Good morning, and welcome to the IWG Q3 2026 trading statement. Hosting today's call will be Christian Schmitz, Chief Executive Officer, and Charlie Steel, Chief Financial Officer. After the presentation, there will be an opportunity to ask questions. As a reminder, this call is being recorded. I will now turn the call over to Christian to begin. Please go ahead.
All right. Good morning, everyone, and thank you for joining us. I apologize in advance, I got a little bit of a cold, but I'm sure we'll make it through here. Quarter three was a strong quarter. We're trading ahead of consensus, and we have good visibility to the year-end, and we are carrying real momentum into 2027. Let me start with two milestones. Our network now has more than 5,000 centers, and systemwide revenue reached $1.26 billion in the quarter, more than $5 billion on an annualized run rate basis. Growth is accelerating. Systemwide revenue grew 12% in the quarter, ahead of 11% for the nine months. Group revenue grew 9%, ahead of 7% year-to-date. We set out a clear plan, and we are delivering it. The shift to capital-light is moving fast.
We have 380,000 managed and franchised rooms open across nearly 2,400 centers, 37% more rooms than a year ago. Managed and franchised now accounts for 46% of our locations, 33% of open rooms, and 23% of systemwide revenue. Include the pipeline, and it's nearly 50% of our rooms. The economics are coming through. Fee revenue grew 28%. Recurring managed fee revenue grew 72% to $19 million in the quarter. This is high-quality recurring income, and it compounds as rooms open and mature. The pipeline keeps building. We signed 324 new centers in the quarter, in line with the same period last year. Center openings were in line with last year. Room openings were lower in the quarter because more of what we opened were smaller properties. That's mix, not demand. Year-t o- date, room openings are up 9% and center openings are up 16%.
We continue to expect up to 1,000 openings a year into 2027. A word on RevPAR, because you will see managed RevPAR down year-on-year. That is what fast growth looks like. We are opening new centers faster than they mature. The mature estate is performing. The new centers are simply still ramping up. The company-owned estate is strong. Revenue grew 8% and RevPAR grew 2% to $388. Pricing and occupancy have held firm into the fourth quarter, which gives us good visibility to the year-end. That is dynamic pricing, active occupancy management, and relentless operating discipline, center by center. We're growing without adding cost. Through automation and AI, we're simplifying how we run IWG. This growth came with no increase in our existing cost base, and we expect that positive cost momentum to accelerate into 2027. The business is generating cash.
Of the 200 million share buybacks announced, we have returned $139 million to shareholders in the first nine months, of which $39 million was in Q3. Net debt still came down in the quarter to $874 million. Charlie will take you through the detail. Demand for flexible workspace is structural. Companies want flexibility in an uncertain economy. Their people want to work flexibly. IWG is a platform built for both. Every quarter, we are getting bigger, more capital-light, and more efficient. The managed and franchised flywheel is gaining speed. The company-owned estate is performing, and we are optimizing our cost base without slowing growth. We expect full-year adjusted EBITDA to be above current consensus, and we will enter 2027 as a stronger platform for growth and for enhanced shareholder returns.
With that, I will hand over to Charlie, our CFO, to take you through the numbers, including the balance sheet and net debt.
Thank you, Christian, and good morning, everybody. I am delighted with the strong performance we delivered this quarter. As Christian mentioned, systemwide revenue grew 12% to $1.26 billion, and group revenue grew 9% to $1.03 billion, taking the nine-month figure to $3 billion, up 7%. It is also the second consecutive quarter we delivered over a billion of group revenue, and represents an annual run rate of over $5 billion of system revenue. The mix continues to move in the direction we want. Managed and franchised systemwide revenue was $287 million, up 27%, and the company-owned revenue was $969 million, up 8%. Systemwide revenue grew 27%, driven by signings turning into openings, and the rest of the portfolio maturing as expected.
Overall fee revenue in this segment was $45 million, up 28% year-over-year, and $125 million for the nine months, up 47%. Managed RevPAR, as Christian mentioned earlier, is $189 for the division, but excluding the 2025 openings, it is $237. This compares to $199 in Q3 2025, showing an improvement in RevPAR for mature centers. This balances against the network RevPAR that has increased to $383, excluding 2025 openings, from $370 in the period last year. Recurring management fee revenue was $19 million in the quarter, up 72%, and $54 million for the nine months, up 80%. This segment has 380,000 rooms open, 37% more than a year ago. This is massive growth. The signed pipeline has grown to 287,000 rooms from 219,000 a year ago, which leaves 667,000 rooms open or contracted.
