International Workplace Group plc (IWG) Earnings Call Transcript & Summary

Good morning, and thank you, everyone, for joining us this morning for our 2025 results. Overall, a very good year, both financially and operationally. And strategically, we continue to roll out the plan that we set out over the past years. I'm going to take you through briefly exactly why that matters, in particular, in these volatile times with geopolitics at play; with AI, the AI question that everyone keeps asking. So what is our business going to be about over the coming years? When I started IWG, there were different times. It was before the Internet, that was before -- there was a time when mobile phones weighed quite a few kilos. But the idea then was simple: it was about giving people access to great workspace, great work tools. And even though I started with one center, it was about doing it better than anything else they can get on the market. And now that morphed into doing that wherever and whenever they want it, and that is the business we have today. So when you look at today, we've got a business more relevant than ever in this changing world. What's very, very clear is that customers, so companies, want to rent, not own. They want to be capital light. They don't want to invest in facilities, fit out furniture for long terms. They really value an asset-light activity. And I'll give you a quick example of this. This is one of the largest tech firms in the world, a big customer of ours. I made the mistake when I was on a conference call with the CFO saying, "Well, I'm sure cash flow is not your problem and you're probably not interested in being capital-light." He said, "No, absolutely the opposite. We are very interested in being capital-light. We want to spend every last dollar on data centers and AI. We don't want to spend any money on anything else." So we're absolutely rationing capital in the business, and we really like things that are flexible. We really like things that are capital-light. Moving to flexibility, we get hit by -- our share price got hit by the AI sort of meltdown, which is the end of commercial property apparently. What people underestimated is that companies really value flexibility. So if you're a CFO or a CEO today and you're trying to work out how many people you're going to be employing in '27 and '28, '29, that's an impossible task because everyone is clear that AI will change the number of people you have, change the type of people that you have, but it's hard to predict what it will actually be. So more and more companies now are adopting both capital-light and a more flexible approach to how they support their people. So there's a very straight correlation. The more publicity there is about AI, the more our inquiries go up and the more our sales go up. So this is absolutely helping us grow our revenues as we come into 2026. And then if we sort of turn to -- so that's the one side. We've got great demand. The demand is getting stronger. That's converting [indiscernible] we've got a very good revenue story. And if we look at supply side, this is the property industry. Now that's changed completely, and it continues to change where the property industry now is starting to understand that it's not just about having assets about how you use them. So they are becoming more and more interested in adding value to their real estate, adding value to their assets and turn them into products that companies can buy, and we help them with that. So we've got unprecedented growth last year, and it will be the same this year. With more and more property companies, more and more investors, pension funds, institutions of all kinds saying we want to be in a much more operational real estate business, adding more value to the people that are going to be using it. And that is really helping us on the supply side. And we've done some fantastic deals. The team did a great job last year, certainly with getting more institutional, larger centers in cities along with growing the network into the provinces as the sort of light bulb moment happens within institutions. What we deliver is a completely different cash flow. We deliver cash flow, and we deliver completely different cash flow with effectively delivering to an investor at least 1x, but an average about 1.8x whatever the yield they would have had. So it's a significant increase in cash flow by giving the customer what they want, using an efficient platform to do it, which is our platform. So today, we're very much the market leader globally, nationally on any count with the network that we have today. We're very optimistic about the future. And the strategy is working, and you're going to see it work again in '26 and beyond as our underlying strategy of moving to $1 billion of EBITDA that we've telegraphed on every meeting, we just keep taking steps closer to it reliably with no surprises. So just looking at the scale of what we have so far, a few numbers. So it's the biggest, it's the most extensive network in every count, more than 1 million rooms open now, 4,600 centers and almost there's another 1,000 centers that are in the construct stage now. Over 120 countries, mixed blessings on that one in terms of the Middle East at the moment, but very, very broad coverage and pipeline of about 230,000 rooms that were already signed and in the pipeline at the moment. And that is before we sign up new locations this year. So the size of the network is very important in terms of what customers are looking for is coverage. What we are looking for is coverage to help those customers and using lots and lots of tools to get scale benefits from having these large networks that work both for the customer and most importantly, for the cost of operations, so we can operate and supply at most efficient, the best prices at the best margin because of the scale, and we work all of that through. In terms of competition. Look, there's plenty of competition out there, but it's very small and fragmented. And overall, our network today is bigger than the next 10 competitors combined, and we're growing at a much higher rate than any of those competitors or the market overall. So one of the other things, it's another AI avenue. They said, well, aren't you going to get disintermediated because they think somehow we're in the booking business or tech business. Whilst we are in it, it's a very small part of our business, most of it is about having all these properties, operating these properties and supporting workers. And yes, the workforce will change, but it will change in our favor and so on. And can what we do be duplicated? I had that question this morning on -- I can't remember what it was. I think it was FT. Can you be duplicated? The answer is no, not quickly. So what we have is something built up over nearly 40 years, lots of relationships, setting up in all these countries, tax, accounting, all of these things, hard to do. It's not something you can do overnight. And so the network size is really important. And I think we have a very, very significant moat between us and any future competition that comes along. So capital-light. This, I think, is one of the most important structural stories, and it hasn't yet been understood fully. I'm sure everyone in this room understands it. But certainly, outside that is when I'm talking to journalists or the outside what we haven't landed this message yet. They think we somehow either own real estate or somehow have some kind