Trading Update

Nov 5, 2019

Earnings release

Ladies and gentlemen, thank you for standing by. Welcome to the trading updates of IWG conference call. Time, all participants are in a listen only mode. After the speaker presentation, there will be a question and answer session. So as a question during the session, will need to press star 1 on your cell phone. I must advise you that this conference is being recorded today, Tuesday, 5th November 2019. I would now like to hand the conference over to your first speaker today, Mark Dixon. Thank you. Please go ahead. Oh, thank you very much, operator. Good morning, everyone. And thank you for joining us this morning to discuss our 3rd quarter trading up, please. I've joined on the call today by Eric Hagman, our CFO. Firstly, I'd like to take you through the key points from the update Then I'll hand over the call to Eric to comment on the financial performance, and then we'll open up as usual for questions. For me, the key message today is about the scale of the momentum that we have in building a business both on the supplier side and the demand side. From a demand point of view, you can see here in these numbers, we trade strongly, but thanks for the revenue growth. That's the best we've seen for a long while, which is translating through into occupancy. We're also growing our enterprise account business. So this is the business we're doing with larger. Accounts where we're gaining more accounts and doing more business with the ones we already have. So that's very pleasing. Continued development there. So on the demand side, we're well set and we've we've got good momentum. On the supplier side, whilst you can you continue to see us invest in centers, you can also see continued progress in partnering, with franchise partners of, our business and most recently, of course, Switzerland on Monday, with the Safra and Perez group, groups very, very strong for the state partners, who will, we think will charge, supercharge the growth in Switzerland, and we'll get to, our our target much more quickly, to become to to have full market coverage instances. So, these partnerships, you know, yes, they bring in return our capital. But the most important thing is they're a great platform for future growth. And, I I speak with more of these, I mean, particularly optimistic that the combination of ourselves with these partners will see step change in growth. We've also made great progress in to invest in capital, and you'll see here, we'll talk about, you know, the recent investments trading very well. And at the same time, we have a rationalized networks producing, about that 4% in square meters, the the the space we have, at some cost, but certainly the right thing to do to improve future profitability. And then finally, we've generated a record amount of cash. Through both our freight and the franchise strategy working together. So as I speak to you today, we are in a fantastic, financial position, and that will, of course, improve by the year end. So let let me just turn first to the trading performance. Please report the sales activity. It's good across the group. And this continues to put a strong revenue growth. The momentum here is broadly based. It's not in any particular place. It's pretty much across the board. And, again, likewise, enterprise accounts broadly placed. It's not any particular country. And what we can see here, especially with enterprise accounts, is that more and more companies are adopting a flexible outsourced approach think the basics really make it appealing. It's cheaper. It's off the balance sheet. Easier to do. And reduces the reason it eliminates IFRS, and it's it's very popular to the team. So we continue to see the mentioned build in in that area. That trans translated into revenue growth from all open centers of 15.5% a constant currency, much more than actual currency. It's up almost 20% in actual. And that if you look at the 1st 3 quarters, good revenue growth 15% so far in the 9 months, 18% at actual rates. This is coming from many countries, but if you look at them in just the sort of larger market groupings, It's the Americas and EMEA that are really providing the best contribution. And what we can also see is the newest centers, I. E. The 18 in the nineties, shaping up the excellent investments, in terms of returns on capital. So we, you know, we we have been doing a lot of the right things in the past few years. On the pre 18 business, revenues in 3rd quarter up 3.3% on the pre eighteens. So and that 7% of actual rates list is you know, this quarter, bearing in mind that we're now starting to anniversary against stronger comparatives, because we significantly improved trading performance in the second half of 'eighteen. Also, pleased to report that the UK business contributed to the group's creating revenue growth in the third quarter, still early days and particularly with the many many the macro uncertainties around. Maybe a little bit too early to call, but certainly, the UK business the second half of this year has traded much better, and it seems that we may have passed the inflection point and the work we did, and we we took you through in previous calls and presentations. It's starting to have very much desired positive effects on the business. A big believer we have to drive even momentum, better momentum in the business is decreasing occupancy. And this is, again, the whole business, Robert, just the UK, pre-18 occupancy has increased by 2.2 percentage points to 76. 