As Christian mentioned, when all of these are open and mature, this segment has the potential to produce annual system revenue of over $2.2 billion. We signed 324 centers in the quarter, in line with the same period as last year, and we are still seeing strong demand from partners. Going forwards, we are happy with the signing and opening rate, but we are increasing our focus on signing larger centers, so you should expect to see the center signing rate remaining at these levels, but the rooms pipeline increase a bit. Company-owned revenue growth grew 8% to $969 million in the quarter and 6% for the nine months. RevPAR grew 2% to $388, underpinned by pricing strategies delivered earlier in the year. As Christian mentioned, occupancy and pricing have been stable into the fourth quarter, so we had good visibility into revenue for year-end.
The growth delivered in the quarter has been with no increase in our existing cost base. As we said at the half-year, now that flywheel is turning, our focus is on efficiency. That positive cost momentum is expected to continue into 2027. Net debt reduced from $880 million at the half-year to $874 million at the end of September. Without the share buybacks of $39 million in the quarter, net debt would have fallen $45 million in the quarter. This is in line with what I guided on the call in August. The balance sheet is in good shape, and there have been no material changes during the quarter. As a reminder, in July, we renewed the revolving credit facility, increasing it to $1 billion and extending it to 2031. That leaves no material debt maturity before 2030.
Our bonds carry fixed coupons and are hedged into U.S. dollars, so we have no exposure to interest rates or FX on them. We expect net debt to stay around these absolute dollar levels in the fourth quarter. That gives net debt to adjusted EBITDA of around 1.4x-1.5x at the year-end, as I previously guided. We expect net debt to remain at these levels going forward as a result of incremental EBITDA, and this will result in incremental net debt to fund even more buybacks. We have returned $139 million to shareholders through buybacks in the first nine months. That is more than we did for the entire of 2025 and includes 15.8 million shares repurchased for $39 million in Q3.
We have increased the program to be up to $200 million for the full year, and we will update the market as it progresses. Our 2026 guidance has been that EBITDA will be between $585 million and $625 million. We now expect to be above the consensus of $599 million. I see that as a tightening of the guidance range. Others may call that an upgrade. As you will see from the net debt pre-buybacks moving positively by $45 million in Q3, we have also had good cash production in the quarter. In October, we have seen some improvement in the working capital position, which reverses some of the payment situation in Q1, but it is early days from that, so I do not want to introduce explicit cash flow guidance before year-end, but it is going in the right direction. There is no other change to guidance.
At this time, we expect to issue FY 2027 EBITDA guidance in Q1 2027, and it's expected to be in line with consensus. To sum up, continued growth momentum into the end of 2026. The managed and franchised segment is delivering, supported by a large pipeline for future growth. Company-owned has good visibility for the rest of 2026. Costs are not rising, and we maintain focus on turning this growth into cash. We look to the end of the year positively and to end 2027 in a strong position. Our full-year results will be on the 2nd of March 2027. With that, Christian and I will take your questions.
Thank you, Charlie. If you would like to ask a question, please click on the raise hand icon. Once you hear your name, you'll be prompted to unmute your microphone before asking your question. We'll now take a few minutes to collect your questions. Our first question comes from the line of Tim Ramskill. Your line is now open. Please go ahead.
Thanks. Good morning, gents. I've got three questions, please. Maybe for Charlie, on the SG&A dynamics, Charlie, I guess in the first half, there was a pretty considerable increase in SG&A, and that meant that overall EBITDA growth in H1 was quite modest. Is effectively the message that you've had the cost build over a period of time, and now we're at the right run rate? Because clearly, to deliver the guidance, it's going to be materially better H2- on- H2. Second question, a bit of an extension from that is, you're likely to be in the ballpark of delivering $340 million of EBITDA in H2. If we think about that as an annualized run rate, obviously, that's $680 million that underpins where consensus sits next year. Anything that you'd call out for 2027 around that's either an incremental headwind or a tailwind?
I guess you're going to have more growth, so could it not be higher still than $680 million? Then maybe just to come back to net debt, perhaps somewhat inevitably. I guess, Charlie, your guidance is clear on the levels, but what's missing is any component that's delivered as a consequence of the supply chain financing arrangements. They weren't in place at Q3 last year, but they clearly were at the year end. So what's baked into your commentary as to the scale of that sort of December versus December? Thank you.