of risk in it. This is very much a success story. If you look at the chart here, you can see that when we started doing capital-light deals, that is partnering with the property industry, about 15% of the network was Managed & Franchised. Today, it's 33%. If you add in the pipeline, we're at 50% already, and that's without anything signed up this year. So we continue to move the business. It grows, but the highest growth is in the Managed & Franchised. And so that starts to become a bigger and bigger percentage of the business, which helps explain in the investment case. It starts to become the major part of the business. And it's a really reliable part of the business, and Charlie will talk to you more about that. So this is about continuing to deliver. When we talked about at the beginning, people said, you have a good idea, we're not sure you can deliver it. But every year now, we continue to deliver. And I think it's that consistency of delivery that sort of helps in the investment case. It's a capital-light delivery, it's high margin, it generates a lot of cash and there's obviously a lot less balance sheet risk. So it sort of shows well, and it's helping us grow much more quickly. What it does also is helps validate and use our IP and our IP is the systems, multiple brands. It's our ability to actually create revenue. We have a massive sales operation that is a direct operation, direct to the customer that the more centers we have on the network, the more the overall platform is validated, the more revenues we get. So look, overall, we feel that we've got a complete rerating story of the business. That hasn't come through yet. But it will come through, and that's I'll talk more to that in a moment. So again, another underestimated part of what we do is the fact that we've got a genuine breadth of brands. These brands allow us to do pretty much any building. So we can go all the way from super budget to 6-star centers. We do laboratories, we do medical suites, we do a whole range of cash-generative enterprises that building investors and owners can tap into and decide what brand, what activity suits their building, and we support them in that choice. But what it gives us is an ability to keep fueling the growth, as more and more real estate starts to become more operational. And this is a key differentiator. No competitor has more than one brand. They're all doing single brands. They're all very fragmented. This -- the brand suite we have here, a very powerful part of our overall IP. So a slide here on the investment case. This is a slide we showed in December at our Investor Day. I'm sure many of you have seen it. So -- but just to reiterate, what we're doing is very similar to what the hotel groups did some time back. They moved to a franchising model, more asset-light model, which enabled faster scaling, generated extraordinary free cash flow and allowed exceptional shareholder returns, so much so that these -- the best operators in this group are trading at 15x, 16x the best. When we last looked was 19x EBITDA. So a long way from where we are at the moment, clearly, but we are doing exactly what they are doing, and we're following this path. So the business becomes more and more capital-light, much more flexible, much more cash generative as we move forward. So we're doing what the hotel companies, they have already followed this path, but we have much stronger megatrends. So we're dealing here in a market where we don't have -- we're Marriott without a Hilton and IHG and every other hotel group. We're pretty much on our own. It's a huge addressable market. That's the real estate office industry, about a $2 trillion market. And it's a market that is changing. So what all these stories about, whether it's AI, whatever it is, work from home, work from an office, all of these stories are all about how technology is changing the way companies and people work. And we're at the forefront of that and benefiting from it. So huge opportunity in the future, as we continue to grow the network, continue to add brands and continue to get scale benefits from operating our business. So -- and I think clearly, it's an easier story for investors to understand, to comprehend when more and more of the revenue comes from management franchise. And that is happening year-by-year. So the question is, how long until we rerate. We continue to deliver and our expectation, we are closing the gap slowly. We need to continue to do it until we get to the promised land. Promised land doesn't have to be 19x EBITDA, by the way, very nice for the investors in the room, but certainly a lot higher than where we are at the moment. So these megatrends, and I've sort of talked to them at the beginning, we're much better -- hotels -- I have hotels in my personal investment portfolio, and they are volatile. They're tough, hotels; very short books revenue. We actually have short and long. We have -- most of our revenues are quite long dated, and we have a mix between short and long. So it's a much more attractive cash flow profile. Absolutely unique. And as I said, we're not -- we are competing, but we're not competing with people like us. Most of it is about explaining the market and growing on the back of that. And our market position means that for investors, for the people that own the properties, we can provide a much better proposition. We have more products, more salespeople and we create revenue much more quickly than anyone else could do. And all of these things support the growth. This change in the way people are working overall is fueling the growth. Now valuation. I'll be direct about this. It's very low. Despite all of the dynamics that we have, we're a mile away from Marriott, who's the best performer in terms of multiple. So what we have to do is we're very clear here. Everything is in our favor, huge addressable market, weak competition. We've got a good model. We're very disciplined about how we deliver on it. We just have to keep delivering and keep cutting the distance between us and the medium-term outlook we put there. So it's about just very reliable delivery, and these results give you just that. And I think it will be helped that eventually a light bulb moment will happen and people will realize that somehow this is something other than a property business. It is about supporting workers, but it's not necessarily about doing that only with property. We have lots of other products that support people. I covered it this morning in the journal. There's a look -- there's more people coming to the office. So look, we are hedged on this. We have a significant business that's growing, supporting people working from home, more than 1 million customers. And that one is growing. And we also have a business in office, and you can clearly see that, that one is growing. So it's a nuanced overall picture that we are winning in, and you can see that coming through in our results. So let's just quickly -- I just want to say once again, megatrends here. CapEx to OpEx, and you will see this pretty much universally amongst companies, they sort of understand that they don't -- if they don't need to own it, then they shouldn't own it. And you can see that with many other comparisons. If you look at Ashtead tools, people rent tools, very cheap tools, $100, $200 tools, but they rent them. They don't want to buy them, even small things. So you can see car rental, fleet rental, truck rental, anything, all of these things now tend