International Workplace Group Stock

Good morning, and thank you for joining us. I'm Christian Schmitz. I became Chief Executive in June. I will take you through the first half and strategy, and Charlie will follow with the numbers. I will start with the market. For decades, an office meant a long lease, significant capital and fixed costs carried whether the space was used or not. That is changing. Companies want real estate as a service. They want to flex up and down. They want to pay for what they use. This shift is structural, and we are still early in it. IWG is positioned for it. We have the network, the brands and the platform. No other operator has comparable coverage. My starting point, therefore, is straightforward. The opportunity ahead of us is larger than the one behind us, and that is exactly why I joined IWG.

This slide summarizes the first half. System-wide revenue grew substantially by 11%. Group revenue grew 6%, company-owned revenue grew 5% and recurring management fees grew 84%. That is our capital-light recurring high-margin income and it is growing fast. We returned $100 million to shareholders in the half, and we have announced $150 million buyback for the year. We are reiterating our guidance for 2026 and our medium target of at least $1 billion of EBITDA. The strategy is simple, and it hasn't changed. Expand margins in company-owned, grow fee income in Managed & Franchised, build the most extensive coverage network in the industry.

The shift shown on this slide is significant. In the first half of 2023, Managed & Franchised was 12% of system revenue, 19% of locations and 14% of rooms. Today, 22%, 46% and 32%. Include the pipeline and around 45% of our rooms are Managed & Franchised. That is a substantial change in 3 years. We have achieved that while retaining everything we had already built. Company-owned created the brands, the customer base and the coverage, and that is why partners choose to sign with us. This is our direction of travel. The hotel industry made this transition before us. The leading global operators built brands, distribution and operating systems, then expanded those networks using third-party capital and earned fees. We are following the same path.

Rooms under management are climbing fast and the recurring fees climb behind them as those rooms open and mature. The comparison on the right is instructive. The asset-light hotel groups earn 40% to 56% of revenues from fees. They convert 80% to 98% of EBITDA into free cash flow. They trade on 18 to 20x EBITDA. We trade on 5x. These businesses differ in important respects, and I would not claim otherwise. But the direction of travel is the same: brands, distribution, scale, partner capital and recurring fees.

Turning to company-owned, where I believe the risk profile is frequently misunderstood. We run it as an operating business, center by center. We see occupancy, price, service revenue and local costs in every single location. Where a center underperforms, we diagnose it and we remediate it. Where remediation is insufficient, we restructure, transfer or exit. The profile continues to improve. 26% of the estate is now on variable rent. Pricing is dynamic and demand is drawn from a global platform spanning more than 100 countries. Enterprise is where our scale delivers the most value. Large companies are changing how they buy space. They want flexibility. They want to scale up and down. They want several products in many locations through one relationship. Very few providers can deliver that globally. We can.

We also carry the full range of price points from value through to premium. Whatever the budget and whatever the requirements, we have a product that fits. And what they buy is IWG, one proposition, one family of brands, one global sales channel. Every additional location, therefore, increases the value of the network to the next enterprise client, makes it harder for others to match. Coverage is a durable competitive advantage. That is evident in the client base. 85% of the Fortune 500 use us, average spend is up 7%. And the Fortune 500 is only part of it, our enterprise base runs much wider than that. 52% of our enterprise clients now use 3 or more of our product lines. The final figure is the one I would emphasize.

A significant part of our growth comes from clients we already serve, taking more of the platform, permanent offices, short-stay space, meeting rooms, memberships, services. Those relationships deepen each year and deeper relationships are more durable. Sustainability matters increasingly to these clients and is central to how we operate. We recently published a detailed sustainability report setting out our work across this area. This is the right product at the right moment. And on the evidence of the last 2 years, there is more upside here than we have taken so far. Turning to technology. We already run a great deal of automation across IWG. We are now layering AI on top of this.

There are 3 areas where this delivers value. Cost. We automate more internal processes, so central costs do not grow in line with the network. Performance, better data supports better pricing, better demand forecasting and better occupancy management. Pricing alone represents a significant opportunity. Customer, faster, easier and more consistent service at scale in every location. We already have the scale and the data. The task now is to make the platform more productive so that more of our revenue growth converts into earnings and cash. Taken together, this is how I see the investment case. Growth is accelerating.

Earnings quality is improving on 2 fronts. Company-owned is performing better and recurring fees are becoming a bigger share of the business. The risk profile is lower than the market perceives. Free cash flow is set to grow strongly as the investment we have already made matures and our buybacks are steadily reducing the share count. To close, cash flow performance is expected to improve in the second half. The structural drivers are moving in our favor, and we remain early in that shift. The capital-light strategy is working, and you can see it in the numbers. Managed & Franchised is scaling fast with over $2 billion of system revenue potential already signed.

Company-owned is growing revenue with material margin upside still ahead. And the model is resilient with increasing earnings visibility. My priorities are therefore, execution, simplification and operational discipline. We will convert this growth into earnings and cash, and we will do so consistently. The first half positions us well for the full year. I'm confident in our guidance, and I look forward to updating you on our progress. I will now hand over to Charlie, who will take us through the financial performance in detail.

Thank you, Christian, and good morning, everyone. I'll now take you through the financial performance in detail, starting with the headline revenue and EBITDA delivery, then the 2 segments, cash flow, leverage, capital structure, capital allocation and the outlook for the rest of 2026 and the medium term. The first half shows strong revenue momentum following our investment into getting the flywheel spinning and our focus in the second half is on converting that growth into cash flow and earnings growth.

The first half delivered strong revenue momentum across the group. System-wide revenue increased by 11% to $2.4 billion, while adjusted EBITDA increased to $265 million. Network growth remained very strong with 728 new centers signed and 425 opened in the first half. Managed & Franchised system-wide revenue increased by 36%, while recurring management fees increased by 84% to $35 million. Company-owned revenue grew by 5% to $1.9 billion, and we also returned $109 million to shareholders during the half, comprising $100 million of share buybacks and $9 million of dividends. All of this was done while maintaining our investment-grade credit rating, a core part of our guidance.

Our first half cash flow profile is affected by the transitory working capital changes around payables that were communicated at Q1, but underlying cash flow is strong, and I'll come to that later. Turning first to Managed & Franchised. System-wide revenue grew 36% to $535 million, and gross profit increased by 48% in the first half to $90 million from $61 million. Within that, recurring management fees grew by 84% and franchise and JV fees also continued to grow. Franchise fees are also recurring. So taken together, total recurring fees were $57 million in the first half of 2026. We ended June with approximately 358,000 Managed & Franchised rooms open, having added around 51,000 net rooms since December.

In addition, there are 257,000 rooms in the signed pipeline. This gives us a total of over 610,000 rooms either open or contracted in total. This is also where operating leverage becomes important. As the estate grows, the fee base grows with it and the capital required to grow the business is limited. That is the core attraction of this model. The open Managed & Franchised network is performing as expected, and the maturation profile remains similar across cohorts as can be seen from the chart. This is important because a significant proportion of the estate is still growing. As those rooms mature, they generate additional system revenue and importantly, additional recurring fee revenue.

The Managed & Franchised segment delivered $535 million of system revenue in the first half, as I've already mentioned. However, once the current open rooms are mature and those in the pipeline are open and mature, potential system revenue for the division is over $2 billion annually. This gives us very substantial embedded growth. That maturity profile also gives us considerable visibility over future management fee growth. Recurring management fees were only $7 million in the first half of 2024. They increased to $19 million in the first half of 2025 and to $35 million in the first half of 2026.

We continue to expect $80 million of recurring management fee income for 2026 and $125 million for 2027. That represents roughly 6x the 2024 level. It is important to point out the value of rooms is far more important than just purely the quantity. So the number to focus on here is very much the system revenue number and the recurring fees number that comes through from that. The growth has been driven by 3 factors: the maturation of the existing estate, the opening and maturation of the signed pipeline and new agreements have yet to be signed. There can, of course, be some short-term variation in the opening dates and the timing of maturity, but the underlying trajectory remains very strong.

Turning to company-owned. Revenue increased by 5% to $1.9 billion. This is in line with our guidance of at least 4% growth for 2026, and this is only to the end of June. Adjusted gross profit increased 4% to $479 million. We're getting good operating leverage here. RevPAR increased by 11%, reflecting the pricing actions we've discussed previously. RevPAR has been driven by increase across all maturities as well as the closure of low RevPAR rooms, and this is an encouraging combination. We have also completed bolt-on center acquisitions at attractive valuations, which provide additional opportunities for margin improvement as we integrate those locations into the IWG platform.

Due to the phasing of CapEx, there's been some increase in the first half of 2026, but we maintain a total net CapEx guidance of $150 million for the year for growth and maintenance CapEx combined. As we said previously, we operate a flywheel business. At this stage in the year, we spoke about incremental investment to get the flywheel going quickly last year. This has delivered incremental gross profit in both the company-owned and also the managed segments. I expect this to continue in both segments for the rest of 2026. You'll see the forward look on the Managed segment.

Today, I also have contracted visibility to an incremental $30 million in the company-owned segment, which drops directly to EBITDA. This gives $40 million of additional revenue visibility without any of the initiatives that Christian has in place to deliver for the second half. Now that the flywheel is turning, we can also focus on becoming more efficient. Many of these cost efficiencies were executed in late June and July. And again, I have visibility on full year costs. I think we can do more than we've already done. So that gives me a lot of confidence for the full year outturn today. On P&L, the group has delivered high revenue, high gross profit and stable adjusted EBITDA outcome despite the additional investment. System-wide revenue growth was 11% to $2.4 billion, group revenue 6%. The increase in gross profit was offset by the planned increase in SG&A and the additional investment overhead, and that's getting more efficient as I just discussed.

The key message here is that revenue growth is there. The second half focus is on converting more of that growth into EBITDA, operating profit and cash flow. Cash flow is impacted in the first quarter by the transitory payments change we discussed at the Q1 stage. Of the $83 million working capital outflow that you can see here, $87 million is linked to the reduction in accounts payable balance and the corresponding reduction in payment days that occurred in the first quarter. You can see that on the balance sheet, where the accounts payable balance moved from $297 million at year-end to $262 million at 30th of June. And that 30th of June balance includes additional working capital balances being added from the acquisitions. The important point is that this is a timing issue rather than a change in the fundamental earning power of the business.

We expect H2 cash flow to improve and look much more like Q2, and I've got a lot of confidence in that delivery. Net debt rose materially in Q1 because of that working capital outflow linked to invoicing automation and reduced supplier payment days I just spoke about. We obviously announced that at the Q1 earnings. In the second quarter, cash flow before corporate activities returned to a $36 million inflow. Net debt closed H1 at $880 million, up by $22 million in the quarter after buybacks, dividends and small M&A. We remain committed to maintaining our investment-grade credit rating, and we expect net debt to EBITDA to finish 2026 slightly elevated versus December 2025. The leverage move across the half is modest once you separate out the moving parts.

Starting at 1.35x net debt to EBITDA at the start of the period, the business absorbed maintenance CapEx, finance and tax, working capital, growth CapEx, M&A, noncash financing items and shareholder returns. Even after all of those items, the half year position only shows a modest increase in leverage on last 12 months net debt-to-EBITDA basis. The business has continued to invest, return capital and maintain a disciplined balance sheet at the same time. In July, we increased the RCF to $1 billion and extended it to 2031. So this is after the 2030 corporate bond is expected to mature. We also increased the 2032 corporate bond to EUR 500 million from EUR 300 million. The 2030 bond remains at EUR 625 million, and there are no refinancing needs until at least 2030 now. Fitch reaffirmed the investment-grade credit rating in June, and we remain committed to maintaining our investment-grade credit rating.

That gives us a much stronger funding profile and a very solid base on which to continue investing in the business and returning capital to shareholders. Our capital allocation framework remains very clear. The first priority is financial resilience. The second is investing in the business and then returning capital to shareholders. We announced a $50 million buyback for 2026 in December, upsized it twice to $150 million in 2026, and we've already spent $100 million of that in the first half, repurchasing 37.9 million shares and reducing the share count by 3.8%. That discipline matters because it means growth in earnings can be translated into a better per share outcome as well as stronger absolute cash generation. We have positive momentum into the second half, and we're confident in the FY 2026 outturn.

In summary, our guidance for 2026 is reiterated and remains unchanged. We reiterate adjusted EBITDA guidance of $585 million to $625 million. I've been very clear about how we get there from where we are today. Company-owned revenue of at least 4%, we are on track on that and actually slightly ahead. Recurring management fee income of $80 million, we are on track for that and $150 million share buyback program for 2026. We still expect margin progression from increased scale efficiencies, and we expect incremental EBITDA to translate into cash flow. So the message for the second half is straightforward. The business is growing, the mix is improving, the balance sheet is stronger, and we remain confident in the full year outturn on guidance. We also reiterate our medium-term adjusted EBITDA guidance of at least $1 billion with a cash conversion ratio of over 50% at that point. And with that, I'll hand over to questions.

[Operator Instructions] Our first question is from Michael Donnelly.

Can you hear me okay?

Yes, we can.

Two quick ones from me, please. Number one, Charlie, on Page 19, you said, "I think we can do more than we've already done." So just to be absolutely clear, did you mean by that, that in the second half, you're confident that you can take out more than the $55 million that was taken from overheads on that page? And then number two is for you, Christian. When you moved from your transformation remit to running the regions day-to-day, what one thing surprised you most, would you say about how the business actually executes on the ground?

So I'll take the first one and then Christian can do the second. So just to be very clear on the EBITDA for the second half. I've got visibility into the contracted revenue, number one. And I think we can do a lot on overheads. I'm thinking we can do around $30 million of overheads improvement in the second half versus the first half, and that's what I've got penciled in. So I'm not quite sure, Michael, where you got the $55 million from. Maybe we can catch up on that offline, but the expectation is at least $30 million. And then Christian, I'll hand it to you.

Look, thank you for your question. Look, I'm not sure there's been big surprises with the change. I've been with the business already for a while, and I had all the regions, all the markets, all the regions report to me. So I guess I kind of knew what I was getting into. But there's one thing that I see every day is just the opportunity that's ahead of us. As I mentioned in my introduction, it's an incredible platform. I think the flywheel is going. There's more growth coming our way and the focus is on execution and delivering cash flow. That's what I'm going to spend my time on.

Our next question is from Paul May.

Just a couple of questions from me. Just on the company-owned leased, obviously positive to see the growth coming through better than expected. Are there any concerns that you have around the competitive environment for that business? Obviously, your managed business is growing very, very strongly. And I understand that, that is also of appeal to other operators in the market who can set up very quickly. I just wondered, are you seeing any competition from others on your company-owned and leased or any price sort of undercutting that's coming through. Obviously, you've got the fixed rent issue, whereas on an operating model, they don't have that. So just wondering if you're seeing any issues there or any challenges in any specific markets would be great.

And then the second one, and this is probably the biggest question and feedback we've had today is historically, as a business, you've not been able to show growth and free cash flow generation at the same time. Either growth slows, free cash flow improves or growth improves and free cash flow suffers. What gives you confidence that this time it's different? The H2 improvement is going to come through that is going to continue to flow into FY '27 improvement. And as you mentioned, the $1 billion translating into 50% free cash flow. Why is this the point that we're going to see the history of IWG change effectively growth with free cash flow generation?

I'll let Christian answer the first, and then I'll cover the second one.

Yes. Look, on the competitive dynamics, look, I mean, overall, I think it's a challenging economy out there, right, which is good and bad at the same time. And the good thing is, I think people are looking for flexibility. So the offer that we have, I think, in the market, it's a great match, and there's a lot more runway for that. I think it's going to change a lot, a lot over the next years. At the same time, right, people are watching costs, right, like everyone does. And that's the environment we are in. I think we've demonstrated in the first half that we had very good top line in that environment, right? And unless something really unforeseen happens, we expect that to continue into the second half. And there isn't really a difference whether it's a company-owned or a managed center, right? It's a center. And I think we've got robust demand as you've seen in the top line growth. Charlie?

