in April had the first month of net positive desk sales for the first time in 12 months.

The U.S. market “is finally turning a corner,” CEO Sandeep Mathrani said on a conference call Tuesday, adding even “with all the headlines of all the layoffs,” companies still “have more employees than they have pre-pandemic” that require space as they ask employees to return.

He said while small- and medium-sized companies were a key driver of demand last year, WeWork is starting to see demand pick up from large enterprise customers.

The global occupancy rate, however, slowed from 75% in the fourth quarter, WeWork said Tuesday.

The quarter-over-quarter drop was due in part to an anticipated large corporate customer leaving and not a change in “market sentiment,” Mathrani said on the call. He pointed to the example of another large enterprise client recently signing to take up 310,000 square feet in New York and another 100,000 square feet in London.

“At a time when [the commercial property industry] is in flux … this is our moment more than ever,” Mathrani said. As more companies ask their employees to return to the office starting in May or June this year, he said WeWork’s seeing “first hand” these companies are seeking flexible space.

First-quarter net loss attributable to WeWork narrowed by $171 million to $264 million year over year. Consolidated revenue climbed 11% to $849 million, helped by a weaker dollar against the euro and the pound that drove up overseas sales.

WeWork recently completed a financial restructuring with investors including majority shareholder SoftBank that cut its debt by about $1.2 billion and extended most of its debt maturity to 2027. The company said it expects to cut its annual cash-base interest expenses by about $90 million.

Still, the restructuring resulted in S&P Global lowering WeWork’s already junk bond rating last week as the credit-rating firm said the move is “tantamount to a default.”

WeWork also had lost more than 95% of its value through Monday since the time it went public and has received a delisting notice from the New York Stock Exchange as its share price had refused to budge above $1 a share for 30 trading days.

The stock fell another 5.5% to 43 cents a share Tuesday after the company said it doesn’t expect free cash flow to break even until the second half of 2024, which is later than what some analysts had expected.

Piper Sandler analyst Alexander Goldfarb said Tuesday in a note to clients WeWork's delay in breaking even "makes management's affirmation that it does not need to access additional debt ... ring a little hollow." He gave support for WeWork's business but also said ultimately the company needs to turn cash flow positive.

Mathrani said he was surprised that the stock would continue its decline even after it completed the financial restructuring recently.

“At this moment of time, the volatility is driven by a very small float,” he said on the call. “I don’t think it’s representative of where the business is.”

He said the company’s investors, led by majority investor SoftBank, still have “conviction in the WeWork model.”

He said WeWork also is making sure its stock won’t be delisted. The company recently said in a proxy filing it's asking shareholders to approve a reverse stock split, though it might not ultimately pursue this option.

A reverse stock split is a reduction in the number of a company's outstanding shares in the market that automatically boosts the value of the stock, usually based on a predetermined ratio. For example, a 2:1 reverse stock split would mean investors would receive one share for every two shares that they own.

As of March 31, WeWork's real estate portfolio consisted of 781 locations across 39 countries, supporting about 904,000 workstations and 664,000 physical memberships. Those include franchised and unconsolidated joint venture markets including India and China.

Gross workstation sales totaled 177,000 in the first quarter, or the equivalent of 10.6 million square feet sold. That's down from 12.3 million square feet in the fourth quarter and 12.7 million in the year-earlier quarter. Average revenue per physical member was $490 in the first quarter, an increase of 1.2% from the first quarter of 2022.

So-called all-access consolidated memberships, which give members access to WeWork locations around the world, rose 36% to about 75,000 in the first quarter. WeWork’s consolidated real estate portfolio consisted of 617 locations across 33 countries.

Mathrani called for patience as the business pursues a number of strategies in a recent letter to shareholders.

He joined in 2020 when WeWork faced a battle to cut debt and shore up investor sentiment.

WeWork became a publicly traded company in 2021. That followed a failed attempt at an initial public offering in 2019 amid corporate governance concerns that led to the ouster of its co-founder and former CEO Adam Neumann.

CoStar News reporter Paul Norman contributed.