0.4% in q 3. And this just to give this comparison is the highest level we've seen in, like, for local occupancies since. Q4 16. Many countries have driven this attention and mention, pulled a few notable contributors in today's statement, Brazil. No. This is not a country like the UK will be we put a lot of actions in place to improve performance, and that's worked well. As well as China, you would need spectrum there, but that's done very well. Indian North America, Spain, and Switzerland. And as we have also a quick rate improvement in the UK or county numbers. Get to date. Occupancy. Is at 76% and the bonus represents an excellent year on year improvement of 3.1 percentage points We believe there's still a lot more headroom to improve this further, and we're laser focused on this. Excuse me. Just one moment. I'm gonna change phones because I can hear interference. Okay. Another strength of our business model is the quantum of revenue we derived from ancillary services. There's more than 120 lines of ancillary activity. Approximately this is approximately 27 percent of group revenue coming from these services. This is one of the things that we believe to be well above average in our industry and gives us a strong and unique competitive advantage. And it's a key character risk that underpins profitable and cash generative business model. We continue to focus on this continually, adjusting and adding new services that we believe customers want and and enhance the overall model. We've continued to develop our network to grow in the right places with the right brands, so multi brand growth, 66 new locations were added in Q3. So you can total new openings to 180 for the year. Importantly, about a third of these would be a terrorist forms of partnering to achieve much more asset light growth In Q3, we added 2,200,000 square feet of space, taking the year to date. So it's a 5,200,000 square feet. We're now at 60, just over 60,000,000 square feet across the network with 3340 8 locations. The 66 locations added in Q3 were all organic where however, however, seeing increasing opportunities to grow our business and develop our MultiClient strategy further via M and A. As we had anticipated, many companies entered this market are now struggling and this presents us with opportunities. For example, since the third quarter, we acquired clubhouse in the UK from the administrator we can hold this business into our existing platform to generate the future returns. And it also adds a brand, which we believe we can roll out internationally in years to come. And we're working on a number of other similar opportunities at the moment. One of which has already been made public, which is Central Working in the UK. It's about operator number 7 in the UK. And, you know, we think that in 2020, there'll be, you know, we should have a good flow coming from this area as as the market. Inevitably consolidates in the the sort of post we work. Seen that we're in at the moment. We've also made excellent progress in rationalizing our network to improve value generation. So we've taken out about 4% of the network after performing marginal sites. And this although we take pain as we do that, mainly non cash pain, writing off some assets that we can't reuse. This will add to returns in future years. In line with our strategy of lower risk and more capital like growth, we're experiencing excellent momentum in our franchising activities. Interest is very strong, and we significantly, grew this year in this area. Our team by putting in the experience from an a team. One of our problems has been And it's a quality problem, but quite frustrating is that we've got so much demand. We just didn't have enough people to deal with it. We now have those people and we are dealing with it. Again, the move here is not just trying to sell our businesses for cash, this is all about finding the right partner. If we find the right partners, that really sets us up for the next stage of our business's growth which we think will be, you know, the most exciting stage that we've seen so far. And again, we announced on, Monday Switzerland. This goes along with Japan of Taiwan already completed. But also multiple other smaller franchise agreements. We've now got 26 franchise bonds across 31 Countries. And most importantly, combined commitments to add over 330 new centers. That excludes any any 18 students and which which has not concluded yet with it was signed but not completed. So as announced today, or yesterday, the strategic partnership with Safran Perez Group. This is we have 38 centers in Switzerland, post consideration a 120,000,000. Swiss francs about 94,000,000 sterling, and a completion at the end of the month. Fantastic partner. Lots of