Great. Thanks, Christian. So to cover the second point, Paul, I think, look, historically, the business, when you say about the growth and cash flow trade-off, that was because you needed the CapEx in order to grow out the company-owned centers. As you can see from the numbers and you look at the historic CapEx, and we covered this at the Capital Markets Day as well, CapEx is currently at a historic all-time low, well within the guidance of $150 million total for the year. So now there is not a trade-off between CapEx, i.e., free cash flow and growth. We're growing that system-wide revenue really strongly at the moment without any incremental CapEx. And I don't think you've ever really seen that in the business before. The CapEx over the last 2 years has been low, will remain low going forward. And we're seeing that cash flow coming through in the managed business and will continue to come through the rest of the year.

It's also worth noting that once you include some of the efficiencies that we're getting on the OpEx side, that translates directly through into cash. And that investment in the overhead we've got has really turned that flywheel. I think sort of we're sitting here this time last year talking about that additional investment. And that was coming through particularly in marketing and salespeople. We really got that flywheel going. It's now coming through in that revenue. And I'm really confident actually in the second half of the year that we've got great visibility through to meeting that EBITDA guidance range and actually a good chance of exceeding it as well and also delivering the cash flow at the same time in the second half.

So look, I think as everybody knows on this call, I have absolutely no problem with saying bottom end of the guidance range, if I think it's going to be bottom of the guidance range. I do not think that at this point in time. And you just heard, I think we've got a good chance of exceeding it as well. So I think all to play for in the second half.

That's great. And just to follow up on that and obviously, a lot of the first half driven by that one-off on the payables side and the payment system. Are you confident saying now that, that is the kind of end of the one-offs? And I appreciate that's always easier said than done and nobody's got perfect foresight. But from where you sit today, is that it for any sort of changes that could effectively bite you in the future? You're done, you've changed all the things you want to change, and now it's about seeing that drop-through of EBITDA growth into free cash flow.

Yes. I think there are a couple of things. I think, first of all, actually, I see some one-off benefit coming through in the second half as we claw some of that back. So as I said, it was transitory. And we now process payments and invoice incredibly quickly. And we've got an AR OCR system that does that. So as soon as an invoice is sent in, it basically processes, posts it straight into the system, which is significantly more efficient than what we've had before. So as I said, I think we claw some of that back. I think as you'd also see in this, and I sort of reiterate this at the Capital Markets Day as well, the way we're presenting the financials is completely unchanged in the first half compared to what we did at the full year. We expect that to be the same going forward. So yes, no sort of further impacts from sort of one-offs in the second half from where we stand today.

Our next question is from Tim [indiscernible].

Maybe let's move on to the next one.

Our next question then will be from Alex Smith.

Just you mentioned some small bolt-on M&A in the announcement that kind of -- I guess that's become increasingly part of the rhetoric or in terms of strategy. Is this something we should probably expect a bit more going forward? And then secondly, just on kind of strong growth in enterprise inquiries that you also mentioned, is how do you plan to kind of capture that growth like you mentioned 50% have more than 3 services kind of plan to kind of take that percentage a bit higher? A bit more color on both those would be great.

So maybe I'll just cover the acquisitions and I've got sort of Mark and Christian here as well to go with that. Look, I think we're being opportunistic about where we find bolt-on acquisitions. We've acquired a few sort of very attractive centers in attractive locations and where we see those at good prices, and you'll see that from the cash flow statement, we pay absolutely minimal amounts for these. We will continue to do that. We think it's accretive to our business. We know how to run these centers at scale and can eke out a lot of cost efficiencies from them. So it's just sort of further ways we can deliver further free cash flow and further earnings as well. In terms of kind of like how we think about additional services from enterprise customers, I'll hand over to Christian.

Yes. I mean I think enterprise overall, I mentioned it in the presentation, a lot of runway, a lot of potential, right? We got access to a lot of customers. You've seen that. When you look at the percentage of the Fortune 500, and it's more than Fortune 500, by the way, that we have. And now it's about deepening the relationships doing more with them, more locations, more countries. And I think overall, a lot of companies are just going through this thinking process, in particular, with everything that's happening in the world, AI, the lack of visibility for them into what space they need in the future. It's going to drive that further in that direction. So we're very confident in our enterprise growth. And by the way, part of the investments that we've made also in the first half of the year has also been in that space, so we can further accelerate that going forward.

Our next question is from Christopher Bamberry.

Just 3 questions. Of the $83 million working capital outflow in the first half, how much we would expect that to reverse in the second half? Secondly, you've talked about slightly elevated leverage this year against last year's 1.35. So something just under 1.5 seems sensible. And finally, as part of that reduction in overheads, you've talked -- I think, if I remember correctly, significantly reducing marketing spend. I guess the obvious question would that be what's the risk to network expansion and growth in '27 on the back of that?

Yes. So I think I'll cover all of these. So the first thing is of the $83 million working capital outflow. I sort of mentioned that we've got the one-off transitory payments outflow, the $89 million. We basically expect working capital to be broadly flat in the second half to slightly negative. We've got some differential in the cash rent versus the P&L rent as you'll see from the cash flow statement. And that's expected obviously to continue because that's embedded within the rents. On the overhead reductions, the main thing to point out on here is to get the flywheel moving. So we're not seeing any impact at all on the top line revenue from that at all. And what I would say is we've already started doing it, and we have not seen that reduction. So confident that, as I say, to get the flywheel moving, it's about efficiency, not about kind of total spend just mapping through directly into revenue. So no problem with that. And then on the slightly elevated leverage guidance, I think, Chris, exactly as you said, I think slightly higher means less than 1.5x.

Our next question comes from Tim [indiscernible]

So I've got 3 questions, please. Maybe, Charlie, if we just come back on the cost kind of shifts a little bit, I think it'd be helpful to get into a tiny bit more detail. So I guess, as you've talked about investing to support the growth and now paring things back, I guess the scale of what you're describing, $30 million or so of delta sort of H2 on H1 is not inconsiderable. So just kind of help us understand what actions you are taking to invest, what specific areas and then what you feel you're able to pull back on? I think just a bit more context would help build people's confidence around that.

And then a little bit around, again, sort of working capital sort of related items. Obviously, you had the PSAs introduced at the end of last year. And then they were settled in January, I think, is what you said at the time, then they effectively be reintroduced. And now you expect them to phase down, I think, is a comment. So again, just some understanding as to how that might play out. And then just moving to a kind of more operational question. You referenced kind of dynamic pricing. Just interested in the extent to which dynamic pricing to what proportion of your business does that apply? Because I guess you've got some longer-term sort of contractual stuff with customers that I suspect is less dynamic. But again, just interested in sort of where you're at on that journey of kind of more yield management and dynamic pricing, that would be helpful to understand.

Great. Thanks, Tim. So on the first one, the first thing I'd say is $30 million is only 5% of total overhead spend, right? It's actually -- it's not an inconsiderable amount of money, but in terms of the -- in the total sort of grand scheme of things is actually relatively small. And basically, it's all about efficiencies, and we are just getting more efficient with that. I think, sort of, when you're in a very big growth phase, you spend some money here and then you work out sort of where you're getting the biggest bang for your buck on that, and we're just getting better at doing that. And it's really -- it's about getting that flywheel moving.

I think you've seen considerable growth since 2024 in the managed business. And I spoke about that and Christian spoke about that in the presentation. This is just about getting that more efficient. So as I say, it's not expected to have an impact on top line revenue. I think sort of on the working capital, as you correctly say, we're expecting to wind down the use of the payment service agreement. You've already actually seen a reduction in that from December into the first half. And we expect -- as we've noted in the text, we expect to see that continue to reduce. And the reason for that is basically, we just got better pricing from suppliers by paying some stuff in advance, and that's the reason why we're using that facility.

But at the same time, though, we're looking to sort of convert some of those deals into permanent deals with suppliers. So therefore, we don't need to be able to do those advanced payments. As I say, that's coming down. We expect to eliminate it in sort of the short to medium term entirely. And that's where we're going with that one. And then on the dynamic pricing, I'll let Christian take over from this one.

Yes. Look, I mean, on pricing, I mean, as I said in the presentation, we think there is a lot of opportunity here. Now when you get a little more specific, what do you think AI can do for you on pricing, right? There's a couple of things. If you think about it. We've got centers that are in the city of London, right, where we got a lot of competition across the street. You got centers in suburban areas. Obviously, price elasticity is probably different there. We got centers that are highly occupied, centers that got less occupied. What AI can do for you is just help you process all the data and information and then come up with better pricing decisions. And that's what we're going to work on over the next months to come.

So still pretty early days, you'd say, in terms of that piece.

I think there's still a lot of opportunity here, and that's how we think about it.

Our next question comes from Samuel Dindol.

Two questions from me, please. Firstly, on the Managed & Franchised, obviously, good growth in new center deals signed. I was just wondering if you could give us some insight into the difference between sort of the partners you have now versus when you sort of started this Managed & Franchised piece sort of 2, 3 years ago? Is it some difference in scale and things like that would be interesting. And then secondly, on sort of the free cash flow and buybacks. I mean, the buyback will be a bit above free cash flow this year. Is that a dynamic you're comfortable with continuing? Or is there a certain leverage point where you'd want that to sort of match going forward?

Great. So I'll let Christian answer the first and I'll take the second.

Yes. Look, I mean, on the partner side, obviously, a great dynamic, right? When you look at it, signatures, openings, it's all going in the right direction. The good thing is really what we're seeing is a mix. We got new partners coming on board. We also got partners who are doing more centers with us. And I think that's really when you see the model working, right, where people do the second, third, fourth, fifth center. And we get a mix of that. And then obviously, there are still a lot of large territory to cover, but that's really what we got here.

Yes. And then just to cover the free cash flow and buyback. So as EBITDA expands and obviously, we get more capacity on the debt side to be able to buy back more shares on that as well. So we are comfortable with buying back more shares above free cash flow. We'll continue to be doing that. But as I say, though, the #1 thing is making sure that we have financial resilience and maintain that investment-grade credit rating. And that's why we're comfortable to increase leverage only slightly, but that does give us more capacity to buy back shares. And look, if you have the same amount of leverage at the $1 billion EBITDA target, that basically is $1.5 billion of net debt or just below that. So clearly, there's more share buybacks that's going into it. And that's how I see it playing out for the rest of the year.

We have no further questions. So I'll now hand back to Charlie for closing remarks.

Great. So thank you very much, everybody, for joining the call. Look, I think it's a really exciting inflection point for the business. I think we've got Christian on board now delivering some great initiatives, really seeing those coming through as well. I'm personally very excited about where we can end up at the full year. We're in a place where we can reiterate guidance and confidently reiterate guidance, seeing more free cash coming through. I think we've got so much opportunity. As Christian said, for me as well, personally, one of the most exciting things about this business is the level of opportunity we've got ahead of us. We've got everything to play for and looking forward to delivering that through the second half of the year. So thank you very much, everybody, for joining the call. And with that, we can close.

Good morning, everyone, and thank you for joining our trading update for the first quarter of 2026. We made a strong start to the year with continued momentum across the business and clear progress against our strategy. And most importantly, we've delivered a 4% revenue growth at the Group level. And System revenue grew at 9%. That's the best we've seen so far. So we're very pleased with that as well.

And all of this despite a clear backdrop of macroeconomic uncertainty and geopolitical events. Anything in particular, developments in the Middle East affect our business directly and indirectly. I think the fact that we're presenting these results today reflects the resilience of both demand and the strength of our model, our global platform. The key message from this quarter is a straightforward one.

Our capital-light model is scaling, demand remains robust and the business is becoming more and more predictable, more cash-generative and more resilient. As you've seen in the numbers, we continue to grow the platform in every way, and we did again so in this quarter. I think, in particular, the Managed & Franchised platform where fee income grew strongly and signings accelerating meaningfully was a very good performance in the quarter.

Over the past years, we've been really pressing the accelerator on our Managed & Franchised business. And as a result, we've reduced our capital intensity, keeping the growth but reducing capital intensity. And this has enabled us to both grow faster and clearly with much less capital and generate structurally higher returns as we do this. What we're now seeing is that model working at scale. The growth in signings, the expansion of the pipeline and the increase in recurring fee income all point to one thing.

We're building a much higher quality earnings base. At the same time, it's important to highlight that the company-owned segment has returned to headline revenue growth as our strategy now converts into higher top line for these units. So we're now seeing both growth in the capital-light platform and growth in the company-owned units. And together, that provides a much stronger and more balanced platform for the Group. Turning briefly to the macro environment.

Globally, there's clearly a higher level of uncertainty, whether that's in politics, whether that's in the expectation of inflation and just broader economic volatility. The world has become a much more uncertain place. But based upon the decades of experience we have in this industry, this sort of pattern can be benign and sometimes it can even be helpful for our business. Periods of uncertainty can accelerate demand for flexibility, not reduce it.

So when we look at that uncertainty, we can see a lot of uncertainty around the changes that AI will bring. I mean, in fact, we believe that AI changes everything. It certainly is within our business, but we think that's going to affect many businesses around the world in the coming years. And what that is causing is an uncertainty into the future headcount requirements for companies, how many people and where do they want those people, the remaining people.

So companies are hesitating from making long-term fixed commitments and are seeking more flexibility. And they're changing also how they take space and generally taking less space, not more. So flexibility, less space really plays into our strategy and what we can offer. So coming back, just reiterating what companies are looking for. I think top of the list, with all the uncertainty and pressures on costs, which seem to be universal in the world today, I think the #1 thing is companies don't want to spend CapEx, no CapEx, #1 thing. Any finance director or CEO I speak to, that is the #1 thing.

The second is they want more flexible situations in everything they're doing. Flex, they put a high value on. It doesn't matter whether that's space, doesn't matter that's renting equipment, doesn't really matter what it is. They want flexibility. They clearly want shorter-term requirements, and they're clearly moving to lower space requirements. We can see that happening. Lower space requirements, excellent for us. That is our business. We do small and medium space; we don't do large space.

And that's certainly becoming a very clear trend. They're also seeking globally scalable solutions. Again, in a world of uncertainty, difficult and changing global politics, the ability to just access a solution that's ready to use, they put high value on. So all of this is greatly helping our model as we move into '26. It always helps us. We're seeing an uptick in the tailwinds here as we come into this year. As a result, our enterprise inquiries are strong.

The activity from those inquiries is increasing and conversion into sales is robust. So we've got all this background macro going on, but we are seeing actually quite positive trends and good tailwinds in the business. So let me move on and just cover a different point, which is looking at our company-owned portfolio. We have a lot of conversations with investors, in particular new investors, where we endeavor to explain this portfolio.

This portfolio is a highly attractive part of our business, very cash-generative and very low risk. And that is the part that's misunderstood by the market. This portfolio over many years has been largely derisked and hedged. And therefore, it is not a cyclical element in our business. It is not a high liability part of our business. It is very flexible. It is very much aligned and very similar to the other part of the business, which is managed space.

So we will work on this as we go through 2026 and beyond to ensure that new investors and existing ones fully understand the very attractive aspects and considerations of our company-owned portfolio. The other key driver is the continued expansion of the network. We signed a new record of 380 deals in the quarter and opened more than 200 centers. But you shouldn't just look at it as growth for growth's sake. The important thing is to understand that this further enhances the flywheel that is our business.