to be off the balance sheet. They tend to be rented complete with service rather than companies buying things and operating themselves. So that conversion is -- you speak to CFOs, they are becoming clearer and clearer about this conversion. Platform working. So we have companies that do contracts with us for 25,000 people. This isn't about a small company rolling up at the front door here and saying, "I need an office, what do you have?" These are big -- we do that, by the way, but the major part of the business and a growing part of the business are enterprise customers that say, "I have 25,000 people in the United States, and I would like them to use your whole platform. How much is it?" And that is what we're delivering. Flexibility is going to become -- the world has become more volatile and uncertain and that very much plays into what we're doing, whether it's geopolitics or whether it's AI or whether it's -- I'm not sure if -- what my business is going to be. All of these things are helping us and leading to a rise in inquiries. We have a consulting arm called Incendium. And it's very interesting to see here the level of interest from companies who are asking for consulting help to change how they support their people. It's very, very clear, very strong increase in demand here as more and more companies seek to find a way from A to B. They can see, they can save lots of money. They like that. They can see that they want more flexibility. The problem is making a change. That company is doing very well. And it is a good -- I think it gives us good visibility on the market itself. So technology. Now that is distorting how and where people work. I mean if you traveled on the tube this morning, you will see -- I'm not sure some people are working, most of them are looking at films and on the tube on the subway. But you can do basic work from anywhere. It's not a thing to say, well, I have to be in an office. I've done interviews all the way here from TV studios to here in the car. It's quite difficult actually in the back of a cab, but we've done them all the way through. So technology just makes work a different thing. Now -- so it's distorting making work change. We really provide a platform that makes that work a more productive thing and that's what we're about. I think then if you turn to AI in terms of how it's transforming what we do, we've doubled up every year now for 3 years our AI investments. We were using AI before it was a thing, in fact it wasn't called AI then. It was called robotics and automation. But for our scaled-up business, it's certainly going to change how we operate. If you look back at the results of this, you see we kept our costs reasonably flat over the last 2, 3 years with a lot of inflation. Now that is AI investments, some of it. And we're putting more in to get more scale benefits as we go forward. So for us, as a scaled-up operation, the benefits are much bigger. So we can make the investments, get the returns. And it will speed up what we're doing. The key thing is it helps better decision-making. We have a huge amount of data. It's not always evident how to use it. And for normal people to pick up that data and use it is quite hard. AI makes the data, do most of the work for you, you can make more better decisions. So if you look at planning, if you look at accounting, if you look at lots of these things, AI tools, customer service, many of these things, totally transformational. And it will mean that we'll be able to do a lot more with less people ourselves, and that's already happening. So these -- a lot of these -- all of these trends are supporting us in what we're doing, and we think they'll continue to gather strength in the future. So partner benefits, I've really covered here. And the key thing here and the strength of what we've done and what we are doing is great endorsements from the partners that we've already signed up and we're already operating centers for. The key thing we're looking for is repeat business. So how many more centers do we get from the same owners? Are they happy with the return? And that's a resounding yes. Are we getting more institutional business? Yes, we are. A lot more to do there, but we're getting more of that. Because once institutions change, pension funds, et cetera, then you're really on to something because they control more of the real estate stock than anyone else, and that is also happening. Overall, sustainable long-term cash flows. Can you get me cash flow? Can you get it quicker than whatever the best alternative is? And we are achieving that and owners are very happy with it. They're, in fact, surprised in our ability and the speed of delivery here. And for customers, it's -- here, we're providing base level services. We're adding to the services. So we've added, for example, health benefits in some countries. We've added gym benefits. So if you imagine you're a company large or small, built into your products, you have benefits for the people. We also have added, and we're growing this globally, a full buyers group so you can buy all sorts of commodities on a buying platform where we're combining the strength of the buying potential of all of the customers that want to participate in buying basic commodities, paper, stuff that they need, also proving very popular. So we're looking to -- these things are not necessarily very high margin. They all make a margin, but they're all about making the company, the office of the company broader, more effective and helping people, i.e., health benefits or gym benefits, not necessarily for the company, but something the company can offer their people done in each country. So overall, we're very focused on customer satisfaction and company, the customers, the real customer who's paying the bill, their satisfaction, and that is working. And then as we put forward in the U.S. this -- the flywheel, Charlie, myself and the management team very focused on this. So this continues to gather momentum. We came out of '25 with strong momentum. We come into '26 strong momentum. So in revenue growth, more centers, more platform, more enterprise customers, it sort of keeps on powering up. We did invest more in growth last year. We signaled that halfway through the year. That has paid off. We'll do more again this year. And that will continue to grow the cash flow and the shareholder returns. Charlie will talk to you more about that. So we're a network business. This flywheel is all about winning. And certainly, the mix that we have. It can always be better, still a lot more for us to do, but we are winning. We are delivering on it. So in summary, it was a good year '25. Tough year in many ways, but a good year. We had a good outcome, and we certainly set ourselves up very well for '26. We're actually growing faster now. We're more capital-light than we have been before, and we're certainly starting to generate more and more cash as we go through this year. Returning capital to shareholders. Charles is going to talk to you more about that. And -- but we're also investing in the platform. So we're investing in growth, investing in the platform. We're not being sort of rationing cash into the business. We're doing all of that and producing enough cash to return to shareholders. So we think we've got a very good mix. And in spite of volatility or anything that's going on in the world, we are confident of delivering again in '26 and beyond. Thank you very much. I'll hand over to Charlie.

