UPDATED: July 9, 7:10 p.m.: Flex-office startup Knotel said its revenue plunged 20 percent during the second quarter, offering a glimpse of the economic toll the pandemic is having on the office market.
CEO Amol Sarva said the preliminary numbers reflect a “really hard” quarter that forced Knotel to cut jobs and slash expenses. “What we saw in Q2 was really difficult,” he said during a webinar Thursday. “We had to make some really big changes.”
According to Sarva, Knotel ended 2019 with $370 million in run-rate revenue. But in March, the company laid off nearly 200 employees, about half its total staff. As part of a cost-cutting initiative, it’s looking to give back 20 percent of its portfolio, which spans 5 millions square feet.
“We have been staying really focused on getting through this year,” Sarva said Thursday.
But even before the pandemic, Knotel faced financial difficulties.
It lost $223 million last year, according to company financials obtained by Business Insider. The documents show it generated $74 million in first-quarter revenue, but had a net loss of $49 million during that time period. Knotel has disputed those numbers, saying its first quarter was “solid.”
Still, Knotel has said one-third of its members sought rent breaks during the pandemic, when many were forced to stay home.
Newly-released data from the Treasury Department shows that Knotel received a PPP loan, between $5 million and $10 million, to retain 159 jobs.
During the webinar, Sarva claimed the majority of Knotel’s markets were profitable during the second quarter, with laggards heading in the right direction. “In some ways, there are some real signs of life” in the market, he said, describing strong demand in Europe.
He also weighed in on the nationwide protests that have swept the U.S., following the killing of George Floyd. He said he was “gobsmacked” by the emotional outpouring, and he said Knotel has adopted a mission of becoming an anti-racist organization, as opposed to a “more mild” company that simply seeks to be inclusive.
Until recently, five-year-old Knotel was among the fastest-growing companies in the flex-office space. It was valued at $1 billion last year, after closing a $400 million funding round.
In June, Knotel was sued for failing to pay $169,040 in rent at 25 West 26th Street in NoMad. According to the complaint, it did not pay rent from March through June for the 10,000-square-foot space.
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