Hello, and welcome to IWG Q3 trading update conference call. My name is Priscilla, and I'll be your coordinator for today's event. Please note this call is being recorded, and your lines will be on listen only. However, you'll have the opportunity to ask questions at the end during the Q&A session. This can be done by pressing star one on your telephone keypad to register your question. If you require assistance at any point, please press star zero and you will be connected to an operator. I will now hand you over to your host, Mr. Mark Dixon, the CEO, along with Mr. Charlie Steel, the CFO, and Mr. Mal Patel, the Investor Relations of IWG, to begin today's conference. Thank you. Thank you very much. Good morning, everyone, and welcome to our Q3 trading update. I'm pleased that we've been joined today by Charlie Steel. It's actually his first day today, so no difficult questions, please. I think most of you have spoken already to Mal. I'm very happy to have him on board. Let me take you quickly through the key highlights, and then we'll turn to Q&A. Another very good quarter where revenue grew strongly. EBITDA month-to-month continued to move upwards, and we started to generate very good cash flow, which has brought net debt down. Taking each of these in turn, group revenue grew in Q3 by 25%. It's 16% excluding Instant. The growth came across all business lines and pretty much over all regions. On a year-to-date basis, this reflects our continuing strength in pricing, which is ahead of inflation, combined with recovering occupancy, which was 650 basis points up across the estate. We've continued to largely mitigate inflationary pressures, or at least reduce them, by maintaining a focus on costs and efficiencies. As a result, EBITDA across all regions continue to grow. The monthly run rate EBITDA is developing according to plan and is now at almost GBP 30 million. As we pointed out in August, this improvement is somewhat weighted towards suburban and provincial centers, with a few city center and a few Asia- Pacific locations recovering at a slightly slower pace. Finally, we generated nearly GBP 45 million of cash flow before investment in growth, which has enabled us to reduce net debt by nearly GBP 20 million compared to where it was at the end of June. Turning to our strategic priorities. Firstly, capital -ight growth. You remember that capital- light contracts, such as franchise agreements or management or partnership contracts, typically involve a fee structure, no CapEx spend by IWG and no lease liabilities. Now, the good news is both demand and supply remain very strong here. In total, across the first nine months, we signed 252 capital- light contracts, with nearly 60% of these happening in Q3. These new capital- light contracts represented nearly 90% of all the contracts we've signed to date in 2022. The rate of monthly signings has continued to accelerate, and we have a good line of sight to a year-end target of 500 agreements. I'm also pleased with how these contracts are translating into openings, with over a third of the capital- light contracts we signed in the first nine months being now open. Given our signing activity, they only began to ramp up from June onwards, but it's running now at a good run rate of both signings and openings. I would expect that this will continue to pick up through Q4 and into 2023, and for these to begin contributing to EBITDA as the center of revenues build during next year. Moving to Instant, let me just remind you that this is the world's largest independent marketplace for flexible working solutions, all on an innovative technology platform. Instant grew strongly during the quarter, showing strong year-on-year progress, accompanied by continuing growth in EBITDA. The integration of IWG's digital assets with the Instant platform is progressing well, and we're seeing the benefits of this coming through. Finally, cash flow generation. As I said, pre-growth investment, we generated very strong cash flows in Q3, and we expect this to continue through Q4, so that with improving month-to-month EBITDA, we'll be able to further reduce net debt by the year end. To conclude, this has been a good quarter for IWG. We remain cautiously optimistic about the outlook for the full year. We've got strong visibility over our forward order book and monthly EBITDA is continuing to grow in line with our expectations. We expect adjusted EBITDA for the full year to come in towards the lower end of the range of market estimates. Market estimates are currently between GBP 304 million and GBP 380 million. With that, I'll hand over to the operator, and we'll pass over to anyone that has questions. Thank you, Mr. Mark. Ladies and gentlemen, as a reminder, if you would like to ask a question or make a contribution on today's call, please press star one on your telephone keypad. To withdraw your question, please press star two. We'll pause for a moment. Could we have the first question? Yes from Sam Bland, please? Yes, please go ahead. Your line is open. Hi, Mark. Many thanks for taking my question. Three questions from me, please. Firstly, on monthly profitability, I think you said almost at GBP 30 million. Are you able to give a sense of the quantum you expect that to incrementally increase in the coming months? Is it GBP 2 million more per month or anything like that? Secondly, on the Instant Group, can you remind us what you expect sort of run rate EBITDA for that sort of combination to be at year-end? Finally, on the bridge loan, I think that matures in September next year. Given the rising cost of