Hello, welcome to the IWG Quarter One Trading Update Conference Call. My name is Caroline, and I'll be your coordinator for today's event. Please note this call is being recorded, and for the duration of the call, your lines will be on listen-only mode. However, you'll have the opportunity to ask questions at the end of the call. This can be done by pressing star one on your telephone keypad to register your questions. If you require assistance at any point, please press star zero, and you'll be connected to an operator. I will now hand over the call to your host, Mark Dixon, Chief Executive Officer, to begin today's conference. Thank you.
Hello. Good morning, everyone, thank you for joining our Q1 statement and for your continued interest in IWG. The update this quarter is quite light, given we did our full year results for 2022 only a few weeks ago. However, looking to this quarter, we had really an excellent start to the year, and we're continuing to deliver on our range of promises that we talked about at the full year. Revenue has increased to GBP 760 million. That's 22% up year-on-year and 4% up quarter-on-quarter. The quarter-on-quarter increase has been driven both by pricing and occupancy increases. The Q1 2023 revenue includes now a full quarter of The Instant Group.
We continue to see the tailwind of the movement to hybrid working, albeit there are the same headwinds from the economic climate that we discussed in March. In spite of all this, I'm pleased to see that December's momentum has continued into 2023. In particular, I'm happy to announce, in addition to the financial results, that we were carbon neutral for the first quarter of 2023 and expect to be carbon neutral from this point onwards. This may not be an obvious benefit to investors, but it's really a key part of our business and investment proposition.
Our clients are extremely interested in this aspect of our provision of service. It will open our business to a wider range of customers who come to us in full knowledge that using us has no net impact to the planet from a climate perspective. Equally, our products offering continues to benefit the planet with a recurring theme of how business thinks about operating in a much more climate friendly way using hybrid work as a key method of doing this. We continue to sign up more capital light agreements with over 200 in Q1 alone. This is a key pillar to our future strategy, and I'm pleased that it continues to deliver. With that, I'll hand over to Charlie for the financials.
Thank you, Mark. As Mark mentioned, the first quarter this year has simply been to deliver on market promises. We've increased revenue and decreased net debt through cash flow. Revenue has increased to GBP 760 million, up 22% year-on-year or 4% quarter-on-quarter. Some of the annual increases as a result of our investment into The Instant Group. It also shows the benefit of our ability to drive inflation increases through to clients and also the quality of our products and services. We can continue to focus on cash flow. Pre-discretionary investment CapEx cash flow was GBP 46 million per quarter. We are also pleased that net debt continues to fall, with pro forma net debt at GBP 683 million, a GBP 29 million reduction from the end of December.
Furthermore, we continue to reduce our gross debt, specifically on the acquisition bridge, which has reduced by over GBP 130 million since this time last year and over GBP 75 million since December, to a balance of GBP 199 million as of today. The group continues to see pressure from inflation and interest rates, which impact cost and cash flow. In particular, the strengthening in sterling, the group's reporting currency during Q1 2023, will negatively impact financial performance at the group level. As a result, we remain cautiously optimistic about the outlook for 2023 and do not change our financial outlook from our statement of the full year results on seventh of March, 2023. We are confident that EBITDA will remain in line with management's expectations, with net debt falling during the year. With that, happy to take any questions.
Thank you. As a reminder, if you would like to ask a question, please signal by pressing star one on your telephone keypad. We will take the first question from Calum Battersby from Numis Securities, London. The line is open now. Please go ahead.
Morning, all. Just a couple from me. Could you give us sort of any indication of the performance of the, you know, The Instant Group, or worker? Any sort of metrics you can give us, you know, regarding how that's trading would be appreciated. Then on any regional trends for the business as a whole, perhaps that's sort of the core. Well, what is classed as the core estate, I guess in terms of the actual locations themselves. Finally, on the new sign-ups that you've done for the 170 during the period, any sort of, you know, color on where they're, you know, located and what's proving popular for those franchises or management contracts, please? Thank you.
I'll hand over to Mark for discussion onto the sign-ups. Overall, in terms of regional performance, we've basically seen very strong performance across the whole group, in particular, EMEA and U.K. I wouldn't say there's sort of a single sort of standout area that people should be focusing on sort of one way or another. Everywhere is improving across the board. In terms of The Instant Group and the worker group as a whole, that continues to progress nicely and through expectations, and we'll provide some further updates on that for the group as a whole at the half year.
Okay. Thanks. Right. Just, also just to add on to what Charlie's saying, with, you know, China, which was sort of something that was affecting both Asia and China itself, China itself is not a huge part of the business, but it's still, you know, 140 odd centers, has started to, you know, with the opening up of China, and post-Chinese New Year, it's really started to pick up some momentum. That's sort of more opening up of Asia because the key driver on the Asia market. That's a good following wind. That's really the only different sort of performance. On signups, look, a very good quarter. I think again, the standouts there are two institutions.