By adding more cities and more network and more depth in the cities that we're in, we created some network, a platform here that is much more relevant to our enterprise customers and to all customers. That relevance drives more demand. More demand drives more partner interest. We're able to fill up and monetize more space for our partners. And clearly, additional scale has huge economies of scale benefits, and we continue to achieve those.

And that's partly why we're optimistic on our ability to control costs and not take the full hit that inflation will bring this year. So we're now at a scale where the flywheel is clearly accelerating, and we're clearly seeing the benefits. So just to summarize, we've delivered growth in revenue and in the growth of the platform despite the backdrop economically and geopolitically, our Managed & Franchised business is scaling strongly. Our growth segment is growing top-line revenue.

The overall risk profile of the business is much lower than is often perceived, and we're going to work on that during the course of this year and very attractive opportunities in addition to all of that to buy back stock, and we'll continue to do this as we move forward, and Charlie will talk to that some more. So with that, I'll hand over to Charlie, our CFO, who will take us through the numbers and other matters.

Thanks, Mark, and good morning, everybody. Let me take you through the financial performance for the quarter, which we've been pleased with. System-wide revenue accelerated in the quarter, growing to $1.17 billion, up 9% year-on-year, and Group revenue accelerated to grow by 4% year-on-year to $958 million as company-owned grew more in the period. As Mark highlighted, the key dynamic here is continued shift towards the capital-light business.

Growth is increasingly being driven by our Managed & Franchised platform, which is higher margin, more scalable, provides greater visibility and more cash flow. In Managed & Franchised, system revenue grew strongly, 41% year-on-year in Q1 to $260 million and fee income increased by 70% year-on-year. Recurring managed fee income grew 80% year-on-year to $16 million for Q1, reflecting the acceleration of openings and the maturity curve of centers.

This has been the key number we have guided to as it reflects the recurring revenue from the growth in the managed network. We continue to see strong partner demand with signings and openings both accelerating. This provides a high level of forward visibility on our future system revenue and fee income. The revenue potential of the Managed & Franchised business continues to grow further.

We now have 336,000 rooms open across the Managed & Franchised segment and a further 231,000 in the pipeline of rooms that have been signed and not yet opened. When all of these rooms are open and mature, potential annual system revenue of Managed & Franchised is over $1.9 billion. In the company-owned business, revenue grew 2% year-on-year, and RevPAR increased 6%. Performance in the first quarter of the year has been in line with expectations, and we are maintaining our full year guidance as outlined with our results in March.

That is adjusted EBITDA in the range of $585 million to $625 million, company-owned revenue growth of at least 4%, recurring management fee income of $80 million and maintaining our investment-grade credit rating. As Mark said earlier, our direct exposure to the Middle East is limited, but we are cognizant of the macroeconomic uncertainty and volatility.

The impact of the Middle East conflict on the global economy remains unknown and includes global inflationary pressures, which may impact the company. These have risen during the quarter, and we are taking proactive steps to reduce them in Q2 and beyond. Despite the macroeconomic backdrop, signings and openings have continued to accelerate post previous investments. Enterprise customer inquiries accelerated, sales have risen and pricing is positive.

On financing, net debt increased to $858 million during the quarter. This is primarily driven by share buybacks as we took advantage of lower prices, but also annual bonus payments and working capital timing effects. As you remember, in late 2025, we updated the date on which we invoice. In Q1, as part of an ongoing program to modernize and automate the business, we have updated the process by which we receive invoices.

This update has reduced payment days significantly during the quarter. We expect this to normalize over the course of the year. And as a result, net debt should reduce from current levels by the end of this year. This program will also help us realize cost savings as we continue to improve efficiencies across the Group. Importantly, our balance sheet remains strong.

Our debt is at a fixed rate. There are no near-term financing requirements, and we maintain -- committed to maintaining an investment-grade rating. On capital allocation, as the business continues to become more capital-light and cash-generative, we're able to return capital to shareholders whilst also continuing to grow.

We have already returned over $70 million to investors so far this year through share buybacks and over $230 million since our Investor Day in New York in December 2023. This is a direct outcome of our model. We have announced $100 million of share buybacks so far for 2026. As we did through the course of 2025, we will update the market accordingly in due course. So in summary, we delivered 9% system revenue growth, 4% Group revenue growth.

We've delivered strong growth in the Managed & Franchised business, continuing to grow our pipeline to add potential future revenue, company-owned delivering revenue and also RevPAR growth and allowing the flywheel to continue turning, which in turn leads to increased returns to shareholders. Thank you very much. And with that, we'll open the line for questions.

[Operator Instructions] So our first question is from Tim [indiscernible].

Can you hear me, okay?

Yes, we can.

A few quick questions from me, please. First, just Charlie, around the guidance on net debt and the movements around working capital. There's obviously been quite a number of moving parts, both at the year-end and then again today. So I don't know if you can group that all together in terms of an expectation for how you think working capital will move kind of December '26 versus December '25? And perhaps specifically, you had the $57 million PSA arrangement as at December.

I think you then said that had been settled in January. So is that part of the equation? So that's question one. Question 2 is around, I guess, churn within the Managed & Franchised estate. So obviously, a lot happening, lots of positivity around signings and openings, but there's always likely to be a degree of churn coming out of the estate. I guess, a, what do you see as -- what drives that? And kind of at what level do you expect to see sort of churn within the Managed & Franchised estate?

I think about 6% of rooms last year sort of exited the Managed & Franchised estate through 2025. So similar levels going forward, I guess, is the question. And then finally, -- just around the Middle East, perhaps you could just sort of furnish us with a bit more detail as to the extent of your exposure and again, to any extent to which Managed & Franchised activities, openings and inquiries in that region have been affected given the backdrop?

Great. Thanks. So maybe I'll cover the first one, and Mark can cover the Managed & Franchised and Middle East exposure. So on the net debt, as I mentioned just now, we expect to get net debt back down to year-end '25 levels by the end of this year. The PSA will continue to be part of the overall construct within that, but it will not increase. And actually, it should decrease slightly by then.

The overall working capital position from a payments perspective, we're now 10 days shorter at the end of first quarter than we were at the end of 2025. And we expect that to unwind back to being net neutral by the end of 2026, as I mentioned. I think we'll get there actually quite a lot quicker than that when we say end of 2026 to be sure.

Okay. Thanks, Charlie. Just on the sort of churn in Managed & Franchised, the churn is basically rooms that we expect to open that don't open more so than rooms that open and then close. Rooms that open and then close is almost rounding error, and that can be adjustments to the size of the center and so on. Rooms that don't open that we think that are going to open would still be the same, about 4%, 5%.

No real change to that. And those are due mostly to owners not being able to finance the opening. That's really what the key cause is there. Middle East, your specific question is around activity in new signings of Managed & Franchised operations. There's really no interruption to that. I think basically, the team there in terms of this part of the activity have a clear look through to the other side.

Clearly, current activity in terms of sales and performance is down in this area simply because there's less traffic coming through those markets. But in the long term, it will bring opportunities to further grow the platform. It's a very successful but small part of our platform. And it has been very tight pre the conflict. It's very slightly looser now, but I emphasize very slightly looser. So that brings with it opportunities in the long term.

Could you just scale the Middle Eastern exposure for us whether it is in terms of revenue mix or...

It's a couple of percent of revenue, and it's mostly Managed & Franchised. So it's probably about 70% of that, 80% would be Managed & Franchised in that particular market.

The next question is from Paul May.

Can you hear me, okay?

Yes, we can.

Perfect. I got 3 ones. When do you think this year, you'll be comfortable providing any free cash flow guidance? Appreciate you got the EBITDA out there and some sort of fee guidance. I just wondered at what point you feel comfortable on the free cash flow side. Second one, second and third are a couple of follow-ups post the full year. Just wanted to check on the buyback.

I think it was mentioned at the full year that it's expected that Mark would be participating pro rata rather than seeing his share in the company increasing. Just wondered how that has progressed year-to-date and whether there has been some pro rata participation in the buyback and then the third one, the full year M&A was mentioned as a sort of theme or an opportunity.

Just wondering if there's been any activity there or whether the current, should we say, geopolitical situation has increased discussions and opportunities there and whether you can confirm if this is larger deals or still likely to be some small bolt-ons as I think was mentioned at the full year.

Yes. Sure. Thanks, Paul. So first of all, on the free cash flow guidance, I think what I'd say on this is the cash flow is good, cash flow is increasing, and we're confident in that cash flow. And that's the reason why we've been confident in buying back a lot of shares so far this year. And actually, we bought back a little bit more, to be honest than we were initially expecting. I think we'll have a lot more visibility going into the year-end when we get to the half year.

If you remember, last year, we gave explicit guidance at the half year. And I think we'll sort of have a much more idea of the shape of the cash flow at that point in time. So I think sort of let's just wait a few months for that. On the buyback, Mark has not sold down any shares pro rata. There has to be an explicit announcement, just to be clear on that, should that happen.

I think it was just more -- we were talking about the possibility of that happening at the full year, but I'd say there has to be an announcement coming out for that. And then from an M&A perspective, I think sort of the way we envisaged it, and I think just to be very clear, it was always about bolt-ons, minimal amount of cash outlay for M&A. We've got no sort of what people call transformational M&A in the pipeline at the moment.

The next question is from Allen Wells.

A couple from me, please. Firstly, you mentioned your confidence, obviously, in the Flex model in light of uncertainty and you referenced in the statement, engagement with enterprise customers stepping up. It would be great just to get a little bit of color here into those discussions. How has maybe the narrative in those discussions changed, if anything at all over the last kind of 12, 18 months? That's my first question.

Secondly, just wanted to touch on the pricing initiatives in company-owned that you talked about. It feels like that's getting a bit of traction when we look at the RevPAR progress. Again, just a little bit of color here on how that's progressing, what next steps are, et cetera? And then third question, just maybe circling back on the kind of the free cash flow and balance sheet questions from earlier.

You mentioned, obviously, the unwind of the invoices, the net debt will be slightly elevated. There's also obviously a reminder on the convertible. I think at least when I look across my Visible Alpha consensus, it looks like kind of $725 million to $750 million of net debt and about $180 million of free cash flow. Maybe I just get any thoughts on if you're happy with where consensus is in terms of those sorts of levels. That would be really helpful.

Yes. So maybe, Allen, I'll cover the third one and then Mark can cover the first 2. So on the net debt levels, we're comfortable with that. I don't want to have a sort of backdoor way of giving explicit guidance on the free cash flow levels by talking about that too much. But yes, I said that net debt will come back down by the end of the year.

Net debt will come back down by the end of the year. The reason why we highlighted the convertible point is just literally for people who are new to the story, it wasn't any sort of backdoor way of adjusting guidance or anything like that.

The amount we're spending on interest cost has not moved since June last year when we issued our second bond apart from the fact that the convertible is now out of the picture. So all of our debt is fixed, as I mentioned earlier, all of our debt is in U.S. dollars. We've got no exposure to sterling rates, and that will be maintained through this year as well.

I think just sort of dealing with the sort of traction in RevPAR and price. So this is basically the price went down last year and has been coming up through the third quarter, fourth quarter and then strongly into first quarter. And our outlook again is positive on the sort of curve on future pricing. And we can already see a lot of what's in the book. So we have a pretty good view on this.

So we should continue to get improvements in RevPAR on the company-owned and also in the Managed & Franchised as we go through this year, notwithstanding the -- what's happening in the economy and everything else, it's pulling through. And that, to an extent, is based on the demand. So we have -- we continue to have strong demand overall in the business. So it's not just enterprise. I'll come to that in a moment.

But overall, demand is strong as effectively, it's more people understand how to use our products. And that's really a key sort of change where people move away from conventional, which is and conventional, just to be clear, is a go out, I take a lease, I then spend money on fitting the place out. I then manage that and then I get rid of it at the end of the lease term or in most cases, not even at the end of the lease term. Highly capital intensive.

The risk is on the balance sheet. it's generally a step aside for 95% of companies, they're not used to doing this, and it ends up being a distraction. So they like whether they're small or large, the fact that they can just rent it ready to use now and that as more companies -- leaders of companies understand that, more people want to use it and it's starting to become more and more mainstream.

And you'll see that if you research into what's happening in the property industry, there's this move underlying, it's been going on for years, but it's picking up pace where people move away from the conventional space market into the prepackaged easy-to-use markets. It's an obvious move. And we're spearheading that, all companies. If you look at enterprise, there the conversation is very interesting listening to them as I do selected. It's -- they're talking about cash free.

Everyone's focused on cash and savings. So does this save me money? Is it capital light for us? Is it flexible? Is it everywhere? How big can I make it? Can you help me, my company make the conversion to having fixed space over to flexible space? Not maybe for all of it, but for a large part of it. We have our own internal consulting firm that's working on numerous projects and exactly this. It takes time for a company to get rid of leases in order to replace them with more flexible space.

So we have good movement with that, but the conversations are practical conversations. They're not really sales conversations. They're explanation conversations where you say that here's the range of products that we have. We did share it with actually on one of the Investor Days. I think it was the one before the last one, Charlie, didn't we? What we call the kimono of products.

Now once you open the kimono, then companies get it and say, okay, how quickly can we move? It's obviously cheaper, it's capital light. It stops distracting people. We get on with the main business. It's obvious. But that as the platform grows, the marketing, clearly, we're spending a lot more on marketing. More people get to understand; it starts to become more mainstream.

And the property industry moves from where it is today, a very, very analog clunky model onto a much more streamlined. I get what I want for the time I want, where I want it immediately. That's what customers want. So that's a long process. Every single month, that process moves forward. That's how we're filling up the centers. That's how we've got 9% all center growth in revenue.

[Operator Instructions] Our next question is from Michael Donnelly.

Can you hear me, okay?

Yes.

Mark, I think this may have been answered from a comment I heard earlier on. But back in March, you noted that M&A will be a more important part of the growth story this year. So I think I heard Charlie say that there was nothing transformative in your sight at the moment. But are there any other comments that you could make about what you're looking for specifically at this stage that would help to drive Managed & Franchised?

Well, it doesn't -- M&A by definition, generally doesn't help Managed & Franchised, but it's sort of growing the -- it grows both, there's 2 groups. One is people joining us and that we have strong performance, but that does not involve any investment because they're joining up with us on the Managed & Franchised to get the benefit of the platform and the flywheel we've described.

So we've got good progress in that every month, and that's a very positive move. It's not M&A, of course, but it's something much better than M&A. On the M&A side, it's small activity, very low cost. And so there are companies joining us. Typically, so far, there's not -- there's very low investment. And so -- and they're very accretive, but they're small.

And I think that's what Charlie was saying. They're not sort of announceable large. They're small sort of bolt-on things that we're not spending any money on. So Charlie, I don't know if there's sort of any clarity more that we want to give on that. But some are completely free, people rolling with us, and the other ones are effectively people capitulating joining us.

I think, Michael, the key thing I'd say is just minimal cash outlay.

Yes, minimal cash. Minimal cash out and in the beginning, minimal cash in that we will grow.

And the next question is from Steve Woolf.

A couple for me. Just on cost inflation, you mentioned earlier in the chat that you're already seeing a little creep in. Just any thoughts on where that was in particular. Secondly, in the cost reduction plan, not really given very much detail within it. But is there any figure you had in mind regarding the contribution to guidance and any exceptional charges that go with it?

Then just thinking of the barriers to sort of accelerate the managed estate, you sort of gave probably the answer to Tim's question earlier. Is it still then the cost element and it's principally used to sort of fit out their existing buildings to get to your demands as it were? And then finally, the proportion of the company-owned that have leases that you'd now say are essentially capital light linked very much to revenues, that kind of thing, please? Apologies.

That's a lot of stuff there. How are we gonna do this, Charlie? So I just...

Why don't you start, Mark, then I will...

