Table of Contents Revenue Revenue includes membership and service revenue as well as other revenue as described below. Membership revenue represents membership fees, net of discounts, from sales of WeWork memberships and on-demand memberships and revenue associated with our WeLive offering. We derive a significant majority of our revenue from recurring membership fees. The price of each membership varies based on the type of workplace solution selected by the member, the geographic location of the space occupied, and any monthly allowances for business services, such as conference room reservations and printing or copying allotments that are included in the base membership fee. All memberships include access to our community through the WeWork app. Membership revenue is recognized monthly, on a ratable basis, over the life of the agreement, as access to space is provided. Service revenue primarily includes billings to members for ancillary business services in excess of the monthly allowances mentioned above. Services offered to members include access to conference rooms, printing, photocopies, initial set-up fees, phone and IT services, parking fees and other services. Service revenue also includes commissions we earn from third-party service providers. We offer access to a variety of business and other services to our members, often at exclusive rates, and receive a percentage of the sale when one of our members purchases a service from a third-party. These services range from business services to lifestyle perks. Service revenue is recognized on a monthly basis as the services are provided. Service revenue does not include any revenue recognized by We Company offerings. For example, revenue from services provided by Meetup and Flatiron School is not included in our service revenue, even if those services have been delivered to a member. All revenue recognized by our We Company offerings not related to our workplace solutions is included in other revenue. Other revenue includes revenue from our Powered by We solution performed and recognized using the percentage-of-completion method based primarily on contract cost incurred to date compared to total estimated contract cost, as well as income generated from sponsorships and ticket sales from branded events and revenue generated by any new solutions or services not directly related to the membership and service revenue earned through the operation of our workplace solutions, such as Flatiron School and Meetup. Location Operating Expenses Location operating expenses include the day-to-day costs of operating an open location and exclude pre-opening costs, depreciation and amortization and general sales and marketing, which are separately recorded. Lease Cost Our most significant location operating expense is lease cost. Lease cost is recognized on a straight-line basis over the life of the lease term in accordance with GAAP based on the following three key components: • Lease cost contractually paid or payable represents cash payments for base and contingent rent and common area maintenance and real estate taxes payable under our lease agreements, recorded on an accrual basis of accounting, regardless of the timing of when such amounts were actually paid. • Amortization of lease incentives represents the amortization of cash received for tenant improvement allowances and broker commissions (collectively, “lease incentives”), amortized on a straight-line basis over the terms of our leases. • Non-cash GAAP straight-line lease cost represents the adjustment required under GAAP to recognize the impact of free rent periods and lease cost escalation clauses on a straight-line basis over the term of the lease. Prior to the adoption of ASC 842 on January 1, 2019, lease cost was referred to as rent and tenancy costs. Tenancy costs include common area maintenance charges and real estate taxes paid in connection with our leased locations. Other Location Operating Expenses Other location operating expenses typically include utilities, ongoing repairs and maintenance, cleaning expenses, office expenses, security expenses, credit card processing fees and food and beverage costs. Location operating 89