real estate experience placed in Switzerland, Perez group. And Safra, you know, huge opportunities going forward. Switzerland's a great market. We'll complete it more quickly with this partner. Through our improved tradings, moving to cash, our improved trading, and our franchising strategy, clearly record cash generation. Cash flow, pre investment in growth totaled 466,000,000 or just over 52p per share. And this doesn't include a 120,000,000 Swiss francs gross proceeds from Switzerland, that will complete at the end of the month. What it does leave us in is a very strong financial position. Net debt substantially reduced year to date to 300 and 1,000,000, which represents a leverage ratio of just 0.8 percent, 0.8 times. Sorry. And this ratio is at point four times if you take the property away from that, and probably sits on a balance sheet at the moment. With Switzerland, the debt will reduce 2.2 times. So, you know, we're in a pretty good position, I think. Cash wise, and we also have very strong capacity to use if we need it and the right opportunities come along. In summary, good sales activity is translated into strong sales revenue as occupancy increases and our newer locations work strongly. We've grown the network coverage through company owned investment and growing momentum in franchising and and with all of that record cash generation. So financial position and I think prospects looking very exciting as we go into 2020. And with that, I'll hand over to Eric to discuss the performance in more detail. Thank you, Mark. Good morning to everyone on today's call. I will look at the financial performance in some more detail. Let's start with the third quarter specifically. Group revenue in Q3 increased 9.4% at constant currency and with the tailwinds from prevailing exchange rate was up 13.2% at actual rates to 692,300,000 in the first quarter. Revenue from open centers, better indicator over the future was up 19.5% at actual and 15.5 at constant currency. So on Q3, 2018 like for like revenue growth was up 3.3% or 7% at actual rates. This reflects the ongoing development of the newer year group added to this space, but also as Marj just said, the much improved trading performance of the business, which we saw in the second half of last year. Occupancy for the third quarter increased 2.2 percentage points to 76.4%. Many countries have contributed to this improvement. And as we say in today's statement, including the UK, and maybe premature to call this inflection point for UK business, but it's very encouraging to see positive evidence that the actions mentioned in the UK benefiting our performance. Let's now look at the 1st 9 months performance. Group revenue for the for the 9 months to 30th September increased 9.9% at constant currency of 12.6% and actual rates to 1,990,000,000. Revenue growth from open centers over the same period was very strong at 15.4% and or 18.3 actual rates. Pre 2018 revenue increased to 1.7000000to4.8000000 up from 1,000,000,000 last year, which is an increase of 4.7% at constant and 7.3% at actual rates. The improvement in occupancy is also reflected over this 9 month with an increase of 3.1 percentage points to 76%. On investments, we invested $249,900,000 of net growth CapEx after partner contributions of $165,900,000, developing a leading network in the 9 months to September. The investment in Q3 was 6 4,400,000 net of product contribution to 134,900,000 gross. These numbers illustrate the growing contribution to our network growth from our partners. We also have more visibility at the end of October over our growth pipeline for the whole of 2019. Currently, we've seen net growth CapEx for 2019 of approximately $280,000,000, and that's roughly two sixty locations and 7,500,000 of square feet of new space. As Mark said, we have been increasingly proactive and accelerated rationalization of our network. In total, we've rationalized approximately 4 under the network year to date. We expect this activity to continue in the fourth quarter and into the early part of 2020. While these actions have a very positive impact on the future performance of the business and shareholder creation in the future, there isn't a short term and negative impact on profitability. In the 9 months to 30th September, the impact was just below EUR 28,000,000. There will be more to come if this rationalization program continues in the remainder of the year. And to end with our financial strength at the signing of our first strategic franchise deals, which raised gross proceeds of C456.8 billion dollars. That's the sum of Japan Taiwan and Switzerland, We made it clear that with our interim results that we are focused on shareholder returns. So as well as committed to sustainable, a progressive dividend policy, We believe access cash should be returned to shareholders. To this end, in August, we announced 100,000,000 share repurchase program. During the third quarter, we acquired approximately 5,500,000 shares for a total consideration of 22,400,000 This share repurchase program continues in fourth quarter. Thank you, and I will hand back to Mark. Thanks, Eric. So