Yes. Look, I think if you -- my comments were we need to explain the company-owned Group better. And effectively, the vast majority are extremely low risk and fully hedged. Some of them like that because the rent is variable, but we put them in company-owned. Some of it is structural. There are many ways we do this. But -- and we're going to work out how we can explain better this Group.

But people have the idea or generally, investors could have the idea that this is somehow capital heavy, which it isn't and cyclical, which it is, but very -- it's marginal cyclicality. It's not full cyclicality. We've explained and we have shown some people when we've asked the question to explain what happened in COVID. And the company-owned mature Group traded well during COVID. The issue for us was the new centers that were added during that period.

That is the thing that caused us over many cycles over many, many decades, okay? So that has now gone. So you've got a Group here that is very well established and has -- is very hedged and managed, it's managed for a downturn already. It's all done ahead of time, not after it happens. So that's #1. And we've got to work out how we can explain that as we go through this year. And we will be adding more things to it.

But almost -- I think all of them pretty much are always hedged, but they also have variable elements, which makes them even more flexible, let's say, if the market gets hit by anything. I think then if we move to cost savings, I think the reason -- I don't think, Charlie, we can put a figure on this, as opposed to what we're saying is we don't see -- we think we can counter the impact of what we expect to be rising costs. There's going to be rising costs in energy costs. Energy cost, Charlie, what's that about 4% for us.

Less than that. It's about 1 anda bit percent, but it also impacts everything else as well.

Impacts everything else. But you've got -- so that we expect, overall, we expect more inflation. The inflation is probably going to come later. That would eventually affect salaries, et cetera, in countries where it's linked. Overall, inflation generally is a good thing for us because we're fixed generally on cost, and we can -- that is quite -- can be quite accretive for us in terms of cash. But -- so #1, we're focused on -- we're always focused on keeping our costs down. We've ratcheted that cost focus up more.

I think both naturally, Charlie, I think the accounting system with all of its issues over the past, whatever it is, 18 months putting it in, we now have excellent access to data, much more real-time access. It allows us to control costs better than we've ever done, and that will give us a bit more of a cushion. So it's all of that normal stuff plus AI.

Now AI will be, I think, a major change to our cost base over the coming years, but it takes time. So we're already using AI a lot, but there's a lot more we can do that would just take time to get it in the business. So that's something that more will allow us to control costs into sort of '27, '28 as the business scales and AI really works with scaled up businesses.

So it just takes out fractions of costs all over the place, helps us to manage price better, many, many things that AI will be helpful with a business of our size. And we're very focused on that. We have a team on it. We can see the savings. It just takes time to get them. Charlie, anything you want to add to that.

I don't think so. Sounds good, thanks.

Steve?

Yes, I think we're through that. There's no exceptional charges. And then the final bit then were the barriers to accelerate that, the managed estate. You mentioned earlier, it was obviously -- to Tim's question, effectively was the financing. Is that -- presumably that's the financing element to up the buildings...

Yes, yes. Yes, I mean, it's not our financing. It's their...

No, no, their financing, yes.

Yes. I mean -- I think we've even got through that. I mean it's -- I think it's just -- I think, look, the momentum we've got is quite good. There's also -- we have to also manage -- you've got to do this in stages that are manageable. And the key thing is great performance for our partners, which we're doing, and we've improved incredibly since we started in how we're interacting with partners.

We continue to improve that. Yes. So I think this year, we're going to have an acceleration in growth, Charlie. And then after the growth, after we got them open, we've got to manage them. And that's -- we continue to adapt the structure. Some of these countries that we're doing are up tenfold on what they are. So the management has just got to catch up to that.

And our final question is from Dan Cowan.

Can't hear you, Dan.

Okay. Sorry, Dan, we can't seem to hear you there. Okay. Well, that brings us to the end of the Q&A session. I'll now hand back to Mark for closing remarks.

Great. Thank you all very much for joining and for your questions. As always, we're all open for any further questions that we didn't cover, we'd like to cover in more detail. Thank you for your participation. Goodbye.

Good afternoon, ladies and gentlemen, and welcome to the International Workplace Group plc Investor Presentation. [Operator Instructions] Before we begin, I would just like to submit the following poll. I would now like to hand you over to CEO, Mark Dixon. Mark, good afternoon, sir.

Good afternoon. Thank you very much for the introduction, and thank you for joining us this afternoon online here. So just let me kick off with a very brief synopsis of the business, what we're doing. And then we'll go straight into questions, I think, and to give you a chance to ask.

I'm sure you've all had a chance to look at the results. But sort of if you stand back and look at what the company is doing, looking at 2025, excellent year in terms of financial results. We hit all of the -- all of our KPIs and provided another year of reliable delivery, and that's what the past years have been about. So '25, a continuation of that.

The business itself, if we look at what we're doing, it's absolutely right for today and the environment that we are living in and the environment that companies, our customers are living in, which is an environment that's, let's just say, volatile, slightly more unpredictable than ever before. It's an environment where technology changes things very quickly. Clearly, AI is going to change things even more quickly. And the service that we provide is what companies are looking for.

So as we came to the end of last year '25 and into the beginning of this year, record numbers of inquiries are coming in from companies who are looking to change the way that they support their workers and the way they want to consume, in particular, office space facilities and so on, while supporting workers. So what companies are looking for is capital-light products. They want property. They want it to be capitalized. They don't want to invest any money. They want it finished, ready to use. And as I've described to other investors, a bit like renting tools from Ashtead or any tool rental company, even very small tools now get rented, people don't go out and buy them. And it's sort of a common thing. You just rent it, you want it for work. You want it for a flexible amount of time, the time you want it, we better give it back at the end. And you're very happy to do that and to pay an additional margin to do that.

Now we make our margins by -- we can do all of the service at a lower price than companies can do it themselves because we have such scale buying power and our method of operating is such honed after over nearly 37 years, just totally efficient in terms of what we offer allows us to give companies not only capital light, but a price -- a cost that is 30% to 50% lower than most can do it themselves. So it's a popular service. It's really easy to use, and that's another thing.

Companies don't want the aggravation, the problems that you get through doing -- going through the conventional property market, that is sort of renting space, fitting it out, then having to take it to pieces after us. It just doesn't work for most companies. They -- most of our customers don't want to be involved in the property industry. They do it because they have to, not because they want to. So we take all the pain away, make it easy.

Just touching back on AI, there's a scare around that no one's going to be ever working in an office ever again. And -- but generally speaking, technology and AI helps us because -- in 2 ways. First of all, it makes companies smaller, which helps -- it's very much in our line of business. That's what we provide, support for smaller groups of people. We do larger groups, but almost 97% of our business are smaller groups of people. The -- it is flexible. There's not many -- if you talk to CFOs, CEOs and ask them how many people they're going to be employing next year or the year after, universally, they say they're not sure.

We offer flexibility that stops them getting caught out with having facilities that they don't need or in the wrong places. So generally speaking, AI helps on the customer side. And certainly, as I mentioned a few moments ago, our inquiry levels at the end of last year and this year are up substantially on previous norms. We're also helped by using AI, and we've touched upon this in some of our presentations this week.

We -- as we're a scaled-up business, we have more than 1 million offices. We have large numbers of people. We have large numbers of transactions, about somewhere between 8 million and 9 million customers, depending on how you count them. AI really suits what we're doing. Our ability to automate, our ability to take out cost is greatly enhanced using AI, and we're using it every single month. We had, in fact, this week, middle of this week, a summit with 150 people, our people and all of our subcontractors, looking at how we execute even faster on AI because it's really a series of technologies that really transforms how we can operate our business and how all companies can operate their business.

So overall, from a demand side, all of these things are very positive, and that's reflecting into the demand and sales levels that we're achieving. That's number one. And then number two, if we look at the supply side, so this is -- one of the questions is, are we taking any risk in expanding rapidly, our network.

So we are adding -- last year, Charlie, what did we add last year? What was the number?

About 3 centers a day were opened last year.

What's that mean? Total. Year?

Just over 800.

Right. So -- and this year, what's that guidance?

More than last year.

Right. So you can expect more -- substantially more than that this year. So the way we're opening these centers is in an extremely low risk or no risk way. And that is we're partnering with the property industry, so with investors. And these investors are pension funds, these investors are owners of current property. And we are converting their properties into managed space of all kinds for this market that wants that product. And we are creating revenue and cash flows for the property industry. And we're doing that very effectively, and you can see that in the presentation when you look at the RevPAR created and so on.

So this is allowing us to significantly grow our platforms in each country. We're very focused on completing national networks of centers. We're effectively linking up buildings across the country. If we just look briefly at the U.K., we're up to around 370 buildings. We will add several hundred buildings in this year in '26. The total, in a full, U.K. network is around 2,500. So we're still a fraction of the way to the end. And that is -- you would see, in the U.K. or any country, one of these offers pretty much on -- in every town, village and street corner across the country.

It's all about convenience. It's all about linking the properties so that people can use them wherever and whenever they want. So that is a program that's working well and gathers momentum each year. We've managed to do better each year that we go forward. And the key thing on that model, it's cash free. So we are also capital-light in our expansion, and it sort of changes the model. We've got a slide in the presentation that you'll be able to find.

Are they seeing the presentation, Richard?

The presentation is available on the Investor Relations website.

Okay, fine. Right. So have a look at that. And you can see the important slide is to see the change in the concentrations. So over time, I think we are at about 50% of all of our centers now are managed with what we've signed up, what we've got open, what we signed up. We expect that to move to about 80% by about 2030. I think it's the guidance, isn't it? Richard, confirm. Yes. So as an investment proposition, whilst the company-owned are very profitable because they've been honed over many, many years, the managed starts to become an ever larger percentage of the whole, which is a favorable outcome for investors -- makes the investment case better.

And then finally, on how we look at our business, we look at it quite simply. We're not EBITDA people. We're cash people. So we are very focused, that's Charlie, myself and the management team. On cash flow per share, we're not really -- whatever happens above that is important in its own right, but the key here is cash flow per share. So we are working every day on maximizing the cash flows and every day on buying shares back if the buybacks make sense, and they most certainly do at the moment. So our outcome is more and more cash flow per share as we go through each year. Everything else is insignificant compared to that. And that, I think, is a snapshot.

Charlie, is there anything you would like to add?

No, I don't think so. I think, look, we go into 2026 good momentum from '25 as we articulated at the Capital Markets Day. We reiterated guidance for the full year, and we're looking forward to the year ahead.

Mark, Charlie, thank you for that quick overview. One question I just have in is regarding -- is very linked to your comment on cash, Mark. And maybe, Charlie, you could take this. In terms of our $1 billion EBITDA target, could you talk about how much of that will convert to cash in that time frame, please?

Yes. So in the Capital Markets Day presentation, we actually outlined this and there's a bridge that sort of shows how that $1 billion of EBITDA translates into cash. The short answer is 50%. We estimate that around -- we'll continue to have around $100 million of maintenance CapEx each year. That goes up with inflation from this year, just less than $50 million of growth CapEx.

The assumption is on that cash conversion that leverage stays flat, but we would expect leverage to increase a bit in line with our capital allocation policy around a trend to delever towards 1x net debt to EBITDA. But clearly, at $1 billion of EBITDA, that means you've got $1 billion -- at least $1 billion of net debt. The amortization of the partner contributions on these properties will continue to unwind, but we'll continue to have an element of those as leases run off and we have new deals that involve some level of cash contribution. Again, we've got a slide that outlines some of the guidance on that at the Capital Markets Day.

Mark, you touched on the flywheel in your initial introduction. Could you expand on the comments you made there and also how we're starting to see more repeat business in terms of some of our partners signing up more locations and more buildings to do partnerships with us, please?

I think -- thanks, Richard. Look, I think it's not that we're now seeing that. We're seeing that from the beginning. We're just seeing more of them because we've got more partners. If you look at the growth, we don't disclose the number, but if you look at the growth we would do this year, a high proportion of it every year is from existing partners who have done 1, 2, 3. I think the largest one, we've done about 20. So we're getting more partners who then do more deals with us, and we continue to add more partners.

The property industry is a huge $2 trillion operation globally. And our part of that is the whole of our industry, if you like, all of our competitors combined is significantly less than 2% of the whole market. So there's a massive opportunity for us to expand and convert more of the market into what the customer wants, which is finished product. And to do that, we have to do a great job for partners, and we have to -- and that great job for partners basically is all about them getting cash flows that are the rent or better than the rent. That's what they need. And we're achieving that. So that, I think, answers that question. But it's -- we would not be able to do the numbers we're doing without repeat business.

Thank you, Mark. Charlie, I've just had a question come in regarding the deferred revenue comments that were in the recent numbers. Could you touch on that, please?

Yes, sure. So at the back end of last year, we changed our billing date from the last day of the month to the first day of the month. And the reason for that is that e-invoicing is now being rolled out across a lot more countries and it is becoming mandatory in many more countries. France, for example, is about to go live with that. U.K. is later this decade. And therefore, you need to get all your invoices into the authorities in good time before the end of the month. So we decided that rather than billing people on the 31st of the month, it was better to bill them on the 1st. The date we collect the cash does not change.

So let me just take everybody through the accounting entries that happen on this. So previously, we billed people, say, on the 31st of January for usage in March. And you have the double entry at that point, which is, let's just say we're billing 100, 100 of deferred revenue, 100 of accounts receivable because we're billing, so it's an accounts receivable, we haven't received the cash yet. On the 14th or 15th of the month -- and some of it's a little bit late or early depending on the country, we collect the cash. So at that point, your accounts receivable balance moves from 100 to 0 and your cash balance goes up to 100.

So you've got 2 balances, obviously, in your balance sheet, as always, you've got your 100 of cash at that point and you've got 100 deferred revenue because you have not received -- you haven't actually delivered the service yet, so you don't see the revenue. And then when you deliver the service during March, you then change it from 100 deferred revenue to run it through the P&L and then it ends up with 100 of cash at the end and 100 of net income through your retained earnings.

The new method is only that the 31st of January entries tip into February. So on the 1st of February, you'll have 100 of deferred revenue and 100 of accounts receivable. We still collect the actual cash. So the dollars coming into our bank accounts are still collect on, say, the 15th or 16th. That actually has no difference in that collection whatsoever. So the timing of the cash flow through our accounts is the same. It's just the tips over the month, I would say. So yes, you see it go through the balance sheet because when you get to 31st of December, you've got less accounts receivable and less deferred revenue, but you see that move through the cash flow statement. So it neutralizes that. But as I say, no difference in actually when the cash is collected.

Thank you, Charlie. Also a question regarding our exposure to currencies and also to commodity prices given the obvious moves that we're seeing in the commodity market at the moment and the currency volatility over the last 12, 18 months.

Yes. So I think we've got a slide in that from the full year -- or maybe actually the half year results last year. So in all of the markets we operate in, with a very, very small number of exceptions, we have the same currency for revenues as we do costs. And therefore, the currency exposure is just on the margin -- when that -- the actual amount of the margin, obviously, rather than the percentage of margin. However, we've got a disproportionate amount of overhead that sits in U.S. dollars as a result of centralized costs going through in U.S. dollars.

And therefore, what you actually see is that the currency effect largely neutralizes out when it gets to cash flow. But as I said, there's a slide in the half year results that talks about that. And by the way, that was one of the big drivers of our decision to move to U.S. dollars from sterling. The U.K. is an important part of our business, but otherwise very exposed to movements in sterling, in particular around our debt and interest costs. That is now 100% hedged from euros actually largely, which is where we issue our bonds into dollars. And so we've got no FX exposure at all on any of our debt.

Thank you, Charlie. Mark, could you talk to the question regarding the risk of potential cannibalization in our managed partnerships, i.e., the fact there isn't cannibalization risk as we continue to sign and open more locations?