Thanks, Tim. Let me just talk about SG&A and the run rate. I think first of all, what I say is that we have been delivering efficiencies through the second half of the year, and that's what gave me confidence at the first- half results in August, to know that consensus EBITDA was the right place and the guidance on the $585 million to the $625 million still stood. I think back then, I was also thinking that that number would begin with a six, and I'm happy to confirm that today. I think when we think about the $340 million EBITDA in H2 and the run rate, I think there are a few things I'd say on this.
It's like, look, first of all, as Christian and I said, we're seeing good momentum on revenue and good momentum on cost. But these things can move around a bit going into the first half of next year. We're just adopting a cautious approach to how we're thinking about running the business at this stage. As I said earlier, we're happy with where consensus is at the moment for 2027. So, look, there are some headwinds and tailwinds across the whole business. Individually, there always will be. We run a business that operates in over 120 countries, and as a result, you always get those. But in aggregation, we're happy with where next year, I think, is looking to shake out at this point in time.
Around net debt, what I'd say is that third quarter was a normal operating quarter, in terms of there's no one-off working capital stuff in the quarter. That's, again, the reason why we can be confident in positive cash flow into year- end, and good cash flow momentum. What I'd say is we haven't really talked in detail about cash flow before at the Q1 or Q3 stage. We've only talked about net debt. So, there's nothing to read into the fact that there isn't more on cash flow. It's just how we normally disclose things when we talk about the cash flow much more at the half year and at the full year.
Okay. But I guess my question is less about the cash flow. It's more about the use of supply chain financing arrangements, which shifts numbers in and out of the net debt number.
S orry. So, at the half year, I mentioned that we are reducing our usage of that over time. We continue to do that, and that has also happened in the third quarter a little bit.
All right. That is great. Thanks, Charlie.
Thank you. Our next question comes from Allen Wells. Your line is now open. Please go ahead.
Hey, good morning, gentlemen. Just two from me, please. Firstly, just on the recurring revenues in managed and franchised, that was flat, obviously, at $19 million in the third quarter. Could you talk a little bit about what kind of slightly stalled the growth there and how we think about the recurring revenue progression? I think you targeted $80 million there for the full year, which obviously now requires a pretty strong step-up in Q4. Just how are you thinking about progression? What stopped maybe the growth a little bit there? Is it phasing? Is it something else? And how we should think about that progression into 2027? Secondly, just to follow up on Tim's question, obviously the step-up in EBITDA in the second half, I think it looks like about $65 million-$70 million incrementally EBITDA in the second half.
Could you maybe provide the building blocks behind that? How much of that is overhead reduction? How much of that is operating leverage in part of the business? Anything else that is giving you that confidence on the step-up in growth in the second half? Any color there, really appreciate it. Thank you.
Great. Thanks. When we talk about the recurring revenues, I think it's worth noting, and I said this before, is that we've given the guidance of $80 million. We've given forward guidance on this, and it's pretty predictable, but can always be plus or minus a few million here and there. I think if you just take the run rate of the $19 million, let's just say we did that again in fourth quarter, and look, we expect to see more growth in fourth quarter on that, you get into the mid-70s anyway, which is close to that $80 million number. If we're a couple of million off that, we might be a couple of million off that, and I think we've discussed that before, but there's nothing to read into it from what we're seeing from a trading perspective at the moment.
In terms of the step-up and the building blocks in the second half, I think first of all, what I'd say is that overall, IWG does generally performs better in the second half than the first half, and if you look back many years, you'll always see that. Which also goes back, by the way, to Tim's question previously around when you think about the full year for 2027, it's not just as simple as just adding, so doubling the second half numbers. It's generally more being 45/55 percentage type of split. In general, though, we've seen good cost progression, some increase in revenue that you've also seen. So really, it's across the board.
It's higher revenue, lower costs, and I gave a bit of guidance on this, and on the individual building blocks at the half year, and I think we've seen that come through as expected.
Thank you.
Thank you. Our next question comes from Paul May. Your line is now open. Please go ahead.
Hi, guys. I have three questions from me. Just wanted to check on the company-owned and leased business. Obviously, run rate there is much stronger than you were previously guiding for. Just wondered if there's any particular regions or markets or anything underlying that we should be thinking about into next year that could support additional growth there relative to probably where people are expecting. Then I just wanted to be clear on the $45 million free cash flow to be the pre-SBB for Q3. So that came in despite some unwind of the supplier cash flow management. Just right to conclude that the underlying free cash flow then, in theory, is slightly better from the business itself.