One, we did one deal for 50 buildings in France with a big REIT. It's a very, well-known institution in France called PERIAL. That was for 50 buildings. We've got another institution, which is a very large insurance company, European insurance company, that we've done, I think we're doing about 10 deals with, but they don't want their name disclosed at this point. Plus, you know, you've got lots of you know, sort of individual landlords, and then you've got other institutions of all kinds sort of not only doing new centers, but we've got people coming back for second, third, fourth, fifth, which is what we're actually looking for and which gives us sort of confidence that we're doing the right thing here if people come back and do multiple buildings.
The weighting of it is about 50/50 in terms of, you know, about half of the growth is in the U.S. and about half is rest of world. That sort of matches the size of the business, really. We're not fully online everywhere yet on this. The rest of the world should go past the U.S. in terms of number of openings as we move into the second half or number of signatures as we go forward. I think just one other interesting piece of information is, you know, how many signups fall off before you open them. This is, you know, we're measuring this number, and it's a very small percentage. It's somewhere between 1%-2% who pay us the opening fee, but then don't open.
This is because their circumstances change and so on. We're getting a good conversion rate. Charlie's already mentioned it takes time for these to open because of permits and various sort of obstacles. It just takes time. We're getting now more openings, more revenue, and so the fees will, you know, start to make a difference as we go through. They're already good, but it's a very high-quality income stream that will grow into the second half and into the following year.
That's great. Thanks, guys.
Thank you. We will take the next question from line of Sam Dindol , stifel London. The line is open now. Please go ahead.
Good morning, guys. A couple of questions from me, please. Firstly, on the center openings, do you think that 170 run rate can continue in the upcoming quarters, or do you think the crunch thing we just mentioned means that dips slightly but remains at a, sort of very attractive level? Secondly, on inflation, can you give a sense of where cost inflation is running at and any trends there in terms of it starting to moderate a little bit from last year? Thank you.
Yeah. So on both things, I think sort of the first thing is that on the center openings, only eight of the center openings in the first quarter were conventional center openings. You're really starting to see more of the partner centers coming through as well as a few of the franchise centers at the same time. I think when we start to think about Q2 and the numbers in Q2, you will really see the managed franchise centers numbers coming through. When we think about inflation overall across the business, there's a little bit of inflation that we have as a result of increase such as minimum wage increases, but that's actually quite low.
We're actually doing a very, very good job of keeping costs under control. We're reviewing all costs on a constant basis, but also being a little bit smarter sometimes around how we are spending our money in some places to make ourselves more efficient at the same time.
Okay. I've just got a slight correction on the number. I've just been told I've given the wrong number on openings. PERIAL is 50 buildings, but we've only we've got 15 signatures because they're actually buying buildings to put us in. They haven't bought the buildings yet. You've got, excluding Perial, about 185, 180, 185, and then 15 from PERIAL . There's more to come, and you can see an announcement, they're a public company, PERIAL , so you can see the announcement on the 50 buildings with them. Sorry, second part of your question, Steve?
Was inflation, which we've been through.
We've been through inflation, right. No, we don't expect the growth rate to drop. You know, we've got a very strong pipeline through the remainder of the year on sign-ups, as Charlie said, the openings will keep strengthening because they're following, and it just takes time. We've got very much focused on getting them open and getting the revenues up. We only make money if we get their revenues up.
Brilliant. Thank you.
Thank you. I will take the next question from Michael Donnelly from Investec. The line is open now. Please go ahead.
Hello, good morning. It's just one from me. Mark, can you please give an example on the carbon neutrality point of how that helps customers rather than doing their own lease? Is it a lower reporting requirement or something like that? Thanks.
Well, what we've got is a, an offering to customers which is more holistic than it was. I mean, just to give you an example, we're providing free additional healthcare to customers. We're providing gym membership. These are to the end users. We're providing social events and a whole range of things that sort of enhance the offering to the individuals that use the centers wherever they are. That's at the first level. Second level. Actually, at that first level as well, the actual users of the space can participate in the carbon neutrality.
For example, whilst we're using renewable forms of everything in order to get neutrality, there is a gap, and that gap is has been closed off by planting forests, and our customers can get involved in the planting of those forests, so they can sort of participate. Those are the users at center level, the people that are coming. From a corporate level, we can give them a certificate that says that your 10 people in Trafalgar Square or Victoria are, you know, that is carbon neutral. You, you know, you have carbon neutrality all included in the prices, nothing you need to do. That's a strong selling point, especially for small companies, it matters less, but for large corporates and mid-sized corporations that are focused on their carbon footprint, it's a real plus.
No one else has it, in the marketplace today. It does give us. It's an additional selling point, let's say.
Thank you, Mark.
Thank you.
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I think we're good to finish. Thank you very much everybody for joining, and happy to take any follow-up questions, if there are any. Thanks very much.
Thank you.
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