Good morning, and welcome to IWG 2024 Q1 results. Hosting today's call will be Mark Dixon, Chief Executive Officer. This call is being recorded. I will now turn the call over to Mark Dixon to begin. Please go ahead.
Thank you. Good morning, and many thanks for joining us today to listen to our results for the first quarter of 2024, in what is still a truly fascinating time for the hybrid working industry. We are clearly the global leader and well-positioned to drive further growth as the market itself expands. The commercial market itself is changing as more and more occupiers want to move to a hybrid way of working and more investors want to supply it, and this gives us a unique opportunity as we move forward. There continues to be more and more research papers done by professional firms, universities, and many others, and all of them share a similar view that hybrid and flexible work will become the norm for around 30% of white-collar workers, and used by at least 50% of white-collar workers from time to time.
So this is clearly a huge potential market, and we are uniquely positioned to capture that market across our network. This quarter's performance is another good marker and step on this journey. Q1 2024 has seen continued momentum for the company, and we're delivering on what we said we would with network and coverage growth, fee income growth in our Managed and Franchised business, and margin expansion in our Company-owned and Leased business, and continued investment in Worka, positioning it for the future. We're reporting this morning on continued momentum in our first quarter of 2024, with system-wide revenues of $1.035 billion, a 2% year-on-year growth on a constant currency basis. Our capital-light growth strategy is also continuing to deliver. We continue to sign up many new locations, which will underpin our growth strategy going forwards.
Signing of new locations and rooms continues, and importantly, this is now evolving into more and more openings. Openings of new and managed rooms in the first quarter is up over 200% year-on-year. Many of these capital-light locations have opened, and we've seen excellent performance in creating revenue for our partners. And as we previously guided, it takes on average, 10 months from signing to opening and a further 18 months to revenue maturity. So the pipeline is signed, but many—we have many not yet open rooms, and those open over the past 18 months are already giving us great visibility for revenue production over the next couple of years, and we give you some indication of that, in our release.
Our active management of costs, including those associated with supporting this accelerated growth, has enabled us to maintain our strong financial performance this year, and our continued commitment to reduce our net financial debt throughout 2024. With that, I'm gonna hand over to our CFO, Charlie Steel, to run through the numbers and other matters.
Thanks, Mark. As Mark said, Q1 saw revenue momentum year-over-year, delivering system revenue of $1.035 billion, representing 2% constant currency growth. Given the earlier occurrence of Easter, this is a pleasing result. All three of our divisions performing in line with our expectations. Managed and Franchised continue to see new rooms being signed, and importantly, this is evolving through to new openings, which are up strongly year-on-year. Managed and Franchised signings were up 37% year-over-year when looking at the number of locations, and we exit Q1 2024 with 50% more rooms open than at the end of Q1 2023. System revenue growth of the division grew by 15% on a constant currency basis, and fee income is evolving as expected. As we previously explained, it takes on average 10 months from signing to opening and a further 18 months to revenue maturity post-opening.
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We exit Q1 with 138,000 rooms in the pipeline of rooms that have been signed and not yet opened, versus the 140,000 rooms that we currently have open in this division. Revenue per available room, or RevPAR, is also evolving as expected. It's worth noting that a significant proportion of the new rooms being signed and opened are in more rural and suburban locations, which generally deliver a lower RevPAR on a like-for-like basis. The results of this pipeline is that once these rooms are open and matured, the system revenue of these 279,000 rooms will be around $260 million per quarter, nearly two times our current quarterly revenue, with very healthy fee income. Our Company-owned and Leased division is doing exactly what we've explained it would do.
Revenue growth was flat year-over-year as we continue to manage the network, and given we closed loss-making centers over the period, the contribution margin in this division increased by 300 basis points for Q1 2024 versus Q1 2023. Coming in at 23.9% to deliver $191 million of contribution. Note that we've continued to sign and open new locations division, but worth noting that the vast majority of these are capital-light in nature, so our net growth CapEx will continue to fall in line with our stated strategy. Worka, as previously guided, revenue growth has been slow to start the year, and we anticipate improvement as the year progresses. Worka remains focused on capturing the full value chain from the structural opportunity in hybrid working, and has continued to invest and develop the platform.
We remain focused on improving the margin in Company-owned and Leased, growing fees in the Managed and Franchised business, and controlling overheads across the group. We will continue to increase both coverage and system-wide revenue in a capital-light format. As a result, we are confident that both 2024 EBITDA and net financial debt will be in line with management's expectations, which are unchanged from when we delivered these at the full year results. Capital allocation continues as guided during our investor day in December 2023, with net debt reduction in 2024 as we progress towards our target of 1x net debt to EBITDA. It's worth reminding that we've also restarted paying dividends alongside our full year results, and we will have a progressive dividend policy going forward.