debt, would you prefer to sort of repay that, or are you looking at sort of refinancing options or any color around that would be very helpful indeed. Thanks. Okay. Monthly progression of EBITDA, we expect that to continue to improve through the Q4. Generally, December's a flatter month that we expect, and we can already see EBITDA improving both in October and November. It should lead us here to a good run rate. Mal, I don't know if you want to just add something here, or is that the kind of color? Yeah, look, Sam, I think as I said to you before, we're today nearly 30. We'd expect that to improve as we go into the Q4. I don't think we're gonna give you specific numbers right now. It doesn't really make sense. I think the message that we feel very confident about is that month-on-month it continues to improve, and therefore we'd expect to exit the year at higher than GBP 30 million per month. Thanks. Thank you. Thanks, Mal. I think, you know, just to add to that, we can see a very solid book into Q1 of next year, which is also important. You know, the outlook's positive. I mean, but there are incremental gains month-on-month. We'll give more color on that clearly on the full year. In terms of Instant, this is another one where we, you know, we're working on the integration at the moment of our digital assets into Instant. We're gonna give a lot more information around this on the full year numbers. We're not going to give too much now because it's still in the integration phase. Fully on plan, contributing excellent EBITDA and excellent improvements on the previous year. It's, you know, we're very happy with it. We're happy that this has been a good investment. We're not ready to give information that's sort of not super clear in terms of either guidance or performance. In terms of moving to the bridge loan, Sam, we are working on a variety of different strategies for the refinancing of the bridge loan. We expect to, during the first part of next year, be able to have a solution to that. We're comfortable that this is not an issue for us. Brilliant. Thank you. Thank you. Can we go to Steve Woolf, please, Priscilla? All right, sure. Hi, all. Thanks, Mark. A couple from me. I appreciate the disclosure has changed, you know, a little bit in order, you know, trying to simplify the business and, you know, have more work to do over that, for next year for the moving parts, which is for sure, appreciated by everyone. Just if you can give any color behind that on the old world and the way that that was put together. Any comments on the, you know, profitability or occupancy of the mature or pre-2021 estate? And then secondly, just in terms of the moving parts between getting from a consensus of 340 closer to 300 with revenues largely unchanged. It's just I appreciate things you're saying the slowdown or slower recovery than expected in Asia and city center locations, but it's still a fairly big chunk of profits to downgrade if the top line isn't changing much. Obviously you've got the benefit of FX coming from, you know, the US estate if nothing else. Just anything in trying to square that for me, if that's possible. Thanks. Mal, I'll hand it to you in a moment, but first these numbers, I believe, Mal, are constant. They're not an actual, are they? We reported constant and actual. Yeah. Yeah. It was more anything to do with the makeup of that in terms of the pre-21 estate rather than constant versus actual at this point. Okay. Mal, do you wanna have a go at that one? Yeah. Steve, look, let's step back a bit. You know, I think over the past three, four quarters, I think our reporting has probably become slightly complex with quite a lot of metrics there. You know, this is a conscious decision as a first step to simplify reporting, but also, you know, certainly by the full-year stage, to improve disclosure. In terms of that pre-2021 estate, you know, that was actually very important when we were adding lots of conventional leases because we gave you a better idea of the underlying estate. I think it's less relevant now because we're adding fewer conventional lease centers, and we do want to evolve disclosure to give you the most meaningful metrics. For what it's worth, the Q3 performance of the pre-2021 estate was exactly in line with what we reported for the group, which is 16%, and similarly in terms of occupancy. I think that tells you something about how evolving disclosure to be simpler and reporting to be simpler will actually, you know, we're certainly very confident that will help people to get a better understanding of how to price the business and how to model it. Yeah. In fact, I do think that's appreciated. Yeah, cheers. I think it's worth adding here as well, Steve, because we've got excellent revenue growth and we've got slight, you know, we've got inflation pressures that are there. We're mitigating, but they're still there. There's some inflation movement, and we are investing also into growing the management contracts and partnerships part of the business, and that does take investment in people. We've decided to do that. We think it's the right way to go, and it will change the mix as we've spoken about in the future. I think underlying the performance in the Q3 and the performance we expect in the Q4 will be absolute. Both of them, very good improvements in terms of EBITDA and cash flow from the core business. If we're not giving it on this particular call clearly, but the graphs that we provided on the half- year, where you can see the improvement on margin in the open center group, you know, that has continued. So, you