IWG Q2 Earnings Call Highlights

Key Points

• IWG reported strong first-half growth, with system-wide revenue up 11% to $2.4 billion and company-owned revenue up 5%. The company maintained its 2026 adjusted EBITDA guidance of $585 million to $625 million and its medium-term target of at least $1 billion.
• The managed and franchised network continued to expand rapidly: revenue rose 36%, recurring management fees increased 84%, and more than 610,000 rooms are now open or contracted. IWG expects recurring management fee income to reach $80 million in 2026 and $125 million in 2027.
• IWG returned $109 million to shareholders in the first half while maintaining 2026 net capital expenditure guidance of $150 million. Management expects second-half cash flow and overhead efficiency to improve, with year-end net debt-to-EBITDA projected below 1.5 times.

IWG LON: IWG reported first-half 2026 system-wide revenue growth of 11% to $2.4 billion, supported by expansion in its managed and franchised network and continued growth in company-owned locations. The flexible-workspace operator reiterated its full-year adjusted EBITDA guidance of $585 million to $625 million and its medium-term target of at least $1 billion in adjusted EBITDA.

Christian Schmitz, who became chief executive in June, said the company is positioned to benefit from a structural shift toward flexible real estate arrangements, as businesses seek shorter commitments and the ability to scale their office use up or down. He said IWG’s priorities are to expand margins in company-owned centers, increase fee income from managed and franchised locations, and broaden its network coverage.

Managed and franchised network expands

Managed and franchised system-wide revenue rose 36% to $535 million in the first half, while gross profit increased 48% to $90 million. Recurring management fees climbed 84% to $35 million. Including franchise and joint-venture fees, total recurring fees were $57 million during the period.

IWG signed 728 new centers and opened 425 during the first half. It ended June with about 358,000 managed and franchised rooms open, up by roughly 51,000 from December, alongside a signed pipeline of 257,000 rooms. The company said this resulted in more than 610,000 rooms either open or contracted.

Charlie Steel, chief financial officer, said the current managed and franchised estate and signed pipeline have the potential to generate more than $2 billion of annual system-wide revenue once locations are opened and mature. IWG continues to expect recurring management fee income of $80 million in 2026 and $125 million in 2027.

Schmitz said the company’s network and existing company-owned estate provide the brand recognition, customer base and coverage that attract third-party partners. Managed and franchised operations accounted for 22% of system revenue, 46% of locations and 32% of rooms in the first half, compared with 12%, 19% and 14%, respectively, in the first half of 2023.

Company-owned revenue and pricing improve

Company-owned revenue increased 5% to $1.9 billion, ahead of IWG’s full-year target of at least 4% growth. Adjusted gross profit in the segment rose 4% to $479 million. Revenue per available room, or RevPAR, increased 11%, which Steel attributed to pricing actions across centers of different maturity levels and the closure of low-RevPAR rooms.

Schmitz said IWG manages company-owned centers on an individual basis, monitoring occupancy, pricing, service revenue and local costs. The company said 26% of its estate is now on variable rent. It also completed bolt-on center acquisitions, which Steel said were purchased at attractive valuations and could provide margin opportunities as they are integrated into IWG’s operating platform.

Management said enterprise clients remain an important source of growth. According to Schmitz, 85% of Fortune 500 companies use IWG, while average spending has increased 7%. He added that 52% of enterprise clients use three or more IWG product lines, including permanent offices, short-stay space, meeting rooms, memberships and services.

Cash flow, costs and capital returns

Adjusted EBITDA was $265 million in the first half. Steel said higher revenue and gross profit were offset by planned increases in selling, general and administrative costs and investment overhead. The company’s focus for the second half is to convert revenue growth into EBITDA, operating profit and cash flow.

Cash flow was affected by working-capital movements related to supplier payment timing and invoicing automation. Of an $83 million working-capital outflow, Steel said $87 million was associated with lower accounts payable balances and reduced payment dates during the first quarter. Accounts payable declined from $297 million at year-end to $262 million at June 30, including balances from acquisitions.

Steel described the movement as a timing issue rather than a change in the business’s earnings potential. Cash flow before corporate activities returned to a $36 million inflow in the second quarter, and he said the company expects second-half cash flow to improve and resemble the second quarter more closely. Management expects working capital to be broadly flat to slightly negative in the second half.

IWG maintained total net capital expenditure guidance of $150 million for 2026, covering both growth and maintenance spending. Steel said the managed and franchised model enables system-wide revenue growth without the level of incremental capital expenditure historically required to expand company-owned centers.

The company returned $109 million to shareholders in the first half, consisting of $100 million in share repurchases and $9 million in dividends. IWG repurchased 37.9 million shares, reducing its share count by 3.8%, and has announced a $150 million buyback program for 2026.

Leverage and outlook

Net debt ended the first half at $880 million, rising by $22 million in the second quarter after buybacks, dividends and small acquisitions. Steel said IWG expects net debt-to-EBITDA to finish 2026 slightly above its December 2025 level, and indicated that “slightly higher” would mean below 1.5 times.

During July, IWG increased and extended its revolving credit facility to $1 billion through 2031. It also increased its 2032 corporate bond to €500 million from €300 million, while its 2030 bond remains at €625 million. Steel said the company has no refinancing needs until at least 2030. Fitch reaffirmed IWG’s investment-grade credit rating in June.

Management said it has visibility on an incremental $30 million of company-owned revenue that would fall directly to EBITDA, in addition to expected managed-business growth. Steel also said he expects around $30 million of overhead improvements in the second half compared with the first half, while maintaining that the reductions should not affect top-line revenue.

Schmitz said IWG is still in the early stages of the flexible-workspace shift and sees opportunities to apply automation and artificial intelligence to internal costs, demand forecasting, occupancy management and pricing. The company reiterated its medium-term target of at least $1 billion in adjusted EBITDA and a cash conversion ratio above 50% at that point.

About IWG (LON:IWG)

IWG plc, together with its subsidiaries, provides workspace solutions in the Americas, Europe, the Middle East, Africa, and the Asia Pacific. The company offers office, coworking and collaboration, flexible and scalable, meeting, and lounges spaces; workplace recovery; memberships workspaces; and reception services and conference products. It provides its services franchise partners, landlords, and property owners under the Regus, Spaces, HQ, Signature, Basepoint, Stop & Work, The Office Operators, BizDojo, Open Office, No18, The Clubhouse, Central Working, and Copernico brands.

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