There is cannibalization risk. It's just very small. So clearly, opening up new centers at the rate we're doing can lead to cannibalization, but it's short-term cannibalization. The market is getting bigger all the time, but it's insignificant and it's something we consider anyway during the planning process. So it's not that it doesn't happen. When it does happen, we've generally predicted that that's going to happen, and we take that into consideration.

I've also had a few more questions, Mark, regarding AI, and you obviously touched on it in your introductory commentary. Could you talk to our end market exposure and how AI can be a driver of customer demand going forward, please?

Yes. Look, it's -- and looking at the question, some of the people are asking a question and answering it, which is really helpful. Thank you. The -- look, big picture here, AI will reduce the size of companies. In particular, it will take out the back offices first. Now we do not do back offices. That's -- we're generally on the knowledge worker end and the representative, in the end, people still got to sell things. They've got to show products. They've got to have meetings. You can't do -- you can't sort of show -- display a product to a buyer over AI or the Internet. You can show pictures, but it's more difficult. So there's a lot of physical activity, and that's what we're involved in.

It's going to change things without doubt. And as I said, the benefit for us in the foreseeable future is that companies need more flexibility, companies become smaller. And company today that, for example, would have maybe 100 people, 200 people in London, tomorrow will have 20 people in London because it's very expensive to have them there and many of those jobs can be done in other places.

The key thing that AI does, it starts to manage productivity and starts to make the management of people much more efficient and you get much more visibility over productivity in the same way that if they were all working in a factory, you can see what the outputs are. So this all plays into what we're doing. There's a question here about sectors. Look, we're doing all sectors, but the types of people we're doing, hard to replace. It will change, but hard to replace. And I think this is all helping us. It doesn't help the property industry, but it helps us as we expand into the property industry.

Thank you, Mark. Another question I had is about our investment in discretionary overheads. And the question is, if signings were to pause, how much of that cost base is truly elastic, i.e., would those costs fall away immediately?

So they wouldn't fall away immediately because a lot of the marketing cost, which is in the discretionary overheads, we incur once the sites open. So if you pause all signings, as an example, you still got the centers that have not yet opened or are still reaching maturity, but we want to put some of our marketing dollars behind. But we could stop that investment immediately. It clearly means that the centers would fill slower than otherwise with that marketing dollars. The cost for the partnership sales managers, though, would fall if we cut all signings completely because clearly, they're employed just to open those centers -- just to sign the centers, sorry.

I think overall, Charlie, the -- if you had a situation which is a sort of meltdown situation, you take a lot more cost out.

So yes, if we're looking at a meltdown situation, yes. So I assume the question was more kind of like what's the underlying sort of steady...

Yes. And steady state, of course, you can take that. And there are other costs that you would take out if you were not growing, it would be totally different cost base. Okay.

And coming back to AI in terms of what we can actually do as a business. And Mark, you spoke about this again earlier in terms of how we can take cost out. But could you also talk to how we can optimize things like pricing by using better technology and AI going forward, please?

Well, we are. And that is -- when you've got -- it sort of puts -- we already have yield management, AI-generated yield management is totally different. That makes -- you're changing prices by second. It's sort of -- it's like airline pricing, but even better. And you can also interpret your customer. It allows you to do both sides of the equation. It's inventory and it's who is the customer and what's their propensity to pay and looks at both sides of it. So that will help.

We don't need very big movements in price to make a very big outcome on the business. So that is the priority of all the things we're doing. But we're also -- 70% of our customer queries already are dealt with by AI agents that are infinitely better than people could do. It's in -- we operate in about 40 languages, but the AI agents are in about 55 languages. They're 24 hours a day, 7 days a week. And it's just -- I've listened to them, and they are super professional, learn all the time and customers, very happy with them. There's many things though. AI affects every part of our business and makes either better customer service or you need less people to do the same thing.

Thanks. Charlie, if we just switch over to managed and franchise and the guidance we've given for this year and next year. Could you talk a little bit about the longer-term potential system revenue that we can generate from the division? And also what's the long-term drop-through to EBITDA, please?

Yes, sure. So we've guided the long-term drop-through to EBITDA in a steady state is around 70%. The RevPAR that we've guided to in the medium to long term for mature centers is $250. What we've seen is that that's taken a little bit longer to get to than we originally forecast. So we originally said it's going to be 18 months. It's looking a bit more like 24. But at the same time, what we are also seeing is that, that RevPAR goes through that $250 depending on the mix and the location of those centers. But overall, though, we're seeing that those RevPARs continue to grow very nicely, growing in line with sort of the -- with all the other cohorts as well. So we're very happy with how that's going. But as I said, yes, it drops through to 70% margin in steady state.

And could you also touch on a question I'm getting from a few people about would we look to move some of our company-owned locations into management franchise locations?

So the short answer is no. And the reason for that, and maybe Mark will want to expand on this a little bit as well. But over time, our company-owned locations get less risky because we know them. We know exactly how they operate through recessions, wars, you name it, pandemics, you name it. They are all sitting within their own entities. So they're low risk, and we continue to generate very good cash flow from those entities. The risk in the company-owned entities comes when you're opening lots of locations and spending lots of CapEx, which as people can see from our accounts, we're not doing any longer.

Yes. And just to -- I think, Charlie, you got it. It just -- there's no point. These are low risk and flexible. They're set up over many years to be that. There's no point in moving them to anything else. You might as well take the cash flow because the risk is not that different to manage the franchise in the end because exactly as Charlie said, these are things that we know and know well. They're in the majority, mature or flexible in their nature or both.

And Mark, could you talk about the competitive dynamics in the industry and perhaps touch on why we've seen so little competition in our managed partnership business, please?

It's a strange question. I mean, look, the -- first of all, let's just talk about competition. There's -- the market has competition. There's plenty of competition, but it's all very small. And it's not joined up. It doesn't have platform, generally has high cost. And so the competition is operating at a completely different level to the level that -- we're like in a different market. But we do compete with them. So if you look at a building owner or an investor, they would always work with us given the choice because we just return a higher level of net yield than anyone else.

No one can get close to it because we're good at managing costs and we can generate revenue quicker than anyone. And that's what counts. In the end, we have a good reputation. I mean, pretty much every owner that we've worked with always does diligence by calling other people. These aren't things we just sign up overnight. They -- diligence at first. And so -- but look, the market is -- will continue to be competitive. But what we are doing is something that no one else is doing. This is the scale of what we're doing that makes us different.

Thank you, Mark. And that pretty much is all the questions that we've had come in. If you've got any closing remarks for the audience to hear, that would be fantastic.

I think there's a few questions. I mean we're out of time. There's a few questions here that have come and gone. There's some stuff about the war, but just -- I can see them here, just quickly dealing with them. Those -- we're not -- it's a very small part of our business in the Middle East. It's about 2% of revenue, 2.5%. Half of it is franchise. We're not affected. We do have an effect from shipping, but the shipping costs -- we have assembly points in Asia, and that's adding about 5, 6 days to delivery times.

They're going around the Cape of Good Hope, not everyone, but quite a few. The shipping costs were absorbed by the suppliers. So no real effect there on our supply chain thus far. And clearly, it affects new sales in the markets that are affected. There are less people doing business today in Dubai than pre-war. But this is, again, a small part of the business.

Final comments, Richard, and everyone. Look, we're happy, I think, to answer other questions or talk through with potential investors or existing investors. People require more information. In the end, it's a simple business that we've been doing for a long, long time. It's 37 years since the business was founded. It's a business that we know very well. It's a business that is totally dispersed, more than 120 countries, about 125, in fact, very strong in America. It's about half the business roughly, but very dispersed elsewhere.

It's a business for the moment, and for the future because it makes business easier. And that is the thing that we hear our customers saying, they just want everything to be easy and focused on core business. So I'm sort of confident that as we look forward, we'll continue to be able to grow the revenues and the business along with it. So it's a particularly positive time, albeit with extreme global volatility around at the moment.

Thank you, Richard. Back to you.

Perfect, guys. If I may just jump back in there. Thank you very much indeed for updating investors this afternoon.

On behalf of the management team of International Workplace Group plc, we would like to thank you for attending today's presentation. That now concludes today's session. So good afternoon to you all.

Good morning, and thank you, everyone, for joining us this morning for our 2025 results. Overall, a very good year, both financially and operationally. And strategically, we continue to roll out the plan that we set out over the past years. I'm going to take you through briefly exactly why that matters, in particular, in these volatile times with geopolitics at play, with AI, the AI question that everyone keeps asking.

So what is our business going to be about over the coming years? When I started IWG, there were different times. It was before the Internet, that was before -- there was a time when mobile phones weighed quite a few kilos. But the idea then was simple. It was about giving people access to great workspace, great work tools.

And even though I started with one center, it was about doing it better than anything else they can get on the market. And now that morphed into doing that wherever and whenever they want it, and that is the business we have today. So -- so when you look at today, we've got a business more relevant than ever in this changing world. What's very, very clear is that customers, so companies want to rent, not own. They want to be capital light. They don't want to invest in facilities, fit out furniture for long terms. They really value an asset-light activity. And I'll give you a quick example of this. This is one of the largest tech firms in the world, a big customer of ours. I made the mistake when I was on a conference call with the CFO saying, well, I'm sure cash flow is not your problem and you're probably not interested in being capital light, he said, "no, absolutely the opposite.

We are very interested in being capital light. We want to spend every last dollar on data centers and AI. We don't want to spend any money on anything else. So we're absolutely rationing capital in the business, and we really like things that are flexible. We really like things that are capital light. Moving to flexibility, we get hit by -- our share price got hit by the AI sort of meltdown, which is the end of commercial property apparently.

What people underestimated is that companies really value flexibility. So if you're a CFO or a CEO today and you're trying to work out how many people you're going to be employing in '27 and '28, '29, that's an impossible task because everyone is clear that AI will change the number of people you have, change the type of people that you have, but it's hard to predict what it will actually be. So more and more companies now are adopting both capital-light and a more flexible approach to how they support their people. So there's a very straight correlation. The more publicity there is about AI, the more our inquiries go up and the more our sales go up. So this is absolutely helping us grow our revenues as we come into 2026. And -- then if we sort of turn to -- so that's the one side.

We've got great demand. The demand is getting stronger. That's converting into. We've got a very good revenue story. And if we look at supply side, this is the property industry. Now that's changed completely, and it continues to change where the property industry now is starting to understand that it's not just about having assets about how you use them. So they are becoming more and more interested in adding value to their real estate, adding value to their assets and turn them into products that companies can buy, and we help them with that.

So we've got unprecedented growth last year, and it will be the same this year. with more and more property companies, more and more investors, pension funds, institutions of all kinds saying we want to be in a much more operational real estate business, adding more value to the people that are going to be using it. And that is really helping us on the supply side. And we've done some fantastic deals. The team did a great job last year, certainly with getting more institutional, larger centers in cities along with growing the network into the provinces as the sort of light bulb moment happens within institutions. What we deliver is a completely different cash flow. We deliver cash flow, and we deliver completely different cash flow with effectively delivering to an investor at least , but an average about 1.8x whatever the yield they would have had.

So it's a significant increase in cash flow by giving the customer what they want, using an efficient platform to do it, which is our platform. So today, we're very much the market leader globally, nationally on any count with the network that we have today.

We're very optimistic about the future. And the strategy is working, and you're going to see it work again in '26 and beyond as our underlying strategy of moving to $1 billion of EBITDA that we've telegraphed on every meeting, we just keep taking steps closer to it reliably with no surprises.

So just looking at the scale of what we have so far, a few numbers. So it's the biggest, it's the most extensive network in every count, more than 1 million rooms open now, 4,600 centers and almost there's another 1,000 centers that are in the construct stage now. Over 120 countries, mixed blessings on that one in terms of the Middle East at the moment, but very, very broad coverage and pipeline of about 230,000 rooms that were already signed and in the pipeline at the moment. And that is before we sign up new locations this year.

So the size of the network is very important in terms of what customers are looking for is coverage. What we are looking for is coverage to help those customers and using lots and lots of tools to get scale benefits from having these large networks that work both for the customer and most importantly, for the cost of operations, so we can operate and supply at most efficient, the best prices at the best margin because of the scale, and we work all of that through.

In terms of competition, look, there's plenty of competition out there, but it's very small and fragmented. And overall, our network today is bigger than the next 10 competitors combined, and we're growing at a much higher rate than any of those competitors or the market overall. So one of the other things, it's another AI avenue. Well, aren't you going to get disintermediated because they think somehow we're in the booking business or tech business. Whilst we are in, it's a very small part of our business, most of it is about having all these properties, operating these properties and supporting workers. And yes, the workforce will change, but it will change in our favor and so on. And can what we do be duplicated. I had that question this morning on -- I can't remember what it was. I think it was FT. Can you be duplicated? The answer is no, not quickly. So what we have is something built up over nearly 40 years, lots of relationships, setting up in all these countries, tax, accounting, all of these things, hard to do.

It's not something you can do overnight. And so the network size is really important. And I think we have a very, very significant moat between us and any future competition that comes along. So capital light. This, I think, is one of the most important structural stories, and it hasn't yet been understood fully. I'm sure everyone in this room understands it.

But certainly, outside that is when I'm talking to journalists or the outside what we haven't landed this message yet. They think we somehow either own real estate or somehow have some kind of risk in it. This is very much a success story. If you look at the chart here, you can see that when we started doing capital-light deals, that is partnering with the property industry, about 15% of the network was managed and franchised. Today, it's 33%. If you add in the pipeline, we're at 50% already, and that's without anything signed up this year. So we continue to move the business. It grows, but the highest growth is in the managed and franchise. And so that starts to become a bigger and bigger percentage of the business, which helps explain in the investment case. It starts to become the major part of the business.

And it's a really reliable part of the business, and Charlie will talk to you more about that. So this is about continuing to deliver. When we talked about at the beginning, people said, you have a good idea, we're not sure you can deliver it. But every year now, we continue to deliver. And I think it's that consistency of delivery that sort of helps in the investment case. It's a capital-light delivery. It's high margin.

It generates a lot of cash, and there's obviously a lot less balance sheet risk. So it sort of shows well, and it's helping us grow much more quickly. What it does also is helps validate and use our IP and our IP is the systems, multiple brands. It's our ability to actually create revenue. We have a massive sales operation that is a direct operation, direct to the customer that the more centers we have on the network, the more the overall platform is validated, the more revenues we get. So look, overall, we feel that we've got a complete rerating story of the business. That hasn't come through yet. But it will come through, and that's I'll talk more to that in a moment. So again, another underestimated part of what we do is the fact that we've got a genuine breadth of brands. These brands allow us to do pretty much any building. So we can go all the way from super budget to 6-star centers. We do laboratories.

We do medical suites. We do a whole range of cash-generative enterprises that building investors and owners can tap into and decide what brand, what activity suits their building, and we support them in that choice. But what it gives us is an ability to keep fueling the growth as more and more real estate starts to become more operational. And this is a key differentiator. No competitor has more than one brand. They're all doing single brands.

They're all very fragmented. This -- the brand suite we have here, a very powerful part of our overall IP. So a slide here on the investment case. This is a slide we showed in December at our Investor Day. I'm sure many of you have seen it. So -- but just to reiterate, what we're doing is very similar to what the hotel groups did some time back. They moved to a franchising model, more asset-light model, which enabled faster scaling, generated extraordinary free cash flow and allowed exceptional shareholder returns. so much so that these -- the best operators in this group are trading at 15x 16, the best when we last looked was 19x EBITDA. So a long way from where we are at the moment, clearly, but we are doing exactly what they are doing, and we're following this path. So the business becomes more and more capital light, much more flexible, much more cash generative as we move forward.