Thanks, Mark, and thank you very much for everybody to be here today. I'll take you through the financials for 2025 and the outlook for 2026. With our full year results that we delivered this time last year, we set out some very clear guidance for 2025, and we made that very explicit. And I'm delighted to report that we delivered those numbers in line with that guidance that we set out. So first of all, we said that we'd deliver EBITDA of $525 million to $565 million, and the outturn for that was $531 million. We originally stated that we deliver more cash flow in 2025 than in 2024, and we revised that at the half year to be at least $140 million, and we delivered $162 million, so up 60% year-on-year. We also stated that net debt would be flattish year-on-year, and we come in and we come in around $730 million on a U.S. GAAP basis, and that came in at $715 million. We also stated that we continue to delever, which is obviously a function of that net debt and the EBITDA, and that's reduced from 1.45x to 1.35x, which was also after returning $144 million of capital to shareholders via buybacks and dividends. We also said we'd delivered $45 million of recurring management fees, up from $19 million in 2024, and we delivered that in line with the guided number. And we also said that we signed more and open more locations in 2025 than in 2024. We opened 25% more and signed 26% more in 2025 than in 2024. So overall, I think we can summarize the year as we guided, we delivered on that guidance, as Mark said, becoming very predictable and making sure we're delivering in line with what we're saying. For the financial year 2025, our Managed & Franchised business drove the system-wide revenue higher by 4% to a record $4.5 billion. This led to the highest ever U.S. GAAP EBITDA delivery in our history, up 6% in 2025 to $531 million, on track towards our medium-term target of at least $1 billion. Our capital-light growth continues to go from strength to strength. We signed over 1,100 new center locations in 2025, and this is an acceleration through the year. We opened 782 centers over 3 centers per working day during the year, so a phenomenal rate of center openings. And this growth in management franchise saw our fee income grow by 2.4x, and we continue to expand our gross margin in the company-owned business as well. And this all came while we returned $144 million to shareholders, $14 million in dividends and $130 million in share buybacks, and we saw our leverage reduce as well. So the engine of our growth in 2025 was the momentum in our Managed and Franchised division. We saw system revenue growth of almost 30% in the Managed & Franchised division in 2025, and this translates into 60% fee income growth and 140% increase in recurring management fees on the Managed Partnerships business. We started the year with a footprint of 185,000 rooms and added 122,000 rooms across the year. So now we have a footprint, including signed but unopened rooms of over 0.5 million. Importantly, and you've seen this chart before, not only are we able to sign these rooms up, but we're also able -- and open them, but we're also able to fill them, and they are trading in line with as we expected. I'm very happy to report that RevPAR for these rooms is performing very much in line with expectations, and that is the case across all of the cohorts. So coming back to our footprint and pipeline. Given the RevPAR experience, when our rooms are opened and mature, this universe will have the potential to generate $1.8 billion of annual system revenue and the fee income comes from that. The recurring managed fee income we are generating comes with good visibility and very good predictability. And we've given this guidance before and always met it in line. At the end of 2024, we guided that we'd generate $45 million of managed fee income in 2025, which we did. And we expect managed fee income to be $80 million in 2026 and $125 million in 2027. So very good forward visibility in this division. As we've been clear for some time now that to head towards our $1 billion of EBITDA in the medium term, we need to keep expanding the system revenue of management franchise, but also expand the margins in company-owned. Margins here expanded by 97 basis points in the year, and we plan to keep expanding the margins going forward towards our target of 30%. At our interim results, which we also expanded upon at the Investor Day in December, we laid out a clear picture as to the price investment we've been making over the last year and why as these discounts rolled off for new customers, blended prices at higher occupancy will be heading up and not down. This has carried on at the start of 2026, giving us good visibility on pricing through 2026. So right now, where we are, we got good visibility into 2026 pricing, and hopefully, this will continue. As Mark mentioned earlier, we continue to manage our core overheads tightly. We actually saw core overheads coming down very slightly year-on-year, but we've made the choice to keep investing in discretionary overheads, including partnership sales managers for new centers that we spoke about at the interims and also logistics people to ensure buildings open faster. We've also spent extra money on marketing to ensure new centers open full as quickly as possible. As we stated at the Investor Day in New York City in December, we've integrated digital and professional services into Managed & Franchised and Company-owned. And I'm pleased to report that both businesses performed well in 2025. Managed & Franchised continues to see strong top line fee income growth and Company-owned revenue momentum trends early in 2026 gives us confidence in our revenue guidance here so far. Putting all that together for 2025 enabled us to return significant amounts to shareholders while still reducing leverage across the year, as I've mentioned. This shows how we bridge from $501 million