Additionally, as we've discussed previously, we're looking to manage the maturity profile of our debt during 2024, so management will continue to monitor market conditions. Additionally, the adoption of U.S. GAAP as our accounting standard remains under consideration, and we'll make a decision in the coming months. We are pleased that the transition to U.S. dollar reporting has been successfully completed, resulting in clearer presentation of our business, given our exposure to the United States. Thank you, and now I'll hand over to Q&A.
Thank you, Charlie. If you would like to ask a question, please click on the Raise Hand icon. Once you hear your name, you will be prompted to unmute your microphone before asking your question. We will now take a few moments to collect your questions. Our first question comes from the line of Sam Dindol. Please remember to unmute your microphone before asking your question. Your line is now open.
Morning, guys. Can you hear me?
Yes.
Yes.
Yeah, morning. Congratulations on the results. Two questions from me, please. Firstly, on the managed franchise, obviously, very good momentum with 179 signings in the quarter. Is that a number you'd like to sort of see stay stable or rise in the next few quarters, and have you got any sort of visibility on that? And then secondly, on the company-owned centers and the RevPAR, appreciate you don't give occupancy and price anymore, but could you give some sort of any broad commentary around how those things are trending? Many thanks.
I'll go on openings. So openings, we expect to be able to sort of continue with that momentum, Sam. I mean, one of the issues for us is just gearing up to, you know, hopefully increase that number as we get into 25. But it's putting all the logistics in place to absorb, you know, a higher number of openings. So we're keeping it sort of steady throughout the year. We may do more, but I'd rather not sort of promise more at the moment. But it's still a very good number for this year. And then your second question, Sam?
Yeah, just on, in the company-owned, can you give any sense of occupancy and price within the flat RevPar ? Just any broad commentary.
Over to you, Charlie, yeah.
Yes, so I think, look, Sam, we've got sort of a good situation on both. I think as you sort of correctly imply, our focus is on margin. Margin's improved and done a very good, so 300 basis points improvement in the quarter year-on-year. And that's basically as a result of the combination of occupancy price and also the cost base.
Brilliant. Thank you.
Our next question comes from the line of Steve Woolf. Please remember to unmute your microphone before asking your question. Your line is now open.
Steve, you're on mute, I think.
There we go.
Hi.
Morning, all. Just a couple from me. Could you just sort of give an indication of your opening plans for the company-owned for this year, you know, in terms of maybe net closures plus openings plans, or to get a net number? And then secondly, just on, on Worka, you mentioned previously that there was sort of a decent chunk of revenue that would fall out this year. Perhaps could I ask you to give the Worka performance on revenue on an underlying and sort of adjusted basis, if we had to x out the stuff that you were thinking would drop?
I'll go on that, Charlie. Yeah.
Yeah, sure.
So look, opening plans for company-owned. I mean, here, as Charlie's already mentioned, you know, we close underperformers. But these are few in- It's a very kind of small percentage overall. There's also centers that are closed because, you know, some of them are 30 years old, where we may upgrade the building and move to another building. We're also picking up quite a few centers from, you know, failed competitors, which, you know, can fall into both company-owned, even though there's no investment, and they're very highly variable in rents. They sort of we put them in company-owned 'cause there is a lease, albeit a very low guarantee lease. And some of them will go into the managed if they aren't genuinely managed. But I think overall, we would expect this year, Charlie-... I think, too, you know, the number will remain broadly stable.
Yep.
So as we said before, Steve, you know, this is about a stable number of centers. It may go up a bit. I don't think it'll go down. And, you know, grow the revenue as we've done in this first quarter, continue to grow the revenue and control the costs, and we should continue to get margin improvement as we go through the year. So this is a, you know, strong cash producer, and, there's, you know, I think we can continue to do well with it. It requires focus, though, but the overall number of centers will, sort of, should remain about stable. Underlying, Worka, Charlie, I mean, I don't...
We've got good organic growth underlying that's sort of compensating for the loss of the contract, and, you know, so we've sort of cautioned flattish on the first part of the year with growth, more growth in the second half as we come out of the year. So we should have a reasonable end to the year. Charlie, do you want to comment?
Yeah, I think that's a reflection where I think sort of the underlying growth, Steve, is sort of high single digits to low double-digit revenue, top line revenue growth that goes with that.
That's great. Thanks, guys.
Thank you.
As a reminder, if you would like to ask a question, please click on the Raise Hand icon. We have no further questions, so I'll now hand back to Mark Dixon for closing remarks.
Okay. Thank you all very much for joining this morning. It's our first quarterly results. Hope you found it helpful. Please don't hesitate to contact us. As always, Charlie, Richard, and myself are available if you have any follow-up questions. Thank you all very much. Thank you for everyone for joining once again. Thank you, Charlie, Richard.