So we're doing what the hotel companies, they have already followed this path, but we have much stronger megatrends. So we're dealing here in a market where we don't have -- we're Marriott without a Hilton and IHG and every other hotel group. We're pretty much on our own. It's a huge addressable market. That's the real estate office industry, about a $2 trillion market. And it's a market that is changing.

So what all these stories about, whether it's AI, whatever it is, work from home, work from an office, all of these stories are all about how technology is changing the way companies and people work. And we're at the forefront of that and benefiting from it. So huge opportunity in the future as we continue to grow the network, continue to add brands and continue to get scale benefits from operating our business. So -- and I think clearly, it's an easier story for investors to understand, to comprehend when more and more of the revenue comes from management franchise. And that is happening year-by-year. So the question is, how long until we rerate. We continue to deliver and our expectation, we are closing the gap slowly. We need to continue to do it until we get to the promised land. Promised land doesn't have to be 19x EBITDA, by the way, very nice for the investors in the room, but certainly a lot higher than where we are at the moment.

So these megatrends, and I've sort of talked to them at the beginning, we're much better -- hotels -- I have hotels in my personal investment portfolio, and they are volatile. They're tough hotels, very short books revenue. We actually have short and long. We have -- most of our revenues are quite long dated, and we have a mix between short and long. So it's a much more attractive cash flow profile. Absolutely unique.

And as I said, we're not -- we are competing, but we're not competing with people like us. Most of it is about explaining the market and growing on the back of that. And our market position means that for investors, for the people that own the properties, we can provide a much better proposition. We have more products, more salespeople, and we create revenue much more quickly than anyone else could do. And all of these things support the growth. This change in the way people are working overall is fueling the growth. Now valuation, I'll be direct about this. It's very low. Despite all of the dynamics that we have, we're a mile away from Marriott, who's the best performer in terms of multiple. So what we have to do is we're very clear here. Everything is in our favor, huge addressable market, weak competition. We've got a good model. We're very disciplined about how we deliver on it.

We just have to keep delivering and keep cutting the distance between us and the medium-term outlook we put there. So it's about just very reliable delivery, and these results give you just that. And I think it will be helped that eventually a light bulb moment will happen and people will realize that somehow this is something other than a property business. It is about supporting workers, but it's not necessarily about doing that only with property.

We have lots of other products that support people. I covered it this morning in the journal. There's a look -- there's more people coming to the office. So look, we are hedged on this. We have a significant business that's growing, supporting people working from home, more than 1 million customers. And that one is growing. And we also have a business in office, and you can clearly see that, that one is growing. So it's a nuanced overall picture that we are winning in, and you can see that coming through in our results. So let's just quickly -- I just want to say once again, megatrends here. CapEx to OpEx, and you will see this pretty much universally amongst companies, they sort of understand that they don't -- if they don't need to own it, then they shouldn't own it. And you can see that with many other comparisons. If you look at Ashtead tools, people rent tools, very cheap tools, $100, $200 tools, but they rent them.

They don't want to buy them, even small things. So you can see car rental, fleet rental, truck rental, anything, all of these things now tend to be off the balance sheet. They tend to be rented complete with service rather than companies buying things and operating themselves. So that conversion is -- you speak to CFOs, they are becoming clearer and clearer about this conversion. Platform working.

So we have companies that do contracts with us for 25,000 people. This isn't about a small company rolling up at the front door here and saying, I need an office, what do you have? These are big -- we do that, by the way, but the major part of the business and a growing part of the business are enterprise customers that say, I have 25,000 people in the United States, and I would like them to use your whole platform. How much is it? And that is what we're delivering. Flexibility is going to become -- the world has become more volatile and uncertain. And that very much plays into what we're doing, whether it's geopolitics or whether it's AI, or whether it's -- I'm not sure if -- what my business is going to be. All of these things are helping us and leading to a rise in inquiries. We have a consulting arm called Incendium. And it's very interesting to see here the level of interest from companies who are asking for consulting help to change how they support their people.

It's very, very clear, very strong increase in demand here as more and more companies seek to find a way from A to B. They can see they can save lots of money. They like that. They can see that they want more flexibility. The problem is making a change. That company is doing very well. And it is a good -- I think it gives us good visibility on the market itself. So technology. Now -- that is distorting how and where people work.

I mean if you traveled on the tube this morning, you will see -- I'm not sure some people are working, most of them are looking at films and on the tube on the subway. But you can do basic work from anywhere. It's not a thing to say, well, I have to be in an office. I've done interviews all the way here from TV studios to here in the car. It's quite difficult actually in the back of a cab, but we've done them all the way through. So technology just makes work a different thing. Now -- so it's distorting making work change. We really provide a platform that makes that work a more productive thing. That's what we're about. I think then if you turn to AI in terms of how it's transforming what we do, we've doubled up every year now for 3 years our AI investments.

We were using AI before it was a thing. It wasn't called AI then. It's called robotics and automation. But for our scaled-up business, it's certainly going to change how we operate. If you look back at the results of this, you see we kept our costs reasonably flat over the last 2, 3 years with a lot of inflation. Now that is AI investments, some of it. And we're putting more in to get more scale benefits as we go forward.

So for us, as a scaled-up operation, the benefits are much bigger. So we can make the investments, get the returns. And it will speed up what we're doing. The key thing is it helps better decision-making. We have a huge amount of data. It's not always evident how to use it. And for normal people to pick up that data and use it quite hard, AI makes the data, do most of the work for you, make more better decisions. So if you look at planning, if you look at accounting, if you look at lots of these things, AI tools, customer service, many of these things, totally transformational. And it will mean that we'll be able to do a lot more with less people ourselves, and that's already happening. So these -- a lot of these -- all of these trends are supporting us in what we're doing, and we think they'll continue to gather strength in the future. So partner benefits I've really covered here.

And the key thing here and the strength of what we've done and what we are doing is great endorsements from the partners that we've already signed up and we're already operating centers for. The key thing we're looking for is repeat business. So how many more centers do we get from the same owners? Are they happy with the return? And that's a resounding yes. Are we getting more institutional business?

Yes, we are. A lot more to do there, but we're getting more of that. because once institutions change, pension funds, et cetera, then you're really on to something because they control more of the real estate stock than anyone else, and that is also happening.

Overall, sustainable long-term cash flows. Can you get me cash flow? Can you get it quicker than whatever the best alternative is, and we are achieving that and owners are very happy with it. They're, in fact, surprised in our ability and the speed of delivery here. And for customers, it's -- here, we're providing base level services. We're adding to the services. So we've added, for example, health benefits. in some countries. We've added gym benefits. So if you imagine you're a company large or small, built into your products, you have benefits for the people.

We also have added, and we're growing this globally a full buyers group so you can buy all sorts of commodities on a buying platform where we're combining the strength of the buying potential of all of the customers that want to participate in buying basic commodities, paper, stuff that they need, also proving very popular.

So we're looking to -- these things are not necessarily very high margin. they all make a margin, but they're all about making the company, the office of the company broader, more effective and helping people, i.e., health benefits or gym benefits, not necessarily for the company, but something the company can offer their people done in each country.

So overall, we're very focused on customer satisfaction and company, the customers, the real customer who's paying the bill, their satisfaction, and that is working. And then as we put forward in the U.S. this -- the flywheel, Charlie, myself and the management team very focused on this. So -- this continues to gather momentum. We came out of '25 with strong momentum. We come into '26 strong momentum. So in revenue growth, more centers, more platform, more enterprise customers, it sort of keeps on powering up. We did invest more in growth last year. We signaled that halfway through the year. That has paid off.

We'll do more again this year. And that will continue to grow the cash flow and the shareholder returns. Charlie will talk to you more about that. So we're a network business. This flywheel is all about winning. And certainly, the mix that we have. It can always be better, still a lot more for us to do, but we are winning.

We are delivering on it. So in summary, it was a good year '25. tough year in many ways, but a good year. We had a good outcome, and we certainly set ourselves up very well for '26. We're actually growing faster now.

We're more capital light than we have been before, and we're certainly starting to generate more and more cash as we go through this year. Returning capital to shareholders. Charles is going to talk to you more about that. And -- but we're also investing in the platform. So we're investing in growth, investing in the platform. We're not being sort of rationing cash into the business. We're doing all of that and producing enough cash to return to shareholders. So we think we've got a very good mix. And in spite of volatility or anything that's going on in the world, we are confident of delivering again in '26 and beyond. Thank you very much. I'll hand over to Charlie.

Thanks, Mark, and thank you very much for everybody to be here today. I'll take you through the financials for 2025 and the outlook for 2026. With our full year results that we delivered this time last year, we set out some very clear guidance for 2025, and we made that very explicit. And I'm delighted to report that we delivered those numbers in line with that guidance that we set out.

So first of all, we said that we'd deliver EBITDA of $525 million to $565 million, and the outturn for that was $531 million. We originally stated that we deliver more cash flow in 2025 than in 2024, and we revised that at the half year to be at least $140 million, and we delivered $162 million, so up 60% year-on-year. We also stated that net debt would be flattish year-on-year, and we come in and we come in around $730 million on a U.S. GAAP basis, and that came in at $715 million. We also stated that we continue to delever, which is obviously a function of that net debt and the EBITDA, and that's reduced from 1.45x to 1.35x, which was also after returning $144 million of capital to shareholders via buybacks and dividends.

We also said we'd delivered $45 million of recurring management fees, up from $19 million in 2024, and we delivered that in line with the guided number. And we also said that we signed more and open more locations in 2025 than in 2024. We opened 25% more and signed 26% more in 2025 than in 2024. So overall, I think we can summarize the year as we guided, we delivered on that guidance, as Mark said, becoming very predictable and making sure we're delivering in line with what we're saying.

For the financial year 2025, our managed and franchise business drove the system-wide revenue higher by 4% to a record $4.5 billion. This led to the highest ever U.S. GAAP EBITDA delivery in our history, up 6% in 2025 to $531 million, on track towards our medium-term target of at least $1 billion. Our capital-light growth continues to go from strength to strength. We signed over 1,100 new center locations in 2025, and this is an acceleration through the year. We opened 782 centers over 3 centers per working day during the year, so a phenomenal rate of center openings. And this growth in management franchise saw our fee income grow by 2.4x, and we continue to expand our gross margin in the company-owned business as well.

And this all came while we returned $144 million to shareholders, $14 million in dividends and $130 million in share buybacks, and we saw our leverage reduce as well. So the engine of our growth in 2025 was the momentum in our managed and franchise division. We saw system revenue growth of almost 30% in the managed and franchise division in 2025, and this translates into 60% fee income growth and 140% increase in recurring management fees on the managed Partnerships business.

We started the year with a footprint of 185,000 rooms and added 122,000 rooms across the year. So now we have a footprint, including signed but unopened rooms of over $0.5 million. Importantly, and you've seen this chart before, not only are we able to sign these rooms up, but we're also able -- and open them, but we're also able to fill them, and they are trading in line with as we expected. I'm very happy to report that RevPAR for these rooms is performing very much in line with expectations, and that is the case across all of the cohorts. So coming back to our footprint and pipeline, given the RevPAR experience, when our rooms are opened and mature, this universe will have the potential to generate $1.8 billion of annual system revenue and the fee income comes from that. The recurring managed fee income we are generating comes with good visibility and very good predictability.

And we've given this guidance before and always met it in line. At the end of 2024, we guided that we'd generate $45 million of managed fee income in 2025, which we did. And we expect managed fee income to be $80 million in 2026 and $125 million in 2027.

So very good forward visibility in this division. As we've been clear for some time now to head towards our $1 billion of EBITDA in the medium term, we need to keep expanding the system revenue of management franchise, but also expand the margins in company-owned.

Margins here expanded by 97 basis points in the year, and we plan to keep expanding the margins going forward towards our target of 30%. At our interim results, which we also expanded upon at the Investor Day in December, we laid out a clear picture as to the price investment we've been making over the last year and why as these discounts rolled off for new customers, blended prices at higher occupancy will be heading up and not down. This has carried on at the start of 2026, giving us good visibility on pricing through 2026. So right now, where we are, we got good visibility into 2026 pricing, and hopefully, this will continue.

As Mark mentioned earlier, we continue to manage our core overheads tightly. We actually saw core overheads coming down very slightly year-on-year, but we've made the choice to keep investing in discretionary overheads, including partnership sales managers for new centers that we spoke about at the interims and also logistics people to ensure buildings open faster.

We've also spent extra money on marketing to ensure new centers open full as quickly as possible. As we stated at the Investor Day in New York City in December, we've integrated digital and professional services into managed and franchise and company-owned. And I'm pleased to report that both businesses performed well in 2025. Management and franchise continues to see strong top line fee income growth and company-owned revenue momentum trends early in 2026 gives us confidence in our revenue guidance here so far. Putting all that together for 2025 enabled us to return significant amounts to shareholders while still reducing leverage across the year, as I've mentioned. This shows how we bridge from $501 million of EBITDA in 2024 to $531 million in 2025. The fee income in managed and franchise, margin expansion company-owned and a small reduction in small overheads, combined with an incremental additional investment in the discretionary overheads drove that in the picture.

But in particular, you'll see that the increase in managed and franchise fee income is really one of the core drivers here. Total reported CapEx was up in 2025 versus 2024, but this is primarily due to 2 factors. Firstly, timing differences between receiving landlord contributions and paying out the respective CapEx on managed enterprise real estate led to phasing issues and there's a difference between the way CapEx is accounted for under IFRS versus U.S. GAAP.

IFRS is on an accrual basis, whereas U.S. GAAP is cash flow based. Some accrued CapEx from 2024 was settled in 2025, which drove a higher year-on-year CapEx outflow on a U.S. GAAP basis. You'll see though, if you look at the IFRS numbers that we reported historically that actually these levels are about in line with the normalized levels. So 2024 is a bit of a dip year on a U.S. GAAP basis. Maintenance CapEx is evolving as expected and expect to be $100 million and grow with inflation going forward, and we've made this guidance very clear in the past. All of these numbers need to be balanced with what we're actually doing. In 2025, we opened 3 centers every single working day and CapEx remains very low on historical levels and will remain so. 2024 was the first full year post the pandemic of full positive earnings, and I'm pleased to report that 2025 was the second year of positive earnings in a row.

Adjusted gross profit increased by 9% to over $1 billion, driven by our system revenue growth. As I've explained earlier, we continue to invest in overheads to drive growth, and this translated into 6% growth in EBITDA to $531 million and a small increase in operating income, which translated into flat earnings per share, but adjusted earnings per share saw significant year-over-year growth. Cash, however, as Mark said, is our key focus.

And I'm pleased to report that we generated 60% more cash available to shareholders in 2025 versus 2024. This enabled us to return $144 million to shareholders and also continue to delever through the period. It's worth noting that cash flow in 2025 was positively impacted by some payments that were originally scheduled for payment in 2025, but were actually paid during 2026. But that notwithstanding, the cash outturn for the year was strong and in line with guidance. We continue to invest in systems and finance during the year. We adopted U.S. GAAP as our accounting standards, integrated digital professional services into company-owned and managed and franchise, and we continue to move our balance sheet structure to a longer-term footing with a new 7-year investment-grade bond that we raised in May.

Aside from only $6 million of convertible bond that was not put by investors in December, we now have no refinancing needs until 2029. And there will also be no further changes to how we're reporting from a divisional perspective. This shows how our net debt has evolved through the year. We started 2024 with 2025 with $729 million of net debt and generate significant cash flow from operations.