of EBITDA in 2024 to $531 million in 2025. The fee income in Managed & Franchised, margin expansion Company-owned and a small reduction in small overheads, combined with an incremental additional investment in the discretionary overheads drove that in the picture. But in particular, you'll see that the increase in Managed & Franchised fee income is really one of the core drivers here. Total reported CapEx was up in 2025 versus 2024, but this is primarily due to 2 factors. Firstly, timing differences between receiving landlord contributions and paying out the respective CapEx on managed enterprise real estate led to phasing issues and there's a difference between the way CapEx is accounted for under IFRS versus U.S. GAAP. IFRS is on an accrual basis, whereas U.S. GAAP is cash flow based. Some accrued CapEx from 2024 was settled in 2025, which drove a higher year-on-year CapEx outflow on a U.S. GAAP basis. You'll see though, if you look at the IFRS numbers that we reported historically that actually these levels are about in line with the normalized levels. So 2024 is a bit of a dip year on a U.S. GAAP basis. Maintenance CapEx is evolving as expected and expect to be $100 million and grow with inflation going forward, and we've made this guidance very clear in the past. All of these numbers need to be balanced with what we're actually doing. In 2025, we opened 3 centers every single working day and CapEx remains very low on historical levels and will remain so. 2024 was the first full year post the pandemic of full positive earnings, and I'm pleased to report that 2025 was the second year of positive earnings in a row. Adjusted gross profit increased by 9% to over $1 billion, driven by our system revenue growth. As I've explained earlier, we continue to invest in overheads to drive growth, and this translated into 6% growth in EBITDA to $531 million and a small increase in operating income, which translated into flat earnings per share, but adjusted earnings per share saw significant year-over-year growth. Cash, however, as Mark said, is our key focus. And I'm pleased to report that we generated 60% more cash available to shareholders in 2025 versus 2024. This enabled us to return $144 million to shareholders and also continue to delever through the period. It's worth noting that cash flow in 2025 was positively impacted by some payments that were originally scheduled for payment in 2025, but were actually paid during 2026. But that notwithstanding, the cash outturn for the year was strong and in line with guidance. We continue to invest in systems and finance during the year. We adopted U.S. GAAP as our accounting standards, integrated digital professional services into Company-owned and Managed & Franchised, and we continue to move our balance sheet structure to a longer-term footing with a new 7-year investment-grade bond that we raised in May. Aside from only $6 million of convertible bond that was not put by investors in December, we now have no refinancing needs until 2029. And there will also be no further changes to how we're reporting from a divisional perspective. This shows how our net debt has evolved through the year. We started 2024 with -- 2025 with $729 million of net debt and generated significant cash flow from operations. After core costs of net maintenance CapEx, interest and tax, it's worth pointing out that if we decide to spend 0 on growth CapEx and not return any capital to shareholders, net debt would only have been $485 million. But we see huge opportunities. So that would have been the wrong thing for the business to do. So net debt after growth CapEx was $567 million and after noncash financing costs, the impact of FX on our debt and our $144 million capital return across dividends and buybacks, we ended net debt with $715 million over the year. Despite investments in capital returns, our net debt to EBITDA still fell during the year to 1.35x. Our transition to capital-light has also enabled us to return significant amounts of capital to shareholders. We are very active in the buyback into any weakness and purchased almost 50 million shares for cancellation at an average price of only 201p, a 13% discount to the share price at year-end. We have a very disciplined approach to our capital allocation. We've already announced $100 million of buybacks for 2026 following the $130 million that we completed last year, and we intend to communicate capital returns in line with how we did that during 2025. As mentioned, we actively managed the buyback last year, and we'll continue to do that through this year. I wanted to put this slide up just as a reminder of what we said we'd deliver at the Investor Day in December and how we expect growth to continue accelerating going forward, driven by our capital-light strategy. So you'll see this slide again going forward when we report back on how we progressed against these targets, which brings me to the outlook for 2026 and beyond. So first of all, I just want to reiterate, no change to outlook from what we said in December, no change from what we said at the Q3 results in November. EBITDA growth is expected to be driven by revenue growth as opposed to cost reduction and adjusted EBITDA to be between $585 million and $625 million for the year. Net debt is expected to go up very slightly in 2026, given the fall in absolute terms in 2025 when we guided that net debt will be roughly the same. In the medium term, we still target a net -- EBITDA of at least $1 billion and remain very committed to our investment-grade credit rating. And we will do that whilst continuing to return cash to shareholders in line with our capital allocation policy. As you'll be aware, we announced $50 million of buybacks on the 31st of December, and we announced an additional $50 million this morning to take the announced program for 2026 to $100 million. Thank you very much. And with that, we'll take questions.