know, internally in the business we're making, we're very happy with the performance. There's just, you know, slight sort of headwinds coming from inflation and from lockdowns in China and a handful of cities, you know, that would just take the shine off the growth. But the growth is still very much there. Sure. Perfect. Thanks, Mark. Thank you, Steve. Move on to Michael Donnelly, please, Priscilla. Thanks, Mark. Good morning. Hi, Michael. Can you hear me? Yep. Can. Two quick ones from me, Mark. Back in August, you were talking about service revenues that were getting close to their pre-COVID levels. Could you just update me on where they are at the moment? Secondly, also back in August, you spoke about how the strong growth in capital- light had been requiring further investment. I think at the time you were guiding us to second half about GBP 25-30. Now, clearly the capital- light has been strong since that time. Is that corridor of investment still between 25 and 30, do you think, in the second half? Thanks. I think just, I'm not sure if we've got a number on the CapEx, but the service revenues continue to improve. They're not yet at pre-COVID, but they could, there's a chance they could get there and, they could get close, much closer in the Q4. You know, overall it continues to improve. We're not there yet, but every month they get better. Certainly just looking in Q4, things like meeting room revenues have picked up a lot. This is mainly city center circulation. You've got more people circulating and that's picking up things, basic things like coffee revenue and so on. Still not quite up there, but it continues to get closer. In terms then of CapEx, I think that was your question. Can I take that? Mark, shall I take that? Yeah, please. As we're gonna pass it to you. Mike, I think what we said was in the first half we spent around GBP 20-ish million on the growth team for capital- light. Then I think at the time we indicated about GBP 30-ish million in the second half. No real change there. That's great. Thank you, Mal. Okay, moving on. Michael, James? James. Yeah. Thanks. Please go ahead, your line is open. Hi, good morning. Three questions, please. Firstly, on the capital- light signings, can you give us a rough idea of how homogenous the terms are for these deals and what you estimate the kind of breakeven occupancy will be, you know, around your fee revenue? Secondly, on leverage, what, if any, working capital unwind might we expect in Q1 based on the guidance for net debt further reducing at the full year? Lastly, just on the kind of bridge facility, do you already have heads of terms that are payable to credit there, or are we not quite at that stage yet? Thanks. Okay. That's sort of net debt, is there sort of an unwind. The first one was? On the capital- lights. Yeah. Is it kind of roughly the same terms across those signings or is there sort of variance, and you know, what would you expect in terms of earnings to be the breakeven occupancy for that type of model? Well, dealing with that one first, I mean, these are management contracts, so there really isn't a breakeven because it's a fee revenue. The issue on them is simply they start off with no revenue and the revenue then builds. As it builds, we get a percentage of that revenue. What I can tell you is there's a number of centers that we've already opened this year that have that pretty quickly reached 100% occupancy, the number of them, and then, you know, if they do that speed, the fee revenue start to come through. The average fill time would be about 12 months. You know, to get them to fee revenue maturity takes about 12 months. They just keep anniversarying in. We open them, the revenues build, and you sort of get to close to optimum performance in fee revenue after about 12 months on average. That is what we'd expect to see. There are upfront fees which mean that you get some of the fees up front, and that does cover some of the costs, but not all the costs, because it takes time to get this new sales force, which is about 200 people, and was only put in place really at the beginning of this year, and it really got going in about April. You know, they, we have quite a lot of upfront costs to get everything in place. Those people are now starting to perform. We've had a very good month for new signatures in October. You know, we can see a very strong pipeline that will continue to build. You know, this, it does take time for those fee revenues to come in, though. We will give some more shape on that as we come into next year. In terms of On working capital. Sorry, Mark. Go on. Do you mind? Are you happy for me to say that? Yeah, James, on working capital, we'd expect to see some of that unwind beginning in quarter four. I think that's what we said over the past few days, that you will see that unwinding happen through quarter four. I think for next year, across the full year, you will see we would certainly expect an improving working capital position across the full year compared to 2022. I think beyond that, to go into granular detail at this stage on working capital items is probably not massively helpful for anyone. Yeah, I guess just trying to get a Sure. You know, some investors look at, you know, I guess, net debt cycles through the year. Just sort of referencing this year, there was an outflow in one Q. Whether that means the one Q net debt kind of I think just looking back at that, there was an outflow actually in the Q1 and the Q2. This was quite a lot of it, and if you look back at the documents that we produced, there's quite a lot of it