in conclusion, we remain confident in our global global position in this exciting market. Sales activity has been showing very good momentum across all the trading groups from the pre eighteen to the later groups of 2018 2019. Occupancy continues to improve as as that translates. We've got strong momentum in our enterprise account, business, larger accounts, we're winning more accounts and doing business with the accounts we already have as more and more of them decide to either expand or convert to a more outsourced approach to a larger parts of their business. Forward order book, very healthy, and in a much stronger position that's been for for several years as we look out to 2020. We've got some momentum in the franchisee model, and we look forward to recording further progress as we go through, the next couple of years. So I've checked on many occasions, this will take a couple of years to execute as we are very, very choosy when it comes to who we are partnering with. Financial position is strong, prudent approach to risk, and the balance between growing and giving returns to investors. So, we're we're very carefully weighing things up as we go forward now. New accounting rules, helping us. More and more companies are starting to look at this and these long term leasing liabilities that are translating onto the balance sheet will start looking more and more like debt as the years go by. And I think the other big change is really kind of underlying everything apart from lower cost is that there certainly seems to now be more of a trend, for workers wanting to work closer to home, not at home, and and company started to consider whether that helps in in in sort of saving the planet if they can reduce commuting. Underlying that, of course, is much cheaper, and it's what the what the workers want. So it can be quite an interesting mix. But certainly in particular in the US, we can see companies starting to think and act that way, which could be very good for us. And again, what's important then is a lot more development to smaller towns and cities so that you can actually have somewhere to work closer to where people live. So we are the industry leader. We've got a great business, we're confident in our ability to continue to grow as we move forward. We think we we tick many boxes in a way are paranoid in terms of our the way we think about our business and what can affect us, but we've spent our time checking positive boxes This is a business that benefits from scale, but it's not just about size. You need to be diversified. You need to be global. You need to have multi brands so you can give a lot more choice to customers and price from work style. And you need to get those ancillary revenues you don't, then you have no possibility of making money in in in in our view. We think that, you know, the tie timing is working on our side at the moment. Think there's gonna be a very big opportunity in years to come both in growing through our franchise partners, in consolidating the industry And we think overall, the interest in the industry as a whole from a customer demand point of view will just continue to to grow. But companies will be. The customers will be looking much more to the quality of the provider and not just the than the notoriety of a provider. We so with all that in mind, we're quite excited and optimistic about future at the same time, we remain cautious on the point bar in the cycle. And So we remain steadfastly, decortious, mode. You know, we we continue to grow, but we do so in a way that is is very risk averse. And, you know, we're very focused on return on capital. And, you know, this is the discussions we have with our franchise partners are all all around the same as they grow their businesses. It is all about, you know, maximizing return and and minimizing risk. That being said, you know, we are in as we come towards the end of 2019 in the best position we've been in for many, many years, And so is there some, cautious optimism we look out to, to next year? And with that, I hand back to the operator who would explain the procedure for session. As a reminder, if you wish to ask a question, please press star 1 on your telephone and wait for name to be announced. Once again, please press star 1 if you wish to ask a question. Your first question comes from the line of Alexander Smith from JPMorgan. Your line is open. Thank you. Good morning gentlemen. Two questions, please. Firstly, Mark, I'm not sure if it's possible to generalize about, pricing. So can auctions see as strong. I wonder if we can pull out any any, general statements about the direction of pricing and load, particularly given your comments around the, the economic cycle. And secondly, I wonder if you could just explain a little bit more channel, behind the accelerator rationalization of the network just with regard to hope fit into the strategy around for your charging, please. Thank you. Okay. Pricing is, we're gaining occupancy at slightly improved pricing. If the short answer. We you'll notice that we don't talk about pricing pricing in this document, and that is because we it's