Finally, were there any monies outside of, say, the supplier management you mentioned that we should be aware of on the working capital that could have boosted free cash flow in Q3? Or is this a pretty clean number without any of the material unwind of the H1 issues, the payment issues? Or is there some of that feeding through into Q3 as well on the positive side? Thanks.
All right, thank you. Let me take the first question on the top line, and then Charlie is going to talk about your second, third question. Look, overall, we just have very strong momentum in the business, and the market and everything that is happening out there is going in our favor, right? You look at the overall revenue growth, you see it on the managed and franchised side, you see it on our company-owned side. So it is not one particular market or so that drives it. There is always a little bit of a regional difference, obviously, but we think fundamentally what we offer is just very relevant and becomes even more relevant in the future, which is also why very optimistic when we think about next year from here, and we will continue to see strong revenue growth in this company. Charlie, you want to tackle the other questions?
Yeah. So, look, on the $45 million, Paul, you are totally correct. Including the unwind, it is slightly better. But what I would just say is it is worth noting that 1% of inflows per month is $4 million, right? So, these numbers can move around, and they do move around a little bit in the quarter. But overall, as I said earlier, this is a normal operational quarter for us and clean in that respect, which also sort of says about the working capital was a normal working capital quarter from an operational perspective.
Perfect. Thank you.
Thank you. Our next question comes from Michael Donnelly. Your line is now open. Please go ahead.
Good morning, gents. Can you hear me okay?
Yes, we can.
Just one from me, probably for you, Charlie. Occupancy and pricing look pretty stable entering Q4. Have you seen any material regional divergence, particularly between the U.S., the U.K., and continental Europe?
Look, Michael, thank you. I think overall, we've seen both being stable. Pricing has been strong, in particular, overall in the business, but I wouldn't say there's been an obvious regional difference in that. What I'd just add, though, is this business is very good for uncertainty. And actually, also, we see AI as a good tailwind in this, where people are starting new businesses, AI-driven businesses. Uncertainty means that we've got a very good product to deal with that, and so there's a lot of demand from those segments as well.
Thank you.
Thank you. Our next question comes from Steve Woolf. Your line is now open. Please go ahead.
Steve, we don't have you.
There we go. Is that better?
Yes, it is. Yeah. Thank you.
No worries. Yeah, apologies. Amongst my scribbles, we may be a bit going back over old ground, as I was struggling to keep up. Just going back firstly to the managed and franchised business. With the new centers signed during the period is flat year-on-year. Is that because you've become more prescriptive in what you're doing? You're being a bit more looking for the right deals. I'm just curious as to why that necessarily hasn't gone up particularly or accelerated in those signing deals. Then within that, also to that point, in the locations in the pipeline, you've got 324 new center deals signed during the year. But obviously, the confidence is in opening the 1,000 for next year. I was wondering whether you'd be prepared to share what's actually in the new center pipeline in M&F.
Then secondly, in company-owned, just trying to get some comparable RevPAR figures, because I know one of the notes says you've now pulled out the enterprise numbers from there. In Q1, RevPAR was, I've got, again, I might be getting this wrong, 6%, H1 11%, now Q3 2%. I'm just checking if we're going to feed on the 2% basis, what the comparable figures were therefore for Q1 and Q2.
Okay. Let me start with your first question around the momentum and the signings. Look, I mean, you're right, the signings are flat. Same time, it's a large number of signings, right? What we're not doing here is, on a quarter-by-quarter basis, chase signatures, right? What we're doing is we're taking a strategic approach to developing our network, right? We've gotten to over 5,000 open locations. We've got many more that are coming. You're seeing the numbers, right? Rooms open in the segment, managed franchise, gone up 37%, right? We keep that momentum, but we're smart where we're putting the locations, right? One of the big benefits that we have that nobody else has in the industry is a range, right? We got a range from super premium all the way to value.
And what we do is we make sure that we find the right concept for the right location, so it works for our customers, works for our partners. That result in around 1,000 openings. We will deliver strong openings next year, continue to do that. But there can be variances on a quarter-by-quarter basis. We are not concerned about it. We do not chase them.
What is the pipeline then at this point in time?
Sorry, what is that?
What is the pipeline? 324 signed during this period. You have got rooms in the pipeline of 287,000. I am just curious as to what the center pipeline that was alongside that rooms of 287,000.
I think I'll come back on that. We'll come back to you on that number. We've published rooms, as you have, that's 287,000. That's 31% up in pipeline versus what we had the quarter before. We'll come back on the exact center number.
Perfect. Thank you.