that applies to the COVID period. Even though it's occurred in 2022, it's applying to 2021. And there was quite a bit of catch up because of the negotiations we did, et cetera. I think that's now reversed the other way. We've got much more. We have almost no one-offs. And, you know, the EBITDA is converting into cash flow, and you've got a smaller, an increasingly smaller investment CapEx. You're starting to get, you will get more net cash flows, and that will continue to grow through 2023. You should not see, I think Mal would be fair to say, big movements in working capital. Yeah Large improvements positively as revenue comes up and deposits come up and so on. You won't see the same disruption to working capital that we saw during the beginning part of 2022 and of course, through the whole COVID period. You have to remember up here, we renegotiated more than 1,000 lease arrangements, and that's all of that, a lot of it, some of it costs money, but we got much better result for the long term. It made the working capital much lumpier and unstable. That is now over. That's very helpful. Mal, anything to add on that? No, I think that's a very comprehensive answer. The bottom line, James, is that this year, 2022, you know, we've seen basically the washout to working capital of, you know, prior impacts. You won't be seeing that in 2023. We'd expect much cleaner working capital movements, and the magnitude will be that much lower. Yeah. I think, you know, again, we could go on and give more clarity, James. We also have acquisitions in there from the first half, not instant, small things we've picked up. There's noise in there. That noise is largely over and we can, I think we can be much clearer now going forward. Then your final question on the bridge. No, we don't have any terms signed, nor do we need them. We, you know, have, as I said earlier, a number of things we're working on that will make us comfortable that we will be able to refinance that bridge in due course. Not least of which is a much stronger cash flow in the core business, by the way, and from the Instant business itself. Overall, we're comfortable that we will get some good outcomes here, as we move to the next stage of developing Instant office in 2023. Thank you. Okay, James. Thank you. Let's move to Daniel. Thanks, Daniel. See you've got your hand up. All right. We'll move on to Daniel. Daniel Cowan here, from HSBC. Just a question on cost cutting. You've mentioned that you're looking at cost cutting and efficiency to help offset that cost inflation that you've been talking about for the last 2, 3 quarters. I was just wondering what areas you're managing to make headway in there and sort of how that affects this year and then annualize maybe into next year. I appreciate it might be hard to quantify things, but any steer you can give us on that would be helpful. Second question would be on corporate clients. There was, I think, quite a flurry of activity in a relatively early in the pandemic, and I was just wondering how that's been borne out this year. You know, how is demand? How are you seeing incoming requests for space from that particular cohort of clients and how we might think that might develop, you know, over the next year or so, please? Okay, let me deal with the corporate clients. Thank you for that. The corporate clients first. Look, very big picture, and when we've got huge amounts of research, which I think now, just as an off point here, we need to prepare some of that research with Simon and get it to our analysts and followers here. Because there's just so much now important scientific data. I I mean, it's all been tested now, not by us, but by Harvard and Stanford and all sorts of professors working on it who see this as being an important change. That will give you a backdrop of what's going on without me saying it. What I can tell you is that pretty much every corporate is considering hybrid working, which is moving people to a different sort of work platform, which is not all based around big centralized head offices. It's having some of the people, maybe in some cases all of the people, working in a more decentralized way, closer to home, a few people at home, but mostly decentralized, close to home. This way of working is becoming more and more entrenched, and that is leading to more and more demand for what we are doing. That is even though we have what's clearly a very difficult economic period, recession in many countries, you know, our demand remains very robust. This is because more and more companies are looking at it and saying, "Look, it's what our people want, and if we can cut costs doing it, then why aren't we doing it?" It certainly doesn't affect productivity. You hear all this gossip and commentators saying, "Well, it's not good for productivity." That is disproven on every test that's been done. Properly managed is something that works. We win because we're providing those decentralized locations. We win because companies that used to have a larger head office in a big city make it smaller and come to us. You know, demand is robust. I think inquiry levels for us in the past couple of months have been all at record levels, I believe. You know, they're marginally above the best we've ever done before. That is the sort of September and October current period. What we can see though is that the large project work, the type of business has slowed down a bit, and this is what you see in recessions. We're seeing it being picked up by companies moving to getting more of their people working hybrid. They're either doing it with