it's mainly occupancy, small pricing. Clearly, as the if we move the occupancy further forward, there may be more pricing opportunities. Thus far, this is about occupancy. So our objective is to, you know, just continue to move that. I'll keep everything up through next year. And and maybe if there'll be some pricing opportunity. There's there's there's typically, again, I'm generalizing because a lack of property inflation. Which is something, you know, on average, we're not seeing rents move up. The the underlying rents, and that's that would be one of the causes of price increase. We're not we're not seeing that. In fact, I would say that we're seeing quite benign you know, average rental increase. We've got quite a lot going down now, which helps us. I think on the rationalization, you know, this is basically, a painful exercise. Let me know if I've talked about this on several occasions on previous calls, and meetings. This is sort of tidying up older centers, and and marginal performers. It hasn't really got anything to do with the franchise business, but it has got to do with just the maximization of profit. It it is a long process, and it's one that started over a year ago. Pretty much when I sort of came back and got much more involved in running the business and and and sort of post the going right back to the the private equity interest. This was a job we had to do. And it's a job that private equity would have done. We've just got on and and done it. So it's closing margins and and and retaining the revenue. So it it costs money in the short term. Not really cash, but write offs. It it, you know, for returns on, that cost of write off are attractive, but it just takes time to do. There's a bit more to do this year. We should be, you know, you know, pretty complete on this by the end of each qq1, q2 next year. It's just the final parts to do. That's very clear. Thank you, Mark. Your next question comes from the line of Michael Donnelly Your line is open. You may ask your question. Good morning. Just two from me, Eric, could you give us some cadence of what the average FITO cost was square footers, for the franchising locations that you've been dealing with this year? And the second question is on the 28,000,000 of, probably noncash costs for the rationalization. Can you just, in any way, split that out into profits? And the closure costs. So you know, the profit or the loss that you're removing from the P and L. And then the the one off that you take about the line to close them down? Thank you. Maybe, Eric. I'll just just ask just a question. So your question on fit out cost for franchisees. Just explain that money. So the total fit out cost per square foot for the locations is they accelerate their their growth. Which is part of the rationale for for for doing the deals. I'm just wondering how much, not necessarily who contributes it, but how much it's likely to cost on average to fit our reach locations. That's for a franchisee, not for us. Because if it's a franchisee, we do not put the for investment in is the franchisee who is investing with capital. And how how much would it be per square foot? It's it can't be anything from 0 to £40, if you're gonna start at £40. It it depends where it is, what it is. I mean, that's it's very elastic number, the cost of doing it in Brunei, not the same as the cost of doing it in, Central London, for example. Under, successfully helpful. Thank you. The key, look, when when we're working with franchisees, franchise partners, a piece of business people with business people. It's just it's return on capital. So it's what what who've got this business in joys and always had has done is if it's run properly, you get exceptionally high returns of capital, invested, you know, pretty much there without calculating any additional benefit from leverage. So that is what the franchise partners are interested in. If they can invest and make returns on capital that, unleverage 20% plus, that's what they that's why they invest. So they buy the platform, make a return on that. It's about completing the platform. Scale benefits in a country as well. And and done well, it just becomes a a very beneficial both return on capital. And then finally, you get the icing on the cake is the national network where you could even higher returns because you have full coverage. So, yeah, it's maybe we can talk to you about that offline, Michael, and give you a bit more information. In terms then of the you take the 28,000,000, just to understand your question, you're saying, of the 28,000,000, benefit. So the conversion rate profit or Yeah. It's it's over 28,000,000, 1 off non cash cost associated with closure? Because presumably, you're also losing some, let's say they were all breakeven then it would be 0 profit. Would would be in that. So is the number 0+28, or is it 1+27, or is it -1 plus 99. Wayne, do you wanna have a sorry, Eric, do you wanna have a Yeah. So we'll we'll try to find out what exactly the split is, it's much more a closure cost than, you know, a profit leakage, if you if you will, but rather than guessing, I will give you the right