It's Michael Donnelly from Investec. Two from me. First of all, Mark, thank you for your comments on AI. And until the market gets bored with this acronym and moves on to something else, we've kind of got to keep talking about it. Specifically, you mentioned the proprietary data that you've got from the world-leading network. Is it true to say that you've been able to use AI tools to interrogate that proprietary data in a way that your competitors would not be able to do? And then the second question probably for you, Charlie, is on the $30 million into the partnership sales team. You said that's on the annual cost. But if you're still in investment mode, should we think about that growing at double digits or more in line with GDP from now on?

So just looking at the -- I would say, in all honesty here that the best is yet to come. So the results we've had thus far are to do with automation, better customer service, use of bots, better sales support, use of bots, automation of some of the accounting, the admin. That's sort of -- if you sort of say where are you today, that's where we are. But where it's going is something far beyond that, where we can make better use of the data in terms of planning, in terms of better decision-making, think yield management, and that is, we think, is a big upside. We're already doing yield management, just to be clear, but we can do yield management on steroids with the quantum of stock that we have, it makes a real difference. You don't have to have a lot of movement on there for that to be a particularly interesting area. So there's a huge amount of data. How can we use that better? That is what we're spending time doing and investing, doing at the moment.

In terms of the additional investment in the partnership sales team, I think that we've also made additional investments into marketing. And we announced this at the half year that we saw that cost increase come through, and we're very happy about doing that because that was leading to better outcomes going forward. We would absolutely do that again if that makes sense to do. And what you're seeing is that we are putting more money into marketing. We are putting more money into the partnership sales team, and we're now opening center every 3 days. I think if you go back to the slides that we were showing 2 years ago, I think sort of most people here would have been absolutely delighted with 1 center per day. And this costs money. It can't be done for free. We have a great ability to scale, which is the reason why you see the core overheads stay flat. So that's things like finance, HR, IT, the back office. But in terms of being able to get new centers open and new centers signed up, that does need marketing money and partnership sales money. So where it makes sense to deploy more expense there, we will do so.