Steve, on the RevPARs, sorry, I was struggling to follow kind of the exact tie-through on the numbers, but what I would say is we've got the data book online, which shows you the RevPARs on a quarter-by-quarter basis. The RevPAR continues to be strong. There's no underlying move downwards in the RevPAR at all, as I said in the script. Seen an improvement in the RevPAR, particularly on the prior 2025 numbers on the mature centers. Really, that's the main thing we're focused on. As Christian said in his comments, big growth means that you get a dilution in RevPAR because you've got the lower RevPAR on the opening centers coming into the mix.
That continues to be the case, and I think you'll start to see that normalize a little bit now because the opening run rate is settling around the 1,000 mark going forwards.
Perfect. That's great. I'm just interested in your other comment, backing up on a few of the other guys. You made a comment specific to costs not rising. I'm surprised given the world of inflation that we seem to be in, even though, like you say, we know you're a huge buyer of things like your tables and chairs, et cetera, for all these new openings. Where you're not seeing vast amounts of cost inflation alongside that, even wage inflation for your own people. Is it still remaining relatively modest, or is it scale? Is that what we're seeing?
So what I'd say, Steve, is we do see cost inflation on some individual things, just to be clear. As an example, we're seeing increase in utility costs, but utility costs are about sort of 1% of—
Yeah.
—revenue, so they're pretty small. What we are delivering on a cost efficiency is, just to be very clear. Yeah, some of your unit costs go up, but we're just delivering fundamentally more for less. AI is a driver of that. We've also made some big investments in technology in the past that we've talked about, and the benefits of that are coming through. We're also seeing some benefits around kind of like headcount per center and that kind of stuff as well. So we're just getting more efficient. I think, as also Christian mentioned at the half year, if you want to go and do big growth, there are two ways you can do that.
You can go and hire seven people and decide which are the best five that you want to keep, or you go and hire five people and hope that you've got the best five. And we went for the first strategy. So this is very much about efficiencies. As you can see, we can deliver the top-line revenue growth with continuing efficiencies, and we expect to continue to do that.
Perfect. That's great. Thanks.
Thank you. Our next question comes from Rebecca Parker. Your line is now open. Please go ahead.
Hi. Hi, thanks. I just wanted to delve a bit more into the decline in room openings being a mix effect. Do you still expect to end the year with around 425,000 and then next year 595,000, as guided to at the half with the $125 million recurring fees for 2027?
Yeah. Rebecca, at this stage, we see no change in the guidance around either center openings or room openings. I think it goes back to what Christian was saying a couple of questions ago, which is we are now very focused on quality. I think I've been saying this to a few investors for a while now, which is we are happy with the cadence of room openings that we've got to at the moment. We are happy with the cadence of signings. Big focus on quality at the moment.
Thanks. I just wanted to ask about, are the managed rooms progressing along that RevPAR maturity curve to $250? Is the experience still that it takes about 24 months to reach full maturity of those rooms?
Yeah. I'd say what we're seeing is it's sitting at more like 30 and has been for a while. No sort of change in expectations around that. The curves that we've been seeing on the RevPAR by maturity curves are the same for the current cohorts they have been for the previous ones. So no change on that.
Okay. Thanks.
Thank you. Our next question comes from [Dan Cowan]. Your line is now open. Please go ahead.
Dan, we can't hear you. I think maybe let's move to the next question.
Okay. Our next question comes from Samuel Dindol. Your line is now open. Please go ahead.
Morning, guys. Can you hear me?
Yes, we can. Thanks.
Yeah. Morning, guys. Just a couple questions from me, please, both on M&A. Firstly, I do not know if you could let us know how Design Offices is going, because that was a bit of a more of a sizable deal earlier in the year. Secondly, how is the M&A pipeline looking? Is there anything notable in there or just sort of adding capability around the core? Many thanks.
I think at Design Offices, we are happy with that acquisition. We are integrating it. I think, like, we have got our playbook on acquisitions, particularly where we have got sort of portfolios or a number of centers that we roll in. We can apply our cost efficiencies very quickly to that. We will continue to do roll-ins as we sort of find good opportunistic ones to do. I think when it sort of comes to M&A pipeline, I think I mentioned at the half year and actually at the full year as well, we do not have any sort of transformational M&A that is sitting in the pipeline at the moment. But we will continue to be opportunistic around good roll-ins and good businesses that we come across. So if there are any out there, we are very receptive to hearing about them.
Many thanks.
Thank you. That now concludes the question session. Thank you for your participation.