and make sure you give her It's hard in the end of profit leakage. Otherwise, you wouldn't be closing them. Yeah. So, they've been just so That's great. Yeah. You know, we're taking a much more aggressive stance. So we know, you know, we're just running the business incredibly tightly. So, you know, very often, you know, the the margins can be because someone tries to increase the rates on us. But whereas before, we may have wetted it. We don't now. We just we just move. Yeah. Maybe a bit of color. Maybe a bit of color around these rather difficult. So it works out to be, what is it, 8,000,000 or $9,000,000 a quarter roughly. And I think if you look at where we are doing those, at the 138 that we've closed so far this year. It's very evenly split in those 4 regions and across the Americas, Asia, India, and the UK, roughly, you know, 30 to 35 per region. So it is across the board costing similar money for those regions as well. And as we said, that is related to closure costs. There will be no reason to close something that is making a profit for us. Got it. Thank you. Thanks, Michael. Next next question comes from the line of Kartik Kumar from Artemis. Your line is open. Hi, Mark. I was wondering if you could comment on the impact we worked hard on the market and particularly perhaps on you in the last few weeks and sort of referring to reading about winning business in Canada for spaces. And the sort of FTE articles about slowing down capacity growth in London. And then the second question, I was just wondering if you could comment briefly on a bit more on the inorganic opportunities that you mentioned, so it's in central working. So I was just wondering what what the economics look like when you got them on, what return on capital is? And also, what the sort of pipeline of opportunities in terms of scale might be there? Good question. Let me do what we work with first. We work in the process of reorganizing. We know that Good new management, Marcelo, Claude is, we think, an excellent manager. But there's a huge legacy problem, sort of mountainous problem that has to be dealt with, which are the commitments of Jesus. And and lots of some profitable, but a lot of loss making operations. So it will take them time to reprice and clearly there's been damage to the brand. That has led to a flight to quality. So first, impact is, companies that were going to them are now more cautious about going to them. They've also sort of prices for the right Lebanon aren't getting crazy discounts and or broker discounts and all sorts of things. That we were using to buy the market. And just just to be clear, when you look at our 3rd quarter numbers, most of that third quarter was with, we were going through absolute extremes in terms of trying to drive revenue growth. And yet, we had very good revenue growth. The impact we work doesn't really affect the 3rd quarter because it happens at the end of it. So, but what it has done is led to more demand for us And, you know, it's it's created an even brighter spotlight on the industry. You know, my taxi driver on the way to the airport on Sunday, white cat drive or was telling me you didn't know who I was. He was telling me about WeWork, and I'm not sure if that's a good thing or a bad thing, by the way. But he, you know, the the knowledge of the industry went up by many notches during that whole period. That is is definitely helping us. The benefit is yet to come. So one of the things that we were doing was, you know, giving people hope. So lots of people, lots of investors, backed entrepreneurs who set up in this industry, multitude of them. They put good money in bit like softbank, small scale, and and banks, you know, you know, on people that said they were entrepreneurs, but many of them couldn't run a business. And So it is an easy business, low barriers to entry, hard lots of very high barriers to making money. So effectively work is it it sort of the balloon got punched, which was the balloon that said, yep, you could be you could sell your business at 20 times revenue, but became myth. And the reality of you you need a business that actually makes some money. Otherwise, it's worthless, and investors have stopped investing in that. You know, investors now will not buy in anymore, generally, to these sort of hockey sticks that never arrive, in the hope of a an extra evaluation. So we've there's a steady stream of people that are in financial difficulty now. Club house. We did central work that we're doing at the moment. There's a number of others, and it's not it's it's Worldwide as well. So that is the real effects. And so it will lead to consolidation we've been why would we want to say the economics are, for them generally, even if they're good at running the business and most are average, some poor, they have they don't have any economies of scale. They're overhead. Completely submerges any gross margin they have. So, you know, it's just the loss making proposition. So the clearly, if you can use synergies, you could these these things can have value from social work in house value, but you have to eliminate the cost. Otherwise, it