International Petroleum Corporation

Good morning and welcome to the International Workplace Groups 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 global market leader in our industry, we continue to build a network, and with that, our revenues and the motor round of 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 move us towards our medium term target of at least a 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 and has resulted in a system revenue growth of 4% year on year. And we expect an acceleration on this, this both compared to the first half of the year and we expect further acceleration as we go into 2026. The incremental investment in management franchise 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. Q3, we signed another 335 locations across the network in total. In the first nine months, we signed 831 locations. These signings are across the managed and 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 open in managed and 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-centre revenue was up 1% for the quarter year over year, an improvement compared to the second quarter in 2025. And these higher occupancy levels are expected to drive revenue through Q4 and into Q into 2026. So the work we've done, that Charlotte and I have talked to you about, will help drive revenue growth through into the company and the segment. It's a combination of both price and occupancy. We have occupancy improved and improving. and the price is coming through now as we hit the end of Q3 and into Q4. So that sets us up very well for 2026. Structure and consumption trends continue to move in our direction, 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're 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 Steele, 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 and 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 centres on a net basis than in Q3 2024. And we've almost doubled the number of managed centres open at the end of Q3 2025 when compared to the end of Q3 2024. Managed and 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 as 83% year over year to $11 million and growth over 130% in the nine 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 and franchise 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 reached 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 centres. 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 locations 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 management franchise division has continued to grow, suggesting that RevPAR maturity could be higher than $250 that we have previously talked about. Digital and professional services saw flat underlying revenues in the quarter and reported revenues being impacted by the one 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 repurchase $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 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. Centre growth and signings to be higher than in 2024. No change to adjusted EBITDA net debt guidance from the half year. Reiterate commitment to maintaining a triple B 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 a billion dollars in the medium term. As we've mentioned, we're holding an investor day on December 4th, where 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.