After core costs of net maintenance CapEx, interest and tax, it's worth pointing out that if we decide to spend 0 on growth CapEx and not return any capital to shareholders, net debt would only have been $485 million. But we see huge opportunities. So that would have been the wrong thing for the business to do. So net debt after growth CapEx was $567 million and after noncash financing costs, the impact of FX on our debt and our $144 million capital return across dividends and buybacks, we ended net debt with $715 million over the year. Despite investments in capital returns, our net debt to EBITDA still fell during the year to 1.35x. Our transition to capital-light has also enabled us to return significant amounts of capital to shareholders. We are very active in the buyback into any weakness and purchased almost 50 million shares for cancellation at an average price of only 201p, a 13% discount to the share price at year-end.

We have a very disciplined approach to our capital allocation. We've already announced $100 million of buybacks for 2026 following the $130 million that we completed last year, and we intend to communicate capital returns in line with how we did that during 2025. As mentioned, we actively managed the buyback last year, and we'll continue to do that through this year.

I wanted to put this slide up just as a reminder of what we said we'd deliver at the Investor Day in December and how we expect growth to continue accelerating going forward, driven by our capital-light strategy. So you'll see this slide again going forward when we report back on how we progressed against these targets, which brings me to the outlook for 2026 and beyond. So first of all, I just want to reiterate, no change to outlook from what we said in December, no change from what we said at the Q3 results in November. EBITDA growth is expected to be driven by revenue growth as opposed to cost reduction and adjusted EBITDA to be between $585 million and $625 million for the year. Net debt is expected to go up very slightly in 2026, given the fall in absolute terms in 2025 when we guided that net debt will be roughly the same.

In the medium term, we still target a net EBITDA of at least $1 billion and remain very committed to our investment-grade credit rating. And we will do that whilst continuing to return cash to shareholders in line with our capital allocation policy. As you'll be aware, we announced $50 million of buybacks on the 31st of December, and we announced an additional $50 million this morning to take the announced program for 2026 to $100 million. Thank you very much. And with that, we'll take questions.

It's Michael Donnelly from Investec. Two from me. First of all, Mark, thank you for your comments on AI. And until the market gets broad with this acronym and moves on to something else, we've kind of got to keep talking about it. Specifically, you mentioned the proprietary data that you've got from the world-leading network. Is it true to say that you've been able to use AI tools to interrogate that proprietary data in a way that your competitors would not be able to do? And then the second question probably for you, Charlie, is on the $30 million into the partnership sales team. You said that's on the annual cost. But if you're still in investment mode, should we think about that growing at double digits or more in line with GDP from now on?

So just looking at the -- I would say, in all honesty here that the best is yet to come. So the results we've had thus far are to do with automation, better customer service, use of bots, better sales support, use of bots, automation of some of the accounting, the admin. That's sort of -- if you sort of say where are you today, that's where we are. But where it's going is something far beyond that, where we can make better use of the data in terms of planning, in terms of better decision-making, think yield management, and that is, we think, is a big upside. We're already doing yield management, just to be clear, but we can do yield management on steroids with the quantum of stock that we have, it makes a real difference. You don't have to have a lot of movement on there for that to be a particularly interesting area. So there's a huge amount of data. How can we use that better? That is what we're spending time doing and investing, doing at the moment.

In terms of the additional investment in the partnership sales team, I think that we've also made additional investments into marketing. And we announced this at the half year that we saw that cost increase come through, and we're very happy about doing that because that was leading to better outcomes going forward. We would absolutely do that again if that makes sense to do. And what you're seeing is that we are putting more money into marketing.

We are putting more money into the partnership sales team, and we're now opening center every 3 days. I think if you go back to the slides that we were showing 2 years ago, I think sort of most people here would have been absolutely delighted with 1 center per day. And this costs money. It can't be done for free. We have a great ability to scale, which is the reason why you see the core overheads stay flat. So that's things like finance, HR, IT, the back office. But in terms of being able to get new centers open and new centers signed up, that does need marketing money and partnership sales money. So where it makes sense to deploy more expense there, we will do so.

It's Paul May from Barclays. I got 4 questions actually, but it should be quite quick. We noticed Mark's stake has increased slightly over the year. I assume that's a direct result of not participating in the share buyback. Just wondered what are your thoughts regarding the stake moving forward and the share buyback as we go on?

I appreciate you don't give free cash flow guidance at this stage, but can you provide some color as to how much of the year-on-year EBITDA increase is expected to flow through into free cash flow? Obviously, for '25, it was higher than EBITDA growth, but some color would be great. Management franchise, you've got a clear EBITDA trajectory there. What are you seeing though year-to-date within the company-owned and leased division? Is there any downside risk from that division into the forecast? And then the final one, just on the free cash flow. You mentioned there were some items that shifted into '26, which boosted '25 free cash flow. As a result, '26 gets the sort of negative impact from that. Would you be willing for the share buyback to be slightly higher than free cash flow in '26, given you had some spare free cash flow in 2025?

Yes. So maybe I'll take most of those, Mark, and so feel free to interject. So I think the first thing on Mark, look, we've been really happy with the fact that Mark is our large shareholders and his percentage stake has increased over the last year, as you say, exactly to the buyback. I think sort of there comes a point though where as a company, we quite see that stabilized.

So sort of Mark might sell into the buyback and keep the percentage exactly the same. So it doesn't go up, but it equally doesn't go down. But obviously, that's a decision for Mark and how and when you do that. I think the second thing is on the free cash flow guidance and the color on that. I don't want to give an explicit number at this point in the year given sort of -- it's a small number relative to the overall revenues and costs. And I think it sort of goes to your third question about the fact that you're seeing sort of small numbers go from 1 year to the next, and that makes a bit of a difference. But we don't see any difference in 2026 from an EBITDA to cash flow conversion ratio going through the year. So same level of percentage. And then in terms of kind of the management franchise trajectory and the company-owned, look, we've been very clear that one of the key underlying assumptions for 2026 is that we want to see revenue growth coming through in the company-owned.

I think we've entered 2026 in a positive way on that, and we've had some good momentum at the end of 2025 with the pricing changes. But clearly, it does require that to continue. And given the fact that in the short term, and I mean sort of very short term quarter-on-quarter, revenue drops through to EBITDA almost 1:1 on the company-owned side, that does make quite a big difference to the near-term earnings outlook.

Clearly, in the long term, we have the flexibility around our cost base. We've been very good to respond to changes in the cost base and the requirements and the change in that cost base. in order to preserve the margins. But in the short term, you do have that sort of slight level of inflexibility. So yes, there is a risk on the overall number, both ways, by the way, up and down, right, on that company and revenue. But I think, as I say, we've got good momentum going into that so far. And then the free cash flow going from '25 into '26. I think what I'd say about the buyback overall is we're a firm believer that our shares, I think articulates very well are very undervalued.

We do whatever it does that makes sense to buy back more shares. I'd love to buy back as many shares as we can. But the main thing that we are committed to, number one, is the investment-grade credit rating. And in some ways, a lot of the buyback program is driven by making sure that we've got adequate headroom under our credit rating.

Sorry, just on the last one, just to check, then if there was a situation where the but was slightly higher than the free cash flow not talking materially higher, that wouldn't necessarily be an issue for 1 year. That's [indiscernible].

Yes.

Alex Smith from Berenberg. Just 2 quick ones for me on the managed side. The rollout seems to be going pretty smoothly. But as you're kind of opening like you say, 3 new centers a day, is there a potential kind of bottleneck there? Or is the investment in the logistics team there to kind of offset that? And then secondly, could you give like a geographical distribution of those managed sites as well, that would be pretty helpful.

The -- is there a bottleneck in the openings? No. but we have to keep working on it because the -- what we're doing is getting better and better at the logistics of how to do those openings. So we're very focused on lowering the cost of openings.

That's very much correlated to our partners, the better value they get, the more centers they will do, the higher their returns. So we've done a lot of work on this. And that sort of is complicated by things like tariffs and shipping costs and things like that. So -- but we've made great progress in actually reducing -- you can't see it in these numbers, but actually reducing the cost of opening a center, making it both quicker and much substantially cheaper.

So I think we are 1/3 we could get to half cheaper than when we started for the same quality. So second question, geographic. So if you look at the growth as it stands today, I'd say we're firing on 5 out of 10 cylinders, if there were 10 cylinders, we're only 50% sort of switched on. We have got breakthroughs.

We have had breakthroughs in some countries where we have very low growth, then we have a breakthrough where we pick up some owners that we do very well, other people hear about it and then it's sort of mushrooms. So the job really of the growth team and the leadership of that team is to make sure that every country is switched on. If you look at a country like Germany, that sort of went from low growth to very substantial growth. There's a whole lot of reasons for that.

So we're still underperforming even with the growth numbers that we have today, we're very much underperforming. So still strong growth in the United States, but now, for example, Latin America, very, very strong growth. And that, again, we've had quite a number of breakthroughs there. So I think the best on that is yet to come.

Sam Dindol from Stifel. Two questions for me, please. First, on management franchise. It looks like a number of sidings stepped up pretty markedly in Q4. Does that just reflects the investment in the sales team? Do you think the size will step up notably in '26.

And then secondly, on capital allocation. Is M&A still part of the story? Do you still expect to make a sort of bolt-ons in areas where you can add capability?

I think -- yes. So yes, investments in the sales team and logistics. It's 2 things together. So what we're -- this is a scientific exercise, brand new, no one's ever done it before. So we've got a great team on this with good leadership that are looking at why are we doing well in that country, not that country. Why -- what are the things that are blocking us. Now the key thing is the cost of doing it, CapEx. So it's not only companies that want to be CapEx light, it's the landlords, they're not a wash with catch all of them. And they're certainly very careful about how they spend it. So I think it's a combination of better management, understanding the countries better, improving the management in the country, still a long way to go. and getting those logistics better at a lower cost. So we're constantly working on that. It's not a -- we have not -- there's not a minute we haven't really focused on that in during '25.

The benefits will come through in '26, but we're still doing now. It's still a long way to go, okay? So that's sort of tick the box. I mean you can guarantee that we are focused on it because we know how important it is. In terms of M&A, you should expect to see more of it next this year, okay? And there was quite a lot last year, all in the numbers, by the way. But it sort of gets a lot of the stuff coming in under management.

You're going to see a bit more M&A this year. And that will be a more important part of the growth story as we go through this year and next year. What we're very clear about is scale, scale all the way through scale benefits, okay? So if we can keep highly disciplined over how we are doing M&A, not growth for the sake of it, it's certainly something we'll consider, and you're going to see more of it coming through. I don't know if you want to add anything to that, but this is...

Steven Woolf from Deutsche Bank. Just a follow-up on the M&A point. What's desirable out there in the market, given your scale versus the competition? Is it buying up some of those competitors to keep it in sort of company-owned fashion? Or is it you're buying brands to go after? I'm just sort of -- given you can do so much in managed and franchising, where does the M&A sort of fit into that side of the story.

Sort of -- it's not brands generally. We're not buying brands. We are partnering with some brands, a few more concepts that we may add in but it's certainly -- but what you're doing is there is adequate synergies, let's just say, to make it attractive enough for us to sort of contemplate doing it. So it's really our scope benefit that we can apply. It sort of comes in, it will grow the company owned attractively. But it also, I think, probably about -- there's a high proportion coming in under management as well, which is obviously our preference. So it's helping both sides of the equation. So yes, I mean that's -- it's very broad, but we are super focused on it. It's not something we're not sort of getting we're very careful on it in that we do. We want to make sure that everything comes back to what you heard Charlie and myself saying all the way for all about cash generation. So what we are doing has to be closing the gap on $1 billion of EBITDA and the cash flow that comes from that. Does it help? And if it does, then we contemplate it, if it makes the right hurdles.

Many thanks, everyone. I think given the time to best supported that and if you have any questions, please feel free to come to me we'll pass on to management for answers. Thank you very much.

Thank you. Thank you very much.

Thank you.

Good morning, and welcome to the International Workplace Group plc Third Quarter Trading Update. This call is being recorded. Today's call is hosted by Mark Dixon, Founder and CEO. I will now turn the call over to Mark. Please go ahead.

Thank you very much. Good morning, everyone, and thank you for joining us today to listen to our results for the third quarter of 2025. As a global market leader in our industry, we continue to build our network. And with that, our revenues and the moat around our business as we continue to sign and open significant numbers of locations to grow our national and global networks and our platform overall. This is what our customers and partners are looking for. That's the scale of the business and the ability to work for both of these constituents.

Q3 has seen continued positive momentum for the group. We have, in the past, been very clear about our plan. And quarter-to-quarter, we're talking to you about how we're executing on this plan and delivering on it as we said we would. Our strategy is to consistently deliver the results, which moves towards our medium-term target of at least $1 billion of EBITDA and underlying here in Q3 and our outlook forward is one of very strong momentum as we come to the end of the year.

As the world of work continues to evolve, the structural growth in flexible working, combined with our unrivaled market position, continues to grow. It's resulted in system revenue growth of 4% year-on-year. And we expect an acceleration on this both compared to the first half of the year, and we expect further acceleration as we go into 2026.

The incremental investment in Managed & Franchised that we spoke about at the interim results has resulted in further capital-light expansion in our networking coverage with a 40% increase in both signings and openings year-over-year in the quarter and a rapid growth in fee income from that. Signings, openings and corresponding growth in fee income continues to show great promise and a part of the momentum that we're talking about.

The growth in the network is extremely healthy globally. In Q3, we signed another 335 locations across the network in total. In the first 9 months, we signed 831 locations. These signings are across the Managed & Franchised and Company-owned. But if it's Company-owned, almost all these leases are very similar to a managed contract and therefore, both capital-light and asset-light. So very, very low CapEx required.

Coming back to my point of scratching the surface of growth. Whilst we have over 1,500 locations opened in Managed & Franchised or 245,000 rooms open, we have a further 190,000 rooms signed but not yet opened. So a lot more growth will come through on the basis of what's in the pipeline. And all of that together only just scratches the surface of the potential of the size of the network. But this pipeline will underpin growth in this division into 2026 and beyond. What's of equal importance is that these locations are also filling up in line with our expectations, critical clearly for our partners and ourselves.

Our strategy to grow occupancy in the Company-owned segment, as previously outlined, is working well and feeding through now into revenues. Although revenue in the quarter was flat, overall, open center revenue was up 1% for the quarter year-over-year, an improvement compared to the second quarter in '25. And these higher occupancy levels are expected to drive revenue through Q4 and into 2026. So the work we've done that Charlie and I have talked to you about will help drive revenue growth through into the Company-owned segment. It's a combination of both price and occupancy. We have occupancy improved and improving, and the prices coming through now as we hit the end of Q3 and into Q4. So that sets us up very well for 2026.

Structural and consumption trends continue to move in our direction. And we -- and as we continue to expand our network and coverage, we're rapidly growing our exposure to enterprise customers who want to use that network. So we've put more investment into -- it's not more overall, it's a switch in investment, switching our sales resource and marketing resource more behind the growth in enterprise customers. So we're ramping that up. And that is bringing with it some very good returns as we start to sell the whole network as opposed to an office in one place.

We've always sold the network, but the network as it grows is becoming more attractive. We have more to talk about to larger sale customers, and we are winning those. So that will be a theme as well during '26, and we'll talk about that a little more at our Investor Day in New York.

And with that, I'll hand over to our CFO, Charlie Steel, to run through the details of the numbers.

Thank you, Mark. As Mark said, we delivered underlying quarterly system-wide revenue growth of 4% year-on-year to over $1.1 billion. Managed & Franchised, in particular, sees new rooms being signed and importantly, converting into openings at pace. In the third quarter of 2025, we opened 62% more centers on a net basis than in Q3 2024, and we have almost doubled the number of managed centers opened at the end of Q3 2025 when compared to the end of Q3 2024.