It's Paul May from Barclays. I got 4 questions actually, but it should be quite quick. We noticed Mark's stake has increased slightly over the year. I assume that's a direct result of not participating in the share buyback. Just wondered what are your thoughts regarding the stake moving forward and the share buyback as we go on? I appreciate you don't give free cash flow guidance at this stage, but can you provide some color as to how much of the year-on-year EBITDA increase is expected to flow through into free cash flow? Obviously, for '25, it was higher than EBITDA growth, but some color would be great. Managed & Franchised, you've got a clear EBITDA trajectory there. What are you seeing though year-to-date within the Company-owned and leased division? Is there any downside risk from that division into the forecast? And then the final one, just on the free cash flow. You mentioned there were some items that shifted into '26, which boosted '25 free cash flow. As a result, '26 gets the sort of negative impact from that. Would you be willing for the share buyback to be slightly higher than free cash flow in '26, given you had some spare free cash flow in 2025?

Yes. So maybe I'll take most of those, Mark, and so feel free to interject. So I think the first thing on Mark, look, we've been really happy with the fact that Mark is our large shareholders and his percentage stake has increased over the last year, as you say, exactly to the buyback. I think sort of there comes a point though where as a company, we quite see that stabilized, so sort of when Mark might sell into the buyback and keep the percentage exactly the same. So it doesn't go up, but it equally doesn't go down. But obviously, that's a decision for Mark and how and when you do that. I think the second thing is on the free cash flow guidance and the color on that. I don't want to give an explicit number at this point in the year given sort of it's a small number relative to the overall revenues and costs. And I think it sort of goes to your third question about the fact that you're seeing sort of small numbers go from 1 year to the next, and that makes a bit of a difference. But we don't see any difference in 2026 from an EBITDA to cash flow conversion ratio going through the year. So same level of percentage. And then in terms of kind of the Managed & Franchised trajectory and the Company-owned. Look, we've been very clear that one of the key underlying assumptions for 2026 is that we want to see revenue growth coming through in the Company-owned. I think we've entered 2026 in a positive way on that, and we've had some good momentum at the end of 2025 with the pricing changes. But clearly, it does require that to continue. And given the fact that in the short term, and I mean sort of very short term quarter-on-quarter, revenue drops through to EBITDA almost 1:1 on the Company-owned, so that does make quite a big difference to the near-term earnings outlook. Clearly, in the long term, we have the flexibility around our cost base. We've been very good to respond to changes in the cost base and the requirements and the change in that cost base in order to preserve the margins. But in the short term, you do have that sort of slight level of inflexibility. So yes, there is a risk on the overall number, both ways, by the way, up and down, right, on that Company-owned revenue. But I think, as I say, we've got good momentum going into that so far. And then the free cash flow going from '25 into '26. I think what I'd say about the buyback overall is we're a firm believer that our shares, I think Mark articulates very well, are very undervalued. We do whatever it does that makes sense to buy back more shares. I'd love to buy back as many shares as we can. But the main thing that we are committed to, number one, is the investment-grade credit rating. And in some ways, a lot of the buyback program is driven by making sure that we've got adequate headroom under our credit rating.

Sorry, just on the last one, just to check, then if there was a situation where the buyout was slightly higher than the free cash flow, not talking materially higher, that wouldn't necessarily be an issue for 1 year relative to the next?

Yes.

Alex Smith from Berenberg. Just 2 quick ones for me on the managed side. The rollout seems to be going pretty smoothly. But as you're kind of opening, like you say, 3 new centers a day, is there a potential kind of bottleneck there or is the investment in the logistics team there to kind of offset that? And then secondly, could you give like a geographical distribution of those Managed sites as well, that would be pretty helpful?