hasn't, you know, it's it is it is never gonna work. So on the one hand, I think, there will be many of these opportunities to arrive in the next 12 months. On the other hand, you know, there will be perhaps more more significant opportunities, to to consolidate from other players who make it good players, you know, there will be there's always the possibility of, events unfolding you know, we are an industry where scale is a key, winning factor. So think it could be some of the other players that we have been talking to over the years, that, you know, sort of may come to the party in 2020 to 2021. I mean, we're we're in a very good position to had the right discussion at the right price at the right time. So I think inorganic growth could be a bigger factor. In, the coming year. At least we would do just to, you know, if it doesn't interfere with franchising, because we would do this with our franchise partners when those opportunities come up. I'm good. Thank you. I'm sorry. May I just follow-up on one point? I was wondering how if you could see a comment on how competitive, Switzerland was because I I know you previously made a comment that Japan was competitive from the Credit Suisse and was also competitive. So, you know, we had, you know, a number of buyers for Switzerland. It wasn't 1. In the end, we choose one to go exclusive with as you typically do in these prognosis. You run them down to a handful and then you choose one with that, we did a deal. Your next question comes from the line of Andy Grover from Credit Suisse. The line is open. Hi. Good morning. Just one for me, if if I may. This is sort of the stabilizing deals. Could you talk a little bit about your pipeline of of tools that are still out there? And to which the departments, you're you're talking to a a property, related counterparties rather than people with franchise experience. And and I'm sorry. There's an add on to that. To what extent are those partners looking at the revenue synergies for low interest in business by only, parts of IWG rather than just the the assets themselves. Sorry. What was the last one? The the When your your your partners are are looking to to buy a country, you know, arrange a master, process agreement with you to an extent that are you thinking about the revenue synergies for the existing business? Just just to, you know, just maybe deal with that first, Steve, you you you It's, you yeah. It's it's interesting. That some, not all, some of the franchise partners see it as a, very synergistic with they they like to buy an own property and they can add this into properties they own. Or would want to buy. So that is an interesting at the end of the day. This is it's it's sort of they they can and will I think combine, not all of them combine some property ownership with the operation. I think You answered the first part of your question that it's a mix between the 2, franchise specialists, and real estate specialists. And some of the real estate specialists, some in the middle do both the real estate specialists and franchise specialists but it's it's about 5050. And if you look at some of the bigger ones, you know, that you've got people coming at them, very much from a property angle. And and where they have substantial funds, you know, that it it it makes a lot of sense. You know, if you believe that this is the real estate of the future, you know, the ability to combine both can can can, you know, make make the terms even more attractive because it adds a whole new level of efficiency. And thanks, Doug. And in terms of the pipeline, over the next 6 months, how you how you're seeing that shape up? But the pipeline's busy. What we don't want to do is get into any a sort of situation where we're over promising here, you know, we'll do the deals as we look. The underlying business is doing very well anyway. So it it there's no rush. So it is all of that, you know, we've got lots of things now underway. Lots of lots of discussions, some transactions, you know, underway they take time. And, you know, but we would expect, you know, that there'd be a steady stream throughout the next year of of of announcements as we do small and large arrangement. And, but it's time consuming. Every one of these partnerships is is very, very important. It's a big investment for them, and it's a big commitment also from us. So you know, we're being we're getting careful in what we do. But so far so good. I mean, the partners we have so far excellent. And, you know, they're accelerating growth. Lots of good ideas on how to improve things. So it's very simple, you know, and I'm seeing, you know, some of the parts is more than, you know, just a financial transaction here. There are no further questions at this time. Please continue. Okay. If there's no further questions, I thank you all very much for your time this morning. And as always, we'll be available if you have any follow-up questions so that we can clarify in the coming days. Thank you all very much for joining. That does conclude our conference for today. Thank you for participating. May I all disconnect speaker, please standby.