Managed & Franchised system revenue has grown by 29% year-to-date to $574 million and showed growth of 36% in the quarter on a year-on-year basis. This system revenue growth is translating into a very healthy fee income for IWG and specifically, recurring management fees from our management partnerships.

This line shows growth of 83% year-over-year to $11 million and growth over 130% in the 9 months to the end of Q3 2025. Increasingly, this is becoming a meaningful contributor to the group and dampening operational leverage.

RevPAR is evolving as expected, as Mark said. And given the network growth, the Managed & Franchised segment should deliver more than $1.6 billion of annual system revenue, and our corresponding fee income will show extremely healthy growth once all rooms currently opened and signed reach maturity.

Given the momentum in signings and the experience of our partners see when our rooms are open, we're increasingly confident this division has years and years of growth ahead of it.

The Company-owned division saw flat revenues year-over-year driven by 1% growth in revenue from open centers. As we explained at the half year stage, we have grown occupancy year-to-date, and this has continued in the third quarter, and this will support revenue growth into Q4 and into 2026, as Mark mentioned earlier.

Note that we continue to sign and open new location in this business, but the vast majority of these have no CapEx requirements, and the company has no minimum leases.

RevPAR continues to develop as expected, and we have seen RevPAR growth in Q3 versus the half year stage. Importantly, even after 18 months, RevPAR in our Managed & Franchised division continue to grow, suggesting that RevPAR at maturity could be higher than $250 that we have previously talked about.

Digital & Professional Services saw flat underlying revenues in the quarter and reported revenues being impacted by the 1 exit contract that we've mentioned before.

Our capital allocation policy has been very clear since its introduction at the Investor Day in December 2023. And I'm pleased to state that we've returned over $100 million of capital to shareholders in 2025, and we will update the market further regarding our capital allocation policy at the Investor Day in December in New York.

Net financial debt increased on the quarter as we accelerated the share buyback program to take advantage of lower prices and repurchased $47 million of equity in the quarter and customary working capital movements, including the payment of tax and VAT in this quarter. We'll be repaying $173 million of the 2027 convertible using RCF liquidity in December, which leaves us with only $5 million of maturity until the RCF renewal in 2029. We expect net debt to reduce in Q4, in line with previous guidance.

We confirm our guidance for the full 2025 financial year provided with the H1 2025 results as follows: center growth in signings to be higher than in 2024; no change to adjusted EBITDA net debt guidance from the half year; reiterate commitment to maintaining a BBB flat credit rating; share buyback of at least $130 million in 2025; free cash flow to shareholders of at least $140 million in 2025; and on track to deliver EBITDA of at least $1 billion in the medium term.

As we've mentioned, we're holding an Investor Day on December 4, where we'll hold our -- we'll outline our medium-term framework and update the market on our capital allocation policy. And with that, we'll hand over to questions.

Thank you. [Operator Instructions] Our first question is from Michael Donnelly.

Can you hear me okay?

Yes, we can.

It's just one from me. Thanks for the detail there, Mark. It's good to see in the statement that pricing and occupancy are trending in the right direction. Could you give us a little bit more color on the levels of each of those metrics at the moment? And how close do you feel they might be to aspirational levels?

Charlie, you might want to correct me on this, but how close they are to aspirational levels, we're not close to aspirational levels. There's a lot more to go, number one. But what's happening now is that we have both occupancy and price improving at the same time. And so that is leading -- that will lead to a better revenue growth in that Company-owned group same center growth.

What we're trying to do, I think, next year, we talked about this, is just to make sure that we're looking at it clearly, the cohorts of what's important here. And it's a question of how much information we give. But we have -- when we talk -- when I'm talking about good momentum and Charlie is talking about good momentum, what we can see is that the margin in the Company-owned, we can see that improving into '26 as a result of better revenue and costs broadly flat, up a bit, maybe down a bit. So that's what we see. Charlie, agree on that broadly?

Yes. And I think it's important to note that if you just outperformed the margin by -- so you outperform the revenue with cost by just 1% a year, every 1% of that is worth $30 million. So we've still got a lot to play for in that segment. And as Mark said, we've got good visibility going into 2026 around both pricing and occupancy. So all to play for there.

Our next question is from Paul May.

A couple of quick questions for me. I had some incoming this morning. Could you explain the reason for the change in the revenue recognition in the Managed & Franchised fee income? Just to give some comfort on why it's now including the gross revenue from starter kits rather than net revenues?

And then second question, can you provide some color or comfort on how you plan to get to the $140 million of the free cash flow generation for the year, given I think in the first 9 months, you're about $30 million, just leaves quite a bit to go in Q4. What color and comfort can you give on that, say, around net working capital movements and so on?

Yes, sure. So Paul, start with on the revenue recognition on the starter kit. So previously, we used to buy starter kits on behalf of clients when we are opening new centers and then just take a margin on that. What we're now doing is buying them in advance and then selling them out to clients as we open new centers. So we are effectively taking risk on that inventory now, which we were not doing before. And that's the reason why it's moved from a net basis to a gross basis. In terms of...

I'll just step in on that one. So Paul, important thing here is we're simplifying the opening program for our partners. So before, we had -- what we had was complicated. It has to deal with a lot of different people in order to get a center open. We've consolidated that so that in '26, we will speed up. You have a one-stop shop for openings, which will -- it's one of the blockages that we need to unlock to get more of the signed centers opened. And it just takes away a whole wave in administration. It doesn't really change much, but we do have to -- as Charlie said, we've got to recognize the revenue. There's no risk in it would be fair to say, Charlie?

Yes, exactly. Well, there is in terms of the -- we're taking inventory risk on it. But from the perspective of -- and that's how the accounting works on it. But in terms of how we sort of have a forward order book and can see that, we've got good visibility.

And then on the second question around the $140 million of free cash flow. Yes. So Paul, in Q3, we spent more on working capital very deliberately. Some of that included, for example, some tax and VAT payments that will be higher in Q3 than in Q4. And we do have visibility towards the end of the year on that $140 million, and that's the reason why we can reconfirm that guidance today.

Our next question is from Alex Smith.

Can you hear me?

Yes, we can.

Yes. Perfect. Just a quick one for me. The investment in -- or the incremental investment in Managed & Franchised division is clearly already delivering an acceleration in growth. Do you expect that to continue over the coming 12 months? And more importantly, do you now have the right headcount to kind of deliver that platform for growth? Or is there potentially more headcount or more investment needed in the short to medium term?

I'll answer that, Charlie.

Yes.

More investment needed. I mean, the headcount has gone up and will continue to go up steadily, but it's not to the same quantum. But we'll -- and basically, the network size and the ability to go and get this done, it's important to seize the moment. So we're not holding back on that type of recruitment. It's in the numbers here. But yes, it will continue to go up. Charlie, agree?

Yes, definitely. And I think if you look at the rate we're both signing and also opening these centers in this quarter, it's up hugely even versus this time last year. And we've got continued visibility seeing that increase even further.

[Operator Instructions] Our next question is from Steve Woolf.

Just a quick question then on the Managed & Franchised. The signings and the pipeline replenishment are obviously going very, very well. I was just -- could I just check whether you feel the fee income part of that Q1, Q2, Q3. Could I just see if you could just check those figures with you, Charlie, and whether you felt that, that was keeping pace with some of the progression you made on the top line? I appreciate the timings of openings.

And then just in terms of the openings themselves on the signings, could you just sort of say whether you have an emphasis or preference for managed versus franchised within that cohort? And then any changes -- where is it skewed to this -- the portfolio geographically as you make these signings?

Yes. So I'll cover the first point and then maybe hand over to Mark for the second point. So in terms of the fee income, as we mentioned, the system-wide revenue to the top line on that has increased 36% quarter-on-quarter. And that basically corresponds to the recurring management fees that you see up 83%, so going from $6 million in Q3 '24 to $11 million in Q3 '25.

Then there's the fee revenue, which also includes JV fees, other fees. And so that includes things like the starter kit fees, it includes signing fees and the like. Those ones are a little bit more lumpy because that depends on kind of when we're receiving and signing up the centers. And so we've seen those just do go up a little bit quarter-on-quarter.

And obviously, you've also got the summer that kind of ends up being a little bit odd because if people are around in August, you can some sign more of these things or sign a few of these things. But we're definitely seeing the momentum in that also going into Q4.

But the one I'd probably just focus everybody on is the recurring management fees because that is, by definition, recurring. And that's really where we're seeing that growth engine coming through in terms of the fees on the managed business.

Is that -- sorry, what's the numbers on that recurring then purely on a Q1, Q2, Q3 basis?

So in the 9 months, in 2025, it's $30 million, of which Q3 is $11 million of that. So it's up hugely quarter-on-quarter as well.

Okay. So 9 months, so within the first half then you've got $19 million. And then you've done $11 million -- so you've done $11 million in Q3 versus $19 million. So it's broadly flat across the periods [ 10 10 10? ]

Well, no, well, it's up sort of $9 million -- it's $9 million up to $11 million, and then that will continue to increase in Q4. So our guidance for the year is to do $45 million on that, and that guidance still stands.

Okay. Perfect. And then geographically or a preference for managed over franchised, Mark?

So very few franchises, all managed because that's -- it's much more streamlined. And as I said a few months ago, we're getting the opening process much slicker so that we can speed up the conversion of sites from a signing to an opening. And so almost all managed, and that's what you should expect going forward.

Our franchisees are also doing well. So there's some growth in franchise revenue. But there are a few franchises really. Regionally, this is across the board. I mean, we've always had strong performance in the U.S. We've now started to switch more so we're getting strong performance in the European zone and in Asia and Latin America. So the numbers are going up. We're getting very good monthly numbers now that are coming in, but it's more spread. And this is as we put the teams in place, then we start to get more performance. The U.S. team is in first. We're growing that as well. But we've just now got the teams in many other places, and that's what it's related to.

Okay. And then you mentioned -- just sorry, finally on those points, in terms of the RevPAR of, what's it, $344 million, you mentioned that's potentially likely to be possibly sustainably higher than the $250 million you've done previously. Is that largely as a result of the enterprise customer part? Or you mentioned before, pushing out into the regions was possibly part of that was pulling that number down? What's the thinking behind that because it's staying so high?

So Steve, the RevPAR of $250 million should be looked at in the context of the $216 million on the Managed because it's the Managed RevPAR we've guided to $250 million. The reason why it's $216 million is it's has obviously got the openings that we just made within that so that they dilute the RevPAR. And as we get more and more open and the openings are a smaller percentage of that, you'll start to see that go up even further.

The reason for that is we're just seeing that actually these centers are doing incredibly well. And yes, some of that will be from new enterprise customers, but we are already seeing centers that have been open for a while on the managed segment being above that $250 million RevPAR. And I think the point is that we've got no reason to see that sort of dipping either back down or that the new ones coming through won't perform in a similar way. It's slightly too early to tell, but that is the direction of travel.

Just to add to that, Steve. So it comes back to the really simple equation. So we put more people and more resource into growth, we're getting more growth in centers. We're now -- we have this year been also putting more investments, switching investment and making additional investments into the enterprise sales team. And that is having significant success in terms of new and new type of revenue growth. We've always had enterprise, but it's growing that enterprise proportion. So we will continue to set that investment. But what you will see is the mix. We're not really talking about that.

I think, Charlie, I'll probably precursory the Investor Day, but the mix we expect to continue to change with more platform users using the network. So the proportion of that revenue goes up in terms of those groups. And that supplies a new layer of revenue growth. But we're putting the investment in to get there in those enterprise salespeople and a whole support structure that goes with it.

So that is paying off already. We're just going to put more into it now. But it's all in the numbers, by the way. So we're not changing any numbers going into next year. But that is part of the overhead investment that we think is going to pay off and give us additional revenue growth in '26.

Our next question is from Allen Wells.

Just 3 quick clarification questions for me, please. Firstly, just to go back on the Managed & Franchised, the grossing up of the starter kit adjustment that's in there. I'm mindful, obviously, as analysts that forecast this. Is that going to continue to drive lumpiness like quarter-on-quarter? Is there a seasonal trend to the inventory build there that we need to be mindful of? Obviously, we kind of model the recurring revenue as a trend, but it's the other stuff I'm thinking of now. That's my first question.

Secondly, just on the Company-owned. Obviously, you talked a little bit about the discounting to drive occupancy over the summer. Mindful, obviously, that has now supported occupancy. Can you just talk to me a little bit about how that discounting program continues from here? Does it carry on? Or do you just continue to push pricing?

And then finally, just a clarification question on the net debt side. And that big -- what looks like a pretty required seasonal swing in Q4 to get to the free cash flow number, is that going to be part of the normal seasonal swing of the way that the business is going to operate moving forward? Is it just going to be an unusual part of the way that the business is ramping this year?

Yes. So I'll cover the first -- sorry, the 1 and 3, and then maybe Mark talk about the discounting.

So the first one, in Managed & Franchised, I think part of this is just it's law of small numbers, right? So right now, those other fees are pretty small. And therefore, the percentages look a little bit bigger because it's on small numbers. But we don't think there's going to be significant lumpiness in that going forward. It might sort of move up or down by $1 million here and $1 million there, but no more -- so not much more than that.

And then from a net debt perspective, no, we don't see that as being seasonal, albeit though the only few things on that is, one, we obviously pay dividends twice a year. So you do see some lumpiness around the net debt for that. The second thing is that we also pay interest on our bonds on a semiannual basis. And then the third thing is that we have accelerated the buyback program following the half year results, which has obviously made a difference to the net debt number.

And look, we're very happy to take advantage of lower share prices when we see them and we'll accelerate the buyback program on the back of that and therefore, and then straight line it to the end of the year afterwards. So as I mentioned earlier, the $130 million of share buyback program for 2025 still stands. But you'll see that the amount that we've been buying on a daily basis does change around a little bit. And in particular, in August, we bought back a lot more in August than we were planning to initially.

I think then, I'll just add to that, Charlie. The sort of -- if we look at the -- some of these other fees, in particular, these starter packs, they're not -- that's not really a margin product. So it's revenue, but it's got corresponding costs with it. So the key thing to look at is the signing fees and the recurring, but the recurring is what -- and that is what's important.

The other ones, I think, Charlie, we probably need to do a better job of explaining them. They're sort of peripheral and sort of, as Charlie said, go up and down. It relates to how complicated the centers are. We've just opened our biggest center on the management program so far in Spain. And that center, one center is worth like 10 ordinary ones. So that can cause lumpiness. But overall, the margins worked out and the contribution, and there's very little contribution there, one.

Going back to your question about discount. Now the -- just to demystify this for a moment. We have been doing -- pulling the levers of price and occupancy for 37 years since the business started. It's not a new thing. What was new this year and at the end of '24 is we started to try simply a different set of levers. And that different set of levers worked in that the occupancy is up 250 basis points, and price is down, but the price has come back up again, and will continue to rise into '26 and you hold the occupancy.

So we are still, let's say, discounting, but the pain was in the first half. Now it's your -- it's a normal thing as opposed to something we started that had an initial effect. I'm probably making that sound more complex than it is. The answer is revenue positive now and will continue to be so. And we're -- and this discount is hugely selective. This is yield management done every minute of every day, just to be clear. It's just -- we tried new levers, it worked, we still continue in those levers.

The important thing is we've got revenue growth, and that was one of the things that we -- the reason we did it is because we weren't happy with the revenue growth. We now have proof that we can get it, and we're doing it.

Thank you. That brings us to the end of our question-and-answer session. Any further questions may be sent to the Investor Relations team. I will now hand back to Mark Dixon for closing remarks.

Thank you very much, everyone, for joining us today. We look forward to having you online or in person at our Investor Day on December 4 in New York, where we'll update more of the background and more of the bridge to getting to our medium-term target. Thank you all very much.

Thank you. This concludes the call.