them controlling it or they're giving their workers an allowance to pick up an office from us themselves. We've got a lot of movement in there as well. Overall, you know, demand is good, whether that's from corporates or people that are working for corporates or smaller companies that are looking to conserve capital and rentalize, you know, demand is good, and revenues are moving up as a result. We see that continuing into the future. This, you know, it's becoming more and more popular. Cost savings. I just turned to that. Just briefly on here, these are really fall into supply chain areas. This is digitizing everything we do areas. You know, things like cleaning costs, as I just take that as an example. You know, it's a cost for us of about just a little over GBP 40 million a year. We've... Where cleaning costs should be inflating, we've managed to hold them flat. We haven't managed to reduce them. Obviously in cleaning costs, there's a high level of labor in there, and labor has inflated. What we've become a lot more digitized, a lot more efficient at how we're doing things, and we've managed to hold it flat, which means we're cleaning our places, keeping them very high quality, but using less hours to do it. We continue to do that throughout 2022. There's a lot of digital in there. It does take investment in the digital platform in order to get there, and we continue to do that. I think the investment overall this year will be around GBP 40-45 million into the digital platform. These are all the things that we're doing to improve the simplicity of how we run our business and lower the people element, the labor cost. The supply chain, we just keep attacking the supply chain in two ways. Driving down costs and driving down any middleman costs or any transport costs too. We've been successful at that, substantially reducing costs in an inflating market. We haven't been successful across the board, but on balance, while we have inflation coming in, we're managing to mitigate a large part of it. Still, we still got inflation, just to be clear. Labor cost is a key one for us. You know, we expect that to continue to inflate, and we budgeted for that in 2023. But we're becoming more and more efficient in how our people are working. You know, we can just trim off the hours by making people more efficient, more digital in that as well. Everything automated. you know, we keep super focused on this. It is working. Final part to this is, look, the backdrop to this is we are managing to continue to get very strong inflationary increases where we're now at the moment. I think you've got the number in front of you. What is it? Sorry, Mark, the number for? No, the price increase. I think it's 11- 11. 12. Yeah. It's just over 11%, in blended pricing. Yeah. That this sort of embedded is moving up and, you know, that's, you're well ahead of what we're seeing in inflation. You know, if we're seeing inflation here, you know, we're after efficiency at, let's say 5 or 6%, we've got the price inflating more than that. Oh, yeah. That's helpful. Okay. Thank you. Thanks very much. We've got, Steve, you've got I have one more question. Already been answered in a couple of the answers you've given previously. It was about further savings from the lease restructuring. You mentioned it was over a thousand that have been restructured. I just wonder whether, you know, we were done at that point or whether there was still a proportion that you were going after, sort of the heavier restructuring that were associated, obviously, as we came out of, you know, impact as a result of COVID. Well, there's still a little bit left to do, but there's not much left to do, so it's not gonna be. Sure. You know, we're not budgeting for a meaningful change here. Sure. We continue to look. It's just now business as usual, Steve, in all honesty here. You know, we're not prepared to. You know, we're very focused on sort of immediate cashflow and profitability. We're in a sort of in a more, let's say, a more booming economic environment. You may be more patient with units. No patience in the current situation. We Got you. You know, because we're very aware that 2023, 2024 will be difficult periods. We don't wanna carry anything through that period. As I say, most things have now moved into profitability, and we're moving up the profitability, but we continue to work through the portfolio on things that we don't think will make it. They need to be adjusted. Thanks, Mark. One final thing from the statement I'm looking at is what is the number of centers in operation now relative to where we were at, you know, the 3,100 at the H1 stage? Just any sort of net movers in and out for the year as a whole as possible. Now, I'm not sure if you have that. Yeah. We said we're at 3,323 locations, Steve. If you want any more detail in detail, I can pick that up with you offline. No problem. That's 3,323? Yeah. It's, it is actually at the very top of the statement. Okay. Sorry, apologies. Missed that one. Yeah, there it is. Perfect. Yep. Okay. Right, Steve, any more questions? Priscilla, can you see anyone that's got their hand up, I think? No. It appears there is no further questions at this time, Mr. Dixon. I'd like to turn the conference back to you for any additional or closing remarks. Okay. Well, once again, thanks very much for your questions today. As always, we'll be available if you've got any follow-up questions. Welcome Charlie on board, and look forward to speaking to you all in due course. Thank you very much indeed. Thank you for joining today's call. You may now disconnect.