Is there a bottleneck in the openings? No. But we have to keep working on it because the -- what we're doing is getting better and better at the logistics of how to do those openings. So we're very focused on lowering the cost of openings. That's very much correlated to our partners, the better value they get, the more centers they will do, the higher their returns. So we've done a lot of work on this. And that sort of is complicated by things like tariffs and shipping costs and things like that. So -- but we've made great progress in actually reducing -- you can't see it in these numbers, but actually reducing the cost of opening a center, making it both quicker and much substantially cheaper. So I think we are 1/3 we could get to half cheaper than when we started for the same quality. So second question, geographic. So if you look at the growth as it stands today, I'd say we're firing on 5 out of 10 cylinders, if there were 10 cylinders. We're only 50% sort of switched on. We have got breakthroughs. We have had breakthroughs in some countries where we have very low growth, then we have a breakthrough where we pick up some owners that we do very well, other people hear about it and then it's sort of mushrooms. So the job really of the growth team and the leadership of that team is to make sure that every country is switched on. If you look at a country like Germany, that sort of went from low growth to very substantial growth. There's a whole lot of reasons for that. So we're still underperforming. Even with the growth numbers that we have today, we're very much underperforming. So still strong growth in the United States, but now, for example, Latin America, very, very strong growth. And that, again, we've had quite a number of breakthroughs there. So I think the best on that is yet to come.

Sam Dindol from Stifel. Two questions for me, please. First, on Managed & Franchised. It looks like a number of signings stepped up pretty markedly in Q4. Does that just reflects the investment in the sales team? Do you think the signings can step up notably in '26? And then secondly, on capital allocation. Is M&A still part of the story? Do you still expect to make a sort of bolt-ons in areas where you can add capability?

So yes, investments in the sales team and logistics. It's 2 things together. So what we're -- this is a scientific exercise, brand new, no one's ever done it before. So we've got a great team on this with good leadership that are looking at why are we doing well in that country, not in that country? Why -- what are the things that are blocking us? Now the key thing is the cost of doing it, CapEx. So it's not only companies that want to be CapEx-light, it's the landlords, they're not a wash with catch all of them. And they're certainly very careful about how they spend it. So I think it's a combination of better management; understanding the countries better; improving the management in the country, still a long way to go; and getting those logistics better at a lower cost. So we're constantly working on that. It's not a -- we have not -- there's not a minute we haven't really focused on that in during '25. The benefits will come through in '26, but we're still doing now. It's still a long way to go, okay? So that's sort of tick the box. I mean you can guarantee that we are focused on it because we know how important it is. In terms of M&A, you should expect to see more of it next this year, okay? And there was quite a lot last year, all in the numbers, by the way. But it sort of gets a lot of the stuff coming in under management. You're going to see a bit more M&A this year. And that will be a more important part of the growth story as we go through this year and next year. What we're very clear about is scale, all the way through scale benefits, okay? So if we can keep highly disciplined over how we are doing M&A, not growth for the sake of it, it's certainly something we'll consider, and you're going to see more of it coming through. I don't know if you want to add anything to that, but...

You covered it. Yes.

Steven Woolf from Deutsche Bank. Just a follow-up on the M&A point. What's desirable out there in the market, given your scale versus the competition? Is it buying up some of those competitors to keep it in sort of Company-owned fashion? Or is it buying brands to go after? I'm just sort of -- given you can do so much in managed and franchising, where does the M&A sort of fit into that side of the story?

It's not brands generally. We're not buying brands. We are partnering with some brands, a few more concepts that we may add in but it's certainly -- but what you're doing is there is adequate synergies, let's just say, to make it attractive enough for us to sort of contemplate doing it. So it's really our scope benefit that we can apply. It sort of comes in, it will grow the Company-owned attractively. But it also, I think, probably about -- there's a high proportion coming in under management as well, which is obviously our preference. So it's helping both sides of the equation. So yes, I mean that's -- it's very broad, but we are super focused on it. It's not something we're not sort of getting -- we're very careful on it in that we want to make sure that everything comes back to what you heard Charlie and myself saying all the way through, all about cash generation. So what we are doing has to be closing the gap on $1 billion of EBITDA and the cash flow that comes from that. Does it help? And if it does, then we contemplate it, if it makes the right hurdles.

Many thanks, everyone. I think given the time to best supported that and if you have any questions, please feel free to come to me we'll pass on to management for answers. Thank you very much.

Thank you. Thank you very much.

Thank you.